CSU Law of Entrepreneur Case Study

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REV: FEBRUARY 13, 2020
NIEN-HÊ HSIEH
CHRISTINA R. WING
EMILIE FOURNIER
ANNA RESMAN
Theranos: Who Has Blood on Their Hands? (A)
On January 17, 2017, Robert Colman and Hilary Taubman-Dye encountered an obstacle in their
class-action lawsuit against Theranos, a high-profile blood diagnostics startup company. In their
lawsuit, Colman and Taubman-Dye, both indirect investors in Theranos, claimed that the company
and its officers had violated California securities law and engaged in fraud. That day, Elizabeth
Holmes, CEO of Theranos, and Ramesh “Sunny” Balwani, former president and chief operating officer,
filed a motion in the U.S. District Court for the Northern District of California to dismiss the suit. 1
Holmes had founded Theranos in 2004. The company claimed to have created a product that could
run an extensive set of diagnostic tests on a single drop of blood, a process that was faster, cheaper,
and less invasive than traditional blood draws. Holmes led Theranos to a peak valuation of $10 billion
by 2014 and was widely celebrated in the media. 2 In late 2015, however, a Wall Street Journal (WSJ)
article exposed Theranos’ development struggles and use of non-proprietary equipment in its tests.
Subsequent investigations revealed that Theranos, despite having commercial operations in 40
Walgreens pharmacies across multiple U.S. states, lacked a functioning product. 3
Theranos raised five rounds of funding between 2004 and 2013. In September 2013, Colman, cofounder of the Silicon Valley boutique investment bank Robertson Stephens & Company, had invested
indirectly through Lucas Venture Group (LVG), a venture capital (VC) firm located in the San Francisco
Bay area. He had purchased a member interest in a fund specifically created to invest in Theranos’ next
funding round. Colman had not interacted with Holmes or other employees of Theranos; Donald A.
Lucas, LVG’s founder, managed the investment. According to the lawsuit, “[Donald A.] Lucas directly
solicited Mr. Colman’s investment, at the invitation of Theranos and Holmes. [The] invitation was
purportedly a favor to [Donald A.] Lucas, whose father, Donald L. Lucas, originally funded Theranos
and ‘mentored’ Holmes.” 4
Taubman-Dye worked as a technical recruiter for companies including LinkedIn and Google. 5 She
had agreed to purchase shares in Theranos through SharesPost Inc., an online marketplace that served
as a broker for private company securities, in August 2015. Individuals who chose to invest through
SharesPost were informed on the website that they “must be prepared to withstand a total loss.” 6 The
website also ensured that all users had a personal net worth of $1 million or an annual income of
$200,000. 7 After the WSJ article came out in October, she attempted to void her Theranos investment.
Professor Nien-hê Hsieh, Senior Lecturer Christina R. Wing, Emilie Fournier (MBA 2019), and Anna Resman (MBA 2019) prepared this case with
the assistance of CRG Case Researchers Nathaniel Schwalb and John Masko. This case was developed from published sources. Funding for the
development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2019, 2020 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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Theranos: Who Has Blood on Their Hands? (A)
Theranos had first right of refusal to buy back shares that any primary investor chose to sell on the
secondary market. Theranos chose not to buy the shares; meaning that Taubman-Dye’s investment
went through on December 7, 2015.
In contrast to direct investors in a privately-held company, as indirect investors Colman and
Taubman-Dye were not able to sue Theranos under federal securities law. In November 2016, they
joined to file a class-action lawsuit in California that represented more than 200 parties who had
invested directly or indirectly between July 2013 and October 2016. Central to Holmes and Balwani’s
motion to dismiss the lawsuit was that Colman and Taubman-Dye had not bought shares directly from
Theranos. 8
Colman and Taubman-Dye were not alone in asking about their investment in Theranos: How had
they missed so many warning signs, and what recourse would they have against the company, its
directors, and its executives? How did hundreds of employees, customers, reputable companies in the
medical space, and sophisticated investors not realize that while Theranos was valued at $10 billion, it
was actually worth near nothing? What had made this company such a convincing sell despite the
secrecy and limited information flow? How were so many caught up in the hype and why were
concerns not surfaced sooner—especially given the risks to customers who relied on Theranos test
results to make medical decisions?
Elizabeth Holmes
Growing up in Houston, Texas, Holmes expressed at an early age what kind of future she wanted
for herself. When a relative asked what she wanted to be when she grew up, she responded confidently,
“a billionaire.” 9 Holmes’ family had a long history of success in business and public service. Her father,
a U.S. State Department official, was a descendant of the founder of the famous Fleischmann Yeast
Company, and her mother came from a family of high-ranking government officials, with ancestry
dating back to one of Napoleon’s top generals. Her father’s storytelling emphasized making the world
a better place while generating a substantial fortune. 10
Holmes was a top student at her prestigious high school and was accepted to Stanford University
in the spring of 2002. She selected chemical engineering as her field of study. 11 In her first year at
Stanford, Holmes took an “Introduction to Chemical Engineering” class with Professor Channing
Robertson, the associate dean of Stanford’s School of Engineering. 12 While in the class, she convinced
him to let her assist Shaunak Roy, one of Robertson’s PhD students, in his research.
After just one semester, Holmes’ desire to obtain a degree was already waning. Nevertheless, she
completed her first year and secured an internship at the Genome Institute of Singapore. During her
summer abroad, she was exposed to conventional, low-tech methods for blood testing. Holmes felt that
these cumbersome and painful collection processes, which had remained unchanged for decades, were
ripe for disruption. She returned home to Houston eager to find a better way, and set out on a rigorous,
sleepless schedule for five days, culminating in a patent application for an arm patch which used tiny
needles both to test blood and administer drugs. 13
Upon her return to Stanford in the fall of 2003, Holmes shared her work with Robertson and Roy.
Robertson was impressed by her synthesis of complex research and her entrepreneurial fervor. He
encouraged Holmes to move forward with her invention and found a startup. Holmes took his advice
and dropped out of Stanford. Roy became her first employee and a minority stakeholder, and
Robertson her first board member. She named the company “Real-Time Cures,” a name she would
2
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Theranos: Who Has Blood on Their Hands? (A)
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later change to Theranos—a portmanteau of the words “therapy” and “diagnosis” (see Exhibit 1 for a
timeline of significant events). 14
Revolutionizing Healthcare
Blood testing was commonly used to assess an individual’s general health and to detect more severe
conditions such as diabetes, cancer, and coronary heart disease. In a few instances, a finger prick could
pull the amount of blood necessary for testing. For most tests, however, the blood was extracted from
a vein or artery using a hypodermic needle. These blood draws were primarily performed by
phlebotomists, technicians who were specifically trained on how to draw blood properly and deliver
specimens to the laboratory for analysis. In 2003, Quest Diagnostics and LabCorp were the two leading
providers of diagnostic testing services. That year, they had annual revenues of $4.7 billion and $2.9
billion, respectively, and both operated networks of clinical laboratory centers across the U.S. 15
Since early childhood, Holmes had a phobia of having her blood drawn. “I’m definitely afraid of
needles, it’s the only thing that scares me,” she explained in an interview. 16 This phobia, in addition to
her internship experience, was a driving force in her decision to focus on the blood diagnostics sector.
Holmes felt that there were unnecessary pain points with current technologies: she explained, for
example, that there were many individuals who avoided getting their blood drawn because they
shared her fear of needles or did not want to wait days to get results back from the lab. 17
While blood testing was Holmes’ entree into healthcare, she had a loftier vision in mind. In a
conversation with Robertson, Holmes explained, “Systems like this could completely revolutionize
how effective healthcare is delivered. And this is what I want to do. I don’t want to make an incremental
change in some technology in my life. I want to create a whole new technology, and one that is aimed
at helping humanity at all levels regardless of geography or ethnicity or age or gender.” 18
Early Days
The early days of Holmes’ startup were focused on fundraising. Biotech ventures required extensive
upfront capital to invest in research and development and clinical trials; Theranos was no exception. 19
Holmes began her search for capital by tapping into family connections. Tim Draper, founder and
managing director of Draper Fisher Jurvetson (DFJ), had been a neighbor of the Holmes family and his
son, Jessie Draper, was Holmes’ childhood friend. He invested $1 million into Theranos. Victor
Palmieri, a lawyer and retired corporate turnaround specialist who worked with her father in the State
Department during the Carter administration, also invested. 20
These initial investments created momentum, attracting additional investors to an eventual $6.95
million Series A round that closed in March 2005. The post-round valuation was $27 million (see
Exhibit 2 for investors). Despite Holmes’ notable fundraising success, she did not impress everyone
whom she approached. MedVenture Associates, a VC firm specializing in healthcare technology,
challenged Holmes during a presentation. She left the meeting early, unable to adequately answer their
questions. MedVenture Associates passed on investing after the presentation. 21
Within the first year, the Theranos team quickly came to realize that Holmes’ original patch design
“bordered on science fiction.” 22 Thus, the product plan evolved into a cartridge-and-reader system,
named the Theranos 1.0. According to the plan, the patient would prick a finger to pull a tiny sample
of blood and put the sample into a small cartridge, resembling a thick credit card. The cartridge would
fit into a larger reader machine, which would use microfluidics to create a chemical reaction and
3
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Theranos: Who Has Blood on Their Hands? (A)
generate results. The frequency and flexibility with which these blood draws could be performed could
allow a doctor to have near up-to-the-minute patient data and to make adjustments to the patient’s
treatment. The hypothesis was that the patient could independently complete the blood draw at home,
without the presence of a trained technician. 23
The idea quickly caught on. A 2005 article named Theranos one of the “hottest startups in the
Valley,” 24 helping Holmes raise a $9.1 million Series B round in February 2006 that included legendary
Silicon Valley venture capitalist Donald L. Lucas, Oracle co-founder Larry Ellison, and venture capital
firm ATA Ventures. Holmes hired Henry Mosley, an experienced chief financial officer, to lead a
fundraising push that stretched from March to November 2006 and raised $32.4 million. 25
Through this fundraising period, Mosley prepared investor pitch decks (see Exhibit 3), but Holmes
challenged his revenue projections as overly conservative, and Mosley revised them upwards. He felt
comfortable revising the financials because Holmes claimed Theranos had secured revenue-generating
agreements with multiple pharmaceutical companies. Mosley, however, was never allowed to see any
of these contracts. 26
His confidence was shaken after a few employees returned from a trip to Novartis, a global
pharmaceutical firm, in Switzerland. While Holmes returned home seemingly ecstatic, none of the
other employees involved seemed to share her elation. Mosley questioned Roy, who confessed that the
Theranos 1.0 did not always function properly during presentations, including on their recent visit to
Novartis. When the product malfunctioned, a team working remotely back in California fabricated
results on the electronic reader to conceal the glitch. 27
Armed with these new revelations, Mosley confronted Holmes. He said: “We’ve been fooling
investors. We can’t keep doing that.” 28 Holmes fired Mosley, telling him that his line of questioning
was unproductive and violated Theranos’ ‘team player’ culture. After Mosley’s departure in November
2006, Holmes did not hire a replacement CFO. 29
Fake it ‘Till You Make it
In early 2008, Theranos made the move to a larger and better-located office. The move to a centrally
located part of Palo Alto, one of Silicon Valley’s biggest startup hubs, signaled to some observers that
Theranos had officially arrived. 30 The company had been growing and made several high-profile hires
and board appointments, including former Apple executives. Internally, however, challenges were
brewing. 31
Holmes hired Todd Surdey, a veteran executive, to lead sales. As he adjusted to the new role, he
questioned the team about revenue projections that they had shared with the board and investors. His
team had no detailed calculations to justify the forecasts and confessed that they felt the projections
were “vastly overinflated.” 32 Revenue calculations were largely dependent on unsecured
commitments from companies like Pfizer and AstraZeneca. If these companies chose not to move
forward after the validation phase, the anticipated revenue would immediately disappear. Moreover,
Surdey learned that the devices malfunctioned regularly. This increased the odds that partners would
walk away, given that the technology was unlikely to pass the validation phase. 33
Surdey brought these concerns to general counsel Michael Esquivel, who confessed he had similar
doubts. In March 2008, they contacted board member Tom Brodeen and informed him that they felt
Theranos was using inflated revenue projections that were not tied to concrete commitments from
partners or successful product development. Brodeen, a successful businessman with consulting and
4
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Theranos: Who Has Blood on Their Hands? (A)
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technology experience, was a newer member of the board and advised them to take their concerns
directly to the chairman, Donald L. Lucas. 34
This was the second time in a year that Lucas had been confronted with questions about how
Theranos was being managed (board member Avie Tevanian had surfaced similar concerns). Lucas
scheduled an emergency board meeting where Holmes, a board member herself, was asked to wait
outside while the others discussed the situation. They decided that Holmes would step down as CEO
and Brodeen would step in as interim CEO. They planned to tell Holmes that she had accomplished a
lot at Theranos but was simply too young and inexperienced to lead the company at this later stage.
