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Theranos founder Elizabeth Holmes to stand trial in 2020

Published June 28, 2019

Elizabeth Holmes, the founder of the now-defunct biotech unicorn Theranos, will face trial in federal court next summer with penalties of up to 20 years in prison and millions of dollars in fines.

Jury selection will begin July 28, 2020, according to U.S. District Judge Edward J. Davila, who announced the trial will commence in August 2020 in a San Jose federal court Friday morning.

Holmes and former Theranos president Ramesh “Sunny” Balwani were indicted by a grand jury last June with 11 criminal charges in total. Two of those charges were conspiracy to commit wire fraud (against investors, and against doctors and patients). The remaining nine are actual wire fraud, with amounts ranging from the cost of a lab test to $100 million.

According to Bloomberg, Holmes’ legal team plans to argue that The Wall Street Journal’s John Carreyrou “had an undue influence on federal regulators,” and “went beyond reporting the Theranos story.”

“The jury should be aware that an outside actor, eager to break a story, and portray the story as a work of investigative journalism, was exerting influence on the regulatory process in a way that appears to have warped the agencies’ focus on the company and possibly biased the agencies’ findings against it,” her attorneys wrote, per Bloomberg. “The agencies’ interactions with Carreyrou thus go to the heart of the government’s case.”

Theranos, founded in 2003 by then 19-year-old Stanford dropout Holmes, raised more than $700 million from private market investors in what’s been referred to by the Securities and Exchange Commission as an “elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.”

Theranos first came under scrutiny in October 2015, when Carreyrou published his first of many investigative pieces questioning the efficacy of Theranos’ blood-testing technology. At the time, Theranos was one of the most buzzworthy companies in Silicon Valley, boasting a valuation of $9 billion and the support of high-profile investors like Tim Draper and Robert Murdoch.

Theranos, as a result of Carreyrou’s reporting, was discovered to be a threat to public health. Its technology, as it turns out, was light years away from processing an expansive range of laboratory tests from just a few drops of blood.

According to The Wall Street Journal, federal prosecutors have collected more than 2 million pages of evidence for the defense teams. Holmes, despite ample evidence, has maintained her innocence since the grand jury indictment last year.

Following criminal charges, Holmes stepped down from Theranos last year; shortly after, the company ceased operations. Carreyrou, for his part, released a best-selling book, ‘Bad Blood,’ documenting Theranos’ secrets and lies. A documentary chronicling Holmes’ and Theranos’ rapid rise and fall was released by HBO in 2019. A Hollywood production starring Jennifer Lawrence as Elizabeth Holmes is reportedly in the works.

In Bad Blood, a pedestrian tale of heuristics and lies

Dear Hollywood, here are 5 female founders to showcase instead of Elizabeth Holmes

Published May 3, 2019

Joseph Flaherty
Contributor

Joe Flaherty is director of Content & Community at Founder Collective.

Judith Faulkner – Founder/CEO, Epic Systems

In the late 1970s, the picture of a working woman in Wisconsin was likely Laverne or Shirley. Little did anyone know that in the basement of a Victorian manse in Madison, the future of healthcare was being coded by Judith Faulkner, the founder and CEO of what would become Epic Systems. Epic is arguably the most impactful startup in the history of health software, and Faulkner was building medical scheduling software before most people could even picture a PC. Her efforts established the Electronic Medical Records market as we know it and today. Her company manages records for more than 200 million people, employs nearly 10,000 and generates around $2.7 billion per year in revenue — not bad for a math graduate who never raised any venture capital.

One might argue that the origins of medical software are too tepid to make for exciting TV, but something tells me the kind of CEO who hires Disney alums to design her corporate campus and dresses up like a wizard to address her employees might make for a compelling subject.

SANTA BARBARA, CA – FEBRUARY 09: Lynda Weinman speaks onstage (Photo by Rebecca Sapp/Getty Images for SBIFF)

Lynda Weinman – Founder/CEO, Lynda.com

Lynda Weinman might have the most esoteric path to becoming a billion-dollar entrepreneur in history. After getting a humanities degree from Evergreen College, where she was classmates with “Simpsons” creator Matt Groenig, Lynda opened a pair of punk rock fashion boutiques on LA’s Sunset Strip.

After those folded in the early 1980s, she taught herself enough computer graphics to become a freelance animator on movies like “Bill & Ted’s Excellent Adventure,” which in turn led to her becoming a teacher at the prestigious Art Center College of Design. Her academic pedigree provided the launching pad to write an influential textbook; that, in turn, gave her the star power to strike out on her own as one of the first web celebrities.

Keep in mind; this dramatic arc only covers the time before she started the eponymous Lynda.com, and bootstrapped it to a $1.5 billion exit in edtech — an industry most VCs and entrepreneurs fear to tread. In terms of material for a memoir, Hannah Horvath has nothing on Lynda Weinman.

