UPDATED: Theranos Slashes 100 Employees, Possible Shut Down in July
Storm-tossed Theranos continues to get battered from the continued fallout from the myriad of self-inflicted problems it has faced over the past few years. Now the company has reportedly laid off an additional 100 employees as it strives to avoid shutting down from bankruptcy.
In a letter to investors Holmes said the company is facing the possibility of shutting its doors by July due to its continued failure to develop its portable mini lab that can test for the Zika virus. Although Holmes attempted to put a positive spin on the development of the product, she told investors “we continue to face issues with the reliability of the Zika assay chemistry itself.” That means, she added, that the hoped-for timeline to seek regulatory approval of the device is in question.
Holmes and Theranos need to have an approved product to market in order to secure a second tranche of $10 million from a debt financing agreement struck last year. Even with the layoffs implemented on Wednesday, Holmes said current projections show the company’s cash reserves will fall below a $3 million threshold established by Fortress Investment Group, the financiers who provided the company with up to $100 million in December contingent on approval of the Zika test. If the company falls below that threshold, Fortress can take full control of Theranos, Holmes said in the letter.
In her letter Holmes pled for an infusion of financing from one or more of the investors to stave off a shut down.
“Of course, even with new capital, the future of the company would remain highly uncertain. Nevertheless, additional investment may come with some meaningful benefits. A further investment could help protect your current one by providing the company time to continue developing the miniLab and/or to monetize its patent portfolio,” Holmes wrote in the letter, which was published in full on BuzzFeed.
The layoffs and news of the company’s dire financial concerns came weeks after company founder Elizabeth Holmes settled charges of investor fraud by the U.S. Securities and Exchange Commission. The termination of the 100 block of employees brings Theranos down to less than 25 employees. At one time it employed nearly 800 people. The latest round of layoffs were first reported by The Wall Street Journal, the company that led the investigations into Theranos’ now maligned blood testing technology. In its report the Journal called the layoffs a “last-ditch effort” to save as much cash as possible.
The company has so far remained silent on the layoffs, but according to reports Holmes made the announcement during an all-hands-on meeting this morning at the company’s headquarters.
Since coming under intense scrutiny that revealed the problems plaguing its blood-testing technology as well as shoddy conditions within its clinical laboratories, Theranos has gone through several rounds of layoffs. Last year the company cut about 40 percent of its staff, which closely followed an October 2016 round of layoffs that cost the jobs of 340 people as the company shut down its clinical labs and wellness centers following a two-year ban from operating a clinical laboratory.
In March Holmes agreed to pay a fine of $500,000 to the SEC following allegations that she made false and misleading statements during investor presentations and product demonstrations that helped the company raise more than $700 million from Silicon Valley investors. Additionally, Holmes will also return approximately 18.9 million shares of stock and relinquish her super-voting equity rights. As part of the deal Holmes will also be barred from serving as a director or officer of a public company for 10 years, the SEC said.
While Theranos has become a cautionary tale in the biotech community, the company still has hopes of securing regulatory approval for its portable mini-lab product. In December the company, which was once valued at nearly $9 billion, announced it had secured $100 million in debt financing from Fortress Investment Group. The move was supposed to help keep the company afloat through the rest of the year as it sought approval for the mini-lab. After the company’s blood-testing device was ridiculed for not working as promised, the company pivoted its business focus to a miniaturized portable laboratory. The lab is expected to be able to run a multitude of diagnostic tests, including detection of the Zika virus.