When they brought Holmes back in the room and shared the news, she assured them that she was
more than suited for the job. She promised change, including more transparency and responsiveness;
when the meeting adjourned, Holmes was still at the helm. 35
Shortly following the meeting, Holmes fired the employees who had raised concerns with the
board. Surdey and Esquivel were both respected employees at Theranos, and their departure added to
a long string of recent leadership exits. By the end of 2008, many more would leave Theranos, including
most of the company’s ex-Apple employees. 36
Coming to a Pharmacy Near You
Walgreens
In January 2010, Walgreens, a major pharmacy store chain, received an email from Theranos that
explained the startup’s technology and proposed a potential partnership. Theranos informed
Walgreens executives that its machines could perform blood tests with just a few finger pricks and
offer real-time results at a fraction of the cost of incumbent laboratories. Two months later, Holmes
presented to Walgreens executives at their Illinois headquarters. 37 She impressed Dr. Jay Rosan, who
was responsible for exploring new growth opportunities as part of Walgreens’ innovation team. Later
that summer, a team from Walgreens visited Theranos headquarters to hammer out an agreement for
a pilot test. To validate Theranos’ technology, Walgreens hired lab consultant Kevin Hunter. 38 Hunter
had started his own consulting firm after years of experience in clinical laboratories, notably at Quest
Diagnostics. 39
Prior to the visit, Hunter submitted standard requests to Theranos—a tour of the lab and a live test
of the product with his own blood. Holmes and her team rejected both. Two weeks prior to the visit,
Hunter had requested a live Vitamin D test with Theranos equipment, so that he could take the same
test at Stanford Hospital later that day and compare the results. Theranos denied Hunter the live
Vitamin D test due to an alleged lack of advance warning. Throughout the visit, the Theranos hosts
were highly secretive. Hunter was not allowed to walk anywhere in the office alone. For a dinner in
the evening, Holmes requested that everyone arrive at the restaurant separately to avoid attracting
attention. Hunter wondered who she thought might be watching and whether all these extra
precautions were necessary. 40
Hunter also perceived significant risk in the regulatory strategy Theranos was pursuing. Theranos
claimed that the tests it planned on offering in Walgreens stores were “laboratory-developed tests”
which meant that they fell in a gray area between the Federal Drug Administration (FDA) and the
Centers for Medicare and Medicaid Services in terms of oversight. In the meantime, no one was
explicitly responsible for overseeing and validating Theranos’s labs and testing methods. 41
5
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Theranos: Who Has Blood on Their Hands? (A)
Hunter shared his concerns with the Walgreens leadership team. The concerns were largely brushed
aside; Rosan and other executives had been impressed with what Holmes had to offer, and the pilot
moved ahead with a plan to place up to 90 Theranos readers in Walgreens stores the following year. 42
A contract was negotiated for Walgreens to purchase up to $50 million of Theranos cartridges and loan
Theranos an additional $25 million. 43 The commercial launch in Walgreens was set for February 1,
2013.
Safeway
Holmes also struck a deal with Safeway, a major U.S. grocery chain headquartered in California.
She quickly developed a bond with Safeway’s CEO Steve Burd, who had championed an innovative
preventative health program for Safeway employees and believed in universal health coverage. 44
When the two met, Burd offered Holmes token presents, including a model private jet, telling her that
her next one would be life-sized. It was not long before Safeway also had an agreement with Theranos.
Burd agreed to loan the company $10 million and to take on $350 million in renovations to create
“wellness centers” in 800 Safeway locations, featuring Theranos technology. 45
Company Culture
Sunny Balwani
When she attended Stanford’s summer Mandarin course in Beijing as a precocious high school
graduate in summer 2002, Holmes had difficulty making friends and was bullied. Ramesh “Sunny”
Balwani, an older program participant, helped her get through the summer. 46 This was the beginning
of a long relationship.
Born in Pakistan in 1965, Balwani immigrated to the United States in 1986 to pursue undergraduate
studies at the University of Texas at Austin. A coder during the dot-com boom, he was part of the
leadership team at CommerceBid.com, an online business-to-business auction platform for supplier
selection. 47 When CommerceBid.com was acquired, Balwani cashed out his shares, worth nearly $40
million. The tech bubble burst shortly thereafter, driving CommerceBid.com’s acquirer out of
business. 48
Balwani joined Theranos in September 2009 (see Exhibit 4 for leadership profiles). He had no
experience in biotechnology, but took on the role of executive vice chairman and, later, chief operating
officer. Balwani had a forceful, aggressive managerial style. He tended to promise results to customers
and investors that other Theranos employees believed were impossible. 49
Balwani and Holmes were involved in a romantic relationship both before and during Balwani’s
tenure at Theranos. They did not, however, disclose this relationship. When questioned by the few who
knew, Holmes insisted that their relationship had ended before Balwani joined the company. 50
‘Stealth Mode’
Holmes and Balwani prioritized privacy and security, siloing functional teams and limiting crossfunctional communication. Theranos’ IT system was constructed so that different teams could not share
information or even speak with each other through instant messages. Using start-up terminology,
Holmes called this operating posture ‘stealth mode.’ As a reason for the intense level of secrecy, Holmes
consistently cited protection of trade secrets and sensitive information. However, the security policies
hampered product development, quality control, and productivity. Given that the engineering and
6
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Theranos: Who Has Blood on Their Hands? (A)
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chemistry teams were not allowed to collaborate, overall system tests were not conducted; each
department only ran tests on their respective parts of the product. 51
Theranos management monitored employees closely. The IT department deployed online tracking
mechanisms and executive assistants sometimes added employees on Facebook and reported on their
personal activities. Holmes also monitored the times at which employees entered and left the office. 52
When quarterly board meetings were held at headquarters, employees were not allowed to speak
to, or even acknowledge, board members. Holmes would quickly escort the board to a conference room
and pull the shades down, a situation that, by one account, “felt like CIA agents conducting secret
debriefings with an undercover operative.” 53
Employee Turnover
Employees transitioned in and out of Theranos at a feverish pace. Matt Bissel, the head of IT in the
mid-2000s, saw this turnover better than anyone, as he supported Holmes and Balwani in offboarding
terminated employees. 54 He quickly recognized the extreme volatility of their attitude towards specific
employees. Balwani terminated employees so frequently that a term was adopted internally for when
this occurred—it was said that Balwani “disappeared” them. 55 Bissel witnessed the firing of at least
thirty people during the two and a half years he spent at the company. In addition to frequent abrupt
firings, many individuals chose to leave of their own volition (see Appendix). 56
Commercial Launch Heightens Pressure
Theranos missed its commitment to launch in select Walgreens stores on February 1, 2013,
persuading Walgreens executives to postpone the date to September 9. In early 2013, Holmes focused
on positioning Theranos’ brand for the launch. She selected Chiat\Day, a Los Angeles-based creative
agency known for its pivotal role in the iconic Apple advertisements of the 1980s, to guide Theranos’
branding and advertising strategy. 57
Theranos was not a typical Chiat\Day client; the large, well-known agency was expensive and
rarely sought out by start-ups. Stan Fiorito, Chiat\Day’s account lead for Theranos, questioned how a
small company was able to pay $6 million annually for the agency’s services. The account team was
equally perplexed by the abnormal level of secrecy Holmes demanded. As the September deadline
loomed, they also began to question the sweeping claims that Theranos was making.
The agency repeatedly asked Holmes to show them the evidence backing up her statements that
“Theranos could run over 800 tests on a drop of blood,” that “its [Theranos’] technology was more
accurate than traditional lab testing,” and that “its [Theranos’] tests were approved by the FDA.” 58
Holmes cited a lengthy report supporting the claims but never provided the report to Chiat\Day.
