
Theranos didn’t work with the huge drug company it supposedly made money from - McKittrick
http://www.theverge.com/2015/10/26/9618390/Theranos-glaxosmithkline-denies-partnership-pfizer-blood-test
======
notacoward
This company is looking less and less like they're struggling to develop new
technology, more and more like a deliberate sham. Given that so much of their
support thus far has been due solely to the Cult of Disruption, I can't help
but wonder if news like this might make at least a few investors consider a
return to good old-fashioned due diligence before placing their bets.

~~~
minimaxir
What's interesting is that venture capitalists are slamming media outlets for
reporting on the issue.

Here's a rather silly rebuttal to a recent Theranos piece on The Information
from Dave Morin:
[https://twitter.com/williamalden/status/658705178523258880](https://twitter.com/williamalden/status/658705178523258880)

"Isn't it time as Millenials that we try to use the Internet to unearth deeper
facts and see through these traditional smear campaigns?"

~~~
volaski
It's a conflict of interest only if there actually is a conflict of interest.
Tell me, what "conflict of interest" does Dave Morin have with Theranos?

~~~
7Figures2Commas
It doesn't look like there's a conflict of interest (Morin, as far as I can
tell, is not a Theranos investor), but I think you're overlooking the fact
that a lot of prominent tech investors are sitting on investments in companies
that have been significantly overvalued, and the cracks in some of these
companies are starting to become apparent.

There's a decent discussion on this here[1]. Red flags, like reports of late-
stage investors marking down the value of some of their unicorn investments,
are starting to mount and I think that has to be worrisome for investors who
are sitting on large unrealized gains that could easily evaporate.

Expect to see a lot more hand-waving on the part of investors as prominent
unicorns come apart at the seams.

Morin, according to his AngelList profile, is an investor in a number of
unicorns, including AirBnB, Dropbox, Evernote and Slack. Two of the mutual
funds that invested in Dropbox have reportedly marked down their
investments[2] and some media reports suggest Evernote is in trouble[3].

[1] [https://pando.com/2015/10/27/techpocalypse-
coming/](https://pando.com/2015/10/27/techpocalypse-coming/)

[2] [https://www.theinformation.com/mutual-funds-mark-down-
dropbo...](https://www.theinformation.com/mutual-funds-mark-down-dropbox-
holdings)

[3] [http://www.businessinsider.com/evernote-is-in-deep-
trouble-2...](http://www.businessinsider.com/evernote-is-in-deep-
trouble-2015-10)

------
BiologyRules
I interviewed at Theranos a year ago, and found the employees to be smart and
dedicated.

However, the company was the most secretive I've interviewed at and the
employees complained about being overworked. The fact the founder sold C++
compilers to Chinese universities when g++ is open-source sounded odd.

But I still had hope in them even after they passed on me -- a Silicon Valley
company actually making a difference in the people's health. I WANT TO
BELIEVE.

If this turns out to be smokes and mirrors, I'd be very saddened. Theranos'
failure would confirm what everyone interested in biotech knows but wishes
wasn't true: that advancements in this field do not move at the speed of the
digital economy.

~~~
tptacek
Holmes ran that business in high school. She was born in 1984, so that would
put the date around 2000. There were good reasons not to use G++ in 2000. When
Alexandrescu's book was published, in 2001, it was somewhat notorious on my
team (shipping code on G++) for how much of it didn't work well, or at all, in
G++.

~~~
saidajigumi
Heck, virtually any C++ compiler was a big pile of sharp edges back then, by
comparison to just a few years later. _Especially_ if you dared to use it for
embedded work, not so much due to the "embedded" part but just because the
embedded suite compilers were just so much further behind the C++ curve.

