General Discussion

(From the DOJ Memo) - "Holmes, 38, of Woodside, Calif., founded Theranos in 2003 and held the positions of Chairperson and Chief Executive Officer. Theranos, now defunct, was a blood testing company based in Palo Alto and Newark, Calif. Evidence at her jury trial showed that for more than a decade, Holmes claimed that Theranos had developed a revolutionary blood analyzer, variously referred to as the Theranos Sample Processing Unit (TSPU), Edison, and minilab. She asserted that the Theranos proprietary blood analyzer device could run any blood test that was run by conventional labs, all from a blood sample drawn via a fingerstick rather than the traditional draw from a vein. She asserted the Theranos analyzer produced results that were better, cheaper, and more accurate than existing methods and at a speed faster than ever before possible."

"Trial evidence demonstrated that Holmes knew the analyzer was not producing accurate and reliable results. Holmes understood that at best it could only perform a few basic tests and was slower than existing devices. She knew that it could not successfully compete with the established conventional machines. Evidence showed that Holmes repeatedly had to resort to using conventional machines to obtain the blood test results that the Theranos analyzer was supposed to perform, though she led investors and the public to believe that Theranos was conducting most or all of its tests using its own analyzer."

"Evidence showed that Holmes, despite being aware of the Theranos analyzer’s failure to perform, was able to induce dozens of investors, many of whom were prominent public figures, to invest hundreds of millions of dollars in Theranos. She used direct communications, marketing materials, statements to the media, financial statements, models, and other information to reach potential investors and induce investments. Holmes consistently provided glowing but false representations to investors and potential investors about the analyzer’s progress and capabilities. She falsely represented to investors that multiple major pharmaceutical companies had comprehensively evaluated Theranos and had validated its technology, and she provided investors with reports bearing logos from pharmaceutical companies, falsely suggesting the pharmaceutical companies endorsed Theranos. Holmes misrepresented to investors that Theranos had a profitable, revenue-generating business relationship with the U.S. Department of Defense and that the Theranos technology had been deployed to the battlefield to treat wounded soldiers. In truth, Holmes knew the technology was never deployed in the battlefield and that Theranos had acquired little revenue from military contracts for trial-runs of the analyzer. Holmes also falsely represented to investors that Theranos would dramatically increase its number of Wellness Centers within stores operated by its partner Walgreens from a few dozen to 900, despite knowing that the relationship with Walgreens was stagnating."

"Trial evidence demonstrated that Holmes also misrepresented the dire financial status of Theranos to investors and its prospects for future earnings. In examples at trial, Holmes represented to one investor in 2010 that the projected revenue for Theranos in 2011 was $223 million, when she knew that Theranos’ revenue was dropping precipitously, from $2.8 million in 2009 to less than $600,000 in 2011. Holmes misrepresented to other investors that Theranos, which had zero revenue in 2012 and 2013, was projected to generate over $100 million in revenue in 2014 and to reach nearly $1 billion in 2015. She knew when she made these representations that Theranos would at best generate only modest revenue in 2014 and 2015."

"In its memorandum filed for the sentencing hearing, the government pointed to evidence that Holmes’ fraud was immensely successful. Projecting altruistic motives, Holmes raised hundreds of millions of dollars by duping investors of all experience levels to invest in Theranos. She fooled investors new to the healthcare and bio-tech sector as well those with deep sophistication and experience in that arena. By the end of 2014, her stock in Theranos was valued at more than $4 billion. She enjoyed a lavish life while carrying out her fraudulent scheme, living in a $15 million mansion and traveling in a Theranos-paid private jet. She gained a national profile, adorning the cover of Fortune, Forbes, Inc., Glamour, and T: The New York Times Style Magazine. Holmes dined at the White House, joined the Board of Fellows of Harvard Medical School, and was named by Time as one of the 100 Most Influential People in the World. But as the government describes, her scheme not only deprived investors of vast sums of money, it also placed numerous others at risk of great physical harm. Wanting to paint Theranos as a legitimate enterprise, Holmes offered Theranos blood tests to the public, and Theranos’ flawed technology was used on patients with serious medical conditions. As a result, Theranos sent out inaccurate results to patients being screened for cancer, to women monitoring their pregnancies, and to one victim who was led to believe she had the precursor virus to AIDS, among many other examples. Theranos itself eventually concluded a patient impact existed for every test run on patients and voided all tests with its analyzer. The government points out that Holmes was undeterred and again chose deceit over candor by downplaying the extent of the patient impact to investor-victims and continuing forward with her elaborate fraud."

https://www.justice.gov/usao-ndca/pr/elizabeth-holmes-sentenced-more-11-years-defrauding-theranos-investors-hundreds

Did Theranos' blood-testing machine actually work as advertised?

"in October 2015 came the massive Wall Street Journal investigation on Theranos. For about half a year, reporter John Carreyrou had tried to answer some of the questions critics have been asking: What actually goes on behind the scenes at Theranos? Did the company’s tests really work?"

"Carreyrou eventually discovered and reported that it appears Theranos rarely even used its much-hyped Edison technology in its tests. Instead, the startup allegedly relies mostly on older technology by companies like Siemens for the bulk of its testing. (This was in contrast to the company’s claims that it used older machines only for 'certain esoteric and less commonly ordered tests.')"

"What’s more, there are real concerns that the company’s signature Edison machines — the ones that have garnered all the hype — aren’t nearly as accurate as claimed. On this point, Carreyrou cited former employees, internal emails, and doctors. One Theranos employee even complained to regulators that Theranos had been gaming the system, 'failing to report test results that raised questions about the precision of the Edison system.' "

"Since the Journal’s story, other critics have come forward and claimed that their blood test results from Theranos didn’t quite match those from standard labs. In a follow-up, the Wall Street Journal confirmed that the FDA had pressured Theranos to stop using its Edison technology on almost all of its blood tests save for one (a test for Type 1 herpes simplex) because of concerns about the machine’s accuracy. Last week, Holmes admitted that Theranos had stopped taking pinprick blood samples for all but one of its tests."

"The company says it has been working with FDA to validate its blood tests, though those results are still pending. Until it receives FDA blessing, it seems Theranos has been mostly operating as a mainstream blood testing lab, taking blood through needles in patients’ arms and using traditional technology to analyze the blood. There’s nothing wrong with that, per se, but it’s hardly likely to revolutionize the industry."

https://www.vox.com/2015/10/20/9576501/theranos-elizabeth-holmes

Did the FDA ever approve Theranos' blood testing machine?

Only one approved test: "In July 2015, the FDA cleared Theranos to use its finger-prick blood collection method and nanotainer vials for its HSV-1 IgG test, marking the company's first and only FDA approval....The FDA did not approve Theranos' general blood testing platform."

Theranos is serving her sentence in the same (country club) federal facility as Ghislaine Maxwell.