FRAMINGHAM, MA – MAY 30: Shira Goodman, former chief executive at Staples, poses for a portrait in Framingham, MA on May 30, 2017 (Photo by Suzanne Kreiter/The Boston Globe via Getty Images)

Shira Goodman – CEO, Staples.com

Shira Goodman has arguably done more for online shopping in the U.S. than anyone not named Bezos. She didn’t found Staples, but she did start and scale its “delivery business,” as she humbly calls it, to the point where it became the fourth largest e-commerce company in the U.S.

At a time when more nimble startups were disrupting big-box retailers, Shira did what few of her contemporaries could do — rapidly shifted a multi-billion-dollar legacy company in an ancient industry into the future, and eventually became CEO of the entire enterprise. She did this while also raising three children and supporting her husband when he decided to change careers and go to Rabbinical school. Sitcoms have been premised on less, and since two versions of “The Office” have captivated audiences, perhaps it’s time to provide the perspective from the CEO of Dunder-Mifflin HQ?

Helen Greiner, co-founder, iRobot

Helen Greiner – Co-founder, iRobot

From C. A. Rotwang in “Metropolis” to Tony Stark in the Marvel movies, there have been plenty of cinematic explorations of robot builders, but the story of iRobot co-founder Helen Greiner might be more interesting than anything yet committed to celluloid. As a recent grad from MIT, Greiner spent a substantial chunk of the 1990s applying her mechanical genius to everything from a mechatronic dinosaur for Disney to a store cleaning robot with the potential for mass destruction for SC Johnson.

Far from an ivory-tower academic, Grenier helped the government deploy search and rescue efforts at Ground Zero after 9/11 and cave-clearing ‘bots in Afghanistan, and the bomb-disposing Packbot she developed has saved the lives of thousands of service members. Grenier, at age 38, took her company public and made the Jetson’s vision of a robot housekeeper a reality in the form of the Roomba.

CAMBRIDGE, MA – MARCH 15: Kelsey Wirth, who has a grassroots organization called Mothers Out Front: Mobilizing For A Livable Climate (Photo by Essdras M Suarez/The Boston Globe via Getty Images)

Kelsey Wirth – Co-founder, Align Technologies

While the original startup bros were inflating the tech bubble in the late 1990s, Kelsey Wirth was pioneering 3D printing, which at the time was as fantastical as anything Theranos promised. Wirth’s story as the co-founder of Align Technology is especially compelling in the way it shares some surface similarities with Holmes’ narrative. Prominent skeptics of Invisalign cast doubts on the company in its early days, noting that the startup’s PR had outstripped its clinical validation. Wirth had to solve seemingly intractable technical challenges, including scanning misaligned incisors, developing algorithms to overcome underbites, pioneering new manufacturing process, convincing the FDA to clear the product and then selling it across the country — armed only with an English lit degree and an MBA. Despite the long odds of curing crossbites with software, Wirth started what has become a publicly traded business that is currently worth more than 20 billion dollars.

Most of these founders faced setbacks, including external obstacles and those of their own making. There were layoffs, bad deals and few of these stories had perfectly happy endings. Still, while a contemporary startup can earn plaudits for simply repackaging CBD and pushing it on Facebook, these entrepreneurs demonstrated a level of ambition rarely seen among modern upstarts.

The sensational focus on Elizabeth Holmes’ misdeeds steal focus from a group of landmark female entrepreneurs and waste a tremendous opportunity to inspire the next generation with heroic tales instead of fables of fabrication. None of these accounts have the black and white morality of the Theranos debacle, but these founders cleared hurdles both scientific and social. They flipped the script and made history; surely Hollywood can find some drama in that.

Thanks to Parul Singh, Elizabeth Condon and Alyssa Rosenzweig for reviewing drafts of this post.

Lack of transparency in healthcare startups risks another Theranos implosion

Published January 28, 2019

Are more Theranos -style scandals looming for investors in healthcare startups?

A team of researchers associated with the Meta-Research Innovation Center at Stanford thinks so. They’ve published a paper warning investors in life sciences startups that a systemic lack of transparency exists in their portfolio companies — creating the possibility for more multi-billion-dollar implosions and scandals like the one that toppled Theranos and its charismatic founder, Elizabeth Holmes.

Indeed, one of the study’s authors, Dr. John Ioannidis, the co-director of the Meta-Research Innovation Center at Stanford and director of the University’s PhD program in Epidemiology and Clinical Research, was among the first people to identify the risks associated with Theranos and its “stealth research.”

Now Dr. Ioannidis and his co-authors, Ioana A. Cristea and Eli M. Cahan, have published a study surveying the publicly available research from the largest privately held companies in the healthcare space, and found them lacking.

Most of the highest-valued startups in healthcare have not published any significant scientific literature, the study found. Nearly half of the publications from companies worth more than $1 billion came from only two startups — 23andMe and Adaptive Biotechnologies, according to the paper.

“Many years ago I was the first person to say that Theranos had a problem,” says Ioannidis. “The problem that I had then was that Theranos did not have any peer-reviewed evidence to show.”

In an interview and in their paper, Ioannidis and Cahan warn that investors have overlooked systemic problems created by the lack of transparency among healthcare startups.

