That thud you just heard was the reputation of Theranos founder Elizabeth Holmes finally hitting the sidewalk after a year-long fall from its lofty perch.
In a sweeping condemnation of Theranos, the U.S. Centers for Medicare & Medicaid Services issued a list of sanctions against the blood testing company. These include barring Holmes from owning or working with a medical lab for two years.
The decision comes after a lengthy investigation, which followed reports in the Wall Street Journal that Theranos’ much-hyped blood testing technology was deeply flawed. While the company says it is committed to restarting its blood testing program, the sanctions raise the question of whether Theranos has the resources or the support of enough investors to continue on.
“We accept full responsibility for the issues at our laboratory in Newark, California, and have already worked to undertake comprehensive remedial actions,” Holmes said in a statement. “While we are disappointed by CMS’ decision, we take these matters very seriously and are committed to fully resolving all outstanding issues with CMS and to demonstrating our dedication to the highest standards of quality and compliance.”
Holmes noted in her statement that fixing the problem would require Theranos to rebuild “the Newark lab from the ground up, rebuilding quality systems, adding highly experienced leadership, personnel and experts, and implementing enhanced quality and training procedures.”
In other words, stuff that costs a lotta, lotta money.
Since its founding in 2003, the company has reportedly raised eight rounds of financing for a total of $686.3 million. At one point, that put Theranos’ valuation at over $9 billion. However, it’s unclear how much money Theranos has in the bank, and the company has lost many of its highest-profile partnerships during the ensuing controversy.
Turning things around is going to be made all the more difficult by the severity of the sanctions. In addition to the Holmes ban, these include limits on the company’s work in the area of blood testing, a “plan of correction” (though details of that were not disclosed), and a ban on all payments from Medicare and Medicaid.
Oh, the company is also going to be hit with a “civil money penalty,” though the amount was not disclosed.
Whether this turns out to be the final chapter of the story or not, Theranos’ rise and fall will linger on as one of Silicon Valley’s most epic cautionary tales.
Holmes, who founded the company at the age of 19, became a rock star of entrepreneurship as Theranos’ valuation rose and investors backed her seemingly revolutionary blood testing method. As her story and the company’s testing credibility unravelled over the past year, Theranos and Holmes fought back bitterly against critics and waged their own media campaign to salvage their respective reputations.
But in the end, the evidence and conclusions of federal regulators apparently proved to be overwhelming. And rather than laudatory magazine profiles, Theranos and Holmes have become punch lines, such as in a recent episode of HBO’s “Silicon Valley,” when a character retorts:
“Our platform does exactly what it says it does. It’s not like we’re fucking lying, like Theranos.”