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After a Year of Controversy and Investigations, Theranos Closes Its Blood Labs

The health tech startup first came under scrutiny a year ago.

by Kaleigh Rogers
Oct 6 2016, 3:20pm

Elizabeth Holmes, the founder and CEO of Theranos Image: Wikipedia

After a year of extreme controversy, health tech startup Theranos will be shutting down its blood-testing operations across the country.

CEO Elizabeth Holmes made the announcement late Wednesday in an open letter posted to Theranos's website, where she told investors the company would be shuttering its lab operations and laying off 340 employees in Arizona, California, and Pennsylvania, representing about 40 percent of the company.

"We are profoundly grateful to these team members, many of whom have devoted years to Theranos and our mission, for their commitment to our company and our guests," Holmes wrote.

Theranos rose to prominence in Silicon Valley and attracted investors with the promise of rapid, efficient blood diagnostic testing using its device, Edison. The tests required only a small amount of blood from a finger prick—similar to blood glucose tests that some people with diabetes use—rather than the vials drawn from a vein for traditional blood testing.

These few drops of blood could supposedly be tested for everything from diabetes to cancer, on demand, direct to customer, in record time. By this time last year, the company was valued at $9 billion.

But last year, an investigation from the Wall Street Journal drew new scrutiny to the company, revealing most of the tests were being done with traditional machines, not Edison. It also raised questions over how accurate Theranos's results were, and whether it was precise enough to be providing patients with medical diagnoses. This launched a public uproar and led to a series of regulatory investigations.

The company is currently under criminal investigation by the Securities and Exchange Commission, and Holmes has been banned from operating labs in California.

With the announcement Wednesday, Theranos is tapping out of its original business plan, and instead shifting focus to the development of its new technology: miniLab, a portable, microwave-sized diagnostic machine offering all of the tests Theranos used to claim Edison could provide.

"Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care," Holmes wrote.

The saga is a stark reminder that, as the startup bubble continues to rapidly expand, health and biotech companies in particular should be held to high standards. Because with these startups, there's more than just money on the line, and broken promises could put people's health at risk.