Theranos, Facing Criticism, Says It Has Changed Board Structure | Hacker News Reader

Theranos, Facing Criticism, Says It Has Changed Board Structure

nytimes.com

56 pointsuptown63 comments

Classic misdirection move. The fundamental issue with this Sham company is that people claim their Testing Methodology gives inaccurate results - How do we fix that?

By changing the irrelevant board to a sightly smaller size.

I think this kind of move strongly indicates that they are in very big trouble. Walgreens should shut down their existing Theranos branded centers or risk getting sued...

An incorrect number on a blood test could be a potentially life altering event for some one - NOT something you want a fraudulent "unicorn" to be putzing with.

An alternative explanation is that some board members were concerned about personal liability and decided they would rather not serve any longer.

This seems much more likely to me as well. The likelihood of bad press and lawsuits suddenly outweighed the profit potential, and these board members probably wanted out. This is a "face saving" way of accomplishing that.

>>An incorrect number on a blood test could be a potentially life altering event for some one - NOT something you want a fraudulent "unicorn" to be putzing with.

My immediate reaction to this statement was what if bad behaving private VC-funded companies cause regulators to come down hard on the entire VC/startup ecosystem, and potentially cause serious collateral damage to the entire ecosystem? I don't know if this is something to be legitimately concerned about or not, but it just popped into my head as a systemic risk all VC backed companies face because of bad behavior from a few.

I don't think the things they are doing wrong is inherently tied to being a startup or being VC funded, at least from a regulatory point a view. They appear to be skirting existing FDA regulations, and that is the area that regulators will focus on and clamp down in.

I think you're right. I just hope it stays that way.

My god, what if startups were forced not to defraud customers, to advertise honestly, and to assume liability for their products working? I mean, what type of world would that be?

"Walgreens should shut down their existing Theranos branded centers or risk getting sued..."

Yes--Yes, I believe that Theranos us a liability too. While I'm here; Wallgreen's refill you clients prescriptions--in a conscious manner!

Vet each store, and make absolutely sure your pharmacists are calling the doctors office and getting an authorization for medication refills. (There seems to be a bit of a problem?)

Furthermore, make sure they are filling out TAR authorizations? I know they are a pain, but a necessity?

If anyone from Wallgreen's reads this; I'm not just nitpicking. Among Doctors and patients your getting a terrible reputation. Again--take the time to refill a prescription properly.

We all want the best for your company, and you don't want to be know as the slacker among Pharmacies? It's not to late to turn it around.

A lot of outlets are using the word 'fraud' when discussing Holmes and Theranos. It's starting to look more likely. http://nymag.com/daily/intelligencer/2015/10/beloved-tech-co...

Anyone have any insight into how they were able to operate for so long without a formal medical advisory board? In my own experience, that was something that potential VCs wanted, either in place or in place shortly after financing happened.

Also interesting that the new governing board has (as far as I can see) zero medical expertise. The medical advisory board is still odd given Theranos' technology: Simons makes sense with a background in hematology, but Helfet doesn't make a lot of sense as an orthopedic trauma surgeon, nor does Frist (a carry-over from the old board) as a cardiothoracic surgeon, nor does Foege (another carry-over) as an epidemiologist. Personally, I'd expect to see perhaps a mix of hematologists and pathologists and endocrinologists, as well as some chemical and biomedical engineers and statisticians on a scientific advisory board.

I'm left scratching my head trying to figure out what sort of due diligence was performed. (edit: the tale of The Emperor's New Clothes does come to mind however)

You'd expect a chief pathologist or someone from that field. But if they are licensed medical doctors that is good. Usually there is also a Chief Medical Officer.

Licensed and practicing: you definitely need someone that's kept up with their CME. Does Theranos have a CMO or CSO? I don't see one listed on their website... Not having one would be yet another oddity.

In my own experience, that was something that potential VCs wanted, either in place or in place shortly after financing happened.

If you don't mind my asking, what were you working on? (You can email me if you don't want to state it publicly on HN. Email in profile.)

Thanks for all your excellent comments here so far.

> I'm left scratching my head trying to figure out what sort of due diligence was performed.

I do tech due diligence for a living. You'd be surprised how much diligence gets ignored or isn't done thoroughly. Remember, the people orchestrating such efforts are financial people, so they tend to take very calculated risks. The alternative is they trust the wrong people in a rapidly changing tech world. Both are plausible.

