April 20, 2016
By Alex Keown, BioSpace.com Breaking News Staff
PALO ALTO, Calif. – Elizabeth Holmes, the chief executive officer of embattled Theranos who could lose her ability to run a blood-testing company for two years, has a champion in company board member David Boies, who defended her ability to run the company, Bloomberg reported.
Boies, an attorney, told Bloomberg that despite the pressures of criminal and civil investigations into the company, is not feeling pressure from investors to make changes at the executive level. He also defended Holmes, saying she is “clearly equipped to be CEO of the company, and I think she has demonstrated that not only through her scientific bones, but management skills,” Bloomberg reported. Boies said the private investors of the company that has been valued at $9 billion are sticking by Holmes, the youngest self-made female billionaire in the United States. He told Bloomberg that investors in Theranos, both recent and long-term, “have faith in Elizabeth and the company’s intellectual property.”
For more than six months Theranos has faced criticism over its blood-testing device, with questions as to its efficacy. The company has also faced scathing criticism over one of its labs in Newark, Calif. –so much criticism that federal regulators have suggested they may shut down the facility. Holmes could get a possible federally-mandated two-year suspension from the blood testing industry over failures to address deficiencies at lab facilities in California. Not only could Holmes face suspension, but the company could also face crippling sanctions, including the shuttering of its heavily criticized Newark, Calif.-based lab, as well as suspension of its eligibility to receive payments under Medicare. The possible suspension, which could also include company president Sunny Balwani, stems from an investigation into the company’s Newark, Calif. laboratory by the Centers for Medicare and Medicaid Services.
Earlier this week, Theranos revealed now the U.S. Department of Justice has launched a criminal investigation into the company. The investigations center on whether or not Theranos and its executives misled investors as to the efficacy of its blood-testing products. Walgreens, Theranos’ biggest client, has been subpoenaed by the government to provide information as to how Theranos described its technology. While investigations are ongoing, it is important to note that there are no formal charges that have been made and charges may never come from the authorities.
Earlier this year, Theranos took another hit to its reputation after a scathing government report shows Theranos’ Edison blood testing devices has failed to meet the company’s own standards. The U.S. Centers for Medicare and Medicaid Services released a 121-page report of its findings following a series of inspections at Theranos’ Newark, Calif. lab and the news for the company valued at $9 billion based on its proprietary blood-testing is not good. The CMMS report showed 29 percent of quality control checks performed on Theranos’ Edison devices in October 2014 “produced results outside the range considered acceptable by Theranos,” the Journal reported. A February 2015 test using the Edison device to measure testosterone levels failed quality control checks 87 percent of the time. The CMMS report shows several months-long stretches of quality control issues when it comes to the Edison device.
These questions about Theranos’ technology, have sparked concerns that Walgreens could sever its relationship with the company. More than 40 Walgreens stores in Arizona offer Theranos blood tests. The tests conducted through those stores are the biggest source of the company’s revenue.
