Theranos to Shut Labs, Wellness Centers

Elizabeth HolmesTroubled consumer healthcare technology firm Theranos has announced plans to close all of its clinical labs and wellness centers as it beats a retreat from blood testing, shedding hundreds of jobs.

This revelation was made by Chief Executive Elizabeth Holmes in a statement posted on the company’s website on Wednesday. The move marks a retreat from the ambitions of Theranos to deliver stress-free, low-priced blood-testing directly to members of the public.

The shutdown of Theranos’ blood-testing facilities is expected to cost about 340 employees their jobs. It will affect employees in Arizona, California and Pennsylvania. The layoffs will represent more than 40 percent drop in the company’s workforce. Theranos has around 790 full-time workers on its payroll.

Holmes said the decision to close the facilities and lay off some employees came after spending several months to assess the Palo Alto, California-based company’s strengths and weaknesses. She revealed focus would now be shifted towards making products for sale to external laboratories.

“We will return our undivided attention to our miniLab platform,” the Theranos CEO said. “Our ultimate goal is to commercialize miniature automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics and intensive care.”

The company’s blood-testing ambitions, said to have been inspired by Holmes’ fear of blood tests during childhood, were dealt a heavy blow following revelation of findings from an investigation by a Wall Street Journal reporter last year. The probe raised doubts about the healthcare company’s technology and operations, while exposing it to sanctions from regulators.

The WSJ investigation cast doubt on the ability of a machine known as Edison, which served as the basis of Theranos’ blood-testing technology. The machine had been claimed to require only a drop of blood for blood tests to be conducted, unlike rival technologies which require tubes of blood. However, it was alleged in the investigation report that the company had in fact used standard equipment for most of its tests because results produced by Edison were not consistent.

Theranos, which was valued at $9 billion in 2014, operated labs in Newark, California and Scottsdale, Arizona. It had a network of wellness centers from where tests are sent to the labs. A number of these centers were operated in partnership with Walgreens.

The biotech startup expectedly challenged claims made in the WSJ report. But significant deficiencies were identified by the Centers for Medicare & Medicaid Services (CMS) at the Newark lab in January. This made regulators to revoke Theranos’ license to run that lab in July. A ban that would make it impossible for Holmes to operate a lab for a period of two years has also been proposed.

Theranos has appealed the regulatory sanctions, although the impact of the outcome is now unclear.

In May, the company voided results of tests carried out with Edison over a two-year period, a move considered to have been made to avoid being sanctioned.

Theranos launched its latest blood-testing device miniLab in August. The supposed Edison successor, which was revealed at a lab scientist conference, was said to be capable of running more accurate tests from only few drops of blood. It is practically a miniature laboratory with a robot running a series of sample tests that would have required use of different machines.