The rise and fall of Elizabeth Holmes

Sreenidi Bala

In the summer of 2014 every tech based magazine had Chief Executive Officer and Founder of Theranos, Elizabeth Holmes, on the cover page. She held a tablet-sized blood sample and donned a Steve Jobs esque black turtleneck. At this time she had just been named one of the richest women in America and had a net worth of 4.5 billion dollars. Her company, Theranos, was inspired by Holmes’ own fear of needles, with a mission to create more affordable and accessible blood testing. The company claims that with a few drops of blood, patients can test for conditions such as cancer and diabetes. An innovative idea with a noble end goal drew the eyes of many investors as they ‘jumped on the bandwagon’ and invested hundreds of millions of dollars. It all seemed like a fairytale Silicon Valley story, until the shortcomings of the company were eventually revealed.

Holmes was a sophomore studying Chemical Engineering when she dropped out of Stanford with a mission ‘to become the Thomas Edison of Biomedical Engineering.’ Early on at Stanford, Holmes had shown physician and Stanford medical professor, Phyllis Gardner, Therapatch. This was created with the intent to scan the wearer for infections and release antibiotics when needed. Gardner attempted to explain to her why that would not work; practically, the antibiotics Holmes wanted to use needed to be given at higher doses than a patch could deliver. However, Holmes refused to listen to Gardner’s justified skepticism which foreshadowed her future conflicts.

In 2003, Holmes dropped out of Stanford and created Theranos. The name came from a combination of therapy and diagnosis. In the first four years of the company, Holmes raised 40 million dollars in venture capital from investors which most notably included media mogul Rupert Murdoch. To the public, Theranos looked like the next big thing. The technology involved a device called a nanotainer, which was used to collect blood through a finger prick. The blood would then be tested by another device, called the Edison. The company’s ability to raise capital from influential people so quickly gave promise for a device in the immediate future, however, the device was more fantasy than a reality.

Holmes’ easy access to billionaires and her convincing personality made it easy to get even more investors including Oracle Founder, Larry Ellison, without the device ever being demonstrated to the public. She created a board of some of Washington D.C.’s and the Pentagon’s most influential people, none of which had any established medical knowledge to question or challenge Holmes’ vision.

As popularity for Holmes and Theranos grew, author John Carryrou of Bad Blood: The Final Chapter interviewed several scientists and laboratories who revealed that taking a blood sample that small wasn’t enough to conduct any medical test. Not to mention the quality of the sample was
not as pure since it would be polluted with tissues and cells. The company refused to disclose financial statements to investors, using the famous members on the board to deflect questions. Even without science or statistics proving Holmes’ claims, Theranos and Walgreens signed a 140 million dollar partnership with a vision of consumer driven medicine where a patient would come into the store and order their own blood test.

“For us, the individual has to be at the center of getting information about their health because it’s the only way in which people can be able to take control of their health,” Holmes said to Consumer News and Business Center (CNBC).

This was yet another example of Holmes winning her audience over with words, not actions because in reality, this idea of consumer driven medicine was about to put human lives at risk.

Merhl Ellsworth walked into his local Walgreens for a Theranos Prostate Cancer Screening test. His first result showed cancer but Ellsworth’s doctor ordered a second test to verify the prognosis. Ellsworth ended up taking the blood test three times and the results came back indicating both cancer positive and negative. Ellsworth ended up taking a traditional prostate blood test which showed he was negative for cancer. Ellsworth and most other patients thought that their blood sample was being tested on the machine inside the Walgreens, but according to Former Theranos scientist Erika Cheung, this was not the case.

“In reality they were just collecting the vial of blood at a Walgreens, sending it over to a main laboratory we had in Palo Alto and then having people like me run it on a wide variety of devices,” Cheung revealed to Business Insider.

Since their own device was so unreliable, Theranos would test blood samples on other companies’ machines. In order for those third party devices to work, the samples would be diluted, leading to very inaccurate results. Scientists at Theranos knew that the result found by the third party machine was inaccurate but they could not do anything to stop it.

“They would not let us tell patients you need to come in for a redraw because they didn’t want people to realize the problems that were going on internally,” Cheung ex-plains to CNBC.

While Holmes believed she could get away with her lab’s errors until the Edison was perfected, in 2015, almost two years after announcing the Walgreens partnership, investors and the public saw the beginning of the end for Theranos. The Wall Street Journal reported Theranos was using its proprietary technique on only a small number of the 240 tests it performed and that the vast majority of its tests were being done with traditional vials of blood drawn from the arm, not the ‘few drops’ taken by a finger prick. In response, Theranos defended its testing practices, calling the Journal’s reporting ‘factually and scientifically erroneous.’ One
week after the Journal report, Holmes was interviewed on stage at the outlet’s conference in Laguna Beach. On the outside, Holmes seemed confident and unrattled but in reality her world was about to fall apart. In the next four years, Holmes’ net worth would be revised to zero dollars, Walgreens would sue the soon-to-be defunct company, and she would be indicted on criminal fraud charges.

Holmes had a vision in her mind but the solution was still a work in progress. Holmes believed she could continuously participate in these lies and carefully crafted coverups until she found the real solution to testing blood in such a small sample and while this is an effective strategy in software, this practice does not work when dealing with human lives.

Almost 18 years later, Holmes underwent trial in September and was convicted of investor wire fraud conspiracy count and three substantive wire fraud counts relating to the scheme to defraud investors, including wire transfers totaling more than 140 million dollars.

If you look at a legitimate, big tech magazine today, Holmes is nowhere to be found. However, her obsession with the media has now been returned. Now almost every streaming service is releasing documentary series’ regarding the life of Holmes. Some are comedic and others make you sick to your stomach but the message to the public is the same: Holmes’ story provides a cautionary tale to all on who or where you should trust your invested money and some things are just too good to be true. In a time where ‘fear of missing out’ is abundant amongst retail and professional investors, it’s important to remember to do your own due diligence and critically analyze before going on board, because without that lives are at risk.