~~~
tptacek
Yep, but the commercial compilers generally had better STLs (particularly for
debugging), debuggers that could properly mangle/demangle symbols, and
precompiled headers --- in addition to different sets of C++ features that did
or didn't work properly.

~~~
saidajigumi
Largely true, but I recall actually isolating one chunk of code and compiling
with g++ just to get halfway sane error messaging around a (IIRC) template-
related error. I.e. you could do worse. The primary compiler for that code was
the circa-2001 ARM tools suite. I wrote a few novels worth of feedback and bug
reporting to them...

------
pen2l
Walgreens recently halted all Theranos expansions (currently only 41 Walgreens
have Theranos centers... there were plans to expand to many more):
[http://techcrunch.com/2015/10/23/walgreens-halts-theranos-
te...](http://techcrunch.com/2015/10/23/walgreens-halts-theranos-testing-
center-expansion/)

And it recently came to light that Elizabeth Holmes was misleading people when
she said her company voluntarily stopped using nanotainers -- it seems she was
forced to stop by FDA: [http://www.nytimes.com/2015/10/28/business/theranos-
quality-...](http://www.nytimes.com/2015/10/28/business/theranos-quality-
control-was-questioned-by-fda.html)

Between all of this, FDA coming in for tests, and other strange things, it
seems they have a lot of answering to do.

Or, alternatively, them being in stealth mode is the reason for all of these
strange happenings and lack of better information out there.

~~~
joezydeco
How can you perform live tests on patients and still be in stealth mode?

At some point you have to come clean with the FDA about your technology,
right? Or is this considered a wide-field clinical trial?

~~~
tvladeck
> How can you perform live tests on patients and still be in stealth mode?

That really hit the nail on the head for me.

~~~
msandford
From an old article on the subject: [http://fortune.com/2014/06/12/theranos-
blood-holmes/](http://fortune.com/2014/06/12/theranos-blood-holmes/)

The tl;dr is that Theranos makes their own machines, which makes every test
that they perform _technically_ a "Lab Developed Test" LDT which doesn't have
the same oversight that machines which are sold to others. As long as they
make their machines and use their machines, they're effectively exploiting a
loophole.

From the article:

The backdrop for this dispute is an unusual regulatory structure that does, in
fact, confer upon some–though not all–conventional lab tests an extra layer of
validation that Theranos’s do not yet have. Most labs, like Quest and
Laboratory Corp. of America, perform many of their routine tests using
analyzers they buy from medical-device manufacturers, like Siemens, Olympus,
and Beckman Coulter. Before those manufacturers can sell such equipment, they
must obtain U.S. Food and Drug Administration approval for the tests those
analyzers perform–a process that is in addition to, and more searching than,
the audits and proficiency tests required to win CMS certification for the lab
itself.

At the same time, for other procedures conventional labs will devise their own
lab-developed tests, or LDTs, which they do not have cleared by the FDA. While
the FDA takes the position that it could require approval for LDTs, for many
years it has said it would forgo that right in the exercise of its
“enforcement discretion.”

Theranos, which does not buy any analyzers from third parties, is therefore in
a unique position. While it would need FDA approval to sell its own analyzers
to other labs, it doesn’t do that. It uses its analyzers only in its own CMS-
certified lab. All its tests are therefore LDTs, effectively exempt from FDA
oversight.

~~~
joezydeco
Beautiful explanation. Thanks.

------
erobbins
Between this and the "wireless energy over ultrasound" scam I'm starting to
wonder if VCs actually do any due diligence at all.

~~~
raverbashing
I bet they pour over and nitpick lots of minor details on the financials

Tech? That's for the nerds. The light is blinking so it's fine I guess

~~~
7Figures2Commas
> I bet they pour over and nitpick lots of minor details on the financials

What financials? Lots of these companies have little to no revenue.

~~~
mmahemoff
Projections up and to the right.

~~~
erobbins
"this graph looks like a hockey stick, how's $50 million?"

~~~
cowsandmilk
to be fair, their competition has well-known financials. The size of the
existing market for blood tests is already large; any penetration would give
you a sizable business.

~~~
7Figures2Commas
"If this company obtains 1% of a $500 billion market, things will be great!"
is _not_ due diligence. Here, everything realistically comes down to the
technology because the company's ability to gain and sustain market share is
almost wholly dependent on it having a superior technology.

------
univalent
I never understood what was unique about this company. I worked for a company
over a decade ago that did a clinical trail for a bacterial pneumonia micro-
assay at Arup Labs in SLC. This seemed like the same thing but with a lot more
fanfare. I called some folks I used to work with to check if I was missing
something and they felt the same. (I'm not a biologist, I wrote the software
and did the stat research).

------
stvswn
The "dress like Steve Jobs" thing is starting to feel kind of messed up, am I
right?

(I read somewhere that she claimed that she hadn't considered that Steve Jobs
used to wear black turtlenecks, that she was more inspired by Sharon Stone...
which is really hard to believe)

~~~
seansmccullough
You probably have better funding rounds if you dress like Steve Jobs. /sarcasm

------
Overtonwindow
I feel like we've seen this before. Young startup, visionary founder, boat
loads of money, then after lots of money burned, outright lies, false claims,
or at the very least vaporware.

~~~
learc83
The funny thing is, this startup isn't that young. It's 12 years old. Someone
basically gave a completely inexperienced founder tens of millions of dollars
and over a decade to run an R&D lab.

