Regulators Propose Banning Theranos Founder from Blood Testing
wsj.com
wsj.com
He's also run a consulting company that's specialising in identifying partners and acting as door-opener for the last 34 years.
In other words: He's not on that board for his expertise in their field, but for his expertise and contacts related to getting in to talk to the right people.
Composition of a board is tricky though. In a case like this you would hope to have equal, if not dominant, representation of people who are strong on the science. Anything else is a bit of a red flag.
Reminiscent of Peter Thiel and Clarium Capital (no fraud there, but tremendous losses). No one ever talks about it.
http://www.unz.com/isteve/the-elizabeth-holmes-reality-disto...
http://www.unz.com/isteve/theranos-maybe-old-white-men-dont-...
Sailor makes the case that there's a strong dose of affirmative action involved. His blog posts don't really contribute much to the discussion other than adding that slight "politically incorrect" slant. His posts just pull from all the other sources people have already mentioned.
Edit:
I don't agree with your characterization of the main post, you may also consider that for someone interested in this matter, there is additional information in the comment sections of the linked posts.
I'm also perplexed as to the driving factor behind your somewhat dickish, snide comment.
> I'm also perplexed as to the driving factor behind your somewhat dickish, snide comment.
Please don't add to such things.
John the more I think about Theranos the more I think this “mess” is actually deliberate. Looking at the history of Theranos and the composition of the board it appears Theranos was designed from early on as a vehicle to defrauded the US military.
The plan appeared to be to use their connection and access to some rather “helpful” high brass to offload the technology for billions and then later sweep the fact that it didn’t work under the rug (this tactic has worked fabulously for the last 20 years). Avoid the FDA altogether.
Who would have noticed another $10 billion misspent on some wizz-bang technology given the $100s billions lost in other frauds? When the wheels fell of this plan (some underling didn’t play along) the idea seems to be to blame the scientists and say “we were misled”. They might be evil, but they don’t appear to be stupid.
Instead was the plan to milk the military for a long time on R&D expenses and just pocket the cash as one goes along? If so how does that work for the VC-backed structure of the company?
Accordingly, the theory about Theranos being set-up to be sold to the DoD, falls entirely flat.
It is estimated that six percent of all procurement dollars are lost to fraud nation-wide annually. If you apply that amount to USAspending.gov’s figure of $700 billion dollars that the Federal Government spent on average each of the past nine years, that would total $42 billion dollars per year or $378 billion dollars lost to procurement fraud during the past nine years.
1. http://www.dodig.mil/iginformation/archives/finalwebsnips.pd...
It seems more likely they were very close on the science, and decided to run with it while they worked out the last 10%. That works great for most tech companies, but healthcare technology is very different.
It's hard for me to imagine they wouldn't have said "well, one drop didn't work but we could decently with four but we won't do that."
I haven't followed tremendously the story though.
The second problem with fingerprick blood is you pick up quite a bit of skin tissue in the process, but the amount collected is quite variable. What you end up measuring is blood + some unknown percentage of skin tissue derived material. None of these things are good for reproducibility.
It probably doesn't hurt to have people like that on your board when you go looking for funding.
Being on a corporate board has got to be the easiest job in the world. When things are going well you collect a six or seven figure paycheck for doing almost nothing.
Hanlon's razor isn't proof of anything.
That said, Hanlon's razor can't explain away evidence.
if (benefit > 0) {
P(malice) >> P(stupidity)
}they actually attempted exactly that back in 2012
https://www.washingtonpost.com/news/wonk/wp/2015/12/02/inter...
https://en.wikipedia.org/wiki/Theranos
In July 2013, the composition of the Theranos board of directors changed markedly, with departure of Channing Robertson (emeritus professor, chemical engineering, Stanford University),[39] experienced pharma and biotech executive Robert B. Shapiro (former chairman/CEO of the Pharmacia, Monsanto, and G.D. Searle group of companies), and financier Pete Thomas (principal, ATA Ventures).[6][38] Remaining from the original board were Theranos President and COO Ramesh "Sunny" Balwani and former Secretary of State George Shultz;
There have been somewhat recent cases of the SECDEF firing a General or Admiral if a development or acquisition goes awry. The JSF Program Executive Officer, MG David Heinz [0] was one example. I doubt a senior officer would risk a $10Bn acquisition program on unverified technology. Development programs are another story.
