“You’d have to look really hard not to see Steve Jobs in Elizabeth Holmes,” Inc. wrote before the storm broke over the 32-year-old’s $10 billion blood-testing company, Theranos. Indeed, Holmes might deserve the comparison. She resembled the Apple founder quite a bit in 2015, looking every bit the tenacious visionary.
Holmes, a chemical engineering major, lasted a little longer in her elite college (Stanford) than Jobs did at his. She showed supreme confidence and business acumen when she was still a teenager, displayed similar ascetic qualities (those black turtlenecks) and built an innovative idea into a potentially disruptive (albeit secretive) business empire. Plus she is photogenic and quotable, making her a media darling.
“It’s not necessarily that the media was looking for a female Steve Jobs,” says Erick Lakin, a senior associate at DeciBio, which focuses on clinical diagnostics and medical devices. “Rather, it found a narrative undeniably similar—black turtleneck-wearing college dropout founds multibillion-dollar disruptive technology company.”
Holmes’s business is breathtaking in its why-didn’t-I-think-of-that simplicity—like, well, the iPod. Holmes was scared of needles—who isn’t?—and so, despite a complete lack of medical training, launched her Silicon Valley company in 2003 while still an undergraduate, and developed inexpensive blood tests (more than 240 of them) that reportedly required only a finger prick. Theranos also developed a lab instrument with a Jobs-ian name—Edison—to process those tests.
Replacing large vials were tiny “nanotainers” holding just a few drops of blood.
The story so far is so beguiling that Holmes’s slim (she’s a vegan, as Jobs often was) figure (usually in a lab coat over that turtleneck) began appearing in and on the covers of business and women’s magazines, including Inc., Glamour, Forbes, New York Times Style, Fortune and Wired. They hailed her as both a financial visionary and a feminist pioneer (who still owns more than 50 percent of the company), but Holmes wanted to talk about what Theranos did, not how it did it.
Nobody knew what made Edison tick, but supporters could point to investments from Oracle founder Larry Ellison as well as the company’s alliances with Safeway, the Cleveland Clinic and Walgreens. At the latter, more than 40 pharmacies (mostly in Arizona) offer her tests, with results quickly released to patients, at a cost of only $2.99 instead of the $50 it might cost at a doctor’s office.
The narrative about Theranos was that it was playing a long game, hiding its slowly marinating technology Oz-like behind a curtain until world domination was assured. Part of that was Holmes’s insistence on unusual Food and Drug Administration approval for all of its lab tests (though only one test, for herpes, was actually approved). “Holmes has taken the road less traveled, and what an exceptionally long road that is,” reported Inc. “She’s already spent a third of her life building an organization that is still in its early days…. She thinks another 20 years is a reasonable time frame for her company to impact the masses worldwide.”
“First they think you’re crazy. Then they fight you. Then all of a sudden you change the world.”
But Theranos didn’t remain in the shadows for long. In the last couple of years, it emerged blinking into the sunlight, announcing some public deals—the Walgreens announcement was in 2013—and that’s where the trouble started.
In October 2015, The Wall Street Journal—previously friendly to Theranos (it published her op-ed calling for “a new era of preventive health care” last July—punched a big hole in the company’s ascending balloon. Theranos offers 240 tests, it reported, but only 15 were actually performed with nanotainer-friendly Edison; the rest are handled by standard machines from suppliers like Siemens AG. “Theranos,” the Journal said, “has struggled behind the scenes to turn the excitement over its technology into reality.” The paper also said doubts had been raised about the accuracy of Edison’s blood tests.
Holmes responded with a vigorous, media-heavy counterattack that even included a personal appearance at a Wall Street Journal conference. “I personally was shocked to see the Journal would publish something like this,” she told Jim Cramer on CNBC’s Mad Money. “We had sent them over 1,000 pages of documentation indicating that the statements in their piece were false.”
Theranos’ response has been that it still needs traditional blood pulls (what it calls “venous draws”) because it has become a full-service laboratory that has widely expanded its offerings to include rarely performed tests. The company said that 80 finger-stick tests were available in its online menu, not 15. In a public response, the company charged that the Journal reporter “made abundantly clear that he considered Theranos a target to be taken down and not simply the subject of an objective news story.”
A charismatic founder will take a company a long way, but once the questions start, it’s hard to keep the narrative on track. And Theranos’ bad news kept coming. The FDA asked the company to resubmit data and declared in late October that the company’s nanotainers are an “uncleared medical device” that shouldn’t be sent across state lines. An alliance with Safeway to install clinics in its supermarkets was suspended last November. Walgreens said it was holding off from approving any more testing centers until the dust settled, and the Cleveland Clinic wants third-party verification that the technology works.
Analysts are divided about Theranos’ future, though all agree it had an impressive beginning. DeciBio’s Lakin believes that the company will survive. “The fact remains that Theranos has innovated in areas beyond its technology, such as consumer engagement and pricing transparency,” he says. “The company needs to share its data and operate with more transparency moving forward.”
Theranos hasn’t yet become a truly disruptive force in a $30 billion blood-testing industry dominated by big players such as Quest Diagnostics and LabCorp. But it could still become one, says Michael Cherny, managing director on Evercore ISI’s Healthcare Technology & Distribution research team. “It has the potential,” he says, “but it doesn’t seem like it’s there yet.” Cherny agrees that transparency is an issue, one that could be addressed if the company published in peer-reviewed literature. “The biggest issue is how little we know,” he says. “I can’t give a definitive answer about what’s fixable because I don’t know what needs to be fixed.”
For her part, Holmes appears to have seen all of this coming. Some of the same things happened to Jobs.
“This is what happens when you work to change things,” she told Cramer. “First they think you’re crazy. Then they fight you. Then all of a sudden you change the world.”
This article appears in the February 2016 issue of SUCCESS magazine.