Embattled Theranos to Shut Down All Labs and Testing Centers, Cuts About 40% of Workforce

Embattled Theranos to Shut Down All Labs and Testing Centers, Cuts About 40% of Workforce October 6, 2016
By Alex Keown, BioSpace.com Breaking News Staff

PALO ALTO, Calif. – Facing a two-year ban on operating a clinical laboratory and after a year of intense scrutiny over the efficacy of its blood-testing products, embattled Theranos is shuttering its clinical labs and wellness centers, which will result in about 340 layoffs, about 40 percent of its workforce, the company announced late Wednesday.

In an open letter published on the website and signed by company founder Elizabeth Holmes, she said after carefully examining Theranos’ successes and failures, the company will now focus its “undivided attention” on development of the portable miniature laboratories the company unveiled earlier in the summer at the American Association for Clinical Chemistry. During her Aug. 1 presentation before that organization, Holmes said the minilab was designed to process small sample volumes across a broad set of different test methodologies. The lab is small enough that it could be maintained in many doctor’s offices, individual homes, or in areas that are critically short of lab facilities. Holmes hopes to see regulatory approval in a few years.

“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,” Holmes said in the online post.

Holmes’ public letter was the public acknowledgement of what had been realized by many onlookers for months as the company faced massive amounts of criticism regarding its blood-testing product Holmes believes would revolutionize healthcare, as well as its and business practices.

The employees facing pink slips are in Arizona, California and Pennsylvania, Theranos said. There was no word on when the cuts will begin and over how long a period.

Holmes said the company has a new executive team leading the work to obtain the eventual clearance from the U.S. Food and Drug Administration (FDA)—an organization the company has had a rocky relationship with. Most recently with a possible Zika virus test, the company was forced to withdraw its request for emergency clearance of the test after inspectors with the U.S. FDA found the company did not include proper patient protections in its study.

She also said the team is looking at developing commercial partnerships with other companies, although none were named, as well as “pursuing publications in scientific journals,” something the highly secretive company has not embraced in its history. The company has been well known for not allowing peer-reviews of its technology. Publishing in scientific journals would now open the company up to greater scrutiny, something that Theranos has not sought in its history. A recent Vanity Fair article highlighted the secrecy and compartmentalization at the company, including reports of the company’s earliest days when Holmes accepted financing, but with the conditions that she would not divulge to investors how her technology works.

The past year has been rough for the company that was once the darling of Silicon Valley investors and worth, at its height, approximately $9 billion. Since late summer of 2015, Theranos has been under siege as more and more questions arose about the efficacy of its blood-testing technology. Those questions ultimately led the U.S. Center for Medicare and Medicaid to investigate the company’s Newark, Calif. blood testing laboratory where investigators found egregious practices. The company has faced increasing scrutiny over its product efficacy as well as compliance issues at its California laboratory. Issues at the lab lead the company to void two years’ worth of data sent to customers. The voiding of data caused Walgreens to sever ties with Theranos and shutter the Theranos testing sites in the 40 Walgreens locations across Arizona. That was a big blow to the company as those testing sites were the company’s biggest source of revenue.

Additionally, the company is facing several lawsuits, some related to the voided data sent to customers and one related to whether or not the company misled investors as to the efficacy of its blood-testing product.

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