Eventually, the agency received a two-page summary of Holmes and Balwani’s meeting with several
scientists from Johns Hopkins University School of Medicine in April 2010. The summary stated that
John Hopkins had “conducted due diligence on the Theranos technology and found it ‘novel and
sound’ and capable of ‘accurately’ running ‘a wide range of routine and special assays.” 59 In reality,
the Johns Hopkins scientists never tested the product independently, because Holmes had never sent
them a device following her presentation. 60
Eight hours before launch, Theranos demanded an emergency conference call because their legal
team had last-minute copy changes. The Chiat\Day team had been requesting this legal review for
months. In the subsequent three-hour meeting, Theranos’ claims were significantly softened.
7
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Theranos: Who Has Blood on Their Hands? (A)
“Welcome to a revolution in lab testing” was changed to “Welcome to Theranos.” “Faster results. Faster
answers” was changed to “Fast results. Fast answers.” “A tiny drop is all it takes” was changed to “A
few drops is all it takes.” 61
The Rise of a Unicorn
To coincide with the Walgreens commercial launch in Arizona (see Exhibit 5), Holmes landed an
interview that ran in the WSJ on Saturday, September 7, 2013 (see Exhibit 6). 62 Reporter Joseph Rago
described an inspiring entrepreneur whose “inventions, which she is discussing in detail here for the
first time, could upend the industry of laboratory testing and might change the way we detect and treat
disease.” 63 The article included statements about the technology’s accuracy, scope, speed, and future
partnerships and ended by comparing Holmes to several of the most iconic technology entrepreneurs
of the time. Former U.S. Secretary of State and new Theranos board member George Shultz, who
facilitated the timely release of this op-ed, was quoted in the article that Ms. Holmes could be “the next
Steve Jobs or Bill Gates.” 64
Funding Pours In
Word of Theranos’ commercial launch and dramatic rise quickly circulated among venture
capitalists in the Valley. Donald A. Lucas, the son of former board chairman Donald L. Lucas, who had
followed in his father’s footsteps by starting the Lucas Venture Group (LVG) in 2009, took a second
look at the company. His firm aggregated funds from investors, known as limited partners, and
deployed the capital towards early-stage investments. 65
Donald A. Lucas had first been introduced to Theranos in 2006 when Holmes presented her
technology to a group of investors on Sand Hill Road, Palo Alto’s Magnificent Mile of venture capital
firms. Lucas chose not to invest at that time; he felt that Holmes was unfocused and “did not like or
trust her.” 66 But by the 2013 commercial launch, Lucas had changed his mind. He called his long-time
friend Mike Barsanti to pitch him on the investment. Barsanti was surprised by Lucas’ call, since he
had been with the investor at Holmes’ presentation on Sand Hill Road in 2006. He recalled that Lucas
had not been impressed with Holmes or her technology. 67 Barsanti wondered what had changed.
Lucas explained that Theranos was about to launch in Walgreens stores, and that the product had
been deployed by the U.S. military in Iraq (in reality, Theranos had not been authorized to use its
technology on soldiers; rather, they had been given permission to test leftover unidentified blood
samples to see if Theranos’ results matched the army’s conventional blood testing methods). Lucas
added that Holmes had given LVG the opportunity to invest at a discount prior to the next big funding
round. Lucas’ father had recently been diagnosed with Alzheimer’s disease, and Holmes claimed to be
offering Donald A. Lucas the discount in appreciation of her close relationship with the elder Lucas. 68
On the date of Theranos’ commercial launch, Barsanti received an email that Donald A. Lucas sent
to a group of LVG limited partners, officially inviting them to contribute to an investment in Theranos.
His email stated that Theranos had “signed contracts and partnerships with very large retailers and
drug stores as well as various pharmaceutical companies, HMOs, insurance agencies, hospitals, clinics,
and various government agencies” and that the company had been “cash flow positive since 2006.” At
the discounted price that LVG received from Holmes, Theranos was valued at $6 billion (see Exhibit
7). Barsanti recalled with a bit of annoyance that in 2006, when Lucas passed on the investment,
Theranos had been valued at $40 million. Barsanti had created a family LLC to invest in attractive
venture deals. After discussing with his family members who were also part of the fund, Barsanti sent
over $790,000. 69
8
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Theranos: Who Has Blood on Their Hands? (A)
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The WSJ op-ed had also piqued the interest of the San Francisco-based investment firm Partner
Fund Management. Managed by two experienced investors, Christopher James and Brian Grossman,
the hedge fund held about $4 billion in assets and had had a successful run since its founding in 2004.
While the fund primarily invested in publicly traded securities, it did occasionally invest in private
companies. Its healthcare portfolio had performed well in recent years. 70
When James and Grossman visited the Theranos campus in December 2013, they were struck by
the extreme level of on-site security. They had to sign a non-disclosure agreement to enter the building
and were escorted everywhere, including the bathroom. These security measures left the investors with
the impression that Theranos had extremely important intellectual property. 71 During the visit, Holmes
and Balwani said that “Theranos could perform 98% of its developed blood tests on tiny blood samples
pricked from a finger and that they had submitted every single one of them to the FDA for approval”
and that the “Theranos system was capable of running seventy different blood tests simultaneously on
a single finger-stick sample.” 72 (This latter claim was especially surprising as bioengineering
researchers around the globe had been actively working on this problem for years—different classes of
blood tests required different processing methods; thus, it was very challenging to perform a large
number of blood tests with a single sample of blood. 73)
Theranos’ impressive board of directors also helped to lure Partner Fund towards an investment.
James and Grossman were struck by the impressive lineup of high-profile politicians and seasoned
business professionals, including Shultz, former secretary of state Henry Kissinger, and former military
general James Mattis (see Exhibit 8). James and Grossman were also made aware that David Boies, one
of the most prominent American lawyers of his time, was a special adviser to the board. 74
On February 4, 2014, James and Grossman made a $96 million investment in Theranos as part of a
Series C-2 round that totaled $633 million. They purchased 5,655,294 shares at $17 per share, which
was $2 per share more than LVG had bought in at just several months prior. Theranos was now valued
at $9.06 billion. 75
Holmes in the Spotlight
In 2014, Holmes still owned over half of Theranos. The company’s $9 billion valuation elevated her
own personal net worth to nearly $5 billion. Media outlets, investors and prominent institutions alike
flocked to Holmes to understand her entrepreneurial story. 76
On June 30, 2014, Fortune ran a feature story about Holmes, titled “This CEO is out for Blood,”
featuring a captivating cover photo of the young entrepreneur. In the article, her former Stanford
professor Channing Robertson compared her to technology legends of the recent decades: “When I
finally connected with what Elizabeth fundamentally is, I realized that I could have just as well been
looking into the eyes of a Steve Jobs or Bill Gates.” 77
The article went on to explain that Theranos’ technology could execute over 200 of the most
frequently requested blood tests without a syringe, that the tests could be conducted at a quarter to
half of the cost of traditional lab centers, and that results were made available within hours. The author
commented: “Precisely how Theranos accomplishes all these amazing feats is a trade secret. Holmes
will only say—and this is more than she has ever said before—that her company uses ‘the same
fundamental chemical methods’ as existing labs do. Its advances relate to ‘optimizing the chemistry’
and ‘leveraging software’ to permit those conventional methods to work with tiny sample volumes.” 78
Media coverage continued to grow. In September, Holmes was on the cover of Forbes’ annual
“Forbes’ 400” issue, a list of the 400 wealthiest Americans in that year. In a striking black and white
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Theranos: Who Has Blood on Their Hands? (A)
photo with the caption reading “The Freshman: Elizabeth Holmes Leads the Class of 2014,” Holmes
held a tiny vial of blood and stared directly out from the page (see Exhibit 9).
In the same month, Holmes took the stage at TEDMED Live 2014, an annual conference focused on
global public health and medical innovation, in a black turtleneck. With her signature deep voice, she
opened, “I believe the individual is the answer to the challenges of healthcare, but we can’t engage the
individual in changing outcomes unless individuals have access to the information they need to do
so.” 79 Throughout the 15-minute talk that followed, Holmes spoke slowly and deliberately,
highlighting the pain, suffering, and high costs that patients endured and how Theranos would
quickly, accurately, and painlessly diagnose their medical issues. 80
Time Magazine named Holmes to its list of the 100 most influential people of the year in April 2015.
She shared the honor with such figures as Hillary Clinton, Pope Francis, Barack Obama, and Malala
Yousafzai. 81 Her biography for the feature was written by Theranos board member Kissinger. He
closed the profile: “Elizabeth is in the process of turning an undergraduate’s vision into a global reality.
That she combines fierce and single-minded dedication with great charm makes her a formidable
advocate. Others will judge the technical aspects of Theranos, but the social implications are vast.” 82
Beyond media outlets, notable institutions backed Holmes’ work in healthcare innovation. She was
inducted into the Harvard Medical School board of fellows, and President Barack Obama named her a
Presidential Ambassador for Global Entrepreneurship. 83
Investigative Reporting
On December 15, 2014, The New Yorker published a feature on Holmes, similar to the glowing
profiles published elsewhere. 84 Adam Clapper, a pathologist residing in Missouri, read the article and
found Theranos’ claims hard to believe. He dug deeper and found considerable evidence to strengthen
his skepticism. In the article, Holmes had referenced a paper she coauthored for a medical journal titled
Hematology Reports. Clapper discovered that this Italian medical journal was an online-only publication
that charged five hundred dollars to researchers who wanted to publish a paper. Furthermore, Holmes’
paper published in the journal included data points from only one study including six patients and one
blood test. 85 While Clapper was deeply disturbed by what he saw, he knew that he could not challenge
Theranos alone. He reached out to John Carreyrou, an investigative reporter at the WSJ, with whom he
had worked in the past. 86
On February 9, 2015, Carreyrou received a phone call from Clapper. Clapper directed Carreyrou to
the article in The New Yorker and encouraged him to look further into the startup. 87 Carreyrou, who
found that Holmes’ explanations of her technology “sounded like the words of a high school chemistry
student, not a sophisticated laboratory scientist,” was intrigued. 88 After several failed attempts,
Carreyrou connected with Alan Beam, Theranos’ laboratory director, who had recently left the
company. Beam was initially nervous and guarded, as he knew that Theranos’ lawyers were closely
watching him. After Carreyrou established that he would respect Beam’s anonymity, however, the
former laboratory director spoke more freely about his concerns with Theranos. 89 Beam would become
a pivotal resource to Carreyrou as he gathered facts and built a story. 90
Over the next several months, Carreyrou connected with other sources that further solidified his
argument. He spoke with Tyler Shultz, grandson of board member George Shultz, who had recently
left the company. 91 After graduating from Stanford in 2012, Shultz had joined Theranos’ assay
validation team (whose job was to ensure that Theranos’ lab results were reliable and replicable). He
quickly grew disenchanted with Balwani’s tendency to paper over or ignore inaccurate test results.
