Last month we heard from the SEC that they were fining the founder and CEO of Theranos $500,000 and restricting her service as a public company officer for the next decade. This seems a minor penalty for what was described as a “massive fraud” that duped investors out of some $700 million and provided patients with inaccurate in-vitro diagnostic (IVD) results. I’m not qualified as a legal thinker, but this seems a far greater sin than that which put Martha Stewart out of circulation a few years back. There are hints that the legal proceedings may yet have more legs.
The IVD industry is, of course, a critical component of healthcare delivery, albeit representing only about 4 percent of the total while supporting most medical decisions. These measurements are also crucial to the clinical trials we report on here. Good decisions require good numbers, and good numbers require good instruments and good samples. In this case, a Stanford University student apparently had an uninformed thought that it would be a good thing to be able to make many hundreds of measurements on small microliter volumes of capillary bed blood collected from a finger prick in a vial cleverly named a “nanotainer.”
This purportedly would be done in pharmacies and grocery stores to start, but was also indicated for drug trials and military field hospitals. To frost the cake, lower costs for the tests were guaranteed. Deals were struck, money was raised and promises were quickly broken. Prestigious customers agreed to participate, including pharma and at least one well-known clinic in Cleveland. Over-promise and under-deliver is a polite view of what happened. Many of us have done that more gently. In this case, it is more of “Oh what a tangled web we weave when first we practice to deceive.” There were many promises made on popular TV interview shows and in top business publications. Cover art featuring the company was very visible at airport newsstands.
Silicon Valley is an inspiring place, not unlike the mall in Washington, D.C., or the battlefields of Normandy. Important things happen there. The flowing cash is palpable. Billions of dollars in value seem to be created out of thin air.
One speaks of unicorns, a term applied to startups quickly reaching a valuation of $1 billion. The term was coined in 2013, and Theranos exceeded this metric with a widely reported valuation of $9 billion. Unicorns have had a distinct IT flavor. They have changed how we live, how we vote, how we share pictures of our grandchildren, how we shop, how we get a ride, how we avoid libraries and book stores and how we find a place to stay. In such cases it is possible to deliver a message with a vision, such as a website or phone app, with nothing behind it. That’s been enough to refine the plan with support from the voice of the customer and then raise money to write the code and make it all come true. The coding and the math is not something that interests me, but it clearly is possible to succeed with low overheads and few capital expenditures until a server farm is needed. Amazing. Alexa and her sisters deliver what is required, from socks to weather reports.
Why was Theranos unable? The one-word answer is BIOLOGY! Patients vary. Finger prick blood is not venous blood. Time of day matters. Blood collected without fasting may reflect a pizza lunch and be of reduced diagnostic value. Who is to determine what tests are needed? Who then is to interpret the results? Analytes in blood vary from small ions to proteins. Concentrations vary over a millionfold. Some measurements are about activities, not concentrations. At first blush, it sounds great to drop into Walgreens and get an accurate report of the usual things. This is reasonable for a strep throat or HIV test. Those are already available. The story began with wrong assumptions, but it got much worse.
The project required a machine, a device. The device was called Edison. Some described it as a microfluidics device. “Microfluidics” has cachet, like “nanotainer.” The performance of Edison (who was himself a dropout) required advances beyond known science to achieve hundreds of tests on microliter volumes. To this day, we’ve not seen a physical embodiment, even though it was said to be used in Afghanistan field hospitals. Nothing was published on its operation, a fundamental requirement of good science. Employees were told to reveal nothing or be let go. Visitors, I’m told, could not use a restroom without being accompanied by an employee. Employees with expertise in bioanalytical measurements were scarce and the leadership, including the board of directors, had none of that. As we all should know by now, $9 billion in value dissipated over several months as an employee expressed worry outside and a Wall Street Journal investigative reporter started sniffing.
The book by that reporter (John Carrefours), Bad Blood: Secrets and Lies in Silicon Valley, is to appear before summer. A movie contract has reportedly been signed with Jennifer Lawrence to play the lead. Tangled webs can make good movies. Analytical chemistry gets little attention unless something goes wrong. We’ve been through nitrosamines, brominated organics and, most recently, lead in drinking water. We learned. What have we learned from Theranos?
In starting a business, engage experts to provide perspective. Don’t fear an honest critique. You are smart enough to have more than one idea. Science is about data and data comes from instruments. We must validate. We must compare with known approaches. We must publish data. Statistics drive validation and safety. Lives are at stake, and we must seek FDA approval of commercial instruments and tests that have evolved beyond the research stage. Investors deserve our respect. Many high net worth individuals are not scientists. Good scientists value integrity more than money.
In this case, Theranos damaged IVD science. There are many worthy efforts toward more IVD measurements in smaller volumes, beginning before Theranos and continuing now. Do not conflate what we are trying to do with what we have already done, until we have already done it. The troops in the labs might not be able to save a CEO who gets too far over their skis.
Peter T. Kissinger (who can be reached at email@example.com) is professor of chemistry at Purdue University, chairman emeritus of BASi and a director of Chembio Diagnostics, Phlebotics and Prosolia.