The Defense Contract Management Agency (DCMA) [1] are known for being rigid when it comes to the units meeting contracted specifications. They also require technical documentation, so trade secret wouldn't be an excuse. If DCMA are on vacation, then no deliveries take place. This happened during federal shutdowns.
If Theranos sold the DoD a device that was faked and didn't meet specifications, It's entirely likely DCMA would reject the delivery.
Development programs with DoD funding sometimes (often?) go awry, and sometimes specifications get changed (e.g F-35) but the unit must meet contractual specifications.
[0] http://www.washingtonpost.com/wp-dyn/content/article/2010/02...
[1] https://en.wikipedia.org/wiki/Defense_Contract_Management_Ag...
Can you point to any sources indicating that the basic concept is viable?
Using a smaller needle can be done. A skilled doctor or nurse can use a butterfly needle [0] with a fine tip, and the patient barely notices. As I recall, a 27G needle is about the smallest and not damage the blood cells.
Microfluidic Arrays [1] are one way to carry out some lab tests with smaller samples. What steps are required to get the results from the array would vary between tests.
YC (W16) funded Unima [2] is working on reducing the cost of certain lab tests with paper test strips.
[0] https://en.wikipedia.org/wiki/Winged_infusion_set
While I'm sure this has happened in weapons technology, can you give an example in Health Care? (Where people deliberately avoided the FDA this way) I know there's a ton of waste in the military, I wasn't aware it spread this wide and deep.
They seem particularly vulnerable to this kind of catastrophe. It's like they have their favored peers who are also retiring & they get them connected to a firm by someone who also left and wants to help out other govies. They do 20 years in the military and then go work in private sector for companies that will sell to the government. So the board gets loaded up with civil servants rather than entrepreneurs.
My perception is that their career experience doesn't arm them with the ability to identify a company with inadequate runway & execution talent. They seem to think a a well connected "who-you-know" network would have enough collective wisdom to avoid this scenario, or maybe they don't really consider that failure is possible, given the funding environment of the military.
That said personalized medicine should end up being interesting, but I think it's really, really early days.
I think I see the experiments you're doing more as internal development. I.e. I run bits of my code dozens of times a day to make sure it's working (or not), which I see as analogous to running bench experiments.
Also, I'm thinking more about traditional pharma biotech where you can run tons of experiments but the drug has to be put into people at some point and there's actually a lot that can go wrong there that can't be easily forecast. The only time you get hints at whether your drug is "viable" is when you're in clinical trials and even then until succeeding in Phase III there's a ton of potentially catastrophic risk.
For the record I was a bench biochemist for the better part of a decade, so under no circumstances do I mean to denigrate bench science.
Internet-type startups, at their core, are about marketing more than they are about technology. Getting the technology right is absolutely no guarantee of success, but you can hack together some PHP and -- if you get the marketing right -- make a shitload of money.
Psychology is kinda hard to do rigorously, so you test marketing the only place you really can -- in the market.
Conversely, the question "does this material prevent infections?" can actually be studied, to a significant extent, in controlled lab experiments. You don't need the marketplace to answer that question.
And for many cases -- such as the OP's -- it's obvious that if the answer is "yes" then you have a valuable product. Period. End of story. Infection-resistant materials aren't a fucking social network. If they work, they are obviously and immediately useful. You'll need to get the business side right, but it's really less difficult than the science itself because hospitals are begging for products to buy that address this problem.
So the question is more "can we solve this totally obviously extant and well-defined and obviously significant problem" rather than "have we identified a problem whose solution will let us win some pocket change of a big number of consumers?"
Figuring out if the science works out IS the MVP test. If you have a product that works your customers will be lining up.
Consider the pharma route. Does it solve something that slots in, or will the process be hard, or maybe they have something close enough that disrupting the pipeline isn't worth it? Many projects don't get into testing, many testing projects don't get purchased, and as generally only one pharma will want to purchase, scale won't be hit (so you're dependent), and many purchased projects won't get acquired.