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Theranos: Who Has Blood on Their Hands? (A)
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After bringing his concerns to Holmes, he instead received a dismissive email from Balwani, solidifying
his decision to leave Theranos. Shultz’s departure would be just the beginning of a years-long legal
battle with the company, in which Holmes’ attorneys accused the whistleblower of stealing Theranos’
“trade secrets.”
Carreyrou also traveled to Phoenix, where he spoke with patients and doctors who had used
Theranos technology in Walgreens testing centers. The customers shared concerning experiences in
which suspect Theranos test results had led to false alarms and medical scares. Over a cup of coffee at
Starbucks, one patient explained that she had been rushed to the emergency room after her Theranos’
test incorrectly reported unusually high levels for calcium, protein, glucose, and three liver enzymes.
Her doctor worried she might be about to have a stroke. The patient underwent a CT scan and two
MRI exams before regaining confidence that her levels were in fact normal. 92
While constructing his story, Carreyrou requested an interview with Theranos but was turned
down. Theranos lawyers, including the high-profile David Boies, eventually met with him at WSJ
offices in June 2015 and pressured him against publishing the story. 93 Holmes also tried to scuttle the
story by meeting with Rupert Murdoch, an early investor in Theranos, who controlled WSJ’s parent
company News Corp. 94 Carreyrou met with the Theranos lawyers for a second time in October and
told them Holmes had one last chance to call Carreyrou and directly address his story before it was
published. Holmes never called, and the investigative report was published on the front page of the
newspaper soon after. 95
Too Good to be True
Inspections Heighten Issues
The October article spurred a series of further investigations into Theranos. On November 10, the
Centers for Medicare and Medicaid Services (CMS) conducted an on-site review of the company’s
laboratory in Newark, California. The federal agency followed up with 45-page report, delivered to
Theranos on January 25, 2016 (see Exhibit 10). The report concluded that Theranos was not in
compliance with the Clinical Laboratory Improvement Amendments of 1988 (CLIA) requirements to
perform laboratory testing and stated that, “the deficient practices of the laboratory pose immediate
jeopardy to patient health and safety.” 96 The company was under risk of losing its laboratory license
and facing civil monetary penalties of $10,000; furthermore, Holmes and Balwani could lose their right
to own or operate a laboratory for two years. Theranos was given ten days to respond to the report. 97
Meanwhile, federal prosecutors began their own criminal investigation in April. Walgreens and the
New York State Department of Health received subpoenas to provide documents and information
relating to their interactions with Theranos. While Theranos had never been granted a license to operate
a laboratory in New York, the company had submitted an application for one. At the same time, the
Securities and Exchange Commission (SEC) began probing into the company’s interactions with
investors to determine whether Theranos had made deceptive statements while fundraising. 98
On July 8, 2016, CMS officially revoked Theranos’ license to operate a laboratory in California and
banned Holmes from owning or operating a lab for two years. While Theranos appealed these
sanctions, the company closed the Newark-based lab later that summer. 99 Theranos’ second laboratory,
which was still operating in Scottsdale, Arizona, received a surprise inspection by the CMS in
September. The agency deemed that this lab also had deficiencies and did not satisfy CLIA
requirements. Days later, Theranos announced that it was closing its laboratory operations and would
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Theranos: Who Has Blood on Their Hands? (A)
lay off 340 employees, 40% of its workforce. According to David Taylor, Theranos general counsel, this
decision had been made before the unannounced inspection in Scottsdale. 100
Walgreens Severs Ties
When Theranos’ deficiencies first came to light in the fall of 2015, Walgreens had reached out to
Theranos for additional information and paused the partnership’s expansion outside of Arizona. 101 In
the midst of multiple federal investigations, Walgreens announced in June 2016 that it was terminating
its partnership with Theranos, effective immediately. For years, Walgreens’ Theranos tests had been
generating questionable results. According to one account:
A patient in Phoenix had called off a vacation after Theranos results incorrectly suggested
she might have deep vein thrombosis. Another test had shown abnormally high TSH in a
pregnant woman already on medication to inhibit that hormone. After seeing the
abnormal Theranos result, the woman’s doctor sent her to a Quest lab to get retested.
Those results were normal. If the doctor had reacted to the Theranos test by increasing the
patient’s medication dosage, she might have lost her baby. 102
Several other patients made alterations to their care based on faulty Theranos test results. One
woman initiated an allergy testing regimen when Theranos gave her a positive result for an
autoimmune disorder called Sjögren’s syndrome. Another was diagnosed with the thyroid condition
Hashimoto’s disease with Theranos tests. She made several medical appointments and was started on
new medications as a result of the diagnosis before being tested at another lab, which found the
Theranos results incorrect. Other patients may even have had unnecessary surgeries based on faulty
Theranos results. 103
Doctors had sent complaints to Theranos regarding strange test results; however, these complaints
were never acknowledged. 104 Beginning June 12, 2016, Walgreens shut down the 40 Theranos Wellness
Centers within its retail locations. “In light of the voiding of a number of test results, and as the Centers
for Medicare and Medicaid Services (CMS) has rejected Theranos’ plan of correction and considers
sanctions, we have carefully considered our relationship with Theranos and believe it is in our
customers’ best interests to terminate our partnership,” said Brad Fluegel, Walgreens senior vice
president. 105 Eventually, Theranos would end up voiding or correcting almost a million test results. 106
Lawsuits Emerge
As public scrutiny intensified and Theranos’ flaws were exposed, investors began to take a stand.
Partner Fund Management, one of Theranos’ major financial backers that led the Series C-2 round in
2014, filed a lawsuit in Delaware court on October 10, 2016. In a letter that Partner Fund sent to its
investors, it stated, “Though a series of lies, material misstatements, and omissions, the defendants
engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain
its investment in the company.” The hedge fund, which was 12 years old at the time, had never
previously been involved in litigation. 107
Walgreens joined the fight on November 8, filing a civil suit that sought $140 million in damages
from Theranos due to a breach of contract. Theranos responded to the charges, stating that it “will
respond vigorously to Walgreens’ unfounded allegations, and will seek to hold Walgreens responsible
for the damage it has caused to Theranos and its investors.” 108
At the end of 2016, Theranos had about $200 million of cash on hand, less than a quarter of the total
funding that it had raised. During an investor call in January 2017, Theranos reported that no material
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Theranos: Who Has Blood on Their Hands? (A)
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revenue was earned in 2015 or 2016, and that the company did not have cash reserves set aside for
potential litigations. 109
Theranos was aware that stakeholders were not pleased with the company’s performance. In early
2017, it offered additional shares to select investors if they pledged not to sue Theranos. Investors
would receive about two additional shares for every share they owned, and these incremental shares
would be taken from the pool of shares that Holmes owned. This arrangement was approved by
Theranos’ board of directors in February 2017 and was scheduled to close in May. It was allegedly only
available to investors that participated in later-stage funding rounds. Partner Fund filed a second
lawsuit attempting to block this deal. LVG told its investors that it had been offered the deal and agreed
to participate. 110
On January 27, 2017, CMS issued another round of sanctions to Theranos that revoked its Arizona
laboratory license, required communication of problems to customers, and banned the company from
billing Medicare. 111 Theranos had 60 days to respond before the sanctions officially went into effect. By
this point, however, Theranos was on its way out of the state. Arizona Attorney General Mark
Brnovich, made it clear that that the state was exploring legal action against Theranos. 112
Colman, Taubman-Dye, and the Class-Action Suit
On November 28, 2016, Colman and Taubman-Dye filed a class-action lawsuit against Theranos
and its officers in the U.S District Court for the Northern District of California under the California
Corporations Code. Neither Colman nor Taubman-Dye had interacted directly with Theranos when
making their investment decisions. They claimed that they had relied on information available to the
general public, such as the company’s press releases and external press coverage. For example, Colman
cited the September 8, 2013 WSJ article and the press release by Theranos on September 9, 2013 about
its partnership with Walgreens. 113
“While Theranos is not traded on a stock exchange, investors who were solicited by venture capital
and other funds, or who purchased indirect interests in Theranos securities through third-parties like
SharesPost, have all been damaged by these public representations,” stated attorney Reed Kathrein of
Seattle-based firm Hagens Berman, who was representing Colman in the lawsuit. “Fund managers are
loathe to sue and forfeit access to start-ups which are their lifeblood. But California law gives us the
ability to represent the ultimate investor who has suffered losses as a result of defendants’ publicity
campaign. As our investigation continues, we will not be surprised to find others who were knowingly
at fault.” 114
In February 2017, Theranos filed a motion to dismiss Robert Colman et al. v. Theranos Inc et al. The
motion centered around three issues:
Different security
First, under California Corporations Code § 25400(d), it was unlawful for a
person selling or offering for-sale securities “to make, for the purpose of inducing the purchase or sale
of such security by others, any statement which was, at the time and in the light of the circumstances
under which it was made, false or misleading with respect to any material fact, or which omitted to
state any material fact.”115 Holmes and Balwani argued that the reference to “such security” meant
that Colman and Taubman-Dye must have purchased the same security offered by Theranos if they
were to argue that Holmes and Balwani committed securities fraud through their public statements.
Indirect purchase of security Second, § 25401 stated that “it is unlawful for any person to offer
or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written
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Theranos: Who Has Blood on Their Hands? (A)
or oral communication that includes an untrue statement of a material fact or omits to state a material
fact necessary to make the statements made, in the light of the circumstances under which the
statements were made, not misleading.” Holmes and Balwani argued that because Colman and
Taubman-Dye did not purchase the securities from them or Theranos, the complaint of securities fraud
did not apply.
