The rise and fall of Theranos, the blood-testing startup that went from a rising star in Silicon Valley to facing fraud charges

Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative's annual meeting in New York, September 29, 2015.

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Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative’s annual meeting in New York, September 29, 2015.
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REUTERS/Brendan McDermid

  • Theranos, the blood-testing startup once valued at $9 billion, has fallen far from grace.
  • Its former CEO and founder Elizabeth Holmes faces criminal charges stemming from allegations that she and former Theranos president Sunny Balwani engaged in a scheme to defraud investors.
  • First founded in 2003 by a 19-year-old Holmes, here are the events that contributed to the rise, the fall, the pivot, and now criminal charges facing Theranos and its founder.

Theranos’ star was shining bright going into 2015.

The darling blood-testing startup had racked up a $9 billion valuation with its big vision to test for a number of conditions off just a small sample of blood, and its CEO Elizabeth Holmes was featured on the cover of business magazines and lists of top executives. But then questions started being raised about how the company’s technology worked.

As Wall Street Journal reporter John Carreyrou details in his book, “Bad Blood: Secrets and Lies in a Silicon Valley Startup,” the events leading up to the imminent downfall of the company started unraveling even years earlier. The book gives a behind the scenes look into the events propelled the biotech startup, Theranos, into chaos and deceit.

In June 2018, Holmes stepped down as CEO of Theranos, remaining with the company as a founder and chair of the board. She was also charged with wire fraud by the Department of Justice. In September, Theranos told investors that it was shutting down, The Wall Street Journal reported.

Here are the events that contributed to the rise, the fall, the pivot, and now criminal charges of the once promising company founded by Holmes.

This article was initially published in May 2018 and has been updated.


Elizabeth Holmes dropped out of Stanford University in 2003 at the age of 19 to start Theranos, which was then called Real-Time Cures. She was inspired both by her grandfather’s medical career, and her summer 2003 internship at the Genome Institute of Singapore. Briefly after the internship she wrote up a patent application for an arm patch that had the ability to diagnose and treat medical conditions.

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Theranos/Screenshot

Shaunak Roy, a PhD student Holmes was assisting in Professor Channing Robertson’s lab, joined her at Theranos in May 2004 as its first employee. Robertson joined the company’s board as an adviser.

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Shutterstock/MintImages

In order to raise initial funding, Holmes leveraged several family connections. The first two investors in Theranos were Tim Draper, the father of her childhood friend and former neighbor, and Victor Palmieri, one of her father’s long-time friends. By the end of 2004, Holmes had raised nearly $6 million.

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Tim Draper defends Theranos on CNBC in 2018.
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CNBC

The initial design for the Theranos device in 2005 was a cartridge-and-reader system that was dependent on microfluidics and biochemistry. This prototype was dubbed the Theranos 1.0, and the company had plans to license the technology out to pharmaceutical firms to help them catch adverse drug reactions during clinical trials.

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Jammy Photography / Shutterstock

In November 2006, Henry Mosley was fired from the position of chief financial officer at Theranos after questioning the reliability of its technology and the honesty of the company.

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Melia Robinson/Tech Insider

Learn more.


In August 2007, Holmes used the premature Theranos 1.0 in a patient study with terminal cancer patients in Nashville, Tennessee. Theranos also announces that it would be suing three former employees for stealing intellectual property.

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Protein analysis tubes are seen in a lab at the Institute of Cancer Research in Sutton, Britain.
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Reuters

Theranos developed a new prototype in September 2007, named the Edison. The device was a modification of a glue-dispensing robot from New Jersey company Fisnar. By then, Holmes had poached some of Apple’s designers and put them in charge of architecting the overall look and feel of the Edison.

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YouTube/ Bot & Dolly

Sunny Balwani joined Theranos in September 2009. He had known Holmes since summer of 2002. Balwani had a background in software engineering and business.

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Shayanne Gal/Business Insider

Learn more about Sunny Balwani.


