Ranica Arrowsmith, Associate Editor02.03.16
By the time Elizabeth Holmes gave her TEDMED talk in September 2014, interest in her company had been building for months. She is the CEO of Theranos, a company that a couple of years ago was heralded as revolutionary, on the brink of upending the business of blood testing as we know it. Holmes described a blood testing procedure that used only a few drops of blood from a finger puncture to diagnose dozens of conditions ranging from high cholesterol to cancer.
Holmes quickly became a media darling. It’s a familiar tale: genius college dropout turned tech mogul (before leaving Stanford, she studied chemical engineering). It didn’t hurt that she was young (Holmes founded Theranos in 2003 when she was 19 years old) and a woman, which bucked standard stereotypes. Yes, Bill Gates founded Microsoft when he was 20, and Steve Jobs was only one year older when Apple was founded—but Holmes was, and remains, a woman entering a man’s world. The media loved her.
Shortly after her TEDMED talk—an annual conference focused on healthcare and part of the Technology, Entertainment and Design project (TED talks)—The New Yorker ran an article on Elizabeth Holmes as a personality. The article recalled Steve Jobs as it described her “uniform” of a black suit and black cotton turtleneck. It mythologized her unique way of speaking: quiet one-on-one, but loud and almost gymnastic on stage, styled to capture the imagination.
Indeed Holmes has been mythologized. The fantastic details of her life and educational background are repeated often in news article after news article, which describe how she learned Mandarin as a child and sold C++ compilers to Chinese universities while in high school. “At a relatively early age I began to believe that building a business was perhaps the greatest opportunity for making an impact because it’s a tool for making a change in the world,” she told Forbes in 2014. The same year, Fortune reported that her chemical engineering professor Channing Robertson, who helped her found the company, said, “When I finally connected with what Elizabeth fundamentally is, I realized that I could have just as well been looking into the eyes of a Steve Jobs or a Bill Gates.”
But for all the celebrity fascination Holmes has managed to inspire in the media, she has also shrewdly managed to shroud the actual details of Theranos’ technology in mystery. Fortune described Theranos as a “potentially highly disruptive upstart in America’s $73 billion diagnostic-lab industry.”
But then, Theranos’ image started to fall apart. In October of last year, Wired drew attention to the problem of the “tech hype cycle” that Theranos had fallen into. The phrase describes the tendency for technology companies to make big claims to attract media and investor attention early on, Apple, Tinder and Uber being perfect examples. However, all three of those companies had the technology to back up the hype once the funding started rolling in. Some companies, like the much anticipated competitor to Facebook, Ello, fail (spectacularly) to live up to the big talk that precedes launch. But, as Wired points out, who gets hurt if Ello fails? No one, unless you count wounds to wallets and egos a material injury. But when medical technology companies overpromise, people’s health is in the balance. And that is what turned public sentiment against Theranos.
In November, Safeway Inc. pulled out of a partnership with the company. The grocery chain had spent $350 million to build clinics in more than 800 of its supermarkets to offer Theranos blood tests. However, Safeway executives said that Theranos missed several deadlines for the proposed blood testing rollout, and perhaps more damagingly, the same executives questioned the accuracy of some of the blood tests performed at Safeway’s headquarters in Pleasanton, Calif. Three former Theranos employees have also filed complaints with the U.S. Food and Drug Administration (which has approved just one of Theranos’ testing processes) alleging that Theranos is providing faulty test results to patients.
Safeway’s partnership with Theranos had been in the works since 2012, when Safeway CEO Steven Burd told investors and analysts that the company was “contemplating a significant wellness play.” Other former Safeway executives said that Burd had indeed been referring to Theranos. Safeway’s many new clinics remain open, but are being used primarily to administer vaccines for now.
Fortune then published a scathing editorial titled “How Theranos Misled Me” in December.
“Fairly high up in my story there is a whopping false statement,” reporter Roger Parloff wrote. “After explaining that Theranos’s tests could be performed with a finger-stick, rather than using traditional venipuncture (a syringe in the crook of the arm), I wrote that the company “currently offers 200—and is ramping up to offer more than 1000—of the most commonly ordered blood diagnostic tests, all without the need of a syringe.’”
As it turns out, this, and many other claims that Theranos had made, were not true. The Wall Street Journal, too, published a front page article about the misleading claims Theranos had made. Denials and claims of false accusations followed from Theranos executives, but they were all non specific, which didn’t help much in the way of image fixing. And then Theranos issued a statement making another misstep, claiming that the negative press was a result of statements from “former disgruntled employees”—a template excuse made by companies going through bad publicity.
Theranos did eventually put out a detailed response to the WSJ’s accusations, but this only seems to feed into the he-said she-said pattern the news coverage was now falling into. And in late December, Theranos did it again, with a letter to the editor of Fortune. The letter leaned on the premise that Fortune’s reporting had been faulty from the beginning, depending on assumptions and extrapolations rather than facts.
“[Theranos] has grown and evolved and made many business and regulatory decisions about its operations along the way,” the letter states. “At no point did the company mislead [Parloff.]”
The beating Theranos has taken now seems to have become a fable for medical technology companies to learn from. As a medical device company that managed to become sexy enough for widespread, mainstream media coverage, it was unique. But the crashing and burning of its image (but not the company, yet) now means that other medtech companies seeking to gain large investments and public interest will be under much scrutiny, being asked for burdens of proof that go beyond regulatory compliance. Although dealing with questions from the FDA is a challenge no medtech company wants to face, redemption in the court of public opinion is a much more difficult journey.