There are other routes and they have their own business risks. The MVP / market analysis process is different for biotech, but still should happen. It's pretty fascinating!
> Does it solve something that slots in
I'm not sure what you mean by this...
> they have something close enough that disrupting the pipeline isn't worth it
This is another incident of thinking that IT startups are the same as Biotech startups, or any science startup. Marginal increments in IT can be worth BILLIONS, marginal increments in Biotech aren't worth the paper they are printed on (that may be a bit of an exaggeration), and the biggest reason is cost to get into market. IT has low costs if any to enter a market place, except in the rare exceptions where the FCC is involved, the average cost to get a drug to market is something like $500MM and YEARS of regulatory approval. It's not worth investing in a marginal increment, you invest in moonshots and as you collect more data and better understand how the drug performs to either continue to invest (if it remains promising) or shelve it if it only looks marginally better.
While the market analysis needs to happen it is much less rigorous than IT startups. Hey 100,000 people die every year from infections acquired in hospitals, great lemme call around see what hospitals are willing to pay and sell to them. Lets not forget the other 600,000 that acquire infections from hospitals, for which under the Affordable Care Act the hospital has to pay for. Great sounds like I have a business as long as my product doesn't surpass a certain price threshold. In biotech you are either a billion dollars or a bust, there is no in-between because new products cost so much you have to have those high returns.
Not many IT startups NEED $500MM just to get their first sale.
Right. I think we're all violently agreeing.
Biotech companies do need MVPs and market analysis. My observation is just:
1) The idea of testing product-market fit by building a complete product and putting it out there in uncontrolled settings doesn't really work for a lot of biotech companies. Especially anything that's going to need regulators' approval.
2) Compared with IT startups, Biotech companies are more likely to fail due to having the wrong answer for "but can we make it work?" rather than "is there a market?". So the MVPs optimize for testing former question, which usually means controlled experiments in a lab. There are counter-examples on both sides, I'm sure, just in general.
Your product will not only require extensive marketing to make it into a major hospital system, it will also need to be cheaper than brasses and bronzes.
...but now that isn't going to happen, primarily because of this debacle.
It's so sad that the "keystone cops" at Theranos have done so much damage to the reputation of the medical startup community- Possibly, they've set medical research back by several years with their bad behavior.
Every time from now on when someone dares suggest that medical regulation is stifling innovation, they will be asked to defend Theranos, which appears indefensible.
The research models have performed as they always have, if not better.
The only thing that's changed is the introduction of know-it-all Silicon Valley VCs who think bio is the same as software.
I'm not an expert on the history of progress in medical research... however, I do have a medical degree.
Bottom line, I have higher standards and think we could be doing a lot better. Regardless, without counterfactual data it's really a very subjective question.
Increasing disparities between resource inputs and outcomes, as measured by certain health deliverables, in biomedical research http://www.pnas.org/content/112/36/11335.full
Basically, increased funding of biomedical research hasn't resulted in better output, and that we do, indeed, need to change the model. The current model is really inefficient.
Another explanation could be that the money givers haven't gotten as much health improvements as they would want because they haven't directly asked for them, as this paper acknowledges:
"A recent focus on productivity has dominated the competitive evaluation of scientists, creating incentives to maximize publication numbers, citation counts, and publications in high-impact journals. [...] The efficiency of society’s investments in biomedical research, in terms of improved health outcomes, has not been studied."
Computer programmers do not produce more profitable programs if you pay programmers by lines of code, either.
And yeah, I heard Casadevall speak at a conference and "used up low hanging fruit" was one of the theories. It's less likely that there'll be another penicillin moment.
It's all pretty depressing, and very true that it's all driven by Science/Nature/Cell publications, not by discoveries.
Without a drastic plot twist it appears this company is little more than vaporware. At least the investors that will lose their money are people who should have all known better (and can afford the loss!), back in the dot com boom this thing would have been held by mom and pop.
Almost anytime a startup gets to a valuation that high, the founders have had an opportunity to take some money off the table. VCs like this, because it keeps the founders' incentives aligned with the investors' (they are more likely to take risks and swing for the fences if they don't have to worry as much about their own personal net worth).
