
Safeway, Theranos Split After $350M Deal Fizzles - bedhead
http://www.wsj.com/articles/safeway-theranos-split-after-350-million-deal-fizzles-1447205796
======
colmvp
Some important points from that article:

> Current and former Safeway executives said Theranos missed deadlines for the
> blood-testing rollout. They also said several Safeway executives questioned
> the accuracy of results Theranos gave to Safeway employees tested at a
> clinic in the supermarket chain’s headquarters in Pleasanton, Calif.

> Theranos often drew the same employee’s blood twice, first with blood from a
> finger prick and then the traditional method of a needle in the arm,
> according to one former Safeway executive.

> The former executive said he worried that Theranos’s finger-prick process
> was still a work in progress. “If the technology is fully developed, why
> would you need to do a venipuncture?” this person said, using the term for a
> traditional blood draw.

> The concerns deepened when Theranos’s test results for several Safeway
> employees differed from the results the same employees got from other
> laboratories, according to the former executive. Another former Safeway
> executive confirmed those recollections.

> One Safeway executive got a frighteningly high result from Theranos on a
> test to gauge his prostate-specific antigen, according to two former Safeway
> executives. They said the test suggested that the executive had prostate
> cancer. Retesting by another lab came back normal.

~~~
sghodas
The positive predictive value for the prostate-specific antigen test for
prostate cancer is only 30%. This means that only 30% of people who test
positive for elevated levels of prostate-specific antigen actually have
prostate cancer. This is an intrinsic problem with testing for prostate-
specific antigen not with Theranos' testing.

~~~
danieltillett
The issue is not how accurate the PSA test is for detecting prostate cancer,
but that Theranos’ tests give wildly different results to everyone else’s FDA
approved tests.

------
danieltillett
Read the informed comments on Derek Lowe's blog about Theranos [1]. This is
the money shot quote from johnnyboy

 _" @Pete: it is entirely justified to have doubts about the validity of blood
results obtained from finger pricks. The blood you get from a prick will be a
mixture of blood from small venules, small arterioles, capillaries and lymph
vessels, mixed with whatever loose tissue and cells have been cut by the prick
and carried over into the blood. No way you could ever get a reliable CBC from
such a sample. Since the kind of general blood tests that this company is
targeting are usually CBC + chem panel, even if you could get your chem
results from the prick, you still need a normal blood draw for the CBC, so the
competitive advantage that they are trying to push (quick sampling by patient
at pharmacy, without need for phlebotomist) is lost. On top of that, the
variability inherent in chem results from prick blood will be significant for
several analytes, like CK and AST (present in muscle so could be raised from
prick injury), glucose and lipids (different levels in venous or arterial
blood or lymph), etc… They are focusing on their fancy technology without much
consideration of the underlying biology, typical error of engineering types.”_

1\.
[http://blogs.sciencemag.org/pipeline/archives/2015/10/15/the...](http://blogs.sciencemag.org/pipeline/archives/2015/10/15/theranos-
and-its-blood-test-machine)

~~~
refurb
No doubt that a blood sample from a finger prick is different than from a
vein.

That said, diabetics just use finger pricks for their blood glucose tests. Is
the result calibrated for a finger prick test or do we just assume it's close
enough?

~~~
danieltillett
You don’t need the accuracy that you need for the other tests plus glucose is
in really high concentrations relatively to the other compounds they want to
measure. If you are out by 20% on the glucose concentration in diabetes it
does not matter too much, but it does for everything else. It is not like the
current machines are 100% accurate anyway even though the ISO threshold is
+-20% [1].

1\.
[http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3317395/](http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3317395/)

------
bedhead
The anecdotal evidence is absolutely overwhelming at this point: Theranos
simply doesn't work. Books will be written about this company...

~~~
nemo44x
I agree. It will likely be seen as a massive scam. Ideas are cheap. Technology
is hard.

~~~
tlmde
Yes, I've been working in MEMS for 15 years.

------
sama
It's now been two weeks since Theranos said they were going to release
clinical data.

~~~
danieltillett
Sam I think we can safely say at this stage that there is no favorable
clinical data.

------
Pyxl101
What options are there for founders to liquidate shares in the process of
fundraising but before going public? Are founders typically able to liquidate
some amount of shares in funding rounds in order to take home cash, or do
investors disallow that entirely until a company is sold or goes public?

Theranos is 12 years old at this point, and raised $400 million at a $4.5
billion valuation. Would a founder of a company in those circumstances have
been able to liquidate - let's say - 1% of their ownership along the way, or
in the last fundraising round, for cash? Or is that out of the question and
founders are expected to retain their ownership aside from investment dilution
until sale?

I suppose the answer depends on the terms the company is able to work out with
their investors. But perhaps someone can comment on what terms are common in
such situations.

~~~
alaskamiller
Biggest example is Snapchat, they got and keep asking for millions of dollars
money when fundraising.

Last year's big drama was Secret app's founder taking $6MM when they raised
$25MM then proceeded to buy fancy cars. The product growth stalled and the
company shut down in less than a year.

Happened with Buffer.

~~~
Asparagirl
Happened with Basecamp (formerly 37 Signals), too -- they're bootstrapped but
they took a small investment from Jeff Bezos so that they could cash out a
little bit and enjoy themselves.

