The Ten Billion Dollar Fraud: Elizabeth Holmes, Theranos, and the Future of Biotechnology
In less than a year, Elizabeth Holmes has gone from being the new 'Steve Jobs', the youngest "self-made" billionaire in the world and an example to every girl on the planet, to simply being a fraud. This is his story.
A story that begins in 2003 when a 19-year-old girl decides to leave Stanford University (where she had started studying chemical engineering) to, encouraged by her professor, create a company with which to develop an idea: the idea of the ten thousand millions of dollars.
A drop of blood
The idea was simple but revolutionary: create a manual device that would allow blood tests to be done in real time. I say it was revolutionary because blood tests are, even today in full swing of neuroimaging and nuclear medicine, "the most powerful glasses in medicine." The blood testing industry is one of the key industries of contemporary medicine and someone with the ability to change it was worth its price in gold.
A decade later, Fortune would value Theranos (a merger between 'therapy' - therapy - and 'diagnosis' - diagnosis) at more than $ 9 billion and Forbes would say that Holmes, with 50% of the shares, was "the thousand youngest self-made millionaire in the world. " But let's not get ahead.
At first it was the fear of needles
Holmes was not just any young woman. If we are to listen to his resume, he spent most of his teens in China and before Theranos had already created a software company that operated throughout Southeast Asia. He worked in a Singapore lab where he helped develop a 'DNA chip' or microarray (a kind of chip-sized microlaboratory) to detect SARS. The SARS virus (severe acute respiratory syndrome) had just appeared in Guangzhou in 2002 and had spread throughout much of Asia, dragging a death rate of almost 20%.
That was when Holmes saw it clearly. It was not that he had much idea about biology when he began the practices in that laboratory, but he soon realized that those technologies had enormous potential. Her fear of needles did the rest.
From that day in 2003 until today, Theranos has changed a lot. What looked like a software company (the core from the initial project as it appears in the first projects was fundamentally the software) it became an extensive network of extraction point and laboratories. All with the seal of the company: what some would call 'discretion' and others, directly 'secrecy'.
"The company culture is that confidentiality is the essence of its existence," Holmes once said. Today we know why, but for many years the truth is that nobody was surprised. In a healthcare market whose spending seemed endless, biotechnology was a booming sector, and keeping a million dollar technology secret could be key to the company's success.
And it worked for them. During the first decade of existence, Theranos' promise of nanobiotech integration raised millions of dollars quite discretely. To get an idea of this, it is enough to point out that in the startup world of Palo Alto full of congresses, events and presentations, its first public declaration of importance was in March 2009.
A company that can change the entire health system
That was the beginning of success. In July 2010, Theranos notified the Securities and Exchange Commission (something like the American National Securities Market Commission) that it had raised $ 45 million in funding.
Once the financial duties were done, Holmes turned to attracting political and business prestige. In July 2013, Theranos signed Richard M. Konacevich, a former CEO of Wells Fargo (the fourth largest bank in the United States), who joined such figures as Henry Kissinger on its board of directors. Two months later, the company signs the largest commercial agreement in its history. With Walgreens, which with 8177 stores, it is the second largest pharmacy chain in the US. Walgreens executives realized that allowing their customers to have blood tests done in their own stores could be a tremendously profitable business, and they started 40 stores in Arizona.
But that was nothing. 2014 was the key year for Theranos and Elizabeth Holmes. Until 2013, the company had been relatively discreet. But in 2014, all the major American media started talking about "the great biotech promise." TEDMED, the TED conference on health, invited her to give a lecture. Theranos had 400 million funds and the valuation was close to $ 9 billion. For Dr. Delos M. Cosgrove, president of the Clevelan Clinic, Theranos had the potential to turn the entire sector around.
Something smells rotten in Palo Alto
In February 2015, an editorial in the Journal of the American Medical Association written by John Ioannidis (a Stanford professor and one of the leading experts on the quality of scientific evidence) strongly criticized Theranos for taking more than a decade "totally changing the health system "without publishing a single article in a biomedical journal.
In what some interpret as an answer, a few months later, Theranos sent one of his tests (to detect a herpes simplex infection) to the FDA; it approves it. What seemed like a huge success was the beginning of the end. The Wall Street Journal began investigating and discovered that despite the company marketing dozens of tests, until now no other had been approved by the authorities.
The report, written by John Carreyrou, was released in October 2015. At that time, doubts about the great promise of biotechnology were mounting. The FDA did not take 24 hours to suspend temporarily Theranos activity.
Since then, the reports have been happening: on January 25 of this year, one came out of the Medicaid and Medicare management center (the two largest health coverage programs in the country); on May 31, one from the federal regulator; on April 18, from the attorney general's office. They were all negative. Not only were most of his tests unreliable and invalid; but those that did work were made with technology purchased from Siemens. Once secrecy was broken, Theranos's revolution was little more than a very well-executed pantomime.
Last week, on July 7 to be exact, a penalty of more than $ 10,000 a day was announced, their laboratories' certification was revoked, and Elizabeth Holmes was disabled from owning or running a laboratory for the next two years.
The ten billion dollar girl had come to naught.
In reality, the history of Holmes and his company reflects one of the great tensions that technological development is creating: the times and logics of venture capital they are not the times and logics of basic research.
What's more, the system is full of perverse incentives that affect not only technology and society, but also ideas as apparently simple as truth and lies. Holmes and Theranos are a perfect example of the risks that the transformation of the world can cause. But it is also a huge case study on which to reflect and work to aspire to a better biotech future.