In an interview with the Financial Times, Geoffrey Baird, a
professor of pathology at the University of Washington, said Holmes’s
presentation had included “a comically small amount of data” and had
“the feel of someone putting together a last-minute term paper late at
night.” Other lab experts were quick to note that none of the miniLab’s
various components were novel. All Theranos had done was make
them smaller and pack them into one box, they said.
One of the miniLab tests Holmes had showcased at the conference
was for Zika, the mosquito-borne virus that had damaged the brains of
thousands of newborns around the world. Theranos had applied to the
FDA for emergency-use authorization of the test, billing it as the first
finger-stick blood test of its kind. But in another embarrassing
setback, FDA inspectors soon discovered that the company had failed
to include basic patient safeguards in its study, forcing it to withdraw
the application.
The possibility that Holmes might pull a rabbit out of her proverbial
hat at the AACC meeting had kept Theranos’s restless investors from
launching a mutiny. After her appearance was panned and the Zika
fiasco made headlines, one of them decided it had had enough:
Partner Fund, the San Francisco hedge fund that had invested close to
$100 million in the company in early 2014, sued Holmes, Balwani, and
the company in Delaware’s Court of Chancery, alleging that they had
deceived it with “a series of lies, material misstatements, and
omissions.” Another set of investors led by the retired banker Robert
Colman filed a separate lawsuit in federal court in San Francisco. It
also alleged securities fraud and sought class-action status.
Most of the other investors opted against litigation, settling instead
for a grant of extra shares in exchange for a promise not to sue. One
notable exception was Rupert Murdoch. The media mogul sold his
stock back to Theranos for one dollar so he could claim a big tax write-
off on his other earnings. With a fortune estimated at $12 billion,
Murdoch could afford to lose more than $100 million on a bad
investment.
David Boies and his law firm, Boies, Schiller & Flexner, stopped
doing legal work for Theranos after falling out with Holmes over how