Reliance on public statements The third issue concerned the reliance of Colman and
Taubman-Dye on public statements cited in their lawsuit. As stated in one of the Theranos class action
cases, “The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation
(false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent
to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” 116 Holmes and
Balwani argued that public statements “were, on their face, statements promoting Theranos’s services,
not statements intended [to] induce these Plaintiffs—or any investors—to invest in Theranos or the
Third-Party Funds.” 117
They continued:
It is implausible to claim that Theranos released consumer-facing publicity for the
rollout of blood testing services in Walgreens stores for the purpose of inducing Plaintiffs
to invest in Theranos shares, the only security Theranos offered for sale. Indeed, Theranos
had been placing its own private securities with private investors—all without any
publicity, —for nearly 10 years before Plaintiff Colman acquired a “member interest” in
non-affiliated LVG XI, and for nearly 12 years before Plaintiff Taubman-Dye purchased
Series B shares of non-affiliated Celadon. . . And, according to the Complaint, when
Theranos solicited investment from potential private investors, those investors generally
evaluated whether to invest in Theranos based on direct contact with Defendants and by
reviewing confidential materials provided directly to those investors—not generic
consumer-facing publicity. 118
Federal magistrate judge Nathanael M. Cousins would rule on the motion in the coming weeks. In
addition to the legal issues, the case raised many broader economic and ethical questions about the
responsibilities of various parties including direct investors, corporate partners, and board members.
It raised the issue of relevant expertise on science and technology company boards, and called into
question the “fake it till you make it” culture that many attributed to the Silicon Valley start-up world
(see Exhibits 11 and 12). Why did it take so long for the problems at Theranos to be widely understood?
How was it possible that a celebrated consumer-facing healthcare company with a $10 billion valuation
was founded upon a product that simply did not work?
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 1
619-039
Theranos Timeline of Key Events
Summer 2002:
Holmes met Balwani while studying in Beijing
March 2004:
Holmes dropped out of her sophomore year at Stanford to start Real Time
Cures, later renamed Theranos.
March 2005:
Theranos closed $6.9 million Series A round
February 2006:
Theranos closed $9.1 million Series B round
April 2006:
Holmes named to Inc’s “30 Under 30” list
November 2006:
Theranos closed $32.4 million Series C round
November 2006:
Holmes fired CFO Henry Mosley, whom she declined to replace
March 2010:
Theranos met with Walgreens executives at Illinois headquarters
July 2010:
Theranos raised $45 million in Series C funding
March 2013:
Theranos raised $84 million in additional Series C funding
February 2014:
Theranos raised $633 million in additional Series C funding
June 2014:
Holmes featured in Fortune cover story titled “This CEO is Out for Blood”
September 2014:
Holmes spoke at TEDMED 2014 event in San Francisco
September 2014:
Holmes featured on cover of Forbes 400 edition on wealthiest 400 people in the
U.S.; Holmes’ net worth purported to be $4.5 billion
December 2014:
The New Yorker published feature on Holmes in weekly magazine edition
February 2015:
Pathologist Adam Clapper called Wall Street Journal investigative reporter
John Carreyrou to recommend that he look into Theranos
April 2015:
Holmes named to Time’s “100 Most Influential People” list
June 2015:
Theranos representatives met with John Carreyrou at Wall Street Journal offices
in New York
October 2015:
Wall Street Journal published John Carreyrou’s skeptical assessment of
Theranos, spurring a series of investigations into the company
November 2015:
CMS conducted on-site review of Theranos’ Newark, California lab
November 2015:
Safeway ended its partnership with Theranos
January 2016:
CMS announced to Theranos its plans to revoke the company’s lab license and
prohibit its owners from owning or running a lab for two years
April 2016:
Federal prosecutors begin criminal investigation of Theranos
May 2016:
Theranos informed CMS that it voided its last two years of Edison machine
results and issued tens of thousands of corrected reports to customers
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 1 Cont’d
Theranos Timeline of Key Events
June 2016:
Walgreens terminated its partnership with Theranos
July 2016:
CMS officially revoked Theranos’ California laboratory license and banned
Holmes from owning or operating a medical laboratory for at least two years
September 2016:
CMS conducted review of Theranos’ second lab in Scottsdale, Arizona
October 2016:
Partner Fund filed lawsuit against Theranos
November 2016:
Walgreens filed a $140 million lawsuit against Theranos
November 2016:
Robert Colman and Hilary Taubman-Dye filed class-action lawsuit against
Theranos (Robert Colman et al. v. Theranos Inc et al.)
January 2017:
Arizona Attorney General Mark Brnovich announced that he was looking to
hire a law firm to assist his department in suing Theranos for fraud
January 2017:
CMS revoked Theranos’ Arizona laboratory license, banned the company
from billing Medicare, and ordered the company to communicate its lab’s
shortcomings to customers
January 2017:
Theranos filed motion to dismiss Robert Colman et al. v. Theranos Inc et al.)
Source:
Compiled by casewriters from John Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Startup (New York: Knopf,
2018).
Exhibit 2a
Round
Theranos Funding & Key Investors
Close Date
Size
($mm)
Post-Money
Valuation ($mm)
Key Investors
(not comprehensive)
Series A
March 30, 2005
$7
$27
DFJ, Jupiter Partners
Series B
February 26, 2006
$9
$46
DFJ, ATA Ventures, Donald L. Lucas
Series C
November 15,
2006
$32
$159
DFJ, ATA Ventures,
Tako Ventures, Continental Properties
Series C1
July 8, 2010
$45
$1,120
DFJ, ATA Ventures, Tako Ventures,
Continental Properties, Black Diamond Ventures
Series C1
March 28, 2013
$84
$1,270
Lucas Venture Group
Series C2
February 4, 2014
$633
$9,060
Partner Fund Management, Sandbox Industries,
BlueCross Blue Shield Venture Partners
Series C3
October 1, 2015
Total
Source:
—
Plan to raise $200 million in mid-October at an estimated pre-money
valuation of $10.6 billion; the deal was not completed.
$810
PitchBook, “Theranos,” PitchBook, https://pitchbook.com/profiles/company/44161-48, accessed January 2019.
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 2b
619-039
Description of Investors in Exhibit 2a
Key Investor
About
ATA Ventures
Venture capital firm focused on early-stage investments in mobile and internet
companies
Black Diamond Ventures
Venture capital firm focused on telecommunications, biotechnology, medical
devices, semiconductor design, mobile applications, and clean technology
BlueCross BlueShield
Venture Partners
Corporate venture fund sponsored by BlueCross BlueShield that invested in
“emerging companies of strategic relevance” to BlueCross BlueShield
Continental Properties
Real-estate company that developed, owned, and operated apartments, retail, and
hospitality real-estate in the United States
Donald L. Lucas
Chairman of the Theranos board and Series B investor; Lucas also served on the
boards of Oracle and Cadence Design Systems
Draper Fisher Jurvetson
(DFJ)
Venture capital firm founded by the grandson of the founder of Silicon Valley’s first
VC firm
Jupiter Partners
Investment firm focused on “management buyouts, industry consolidations, and
growth capital opportunities”
Partner Fund
Management
Hedge fund “specializing in global diversified long/short, global long-only, and
global healthcare strategies”
Sandbox Industries
Venture capital firm that “bridge[d] gap between startups and corporations” through
“consulting services, strategic venture funds, and accelerators”
Tako Ventures
Venture capital firm founded by Larry Ellison that focused on biotechnology
companies; Ellison was the co-founder, executive chairman and chief technology
officer of Oracle
Source:
Compiled from PitchBook, “Theranos,” PitchBook, https://pitchbook.com/profiles/company/44161-48, accessed
January 2019. ATA Ventures, http://ataventures.com/, accessed September 2019. “Black Diamond Ventures,”
PitchBook, https://pitchbook.com/profiles/investor/51779-53, accessed September 2019. “Blue Cross Blue Shield
Venture Partners,” https://bcbsvp.com/, accessed October 2019. “Continental Properties Co Inc,” Bloomberg,
https://www.bloomberg.com/profile/company/0570650D:US, accessed October 2019. “Jupiter Partners,”
PitchBook, https://pitchbook.com/profiles/investor/11225-53, accessed October 2019. “Investment Discipline,”
Partner Fund Management, AMG, https://www.amg.com/affiliates/partner-fund-management.html, accessed
October 2019. “Tako Ventures,” Crunchbase, https://www.crunchbase.com/organization/tako-ventures, accessed
October 2019.
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Exhibit 2c
Other Firm Investors in Theranos
Firm
Walgreens
Safeway
Source:
Pharmacy
Supermarket
Amount
$140 million
$10 million
Carreyrou, Bad Blood, p. 177; Carreyrou, “Safeway, Theranos Split After $350 Million Deal Fizzles,” Wall Street Journal,
November
10,
2015,
https://www.wsj.com/articles/safeway-theranos-split-after-350-million-deal-fizzles1447205796, accessed December 2018; Christopher Weaver, John Carreyrou and Michael Siconolfi, “Walgreens Sues
Theranos,
Seeks
$140
Million
in
Damages,”
Wall
Street
Journal,
November
8,
2016,
https://www.wsj.com/articles/walgreens-seeks-to-recover-140-million-investment-from-theranos-1478642410,
accessed December 2018.
Exhibit 2d
High-Profile Individual Investors in Theranos, 2013 – 2015
Individual
Walton Family
Rupert Murdoch
DeVos Family
Cox Family
Carlos Slim
Andreas Dracopoulous
Oppenheimer Family
Riley Betchel
Daniel L. Mosley
Robert Kraft
Source:
Type
Affiliation
Walmart heirs
Executive Chairman, 21st Century Fox / News Corp
CEOs of Amway and Prince Corporation
Owner of Cox Communications
Media investor
Greek shipping magnate
Former De Beers diamond owners
Former chairman of Betchel Corporation
Estate attorney at Cravath, Swaine, and Moore
Owner of the New England Patriots
Amount
$150 million
$125 million
$100 million
$100 million
$30 million
$25 million
$20 million
$6 million
$6 million
$1 million
Compiled from John Carreyrou, “Theranos Cost Business and Government Leaders More Than 600 Million,” Wall
Street Journal, May 3, 2018, https://www.wsj.com/articles/theranos-cost-business-and-government-leaders-morethan-600-million-1525392082, accessed January 2019. Polina Marinova, “How to lose $700 million, Theranos-style,”
Fortune, May 4, 2018, http://fortune.com/2018/05/04/theranos-investment-lost/, accessed December 2018.
