If you saw that one word—Theranos—on a blank page, you’d probably need no further explanation why this company, setting itself up as diagnostics 2.0, is a rotten tomato. But, just for self-flagellation, let’s go through the saga, and hope that it serves as a warning for the future.
Elizabeth Holmes was a poster child of this "New Way" that millennials—speaking as a millennial myself—often like to think they exemplify: a young, fierce, turtleneck-wearing businesswoman with a science background, aiming to radically revolutionize the blood-testing industry.
These are laudable aims, and Holmes started off strong. She dropped out of college (like a lot of storied entrepreneurs) to start her company with millions in backing. By 2014 she'd raised around $400 million. That was the year her Fortune story appeared, and she was at the height of her fame. At its peak, the company itself was believed to be worth around $9 billion.
The original idea was to work on drug-delivery patches, but then moved on to fingerprick diagnostics, and Theranos went from selling to biopharma to selling directly to consumers. The tests were designed as a pain-free “solution” that could sift dozens of markers and deliver results to a consumer in a few hours, all at a price cheaper than other suppliers.
On paper at least, it all sounded like a great idea, and that's what garnered the financial and media attention. But then cracks started to appear. Holmes was great at marketing, but she fell short on details about how, exactly, the Theranos tech worked. Specialists suggested it required more scrutiny from outsiders to confirm that it worked as advertised. Questions arose about the company’s use of third-party analyzers, and how much Theranos was actually using its own technology.
It was the Wall Street Journal that really began digging into the company and Holmes, starting a process that led to a hard fall from grace for Theranos and its CEO. The company had a tough 2015 as questions over its practices got louder, but it was last year when quality-control checks turned up questionable results and the whole business began to unravel.
Staff left, partners pulled out of deals, and Holmes was left to mop up the problems, but she still refused to share the secrets of her technology. Federal regulators in fact banned Holmes from owning or operating a medical laboratory for at least two years, and ordered Theranos to stop operating its California lab.
Then, in October of last year, Theranos announced that it would abandon its fingerprick blood tests entirely to focus on its new tabletop blood-testing system—and that it planned to cull around 40% of its staffers in the process.
And there's more. According to recent WSJ articles, an internal Theranos inspection report said staffers had been using its diagnostics incorrectly and had failed to follow procedures when telling patients about the possibility of inaccurate results. The newspaper also reported that Theranos had produced “no material revenue” over the past two years.
One of the Holmes memes that's been making the rounds on LinkedIn for awhile now is this: “The minute you have a back-up plan, you’ve admitted you’re prepared to fail." This is not a philosophy that works particularly well in the scientific field of trial and error, however, and had she applied for a job at NASA with this mantra, she likely would not have been called in for an interview.
You cannot hack science to create something new and cutting-edge without serious research, years if not decades of work, and repeated failures. Slick marketing and magazine profiles—Fortune has since issued a major mea culpa for its Holmes interview in 2014—is not hard work in the lab.
There was a hollowness in this company that could not be filled with cash, endorsements and Steve Jobs-like appearances, and it was found out, although too late. Patients rely on blood tests for their health and sometimes for their lives. Getting this wrong is simply dangerous.
We all want the future now; we all want precise blood tests that can tell us everything about our health within seconds and offer immediate advice on how to treat problems or tweak medications. But if this was such an easy goal, the experienced, billion-dollar diagnostic and blood testing companies, such as Quest and LabCorp, would be doing it already.
Some good has come from the Theranos mess, however: In Arizona, for instance, Theranos pushed hard for new rules to allow self-testing by consumers, and that's allowed other companies, such as Sonora Quest Labs, to help consumers order blood tests on their own for a relatively cheap price. New companies just might spring up in Theranos' place, doing well what it had promised, but as yet failed, to achieve.