Post by stcks on Dec 28, 2015 4:00:29 GMT
At Theranos, Many Strategies and Snags
The night before a big meeting with a Swiss drug company in 2008, Theranos Inc. founder Elizabeth Holmes and a colleague sat in a Zurich hotel, sticking their fingers with a lancet.
They drew drops of their own blood to try the company’s testing machine, but the devices wouldn’t work, says someone familiar with the incident. Sometimes the results were obviously too high. Sometimes they were too low. Sometimes the machines spit out only an error message.
After two hours, the colleague called it quits, leaving Ms. Holmes still squeezing blood from her fingers to test it again.
Ever since she launched Theranos in 2003 when she was 19 years old and dropped out of Stanford University, Ms. Holmes has been driven by ambition that is big even by Silicon Valley standards. Instead of a smartphone app to hail a car or order food, she wants to revolutionize health care with a vast range of diagnostic tests run with a few drops of finger-pricked blood.
Now 31, Ms. Holmes has emphasized a variety of strategies—a hand-held device, tests for drugmakers, drugstore clinics—while trying to turn her dream into a business. She often has collided with technological problems, according to interviews with more than 20 former Theranos employees, company emails and complaints filed with federal regulators.
In Switzerland, she went ahead and pricked her finger in front of a group of Novartis AG executives at the meeting the next day, testing for a protein that measures inflammation, says the person familiar with the incident.
All three of her Theranos devices flickered with error messages, the person says. Ms. Holmes was unfazed, blamed a minor technical glitch and continued to pitch the vast potential of her technology.
At the WSJDLive 2015 conference, Theranos founder and CEO Elizabeth Holmes discusses her company’s proprietary technologies, the FDA’s inspection of its facilities and the assertion that Theranos was too quick to market its products.
Ms. Holmes and several current or former Theranos directors declined interview requests. A spokeswoman for Theranos, Brooke Buchanan, says Ms. Holmes recalls only one machine with an error message, because someone tripped over the cord. A second machine ran perfectly, and the third wasn’t used, the spokeswoman says. A Novartis spokeswoman wouldn’t comment.
Since a Wall Street Journal article in October, Ms. Holmes has defended the Palo Alto, Calif., company’s laboratory work and promised to publish data proving the accuracy of its more than 240 tests, ranging from pregnancy to diabetes.
She said earlier this month that customer volume was higher than ever. The company has said it performed millions of tests, with highly positive feedback.
For now, though, Theranos has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the small proprietary vials called “nanotainers.” As a result, Theranos is using traditional lab machines for most of its tests.
Many technology startups struggle to overcome problems while developing their products. Theranos has always faced an extra burden because blood tests sometimes provide life-or-death answers.
David Philippides, an engineer who worked on Theranos devices from January 2013 to November 2014, says the company didn’t show enough regard, based on his involvement in research while he was there, for the scientific rigor of medical research.
“The time was not taken to develop anything properly,” Mr. Philippides says. “This is science. You need time.” He says he was fired after refusing to go to Arizona to retrieve a broken machine.
The Theranos spokeswoman says he held only a “junior role” that gave him “no visibility into the extent of” the company’s research and development. She says the company employs more than 80 scientists with doctorates.
When she was a high-school junior at St. John’s School in Houston, Ms. Holmes offered a glimpse of herself in the yearbook. “I tend to be a perfectionist so sometimes I’m up really late working,” she was quoted as saying. “But usually I can stay on top of things and everything works out.”
A senior-year student survey said her theme song was “I’m in a Hurry” and she would be “trying to save the world” in 20 years.
The daughter of a well-connected public servant and former congressional aide, Ms. Holmes took chemical engineering classes at Stanford but had no medical training when she quit to start Theranos in 2003. She began approaching venture-capital firms to gauge their interest.
She got a meeting in 2004 with MedVenture Associates, which has invested in medical technology companies for 29 years. Ms. Holmes sat down at the firm’s office across from five MedVenture partners.
