Theranos will fire 340 employees – about 40 percent of its workforce – in California, Arizona and Texas, as well as shuttering all its clinical labs and Theranos Wellness centers, the company said in a statement today. The troubled start-up appears to be moving back to doing more research and development.
Theranos will fire about 40 percent of its workers The development comes after a decision by regulators that Theranos chief executive officer Elizabeth Holmes will be banned from operating laboratories for two years. The sanctions were imposed by Centers for Medicare and Medicaid Services (CMS), which is responsible for supervising labs. With all its labs closed, Theranos may no longer be under CMS’s purview. The company declined to comment on whether CMS would continue to oversee its work.
The startup was once a poster-child for Silicon Valley, with Holmes gracing the covers of many publications, including Inc, Forbes, Fortune, and The New York Times’ T Magazine. It earned a $9 billion valuation, largely on the strength of a pin-prick test that used its proprietary technology to draw small amounts of blood from a fingerstick, rather than using a large needle to draw from the vein. Only one of its tests was approved by the US FDA – the rest were sold through a regulatory loophole – but it was able to sell its products at 40 Walgreens stores.
Then came a series of reports appearing in The Wall Street Journal, which claimed a year ago that Theranos wasn’t using its proprietary technology for most of its tests. Another report suggested the company’s proprietary technology was unreliable, and was hidden from regulators who visited Theranos facilities. The Verge‘s own reporting showed that no federal regulators – either from CMS or the US Food and Drug Administration – reviewed the company’s proprietary technology for almost two years. A study conducted by independent researchers in March found that Theranos’ results were more unreliable than those of conventional tests. In July, regulators sanctioned Holmes and invalidated years of test results. (The company is appealing the decision.) People who used the company to get blood test results are now suing, and the company is also being probed by federal prosecutors.
The company will develop its miniLab deviceThe company employed 790 people as of August 1st. The remaining employees will be focused on “obtaining FDA clearances, building commercial partnerships, and pursuing publications in scientific journals,” Holmes wrote. The company will also develop the blood-testing device it showed off at the American Association for Clinical Chemistry, called the “miniLab,” which is the size of a computer printer. According to Holmes’ presentation, the miniLab can run up to 40 tests, including one for Zika. That claim was challenged by The Wall Street Journal, which said so many tests could not be run on the same blood; patients would need to provide at least three samples. The company later withdrew its request for approval for its Zika blood test, after the FDA discovered Theranos began testing its diagnostic without the necessary protections required for human research subjects, The Wall Street Journal reported.
“We are fortunate to have supporters and investors who believe deeply in our mission of affordable, less invasive lab testing, and to have the runway to realize our vision,” Holmes said in the company statement.