Nancy Crotti

May 3, 2017

3 Min Read
Has Theranos Seen the Light at the End of its Tunnel?

The blood-testing company continues to chip away at heaps of litigation while focusing its business efforts on developing and selling lab equipment.

Nancy Crotti

Theranos said it will use the money it would have spent fighting the PFM lawsuits on trying to bring its miniLab to market.

Theranos has settled two lawsuits brought by a major investor, according to the company.

Partner Fund Management (PFM), a San Francisco-based hedge fund, invested $96.1 million in Theranos in 2014. The embattled blood-testing company announced the settlement this week. The amount was not disclosed. PFM declined comment on the settlement, but the firm had previously accused Theranos of using a "series of lies" to attract investments.

The settlement represents the latest effort to resolve Theranos' legal problems. The company is also trying to head them off. Theranos is offering to give its most recent investors shares of company stock held by CEO Elizabeth Holmes in exchange for agreeing not to sue it, according to a report in the Wall Street Journal. Holmes owes the company $25 million, the newspaper also reported.

Theranos CEO Elizabeth Holmes owes the company $25 million, according to recent news reports.

"Theranos is pleased to have resolved both lawsuits with PFM," Theranos General Counsel David Taylor said in the settlement announcement. "Although we are confident that we would have prevailed at trial, resolution of these two cases allows our tender offer to go forward and enables us to return our focus where it belongs, which is on executing our business plans and delivering value for our shareholders."

Theranos said it will direct the money it would have used to fight these lawsuits to its efforts to bring its miniLab to market. Holmes has described the tabletop blood-testing device as a miniaturized, automated laboratory capable of performing small-sample tests. Theranos is seeking FDA approval for miniLab, which it apparently would sell to laboratories rather than performing blood tests itself.

In a recent settlement with the Centers for Medicare and Medicaid Services, the company agreed to a civil penalty of $30,000 and pledged not to own or operate a clinical lab for two years, according to a company statement. CMS revoked Theranos' CLIA certificates in July 2016 and fined the company $10,000 a day for each day its Newark, CA-based lab was out of compliance.

Theranos also recently agreed to pay $4.65 million to the state of Arizona to refund residents of that state who had purchased Theranos blood tests. The company sold about 1.5 million such tests to more than 175,000 Arizona residents between 2013 and 2016, according to a statement by the state attorney general's office. Theranos has admitted to voiding or correcting 10% of those tests.

The company cut 155 jobs in January, which is in addition to the 340 workers who lost their jobs in October when it shut down its clinical labs and wellness centers. That left Theranos with a team of 220, quite a drop from the 790 full-time employees on its payroll last August.

Nancy Crotti is a contributor to Qmed.

[Image credit: Theranos]

About the Author(s)

Nancy Crotti

Nancy Crotti is a frequent contributor to MD+DI. Reach her at [email protected].

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