Theranos, the once-budding biotech company that promised to detect diseases through a simple pinprick, is unraveling. On Wednesday, they announced that 40 percent of their workers will be laid off and they would be closing down the company’s blood-testing facilities. What caused the company’s fall from grace to occur?
Here are seven things you need to know about Theranos.
1. The company was first started by Elizabeth Holmes. Holmes had dropped out of Stanford during her sophomore year at the age of 19 to start Theranos, which was inspired by her research for “lab-on-a-chip’ technology” at Stanford as well as from “working on tests for the SARS” when she spent a summer in Singapore. Holmes was able to persuade her parents that her college money would be put to better use to start her company Theranos, based on the words “therapy” and “diagnosis.”
2. The basis of Theranos was the ability to detect diseases through blood-testing. Holmes declared that she could “change the world” with a pinprick, as testing a sample of blood could supposedly determine if someone were at risk of numerous diseases, whether cancer, Alzheimer’s or even high cholesterol in a cheap and efficient manner that empowered consumers. There was just one problem…
3. The technology doesn’t work. While the concept of being able to detect diseases through a blood-test is an appealing theory, the reality is that it’s not plausible. As FiveThirtyEight noted back in May, allowing for such a wide-use of testing for diseases increases the likelihood that false positives will occur, and such tests are difficult for people without a medical background to decipher. Given these facts, it shouldn’t be surprising that the concept of Theranos was flawed from the get-go.
As it turns out, Holmes was warned by a Stanford medical professor, Phyllis Gardner, that the blood-testing concept was impractical, via Vanity Fair:
As Gardner explained, it is impossible to get a precise result from the tip of a finger for most of the tests that Theranos would claim to conduct accurately. When a finger is pricked, the probe breaks up cells, allowing debris, among other things, to escape into the interstitial fluid. While it is feasible to test for pathogens this way, a pinprick is too unreliable for obtaining more nuanced readings. Furthermore, there isn’t that much reliable data that you can reap from such a small amount of blood.
But Holmes pushed through with her idea, and hired Cambridge University Ian Gibbons as her chief scientist to pull it off. Gibbons ran into a major problem: he couldn’t get the blood-testing to work properly:
Gibbons, who was diagnosed with cancer shortly after joining the company, encountered a host of issues with the science at Theranos, but the most glaring was simple: the results were off. This conclusion soon led Gibbons to realize that Holmes’s invention was more of an idea than a reality. Still, bound by the scientific method, Gibbons wanted to try every possible direction and exhaust every option. So, for years, while Holmes put her fund-raising talents to use—hiring hundreds of marketers, salespeople, communications specialists, and even the Oscar-winning filmmaker Errol Morris, who was commissioned to make short industrial documentaries—Gibbons would wake early, walk his dogs along a trail near his home, and then set off for the office before seven A.M. In his downtime, he would read I, Claudius, a novel about a man who plays dumb to unwittingly become the most powerful person on earth.
Gibbons made numerous attempts to find a way for the blood-testing to provide accurate results, to no avail.
4. Despite the blood-testing’s lack of success, Holmes pitched the idea as if it were already working smoothly. She masterfully manipulated the Silicon Valley crowd, wooing over investors to the point where Theranos scored a $9 billion valuation, and Holmes was dubbed by Forbes “as the world’s youngest self-made woman billionaire” in 2015 for amassing $4.5 billion in wealth. Holmes became the face of magazine covers and was hailed by Silicon Valley’s finest as the second-coming of Steve Jobs. But such praise and fame was nothing more than a facade.
5. Holmes has been incredibly secretive in running Theranos, lashing out at anyone who dared to poke holes in her blood-testing idea. Despite her success in winning over investors, many were scared off by her lack of transparency. In the workplace, she forbade her employees from discussing each other’s work. Holmes even had an “enforcer”–a man named Sunny Balwani, whom she used to date. Until he resigned in May, Balwani served as Therano’s chief operating officer and president despite a lack of medical experience, and he would put anyone who dared to question the blood-testing technology through the wringer.
In the case of Gibbons, he became a thorn in Holmes’s side as she was attempting to open Theranos Wellness Centers in numerous Arizona Walgreens; he became “very vocal” about the blood-testing concept’s inability to function properly, according to his wife Rochelle. Rochelle recalled the following tragic story to Vanity Fair:
A few months later, on May 16, 2013, Gibbons was sitting in the family room with Rochelle, the afternoon light draping the couple, when the telephone rang. He answered. It was one of Holmes’s assistants. When Gibbons hung up, he was beside himself. “Elizabeth wants to meet with me tomorrow in her office,” he told his wife in a quivering voice. “Do you think she’s going to fire me?” Rochelle Gibbons, who had spent a lot of time with Holmes, knew that she wanted control. “Yes,” she said to her husband, reluctantly. She told him she thought he was going to be fired. Later that evening, gripped and overwhelmed with worry, Ian Gibbons tried to commit suicide. He was rushed to the hospital. A week later, with his wife by his side, Ian Gibbons died.
While Rochelle Gibbons received sympathy and condolences from Holmes’s secretary, she receive none from Holmes herself. In fact, “a few hours later, rather than a condolence message from Holmes, Rochelle instead received a phone call from someone at Theranos demanding that she immediately return any and all confidential Theranos property.”
6. It all began to unravel for Theranos with the publishing of a Wall Street Journal article. There were already federal government agencies which were questioning the accuracy of the blood-testing results, such as the Department of Defense, the Food and Drug Administration and the Centers for Medicare and Medicaid Services. CMS found “that some of the tests Theranos was performing were so inaccurate that they could leave patients at risk of internal bleeding, or of stroke among those prone to blood clots” and “that Theranos appeared to ignore erratic results from its own quality-control checks during a six-month period last year and supplied 81 patients with questionable test results.”
But it was John Carreyou, healthcare reporter for the Journal, who truly highlighted the problems with Theranos with his October 2015 story, “Hot Startup Theranos Has Struggled With Its Blood-Test Technology.” The story caused the public to become aware of Theranos’ sketchy medical practices. Holmes attempted to use damage-control by putting forth a narrative that Carreyou was reflective of a natural resistance to such a revolutionary concept, even causing a chant of “F*** you Carreyou!” among her employees when she addressed them about the story. But Holmes couldn’t spin her way out of the truth.
Holmes has been incredibly secretive in running Theranos, lashing out at anyone who dared to poke holes in her blood-testing idea.
7. Theranos is now unraveling fast. Ostracized by Silicon Valley, under investigation from numerous federal agencies–including the FBI–, and facing a two-year ban from lab work, Holmes made the Wednesday announcement about the layoffs and closure of blood-testing facilities. And just like-that, the woman who was thought to be the next Steve Jobs is plunging in a remarkable fall from grace.