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Elizabeth Holmes dropped out of Stanford in 2003, at age nineteen, with a chemical-engineering credit-hour total in single digits and an idea for a wearable patch that would dose drugs by reading the blood beneath it. She used the education trust her parents had set aside and incorporated a Palo Alto company called Real-Time Cures. She renamed it Theranos — therapy plus diagnosis — after deciding that consumers were skeptical of the word "cure." Her Stanford chemical-engineering professor Channing Robertson became her first technical advisor and joined her board.
By December 2004 she had raised six million dollars at a thirty-million valuation. By 2010 the company held forty-five million more on a billion-dollar valuation. The product, by then, had a name: the Edison. Theranos said it could run hundreds of clinical tests on a single fingertip drop of blood, in a black box about the size of a desktop printer. The company refused, throughout its life, to publish its methods in any peer-reviewed journal.
In July 2011 Holmes was introduced to former U.S. Secretary of State George Shultz. After a two-hour meeting Shultz joined her board, and over the next three years he recruited what one trade journal called "the most illustrious board in U.S. corporate history." Henry Kissinger. Former Defense Secretary William Perry. Former Senator Sam Nunn. Former Senator and heart-transplant surgeon Bill Frist. Retired Admiral Gary Roughead. The future Defense Secretary James Mattis. Almost none of them had any expertise in clinical chemistry.
The money flowed in behind the names. The Walton family put in $150 million. Rupert Murdoch put in $121 million. Betsy DeVos put in $100 million. The Cox family of Cox Media put in another $100 million. Larry Ellison invested. Bain reported total raises above $700 million. By 2014, Forbes valued the company at $9 billion and Holmes herself, on paper, at $4.5 billion — the youngest self-made female billionaire on the list.
The commercial deployment was just as aggressive. In 2012 Safeway committed $350 million to retrofit 800 stores with Theranos clinics. In 2013 Walgreens began rolling out Theranos blood-draw "wellness centers," eventually opening more than forty. In March 2015 the Cleveland Clinic announced a partnership. In July 2015 the FDA cleared the Theranos finger-stick herpes test for use outside a clinical lab.
The product, behind the curtain, did not work. Inside the Newark, California lab, the Edison machines could only run a small handful of assays — and the rest of the menu Theranos was billing for was being secretly run on third-party Siemens analyzers, with the small finger-stick samples diluted to make them fit conventional machines. Dilution killed accuracy. The company would later void about two years of Edison results.
Three external voices broke through. In February 2015, Stanford epidemiologist John Ioannidis published a piece in the Journal of the American Medical Association noting that Theranos had no peer-reviewed publications. In May, University of Toronto biochemist Eleftherios Diamandis published a critique of the company's claims. And on October 15, 2015, John Carreyrou of the Wall Street Journal published "Hot Startup Theranos Has Struggled With Its Blood-Test Technology." Carreyrou's most important source was a 24-year-old former Theranos employee named Tyler Shultz — grandson of the board member George Shultz — who had spent months trying to raise concerns inside the company, and had finally reported it to the New York State Department of Health under an alias.
Theranos's response was to send lawyers after Tyler Shultz and other sources. The Theranos chief scientist Ian Gibbons had died by suicide in 2013, the night before he was scheduled to give a deposition in an unrelated patent case.
Then the regulators arrived. In January 2016, the Centers for Medicare and Medicaid Services wrote that the Newark lab posed "immediate jeopardy to patient health and safety," citing in particular failed tests for the dose of the blood-thinner warfarin. Walgreens suspended Theranos work that month. CMS revoked the Newark CLIA certificate in July 2016 and barred Holmes and Balwani from owning a clinical lab for two years. In May 2016, Theranos quietly voided two years of Edison results. In June 2016 Walgreens terminated the partnership and sued. In June 2016, Forbes revised its estimate of Holmes's net worth from $4.5 billion to zero.
The criminal case opened on March 14, 2018, when the SEC filed civil fraud charges. On June 15, 2018, federal prosecutors in the Northern District of California indicted Holmes and her former boyfriend and company president Sunny Balwani on two counts of conspiracy and nine counts of wire fraud. The case, before Judge Lucy Koh, was scheduled for August 2020 and pushed back repeatedly through the pandemic.
The company itself dissolved on September 4, 2018, after a SoftBank-backed lender named Fortress Investment Group called in a $100 million loan secured by the Theranos patent portfolio. Carreyrou later calculated that named American business and political figures had collectively lost more than $600 million.
Holmes's trial began in San Jose on August 31, 2021, severed from Balwani's. On January 3, 2022, the jury convicted her on four counts — three of wire fraud against investors and one of conspiracy. She was sentenced in November 2022 to 11 years and 3 months. She reported to Federal Prison Camp, Bryan, in Bryan, Texas, on May 30, 2023. Balwani went to trial alone in March 2022 and was convicted on all twelve counts in July 2022. He was sentenced in December 2022 to 12 years and 11 months in prison and three years of probation.