Speaking fast, the young entrepreneur pitched them about putting blood tests on a chip, recalls Annette Campbell-White, MedVenture’s managing partner. She says Ms. Holmes talked “from 30,000 feet about how these tests are going to change mankind” but provided no technical or scientific details.
When asked for more specifics, such as how the technology would differ from a portable blood-diagnostics device made by a company called Abaxis Inc., Ms. Holmes got annoyed, according to the venture capitalist.
Elizabeth came to me with extraordinary energy and brilliance.
—Tim Draper, a venture capitalist who invested the first $1 million in Theranos
“The more we tried to drill down, the more uncomfortable she got,” Ms. Campbell-White says. After about an hour, Ms. Holmes stood up and left, “leaving us to look at one another in amazement,” Ms. Campbell-White says.
Theranos’s Ms. Buchanan says Ms. Holmes remembers the meeting very differently and would never leave a meeting so abruptly.
The spokeswoman says Ms. Campbell-White’s memory might be biased by MedVenture’s investment in Abaxis. Ms. Campbell-White says MedVenture exited the investment years before the meeting.
By the end of 2004, Ms. Holmes had raised at least $6.9 million, valuing Theranos at about $30 million, according to corporate filings.
The first $1 million came from Tim Draper, a founder of Draper Fisher Jurvetson, through two of his funds. Ms. Holmes was a childhood friend of his daughter and came to him “with extraordinary energy and brilliance,” he says.
The money enabled Ms. Holmes to hire scientists and engineers. She believed the fastest route to getting revenue was by offering Theranos’s blood tests to drug companies for use in clinical trials, former Theranos employees say.
In April 2005, Ms. Holmes said on the public-radio program “BioTech Nation” that she had created a hand-held device that would help drug companies tell in real time how well their drugs worked on patients using “a little tiny needle that pulls a little tiny drop of blood” from an arm or the hand.
Ms. Holmes called it the RDX Metabolic Profiler and said it was “going into the production phase,” according to a recording of the interview. “We hope to release it, actually, to a pharmaceutical partner around mid to late this year.
Two people who worked at Theranos at the time say it was still years away from developing such a device. They say the company was still trying to figure out the chemistry of various blood tests.
Ms. Buchanan says the tone of the interview was “aspirational” rather than “literal.” She says Ms. Holmes actually described two devices, one of which went into manufacturing within a year. Theranos did eventually enter into partnerships with drugmakers such as Pfizer Inc., she says.
A Pfizer spokesman says it has done “only very limited historical exploratory work with Theranos through a few pilot projects” and doesn’t have any current or active projects with it.
In the interview, Ms. Holmes also showed less interest in finger-pricked blood than Theranos does now. “If you poke yourself in the arm or on the palm of your hand, it doesn’t hurt as much as if you do it on the fingertip, because there’s many nerves in your fingertip,” she said.
Since then, says Ms. Buchanan, the company has invented techniques that make it less painful to extract blood from a finger.
The more we tried to drill down, the more uncomfortable she got.
—Annette Campbell-White, a venture capitalist pitched by Elizabeth Holmes shortly after Theranos was launched
“Things change in any company,” she adds. “You improve with time, you learn, you test things, you do things differently.”
By 2007, Theranos was valued at an estimated $197 million after raising another $43.2 million. The company had developed a device to test small quantities of blood, but it was the size of a personal computer tower and weighed 70 pounds, says a person who worked at Theranos. A later version weighed 23 pounds, the former employee recalls.
After the demonstration at Novartis, Ms. Holmes kept trying to get other drugmakers interested in the concept.
Oscar Laskin, then vice president of early drug development at Celgene Corp. , recalls being told by Ms. Holmes in 2008 that Theranos could tell how certain markers in the blood were changing and then input the results into a computer model that would become more predictive over time.
