If you haven't heard of Theranos (a made-up word coming from “therapy” + “diagnosis”), a startup company promising to disrupt the clinical laboratory industry, you might have seen news about it this week. The company has hit a wave of negative press inspired by a Wall St. Journal expose on its early failures.
Theranos has a compelling backstory: Founder and CEO Elizabeth Holmes dropped out of Stanford at age 19, spent 10 years in obscurity developing a new technology for blood tests, then launched the company with a wave of publicity that would make Donald Trump and Steve Jobs envious: Business magazine cover stories, a New Yorker profile, a TEDMED talk. Along the way, she creates an advisory board with names like Kissinger, Frist, Shultz, Nunn, Perry, etc., all high-ranking former government officials. The company garners a valuation of $9 billion, making Holmes, at 31, on paper the youngest self-made female billionaire in the world. (Mark Zuckerberg of Facebook is 3 months younger than Holmes.)
The premise is this: Holmes hated giving blood for routine medical tests. Her phobia was so great she thought there had to be a better way to do it: Microfluidics. Using a finger stick to collect of drop of blood instead of the more traditional practice of puncturing a vein near your elbow, Theranos promises the ability to run dozens of medical tests from that single drop instead of the numerous traditional blood vials. Moreover, Theranos promises to perform the tests at a fraction of the cost of industry leaders LabCorp and Quest.
Disruptive technology indeed.
The problem is that Theranos is highly secretive about its methods, choosing to go the press to announce its new technologies and partnerships, never proving its mettle in a peer-reviewed scientific publication. Medical and scientific skepticism therefore abounds.
In appearances, like 1 moderated by an acquaintance, Holmes seems more like the charismatic mouthpiece for some sinister group than a true wunderkind.
Last week the WSJ reported extensively on the fact that Theranos is outsourcing its blood tests to third parties, not running the tests themselves. Moreover, the microfluidic (finger stick) assays work on only 5 of the company's menu of dozens of tests. The rest of the time their test centers obtain blood via traditional veinipuncture.
What's going on here?
Rather than come out and discuss the company's problems and plans to address them, the company has simply issued denials and obfuscations, hiding behind attorneys rather than letting its CEO speak.
Schadenfreude is the word for it. Now it seems every business publication is piling on after the WSJ story. Nobody likes an upstart that promises to trample the established way of doing business, then fails to measure up, especially when dis-inviting scrutiny at every turn.
This is shaping up to be a story of colossal underperformance for such high promise, if not outright fraud in the hype and publicity departments.
This post by John H. Schumann, MD, FACP, originally appeared at GlassHospital. Dr. Schumann is a general internist. His blog, GlassHospital, seeks to bring transparency to medical practice and to improve the patient experience.