In 2020, will begin the trial of the founder of a startup that was to develop an innovative program of drawing blood. Elizabeth Holmes and his colleagues have collected $ 1.1 billion on a technology that could predict disease. Now a woman can go to prison for 20 years.
The business of blood
Elizabeth Holmes founded Theranos 15 years ago. During the existence of the company, she managed to attract more than a billion dollars from venture capital funds and private investors. The company’s goal was to create an innovative miniaturized lab for blood tests. It was assumed that the blood will not take from a vein, as established by the standards for tests in the US, and from the finger that will make the procedure less unpleasant. Also, the technology needed to accelerate the process of blood sampling and facilitate the verification of results by many parameters. This idea promised a revolution in the diagnosis of many diseases. But Holmes brought clean water after the journalistic investigations, which showed that the developed methods did not work, and the demonstrations of prototypes used technology competition.
In 2014, Holmes spoke at the TEDMED conference, where she began with a story about my childhood: every summer, young Holmes came to his uncle in a cottage by the sea, and all was well until the man was diagnosed with skin cancer, and then brain and bones.
In this example, the woman explained that timely information about your health is a necessity. But the modern health care system with expensive diagnostics allows to detect in advance changes in the body, and this leads to the terminal stage of the disease.
The idea of a device that would monitor blood counts came to Holmes while studying at Stanford in the early 2000-ies at the faculty of “Chemical technology”. The device was to determine the presence of infection in the blood sample and to ensure the introduction of the antibiotic. Consultant Holmes and Professor of health Sciences University Dr. Phyllis Gardner stated that to create such a device from a medical point of view, impossible, as it is impossible to administer the antibiotics through a tiny tube, but Holmes did not listen.
At the age of 19, Holmes left Stanford, realizing that she was more interested in their own business. The money of the trust Fund parents, which was intended to pay for her training, the girl founded the company, which was later called Theranos.
Holmes really wanted to be like Steve jobs — was wearing a black turtleneck, conducted staff meetings at the same time that Steve jobs tried to hire ex-Apple employees. In addition, the woman specifically spoke in a very low voice to sound more confident. Holmes also appeared on the covers of Forbes, Fortune, Bloomberg.
Photo source: Flickr / FORTUNE Global Forum
Investors dream and Edison
A blood test can show many parameters: from cholesterol to cancer. The procedure is performed on a huge equipment which costs hundreds of thousands of dollars. The idea of Holmes was the creation of a tiny analogue of the device while maintaining its functionality. In addition, it was a good option for people who are afraid of panic of needles and injections.
By December 2004 Holmes had several patents and six million dollars of investments on valuation of Theranos at $ 30 million. 10 years later in 2014 the value of the company was estimated at nine billion dollars. Invested in the development of the company is not “left-wing” people. One of the investors were Tim Draper (invested one million dollars), which at the time was the first investor in Tesla, and Skype. Holmes also received 150 million from Walmart, 125 — from Rupert Murdoch and 100 million dollars from the DeVos Family. By 2016, the Board of Directors Theranos consisted of very serious people who, alas, hadn’t a clue about medicine. One of them was even the Minister of defence of the USA James Mattis, who became a member of the company in 2012.
Marketing companies have decided to use this information to create the appearance of Theranos cooperation with the Ministry of defence. Advertisers came up with common phrases as quotes Mattis: “We use Theranos two years with incredible success” or “We can move these little machines to the front lines in helicopters and airplanes.” This flow has created an incredible reputation for Theranos, but no contract of the company with the Ministry never was.
As investors became more, Holmes had to show the results of the activities Theranos with each new stage of investment. In 2012, Holmes has developed a prototype, calling it the Edison. But it didn’t work as constantly exploding inside of the centrifuge and sprayed everywhere blood. To “revive” the machine, Holmes continually hired biochemists, engineers and technologists. If someone of them said something like “it’s impossible”, it immediately replaced the employees.
Edison did not work, but Holmes needed to show results to investors. Of course, none of them knew that the device was not functioning, but the woman managed to show the result of “successful” work. At the demonstration, the volunteer was drawing blood, was loaded into Edison. As the analyses of blood would take about an hour, the guests went on a tour. At this time, the laboratory took a blood sample and take it to the classic analyzer from Siemens. Then the cartridge was loaded back into Edison.
Fear of Theranos
Photo source: Flickr / TechCrunch
Holmes dismissed the staff wanted to talk about multi-million and multi-year deception, but when the job took an oath not to disclose commercial information. Moreover, they were afraid of a very serious lawyer David Boyce (he has represented the Ministry of justice of America in the case “U.S. V. Microsoft”), which had threatened to sue for violation of “non-disclosure agreements”.
In 2015, the journalist of the Wall Street Journal, John Carrera, revealed the falsification of testing the blood. Reporter obtained the information from former employees Theranos, whose names were not disclosed, as this was their permanent job loss. Holmes lied to the questions of journalists about the use of commercial analyzers, it is always said that Theranos its technology.
The last straw was a letter an ex-employee of the company Erika Cheng at the Federal Agency CMS. She spoke in detail about what is happening in Theranos. In April 2016, the Prosecutor’s office and the securities Commission, the U.S. brought a criminal case against the company, suspecting her of cheating investors.
As the company Holmes was quite well-known investors, about her made a documentary, in which it is presented as a dreamer who did not want to deceive people, and had hoped to invent an innovative device. In the film, the authors tried to convey that Holmes had no malicious intent, and acted according to the script of other great scientists such as Thomas Edison, who first collected the money on the supposedly already invented the incandescent lamp, but only four years later, it really created.
But even despite this, at the end of 2017 Theranos paid a large fine at the suit of the authorities in Arizona. In March 2018 the U.S. Commission on securities and markets advanced fraud claims that Holmes was able to resolve. She paid a fine of 500 thousand dollars, back 19 million shares of the company and agreed for ten years to occupy posts in public companies. Theranos closed in 2018. Prosecutors brought Holmes and her Deputy Ramesh Balwani allegations of conspiracy to commit fraud.
In 2020, will open the trial of Holmes and his Deputy Ramesh Balwani. Both face 20 years in prison and millions in fines for deceiving investors and fraud.
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