He says she told him the technology could help Celgene make important adjustments during drug trials. When Mr. Laskin asked for an explanation of how it worked, Ms. Holmes said she couldn’t reveal trade secrets.
Things change in any company…You improve with time, you learn, you test things, you do things differently.
—Theranos spokeswoman Brooke Buchanan
“The level of sophistication required by what she was describing involved a paradigm shift,” he says. “It sounded like something that was too good to be true.” Ms. Buchanan says Theranos disagrees with Mr. Laskin’s recollection but declines to comment further.
Nevertheless, Celgene signed a $3 million contract with Theranos for a custom-made blood test and use of the company’s computer model, two former Theranos employees say. It isn’t clear if Theranos ever created the test. Ms. Buchanan says Theranos doesn’t comment on confidential business relationships. Celgene declines to comment.
In 2009, Ms. Holmes returned to Stanford to give a talk about entrepreneurship. She described Theranos’s accomplishments and said its testing system made it possible to poke the finger of a patient who had taken a drug “and see whether it works, whether it’s safe and whether they have the right dose,” according to a recording of her talk.
The same year, Theranos hired Sunny Balwani as president and chief operating officer. He had started and sold an e-commerce company during the dot-com boom.
Anthony Nugent, an engineer listed as co-inventor with Ms. Holmes on five patents, says the hiring seemed odd because Mr. Balwani lacked experience in blood diagnostics and didn’t have a science or medicine background. Mr. Nugent worked at Theranos from 2007 to 2013.
Ms. Buchanan, the company’s spokeswoman, responds that Mr. Balwani has an “extensive and successful background in technology.” He declines to comment.
In 2010, another fundraising round boosted Theranos’s valuation above $1 billion. By then, the device was code-named Edison, after the famous inventor.
Safeway Inc. and Walgreens agreed to offer Theranos tests in stores. Mr. Nugent says he was surprised by the September 2013 announcement to “bring access to” Theranos’s “lab testing service through Walgreens pharmacies nationwide” because he still considered the Edison an experimental device.
He recalls seeing the machines labeled “for investigational use only.” Their accuracy “was not to the level you’d want.”
Ms. Buchanan responds: “We are 100% confident of the accuracy of our tests when we rolled them out.” She says Mr. Nugent seems to be confusing devices designed “for a non-clinical purpose…with those that are ultimately used in the clinical lab.”
In November 2013, Theranos’s lab in California got an order from a patient at a Walgreens for a blood test handled by the Edison, according to a former Theranos lab worker assigned to run the test.
Before doing the test, the employee put the device through three trial runs with a quality-control sample containing a known amount of the substance the test was supposed to measure.
The lab employee later told federal authorities that the results from the quality-control runs diverged from the known amount by more than two standard deviations, a red flag that suggested possible accuracy problems, according to a complaint filed by the employee.
When the Theranos employee alerted superiors, someone from research and development came to the lab and deleted quality-control data to make the Edison’s test runs look better, the former lab employee alleged in the complaint to the Centers for Medicare and Medicaid Services, or CMS.
The R&D employee then tested the patient’s blood on the Edison and sent the results to the patient, according to a copy of the complaint. An agency spokeswoman declines to comment. CMS auditors inspected Theranos last month as part of a regularly scheduled audit the company says is continuing.
Ms. Buchanan says Theranos doesn’t believe the incident happened. “If there ever were a circumstance like that, we would do a quality-control check on that device and not give out a patient result,” she says.
It sounded like something that was too good to be true.
—Oscar Laskin, a drug-company executive who met with Elizabeth Holmes in 2008
CMS auditors did another scheduled inspection shortly after the alleged incident two years ago. Upstairs were the traditional lab instruments bought from outside companies and used to test most patient samples. That part of the lab was called Jurassic Park because Ms. Holmes and Mr. Balwani said Theranos’s technology would soon make those machines obsolete, former employees say.
