It seems billion dollar baby of Silcon Valley, Elizabeth Holmes, is facing yet another unicorn-slaying moment as the fairy-take ending for Stanford drop-out looks increasingly distant after a WSJ report that U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California, according to people familiar with the matter. With a board full of big swinging dicks about to be exposed for the greater fools they truly are, failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program.

We reported on the beginning of the end of the multi-billion dollar dream here, when its core "new technology" - known as a Capillary Tube Nanocontainer (CTN) - was exposed as essentially unacceptable for use.

And now, as The Wall Street Journal reports, U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California, according to people familiar with the matter.

The problems were found during an inspection by the Centers for Medicare and Medicaid Services, the chief federal regulator of clinical labs, at the blood-testing company’s facility in Newark, Calif. Failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program. The inspection results are expected to be publicly released soon, these people said. A spokesman for the agency said it “can’t confirm any survey conclusions or results at this time.” Theranos spokeswoman Brooke Buchanan said the company “does not have the report from last year’s regularly scheduled CMS audit of its California lab.” The problems observed by regulators were far more severe than those cited by CMS following its last inspection of the same lab in December 2013, according to the people familiar with the matter. The previous inspection cited infractions that Theranos said it promptly resolved.

This deficiency comes just days before a CMS inspection report critical to Theranos future relationship with its main retail partner Walgreens Boots Alliance,

The drugstore operator has 41 blood-drawing “wellness centers” in stores in Arizona and California, which are Theranos’s primary access to consumers. Walgreens had aimed to expand the sites nationwide but has suspended those plans until Theranos answers questions about its technology, said the people familiar with the matter. In recent weeks, Walgreens has debated whether to close the wellness centers, and the results of the latest inspection by CMS could lead the retailer to take an even harder look at what remains of its partnership with Theranos, these people said. Since October, Walgreens representatives have met a number of times with Theranos Chief Executive Elizabeth Holmes and her executive team but were dissatisfied with their responses, the people added. An earlier review of the contract led Walgreens officials to conclude that it would be difficult to exit the agreement, but the inspection findings could alter that conclusion, according to people familiar with the matter.

Finally, as Aswath Damodaran chastened just a few months ago, looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives...