- Thomson Reuters
A hedge fund that invested $96.1 million in Theranos is suing the blood-testing company, The Wall Street Journal reports.
Partner Fund Management LP invested in Theranos back in 2014. The firm, among other investors that collectively funneled hundreds of millions of dollars into Theranos, largely remained silent as the startup withered under increasing scrutiny during the past year, The Journal said.
“Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company,” the company said in a letter to investors that The Journal reviewed.
The suit comes less than a week after Theranos stopped all of its clinical operations, cutting 340 positions and closing its Wellness Centers where blood tests were performed.
Instead, Theranos will focus solely on its technology, namely the miniLab platform it introduced in August at a scientific conference. The product reveal didn’t go over too well because those in attendance were hoping for large amounts of independently reviewed data that validated the company’s blood-test results.
“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,” Theranos CEO Elizabeth Holmes said in an open letter published Wednesday.
Theranos until Wednesday was trying to own all the parts of the blood-testing industry by building the technology as well as administering the tests to patients.
The company’s business model was based on offering more than 100 simple blood tests at a cost much lower than at traditional blood labs, in addition to developing its own technology to test that blood, which Holmes had emphasized would need to be drawn in only very small amounts.
In the past year, however, Theranos’ aspirations to be a one-stop shop have been derailed, with the company having to void two years’ worth of tests. The government agency that regulates clinical labs found that Theranos’ Northern California lab posed “immediate jeopardy to patient health and safety.”
The firm alleges, according to The Journal
- That Theranos said it could do more forms of its finger-prick blood tests than it actually could. That the company overstated how much it had submitted to the Food and Drug Administration. That the company couldn’t uphold its partnerships with companies like Walgreens, which ended its partnership with Theranos back in June, closing 40 Wellness Center locations.
Here’s Theranos’ response:
“The suit, filed by a hedge fund, is without merit and Theranos will fight it vigorously. The hedge fund is engaging in revisionist history, making claims that are not rooted in facts. The company remains committed to its mission and is appreciative of its strong investor base that understands and continues to support those efforts.”