Theranos faces cash shortfalls after failing second major lab test
Following a failed lab inspection and an effort to rebrand itself, Theranos has ended 2016 with only $200 million in cash reserves, The Wall Street Journal reported.
The failed lab inspection carried out in Theranos’ Arizona facility revealed that the company was not adhering to its own medical standards. In mid-February, MarketWatch reported that the company has made “no maternal revenue for 2 years.” To top that off, Theranos is currently facing multiple lawsuits from several investors, including Walgreens.
In response to the allegations, a press release published on Oct. 11, 2016 claimed that the lawsuits filed by the company’s investors lacked solid ground.
“The suit is without merit, the assertions are baseless, and the plaintiff is engaging in revisionist history,” the press release states. “Most of the company statements the plaintiff has cited in its suit were made after the plaintiff invested, and could not possibly have been the original basis for investment. This wholesale reliance on post-investment statements, therefore, negates the claim that the plaintiff was misled.”
The multiple lawsuits pose a risk to Theranos’ future. The company has spent most of the $1 billion that it raised from investors and there is no money set aside for liabilities that may arise from the lawsuits, MarketWatch reported.
The company’s problems date back to the failed inspection that was carried out in Theranos’ Arizona facility, which has since shut down. According to the documents that have been acquired and released by The Wall Street Journal, the company has made severe errors in creating clear training standards, following instructions for using the blood testing equipment and notifying customers if an error was discovered.
For example, the document goes into detail about the disparity between the written policies and procedures that are actually carried out. There were no written guidelines for assessing employees, although an employee interviewed by the inspectors said that unwritten procedures were in place.
The deeper issues lied in how the employees were carrying out blood tests. The root of the failed inspection lies in the fact that Theranos employees were taking small blood samples that brought back false results. The documents show that when using lab equipment, employees would follow third-party guidelines that were different from the manufacturer’s instructions. These third-party guidelines were followed when calibrating equipment or testing its accuracy. This means that even larger blood samples were doomed for inaccuracy.
“The laboratory director failed to ensure that chemistry verification procedures used were adequate to determine the precision of the methods used. For chemistry tests, the laboratory failed to demonstrate it can obtain precision performance specifications comparable to those established by the manufacturer,” the document states.
The inspection documents show that one of the employees claimed that the workers would call customers to inform them about results that were off by more than 20 percent of the actual result, though the inspectors found no formal documentation to prove that claim.
Despite these results, Theranos is fighting hard to stay afloat in the biomedical industry. The company has hired several new engineering experts, executives and other professionals. While it does not solve all of the company’s issues, it is a clear sign that Theranos is trying to move past its issues.
Among the most notable of its recent hires, Theranos found experts to complete its Technology Advisory Board.
“The eight-member TAB has had full access to Theranos’ proprietary technologies, associated data and team members. The board will work alongside Theranos’ leadership and internal research and development teams in various areas, including advising the company on peer-reviewed publication submissions and on presentations at scientific meetings,” a press release published on Jan. 17 explains.
There are five tasks that the TAB will be responsible for. This includes reviewing specific product initiatives, cooperating with specific technology and product development teams, promoting Theranos’ products in peer-reviewed journals and presentations, analyzing target audiences and proposing and assessing new technologies.
On the flip side, when the company shut down its facilities in Arizona, California and Pennsylvania, 340 workers were “impacted,” Theranos CEO Elizabeth Holmes said in an open letter published on Oct. 5, 2016.
In order to recover from the crisis, Theranos has to concentrate on raising more funds to mitigate the impact of possible liabilities. More important than that, the company has to find new sources of revenue. In her open letter, Holmes explained that the new brain power will be used to drive new technology.
“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,” the open letter states. “We have a new executive team leading our work toward obtaining FDA clearances, building commercial partnerships, and pursuing publications in scientific journals.”