It's dangerous if the founder divests entirely, but you want them to have enough that they aren't too worried about the risk of the company collapsing to make bold decisions when necessary.
That said, I don't know Theranos's cap table, but it's probably unlikely that her current stake in Theranos is worth $1B on paper even today - did she really manage to achieve a $9B valuation while holding onto 11% of her company?
Who also should have known better. If someone doesn't understand how a company they invest in makes a profit, or what the risks to that company are, they have no business investing in it. For example, I hold agency-MBS REITs in my portfolio, but only because I'm willing to read the quarterly filings and keep an eye on news relevant to interest rates. They are absolutely not an investment I would recommend to most people who want something simple they can "set and forget."
Will be interesting to see what the company does. Normally the CEO would be "asked" to step down from having any involvement with the company whatso ever.
However, I believe she's the majority shareholder so the usual remedy of removing her from the company altogether might not work so well.
Man, there goes any hope of a decent exit anytime soon Thernos, as usual its the employees themselves who will absorb the brunt of this. I hope they have alot of money saved because if they try to raise again, and its debatable if t hey'd be able to, its going to be a nasty round.
She could step down voluntarily if she believes that someone else could turn the company around. That would be better than going bankrupt and losing her entire fortune in Theranos stock.
But how many CEO's have you talked with in your lifetime?
Every CEO I've ever talked with that has started a company or been there long enough to think of it as their "baby" have all had tough times letting go.
The problem is the company is 100% based around her invention that she won't share the inner workings of and apparently that doesn't actually perform up to standards. It's not mismanagement, it's a material issue.
Wrong prothrombin time results could cause doctors to prescribe too little or too much warfarin. Too much of the drug, also known by its brand name Coumadin, can cause fatal bleeding, while too little can leave patients vulnerable to clots and strokes, according to medical experts."
Huge free market failure here. Thank god we still have some working government regulation in this country.
I think with this specific industry testing and compliance is more important in due diligence.
According to the WSJ she was childhood friends with Tim Draper's daughter and that's where she got her first round.
http://www.wsj.com/articles/at-theranos-many-strategies-and-...
> The first $1 million came from Tim Draper, a founder of Draper Fisher Jurvetson, through two of his funds. Ms. Holmes was a childhood friend of his daughter and came to him “with extraordinary energy and brilliance,” he says.
At that point you have a very bright founder who interviews well and is backed by Draper. Everyone else assumes everyone else did their research.
http://fortune.com/2015/12/17/how-theranos-misled-me-elizabe...
Once one journalist finds one problem and does the legwork and prints it, others who know of problems find that journalist because they know he/she will do the legwork and get the story out.
The company then puts their side out to journalists they think might not put them in a bad light, who maybe get special access if they don't ask the toughest questions.
There's a natural triage of journalists in these battleground stocks/stories into pro- and anti- factions, even if the journalists are doing the fairest job they can with the info they get.
Not to say the company, the competition and other interested parties don't feed tips, leaks and tough questions to one side or another.
These assays are performed regularly on large samples no problem, but the sensitivity and accuracy of the assay becomes erratic when you only have a couple micro liters of blood.
Either they couldn't develop proper assays (an engineering problem) or microliters of blood don't contain enough substrates for their assays (a major lapse in knowledge)
Whereas a fingerstick produces a few drops of blood that flow to the surface moving past the tissue and cells that were cut getting to the blood vessels, and they'll contribute unrelated proteins, lipids from cell membranes, etc. etc. On its face, many many people have said this is so problematic real evidence that it worked was needed; heck, even a theory would have been nice, but neither were forthcoming.
There's been some research into using piezoelectric elements coated with antigen or other reactive surfaces.
A positive result (meaning antibodies are attaching themselves to the substrate) would change the resonant frequency of the surface.
http://www.sciencedirect.com/science/article/pii/S0003267000...
From the many blood draws I have done, standard practice is to fill a tosser vial before collecting the real samples in order to remove these contaminants.
