Elizabeth Holmes, 32, was the youngest self-made billionaire in the world, before her world came crumbling down around her. So, what happened? How did this young, talented, intelligent engineer go from being at the forefront of medical innovation and technology – even being deemed the next Steve Jobs – to the laughing stock of the scientific world and being banned from running any laboratory for two years? This is the cautionary tale of how an imperfect idea became a front page story.
The Rise of Theranos
Theranos, a blood testing company founded by Holmes, was set to revolutionize science and medicine. How, you ask? Theranos claimed it could take microscopic blood volumes from the prick of a finger, and run a series of blood tests using their proprietary device – the Edison – for a cheaper price and at faster speeds than currently possible. Unnecessary, were the vials of blood and intravenous needles currently used in disease testing. Theranos’ costs were 90% lower than Medicare rates, and merely publishing prices online was ground-breaking inside the US’s impervious healthcare system. Theranos, as Holmes reiterated time and time again, would “change the world”.
Theranos, an amalgamation of “therapy” and “diagnosis” was founded in Palo Alto, California in 2003, when then 19 year old Holmes dropped out of Stanford’s School of Engineering and used her college tuition to start her company. Despite professors telling her that they didn’t think her idea would work, Holmes managed to build her company into a billion dollar business.
How One Journalist Brought Down the Billion Dollar Company
This all changed on October 14, 2015, when Holmes’ world turned upside down. An article written by journalist John Carreyrou, from the Wall Street Journal, published a damning article alleging that the then 9 billion dollar company, was in effect a con – that it’s lauded central technology was flawed and that Theranos’ claims and use of proprietary tools was false. Even Holmes’ inability to explain her own technology became central to the story.
For two whole days, following the publication, Holmes avoided her employees. Finally, after days in the “war room” as it has been called, she addressed her confused staff. You see, Theranos was run in a secretive environment, even internally, similar to how a technology company, like Apple, is run – this is not typical of medical companies. Departments were isolated and employees were forbidden from communicating with each other about projects. Scientists were even forbidden from writing peer-review papers on its technology – this is not normal for those wondering.
For those two days, while Holmes was listening to various response strategies, it became evident that the most ideal situation would be to enlist scientists to defend Theranos – unfortunately because of Holmes’ highly secretive infrastructure, no scientist could realistically endorse Theranos. Not much could be done, even its’ high profile board members, such as Henry Kissinger and George Schultz, to name a few could do nothing – they were not scientists and did not have the required expertise. With very few options, Holmes decided she would push the Theranos narrative even harder. Holmes explained to her staff of scientists and programmers that the Wall Street Journal had gotten the story wrong. Balwani, President and Chief Operating Officer of Theranos, echoed her sentiments.
The Plot Thickens… Theranos Is Exposed
The unraveling of Theranos has been quick. Regulatory probes revoked the company’s license to operate in the state of California, citing unsafe practices. This admonition brought even more questions to Theranos’ proprietary technology and scientific plausibility. Holmes, herself, has also come under severe questions, and has been banned from running a laboratory for two years. The company is even under federal investigation for misleading current and potential investors.
Adding more weight to this sinking ship, Walgreen’s, the titan drugstore, is suing Theranos for 140 million dollars, alleging breach of contract. To add to their woes, Theranos has also recently announced plans to lay off hundreds from its staff and get out of the blood testing business.
So, What’s Next?
Holmes plans to do things very differently this time. They are putting together a new executive team working toward FDA clearance, partnerships, and pursuing publications. Holmes also recently announced in an open letter that they would be refocusing their efforts toward developing the “minilab” (a miniaturized, automated laboratory that can run diagnostic tests on a small amount of blood). Let’s hope she gets things right this time!
