Theranos Quietly Settles Lawsuits With One of Its Biggest Investors

Published: May 03, 2017

Theranos Quietly Settles Lawsuits With One of Its Biggest Investors May 2, 2017
By Alex Keown, BioSpace.com Breaking News Staff

PALO ALTO, Calif. – Theranos has settled two lawsuits brought against it by a hedge fund that invested nearly $100 million into the beleaguered biotech company.

On Monday, Theranos announced it had reached an agreement with Partner Fund Management LP, a hedge fund that invested $96.1 million into the company in 2014. The terms of the agreement were confidential, Theranos said in its statement.

The deal struck between the company and Partner will result in a dismissal of all claims by Partner against Theranos, the company said in its statement. In the lawsuit, Partner claimed that Theranos and its founder and Chief Executive Officer Elizabeth Holmes lied about the performance of its blood-testing equipment in order to raise funds. Allegations made in the lawsuit also said that Holmes and Theranos threatened to file bankruptcy if investors like Partner did not give up their threats to sue and instead invest more money in the beleaguered biotech. According to the now-unsealed court documents, Partner said Theranos designed its bankruptcy threat so that “investment funds would not obtain any recovery in a bankruptcy filing,”

“Theranos is pleased to have resolved both lawsuits with PFM. Although we are confident that we would have prevailed at trial, resolution of these two cases allows our tender offer to go forward and enables us to return our focus where it belongs, which is on executing our business plans and delivering value for our shareholders,” Theranos General Counsel David Taylor, said in a statement.

Theranos has several lawsuits against it, although the company has kept very little in reserve for litigation, according to previous reports. At one time, Theranos was reportedly worth about $9 billion, but according to reports the company is in desperate need of cash. Reports suggest the company has between $150 and $200 million in its bank accounts.

The settlement with Partner marks the third settlement the company has made in the past month. In addition to this lawsuit, Theranos settled claims with the U.S. Centers for Medicare and Medicaid Services, which included a $30,000 fine, and the company also paid out nearly $5 million to the state of Arizona to settle claims brought against it by that state’s attorney general over blood testing services conducted in that state.

Theranos still faces lawsuits from consumers who relied on blood test results generated by company labs that were later voided. Theranos is also facing a massive $140 million lawsuit from Walgreens.

While Theranos is facing the lawsuits against it, the company is trying to stave off future lawsuits from investors through a tender offer made to shareholders who participated in the company’s most recent funding rounds, the last of which was in 2015. The offer is a two-for-one stock deal. Under the agreement, Holmes would give away shares of her own personal holdings in the company. Theranos said as of this week “99 percent of the shares subject to the tender have committed to participate.”

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