It was once poised to revolutionize the healthcare industry, with its brand new blood-testing techniques and a media-savvy CEO who seemed to know just how to woo both the media and high-profile investors. But in just a few short months, Palo Alto-based blood-testing startup Theranos has experienced quite a fall from grace, and now, a full-blown investigation is underway to determine whether the company misled the public and its backers about what was once purported to be disruptive, innovative technology. Both the Securities and Exchange Commission (SEC) and the U.S. Attorney’s Office for the Northern District of California are taking a closer look at Theranos, the company told stakeholders in a note on Monday. Sadly, it’s just the latest in a long string of mishaps for the health-tech startup.
Once upon a time, Theranos was valued at $9 billion, and headed by Stanford dropout Elizabeth Holmes, who promised to turn the medical diagnostics field upside down with a new technique that required just a few drops of blood for extensive tests. But as it would turn out, all that glitters is not gold. Following a blistering report from the Wall Street Journal in October of last year, the company has come under fire for the accuracy of its test results from just about every major state and federal agency there is.
On Monday, CEO Holmes told NBC’s “Today” that she was “devastated” the company didn’t manage to identify problems with its testing techniques before regulatory agencies did. “We’ve taken the approach of saying, ‘Let’s rebuild this entire laboratory from scratch so that we can ensure it never happens again,’” Holmes said. “I feel devastated that we did not catch and fix these issues faster.”
In the memo sent out to its partners, Theranos notes, “In the past, we have generally not commented on the specifics of these inquiries out of deference to our regulators and in light of specific requests for confidentiality. However, in light of consistent press attention in this area we want you to hear about them from us.”
The company has acknowledged that it faced investigations by state health departments in Pennsylvania and Arizona, CMS, the FDA, the Securities Exchange Commission (SEC), and the U.S. Attorney’s Office for the Northern District of California. While inspections by the Departments of Health of Pennsylvania and Arizona and the FDA have since been closed, there are new ongoing investigations from other agencies, and Theranos says that it “continues to work closely with regulators and is cooperating fully with all investigations.”
“We welcome further review of our technologies, performance, and data, which is why we voluntarily engaged with the FDA years ago,” the company says. “We recently hosted three scientific review sessions in Palo Alto with leading laboratory and medical experts, many of whom joined our Scientific and Medical Advisory Board as a result, and are now working with us to introduce our technologies through peer-reviewed publications.”
Neither the SEC nor the U.S. Attorney’s Office for the Northern District of California have commented on their investigations.
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