Holmes quickly became a media darling. It’s a familiar tale: genius college dropout turned tech mogul (before leaving Stanford, she studied chemical engineering). It didn’t hurt that she was young (Holmes founded Theranos in 2003 when she was 19 years old) and a woman, which bucked standard stereotypes. Yes, Bill Gates founded Microsoft when he was 20, and Steve Jobs was only one year older when Apple was founded—but Holmes was, and remains, a woman entering a man’s world. The media loved her.
Shortly after her TEDMED talk—an annual conference focused on healthcare and part of the Technology, Entertainment and Design project (TED talks)—The New Yorker ran an article on Elizabeth Holmes as a personality. The article recalled Steve Jobs as it described her “uniform” of a black suit and black cotton turtleneck. It mythologized her unique way of speaking: quiet one-on-one, but loud and almost gymnastic on stage, styled to capture the imagination.
Indeed Holmes has been mythologized. The fantastic details of her life and educational background are repeated often in news article after news article, which describe how she learned Mandarin as a child and sold C++ compilers to Chinese universities while in high school. “At a relatively early age I began to believe that building a business was perhaps the greatest opportunity for making an impact because it’s a tool for making a change in the world,” she told Forbes in 2014. The same year, Fortune reported that her chemical engineering professor Channing Robertson, who helped her found the company, said, “When I finally connected with what Elizabeth fundamentally is, I realized that I could have just as well been looking into the eyes of a Steve Jobs or a Bill Gates.”
But for all the celebrity fascination Holmes has managed to inspire in the media, she has also shrewdly managed to shroud the actual details of Theranos’ technology in mystery. Fortune described Theranos as a “potentially highly disruptive upstart in America’s $73 billion diagnostic-lab industry.”
But then, Theranos’ image started to fall apart. In October of last year, Wired drew attention to the problem of the “tech hype cycle” that Theranos had fallen into. The phrase describes the tendency for technology companies to make big claims to attract media and investor attention early on, Apple, Tinder and Uber being perfect examples. However, all three of those companies had the technology to back up the hype once the funding started rolling in. Some companies, like the much anticipated competitor to Facebook, Ello, fail (spectacularly) to live up to the big talk that precedes launch. But, as Wired points out, who gets hurt if Ello fails? No one, unless you count wounds to wallets and egos a material injury. But when medical technology companies overpromise, people’s health is in the balance. And that is what turned public sentiment against Theranos.
In November, Safeway Inc. pulled out of a partnership with the company. The grocery chain had spent $350 million to build clinics in more than 800 of its supermarkets to offer Theranos blood tests. However, Safeway executives said that Theranos missed several deadlines for the proposed blood testing rollout, and perhaps more damagingly, the same executives questioned the accuracy of some of the blood tests performed at Safeway’s headquarters in Pleasanton, Calif. Three former Theranos employees have also filed complaints with the U.S. Food and Drug Administration (which has approved just one of Theranos’ testing processes) alleging that Theranos is providing faulty test results to patients.
Safeway’s partnership with Theranos had been in the works since 2012, when Safeway CEO Steven Burd told investors and analysts that the company was “contemplating a significant wellness play.” Other former Safeway executives said that Burd had indeed been referring to Theranos. Safeway’s many new clinics remain open, but are being used primarily to administer vaccines for now.
Fortune then published a scathing editorial titled “How Theranos Misled Me” in December.
“Fairly high up in my story there is a whopping false statement,” reporter Roger Parloff wrote. “After explaining that Theranos’s tests could be performed with a finger-stick, rather than using traditional venipuncture (a syringe in the crook of the arm), I wrote that the company “currently offers 200—and is ramping up to offer more than 1000—of the most commonly ordered blood diagnostic tests, all without the need of a syringe.’”
As it turns out, this, and many other claims that Theranos had made, were not true. The Wall Street Journal, too, published a front page article about the misleading claims Theranos had made. Denials and claims of false accusations followed from Theranos executives, but they were all non specific, which didn’t help much in the way of image fixing. And then Theranos issued a statement making another misstep, claiming that the negative press was a result of statements from “former disgruntled employees”—a template excuse made by companies going through bad publicity.
Theranos did eventually put out a detailed response to the WSJ’s accusations, but this only seems to feed into the he-said she-said pattern the news coverage was now falling into. And in late December, Theranos did it again, with a letter to the editor of Fortune. The letter leaned on the premise that Fortune’s reporting had been faulty from the beginning, depending on assumptions and extrapolations rather than facts.
“[Theranos] has grown and evolved and made many business and regulatory decisions about its operations along the way,” the letter states. “At no point did the company mislead [Parloff.]”
The beating Theranos has taken now seems to have become a fable for medical technology companies to learn from. As a medical device company that managed to become sexy enough for widespread, mainstream media coverage, it was unique. But the crashing and burning of its image (but not the company, yet) now means that other medtech companies seeking to gain large investments and public interest will be under much scrutiny, being asked for burdens of proof that go beyond regulatory compliance. Although dealing with questions from the FDA is a challenge no medtech company wants to face, redemption in the court of public opinion is a much more difficult journey.