By 2010, a startup boom had hit Silicon Valley. That year, Holmes and Balwani approached Walgreens with a business proposition to run health clinics. At the same time, Theranos was also pursuing a partnership with Safeway.

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A pharmacist stands in the background as a sign rests on a counter at a Walgreens pharmacy store in Austin, TX, U.S., March 26, 2018
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Reuters/Mohammad Khursheed

The new partnerships meant that Holmes had to create a new device that could perform more than just one class of blood tests. The miniLab was created in 2011, and was nicknamed the 4s after the iPhone model.

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Shutterstock

In early 2012, Theranos took over blood testing at a Safeway employee health clinic as a beta run. The chief medical officer of Safeway had concerns about the discrepancies and differences between the values given by Theranos. Safeway’s CEO brushed it off and retired the following year. Theranos also signed a deal with Walgreens in 2012 to launch its devices in-store but continuously missed agreed-upon deadlines.

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Justin Sullivan/Getty

Lieutenant Colonel David Shoemaker raised concerns about Theranos’ regulatory strategy to the FDA in 2012 after Holmes approached him about deploying the device in the military. The Center for Medicaid and Medicare Services (CMS) then did a surprise inspection, where Balwani told them that the device was still under development. After battling James Mattis, who was on the Theranos board, Shoemaker ultimately agreed to a more limited experiment.

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US Air Force/Staff Sgt. Cody H. Ramirez

At Theranos, things were getting tense. Ian Gibbons, a former scientist at Theranos, committed suicide in May 2013.

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Steve Jurvetson/Flickr

In September 2013, Theranos launched its 4s model with a new website and an op-ed piece by Holmes in The Wall Street Journal, despite protests from several of the company’s scientists saying that the technology was not ready.

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Skye Gould/Tech Insider

Source: Wall Street Journal


Partner Fund purchased 5.6 million shares of Theranos at a price of $17 a share in February 2014. Theranos was valued at $9 billion and Elizabeth Holmes had a net worth of almost $5 billion.

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Larry Busacca/Getty

Theranos and Holmes started gaining media attention, gracing the cover of Fortune magazine in June 2014. In it, she made claims about her blood test like that the company offered more than 200 tests and was ramping up to more than 1,000. In deposition tapes reported by ABC News in January 2019, Holmes was asked if that claim was true. “Reading it now I don’t think it is,” Holmes said.

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Drew Kelly / Fortune

Source: Fortune, ABC News


Wall Street Journal investigative reporter John Carreyrou got a tip about Theranos in early February 2015. On February 26, he contacted a former lab director at Theranos who told him about unethical and harmful practices there. At that time the company was operating at a limited capacity and had been generating false and unreliable results for patients. Theranos had also been thinking of conducting HIV tests before the former lab director talked Holmes and Balwani out of it.

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Wall Street Journal reporter John Carreyrou
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Hollis Johnson/Business Insider

Source: Business Insider


While Carreyrou was investigating the company, business carried on as usual. In July 2015, Theranos got its first FDA approval. By this point, scientists were starting to raise some questions about the company’s technology.

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The headquarters of the U.S. Food and Drug Administration (FDA) is seen in Silver Spring, Maryland
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Thomson Reuters

Source: Business Insider, Business Insider


Shortly before Holmes was scheduled to speak at a conference, Carreyrou published his first story, revealing the company’s struggles to develop its blood-testing technology. Holmes went on stage and appeared on TV to defend her company over the coming weeks.

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Mike Blake/Reuters

But the facts were starting to come out. In documents related to the FDA’s visit to Theranos’ lab, the agency told the company that it was shipping an “uncleared medical device.”

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One of the documents from the FDA.
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FDA

Source: Business Insider


By November, the partnership with Safeway had fallen through, and the Walgreens relationship was on thin ice.

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YouTube

Source: Business Insider


By early 2016, more regulators were finding problems with Theranos. In January, the Centers for Medicare and Medicaid Services, which regulate blood-testing labs, cited concerns that one of Theranos’ labs posed “immediate jeopardy” to patients. Later in April, the SEC started its investigation into the company.