Edison machines were kept downstairs in the Normandy section of the lab, a reference to the D-Day invasion by Allied forces that evoked comparisons to how Theranos was taking the lab industry by storm.
Two former employees say managers told lab staff not to enter or exit Normandy during the audit. The inspectors toured Jurassic Park but never went downstairs or saw the Edison machines, the former employees say.
David Boies, Theranos’s outside counsel and a company director since October, told the Journal in a letter in July that the company “never hid the existence of any laboratory.” Inspectors were told about both sections but chose to visit only “the room that processed over 90 percent of the samples at the time.”
Theranos passed. The agency won’t comment beyond the inspection report.
Last year, investors pumped another $633 million into Theranos, increasing its valuation to about $9 billion and Ms. Holmes’s majority stake to more than half that.
In April 2014, she got a long email from another employee. The employee alleged that Theranos had cherry-picked data when comparing Edison machines to traditional lab machines to make the Edison look more accurate, according to a copy of the email.
For one test, the device’s accuracy rate increased sharply after some information was deleted and manipulated, the employee wrote. Edison machines also allegedly failed daily quality-control checks often.
“I am sorry if this email sounds attacking in any way, I do not intend it to be,” the employee told Ms. Holmes. “I just feel a responsibility to you to tell you what I see so we can work towards solutions.”
Ms. Holmes forwarded the email to Mr. Balwani. He replied to the employee, who no longer works at Theranos, denied all the claims and questioned the employee’s understanding of statistics and lab science.
Quality-control failures were due to the “newness of some of our processes, which we are improving every day,” Mr. Balwani wrote.
He added: “This is product development, this is how startups are built.” The reply ended with an edict that the “only email on this topic I want to see from you going forward is an apology that I’ll pass on to other people.”
Ms. Buchanan says the employee was too inexperienced to “make these types of comments” and “struggled” to grasp Theranos’s scientific processes. The company has disclosed its test methods to regulators, she adds.
www.wsj.com/articles/at-theranos-many-strategies-and-snags-1451259629
The night before a big meeting with a Swiss drug company in 2008, Theranos Inc. founder Elizabeth Holmes and a colleague sat in a Zurich hotel, sticking their fingers with a lancet.
They drew drops of their own blood to try the company’s testing machine, but the devices wouldn’t work, says someone familiar with the incident. Sometimes the results were obviously too high. Sometimes they were too low. Sometimes the machines spit out only an error message.
After two hours, the colleague called it quits, leaving Ms. Holmes still squeezing blood from her fingers to test it again.
Ever since she launched Theranos in 2003 when she was 19 years old and dropped out of Stanford University, Ms. Holmes has been driven by ambition that is big even by Silicon Valley standards. Instead of a smartphone app to hail a car or order food, she wants to revolutionize health care with a vast range of diagnostic tests run with a few drops of finger-pricked blood.
Now 31, Ms. Holmes has emphasized a variety of strategies—a hand-held device, tests for drugmakers, drugstore clinics—while trying to turn her dream into a business. She often has collided with technological problems, according to interviews with more than 20 former Theranos employees, company emails and complaints filed with federal regulators.
In Switzerland, she went ahead and pricked her finger in front of a group of Novartis AG executives at the meeting the next day, testing for a protein that measures inflammation, says the person familiar with the incident.
All three of her Theranos devices flickered with error messages, the person says. Ms. Holmes was unfazed, blamed a minor technical glitch and continued to pitch the vast potential of her technology.
At the WSJDLive 2015 conference, Theranos founder and CEO Elizabeth Holmes discusses her company’s proprietary technologies, the FDA’s inspection of its facilities and the assertion that Theranos was too quick to market its products.
Ms. Holmes and several current or former Theranos directors declined interview requests. A spokeswoman for Theranos, Brooke Buchanan, says Ms. Holmes recalls only one machine with an error message, because someone tripped over the cord. A second machine ran perfectly, and the third wasn’t used, the spokeswoman says. A Novartis spokeswoman wouldn’t comment.
