The hypnotic tale of the rise and fall of Theranos | Bad Blood

Elizabeth Holmes, The founder and CEO of the failed biotech startup Theranos went from being a visionary leader to a fallen biotech star. At one point in her career, she was also hailed as the next Steve Jobs. How did she even get there?

Beginning of the end

Theranos a fallen kingdom founded by a Stanford dropout, inspired by her own fear of needles started the company when she was only 19, with a vision of creating a more efficient and cheaper alternative to a traditional blood test.

The promise that the company sold to its customer was even conditioning diseases like cancer could be detected with just a little prick and a few drops of blood. Her influence with well known political figures helped her startup attract hundreds of millions of dollars in investments. 

But the companies dominos started to fall once a wall street journalist named John Carreyrou started poking holes in Theranos’s testing technology equipment.

Since the fall of Theranos the startup environment hasn’t been the same, so let’s look up what actually happened between the timestamp of 2004-2018.

Here are the events along with the timeline that led to the rise, the fall and now potential criminal charges of the unicorn that was once set to revolutionise the blood-testing industry.

2003: Theranos was born

Holmes a Stanford sophomore studying chemical engineering drops out to go all-in on her startup “Theranos”, which she founded in  2003 when she was only 19.

Theranos – the name is a combination of 2 different words “Therapy” and “Diagnosis”.

In order to raise some funding for her startup, Holmes pulled some strings within the family and friends circle. The first two investors she attracted was Tim Draper her childhood friend’s father and Victor Palmieri her neighbour and a friend of Holmes father. By the end of 2004, Holmes somehow managed to raise $6 million.

2005: The Initial Prototype

The initial prototype consisted of a cartridge and a reader and was dubbed Theranos 1.0 was set out to launch a study with cancer patients in Tennessee.

2007: Design Improvements

Theranos development team enhanced the previous developed Theranos with new features and called it The Edison.

The Edison had a mechanical hand to help move the cartridges. By the end of the year, Theranos started to steal some of apple’s designers and put them in charge of the User interface and experience design of Edison.

2009: The New right-hand man “Ramesh Sunny Balwani” joins Theranos

Ramesh Sunny Balwani shortly called Sunny who’s been a right-hand man for Holmes officially becomes the COO and President for Theranos.

Sunny is like 20 years older than Holmes they met in Beijing through a Stanford education program.

2010-2013: The Walgreens Partnership

By the start of 2010, the startup boom hit silicon valley, that was the same year Sunny and Holmes approached Wallgreens for an investment opportunity and a business proposition to run health clinics. And that meant that partnership meant that Edison should do more than just one class of blood test. The Theranos once again released a new version of the Edison and named it minilab which had a user interface and was also nicknamed to be the 4s(iPhone model).

Just a decade after starting the company, Theranos hit headlines when it announced the long term partnership between Theranos and Wallgreens.

Walgreens agreed to open a wellness centre located in Palo Alto where Wallgreens customers can access the new miniLabs(Theranos Blood Test Equipment). But the original plan was to open wellness centres in all of Wallgreens stores nationwide.

2014:  All Hail The Richest women in America

In the midst of 2014, Partner Fund purchased 5.6 million Theranos shares at $17 a share. Which valued the company a whopping $9 billion, by owning more than 50% of the company Holmes net worth was almost $5 Billion, And Holmes started hitting headlines in all newspaper and magazine covers in June 2014.

2015: Bad Blood with John Carreyrou

Wall Street journalist John Carreyrou got a tip from a former Theranos employee who told him about unethical practices taking place at Theranos.

Back in the day Theranos was operating with limited capacity and was giving out false statements and reports to customers/patients. Theranos was also planning to conduct HIV tests with the minilab until the former lab director talked Sunny out of it.

When Carreyrou was busy investigating the case, Theranos gets their FDA approval for a herpes test.

And at this point scientists were starting to ask questing about the technology being used and the miniLabs.

Shory before Holmes was set to give her speech at a conference, Carreyrou released his first story.