~~~
maxlamb
hundreds of millions.

------
ameyamk
I just wonder instead of going back and forth and create more controversy -
why don't they just show which tests are working right now - and which don't.
Demonstrating with data is the best defense they can put forth.

its ok - if only small portion of tests are valid at this point but if they
show progress with data - this validates they are on the right track.

~~~
semi-extrinsic
They have one test which is FDA approved, for herpes simplex.

------
uptown
If their tests work, why not just show the world? Invite the press. Invite
doctors. Livestream it. Whoever it takes to validate what they say. What's the
downside?

------
ChuckMcM
I wonder what the real story is. A lot of questions, that if true make it look
bad, but if those are just random guesses with no basis in fact? Then its just
a hit piece.

~~~
antr
Me too, but I'm also very curious to see the due diligence reports (if any),
DFJ has on Theranos given that they've been in Serias A, B, and C.

------
maxerickson
Is there somewhere a clear indication that the extent of the relationship with
Phizer or GSK was misrepresented to reporters by someone from Theranos?

------
7Figures2Commas
Since there's so much interest in unicorn valuations today, and Theranos is a
prominent unicorn, anyone wondering about the potential implications of all
this news on Theranos' valuation might find it useful to look at Valeant
Pharmaceuticals, a publicly-traded company (ticker: VRX).

It is facing a number of issues, a few of which have led some to speculate
that it could become pharma's version of Enron[1]. In July, VRX hit a high
above $260. Today it's trading at less than $110.

[1] [http://www.nytimes.com/2015/10/27/opinion/is-valeant-
pharmac...](http://www.nytimes.com/2015/10/27/opinion/is-valeant-
pharmaceuticals-the-next-enron.html)

~~~
milesskorpen
Accounting rules changed after Enron; it's a lot harder to do what they did.
The biggest recent drop was after a very negative piece from someone who
publishes negative pieces while short-selling. I don't have much information,
but I'm not all that convinced Valeant has real fraud issues.

Also, Theranos and Valeant seem like entirely different businesses.

~~~
7Figures2Commas
> Theranos and Valeant seem like entirely different businesses.

I think you're missing the point I was making: Valeant is a timely and
interesting example of what can happen to the valuation of a company under
fire.

> I don't have much information, but I'm not all that convinced Valeant has
> real fraud issues.

If you don't have much information, how can you be convinced of anything one
way or the other?

------
slr555
I seem to detect the familiar odor of negative PR wafting over this entire
series of articles. The New Yorker has one of the most famously rigorous fact
checking policies in journalism. Things rarely ever slip past them. Companies
like Quest Diagnostics and Labcorp have immense amounts of revenue to lose to
a new, more efficient entrant like Theranos. No surprise they would go
negative to undermine a new competitor. As far as the company ferreting out
journalistic mistakes and correcting them, the onus should be on the media to
get the story right.

~~~
exegesis
Yes, agreed, except that micro-assay isn't new, and is actually used on
newborns all the time. It isn't used in adults because it tends to be wildly
inaccurate/variable, even under the best of circumstances.

------
pbreit
So Theranos definitely worked with Pfizer and probably worked with GSK.

I am not a Theranos apologist but this is lousy reporting.

------
kyrre
hopefully this isn't an example of a biotech startup embracing the silicon
valley 'fake it until you make it' mentality.

------
untilHellbanned
Dead unicorn list

1\. Homejoy

2\. Theranos

3\. ....

~~~
adharmad
There should be a dying unicorn list too..

~~~
toomuchtodo
I'm working on rolling out fuckedunicorns.com (a nod to pud's
fuckedcompany.com).

As someone who lived through the first boom bust, very interested to watch
things play out again.

------
andyl
"Fake it till you make it."

------
uslic001
The Emperor's New Clothes: the Emperor is wearing nothing at all. What a sham
company.

~~~
kefka
What emperor? You mean that homeless dude with schizophrenia?

Yeah, that's VC funding for you.

