Monday, December 26, 2016

Theranos had an awful year, and it only has itself to blame

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It’s hard to mock a company that’s hit the skids, especially when there are real people suffering as a result — whether that’s employees losing their jobs or patients who have made medical decisions based on misleading data. Back in May, Theranos voided and corrected “tens of thousands” of blood tests that it had taken and examined across the previous two years. All because a lab staffer used a generic piece of testing equipment with the wrong settings and nobody thought to check.

Even worse is that Theranos knowingly sent inaccurate test results to between 40 and 81 people that placed them in “immediate jeopardy.” Whistleblower Tyler Shultz found that when Theranos tested its Edison machines, any inconvenient data — meaning that which conflicted with the company’s official narrative — was discarded. Internal paperwork said that Edison was accurate 95 percent of the time, but in reality that figure was somewhere between 65 and 80 percent.

Fortune Global Forum - Day 1

Kimberly White / Getty Images for Fortune

In hindsight, it’s easy to pinpoint exactly where things went wrong, and where founder and CEO Elizabeth Holmes should have made amends. But with Theranos, the whole venture seemed misguided from the moment her professors at Stanford told her that fingerprint testing wouldn’t work. Whenever there was a hint of discord, Holmes would immediately send a cadre of lawyers around to intimidate them into silence.

It is often the case that the most thin-skinned and deceitful people are the first to call in lawyers. The day after Theranos’ chief scientist, Ian Gibbons, died after attempting to take his own life, lawyers turned up at his widow’s door. They were there to ensure that she didn’t repeat her late husband’s objections, and to seize any Theranos documents at their home.

You’d have to wonder if, at any point, Holmes looked in the mirror and wondered if she had turned into the villain of this story. It seems not, since she then spent 2016 desperately trying to deny reality, distract customers, investors and the media, and generally pass blame on to others. The company’s statement in response to the Walgreens lawsuit is to suggest that the retailer “mishandled” its partnership, which caused Theranos “significant harm.” But the harm that Theranos has suffered has all been self-inflicted, and now it’s all coming back, with interest.

Theranos’ miniLab / Theranos

First came the lawsuits. Walgreens, which until recently was Theranos’ key retail partner, wants $140 million. The investment fund PFM believes that it was misled by Holmes into investing $100 million in the startup “through a series of lies, material misstatements, and omissions.” Another investor, Robert Colman, believes that he, too, was misled about Theranos’ capabilities and technology. Others could soon pile on as well. Holmes herself, who at the beginning of the year was on Forbes’ list of America’s Richest Self-Made Women, has seen her perceived net worth written down to nothing.

Theranos attempted to distract from its malaise by announcing a new piece of testing equipment, called miniLab. Holmes claimed that one of the key new features of the box would be to detect the Zika virus — timely, given the global crisis surrounding the disease. In the same month, however, the FDA inspected the box and said that it was unsuitable for general use because the company had flouted agency rules. Elizabeth Holmes is now banned from running or owning a lab for two years after the Centers for Medicare and Medicaid Studies audited one Theranos facility.

If that wasn’t bad enough, Adam McKay, who directed The Big Short, has signed a deal to direct a movie based on Holmes’ life. On the upside, it’s currently pegged to star the Academy Award–winning Jennifer Lawrence. On the downside, it’s likely going to use all of these grisly pieces of news as fodder for the screenplay, which will probably paint Holmes as a charlatan. Either way, it’s not going to be pretty.

Check out all of Engadget’s year-in-review coverage right here.

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