The executives of Theranos would be in a lot less trouble right now if they hadn’t succeeded so wildly at making blood testing, of all things, look glamorous. In its heyday, the startup recruited statesmen like George Shultz and Henry Kissinger to its board while founder and CEO Elizabeth Holmes got adoring profiles in Fortune and Forbes. At its peak, Theranos was valued at $9 billion. The glow surrounding the company was so bright that even other companies in the space felt its warmth. “Theranos, by the fact that they raised so much money and made so much noise and had so many famous people related to the company, significantly increased the exposure that the average Joe had to direct-to-consumer blood testing,” Gil Blander, the founder and chief scientific officer of InsideTracker, told me recently. His company specializes in giving people lifestyle and health recommendations based on their blood samples. “It was very positive for everyone, especially for us.”
And now? Theranos’ former blood testing competitors are still washing out the stain.
Theranos’ collapse was as public as it gets for a Silicon Valley unicorn, beginning in 2015 with a widely read series of articles by former Wall Street Journal reporter John Carreyrou, who revealed that Theranos’ technology was far less effective than advertised. The debacle went on to inspire the bestselling book Bad Blood by Carreyrou, an HBO documentary, and a forthcoming Hulu series starring Amanda Seyfried. This week, Holmes’ highly anticipated trial begins in earnest. Jurors were sworn in last Thursday, and opening statements will begin on Wednesday. Prosecutors have charged Holmes with multiple counts of fraud and conspiracy related to the ascent and operations of Theranos, though she maintains her innocence. Once famous for a supposedly innovative approach to blood testing, now infamous for allegedly faking it, the names Theranos and Elizabeth Holmes aren’t fading away anytime soon.
All of this has had a ripple effect for other companies that, like Theranos, were trying to make blood drawing and diagnostics easier for consumers. I spoke to five such companies recently about how they have dealt with unwelcome comparisons to Theranos, which has bedeviled the sector ever since Carreyrou’s first piece on the subject. One company I reached out to expressed that it was hesitant to even appear in an article about Theranos.
Even before Theranos imploded, its outsize presence was felt by other companies in the blood testing industry, for better and worse. “In the beginning, when Theranos was on its up slope, people were asking how we were ever going to compete with a company like Theranos when they’ve raised a billion dollars,” said Daniel Levner, co-founder of Sight Diagnostics, a biotech company that sells a device that can conduct a blood count analysis from a finger prick.
Yet when Carreyrou’s pieces began appearing in the Journal, comparisons to Theranos became a curse for its peers. “In pretty much every conversation we had for a year, Theranos would come up,” said John Lewis, founder and CEO of Nanostics, a biotech company that sells a device that can use a very small amount of blood to diagnose and predict diseases. “Most people recognized that Theranos was mostly just bad founders, but it certainly was on everybody’s mind.” Lewis recounts that his company, which had only existed for a year and a half at the time, was in a pitch competition right as the Theranos scandal was coming to light. The very first question they got at the event was how the Nanostics product compared to Theranos’. From there, Nanostics took pains to distinguish itself from Theranos, down to the smallest details. For instance, the company in its promotional materials tried to stay away from Theranos’ famous selling point of diagnosing diseases from a single drop of blood. “Our initial plan was to go out saying that we can detect disease signatures with a single drop of blood, but that was literally just when Theranos was going down for stating that they could do that when they couldn’t,” Lewis recalled. “So in our texts we said, ‘two drops of blood.’ ”
Theranos made big promises about revolutionizing blood drawing by eventually allowing people to test themselves for a host of different conditions with a simple finger prick instead of having to give entire vials of blood. The idea was that people would then get tested more frequently and catch ailments earlier when they’re still treatable. Most of the executives I spoke to said that Theranos’ goal of quickly, conveniently, and cheaply diagnosing people with just one (or a few) drops of blood is a worthwhile goal that’s still worth working toward. “You could accurately characterize it as the holy grail of the diagnostics industry,” said Lewis. “The vast majority of the technologies we need are already discovered—it’s just a matter of combining them in a certain way.” Still, Theranos’ technology was notoriously inconsistent and did not live up to the claims it was making, and the company ended up having to rely on the competitors’ devices to run the actual tests.
Blood testing companies had to, in one way or another, come up with convincing explanations about how they were different from Theranos. “There just got to be this absurd connection between a blood test and fraud,” said Tim Blauwkamp, co-founder and chief scientific officer of Karius, a company that specializes in noninvasive pathogen blood tests. “It was such a visible event, and everybody had made those associations and wanted to double-check that it wasn’t a widespread phenomenon in every blood testing company.”
Some executives stressed that they had spent more time making sure that their technology was actually sound before going to market unlike Theranos, which seems to have been scrambling to get its blood testing to work while at the same time making deals with big investors and pharmacy chains like Walgreens. “We spent the first few years just developing the platform, the science, the technology, and the patents,” said Blander. “[Theranos] started to sell before they had something. We started to sell only after we had a ready product for the market.”
Levner thinks that it was actually easier to explain the difference between his company and Theranos once the specific details of the alleged fraud became more widely known. “The book Bad Blood was definitely the last nail in the coffin. People read the book and got a sense of what at least the book says happened behind the scenes,” he noted. “Once the book was out, it made the conversation very easy for us to say, ‘Look, we’re not that.’ ” For example, he mentioned that his company, Sight Diagnostics, was intent on quickly gaining FDA approval, which Theranos apparently attempted to put off, and has been far more open with sharing its data. Having those details in the book allowed Levner to point out particular bad practices at Theranos and show how Sight was doing things differently.
Nevertheless, some companies did find that investments were harder to come by in the immediate aftermath of Theranos’ collapse. Levner said that prospective financiers asked him, “Why would you succeed when this company that has billions of dollars and an impressive board is failing?” Other executives saw short-term decreases in investment around 2015 as well, though it wasn’t always clear whether it was a direct result of Theranos.
On the other hand, Eric Stone, CEO and co-founder of the needle-free, catheter-based blood drawing company Velano Vascular, ventured that other forces were likely at play. “With investors, there certainly were some folks that became increasingly skittish after the whole ruse unraveled for Theranos,” he said. “But I would argue that even before the Theranos story, the markets were so frothy that it was going to be something else that caused people to step back.” Indeed, Theranos was seen as emblematic of Silicon Valley startups riding often meritless hype to unbelievable valuations.
Nowadays, the Theranos scandal is far enough back in the rearview mirror that unwelcome comparisons don’t come up too much for its competitors. In fact, the whole diagnostics industry is seeing an upsurge in business due to the coronavirus, as more people have come to realize the usefulness of testing. “The pandemic has really brought to the surface the importance of diagnostics in the treatment of specific diseases,” Lewis said. “That’s been a real boon to the industry.”
That doesn’t mean, however, that Theranos didn’t have any lasting impacts on the industry at large. Blauwkamp argues that, had it not been for the company’s chicanery, blood testing innovation may be farther along than it currently is. “The universal skepticism around investing in blood-based diagnostics that the Theranos situation created absolutely delayed and likely even prevented many of those investments in technologies that could reduce the amount of time and improve the accuracy in figuring out health states,” he said. “Those technologies could have been saving lives much sooner than they are today.”