We talked about our famous Tony Stark-wannabe (aka Elon Musk) last week.
It made me think of a time when we had another face standing at the top of the biotech mountain : Elizabeth Holmes.
As she made herself more than discreet lately, I figured it was time for a little recap (especially for our younger lab rats out there). So let’s dive into the incredible story of Elizabeth Holmes, Theranos, and how she got everyone in the Silicon Valley fooled.
Who is Elizabeth Holmes ?
Elizabeth Anne Holmes was born the 3rd of February 1984, in Washington, USA. Her father had been a vice president of a big energy company and held various governement jobs (let’s just say they did not have financing troubles…).
At age 18, Holmes got into Stanford University as a chemical engineering student. During her studies, she worked at the Genome Institute of Singapore as a laboratory assistant, mainly working on blood samples collection.
In March 2004, she dropped out of Stanford with a dream of funding a biotech company using her tuition fund. I mean, the girl is ambitious, you gotta give it to her!
But keep in mind : she did not finish her studies, and she was enrolled as an engineering student, not a life science student. That will be important later.
The beginning of Theranos
The idea
While still in university, Holmes brainstormed a bit and came up with a first idea : a skin patch that could deliver drugs and register variables in the patient’s blood. As great as her idea was, it was obviously not feasible at that time (and still isn’t) due to our technology’s limitations. But with her dream in mind, Holmes founded the company “Real-Time Cures” in Palo Alto in 2003, in order to “democratize healthcare”.
That was enough to plant a seed in Holmes’s brain : she wanted to make blood tests cheaper, faster, and more convenient for patients. As she also had a fear of needles, her goal was to develop a machine that could test everything using only a drop of blood taken from the finger.
If there are any life science scientists reading me (and I hope so, otherwise this blog is quite pointless), that’s when you stop reading and say “wait, what?” out loud. And you would be right. Any scientists would recognize that as beautiful as this idea is, it just cannot work. A drop of blood is way too small of a sample to quantify anything else than blood sugar or hemoglobin.
That is also what Holmes’s medicine professor at Stanford, Phyllis Gardner, told her when she pitched her idea (obviously). But that did not stop our girl, hell no. She had a goal in mind and was going for it.
The first step
She decided that presenting her idea to biomedical scientists was just not working (as they all told her that her idea will never work). So she changed tactics and presented her pitch to her advisor and dean at the School of Engineering, Channing Robertson. Robertson was a chemical engineer and he found the idea amazing (duh).
Let’s do a quick break and let me take this moment to tell you something important about Holmes : she was a blue-eyed, blonde, white, attractive young woman. Let’s be honest, this probably played its part in the disaster that will follow.
Okay so let’s go back to Channing Robertson, the chemical engineer who believed in Holmes’ project. He became the company’s first board member. At the same time, Holmes renamed the company Theranos (as a mix of “therapy” and “diagnosis”). Dope name though.
And thus the story begin !
Development
The CEO persona
Holmes, now CEO of her own biotech company, began to present herself in a.. peculiar way. As a biotech entrepreneur, her model was evidently Steve Jobs : therefore she most exclusively dressed in a black turtleneck. Additionally, she began to speak in a weirdly low, baritone voice ?
It was as if she was creating this ~successful biotech entrepreneur~ persona in order to be taken seriously. Which I can understand as being a CEO-level woman in biotech is probably not a walk in the park, but girl you did not need to go that hard. Also, she tried her best to never blink. Yeah, weird.
Investors
So let’s go back to where we left Holmes : after being backed up by Channing Robertson, Holmes was introduced to several investors. With her newfound strange-but-in-a-fascinating-way facade, she convinced several investors and by December 2004, she had raised $6 MILLION DOLLARS to fund Theranos.
You can criticize her all you want but you gotta admit that the girl was convincing! Nevertheless, keep in mind that investors are not (at all, far from it actually) biomedical experts. They probably just went “Damn, what a great idea. How much money did you say we could make?”.
Theranos’s board and investors included many influential figures. Holmes’s first major investor was Tim Draper (a Silicon Valley venture capitalist). The pool expanded to include Rupert Murdoch, the Walton family, the DeVos family including Betsy DeVos, the Cox family of Cox Enterprises and Carlos Slim Helú.
Each of these investors will live to see tens to hundreds of millions of dollars disappear, but we’ll get to it. Although I feel like they kinda brought it upon themselves (pro tip : always do your own research before dropping millions into a company you guys).