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Blood samples wait to be processed at Biobank, the world’s largest blood and urine sample freezer near Manchester, northern England, in this March 18, 2010 file picture.
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Phil Noble/Reuters

Source: Business Insider


In May 2016, Theranos President Sunny Balwani left the company, leaving Holmes as the sole top executive.

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Footage of Sunny Balwani presenting.
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“60 Minutes”

Source: Business Insider


In June, Walgreens ended its partnership with Theranos and closed all of the Wellness Centers it had opened in Arizona and California.

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An example of the Wellness Centers.
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Steve Jurvetson/Flickr

Source: Business Insider


In July, CMS banned Holmes from the lab-testing industry for two years. Theranos later in 2017 settled with the regulatory body for $30,000. As part of the settlement, Theranos agreed not to own or operate a clinical lab until 2019.

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CBS This Morning via YouTube / Screengrab

The following month, Theranos finally presented at a scientific conference, though the details about the company’s technology were still lacking. Theranos appeared to be pivoting toward focusing on its new sample processor, the miniLab.

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Theranos CEO Elizabeth Holmes at the American Association for Clinical Chemistry’s annual conference in 2016.
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YouTube

Source: Business Insider


The presentation over the summer foreshadowed Theranos’ pivot just a few months later, in which the company shut down its clinical labs, laid off about 340 employees, and went to work solely on its miniLab technology.

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The miniLab, presented at the AACC conference in August 2016.
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Lydia Ramsey

Source: Business Insider


Lawsuits then started piling up from all angles including Walgreens, investors and patients in Arizona. Those cases all ultimately got settled, with Theranos paying millions to refund patients who took its tests in Arizona.

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Melia Robinson/Tech Insider

Source: Business Insider


Some of the big names on Theranos’ board departed shortly after, including former US Secretaries of State Henry Kissinger and George Shultz. The company also went through another round of layoffs.

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Former Secretary of State Henry Kissinger.
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REUTERS/Lucas Jackson

Source: Business Insider, Business Insider


By the end of 2017, Theranos was in need of a cash infusion and made a deal with Fortress Investment Group for $100 million in secured debt financing to get it through 2018. The deal relied on Theranos hitting certain development milestones as it worked to get its Zika virus approved by the FDA.

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Jamie McCarthy / Getty

Source: Business Insider


Then in March, the SEC charged Holmes, Balwani, and the company with “massive fraud,” though Theranos and Holmes settled. As part of the resolution, Holmes paid a fine and cannot be a director or officer of a publicly traded company for 10 years.

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Holmes attends the WSJDLive conference in Laguna Beach
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Thomson Reuters

Source: Business Insider


Facing setbacks in its Zika test development, Theranos laid off the majority of its remaining employees and appealed to investors for more funding.

Source: Business Insider


Theranos said in its December letter to investors that the Department of Justice is still investigating the company, meaning that criminal charges could come to Holmes and Balwani. The company is still in danger of defaulting on its agreement with Fortress. Either event may mark the end of the 15-year-old company’s saga.

Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative's annual meeting in New York, September 29, 2015.

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Elizabeth Holmes, CEO of Theranos, attends a panel discussion during the Clinton Global Initiative’s annual meeting in New York, September 29, 2015.
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REUTERS/Brendan McDermid

Source: Business Insider


In June 2018, Holmes stepped down as the CEO of Theranos, remaining on as a chair of the board. She has also been charged with nine counts of wire fraud by the Department of Justice.

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Holmes attends the WSJDLive conference in Laguna Beach
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Thomson Reuters

Source: Business Insider


By the end of the summer, it appeared to be the end of the line for the company itself. The Wall Street Journal reported in September 2018 that the company told its shareholders that it plans to formally dissolve. Theranos said it’s working to give Fortress ownership of the company’s patents, while its remaining cash would go to creditors.

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Theranos

Source: The Wall Street Journal