Theranos Retreats From Blood Tests – Wall Street Journal

Elizabeth Holmes, Theranos’s founder and chief executive, at the Clinton Global Initiative’s annual meeting in New York in Sept. 2015.

Theranos Inc. said it will shut down its blood-testing facilities and shrink its workforce by more than 40%.

The moves mark a dramatic retreat by the Palo Alto, Calif., company and founder Elizabeth Holmes from their core strategy of offering a long menu of low-price blood tests directly to consumers. Those ambitions already were endangered by crippling regulatory sanctions that followed revelations by The Wall Street Journal of shortcomings in Theranos’s technology and operations.

The shutdowns and layoffs could help the closely held company accelerate its shift to developing products that could be sold to outside laboratories. Ms. Holmes announced in August a new blood-testing device called miniLab, which is about the size of a printer but hasn’t been approved by regulators.

In a statement posted on Theranos’s website late Wednesday, Ms. Holmes said: “We will return our undivided attention to our miniLab platform. Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care.”


Theranos has labs in Newark, Calif., and Scottsdale, Ariz., and five blood-drawing sites that send samples to the Arizona lab. The California lab has been closed since regulators decided in July to revoke Theranos’s license to operate the facility, a move Theranos is appealing.

As part of the restructuring, Theranos will shut down those operations entirely. Ms. Holmes said the restructuring “will impact approximately 340 employees” in Arizona, California and Pennsylvania. The company said it had 790 full-time employees as of August 1.

The impact on Theranos’s ongoing appeal of regulatory sanctions is unclear. Regulators also sought in July to ban Ms. Holmes from owning or operating any lab for two years, throwing the future of the Arizona lab into doubt. Theranos has appealed her ban, which hasn’t taken effect.

A retreat from the strategy that won the company a valuation of $9 billion in 2014 could make it less complicated for Ms. Holmes, 32 years old, to keep running Theranos as chief executive if the ban is imposed. She also controls a majority voting stake in the company and can’t be easily removed from her position, according to people familiar with the matter.

Theranos has said it accepted “full responsibility for the issues” at its California lab and had “worked to undertake comprehensive remedial actions,” including improvements in quality, training procedures and systems.

After the regulatory sanctions were announced, Theranos said its research and development unit “has developed many technologies that are not dependent on running a clinical laboratory.”

The miniLab was unveiled at a conference of lab scientists, and Ms. Holmes said it could run accurate tests from a few drops of blood. Theranos sought emergency clearance of Zika-virus blood test but then withdrew its request after federal regulators found that the company didn’t include proper patient safeguards in a study of the new test.

Theranos told the Food and Drug Administration it hadn’t reported results of the tests to doctors or patients, according to a letter obtained by the Journal in a public-records request.

The new technology is the successor to the Edison devices rolled out in a company lab in the fall of 2013, according to a person familiar with the matter. The Edison devices were at the center of Ms. Holmes’s vision to revolutionize the blood-testing industry with pioneering technology that makes the tests cheaper, less painful and more convenient.

At the Tedmed health-care conference in 2014, Ms. Holmes called Theranos “a new paradigm of diagnosis, in which every person will be able to see the onset of disease in time for therapy to be effective. Through it, we see a world in which no one ever has to say ‘goodbye’ too soon, and people are able to leverage engagement with their health to live their best lives.”

Theranos launched a partnership with Walgreens
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drugstores to collect blood samples at the drugstore chain and send them to Theranos labs for analysis.

In October 2015, the Journal detailed concerns about the company’s testing accuracy. Theranos later voided all results from its proprietary device for 2014 and 2015, though the company said it wasn’t aware of any patient harm resulting from its tests.

In June, Walgreens Boots Alliance Inc. closed all of the blood-collection locations opened in the Theranos partnership. Walgreens announced the decision on a Sunday evening, and Theranos’s signs disappeared overnight, according to some drugstore employees.

“I had heard advertising about Theranos,” said Lynn Boyer, 65, a retired nurse in Chandler, Ariz., who was attracted to Theranos because of her high health-insurance deductible. “It never occurred to me I was taking such a risk.”

Theranos also faces federal criminal and civil investigations into whether it misled investors. The company has denied wrongdoing.

As part of its appeal of regulatory sanctions, Theranos has asked the federal Department of Health and Human Services’ Departmental Appeals Board to conduct a hearing, according to appeals official Eric Lester. He said administrative law judge Leslie Weyn has been assigned to the case.

The proceedings are set to start Dec. 1, when the Centers for Medicare and Medicaid Services must reveal its evidence and arguments against Theranos, according to Mr. Lester.

A spokesman for CMS said the agency doesn’t comment on ongoing enforcement or legal cases. Thomas Barker, a former HHS general counsel who represents Theranos, said the company continues “to work closely with CMS” and is “following the [appeals board’s] timeline at this point.”

Write to John Carreyrou at john.carreyrou@wsj.com and Christopher Weaver at christopher.weaver@wsj.com

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