Connections
Let’s fast-forward to 2010. We do not have a lot of information on what happened before that but we can take a wild guess : Holmes pushed her scientists to make her idea work, and it didn’t work. Duh.
Remember, the goal was to create a machine (the “Edison”), that would analyse a drop of blood and quantify multiple blood components. Yeah, good luck with that!
Nevertheless, thanks to the smitten investors, by the end of 2010 Theranos had more than $92 million in venture capital. For those of you that are a bit financially dumb like myself : venture capital is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. You’ll go to bed smarter.
One of Holmes’s first board members was George Shultz, former U.S. Secretary of State, no less. Pay attention to that name, it will come back later.
With Shultz’s early involvement aiding Holmes’s recruitment efforts, the 12-member Theranos board eventually included: Henry Kissinger, a former secretary of state; William Perry, a former secretary of defense; James Mattis, a future secretary of defense; Gary Roughead, a retired U.S. Navy admiral; Bill Frist, a former U.S. senator (R-TN); Sam Nunn, a former U.S. senator (D-GA); and former CEOs Dick Kovacevich of Wells Fargo and Riley Bechtel of Bechtel.
Yeah, I don’t really know half of these people but as you can see they seem like ~The Big Deal~. The San Francisco Business Times even declared that Holmes formed “the most illustrious board in U.S. corporate history” over the next three years.
Media attention
Things started speeding up a bit for Theranos in 2013. Before that, the company was fairly discreet, not well-known to the general public. That was about to change as Theranos announced a collaboration with the pharmacy store chain Walgreens in order to launch in-store blood sample collection using the Edison machine (that still did not work).
This huge deal meant that in 2014, Holmes made the cover of Fortune, Forbes, T: The New York Times Style Magazine, and Inc. Yeah, just that. Of course the media loved the idea of this beautiful, smart young woman taking up the Sillicon Valley by storm.
Forbes also recognized Holmes as the world’s youngest self-made female billionaire. At this point, Theranos was valued at $9 BILLION and had raised more than $400 million in venture capital. Let’s take this moment to remember that THE TECHNOLOGY NEVER EVEN WORKED. How crazy is that ?
Personal Life
It’s time to talk a bit more about the personal life of Elizabeth Holmes, as that will come into play later.
I already explained how weird Elizabeth presented herself, but don’t worry, her personal life is even weirder.
While on an exchange program through Stanford’s University in Beijing in 2002, Elizabeth met technology entrepreneur Ramesh “Sunny” Balwani. She was 18, he was 37 and married. That is gross, Sunny, and you should be ashamed (though he will live to regret that, as you will see).
In 2002, Balwani divorced his wife, and by 2003, he became romantically involved with Holmes. The couple moved into an apartment together in 2005.
While Balwani officially joined Theranos in 2009 as chief operating officer, he had been advising Holmes behind the scenes since the company’s start. Together, they ran the company with a corporate culture characterized by “secrecy and fear,” as told by employees (no kidding, when your product is a lie). Balwani left Theranos in 2016 when the investigations became serious.
The beginning of the end
The first clue : Ian Gibbons
Ian Gibbons was the chef scientist of Theranos from 2005 to 2010. Gibbons was a brilliant biochemist that studied at Cambridge and had a lot of experience in biomedical research.
He soon realized that the devices Holmes wanted to create were extremely difficult to produce. As a great scientist, he had high standards, which became problems when management pushed for shortcuts and quick results. Gibbons tried his best to match the company’s expectations, but was obviously unsuccessful.
After becoming tangled in one of Theranos’s patent battle, and being asked to be a witness in court, Gibbons became extremely depressed. He saw no way out of his situation, and was being bullied, harassed and intimidated.
Just before having to give his deposition to court in May 2013, Gibbons took his own life with acetaminophen pills.
Theranos did not even hold a memorial service for him.
The accusations
The downfall of Theranos has to be attributed to a few key players that began their moves in 2015. Let’s review them :
- February 2015 : Stanford professor John Ioannidis wrote in the Journal of the American Medical Association that no peer-reviewed research from Theranos had been published in medical research literature. Damn, who would have thought that a medical equipment had to be tested and peer-reviewed ?
- May 2015 : University of Toronto Professor Eleftherios Diamandis analyzed Theranos technology and concluded that “most of the company’s claims are exaggerated.” No shit Sherlock.