Now, it's possible I'm mis-remembering this, although the protocol includes showing me the vial after the draw so I can confirm it's labeled correctly and I tend to remember additional vials, since that manipulation often hurts more than anything else. I'll pay attention, heck, ask the phlebotomist in a few months during my next annual checkup.
http://www.cbc.ca/news/canada/british-columbia/uvic-blood-te...
I was at one of those firms 25 years ago and they were working on it back then. Either they abandoned the effort, or are still trying, but they haven't launched a single microfluidic immunoassay.
More likely I think they were also enamored with what looked like promising results. I've personally seen situations where technical due diligence on lab tech was poorly done and therefore wrong. Unless the VC has a fairly strong science background/scientific advisors in a related sector, it's super easy to make something look like it's working when it's actually totally busted.
Theranos was at the right time with a very intriguing idea, but one that was ultimately not a model for reality. They were able to get lots of capital at this time in preparation to develop a product that ultimately never materialized (and more fundamentally, may not be physically possible).
http://www.cbc.ca/news/canada/british-columbia/uvic-blood-te...
To be honest, I don't know. I think it is possible to get a lot of information out of a single drop of blood. But there are issues with sampling--blood from the capillaries in my finger is very different from blood coming back from my intestine.
Maybe more fundamentally: a lot of "interesting" things are specific proteins. These can be at extremely low concentration--on the order of nanomolar all the way down to femtomolar. It's very difficult to amplify such a signal -- DNA is easy to amplify but proteins are not. At such low levels, the wrong drop of blood may have a dramatically different meaning, due to stochastic effects.
If you've ever invested in something and found out you were about to lose it, part of you flirts with the idea of selling while you still have plausible deniability. You know that if you ask too many questions, you'll lose that plausible deniability. Of course it doesn't really make a difference, you know damn well, but it's part of the grieving process.
> Stanfraud graduate (not even graduated)
> Father has a IV in his name
> Both parents work in DC (east coast)
These are HUGE red flags in a field where results are much more tightly correlated with technical expertise. They wouldn't be in another field that is less tightly correlated such as banking or politics.
Furthermore, anybody that has done any amount of research in any capacity knows that an undergraduate claiming their research project (in biology especially. CS is possible) could launch an entire company is either purposefully delusional or incompetent.
Maybe it's that legitimate medical tests take long enough that you could get a lot of sales and investment off of early trials and social proof.
I don't know anything about it to say that it really was a Bernie Madoff type situation, but it has a bizareness to it that feels similar.
http://online.wsj.com/public/resources/documents/cms20160412...
Umm, what's odd? FOIA? Perseverance in reporting? High quality investigative journalism from someone (John Carreyrou) with a track record?
Theranos potentially could have been amazing for medicine, but more and more this looks like an epic disaster.
The traditional cab companies (who have to cover that market by law) are quite right in crying foul, IMO.
Right now, there's a real risk they'll put legit taxi companies out of business, and then those people in wheelchairs who need transportation are simply screwed. But nobody at Uber cares, of course, because the company is run by complete jerks.
Also, you appear to be wrong about each taxi company requiring to support wheelchairs. As far as I can tell from my brief search, the ADA requires training, not supporting vehicles that allow wheelchairs.
Most places in US ignore that.
https://wheelchairtravel.org/taxi-companies-local-government...
> Sec. 37.103 Purchase or lease of new non-rail vehicles by private entities primarily engaged in the business of transporting people.
> (a) Application. This section applies to all acquisitions of new vehicles by private entities which are primarily engaged in the business of transporting people and whose operations affect commerce, in which a solicitation for the vehicle is made (except as provided in paragraph (d) of this section) after August 25, 1990.
> (c) Demand responsive systems. If the entity operates a demand responsive system, and purchases or leases a new vehicle other than an automobile, a van with a seating capacity of less than eight persons (including the driver), or an over-the-road bus, it shall ensure that the vehicle is readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs, unless the system, when viewed in its entirety, meets the standard for equivalent service of Sec. 37.105 of this part.
That's funny. You must work for Uber PR.
> and wheelchair access is a very small percentage of customers.
Well in that case, fuck 'em. And fuck the ADA too.
In what sense?
