Written By Avani Bhandari (Grade 10)
Theranos was a biotech startup founded in 2003 by Elizabeth Holmes, a Stanford University dropout who had been hailed as a visionary and even compared to Steve Jobs.
The company claimed to have developed a blood-testing technology that could diagnose diseases using just a few drops of blood. Holmes was able to attract high-profile investors, including Rupert Murdoch (founder of News Corp) and the Walton family (owner of Walmart Inc), and the company was valued at $9 billion at its peak. Theranos promised to disrupt the healthcare industry with its fast, cheap, and accurate tests, which it claimed would revolutionise the way people received medical care. However, Theranos turned out to be one of the largest corporate scams in history. The technology behind the blood-testing system, which was supposed to be the company’s core innovation, simply did not work. Despite repeated attempts, Theranos was unable to develop a reliable and accurate system for testing blood from a finger-prick. Holmes and her executives, including former boyfriend Sunny Balwani (COO of Theranos), allegedly knew that the technology was flawed but continued to promote and sell it to investors, doctors, and patients. They also concealed the fact that they were using traditional blood-testing machines from other companies to conduct most of the tests.
In 2015, investigative journalist John Carreyrou published a series of articles in the Wall Street Journal, exposing the fraud at Theranos. The company’s house of cards began to crumble, and it was eventually revealed that the company had misled investors, regulators, and the public. Holmes and Balwani were charged with fraud and conspiracy after this article, and everything was revealed to the world. In 2018, the SEC charged Holmes and Theranos with “massive fraud,” and the company was forced to shut down. Holmes settled with the SEC, agreeing to pay a $500,000 fine and to be barred from serving as an officer or director of a public company for ten years.
On November 18, 2022 Elizabeth Holmes was sentenced to federal prison for 11 years and 3 months. On December 7, 2022 Sunny Balwani was sentenced to 12 years and 11 months, plus three years of probation, with a surrender date by March 15, 2023. The story of Theranos is a cautionary tale about the dangers of hype and over-promising in the startup world, as well as the importance of rigorous scientific testing and accountability in the healthcare industry.
Featured Image Courtesy – Vanity Fair