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 3
619-039
Select Slides From Investor Pitch Deck, June 2006
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 3 Cont’d.
Source:
Select Slides From Investor Pitch Deck, June 2006
Dan Primack, “Exclusive: Theranos 2006 pitch deck,” Axios, January 18, 2017, https://www.axios.com/exclusivetheranos-2006-pitch-deck-1513299967-ad008bbd-b684-4e3f-9301-5d560668d488.html, accessed November 2018.
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 4
619-039
Key Members of Theranos’ Leadership Team
Ramesh “Sunny” Balwani
Born in Mumbai, India, Balwani attended the University of Texas at Austin for undergrad, majoring in
information systems and artificial intelligence, before working at Microsoft and Lotus. He founded
‘CommerceBid’, a developer of intranet, extranet and Internet-based e-commerce solutions for dynamic
exchanges, which was acquired by Commerce One in 2002. After completing an MBA at the University
of California Berkeley, Balwani joined Theranos in 2009.
Shaunak Roy
Roy received a PhD in chemical engineering from Stanford University in 2004. He joined Theranos as
its ‘first employee’ after meeting Holmes at Stanford and provided the majority of the technical
expertise in the company’s early days. He left Theranos in November 2007.
Ian Gibbons
Gibbons received a BA and MA in Biochemistry and Chemistry and a PhD in Biochemistry from
Cambridge University in England. He spent 30 years working on diagnostic and therapeutic products.
At Biotrack Laboratories, he worked with Robertson, who later recommended him as Theranos’ first
experienced scientist hire. Before Theranos, Dr. Gibbons worked on Therapeutic Drug Monitoring,
Infectious Disease Diagnostics and Novel Non-Separation Assay at Syva Company.
Tony Nugent
Nugent joined Theranos in 2007 as Systems Integration Lead, later promoted to role of VP Product
Development before leaving in 2013. Prior to Theranos, Nugent held varied engineering roles,
including 11 years at Logitech. He holds a BA in mechanical engineering from Trinity College Dublin.
Michael Esquivel
Esquivel held the role of General Counsel and Corporate Secretary at Theranos from 2007 to 2008. He
attended Columbia Law School before starting his law career at O’Melveny & Myers LLP and later
transitioning to Wilson Sonsini Goodrich & Rosati, a premier law firm in Silicon Valley.
Henry Mosley
Mosley was the CFO at Theranos from March to November 2006, at which point he was let go by
Holmes after questioning figures and promises that were made to external stakeholders. Prior to
joining Theranos, he started his career at Intel and then led the finance departments of multiple tech
companies, helping some of them go public. He holds an MBA from the University of Utah.
Source:
Compiled from Carreyrou, Bad Blood (New York, NY: Alfred A. Knopf, 2018), pp. 4, 14, 141. Carreyrou, “Theranos,
Inc. Partners In Blood,” Wall Street Journal, May 18, 2018, https://www.wsj.com/articles/theranos-inc-s-partners-inblood-1526662047,
accessed
December
2018.
Michael
Esquivel,
LinkedIn,
https://www.linkedin.com/in/mtesquivel/,
accessed
September
2019.
Tony
Nugent,
LinkedIn,
https://www.linkedin.com/in/tony-nugent-23922a/, accessed September 2019.
21
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Exhibit 5
Theranos Press Release Announcing Walgreens Partnership, September 9, 2013
Theranos Selects Walgreens as a Long-Term Partner Through Which
to Offer Its New Clinical Laboratory Service
With first location launches this month in Silicon Valley, consumers can now complete any
clinician-directed lab test with as little as a few drops of blood and results available within a matter
of hours
PALO ALTO, Calif. & DEERFIELD, Ill.– Theranos, Inc. and Walgreens (NYSE: WAG)
(Nasdaq: WAG) today announced a long-term partnership to bring access to Theranos’
new lab testing service through Walgreens pharmacies nationwide. As the service
becomes available through Theranos Wellness Centers inside Walgreens stores,
consumers will be able to access less invasive and more affordable clinician-directed lab
testing, from a blood sample as small as a few drops, or 1/1,000 the size of a typical blood
draw. The samples are either taken from a tiny finger stick or a micro-sample taken from
traditional methods, eliminating the need for larger needles and numerous vials of blood
required for most diagnostic lab testing.
Theranos and Walgreens are taking the first step in making this service available to
consumers with the first Theranos Wellness Center location opening this month at
Walgreens drugstore at 300 University Ave. in Palo Alto, Calif., in the heart of Silicon
Valley. The companies plan to offer the service at Walgreens locations nationwide.
For the first time, Theranos is introducing CLIA-certified laboratory services with the
ability to run its tests on micro-samples. Theranos’ proprietary laboratory infrastructure
minimizes human error through extensive automation to produce high quality results.
Test results are available to physicians in a matter of hours, enabling fast diagnoses to
help informed treatment choices. Theranos tests are low cost—always 50 percent of
Medicare reimbursement rates or less—and are reimbursed by major insurance carriers,
Medicare, and Medicaid. Developed to be accessible to everyone, Theranos tests cost the
same amount for everyone, regardless of insurance plan or whether they are uninsured.
“For the past 10 years, Theranos has worked relentlessly to reach a point at which we
could help make actionable information accessible to physicians and patients at the time
it matters most. Clinicians can now see their patients having received lab results from
fresh samples in a matter of hours,” said Elizabeth Holmes, Chairman, CEO and Founder
of Theranos. “This partnership will further our goal to bring high quality, affordable lab
testing to people everywhere, with our new Wellness Centers in Walgreens retail
locations closest to homes and workplaces.”
Source:
Theranos, Inc. and Walgreens, “Theranos Selects Walgreens as a Long-Term Partner Through Which to Offer Its New
Clinical
Laboratory
Service,”
Business
Wire
Press
Release,
September
9,
2013,
https://www.businesswire.com/news/home/20130909005578/en/Theranos-Selects-Walgreens-Long-TermPartner-Offer-Clinical, accessed January 2019.
22
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 6
619-039
Wall Street Journal Article in the Opinion Section, September 8, 2013
Elizabeth Holmes: The Breakthrough of Instant Diagnosis
A Stanford dropout is bidding to make tests more accurate, less painful—and at a fraction of
the current cost
‘The reality within our health-care system today is that when someone you care about
gets really sick, by the time you find that out it’s most often too late to do anything about
it. It’s heartbreaking. Because in those moments, there’s nothing you wouldn’t do to
change it, and too often you’re helpless,” says Elizabeth Holmes. “We’re finding cancer
when you have a tumor, or heart disease by virtue of the fact that you’re having a heart
attack.”
She wants to change that.
Ms. Holmes, a 29-year-old chemical and electrical engineer and entrepreneur, dropped
out of Stanford as an undergraduate after founding a life sciences company called
Theranos in 2003. Her inventions, which she is discussing in detail here for the first time,
could upend the industry of laboratory testing and might change the way we detect and
treat disease.
Ten years ago, Ms. Holmes was working out of the basement of a group college house,
a world away from her current headquarters at a rambling industrial building in a
research park just off campus. The company’s real estate was one of the few Theranos
facts known to Silicon Valley, but one suggestive of the closely held business’s potential:
The space was once home to Facebook, and before that Hewlett-Packard.
The secret that hundreds of employees are now refining involves devices that
automate and miniaturize more than 1,000 laboratory tests, from routine blood work to
advanced genetic analyses. Theranos’s processes are faster, cheaper and more accurate
than the conventional methods and require only microscopic blood volumes, not vial after
vial of the stuff. The experience will be revelatory to anyone familiar with current
practices, which often seem like medicine by Bram Stoker.
A Theranos technician first increases blood flow to your hand by applying a wrap
similar to one of those skiing pocket warmers, then uses a fingerstick to draw a few
droplets of blood from the capillaries at the end of your hand. The blood wicks into a tube
in a cartridge that Ms. Holmes calls a “nanotainer,” which holds microliters of a sample,
or about the amount of a raindrop. The nanotainer is then run through the analyzers in a
Theranos laboratory. Results are usually sent back to a physician, but a full blood workup—metabolic and immune markers, cell count, etc.—was in my inbox by the time I
walked out the door. (Phew: all clear.)
Source:
Joseph Rago, “Elizabeth Holmes: The Breakthrough of Instant Diagnosis,” Wall Street Journal, September 8, 2013,
https://www.wsj.com/articles/elizabeth-holmes-the-breakthrough-of-instant-diagnosis-1378526813,
accessed
January 2019.
23
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Exhibit 7
Source:
Theranos’ Valuation in Late 2013 Compared to Other Well-Known “Unicorns” ($billions)
Joseph Fuller and John Masko. “Theranos: The Unicorn that Wasn’t,” HBS No. 319-068, Rev. September 6, 2019 (Boston,
Harvard Business Publishing), p. 24. Compiled from John Carreyrou, Bad Blood, 177; Alex Wilhelm, “Putting Square’s
$5 billion valuation into context,” TechCrunch, January 13, 2014, https://techcrunch.com/2014/01/13/puttingsquares-5b-valuation-into-context/, accessed December 2018; Alyson Shontell, “The Vision For $3.4 Billion Uber Is
Much More Than Just A Car Service, And It Could Vastly Improve Our Lives,” Business Insider, August 13, 2013,
https://www.businessinsider.com/why-uber-is-worth-34-billion-2013-8, accessed December 2018; “Series C –
Airbnb,” Crunchbase, https://www.crunchbase.com/funding_round/airbnb-series-c–fb9e4d00#section-overview,
accessed December 2018; “Series F – Spotify,” Crunchbase, https://www.crunchbase.com/funding_round/spotifyseries-f–8fff2ebf, accessed December 2018.
24
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 8
619-039
Theranos’ Board of Directors in 2016 and 2017
“Little known and privately held, Theranos has assembled what may be, in terms of public service, the most
illustrious board in U.S. corporate history. It includes three former U.S. cabinet secretaries, two former U.S.
senators, a retired Navy admiral and a retired Marine Corps general.”