Since a Wall Street Journal article in October, Ms. Holmes has defended the Palo Alto, Calif., company’s laboratory work and promised to publish data proving the accuracy of its more than 240 tests, ranging from pregnancy to diabetes.
She said earlier this month that customer volume was higher than ever. The company has said it performed millions of tests, with highly positive feedback.
For now, though, Theranos has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the small proprietary vials called “nanotainers.” As a result, Theranos is using traditional lab machines for most of its tests.
Many technology startups struggle to overcome problems while developing their products. Theranos has always faced an extra burden because blood tests sometimes provide life-or-death answers.
David Philippides, an engineer who worked on Theranos devices from January 2013 to November 2014, says the company didn’t show enough regard, based on his involvement in research while he was there, for the scientific rigor of medical research.
“The time was not taken to develop anything properly,” Mr. Philippides says. “This is science. You need time.” He says he was fired after refusing to go to Arizona to retrieve a broken machine.
The Theranos spokeswoman says he held only a “junior role” that gave him “no visibility into the extent of” the company’s research and development. She says the company employs more than 80 scientists with doctorates.
When she was a high-school junior at St. John’s School in Houston, Ms. Holmes offered a glimpse of herself in the yearbook. “I tend to be a perfectionist so sometimes I’m up really late working,” she was quoted as saying. “But usually I can stay on top of things and everything works out.”
A senior-year student survey said her theme song was “I’m in a Hurry” and she would be “trying to save the world” in 20 years.
The daughter of a well-connected public servant and former congressional aide, Ms. Holmes took chemical engineering classes at Stanford but had no medical training when she quit to start Theranos in 2003. She began approaching venture-capital firms to gauge their interest.
She got a meeting in 2004 with MedVenture Associates, which has invested in medical technology companies for 29 years. Ms. Holmes sat down at the firm’s office across from five MedVenture partners.
Speaking fast, the young entrepreneur pitched them about putting blood tests on a chip, recalls Annette Campbell-White, MedVenture’s managing partner. She says Ms. Holmes talked “from 30,000 feet about how these tests are going to change mankind” but provided no technical or scientific details.
When asked for more specifics, such as how the technology would differ from a portable blood-diagnostics device made by a company called Abaxis Inc., Ms. Holmes got annoyed, according to the venture capitalist.
Elizabeth came to me with extraordinary energy and brilliance.
—Tim Draper, a venture capitalist who invested the first $1 million in Theranos
“The more we tried to drill down, the more uncomfortable she got,” Ms. Campbell-White says. After about an hour, Ms. Holmes stood up and left, “leaving us to look at one another in amazement,” Ms. Campbell-White says.
Theranos’s Ms. Buchanan says Ms. Holmes remembers the meeting very differently and would never leave a meeting so abruptly.
The spokeswoman says Ms. Campbell-White’s memory might be biased by MedVenture’s investment in Abaxis. Ms. Campbell-White says MedVenture exited the investment years before the meeting.
By the end of 2004, Ms. Holmes had raised at least $6.9 million, valuing Theranos at about $30 million, according to corporate filings.
The first $1 million came from Tim Draper, a founder of Draper Fisher Jurvetson, through two of his funds. Ms. Holmes was a childhood friend of his daughter and came to him “with extraordinary energy and brilliance,” he says.
The money enabled Ms. Holmes to hire scientists and engineers. She believed the fastest route to getting revenue was by offering Theranos’s blood tests to drug companies for use in clinical trials, former Theranos employees say.
In April 2005, Ms. Holmes said on the public-radio program “BioTech Nation” that she had created a hand-held device that would help drug companies tell in real time how well their drugs worked on patients using “a little tiny needle that pulls a little tiny drop of blood” from an arm or the hand.