They write:

It would be tempting to dismiss the Theranos case as just one rotten apple. However, we worry that the focus on fraud puts aside a more fundamental concern. Fraud is making waves in the news, but stealth research may have a more detrimental impact.

According to the study’s findings, more than half of the healthcare startups that are worth more than $1 billion have published no highly cited papers at all. For companies that were acquired or are publicly traded that number is around 40 percent.

In all, healthcare startups that are currently valued at more than $1 billion published 425 Pubmed papers. And of those papers only 34 (8 percent, including two reviews) were highly cited. For companies with valuations of more than $1 billion that had been acquired or are publicly traded on stock exchanges, the researchers counted 413 papers, of which 47 (11 percent, including nine reviews) were highly cited.

Digging deeper into some of the companies that had high valuations but little or no published research revealed scores of operational and technological issues for the researchers.

For instance, StemCentrx, which was bought for $10.2 billion in 2016 by AbbVie, had published 16 papers — and only one highly cited paper. Since the acquisition, the Food and Drug Administration had imposed a delay on the readout of the company’s phase II trial for its Rova T targeted antibody drug for cancer treatment. In December, a Phase III trial for Rova T as a second-line treatment for patients with advanced small cell lung cancer was halted because the treatment wasn’t working, according to a report in Targeted Oncology.

Acerta Pharma, another healthcare-focused startup focused on cancer treatments, was bought by AstraZeneca for $7.3 billion. That company published nine articles and had one highly cited paper for a very early study of a potential treatment for relapsed chronic lymphocytic leukemia. Acerta received accelerated approval for a drug called acalabrutinib, which treats a rare form of lymphoma called mantle cell lymphoma. Two years ago, AstraZeneca had to retract data and admit that Acerta falsified preclinical data for its drug.

Then there’s Intarcia, the developer of a device for diabetes treatment that’s worth $5.5 billion. That company had its device rejected by the FDA and was forced to lay off staff and halt a couple of later-stage trials. It had only published six papers — none of them very highly cited.

Ultimately, the researchers concluded that highly valued healthcare startups don’t contribute to published research and that the valuation of these companies by investors is divorced from any externally validated data.

For the researchers (and for investors) this should present a problem.

“Many unicorns may be overvalued [21] and subject to unrealistic scientific expectations,” the study’s authors write. And they reject the argument that simply applying for — and receiving — patents is enough to prove that a technology in the healthcare space has been thoroughly vetted. “[Patents] do not offer the same level of documentation as peer-reviewed articles. For example, Theranos had over 100 patents [1], but these were unable to supplant the vacuum in their evidence,” the researchers wrote.

Even if companies want to protect their technology, there are still ways for them to be more transparent about the results or benefits of their technology. The authors acknowledge that publishing isn’t the primary mission of startups. They can, however publish a few high-value articles, secure their technology through patents and then work with researchers, universities or hospitals to validate the technology and have those organizations publish results of the tests, the authors argue.

As the authors conclude:

Start-ups are key purveyors of innovation and disruption. Consequently, holding them to a minimal standard of evaluation from the scientific community is crucial. Participation in peer review, with all its limitations, is the best way we have to uphold this standard. We are not arguing that start-ups should divert excessive resources to having peer-reviewed papers. However, when their products are destined to affect patient health, they should neither be solely doing marketing. Confidential data sharing with potential investors or regulators cannot replace more open scrutiny by the scientific community.

Arizona residents are getting refunds on Theranos tests

Published December 18, 2017

Theranos is issuing refund checks to all Arizona residents who used the company’s blood-testing services, thanks to a recent settlement by Arizona Attorney General Mark Brnovich. Between 2013 and 2016, Theranos offered testing at several locations throughout the state in a partnership with Walgreens. However, the drug store chain severed ties with Theranos in mid-2016. Read More

Theranos’ COO retires as the troubled bio-tech startup overhauls its organizational structure

Published May 12, 2016

theranos1 The chief operating officer of Theranos, the beleaguered medical diagnostics startup currently under federal investigation for allegedly making misleading claims about its blood analysis technology, is stepping down as the company reorganizes its structure. Read More

Health Agency Says Theranos Lab Practices Pose “Immediate Jeopardy” To Patient Safety

Published January 27, 2016

elizabeth-holmes3 More bad news for Theranos: A federal health agency has declared that the blood test company’s “deficient practices … pose immediate jeopardy to patient health and safety.” In a letter sent to Theranos on January 25, the Centers for Medicare & Medicaid Services said it identified deficiencies related to hematology and analytic systems, and with the… Read More

Theranos Founder Elizabeth Holmes Attempts To Clear Up The Bad Blood With WSJ

Published October 21, 2015

Elizabeth_Holmes_Photo1 The energy in the room was palpable as audience members waited to see if Theranos founder Elizabeth Holmes would really show up this morning for her onstage interview at the Wall Street Journal Live conference. But show up, she did. Holmes took the hot seat in the midst of a very public brawl with the Journal, which published a couple of articles alleging Theranos wasn’t using its own… Read More