Also, for the record, small cab companies were allies of Uber here in Dallas.
The extent to which it is enforced I have no idea but that would be up to consumers to make complaints to the regulatory body.
[0]: http://dallascityhall.com/departments/codecompliance/Pages/T...
"When a wheelchair accessible vehicle is requested, the operating authority must provide a wheelchair accessible vehicle, or cause one to be provided, without unreasonable delay."
Highlighted for emphasis. The cab company does not need to own or operate the vehicle. They just need to make sure the customer is provided with one at the same rate they would charge a customer who did not require one. This is not the same as what was originally stated above.
Your exact statement was "No, the traditional cab companies do not have to cover this market by law."
That is simply false.
On the other hand, she is an excellent example of how not to be disconnected from reality for founders.
Just because someone gets anointed by family connections to money and PR, that doesn't make them an 'inspiration', regardless of gender.
she dropped from Stanford at something like first year.
Here's an example:
http://www.ted.com/talks/tan_le_a_headset_that_reads_your_br...
Suffice to say that this debacle won't do any further biotech investment any good, and that's a great shame.
US$ 10B is a lot to piss away, I hope some good came of it.
This takes you to Google News search from where you can click through to the article.
It usually works.
Because its just conjecture has no proof behind it? HN isn't the place for conspiracy theories.
Astrologers also have happy customers, that doesn't mean their money is well spend.
To put it another way: none of the Theranos-only innovations turned out to be medically sound.
In the case of Theranos, there are high school biology labs that are run safer and better.
[0] http://www.cancer.gov/about-cancer/causes-prevention/genetic...
I like public prices and a nice phone app, but that's completely peripheral to the actual objective of real, reliable, verifiable medical data.
Theranos could ditch the faulty tests and provide only those which are reliable, and the experience they would provide would still be superior to that of other labs, by a long shot.
Now if you want to question their honesty as a company, as a way of doing things, well, that's a different story.
You're right there are a few labs they do on commercial hardware that does work, and I think they're allowed to provide a test (for Herpes I think? could be wrong on specific test) that is inherently based on very small sample sizes. As I recall though, none of those tests use any new tech at all, and if it's an old blood test then it's not going to require less sample, therefore not that much less painful re. needles anyway.
Take that all away and you have a nice app and pricing experience. Pluses to be sure, and I'd love those things to happen more in medicine, but not very innovative or well positioned to take down $10B megacorps.
Lab tests aren't 100% reliable either, it's true. But the nature of that unreliability is understood and the value of the resulting tests are well established to be related to a clinical outcome. The main criticism of Theranos is that they never put themselves to that kind of test or scrutiny.
All things being equal, even if the only advantage Theranos has over its competition is lower pricing, I'd take it, because having access to affordable medicine has numerous positive implications for the entire society. What's the point of all the medical innovation if people cannot afford it? Ideally we should strive for both innovative and affordable healthcare, but unfortunately things in the healthcare sector are moving extremely slow.
If the tests aren't actually equivalent, they haven't improved anything. Charging less for vaporware doesn't mean it's better, it's still fuckin' vaporware. :P
As of now, the -only- test they are allowed to perform is for HPV, by traditional methods.
The FDA has "concerns" about every other test they offer or have offered.
* First off, it's HSV not HPV. Pay attention, as they are two different viruses.
* Theranos' proprietary test system for the herpes simplex 1 virus IgG (HSV-1) has been approved by FDA, so no, it's not by traditional methods. [1]
* Other tests are performed actually by traditional methods
I'm not associated with Theranos in any way, so I couldn't care less, but please don't throw around random statements.
[1] http://techcrunch.com/2015/07/18/theranos-gains-fda-approval...
"This new approval, classified as CLIA certificate of waiver, allows testing outside of the lab for those determined to be so simple there is little room for error."
If i remember this is the "lab developed tests" loophole that Threanos was trying to sneak through, and which was shut close for them on the basis that spreading their devices around, like interstate commerce, is a clear violation of the loophole and they do need actual FDA approval... the rest of the story we have been observing for the last several months.
Rumor is the response was short and read: "Bring it, Feds! We have Kissinger! ... KISSINGER!!!"