Ms. Holmes called it the RDX Metabolic Profiler and said it was “going into the production phase,” according to a recording of the interview. “We hope to release it, actually, to a pharmaceutical partner around mid to late this year.
Two people who worked at Theranos at the time say it was still years away from developing such a device. They say the company was still trying to figure out the chemistry of various blood tests.
Ms. Buchanan says the tone of the interview was “aspirational” rather than “literal.” She says Ms. Holmes actually described two devices, one of which went into manufacturing within a year. Theranos did eventually enter into partnerships with drugmakers such as Pfizer Inc., she says.
A Pfizer spokesman says it has done “only very limited historical exploratory work with Theranos through a few pilot projects” and doesn’t have any current or active projects with it.
In the interview, Ms. Holmes also showed less interest in finger-pricked blood than Theranos does now. “If you poke yourself in the arm or on the palm of your hand, it doesn’t hurt as much as if you do it on the fingertip, because there’s many nerves in your fingertip,” she said.
Since then, says Ms. Buchanan, the company has invented techniques that make it less painful to extract blood from a finger.
The more we tried to drill down, the more uncomfortable she got.
—Annette Campbell-White, a venture capitalist pitched by Elizabeth Holmes shortly after Theranos was launched
“Things change in any company,” she adds. “You improve with time, you learn, you test things, you do things differently.”
By 2007, Theranos was valued at an estimated $197 million after raising another $43.2 million. The company had developed a device to test small quantities of blood, but it was the size of a personal computer tower and weighed 70 pounds, says a person who worked at Theranos. A later version weighed 23 pounds, the former employee recalls.
After the demonstration at Novartis, Ms. Holmes kept trying to get other drugmakers interested in the concept.
Oscar Laskin, then vice president of early drug development at Celgene Corp. , recalls being told by Ms. Holmes in 2008 that Theranos could tell how certain markers in the blood were changing and then input the results into a computer model that would become more predictive over time.
He says she told him the technology could help Celgene make important adjustments during drug trials. When Mr. Laskin asked for an explanation of how it worked, Ms. Holmes said she couldn’t reveal trade secrets.
Things change in any company…You improve with time, you learn, you test things, you do things differently.
—Theranos spokeswoman Brooke Buchanan
“The level of sophistication required by what she was describing involved a paradigm shift,” he says. “It sounded like something that was too good to be true.” Ms. Buchanan says Theranos disagrees with Mr. Laskin’s recollection but declines to comment further.
Nevertheless, Celgene signed a $3 million contract with Theranos for a custom-made blood test and use of the company’s computer model, two former Theranos employees say. It isn’t clear if Theranos ever created the test. Ms. Buchanan says Theranos doesn’t comment on confidential business relationships. Celgene declines to comment.
In 2009, Ms. Holmes returned to Stanford to give a talk about entrepreneurship. She described Theranos’s accomplishments and said its testing system made it possible to poke the finger of a patient who had taken a drug “and see whether it works, whether it’s safe and whether they have the right dose,” according to a recording of her talk.
The same year, Theranos hired Sunny Balwani as president and chief operating officer. He had started and sold an e-commerce company during the dot-com boom.
Anthony Nugent, an engineer listed as co-inventor with Ms. Holmes on five patents, says the hiring seemed odd because Mr. Balwani lacked experience in blood diagnostics and didn’t have a science or medicine background. Mr. Nugent worked at Theranos from 2007 to 2013.
Ms. Buchanan, the company’s spokeswoman, responds that Mr. Balwani has an “extensive and successful background in technology.” He declines to comment.
In 2010, another fundraising round boosted Theranos’s valuation above $1 billion. By then, the device was code-named Edison, after the famous inventor.
Safeway Inc. and Walgreens agreed to offer Theranos tests in stores. Mr. Nugent says he was surprised by the September 2013 announcement to “bring access to” Theranos’s “lab testing service through Walgreens pharmacies nationwide” because he still considered the Edison an experimental device.