- October 2015 : John Carreyrou of The Wall Street Journal published a bombshell article following a months-long investigation after receiving a tip from an ex-employee. In his article, Carreyrou detailed how Theranos used regular blood testing machines instead of the Edison, as they knew the Edison would not (could not, would I even say) give accurate results. Like, the audacity to use good-old Sysmex analyzer and reep all the glory ?
What is crazier is that the ex-employee that acted as a whistleblower to John Carreyrou was no less than Tyler Shultz, a Theranos employee from 2013 to 2014 and the grandson of then-Theranos director, former U.S. Secretary of State George P. Shultz (told you to pay attention).
Tyler had tried talking to his management (that evidently didn’t care) and felt that it was his duty to report the company after that. A true scientist that put science and the well-being of patients above his own needs and family. We admire you, Tyler.
The consequences
Obviously, Theranos response was that the article and accusation were “factually and scientifically erroneous”, but the damage was done, and the fall was near.
In January 2016 the Centers for Medicare and Medicaid Services (CMS) sent a letter to Theranos based on an inspection of its Newark lab in 2015, reporting that the facility caused “immediate jeopardy to patient health and safety” due to a test to determine the correct dose of the blood-thinning drugwarfarin (test that did not work, obviously). Consequently, Walgreens announced a suspension of Theranos blood tests from the Newark lab and immediately paused its testing services in Palo Alto.
In March 2016 CMS regulators announced plans to enact sanctions that included suspending Holmes and Balwani from owning or operating any certified clinical laboratory for two years and that they would revoke the facility’s certification as a clinical laboratory.
The downfall
By April 2016 Theranos came under criminal investigation by federal prosecutors and the SEC (The Securities and Exchange Commission) for allegedly misleading investors and government officials about its technology.
By October 2016, Theranos had lost all of their partnerships, and laid off 40% of their workforce.
By January 2017, this number rose to 81%.
The company was officially shut down on the 4th of September, 2018.
The aftermath
Lawsuit n°1
In March 2018, the SEC charged Holmes and Ramesh Balwani with fraud, as they took more than $700 million from investors while advertising a false product. Holmes settled the lawsuit by surrending total control of Theranos, returning 18.9 million shares to the company, and accepting a ban on holding an officer or director position in a public company for 10 years, as well as a $500,000 fine. Ouch.
Lawsuit n°2
After an investigation by the U.S. Attorney’s Office for the Northern District of California in San Francisco that lasted more than two years, Holmes and Balwani were indicted on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. According to the indictment : “Investors, doctors and patients were defrauded. It is alleged the defendants were aware of the unreliability and inaccuracy of their products, but concealed that information”.
The case, United States v. Elizabeth A. Holmes, et al., began on August 2020, but had to be postponed because of the pandemic.
Holmes testified she was misled by her staff regarding the technology. Additionally, she claimed that her former partner Sunny held power and influenced her during their ongoing relationship. The evidence presented in the case detailed Holmes’s involvement in fabricated demonstrations, falsified validation reports, deceptive claims about contracts, and exaggerated financial statements at Theranos. Nice try Liz, but the U.S. governement does NOT like fraudsters.
On January 3, 2022, Holmes was found guilty of three counts of wire fraud and one count of conspiracy to commit wire fraud. She was sentenced in November 2022 to 11 years and 3 months in prison, and was ordered to pay $452 million to the victims of the fraud.
After trying numerous appeals and using the facts she had two young children (more on that later) to try and postpone her incarceration, Holmes began serving her sentence at Federal Prison Camp in Texas in May 2023.
Balwani’s trial began in March 2022 and he was convicted of 12 counts of fraud in July 2022. In December he was sentenced to 12 years and 11 months in prison and 3 years of probation.
A new “Liz” ?
Before the trial
In 2017, Holmes met William “Billy” Evans. Billy is the heir of the Evans Hotels, a family-owned group of hotels near San Diego. Not a bad pick Elizabeth, well done).
They had a a son in 2021, and Holmes reported a new pregnancy in October 2022, just before her sentencing hearing. Interesting timing there, Liz.
After the sentencing
In May 2023, just before Holmes was set to begin her sentencing, the New York Times published an article titled “Liz Holmes Wants You to Forget About Elizabeth”.
In it, New York Times writer Amy Chozick explains how she spent some marvelous days with Holmes and her family (they even went to the zoo together mind you). She goes on to describe Holmes as a loving mother, down-to-earth wife that takes care of her family, her home and her dogs. See ? Just like us !