— Roger Parloff, Fortune journalist 119
2016 Board
Elizabeth Holmes, founder and CEO of Theranos
Sunny Balwani, president and COO of Theranos
Riley Bechtel, former CEO of Bechtel
William Foege, former epidemiologist and director, Centers for Disease Control and Prevention
Bill Frist, former U.S. Senator for Tennessee, heart and lung transplant surgeon
Henry Kissinger, former U.S. Secretary of State
Richard Kovacevich, former CEO of Wells Fargo
James Mattis, former U.S. Marine Corps General
Sam Nunn, former U.S. Senator for Georgia
Bill Perry, former U.S. Secretary of Defense
Gary Roughead, former U.S. Navy Admiral
George Shultz, former U.S. Secretary of State
2017 Board
Elizabeth Holmes, founder and CEO of Theranos
Sunny Balwani, president and COO of Theranos
Riley Bechtel, former CEO of Bechtel
David Boies, co-founder, lawyer, and chairman of Boies, Schiller & Flexner LLP
Fabrizio Bonanni, former executive vice president of Amgen
William Foege, former epidemiologist and director of CDC
Richard Kovacevich, former CEO of Wells Fargo
James Mattis, former U.S. Marine Corps General
Daniel Warmenhoven, former CEO at NetApp
Source:
Reed Abelson, “Embattled Blood Lab Theranos Makes a Bid to Regain Confidence,” The New York Times, May 11, 2016,
https://www.nytimes.com/2016/05/12/business/embattled-blood-lab-theranos-makes-a-bid-to-regainconfidence.html?_r=1, accessed December 2018. Roger Parloff, “A Singular Board at Theranos,” Fortune, June 12, 2014,
https://fortune.com/2014/06/12/theranos-board-directors/, accessed September 2019. Lydia Ramsey, “Theranos
Dissolves High-Profile Board of Counselors,” Inc.com, December 2, 2016, https://www.inc.com/businessinsider/theranos-retires-board-of-counselors-leadership-kissinger-schultz.html, accessed December 2018.
25
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Exhibit 9
Source:
Forbes Magazine Covers Featuring Holmes, 2014
Adam Brown, “Meet the Newest Members of The 2014 Forbes 400,” Forbes, September 29, 2014,
https://www.forbes.com/sites/abrambrown/2014/09/29/meet-the-newest-members-of-the-2014-forbes400/#4ba96781578c, accessed November 2018. From Forbes. © 2014 Forbes. All rights reserved. Used under license.
26
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 10
Source:
619-039
First Page of CMS’ Violation Notice, January 25, 2016
Reed Abelson, “Theranos Lab May Pose Threat to Patient Safety, Regulator Says,” The New York Times, January 27,
2016, https://www.nytimes.com/2016/01/28/business/theranos-lab-found-in-violation-of-clinical-standards.html,
accessed January 2019.
27
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Exhibit 11
Board of Adaptive Biotechnologies in 2016
Director Name
Outside Position
Eric Dobmeier
Chief Operating Officer at Seattle Genetics
David Goel
Co-founder and Managing General Partner of Matrix Capital Management
Robert Hershberg
Executive Vice President and Chief Scientific Officer at Celgene, Founder and CEO
of VentriRx Pharmaceuticals
Arnold J. Levine
Peter Neupert
Systems Biology Professor, Institute for Advanced Study, School of Natural
Sciences, Princeton; and Professor, Departments of Biochemistry and Pediatrics,
Robert Wood Johnson Medical School
Operating Partner at Health Evolution Partners
Chad Robins
President, Chief Executive Officer and Co-Founder, Adaptive Biotechnologies
John Stuelpnagel
Chairman at 10X Genomics and Omicia, Inc.
Tom Willis
Former CEO and Co-founder of Sequenta, Inc. (acquired by Adaptive in 2015)
Andris Zoltners
Founder and Chairman, ZS Associates; and Marketing Professor, Kellogg School of
Management
Source:
Adaptive Biotechnologies, “Leadership,” http://www.adaptivebiotech.com/about/leadership, via Internet Archive
as of August 2016, accessed February 2019.
Note:
Adaptive Biotechnologies had the most venture funding of any diagnostics company in 2016 according to Tracxn, “20
Most Well-Funded Diagnostics Startups,” https://blog.tracxn.com/2016/06/14/20-most-well-funded-diagnosticsstartups/, accessed February 2019.
28
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Theranos: Who Has Blood on Their Hands? (A)
Exhibit 12
619-039
New York Times Op-Ed Discussing Theranos Investors, April 27, 2016
Don’t Blame Silicon Valley for Theranos
It is tempting to seeEx 12 Theranos as another example of Silicon Valley hype — a
company based on a wisp of an unproven idea becomes a multibillion-dollar
phenomenon with the backing of pump-and-dump venture capitalists.
In fact, however, Silicon Valley’s most experienced investors in start-ups saw red flags
at Theranos before anyone else [ . . . ]
GV, formerly Google Ventures, has a five-person investment team for Life Science &
Health that includes two members with Ph.D.s in bioengineering; another with both an
M.D. and a Ph.D. in biophysics; and a partner who, unlike Ms. Holmes, finished at
Stanford, then went on to earn an M.D. and M.B.A. at Harvard.
Theranos approached GV twice and was turned down twice because of what one
partner called “so much hand-waving.” People I have talked to at other investment firms
said they turned down Theranos for similar reasons, unsatisfied with Theranos’s attempt
to substitute its intangible “coolness” in place of technical details needed to validate its
diagnostic technology.
Another tipoff? Theranos wouldn’t publish in peer-reviewed journals. Guy Cavet,
chief technology officer for the biotech firm Atreca, said: “Every smart prospective partner
of a life sciences start-up looks for strong peer-reviewed publications. It’s a way of getting
expert due diligence at zero cost.”
Experience in health care is critical for a company like Theranos, which has to comply
with government regulations. Instead, even the board of directors was weighted during
most of the company’s life with older political figures like George P. Shultz and Henry A.
Kissinger.
Source:
Randall Stross, “Don’t Blame Silicon Valley for Theranos,” The New York Times, April 27, 2016,
https://www.nytimes.com/2016/04/27/opinion/dont-blame-silicon-valley-for-theranos.html, accessed February
2019. From The New York Times. © 2016 The New York Times Company. All rights reserved. Used under license.
29
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619-039
Theranos: Who Has Blood on Their Hands? (A)
Appendix Select anecdotes of employee departures from Theranos
Ana Ariola, chief design architect
Ana Ariola, a product designer for the iPhone, left behind 15,000 Apple shares to join Theranos in
2007 as chief design architect. She soon became uneasy with the firm’s practices, including the decision
to conduct a pilot with a Tennessee oncology center using an undeveloped, malfunctioning product.
While results from the pilot would only be used for research, Ariola felt that the study should be paused
until some of the product issues were resolved. Holmes did not appreciate being challenged and told
Ariola to “reflect on whether this was the right place for her.” Ariola submitted her resignation letter
later that day.
Source:
Excerpted from John Carreyrou, Bad Blood (New York, NY: Alfred A. Knopf, 2018), pp. 37–38.
Anjali Laghari, head of immunoassay group
When Anjali Laghari, head of the immunoassay group, came home from her summer holiday in
late August of 2013, she was perplexed to see emails circulating regarding a commercial launch. She
became increasingly concerned as she learned that employees who had not been cleared as CLIA lab
personnel had been allowed into the lab, and they were told to not discuss what they were doing.
Laghari sent an email to Holmes and Young expressing her concerns with the launch plans. Her email
was not acknowledged. Laghari had stomached considerable uneasiness during her eight years at the
company; however, this commercial launch crossed an ethical boundary for her. She was familiar, and
comfortable, with product issues and ‘family and friends’ testing during R&D mode. Making a “big
authorized research experiment” available to the general public was completely different—and
something that she was not comfortable with. Laghari resigned and was followed by another
immunoassay team member, Tina Noyes, who had been at the company for seven years.
Source:
Excerpted from John Carreyrou, Bad Blood (New York, NY: Alfred A. Knopf, 2018), pp. 171–173.
Tyler Shultz, research engineer
After completing an internship at Theranos, Tyler Shultz, grandson of board member George
Shultz, joined the company full-time in 2013 after graduating from Stanford. After eight months at the
company, he knew that something was off about the way Theranos tested its equipment, and reached
out to Holmes by email with his findings. He heard back from Balwani instead: “That reckless comment
and accusation about the integrity of our company, its leadership and its core members based on
absolute ignorance is so insulting to me that had any other person made these statements, we would
have held them accountable in the strongest way.” That day, Shultz chose to leave Theranos.
This set off a series of events that led him to a year of expensive legal proceedings and Shultz’
estrangement from his grandfather. Shultz became the first Theranos employee to anonymously reach
out to a state regulator about the company’s questionable lab test validation practices. He then became
a key source for reporter John Carreyrou. Pursuant to these efforts, he was accused of leaking trade
secrets and violating a nondisclosure agreement by Theranos’ law firm, Boies, Schiller & Flexner LLP.
The firm and Theranos unsuccessfully attempted to use his connection to his grandfather to pressure
him to admit to whistleblowing and share the names of other current or former employees who spoke
to third parties.
Source:
Excerpted from John Carreyrou, Bad Blood (New York, NY: Alfred A. Knopf, 2018), pp. 196-198, 243, 246.
30
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Theranos: Who Has Blood on Their Hands? (A)
619-039
Endnotes
1 Motion to Dismiss Class Action Complaint Case 5:16-cv-06822-NC, United States District Court, Northern District of
California, https://www.courthousenews.com/wp-content/uploads/2017/04/Theranos-ruling.pdf, accessed October 2019.
2 Roger Parloff, “This CEO is Out For Blood,” Fortune, June 12, 2014, http://www.fortune.com/2014/06/12/theranos-blood-
holmes/, accessed November 2018.
3 John Carreyrou, “Hot Startup Theranos Has Struggled With Its Blood-Test Technology,” Wall Street Journal, October 15, 2015,
https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901, accessed November 2018.
4 Motion to Dismiss, p. 4.
5 Hilary Taubman-Dye, LinkedIn profile page, https://www.linkedin.com/in/hilary/, accessed January 2019.
6 Christopher Weaver, “Theranos Sued for Alleged Fraud by Robertson Stephenes Co-Founder Colman,” Wall Street Journal,
November 28, 2016, https://www.wsj.com/articles/theranos-sued-for-alleged-fraud-by-robertson-stephens-co-foundercolman-1480364852?mod=article_inline, accessed January 2019.
