- Beleaguered blood-testing firm Theranos will close its clinical laboratories in California and Arizona, as well as all of its blood collection centers at Walgreens, in a major step back from founder Elizabeth Holmes' vision of transforming the diagnostic industry.
- The move, announced by Holmes in an open letter posted Wednesday evening, will involve layoffs for 340 employees in California, Arizona and Pennsylvania — approximately 40% of the company's workforce, according to The Wall Street Journal.
- Holmes said Theranos would instead focus its efforts on development of its miniLab platform, a new printer-sized device unveiled this past August which the company claims can process blood samples across a number of different testing methods.
Holmes decision to walk away from the laboratory testing business caps a year-long fall from grace for the once-heralded Silicon Valley unicorn.
Questions into the accuracy of Theranos' proprietary finger-prick technology, first raised publicly by The Wall Street Journal last fall, spiraled into federal investigations, major recalls and widespread criticism.
In July, the Centers for Medicare and Medicaid Services banned Holmes from the blood-testing business for two years and stripped Theranos' Newark, CA facility of a critical certification. The severe penalties stemmed from serious deficiencies in the company's testing processes, which were uncovered in a CMS inspection last fall.
Theranos has appealed both Holmes' ban and other related sanctions, which were originally set to take effect on September 5. It is not clear what effect the decision to shut down its blood testing business (as it currently stands) would have on either the appeal or the CMS penalties.
When the sanctions were first handed down, Theranos made a point of noting its R&D unit had developed "many technologies that are not dependent on running a clinical laboratory." The miniLab device, Theranos' new focus, would appear to be the most advanced of those efforts.
"Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care," Holmes said in her letter announcing the closures and layoffs.
"We have a new executive team leading our work toward obtaining FDA clearances, building commercial partnerships, and pursuing publications in scientific journals," the Theranos founder said.
The miniLab platform is designed to be used in a decentralized setting rather than a clinical laboratory, which could help Theranos and Holmes avoid the full impact of the CMS decision, if enacted. But the company does not currently have approval from the Food and Drug Administration for either the device or any individual test which would run on the machine.
Theranos did submit data for a Zika virus test to be run on the miniLab after the August unveiling. But the company was forced to subsequently withdraw its application after FDA inspectors discovered the company had neglected to fully follow patient-safety protocols for data collection, according to a report from The Wall Street Journal.
Holmes built Theranos on the promise of revolutionizing blood-testing, claiming hundreds of tests could be run on just a finger-prick of blood rather than through an intravenous draw. Wednesday's decision to pull back from clinical testing seems to be a marked retreat from that lofty goal.