Holmes gave up the deep voice and the turtlenecks, started a family, and now lives a seemingly ordinary life as a traditional wife named “Liz”. Her past deception, where she made people believe that she could conduct a variety of medical tests with just a drop of blood, was nothing more than a stupid phase !
Behold, an excerpt of the article :
I was admittedly swept up in Liz as an authentic and sympathetic person. She’s gentle and charismatic, in a quiet way. My editor laughed at me when I shared these impressions, telling me (and I quote), “Amy Chozick, you got rolled!” I vigorously disagreed! You don’t know her like I do! But then, something very strange happened. I worked my way through a list of Ms. Holmes’s friends, family and longtime supporters, whom she and Mr. Evans suggested I speak to. One of these friends said Ms. Holmes had genuine intentions at Theranos and didn’t deserve a lengthy prison sentence. Then, this person requested anonymity to caution me not to believe everything Ms. Holmes says.
Like, what ? How gullible can you be ? And for the love of god, did nobody at The New York Times read that article before publishing ?
Obviously this article sparked outrage all over the internet, as people were quick to remind others of the terrible things Elizabeth has done.
You can try all you want, but you will forever stay a liar and a fraudster, Liz.
Have fun in jail!
In the media
In May 2018, author John Carreyrou released the book Bad Blood: Secrets and Lies in a Silicon Valley Startup, describing the life of Holmes and the inner workings of Theranos.
Disclaimer : Bought the book, but did not read it yet (it’s on my “to read” pile I swear).
In January 2019, ABC News, Nightline, and Rebecca Jarvis released a podcast and documentary about the Holmes story called The Dropout. It included interviews and deposition tapes of key figures, including Elizabeth Holmes, Sunny Balwani, Christian Holmes (Elizabeth’s brother), and Tyler Shultz.
Disclaimer : Saw it, liked it.
In March 2022, Hulu released The Dropout, a miniseries based on the podcast of the same name. The series starred Amanda Seyfried as Holmes, a role for which she received a Primetime Emmy Award and a Golden Globe Award.
Disclaimer : Saw it, loved it. Amanda Seyfried does an amazing job.
Conclusion
The story of Elizabeth Holmes and Theranos put into light the huge ditch in between investors, biotech companies and the actual science. Investors are not scientists nor experts, they trusted the CEO’s results because that’s what you’re supposed to do as an investor. There were no double-checking or reviewings, and those who suffered the most were the patients.
That’s a lesson in why you should always do your research and take all the new “ground-breaking technology” announcements with a grain of salt.
Never forget the scientist’s motto : “question everything“.
Post-scriptum – December 2023
Well, well, well.. Elisabeth Holmes seems to have inspired biomedical companies.
In December 2023, BD (Becton, Dickinson and Company, the global medical technology company), announced it has received FDA clearances for “a novel blood collection device that obtains blood samples from a fingerstick that produce lab-quality results for some of the most commonly ordered blood tests.”
Mmh, I wonder where I read that before ?
Let’s see what this device is about :
“The BD MiniDraw™ Capillary Blood Collection System is less invasive than a traditional venous blood draw by using capillary blood collected from a patient’s finger by a trained healthcare worker, without the need for a phlebotomist to collect blood from a vein. The innovative design provides a sample that produces lab-quality blood test results from a fraction of the volume of traditional venous collections. It is less invasive than traditional venous blood collection methods and more convenient for the patient by expanding access to blood collection to new locations, including retail pharmacies. The device may provide a better patient experience and has the potential to transform diagnostic testing.“
I mean, it is a bit uncanny isn’t it ?
In bold are the parts that made my deja-vu senses go crazy.
I have to say that the worst one is “sample that produces lab-quality blood test results from a fraction of the volume of traditional venous collections“.
Wow, seems like an amazing idea ! How did no one think of that before ?
I’m having fun with the comparison I have to admit. But let’s look at the facts : The FDA clearance apparently include “low-volume blood collection for a lipid panel, selected chemistry tests, and hemoglobin and hematocrit (H&H) testing”. All of these tests are already done on a small drop of blood, so no jaw-dropping discovery there, the technology is as its beginning.
However, I do think nano nanotechnologies will play a big role in the future, so I’m excited to see where this is all going!
And beside my sarcasm, I don’t think we really are in danger of repeating the past, as BD is a well-established company that should abide to rules and regulations. Let’s see where this is all going !
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