7 The material in this paragraph is drawn from Christopher Weaver, “Theranos Sued for Alleged Fraud by Robertson Stephens
Co-Founder Colman,” Wall Street Journal, November 28, 2016, https://www.wsj.com/articles/theranos-sued-for-allegedfraud-by-robertson-stephens-co-founder-colman-1480364852?mod=article_inline, accessed January 2019.
8 Alison Frankel, “Will the Theranos ‘indirect’ investor lawsuit break new legal ground?” Reuters, March 15, 2018,
https://www.reuters.com/article/us-otc-theranos/will-the-theranos-indirect-investor-lawsuit-break-new-legal-groundidUSKCN1GR34N, accessed September 2019.
9 Carreyrou, Bad Blood (New York: Knopf, 2018), p. 9.
10 Carreyrou, Bad Blood, pp. 9-10.
11 Carreyrou, Bad Blood, p. 13.
12 Carreyrou, Bad Blood, p. 4.
13 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 13-15.
14 Carreyrou, Bad Blood, pp. 14-15.
15 Quest Diagnostics, 2003 Annual Report, http://ir.questdiagnostics.com/phoenix.zhtml?c=82068&p=irol-reportsannual,
accessed November 2018; LabCorp, 2003 Annual Report, https://ir.labcorp.com/static-files/cf5ea2c8-280d-492b-80e137dcc191fa84, accessed November 2018.
16 Caitlin Roper, “This Woman Invented a Way to Run 30 Lab Tests on Only One Drop of Blood,” Wired, January 18, 2014,
https://www.wired.com/2014/02/elizabeth-holmes-theranos/, accessed November 2018.
17 Roper, “This Woman Invented a Way to Run 30 Lab Tests on Only One Drop of Blood.”
18 Roger Parloff, “This CEO is Out For Blood,” Fortune, June 12, 2014, http://www.fortune.com/2014/06/12/theranos-bloodholmes/, accessed November 2018.
19 Carreyrou, Bad Blood, p. 15.
20 Carreyrou, Bad Blood, p. 15.
21 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 16.
22 Carreyrou, Bad Blood, p. 16.
23 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 16–17.
24 Carreyrou, Bad Blood, p. 17.
25 “Theranos,” PitchBook, https://pitchbook.com/profiles/company/44161-48, accessed January 2019.
26 Carreyrou, Bad Blood, p. 5.
31
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Theranos: Who Has Blood on Their Hands? (A)
27 Carreyrou, Bad Blood, pp. 6–7.
28 Carreyrou, Bad Blood, p. 8.
29 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 8.
30 Carreyrou, Bad Blood, p. 41.
31 Carreyrou, Bad Blood, p. 53.
32 Carreyrou, Bad Blood, p. 49.
33 Carreyrou, Bad Blood, p. 49.
34 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 50.
35 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 50–51.
36 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 51-53.
37 Carreyrou, Bad Blood, p. 83.
38 Carreyrou, Bad Blood, p. 83.
39 Kevin Hunter, LinkedIn Profile, https://www.linkedin.com/in/khunteronline/, accessed January 2019.
40 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 86.
41 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 88–89.
42 Carreyrou, Bad Blood, p. 84.
43 Carreyrou, Bad Blood, p. 85.
44 Carreyrou, Bad Blood, p. 91.
45 Carreyrou, Bad Blood, p. 92.
46 Carreyrou, Bad Blood, p. 69.
47 Carreyrou, Bad Blood, p. 69.
48 Carreyrou, Bad Blood, p. 70.
49 Carreyrou, Bad Blood, p. 70.
50 Carreyrou, Bad Blood, p. 72.
51 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 32.
52 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 33.
53 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 33.
54 Carreyrou, Bad Blood, p. 43.
55 Carreyrou, Bad Blood, p. 77.
56 Carreyrou, Bad Blood, p. 43.
57 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 150–151.
58 Carreyrou, Bad Blood, pp. 154–155.
59 Carreyrou, Bad Blood, p. 156.
60 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 156.
61 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 158–159.
32
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Theranos: Who Has Blood on Their Hands? (A)
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62 Joseph Rago, “Elizabeth Holmes: The Breakthrough of Instant Diagnosis,” Wall Street Journal, September 8, 2013,
https://www.wsj.com/articles/elizabeth-holmes-the-breakthrough-of-instant-diagnosis-1378526813, accessed January 2019.
63 Rago, “Elizabeth Holmes: The Breakthrough of Instant Diagnosis.”
64 Rago, “Elizabeth Holmes: The Breakthrough of Instant Diagnosis.”
65 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 176.
66 Carreyrou, Bad Blood, pp. 176–177.
67 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 177.
68 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 176–177.
69 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 178.
70 The material in this paragraph is drawn from Carreyrou, Bad Blood, p. 179.
71 Carreyrou, Bad Blood, pp. 179–180.
72 Carreyrou, Bad Blood, pp. 180-181.
73 Carreyrou, Bad Blood, pp. 179–181.
74 The material in this paragraph is drawn from Carreyrou, Bad Blood, pp. 181–182.
75 Carreyrou, Bad Blood, p. 183.
76 Carreyrou, Bad Blood, p. 183.
77 Parloff, “This CEO is Out for Blood.”
78 Parloff, “This CEO is Out for Blood.”
79 John Brandon, “If You Watched This Elizabeth Holmes TED Talk From 2014, It Was Clear She Was A Fraud From Day One,”
Inc., March 14, 2018, https://www.inc.com/john-brandon/the-truth-about-theranos-how-we-were-all-laundered-by-this-spinmachine.html, accessed November 2018.
80 Brandon, “If You Watched This Elizabeth Holmes TED Talk From 2014, It Was Clear She Was A Fraud From Day One.”
81 TIME, “The 100 Most Influential People,” TIME, April 16, 2015, http://time.com/collection/2015-time-100/, accessed
November 2018.
82 Henry A. Kissinger, “Elizabeth Holmes,” TIME, April 16, 2015, http://time.com/collection-post/3822734/elizabeth-holmes2015-time-100/, accessed November 2018.
83 Carreyrou, Bad Blood, pp. 208–209.
84 Ken Auletta, “Blood Simpler: One Women’s Drive to Upend Medical Testing,” The New Yorker, December 15, 2014,
https://www.newyorker.com/magazine/2014/12/15/blood-simpler, accessed January 2019.
85 Carreyrou, Bad Blood, pp. 219–220.
86 Carreyrou, Bad Blood, p. 222.
87 Carreyrou, Bad Blood, p. 223.
88 Carreyrou, Bad Blood, p. 224.
89 Carreyrou, Bad Blood, pp. 225–226.
90 Carreyrou, Bad Blood, pp. 228–230.
91 Carreyrou, Bad Blood, p. 231.
92 Carreyrou, Bad Blood, p. 233.
93 Carreyrou, Bad Blood, pp. 249–250.
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Theranos: Who Has Blood on Their Hands? (A)
94 Carreyrou, Bad Blood, p. 270.
95 Carreyrou, Bad Blood, pp. 272–273.
96 Reed Abelson, “Theranos Lab May Pose Threat to Patient Safety, Regulator Says,” The New York Times, January 27, 2016,
https://www.nytimes.com/2016/01/28/business/theranos-lab-found-in-violation-of-clinical-standards.html, accessed
January 2019.
97 The material in this paragraph is drawn from John Carreyrou, “Theranos Lab Practices Pose Risk to Patient Health
Regulators Say,” Wall Street Journal, January 27, 2016, https://www.wsj.com/articles/theranos-lab-practices-pose-risk-topatient-health-regulators-say-1453933143, accessed January 2019.
98 The material in this paragraph is drawn from Christopher Weaver, John Carreyrou, and Michael Siconolfi, “Theranos is
Subject of Criminal Probe by U.S.,” Wall Street Journal, April 18, 2016, https://www.wsj.com/articles/theranos-is-subject-ofcriminal-probe-by-u-s-1461019055, accessed January 2019.
99 Christopher Weaver, John Carreyrou, and Michael Siconolfi, “Theranos Dealt Sharp Blow as Elizabeth Holmes Is Banned
From Operating Labs,” Wall Street Journal, July 8, 2016, https://www.wsj.com/articles/u-s-regulator-bans-theranos-ceoelizabeth-holmes-from-operating-labs-for-two-years-1467956064?mod=article_inline, accessed January 2019.
100 The material in this paragraph is drawn from Christopher Weaver and John Carreyrou, “Second Theranos Lab Failed U.S.
Inspection,” Wall Street Journal, January 17, 2017, https://www.wsj.com/articles/second-theranos-lab-failed-u-s-inspection1484708428, accessed January 2019.
101 Christopher Weaver and John Carreyrou, “Craving Growth, Walgreens Dismissed its Doubts About Theranos,” Wall Street
Journal, May 25, 2016, https://www.wsj.com/articles/craving-growth-walgreens-dismissed-its-doubts-about-theranos1464207285, accessed January 2019.
102 Joseph Fuller and John Masko. “Theranos: The Unicorn that Wasn’t,” HBS No. 319-068, Rev. September 6, 2019 (Boston,
Harvard Business Publishing), p. 13; cited to Carreyrou, Bad Blood, pp. 234-235.
103 Ken Alltucker, “As Theranos drama unwinds, former patients claim inaccurate tests changed their lives,” USA Today, July
5, 2018, https://www.usatoday.com/story/news/nation/2018/07/05/theranos-elizabeth-holmes-lawsuits-patients-harmarizona/742008002/, accessed November 2019.
104 Carreyrou, Bad Blood, pp. 234–236.
105 Walgreens, “Walgreens Terminates Relationship with Theranos,” Walgreens Web site,
https://news.walgreens.com/404.cfm?404;http://news.walgreens.com:80/press-releases/general-news/walgreensterminates-relationship-with-theranos-will-be-closing-operations-at-all-40-theranos-wellness-centers-inarizona.htm?404;http://news.walgreens.com:80/press-releases/general-news/walgreens-terminates-relationship-withtheranos-will-be-closing-operations-at-all-40-theranos-wellness…