Theranos is an American privately held health-technology and medical-laboratory-services company based in Palo Alto, California. It is under criminal investigation by federal prosecutors and the Securities and Exchange Commission.
Theranos developed a blood-testing device named Edison. The company said the device uses a few drops of blood obtained via a finger-stick, rather than vials of blood obtained via traditional venipuncture, utilizing microfluidics technology. By the summer of 2014, its founders had raised over $400 million from investors, valuing the company at $9 billion.
In October 2015, controversy surrounding the company's blood testing process arose after a report in The Wall Street Journal raised concerns about the accuracy of its Edison device. An independent U.S. government review by the Centers for Medicare and Medicaid Services reported inaccurate testing results and multiple deficiencies in sample handling during a recent inspection.
On July 7, 2016, Theranos announced that it had received notice from the Centers for Medicare & Medicaid Services (CMS) regarding the revocation of its CLIA certificate. Sanctions include a prohibition of the owners and operators from owning or operating a lab for two years and a civil monetary penalty.
Holmes founded a software company and worked on a protein microarray for the detection of SARS in Singapore, and left Stanford University at age 19 while a sophomore majoring in chemical engineering, to start Theranos. Holmes' Stanford chemical engineering professor Channing Robertson had encouraged her in the endeavor, and joined the board of directors. By the end of 2004, Theranos had raised at least $6.9 million, the first $1 million an investment by Tim Draper, a founder of Draper Fisher Jurvetson.
The company had raised $16 million in two rounds of initial fundraising, and $28.5 million in a third round in 2006. In 2010, Theranos raised an additional $45 million from a single unnamed investor, bringing its total funding to more than $70 million. Investors included ATA Ventures, Tako Ventures, Continental Properties Inc., and Larry Ellison, former CEO of Oracle. With this funding, the company was valued at more than $1 billion.
In February 2015, a Journal of the AMA editorial noted that information about such technology had appeared in the mainstream press including The Wall Street Journal, Business Insider, San Francisco Business Times, Fortune, Forbes, Medscape, and Silicon Valley Business Journal, but not in the peer-reviewed biomedical literature.
President and COO Sunny Balwani left the company in May 2016.
After the revelations of October 2015, Theranos' partner Walgreens suspended their plans to roll out Theranos' testing services in their stores, and later removed Theranos' testing from all existing locations. It was revealed that Safeway had already cancelled a $350 million agreement to use Theranos' testing technology amid doubts about its accuracy. The Cleveland Clinic hospital, recently announced as a Theranos partner, distanced itself from Theranos's technology and denied they had verified its accuracy. Customers have reported writing to Theranos querying inaccurate results, receiving no response.
On October 27, 2015, Theranos claimed to have data verifying the accuracy of its Edison testing device and announced it would publish it.
During its first decade of operation, the company developed devices to automate and miniaturize blood tests using microscopic blood volumes. Theranos is best known for its "nanotainer" fingerstick, which draws a microliter sample of blood from the capillaries in a patient's hand. The company's Edison blood testing machines use microfluidics technology to analyze blood for hundreds of diseases and conditions. Theranos claimed to have data verifying the accuracy and reliability of its tests that would be published.
Its technology has been criticized for not being scientifically peer reviewed. In February 2016, Theranos announced that it would permit the Cleveland Clinic to complete a validation study of its technology. The Journal of Clinical Investigation found that the company's blood test results were "much more in line with the others than they are out of line" in March 2016. In May 2016, Theranos announced that it had voided two years of results from its Edison device. The company announced that about 1 percent of test results had been voided or corrected from its proprietary machines in June 2016. The company is presenting data about its technology to the American Association for Clinical Chemistry in August 2016.
Theranos is headquartered in Palo Alto, California. It has laboratories in Newark, California and Scottsdale, Arizona. In June 2016, Theranos announced plans to expand its operations into physician offices and independent retail stores in Arizona.