Sometime last year I had moved to the Bay Area from Denver and was looking for jobs. After hearing a lot of buzz about Theranos and seeing a recruiter post here (on HN: Who's Hiring) I sent my resume over. Was rejected right off the bat for not having a degree from a top tier school. This after ignoring the fact that I have almost 20 years of experience and have worked on some world class Medical Devices deployed over 150 countries. Granted, I could be a complete idiot, but refusing to look at anything past my degree obtained 2 decades back was a little jarring.

In any case, I do think they are pursuing a worthy goal and we should not lose sight of that fact. Kudos to Holmes for trying. As in any entrepreneur's case there might be a lot of optimism bordering on delusion. If they fail, is it because the problem was too hard to begin with or mismanagement? That is something I'm curious to know.

They told you they rejected you because you don't have a degree from a top tier school?

Yup that is correct.

That's odd, but then again, this company seems to be an odd duck.

HR has actually been able to convince me that I should avoid looking at where degrees have been conferred from, at least in initial screenings. I thought that was fairly standard for companies for the past few years. Is your degree from an accredited college/university program? That should be all that matters.

Yeah pretty well known. M.S. Computer Science - Texas Tech. One of my profs. is an ACM Fellow and my thesis advisor did some really good NASA projects.

I don't know much about Theranos but after visiting their website (at least on my iPhone) it appears to be a great platform for Elizabeth Holmes' self-aggrandizement. The first half of the front page talks about how she's "empowering women globally to break down barriers in business," then a quote from her about a glass ceiling and some more fluff about her encouraging female entrepreneurship. And out of the 5 slides on the first page, 3 are about her personally, including the first one. If I'm a patient interesting in learning more about the quality of their lab tests, this would not be a great first impression for me. It's just bizarre.

Holmes is all they have: a PR-friendly cargo-cult attempted zuckalike

Sorry, but I don't buy that.

I don't care who you are, nobody could straight up dupe their way into $88M.

They must have something that works at some scale - but probably not the scale they claim. Like most unicorns that don't have valuation based on their revenue multiple.

> I don't care who you are, nobody could straight up dupe their way into $88M.

Bernie Madoff duped his way into tens of billions of dollars. His ponzi scheme worked pretty well at scale. Until it didn't.

Never underestimate what the two most powerful emotions, fear and greed, can lead even the most intelligent and sophisticated individuals to invest in.

At it relates to any specific company, assuming that there's no funny business solely on the basis that significant amounts have been invested is the product of flawed reasoning. Investors in the U.S. are defrauded to the tune of tens of dollars every year. Annual fraud related to penny stocks alone amounts to a billion-plus dollars[1].

[1] https://en.wikipedia.org/wiki/Securities_fraud#Pervasiveness...

Again, that's not the whole story.

Madoff had an incredibly successful and well run OTC trading platform that was a backbone for NASDAQ. His fraud was done outside of the primary business lines - so it wasn't just straight up selling just himself, he had an auditable track record.

Thank you. You have refuted your own argument ("nobody could straight up dupe their way...").

Folks like Madoff are successful because they take advantage of fear and greed.

An "auditable track record" helps but is not required. See http://www.vanityfair.com/news/2008/10/follieri200810 for an example.

That's not a straight up dupe - like the OP claimed about Holmes:

Holmes is all they have: a PR-friendly cargo-cult attempted zuckalike

She has no record.

People are straight-up duped all the time. Just read the Vanity Fair link I posted. You can find countless other stories like this.

Again, investors in the U.S. are defrauded to the tune of tens of billions of dollars every year. Do you honestly believe that all the perps have stellar track records?

As it relates to Holmes and Theranos, it should first be noted that nobody really knows what's happening, so I don't think anybody can legitimately claim that Theranos is a scam at this point. But to say that Holmes has "no record" is silly. One might have good reason to question how meaningful her accomplishments are and her qualifications to run a business like Theranos, but she comes from a politically-connected family, attended an elite prep school and was a President's Scholar at Stanford. Before she ever reached the age of 20 she had access to, and could command the attention of, powerful and influential people most of us will realistically never be able to call on.

Have we already forgotten the $41M VCs put into Color, which literally had nothing going for it but personality?

I feel like Color gets shit on unnecessarily because they raised a lot of money. The founders had an incredible track record and they actually had a product that a lot of people used 1MM downloads at one point.

I agree that they got too much money for their traction, but it's all Sunday morning quarterbacking.

Same with Clinkle, at first blush it seems like vaporware, but according to some of the insiders they had some hardcore tech that they could never get legally cleared to use.

I think the key thing though is that these companies have something real, but that they can't execute on it at scale.