The Wall Street Journal reports that the vast majority of the test’s that Theranos is conducting is with traditional vails and only a small number of tests are being done with the miniLabs. Holmes fired back at the reports calling it “Factually and Scientifically erroneous” 

Later that month the FDA released two statements about Theranos's devices called the companies product “The vial” and uncleared medical device and also reported 14 concerns.

So Theranos halted its use of blood collecting vials for a few months but continued using it for herpes tests due to pressure from FDA.

Later that year the company shakes up its board and moves 2 members to a new board of counsellors and the company also formed a new medical board later that year.

By the end of November 2015, the partnership between Safeway and Theranos has fallen and their partnership with Walgreens was on thin ice and.

2016: The End is Near

More and More regulators and scientists started raising questions and finding problems with Theranos’s technology. And CMS sends out a direct report to Theranos that their Lab in California has failed to comply with standards and that its patients are in immediate jeopardy, and the company was given 10 days max to address the issues.

And this report made Walgreens a backup from the deal. Walgreens stopped sending blood samples to the California Lab and soon suspended Theranos service at Wallgreens locations.

After failing to fix the problems with the California Lab CMS threatened to ban Holmes and Sunny from the Lab business.

In May 2016 Sunny steps down as COO and leaves the company for good and now Holmes is the sole top executive in the company.

In the June of 2016, Walgreens finally ended its partnership with Theranos and closed all 40 wellness centres once and for all.

By 2016 CMS came down with the decision to ban Holmes from the lab testing business for 2 years and the worth of the company went from $9 Billion to $800 million overnight and Elizebeth Holmes was officially worth $0. 

By August of 2016, Holmes tries to move past recent setbacks by launching a mini testing laboratory, called miniLab, at a conference. CMS only banned Theranos from testing blood samples and didn’t prohibit research and development.

Partner Fund Management who purchased 56 million shares, sues the company for $96 million, the amount it invested into the company in 2014, plus damages, for misleading the shareholders.

At the late end of 2016, Theranos lays off 340 employees to pivot its attention to miniLabs. And by the end of that month, Walgreens sues Theranos and was looking for $140 million it poured into the company including damages.

2017 - 2018: The Fall

Partner fund and Theranos came to an agreement for an undisclosed amount.

Theranos downsizes its workforce yet again following the increased scrutiny into its operations, laying off approximately 41% of staff.

At the same time, Theranos also failed yet another lab regulatory inspection and was made to close its last blood testing location.

Theranos and CMS settled after Holmes, agreed to pay $30,000 and not to own or operate any clinical labs for two years.

And by the start of 2018 Holes and Sunny was charged with massive fraud involving more than $700 million from investors simply called misleading the shareholders.

SEC alleges that Holmes and Sunny knew that their proprietary device has a 6:100 ratio where only 6 of the 100 tests could be performed on its patients testing menu.

In the court filings, Holmes' lawyers argued that Holmes never knew the financial information provided to investors and others was false.

However, in the end, Theranos and Holmes agreed to resolve the claims against them, and Holmes gives up most or all of her control over the company and much of her stake in it.

Sunny, however, seems to be a fighter, is fighting the charges, with his attorney claiming to have "accurately represented Theranos as it is to investors to the best of his ability."

 Reporter John Carreyrou, who first broke open the story of Theranos for the Wall Street Journal, publishes the famous Book "Bad Blood" a definitive look at what happened inside the company. Director Adam McKay (who directed "The Big Short") secures the rights to make the film, starring Jennifer Lawrence as Holmes, by the same name.

 In the midst of September, Holmes wrote an email to all its shareholders that Theranos will dissolve, and also included that no one is interested in a buyout and “We are out of time”

And that it’s the end of the 15-year-old company’s sage.

Whatever be the result of the trial, Theranos will serve as a cautionary tale for the fast-paced world of startups and their often irrationally astronomical valuations across the world.

From my point of view, I still can’t understand what Holmes was thinking, all I can see is a cold-blooded scam, “It started with one lie and it snowballed”.