Theranos has laid off most of its staff to eke out what is left of its cash reserves, according to The Wall Street Journal. The layoffs will see the embattled blood-testing company sever ties with around 100 of its remaining 125 staff.
Palo Alto, California-based Theranos employed around 800 people in late 2015 but the figure has since fallen as sharply as its reputation. The latest, deep cut will leave Theranos with at most two dozen staffers. By shrinking the team, Theranos will buy itself a few more months to see if its story can end in anything other than bankruptcy.
That is a real threat. The case brought by the SEC last month stated that Theranos was on the verge of bankruptcy late last year, with only a loan secured against its patents saving the company and keeping the lights on for another 12 months. The WSJ reported that the loan is worth up to $100 million, but private equity firm Fortress Investment Group will only provide access to the full amount if Theranos meets product and operational milestones.
Whatever the eventual outcome, Theranos CEO Elizabeth Holmes is unlikely to profit personally. The SEC case revealed that Holmes will only profit from her Theranos stake once $750 million is paid out to other investors in the event the company goes into liquidation or is acquired. That was a minor revelation from the documents the SEC released when Holmes settled its case without admitting wrongdoing.
In the SEC’s telling of events, Holmes, in collaboration with ex-Theranos president Ramesh “Sunny” Balwani, used her control to deceive investors and customers, applying Silicon Valley’s “fake it till you make it” ethos without coming good on the second part of that equation. One investor was reportedly told Theranos’ sales hit $108 million in 2014. The SEC said they actually amounted to $100,000.
The SEC also accused Holmes of other types of deceit. The agency’s case alleges Holmes told staff to put numerous miniLabs in a clinical lab, despite the devices only being suitable for R&D use. Holmes then allegedly led pharmacy executives through the room, which looked like a clinical lab run on miniLabs. At the same time, Theranos engineers were repurposing third-party analyzers to perform tests that were beyond the limited capabilities of their own devices.
Investors were allegedly put through a different game of smoke and mirrors, in which a phlebotomist would take blood from the financier using a fingerstick.
“Based on what they saw, potential investors believed that Theranos had tested their blood on either an earlier-generation [Theranos Sample Processing Unit] or the miniLab. As Holmes knew, or was reckless in not knowing, however, Theranos often actually tested their blood on third-party analyzers,” the SEC wrote.