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Is Theranos done?

The Silicon Valley upstart wowed the medical world with a whopping $9 billion valuation, a supremely media-savvy CEO and the promise that it could revolutionize health care by using just a few drops of blood to run scores of lab tests at a fraction of the current cost.

But these days, Theranos is sinking deeper and deeper into a quagmire. Regulators keep issuing sharp warnings about its lab practices. Pharmacies keep pulling back from its partnerships. The Wall Street Journal keeps raising questions about its technology.


Does Theranos have a chance to regain the confidence of potential investors, partners, and patients — or is it on an irreversible decline? For clues, keep an eye in the coming months on these five bellwethers:

1. Can it satisfy government regulators?

If Theranos is going to mount a comeback, it’s going to have to start showing progress this week.


Last week, the Centers for Medicare and Medicaid Services sent a sternly worded letter to Theranos ordering it to correct violations of clinical standards in its Newark, Calif., lab, including one that posed “immediate jeopardy to patient health and safety.” Theranos has until Thursday to show it has fixed the problems — or else risk losing certification for its lab.

CMS isn’t the only regulator that’s been prodding Theranos lately: The Food And Drug Administration cited multiple concerns about laboratory operations after an inspection last year. And the FDA has declared the company’s signature “nanotainer,” which collects a tiny amount of blood from a finger prick, an “uncleared medical device.”

Theranos now uses the nanotainer for just one lab test, for herpes virus. Chief executive Elizabeth Holmes has said the company is seeking FDA clearance to use the method for more than 120 other blood tests.

If Theranos can’t satisfy these agencies — and, in particular, earn the FDA’s approval to use the nanotainer — it’s not going to rebound. Another rebuke from federal regulators could be disastrous.

2. Are pharmacies distancing themselves from Theranos?

Theranos set up shop at pharmacies and grocery stores across the country to draw patients’ blood. Now some of these partners are trying to back away from the company as fast as they can.

The Pennsylvania health insurer Capital BlueCross last week asked Theranos to stop drawing blood at its store in the Harrisburg, Pa., area. Also last week, Walgreens temporarily closed Theranos’s testing site in a Palo Alto, Calif., store. The pharmacy chain has suspended plans to expand Theranos testing to its stores nationwide.

And in perhaps the biggest blow, the Safeway supermarket chain is reportedly in negotiations to dissolve its partnership with Theranos, even after investing $350 million to build blood-draw centers in 800 grocery stores.

If Theranos can’t salvage these relationships or bring in new ones, it won’t have much of a future.

3. Does a top hospital’s study validate Theranos’s technology?

The chief executive of the Cleveland Clinic said last fall that his hospital would work with Theranos to verify its technology.

The plan was to compare the results of blood tests conducted with Theranos’s device with those conducted using traditional technology, and to publish the results. But Eileen Sheil, a spokeswoman for the Cleveland Clinic, said that no such studies have begun, and there’s no target date for that to happen.

Intermountain Healthcare, a hospital system based in Utah, also said last fall it was planning a side-by-side comparison of Theranos technology with conventional lab draws. A spokesman told Bloomberg last week that no such testing had been scheduled.

Theranos has been notoriously secretive about its technology. Despite its professed commitment to transparency, it has yet to publish a single journal article on its results.

Working with a respected hospital or academic researchers to get that data out would go a long way to quieting some of the most troubling questions around Theranos. Even if the results are just mediocre, their publication would signal that the company is serious about transparency and committed to research.

4. Does Theranos have enough cash to stay afloat?

The privately held company won’t say how much capital it has raised, but regulatory filings indicate it’s in the neighborhood of $750 million.

That’s a lot of money — but one vignette suggests Theranos might not be spending its cash very efficiently. The company has been outsourcing some of its tests at what appears to be a huge loss to labs at the University of California, San Francisco. The Wall Street Journal has reported that UCSF charges Theranos more than $300 for a particular test, a comprehensive metabolic panel. Theranos charges its patients just $7.19 for that test.

Theranos didn’t respond to questions about how it’s doing financially. Its secrecy on that front probably won’t change in the coming months. But you can bet that investors and analysts are watching for any sign that it’s having financial problems.

5. Are hotshot new hires and board members running for the hills?

Theranos has made some impressive hires recently: A former policy adviser to Hillary Clinton. The associate director of UCLA’s clinical labs. A transplant surgeon at Stanford (though he’s just signed on part-time as a medical consultant).

After criticism that its board consisted mostly of political rock stars with no medical or technical expertise (think former Secretary of State Henry Kissinger, former Secretary of Labor George P. Shultz, and former Senator Sam Nunn), Theranos changed course last fall. The company created a medical advisory board and filled it out with a respected orthopedic trauma surgeon and the chief executive of the Prostate Cancer Foundation.

It’s great that Theranos is bringing on people more familiar with the medical world. The key is whether they stick around. Any departures would be taken as a sign that those with access to the inner circles are giving up on the company.

And what about chief executive Elizabeth Holmes?

The 31-year-old Stanford dropout in the black turtleneck has long been the iconic face of her company, linked to the Theranos brand in a way that few founders are. There’s no evidence to suggest that Holmes is thinking about stepping down or that Theranos’s governing board is considering asking her to. (Theranos didn’t respond to questions about the prospect.)

Still, it’s common for an embattled company to turn to a new leader to right the ship, and Theranos is as embattled as they come. But don’t expect the fate of Theranos to hinge on whether Holmes keeps her corner office. If she stays in the coming months, it could either be a sign that she has things under control — or that she’s going down with her ship.