~~~
harryjo
Funny how they dedicate their blogging to attacking Bezos's business model,
then make their living off of it.

~~~
fit2rule
The very definition of disruption.

------
sebbot
to anyone that doesn't have a wsj subscription, use the link from the google
results:

[https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...](https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB8QqQIwAGoVChMI8_XZ1ayHyQIVQcFjCh20CAnN&url=http%3A%2F%2Fwww.wsj.com%2Farticles%2Fsafeway-
theranos-split-after-350-million-deal-
fizzles-1447205796&usg=AFQjCNH0VFmzVZNRQHli7qd2DDXu6umZBg&sig2=etQXPu4uSowWZeJZYjGUbA)

~~~
ecopoesis
Or just click the web link stories have now under their title.

------
7Figures2Commas
> Theranos often drew the same employee’s blood twice, first with blood from a
> finger prick and then the traditional method of a needle in the arm,
> according to one former Safeway executive.

> The former executive said he worried that Theranos’s finger-prick process
> was still a work in progress. “If the technology is fully developed, why
> would you need to do a venipuncture?” this person said, using the term for a
> traditional blood draw.

> The concerns deepened when Theranos’s test results for several Safeway
> employees differed from the results the same employees got from other
> laboratories, according to the former executive. Another former Safeway
> executive confirmed those recollections.

> Theranos also backed away from putting its blood analyzers in Safeway’s
> clinics so patients could get the results quickly, the current and former
> executives said.

> Instead, Theranos said blood samples collected at Safeway would have to be
> shipped to a central lab for analysis, according to the former executives.

Wow. The Theranos story just keeps getting worse.

~~~
danieltillett
Yep. I think this unicorn has a broken leg.

~~~
AJ007
Where is the line between grossly exaggerating ones product and criminal fraud
drawn?

Personally I view things where you give someone a false health diagnosis to be
among the most egregious deceptions possible, a step beyond running a Ponzi
scheme and in line with other things where users are severely hurt or killed.

~~~
danieltillett
I will be very surprised if Elizabeth hasn’t crossed the line over to fraud at
some point. She is pulling down some very well connected people - she had
better like orange.

~~~
nemo44x
I'm not even sure it's her fault or the fools who gave a 20 year old billions
of dollars to startup a healthcare company. What could go wrong?

~~~
adventured
It should be pointed out that she never got billions of dollars to start
Theranos.

She was 21 or so when Theranos got a $5.8m A round. She's now 31.

[https://www.crunchbase.com/organization/theranos](https://www.crunchbase.com/organization/theranos)

------
marcusgarvey
>Safeway Inc. spent about $350 million to build clinics in more than 800 of
its supermarkets to offer blood tests by startup Theranos Inc.

>The $350 million price tag was equivalent to more than half of Safeway’s net
income of $596.5 million in 2012. Safeway had revenue of $44.21 billion.
Safeway also invested more than $10 million in Theranos, one former Safeway
executive said.

>Two of the former Safeway executives said they told Mr. Burd, Safeway’s chief
executive, about the varying employee test results.

>The former executives said Mr. Burd told them he had been reassured by Ms.
Holmes. Mr. Burd continued to support the partnership with Theranos, according
to the former Safeway executives.

If he hadn't retired already, he should be fired for incompetence.

~~~
sk5t
Well, Holmes _did_ reassure Burd. We cannot rule out the possibility that she
is an exceptionally deft reassurer.

In seriousness, Safeway gets durable capital improvements to their stores for
their $350mm, still useful without Project T-Rex.

------
goodJobWalrus
Is having blood tests in grocery stores / pharmacies a newish thing in the US,
or it existed for a long time? I lived in the US in 2004-2007, and had blood
tests regularly, but it would have never occurred to me to go to a grocery
store for one.

~~~
Pyxl101
No, that's not typical. Blood tests are not usually offered in pharmacies
either, and are reserved for clinics and hospitals. Blood tests typically
involve needles, privacy, etc. They're the wrong atmosphere for a casual
grocery store or pharmacy.

Theranos's vision was to make blood tests easier and more accessible by
requiring only a finger prick instead of drawing from a vein and by giving
results quickly instead of hours or days later from a lab. It sounds like
Safeway got on board with that vision as a forward-looking opportunity.

If a full panel blood test was as easy as a finger prick, then I could see
blood testing going mainstream in the way that Theranos is hoping, and Safeway
was hoping, but it all depends on the technology actually working as
advertised.

------
geomark
Have the people who funded Theranos been calling the critics haters? That
seems to be common with some VCs. Like calling HN "Hater News" because of
harsh criticism of questionable claims of innovation.

~~~
w1ntermute
[https://twitter.com/pmarca/status/651634611357790208](https://twitter.com/pmarca/status/651634611357790208)

If it comes out that Andreessen backed Theranos, I suspect there'll be a lot
of schadenfreude in the Valley.

~~~
geomark
We all understand that the VC narrative is about potentials. Sometimes we
don't buy into the potential, may even have legit reasons to believe it is
bogus. But if we don't support the narrative we are haters. Seems beneath
someone in that position to resort to name-calling.

------
seesomesense
This is what happens when the CEO of a startup is a liar. It is a shame, but
it is unsurprising.

------
swampthinker
Could a kind person summarize the article for us that don't have a WSJ
subscription?

~~~
empressplay
Click the "web" link in the header at the top of this page and it will google
search the article, click on it in google and you'll see the whole thing.

