Tough Times for Biotech Firm Theranos

     SAN JOSE (CN) — Hard times have come to Silicon Valley biotech company Theranos. Forbes magazine is reducing its founder’s estimated net worth from $4.5 billion to nothing, and the company faces two class actions about its blood-testing devices.
The consumer class actions, filed May 25 and 26 by attorneys with McCune Wright, and Hagens Berman Sobol Shapiro, claim the company misled customers about the accuracy of its “revolutionary” handheld blood testing devices and its compliance with federal regulations.
Lead plaintiff M.P.B. and McCune Wright beat lead plaintiff Casey Jones and Hagens Berman to the same federal court by a day.
“Theranos was focused more on press and market value than the health of its customers, and it achieved the opposite of its mission: it obfuscated its actions and tests to where no reasonable consumer can rely on the results provided or make health care decisions based on them,” Casey claims.
Theranos spokesperson Brooke Buchanan said the lawsuits are “without merit.”
In its June 21 issue, already posted on the Internet, Forbes magazine said Theranos’ founder and CEO Elizabeth Holmes topped its list of America’s Richest Self-Made Women last year with an estimated net worth of $4.5 billion, but “Forbes is lowering our estimate of her net worth to nothing.”
Forbes said its estimate is “based entirely on her 50 percent stake in Theranos, the blood-testing company she founded in 2003 with plans of revolutionizing the diagnostic test market.” Theranos shares are not publicly traded; investors bought stakes in it in 2014 “at a price that implied a $9 billion valuation for the company,” Forbes reported.
Theranos sold its Edison handheld blood-testing gadgets as a quicker, less invasive way to perform more than 200 tests on a few drops of blood pricked from a finger.
But on May 19, the company voided all results from blood tests performed on its Edison machines, several months after it received a warning letter from the Centers for Medicare and Medicaid Services threatening to impose sanctions for lab deficiencies, according to M.P.B.’s complaint.
“At the very time that Theranos was advertising compliance with federal regulations, it had been repeatedly sanctioned by federal authorities,” M.P.B. claimed.
Theranos began partnering with Walgreens in 2013, offering its blood testing services to customers at pharmacies in Arizona and California. But Theranos never received FDA approval to conduct blood tests outside of a laboratory setting, so it had to ship blood vials to a lab in Newark, Calif., for analysis, according to the complaint.
Although the FDA lacks authority to regulate blood testing developed through proprietary methods, it has the power to regulate medical devices, such as the company’s nanotainers containing blood samples, that are shipped across state lines.
The company did not have FDA approval to conduct the 205 blood tests it offered to Walgreens customers, so under pressure from the FDA, the company in October last year stopped collecting blood samples for all but one test, herpes simplex HSV-1, for which it obtained approval in July 2015, according to the complaint.
FDA inspection reports released in October 2015 found problems with how the company handled customer complaints, monitored the quality of its blood tests and vetted suppliers.
Plaintiffs in both lawsuits seek class certification, restitution, an injunction and damages for false advertising, breach of contract, fraud, unfair business and unjust enrichment.
According to M.P.B.’s complaint, Theranos has conducted 6.1 million diagnostic tests since 2013, and that “tens of thousands of patients may have been given incorrect blood-test results, been subject to unnecessary or potentially harmful treatments, and/or been denied the opportunity to seek treatment for a treatable condition.”

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