Elizabeth Holmes To Shut Theranos' Core Operations, Fire 40% Of Workers

The death of Theranos has been long coming ever since the WSJ' John Carreyrou did a phenomenal job, starting about one year ago, of exposing the fraud that is Clinton Global Initiative-darling Elizabeth Holmes, but as of this evening it is largely official. In an "open letter" just posted on the company's website, Holmes said Theranos would shut down its blood-testing clinical labs and fire 340 of approximately 790 full time employees, roughly 40% of its entire workforce.

As the WSJ, whose story this has been from day one writes, "the moves mark a dramatic retreat by the Palo Alto company and founder Elizabeth Holmes from their core strategy of offering a long menu of low-price blood tests directly to consumers. Those ambitions already were endangered by crippling regulatory sanctions that followed revelations by The Wall Street Journal of shortcomings in Theranos’s technology and operations."

Still, while Theranos' official closure, and still long-overdue criminal raid, should have taken place long ago (we wonder if Holmes' proximity to the Clinton Foundation may be a mitigating factor) in a testament to just how much dumb money there really is, the company will still continue to operate, even if under a severely scaled down, "post-pivot" business model. As Holmes writes, "we will return our undivided attention to our miniLab platform.  Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care."

Holmes announced in August a new blood-testing device called miniLab, which is about the size of a printer but hasn’t been approved by regulators. The shutdowns and layoffs could help the closely held company minimize its cash burn in its attempt to accelerate the development of products that could be sold to outside laboratories, although it is unclear who would want to buy them.

Her full - and perhaps final - letter is below:

For our stakeholders,

 

After many months spent assessing our strengths and addressing our weaknesses, we have moved to structure our company around the model best aligned with our core values and mission.

 

We have decided to close our clinical labs and Theranos Wellness Centers, which will impact approximately 340 employees in Arizona, California, and Pennsylvania.  We are profoundly grateful to these team members, many of whom have devoted years to Theranos and our mission, for their commitment to our company and our guests.

 

We will return our undivided attention to our miniLab platform.  Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care.

 

We have a new executive team leading our work toward obtaining FDA clearances, building commercial partnerships, and pursuing publications in scientific journals.

 

We are fortunate to have supporters and investors who believe deeply in our mission of affordable, less invasive lab testing, and to have the runway to realize our vision.

 

I look forward to sharing more with you as we progress along the way.

 

Sincerely,

 

Elizabeth Holmes

According to the WSJ, a retreat from the strategy that won the company a valuation of $9 billion in 2014 could make it less complicated for Ms. Holmes, to keep running Theranos as chief executive if the a ban sought by regulators to prevent her from owning any lab for two years is imposed. She also controls a majority voting stake in the company and can’t be easily removed from her position, according to people familiar with the matter.

As for the new product, we doubt it will get a billion, or even a million dollar valuation: "The miniLab was unveiled at a conference of lab scientists, and Ms. Holmes said it could run accurate tests from a few drops of blood. Theranos sought emergency clearance of Zika-virus blood test but then withdrew its request after federal regulators found that the company didn’t include proper patient safeguards in a study of the new test."

Oops.

But while Holmes downfall, while fascinating, was predictable the far bigger question is how she managed to get to the top in the first place. The answer: a relent barrage of sycophants, paving her way from day one, instead of asking probing questions for some reason we hope to uncover one day. Here is a sample of everyone in the press who probably should be fired, courtesy of Bruce Quinn.

August 30, 2013
"Theranos: The Biggest Biotech You've Never Heard of."
San Francisco Business Times. By Ron Leuty.  Here.

September 8, 2013
"Elizabeth Holmes: The Breakthrough of Instant Diagnosis."  

Video interview with Pattie Sellers.  Here.
For further details, see here.

December 8, 2014
"Here's How the World's Youngest Self-Made Female Billionaire Shows People She's In Charge."
Business Insider.  By Richard Feloni.  Here.

December 8, 2014
"The New Yorker on the Promise, the Secrecy, and the Challenges of Super-Startup Theranos."
MedCityNews.  by Meghana Keshavan.  Here.

December 12, 2014
"Behind the Curtain at Theranos."
NBC News. (Video).  Interview with Ken Auletta.  Here.
For more detail, see here.

December 14, 2014
"Blood Test Innovation: Less Cost, No Big Needle"
Information Week/Healthcare.  By Larry Stofko.  Here.