> Same with Clinkle, at first blush it seems like vaporware, but according to some of the insiders they had some hardcore tech that they could never get legally cleared to use.

I have a bridge I'd like to sell you.

> I don't care who you are, nobody could straight up dupe their way into $88M.

Maybe the investors thought the same in earlier rounds?

Never underestimate the powerful combination of pedigree and self-promotion. Rich/important, well-connected family, the right prep school, Ivy League/Stanford education, government industry contacts, etc. This class of people are essentially created in a lab for the sole purpose of succeeding. Combine that with relentless self-promotion and grooming of their own personal brand/celebrity-- they're essentially money-attracting magnets.

Reminds me of this story:

http://www.fastcompany.com/3028159/a-broken-place-better-pla...

The website appears to exist as more of a promotional platform for the CEO's personal celebrity than it is a place to learn anything about the company or product.

>> It's just bizarre.

That's what I thought about the New Yorker article about Theranos/Holmes (http://www.newyorker.com/magazine/2014/12/15/blood-simpler) a while back, where it was said about her: "Her home is a two-bedroom condo in Palo Alto, and she lives an austere life. Although she can quote Jane Austen by heart, she no longer devotes time to novels or friends, doesn’t date, doesn’t own a television, and hasn’t taken a vacation in ten years. Her refrigerator is all but empty, as she eats most of her meals at the office. She is a vegan, and several times a day she drinks a pulverized concoction of cucumber, parsley, kale, spinach, romaine lettuce, and celery."

Yeah, all the pictures of her in various affected poses, always in black turtleneck...She must have been on more magazine covers than most politicians or celebrities.

Such pretentiousness and in-your-face personality cult (of a freshman-year college drop-out, no less)? Perhaps to cover up lack of substance?

I think the more important story here is that Walgreens has halted their partnership with Theranos.

http://www.wsj.com/articles/walgreens-scrutinizes-theranos-t...

That they started out with such a board of directors in the first place tells me they were more about image than technology.

Nothing less than a full reconstitution of the board plus top management, as well as a thorough third-party review of their tech would convince me they're legit moving forward.

Does anyone know of any good articles on the actual tech she is supposedly developing?

Like some other folks here, I am kind of weirded out by this company that seems to be worth so much, yet seems to have, so far, done so very little. I wonder if "brilliant young woman" does, in fact, equal "cult of personality." I am a woman. I have a tendency to attract a lot of attention, but usually for the wrong reasons. I have had a very hard time translating that into work that is worth something to other people and that puts money in my pocket. Some of the things I have experienced makes me inclined to fear that pretty young woman, charming all kinds of brilliant men, is all this boils down to. I fear it is, in fact, vaporware.

I am reminded of the vintage wine scam that occurred a few years ago (which I just posted two links to).

Edit: The wine scam links I posted, for future reference:

https://news.ycombinator.com/item?id=10474174

https://news.ycombinator.com/item?id=10474167

As far as I know, there isn't any concrete public info on their technology platform. Supposedly it is on the way to address the recent problems.

One of the few peer-reviewed articles (with Holmes as a co-author) that uses Theranos technology I see indexed on PubMed is ref. [0]. The results aren't mind blowing, and I have issues with their statistics methodology. This article doesn't really go into the technology, and as a reviewer, I would have given them hell for not even including a cursory description.

There is also a recent commentary in Clinical Chemistry and Laboratory Medicine that could be of interest, at ref. [1].

[0] http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4091290/

[1] http://www.degruyter.com/view/j/cclm.2015.53.issue-7/cclm-20...

Thank you very much.

Excerpt from [1]:

Are all these accolades enough to guarantee that the company will deliver the promised goods in healthcare? The answer is no. History teaches us that there are numerous examples of seemingly disruptive technologies in healthcare (and especially in diagnostics), developed by high-profile scientists, including Nobel Laureates, which later collapsed, due to their inability to deliver the promised goods.

I feel like my sanity is partially restored, and I haven't even finished the first article.

If I may, I'd like to also direct attention to the last paragraph in the "Costs" section. Certainly this perspective is under active debate, but even if Theranos is able to deliver on their promises (and they could), their fundamental hypothesis may be flawed.

Thank you. Very good call. Not at all what I expected it to be, based on the context when you were pointing it out. Very pertinent information and fits with a lot of things I understand to be true.

Rearranging the deck chairs of the Titanic. How long can they last with their cash burn (have you seen the new office?) and the loss of Walgreens. The last valuation may have been $9 Billion, but they are not that well capitalized.

I doubt Theranos voluntarily changed the board structure. It is more likely that board members left after the expose.

