Bloodwork darling Theranos under fire

Marco della Cava | USA TODAY

SAN FRANCISCO — Theranos, the secretive and revolutionary bloodwork analysis start-up valued at $9 billion, is under fire from a Wall Street Journal report that anonymously quotes former employees who question the efficacy and accuracy of the company's proprietary hardware.

The heart of the allegations charge that of the 240 different tests Theranos offers consumers, only 15 are conducted on a machine called Edison while the rest are being outsourced to machines that are similar to those used by more traditional labs such as LabCorp and Quest Diagnostics. The report, which published online late Wednesday, also contends that some results were so inaccurate that "patients would have to be dead for the results to be correct," the source said.

Theranos responded to the Journal's report in a blog post Thursday. It countered that the piece was "factually and scientifically erroneous and grounded in baseless assertions by inexperienced and disgruntled former employees and industry incumbents. Theranos presented the facts to this reporter to prove the accuracy and reliability of its tests and to directly refute these false allegations, including more than 1,000 pages of statements and documents. Disappointingly, the Journal chose to publish this article without even mentioning the facts Theranos shared that disproved the many falsehoods in the article."

The Journal article, written by investigative reporter John Carreyrou, describes how, in one instance, "two types of equipment gave different results when testing for vitamin D, two thyroid hormones and prostate cancer. The gap suggested to some employees that the Edison results were off, according to the internal emails and people familiar with the findings."

The story continues: "Senior lab employees showed both sets of results to Sunny Balwani, Theranos’s president and chief operating officer. In an email, one employee said he had read 'through the regulations more finely' and asked which results should be reported back to the test administrators and government. Mr. Balwani replied the next day, copying in Ms. Holmes. 'I am extremely irritated and frustrated by folks with no legal background taking legal positions and interpretations on these matters,' he wrote. 'This must stop.'”

The newspaper article quotes Theranos' outside attorney David Boies, who famously took on Microsoft in the 1990s, as acknowledging that Theranos is not yet using its machine for all its blood tests, describing that ongoing process as "a journey." Holmes repeatedly declined the Journal's request for an interview, until, it says, she agreed after the article's deadline.

In Theranos' rebuttal, the company says "the sources relied on in the article today were never in a position to understand Theranos’ technology and know nothing about the processes currently employed by the company." It adds that the Journal turned down requests to have Theranos' proprietary machines sent to its offices for further testing.

Theranos' 'Nanotainer' revolutionizes blood testing Elizabeth Holmes, Founder and CEO of Theranos, says their mission is to revolutionize the medical industry by taking the pain out of blood tests and lab costs.

Theranos founder Elizabeth Holmes, 31, started the company while she was still at Stanford University and is now on paper a self-made billionaire (she owns half of Theranos).

Holmes has amassed a powerful board that includes luminaries such as Henry Kissinger as well as nearly $400 million in venture capital funding. Her oft-stated mission is to bring affordable blood testing to the masses (many tests cost as little as $15) through a growing network of Theranos outlets in Walgreens stores nationwide. The labs currently are operating near the company's headquarters in Palo Alto, Calif., a few dozen locations in Arizona and in Capital BlueCross facilities in Pennsylvania.

Biotech analyst Eric Lakin of DeciBio Consulting says the Journal's report highlights the challenges Theranos faces, including "the simple fact that healthcare is not software, where you can launch a product and then just iterate it as you go along. There's going to be more scrutiny."

Theranos' blog post says, "When you create innovative technology, scrutiny is to be expected. We have always welcomed that scrutiny — opening up to regulators like no lab before and voluntarily submitting all our tests for FDA review, the gold standard for quality."

The company recently did get Food and Drug Administration approval for both its finger-stick method — which replaces the need for drawing vials of blood because only a drop is needed — and for herpes simplex 1 virus testing. Theranos also was behind a new Arizona law that allows patients there to get blood tests without needing a doctor's approval. Holmes argues that by making such tests affordable, people can begin keeping closer tabs on their own health and perhaps catch signs of impending disease.

But, says Lakin, "this article may temper some excitement and raise questions about just what stage Theranos is at in their development. They've raised $400 million, and they could well be subsidizing these (low-cost) blood tests with these funds. But the bottom line is there's just no visibility into what they're doing."

Since the company came out of a decade of stealth research in July 2014, Holmes has vaulted from unknown to media celebrity, appearing everywhere from The Charlie Rose Show to White House events. All the while, she has remained steadfast in preserving the company's secrets arguing that revolutionizing the decades-old blood analysis business requires diligent private research.

"We are patient and we're building this company for the very long term," Holmes told USA TODAY last year. "We're looking to reshape the system."

Follow USA TODAY tech reporter Marco della Cava on Twitter: @marcodellacava