This Could be The Reason Elizabeth Holmes is Still Leading Theranos

Published: Nov 23, 2016

This Could be The Reason Elizabeth Holmes is Still Leading Theranos November 21, 2016
By Alex Keown, Breaking News Staff

PALO ALTO, Calif. – Theranos has failed to turn its dream of a blood-testing and miniaturized laboratory technology into any kind of commercial or regulatory success and the company is facing a myriad of lawsuits—bad news that has dropped its estimated value of $9 billion to a few hundred million at best.

So why is founder and chief executive officer Elizabeth Holmes still at the helm of the company? Other biotech companies that have gone through half of Theranos’ trouble have brought in new leadership in an attempt to right the proverbial ship. Look no further the embattled Valeant Pharmaceuticals . The company’s stock lost nearly 80 percent of its value after being rocked by questions over pricing as well as accounting concerns from its relationship with specialty pharmacy company Philidor Rx. The board of directors at Valeant, along with major shareholders, stepped in and removed CEO J. Michael Pearson.

So why is Holmes still around? This was a question raised this morning by the San Francisco Business Chronicle and the answer may be at the board level. Holmes famously surrounded her company with board members who were long on political connections, but short on scientific backgrounds. It’s been “long speculated” that had Holmes sought out a more traditional board, she would have already been removed from her leadership position and replaced by someone who could have turned the company around.

Instead, Holmes remains in charge and publicly the company acts as if the negative press and lawsuits are nuisance problems, rather than indicative of greater concerns.

Theranos is facing multiple lawsuits, including a $140 million lawsuit filed by former partner Walgreens and another filed by a Bay Area hedge fund that alleged the biotech company duped investors about the efficacy of its products in order to attract investments of nearly $100 million. Theranos is also the subject of a criminal investigation by the U.S. Department of Justice centering on whether Theranos and its executives misled investors about the efficacy of its blood-testing products.

The Times pointed out that Holmes has not really taken responsibility for Theranos’ problems. Earlier this year when one of its blood-testing laboratories (now shut down, along with the other clinical labs) was under such scrutiny, Holmes said the problem was leadership at the lab. However, the Times noted that Holmes had a hand in hiring company employees—the same ones she later dismissed as not being right for the roles they were placed in. Since that time, Theranos has pivoted the focus of its business from its blood-testing technology to the development of a portable lab dubbed Edison, which is touted to be able to run a multitude of tests using miniaturized laboratory robotics.

While there are questions over the role of the Theranos board, it’s also keen to note that the grandson of one former board member, now serving in a different advisory role, was the whistleblower who alerted media to concerns over the failings of company technology. The whistleblower, Thomas Schultz, of former U.S. Secretary of State George Schultz, who has served as a director of the company for years, attempted to go through proper company channels regarding his concerns, but was rebuffed, according to a report in the Wall Street Journal.

While there may be trouble in the Schultz household, the Times noted that one of Theranos’ politically connected board members, retired four-star Marine General James "Mad Dog" Mattis, is being considered as a candidate for Secretary of Defense by President-elect Donald Trump. If that’s the case, Theranos may have some life left in it yet.

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