Silicon Valley girl power: Put on a Steve Jobs turtleneck and investors will throw money at you
Holmes looking good in black: Venture capitalists made her a Fortune 400 billionaire for…products that don’t seem to work
As a college sophomore, Elizabeth Holmes envisioned a way to reinvent old-fashioned phlebotomy and, in the process, usher in an era of comprehensive superfast diagnosis and preventive medicine.
That was a decade ago. Holmes, now 30, dropped out of Stanford and founded a company called Theranos with her tuition money. Last fall it finally introduced its radical blood-testing service in a Walgreens pharmacy near company headquarters in Palo Alto, California. (The plan is to roll out testing centers nationwide.) Instead of vials of blood—one for every test needed—Theranos requires only a pinprick and a drop of blood. With that they can perform hundreds of tests, from standard cholesterol checks to sophisticated genetic analyses. The results are faster, more accurate, and far cheaper than conventional methods.
The implications are mind-blowing. With inexpensive and easy access to the information running through their veins, people will have an unprecedented window on their own health. And a new generation of diagnostic tests could allow them to head off serious afflictions from cancer to diabetes to heart disease.
None of this would work if Theranos hadn’t figured out how to make testing transparent and inexpensive. The company plans to charge less than 50 percent of the standard Medicare and Medicaid reimbursement rates. And unlike the rest of the testing industry, Theranos lists its prices on its website: blood typing, $2.05; cholesterol, $2.99; iron, $4.45. If all tests in the US were performed at those kinds of prices, the company says, it could save Medicare $98 billion and Medicaid $104 billion over the next decade.
The night before a big meeting with a Swiss drug company in 2008, Theranos Inc. founder Elizabeth Holmes and a colleague sat in a Zurich hotel, sticking their fingers with a lancet.
They drew drops of their own blood to try the company’s testing machine, but the devices wouldn’t work, says someone familiar with the incident. Sometimes the results were obviously too high. Sometimes they were too low. Sometimes the machines spit out only an error message.
After two hours, the colleague called it quits, leaving Ms. Holmes still squeezing blood from her fingers to test it again.
Ever since she launched Theranos in 2003 when she was 19 years old and dropped out of Stanford University, Ms. Holmes has been driven by ambition that is big even by Silicon Valley standards. Instead of a smartphone app to hail a car or order food, she wants to revolutionize health care with a vast range of diagnostic tests run with a few drops of finger-pricked blood.
Now 31, Ms. Holmes has emphasized a variety of strategies—a hand-held device, tests for drugmakers, drugstore clinics—while trying to turn her dream into a business. She often has collided with technological problems, according to interviews with more than 20 former Theranos employees, company emails and complaints filed with federal regulators.
In Switzerland, she went ahead and pricked her finger in front of a group of Novartis AG executives at the meeting the next day, testing for a protein that measures inflammation, says the person familiar with the incident.
All three of her Theranos devices flickered with error messages, the person says. Ms. Holmes was unfazed, blamed a minor technical glitch and continued to pitch the vast potential of her technology.***For now, though, Theranos has stopped collecting tiny samples of blood from patients’ fingers for all but one of its tests while it waits for the Food and Drug Administration to review the company’s applications for wider use of the small proprietary vials called “nanotainers.” As a result, Theranos is using traditional lab machines for most of its tests.***
In April 2005, Ms. Holmes said on the public-radio program “BioTech Nation” that she had created a hand-held device that would help drug companies tell in real time how well their drugs worked on patients using “a little tiny needle that pulls a little tiny drop of blood” from an arm or the hand.
Ms. Holmes called it the RDX Metabolic Profiler and said it was “going into the production phase,” according to a recording of the interview. “We hope to release it, actually, to a pharmaceutical partner around mid to late this year.
[Theranos spokeswoman Brooke] Buchanan says the tone of the interview was “aspirational” rather than “literal.” She says Ms. Holmes actually described two devices, one of which went into manufacturing within a year. Theranos did eventually enter into partnerships with drugmakers such as Pfizer Inc., she says.
A Pfizer spokesman says it has done “only very limited historical exploratory work with Theranos through a few pilot projects” and doesn’t have any current or active projects with it.
***By 2007, Theranos was valued at an estimated $197 million after raising another $43.2 million. The company had developed a device to test small quantities of blood, but it was the size of a personal computer tower and weighed 70 pounds, says a person who worked at Theranos. A later version weighed 23 pounds, the former employee recalls.***
Last year, investors pumped another $633 million into Theranos, increasing its valuation to about $9 billion and Ms. Holmes’s majority stake to more than half that.
Posted by Charlotte Allen