Why Theranos Could Burn Through All Its Cash by the End of This Year

July 5, 2017
By Alex Keown, BioSpace.com Breaking News Staff

PALO ALTO, Calif. – Could beleaguered Theranos be close to running out of money?

Some analysts predict the company will have exhausted its bank accounts by the end of 2017 due to nearly $10 million in monthly legal fees. At the end of June, the Wall Street Journal estimated Theranos had about $54 million in remaining cash. If the $10 million estimate is correct when added to everyday operating costs, Theranos could run out of money by the beginning of this year’s holiday season.

Writing in Forbes, Peter Cohan noted an unnamed individual close to the company said the monthly burn rate first reported in the Journal is not accurate, but did not provide any specifics to counter the claim. While the company is not commenting on how much funding is left, there is now rampant speculation of what could happen to the company founded by Elizabeth Holmes. Over the past few years the Theranos name has been devalued due to numerous problems with its blood-testing technology, clinical laboratory concerns, veil of secrecy and the numerous lawsuits filed against it.

At one time Theranos was estimated to be worth about $9 billion. However, after reports questioned the validity of its technology and the other aforementioned troubles, the value of Theranos has plunged. It is possible Holmes could look to salvage some of her vision by seeking out new investors or possibly selling company assets. Citing Michael A. Greeley, cofounder and partner of Boston's Flare Capital Partners, Cohan said the intellectual property belonging to Theranos, including the new miniature portable laboratory the company is attempting to develop, has been “discredited.” The company has no real revenue drivers, particularly after it was forced to shut down its clinical lab operations and has been in the process of settling as many legal woes as possible.

Several lawsuit settlements, including one with Walgreens, have been settled for amounts that are significantly less than what was originally sought. In Walgreen’s case, the drugstore company settled a $140 million lawsuit for $30 million. Greeley suggested Walgreen’s settled for the much smaller amount because the company “saw nothing of value” in Theranos’ intellectual property. The company also settled lawsuits brought against it by a hedge fund that invested nearly $100 million into the beleaguered biotech company. The terms of the agreement were confidential. The company also agreed to pay $4.8 million to settle consumer fraud claims filed by the Arizona Attorney General’s office.

One area where Theranos could make some money, according to Greeley, is with its patient list. Greeley, Cohan writes, calls this “blocking patients.” Greeley said Theranos, which has been operating for about 14 years, could look to sell its patient information to another company, such as Boston-based Seventh Sense Biosystems. In February, the U.S. Food and Drug Administration (FDA) gave regulatory approval for that company’s blood collection device, a push-button platform called TAP (Touch Activated Phlebotomy). The technology is similar to what Theranos developed before it ran into its clinical testing problems.

What happens to Theranos remains to be seen. Time will tell, but unless Theranos secures new funding sources, time is quickly running out.