In July 2013, the composition of the Theranos board of directors changed markedly, with the departure of Channing Robertson (emeritus professor, chemical engineering, Stanford University), experienced pharma and biotech executive Robert B. Shapiro (former chairman/CEO of the Pharmacia, Monsanto, and G.D. Searle group of companies), and financier Pete Thomas (principal, ATA Ventures). Remaining from the original board were Theranos President and COO Ramesh "Sunny" Balwani and former Secretary of State George Shultz; added to the new board were Riley P. Bechtel (chairman of the board at Bechtel Group), Richard Kovacevich (former Wells Fargo Chairman and CEO), Sam Nunn and Bill Frist (former U.S. Senators), Henry Kissinger (former Secretary of State), William Perry (former Secretary of Defense), William Foege (epidemiologist, former director U.S. CDC), James Mattis (General, USMC, retired) and Gary Roughead (Admiral, USN, retired), several of whom are members of Stanford's Hoover Institution, with medical doctors Frist and Foege, and lawyer/executive Bechtel being added most recently (in 2014).
A consequence of these 2013 changes, noted Ron Leuty of the San Francisco Business Times, was that "Theranos’ board… consists mainly of directors with diplomatic or military backgrounds." In April 2016, Theranos announced its medical advisory board which included past presidents or board members of the American Association for Clinical Chemistry.
Famed litigator David Boies was hired by Theranos after it failed a federal laboratory inspection. The company’s general counsel is a former partner at Boies Schiller and Theranos had hired Boies in the past. Theranos attracted controversy, however by also granting Boies a seat on the board of directors. While the 2013 adopted high-vote stock structure gives Holmes total control of the company, business ethics insiders, reporting to the New York Times, argued that, while its been done before, having Boies serve both on the board and as the company’s attorney would be difficult as he would have to represent both the Company (as lawyer) and the Investors (as a Director), and that this could in some circumstances result in making a choice between the two.
In 2016, the following people joined Theranos as directors: Fabrizio Bonanni, former executive vice president of Amgen; Richard Kovacevich; and William Foege, former director of the Centers for Disease Control and Prevention.
As of May 2016, the Theranos board of directors are:
- Elizabeth Holmes, Founder and CEO
- Riley Bechtel, former Bechtel Group CEO
- David Boies, a founder and the chairman of Boies Schiller & Flexner
- William Foege, former director U.S. Centers for Disease Control and Prevention
- Richard Kovacevich, former Wells Fargo CEO and chairman
- James Mattis, retired USMC General
- Fabrizio Bonanni, former executive vice president of Amgen
On October 16, 2015, The Wall Street Journal, quoting many unnamed current and former employees, reported that Theranos's flagship Edison testing device might provide inaccurate results. The alleged discrepancies in Theranos' proficiency testing and reporting to regulators led to a formal complaint filed with the New York State Department of Health that was forwarded to the Centers of Medicare and Medicaid Services (CMS). Moreover, the bulk of the blood tests being performed by Theranos were reported to be conducted on traditional machines of competitors' companies, such as Siemens, rather than its own Edison machines. Theranos attacked the Journal, but did not refute any of the allegations.
Wired asserted that the company may have succumbed to Silicon Valley pressures of trying to "spin hype into startup gold" and promising more than they could deliver. Theranos has claimed to have partnerships with GlaxoSmithKline and Pfizer, which both companies have denied. Theranos also claimed the successful venture capital firm Draper Fisher Jurvetson had invested in them, but company principal Steve Jurvetson clarified that it had provided the company's first $500,000 seed investment and nothing more.
On October 28, 2015, the Food and Drug Administration (FDA) also reported major shortcomings in the company's practices and ordered Theranos to stop using its Edison device, which it had neither tested for accuracy nor approved, contrary to the company's previous claims. Theranos was ordered to limit its use of Edison to one of the 200 tests it offered. The Arizona Department of Health Services reported issues in the company's other laboratory.
Theranos asserted that the reports were “factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents.” Subsequently, a key metric of Theranos valuation was notably called into question when Walgreens suspended further expansion of Theranos Wellness Centers. Additionally, after an FDA inspection, Theranos reported it had voluntarily suspended use of its flagship micro or low volume blood testing technique except for Herpes virus testing.