He recalls seeing the machines labeled “for investigational use only.” Their accuracy “was not to the level you’d want.”
Ms. Buchanan responds: “We are 100% confident of the accuracy of our tests when we rolled them out.” She says Mr. Nugent seems to be confusing devices designed “for a non-clinical purpose…with those that are ultimately used in the clinical lab.”
In November 2013, Theranos’s lab in California got an order from a patient at a Walgreens for a blood test handled by the Edison, according to a former Theranos lab worker assigned to run the test.
Before doing the test, the employee put the device through three trial runs with a quality-control sample containing a known amount of the substance the test was supposed to measure.
The lab employee later told federal authorities that the results from the quality-control runs diverged from the known amount by more than two standard deviations, a red flag that suggested possible accuracy problems, according to a complaint filed by the employee.
When the Theranos employee alerted superiors, someone from research and development came to the lab and deleted quality-control data to make the Edison’s test runs look better, the former lab employee alleged in the complaint to the Centers for Medicare and Medicaid Services, or CMS.
The R&D employee then tested the patient’s blood on the Edison and sent the results to the patient, according to a copy of the complaint. An agency spokeswoman declines to comment. CMS auditors inspected Theranos last month as part of a regularly scheduled audit the company says is continuing.
Ms. Buchanan says Theranos doesn’t believe the incident happened. “If there ever were a circumstance like that, we would do a quality-control check on that device and not give out a patient result,” she says.
It sounded like something that was too good to be true.
—Oscar Laskin, a drug-company executive who met with Elizabeth Holmes in 2008
CMS auditors did another scheduled inspection shortly after the alleged incident two years ago. Upstairs were the traditional lab instruments bought from outside companies and used to test most patient samples. That part of the lab was called Jurassic Park because Ms. Holmes and Mr. Balwani said Theranos’s technology would soon make those machines obsolete, former employees say.
Edison machines were kept downstairs in the Normandy section of the lab, a reference to the D-Day invasion by Allied forces that evoked comparisons to how Theranos was taking the lab industry by storm.
Two former employees say managers told lab staff not to enter or exit Normandy during the audit. The inspectors toured Jurassic Park but never went downstairs or saw the Edison machines, the former employees say.
David Boies, Theranos’s outside counsel and a company director since October, told the Journal in a letter in July that the company “never hid the existence of any laboratory.” Inspectors were told about both sections but chose to visit only “the room that processed over 90 percent of the samples at the time.”
Theranos passed. The agency won’t comment beyond the inspection report.
Last year, investors pumped another $633 million into Theranos, increasing its valuation to about $9 billion and Ms. Holmes’s majority stake to more than half that.
In April 2014, she got a long email from another employee. The employee alleged that Theranos had cherry-picked data when comparing Edison machines to traditional lab machines to make the Edison look more accurate, according to a copy of the email.
For one test, the device’s accuracy rate increased sharply after some information was deleted and manipulated, the employee wrote. Edison machines also allegedly failed daily quality-control checks often.
“I am sorry if this email sounds attacking in any way, I do not intend it to be,” the employee told Ms. Holmes. “I just feel a responsibility to you to tell you what I see so we can work towards solutions.”
Ms. Holmes forwarded the email to Mr. Balwani. He replied to the employee, who no longer works at Theranos, denied all the claims and questioned the employee’s understanding of statistics and lab science.
Quality-control failures were due to the “newness of some of our processes, which we are improving every day,” Mr. Balwani wrote.
He added: “This is product development, this is how startups are built.” The reply ended with an edict that the “only email on this topic I want to see from you going forward is an apology that I’ll pass on to other people.”
Ms. Buchanan says the employee was too inexperienced to “make these types of comments” and “struggled” to grasp Theranos’s scientific processes. The company has disclosed its test methods to regulators, she adds.
www.wsj.com/articles/at-theranos-many-strategies-and-snags-1451259629