The board may not have any real voting power, "thanks to a supervoting share structure that gives insiders 100 votes per share." Holmes unilaterally decides who's on the board.

https://www.theinformation.com/inside-private-tech-voting-st...

Ordinarily at least, the board is the board. Shareholders can vote them out, though.

Remember when we were speculating that theranos and its wacky cast of characters heralded the zombie apocalypse?

https://news.ycombinator.com/item?id=7951019

I guess we can breathe easy now.

The most shocking implication of this article is that Sam Nunn and Bill Frist are not aging.

Seriously though, how does moving several people from the board of directors to board of counselors help?

"Video Doctor Bill Frist", I can't help but read it that way. Look it up if y'all are too young to remember.

The fact that anyone would associate with Bill Frist in any way has always let me to skepticism about Theranos.

You're referring to this? Definitely a bit of an eyebrow-raising moment.

http://www.washingtonpost.com/wp-dyn/articles/A48119-2005Mar...

It's worth nothing that, despite all the noise from religious idiots and those pandering to them, autopsy results were conclusive.

   Terri Schiavo suffered severe, irreversible brain damage that left that 
   organ discolored and scarred, shriveled to half its normal size, and damaged 
   in nearly all its regions, including the one responsible for vision, 
   according to an autopsy report released yesterday.
   
   Although the meticulous postmortem examination could not determine the 
   mental state of the Florida woman, who died March 31 after a judicial and 
   legislative battle over her "right to die," it did establish the permanence 
   of her physical condition.

http://www.washingtonpost.com/wp-dyn/content/article/2005/06...

it's also worth reading this to get a sense of the full circus created by the would-be theocrats and how dangerous they are to decent humans [2,3]

[2] http://www.esquire.com/news-politics/politics/a31593/charlie...

[3] https://en.wikipedia.org/wiki/Terri_Schiavo_case

The new board is:

20% military - James Mattis, retired USMC general

20% legal - David Boies, lawyer extraordinaire

20% construction/civil engineering - Riley Bechtel

Military = "government contracting connections"

Legal Boies = "government regulatory connections"

Engineering = passing the Bechtel test. [That one is a bad joke, sorry]

I wonder if this was a move by the company, or the departing board members. Perhaps they don't want to have their names associated with the current situation.

Seems like the right direction but I'm not sure why it had to come in response to media reports.

At this point, the company simply needs to hunker down and try to make its technology work. Demonstrating that it works will be comparatively trivial. Building a business if it works, relatively easy as well.

The whole exercise seems to be closing ranks. These guys would not want to lose their reputation with one article out. They will use smoke and mirrors etc. The Theranos facade will continue. Who ever thinks Elizabeth Holmes is going to go away are mistaken. With $9 Billion valuation a lot is at stake and there are lot of stake-holders. Elizabeth Holmes practically OWNS every member on that board.

In addition, even if they have no hope of liquidating their position, the VCs involved have every incentive to hide problems so as not to look bad in front of their LPs.

> Seems like the right direction...

Huh? How in the world does Theranos shuffling its board(s) and issuing a statement supporting its "remarkable" founder represent anything meaningful?

> At this point, the company simply needs to hunker down and try to make its technology work. Demonstrating that it works will be comparatively trivial. Building a business if it works, relatively easy as well.

What in the world has Theranos been doing the past 12 years?

What's done is done. Sunk cost, if you will. All that matters is going forward. The board would have been smaller and included subject matter experts.

A lot of people here and in the media seem very troubled by Theranos and say it is a sham or a fraud. But a fraud upon whom?

Theranos is a private company with a small number of sophisticated institutional investors: ATA Ventures, Continential Ventures, Draper Fisher Jurvetson, Tako Ventures, and Larry Ellison (founder of Oracle) [1].

These sophisticated investors presumably performed due diligence before parting with $400 million.

But then again, maybe journalists and internet commenters know more about this company than Draper Fisher Jurvetson and should all set off on lucrative careers as biotech venture capitalists.

[1] https://www.crunchbase.com/organization/theranos/investors

    But a fraud upon whom?

Perhaps customers who have, er, paid to send Theranos their _blood_?

There is no evidence that the tests Theranos offered are inaccurate. The company has voluntarily discontinued them to allow the FDA to review them [1].

The controversy is principally about Theranos claims about technology it has yet to deploy and the company's high valuation [2].

[1] http://www.azcentral.com/story/news/arizona/investigations/2...

[2] http://www.wsj.com/articles/theranos-has-struggled-with-bloo...

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