What Makes Theranos Company Unique
Theranos: the rise and fall of a superstar
As the "youngest self-made billionaire in the world", Elizabeth Holmes was hailed by influential sponsors and the media, criticism of lack of transparency brushed aside. Your promise of a medical revolution is now in ruins.
The agency's letter, dated January 25, is just under four pages long and in brittle bureaucratic English it may announce the death sentence for one of the most fascinating biotech companies in Silicon Valley.
The regulatory audit of Theranos, a billion dollar blood diagnostics provider, revealed several legal violations, above all practices "that pose an immediate threat to the health and safety of patients". In the letter from the Centers for Medicare and Medicaid Services (the US agency responsible for overseeing medical laboratories) this is described as a situation “where immediate corrections are required” because otherwise “people from the laboratory or the health and safety of the general public are threatened with serious injury, damage or death at any time.
A laboratory whose blood tests may be fatal: business partners don't like to hear that. What exactly is wrong cannot be inferred from the letter. For example, it is conceivable that blood coagulation tests could produce incorrect results. This could cause fatal internal bleeding in stroke patients who are given blood-thinning medication based on such laboratory results.
In any case, the drugstore chain Walgreens announced on Thursday that it would not send any blood samples to this laboratory in Newark, California until further notice. Theranos now has ten days to correct the grievances to the authorities. Failure to do so could face sanctions ranging from daily fines of $ 10,000 to forced closure.
This bad news calls into question the life's work of one of the most colorful personalities in the American biotechnology industry. When Elizabeth Holmes was seven, she drew a detailed blueprint for a time machine. When she was nine, she read Herman Melville's novel “Moby Dick” in one go. At 16, she was so fluent in Mandarin that it was good enough for specialty courses at Stanford University (she completed three years of college-level Mandarin before graduating from high school).
A few years later, at the age of 19 and after only one year of studying chemical engineering at Stanford, she applied for her first patent: a test method that draws numerous diagnostic conclusions from just one drop of blood and sends these results to the treating physician via a wireless Internet connection. Her professor urged her to finish her studies before diving into the jungles of Silicon Valley. "What for?" She threw at him. "I already know what I want to know."
Like Steve Jobs. Holmes left university and started her company: Theranos, a combination of the words therapy and diagnosis. It quickly became apparent that the now 32-year-old Holmes has what it takes to be a technology star. That was also enough for the company's commercial benefit. “We didn't need any advertising. With her, we have the best publicity that one can get, ”said Richard Kovacevich, who sits on the Theranos supervisory board, exulted the former CEO of the major bank Wells Fargo. Not only because of the black turtleneck, which quickly became their trademark, the daughter of a successful couple, networked in the political scene in Washington as well as in the better circles of the West Coast, was soon compared to Steve Jobs, the late founder of Apple. Holmes combines high intelligence with youthful attractiveness and that whispering secrecy that also cemented Jobs' fame as one of the most important founding figures of our time.
Because Theranos 'promise sounds just as beguiling as Jobs' earlier announcement of a completely new type of mobile communication did. It claims that its technology can revolutionize the market for medical diagnostic blood tests, which amounts to around 70 billion dollars (64 billion euros) annually in the USA alone. Instead of sticking a needle, which is intimidating for many people, and filling several vials with blood, which are tested in elaborate tests for the blood sugar level, the number of blood platelets and other important properties, a small needle prick in the finger should only deliver a drop of blood from which Theranos machines and computer programs can draw hundreds of diagnostic insights. Instead of paying $ 50 or more for a traditional cholesterol test, the Theranos test at Walgreens costs just $ 2.99.
But Holmes not only had a good idea, but also the personal contacts to raise start-up capital. Venture capital investor Timothy Draper, a neighbor and friend of the family, gave her the first million. A former top banker and her father's college colleague introduced her to Silicon Valley magnate Don Lucas, who once came across a gold mine with his investment in software developer Oracle. Lucas, in turn, introduced Holmes to Oracle founder Larry Ellison, and both gentlemen joined Theranos. In total, Holmes has raised more than 400 million dollars in capital, Theranos is valued at around nine billion dollars. Since she holds just over half of the shares, the designation as the "youngest self-made billionaire in the world", with which she was chosen by the magazine "Forbes", is probably appropriate.
George Shultz and friends. But for some years now, the critical voices have been increasing. They point out that Holmes' technology has not been critically examined by other researchers in any prestigious scientific journal. John Ioannidis, a medical professor at Stanford University, criticized Theranos' "sham research" in the prestigious "Journal of the American Medical Association" in February last year. By this, he understands a phenomenon that “creates a mixture of possibly brilliant ideas, aggressive company announcements and mass media hype, a total uncertainty about which evidence can be trusted”.
Theranos' corporate structure is also questionable. In the twelve-member board, so to speak the supervisory board, sits with William Foege, the retired director of the Centers for Disease Control of the US health authority, a single physician with specialist training. But Foege will be 80 in March, and most of the other board members are old too: first and foremost, 95-year-old George Shultz, Treasury Secretary under Richard Nixon and Foreign Secretary under Ronald Reagan; 92-year-old Henry Kissinger, Nixon's Secretary of State; 77-year-old former Democratic Senator Sam Nunn; and 88-year-old William Perry, Bill Clinton's Secretary of Defense. Holmes met Shultz at a conference in 2011 and brought him on board Theranos. Shultz brought with him half a dozen of his (very) old political friends, all of whom are filing consultancy fees at the Hoover Institution at Stanford University. Eight of the twelve supervisory boards are former politicians, senior civil servants or retired military personnel. What insight they can get into the operative business of Theranos is questionable. “It has an ethereal quality, that is to say: It looks like 19”, Kissinger enthused about the “New Yorker”. “She leads the company with intellectual dominance. She knows her subject. "
Series of flops. Even before the fatal letter from the authorities this week, Theranos' commercial future was questionable. After almost twelve years, it is still unclear what this company is actually doing to make money and justify its high rating, which puts it on a par with the two established industry leaders in blood tests, Quest and Laboratory Corporation of America.
Several business ideas came to nothing. First, Holmes tried to win drug manufacturers such as Pfizer and GlaxoSmithKline to buy their diagnostic technology for clinical testing of new pharmaceuticals. But the machines did not work reliably. Pfizer ended its collaboration years ago, saying GlaxoSmithKline never worked with Theranos on clinical trials.
The next idea, a diagnostic device for home use, also failed. Theranos hired Apple product designers, but the machine was too big. The attempt to sell portable diagnostic equipment to the Pentagon was also unsuccessful. They were also too heavy and also not yet officially approved.
How it will go on with Theranos is open. Holmes has abstained from public statements since mid-December. She hired two public relations consultants and fired the head of the troubled Newark laboratory. The current blood tests run on conventional, bought-in machines. A fundamental revolution in testing is therefore not possible. "We have to grow," said Holmes 'brother Christian, Theranos' head of product development, to the "New Yorker" a year ago. "If we can't do that, we'll be killed."
Theranos is a laboratory diagnostic company based in Palo Alto, California. The company promises to be able to produce numerous findings from just one drop of blood. In several dozen drug stores in California and Arizona, you could buy such tests for $ 2.99.
Elizabeth Holmes founded Theranos at the age of 19 and grew it to a book value of nine billion dollars. Serious criticism from regulators is now casting a shadow over the company's future.
("Die Presse", print edition, January 31, 2016)
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