Subsequent articles have called into question previous statements by Theranos regarding the nature and source of its income. Though Theranos has often claimed to have FDA approval for its laboratory tests, FDA inspection reports from 2014 and 2015 suggest that the government has noted significant concerns.
Centers for Medicare and Medicaid Services Certification
A report from the the Centers for Medicare and Medicaid Services (CMS) released in 2016 detailed a number of deficiencies with Theranos procedures and testing results. The inspection report indicates that 29% of the quality control checks performed on the Edison devices produced results outside an acceptable range. In addition, federal inspectors also cited Theranos for "doing tests with unqualified personnel, for long delays in notifying patients of flawed test results and for storing blood samples at the wrong temperatures."
On January 27, 2016, CMS said that Theranos's Newark, California location posed "immediate jeopardy to patient safety," and required a response in 10 days or it would pull its certification of the lab. It was later revealed that the "immediate jeopardy" specifically related to Theranos’s test for the clotting ability of blood, which is used to help determine the correct dose of the blood-thinning drug warfarin.
Theranos submitted a plan to correct the problems in February 2016. However, in March 2016, CMS regulators said that the company’s response "does not constitute a credible allegation of compliance and acceptable evidence of correction for the deficiencies cited." The regulators "proposed a series of sanctions against the company, including the revocation of the company’s certification for its California laboratory, its primary operation, and suspension of its eligibility to receive payments under the Medicare insurance program." The company responded on April 1, but said it had not received notice of the regulators’ final decision as of April 13, 2016.
On July 7, 2016, Theranos announced that it had received notice from the CMS regarding the revocation of its CLIA certificate. Sanctions include a prohibition of the owners and operators from owning or operating a lab for two years, suspension of approval to receive Medicare and Medicaid payments, and a civil monetary penalty. Theranos' CEO Elizabeth Holmes responded in a statement: “We accept full responsibility for the issues at our laboratory in Newark, California, and have already worked to undertake comprehensive remedial actions. Those actions include shutting down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures. While we are disappointed by CMS’ decision, we take these matters very seriously and are committed to fully resolving all outstanding issues with CMS and to demonstrating our dedication to the highest standards of quality and compliance.”
In a later statement on it's website replying to the CMS on July 8, 2016 Theranos announced it was discontinued testing at its Newark location while attempting to resolve issues identified. The company further stated “The clinical lab is just one of Theranos’ many opportunities to provide access to high-integrity, affordable and actionable health care information, and the company will continue to carry out its mission under the leadership of its founder and CEO, Elizabeth Holmes”.
On December 2, 2015, The Washington Post reported that the exploration of a partnership with the US military had led to issues being found with the Edison device and a request that the FDA investigate. This request was denied by United States Marine Corps General James Mattis after Holmes's intervention. After retiring, Mattis joined the board of directors of Theranos.
U.S. House of Representatives Committee Investigation
It was reported on July 1, 2016, that a U.S. House of Representatives committee investigation was being undertaken into Theranos' past practices. The Committee on Energy and Commerce is requesting information on what Theranos is doing to correct its testing inaccuracies and adherence to federal guidelines. In the letter sent to founder Elizabeth Holmes, a response is requested by July 14. Theranos has said in a statement that it looks forward to responding to the inquiry with an explanation of its improvements “That includes new operational leadership, best practices in our laboratories, continuing and constructive engagement with our regulators and ongoing communications with physicians and our patients,” 
In 2007, Theranos filed suit in Santa Clara, California, accusing former employees of breaching company secrecy. In 2011 the company filed suit against Fuisz Pharma LLC, accusing them of stealing Theranos' patent files from McDermott Will & Emery. The suit was settled in 2014. Another case, in Washington, D.C. against McDermott Will & Emery itself, was dismissed in August 2013.
Theranos is currently under criminal investigation by federal prosecutors and the Securities and Exchange Commission.
Theranos is facing class-action complaints alleging misrepresentation of its testing services.