It started off as a bad enough day for embattled, recently notorious, biotech startup Theranos, which after a series of reports by the WSJ has found itself, and its $9 billion valuation, reeling.
First, the Verge reported citing New Yorker, WaPo, Economist and Fortune, that according to Theranos, it "earns a portion its income from large pharmaceutical companies Pfizer and GlaxoSmithKline, who reportedly use Theranos' tech to conduct clinical trials. But according to representatives from both companies who spoke to the Financial Times that information is factually incorrect."
"I cannot find any evidence that we've done business with them in recent years," a spokesperson for GSK told the Financial Times. Pfizer, on the other hand, said that the company's dealings with Theranos were limited. "We've done only very limited historical exploratory work with Theranos through a few pilot projects," the Pfizer representative said, "and we do not have any current or active projects with them."
Embarrassing yes, but hardly fatal: if the company has survived the recent spate of bad publicity, then its deep-pocketed backers will certainly ignore this latest discovery.
Much worse was the news released later in the day when in a Form 483, released by FDA, it was unveiled that the very heart of the company's business model, its 'nanotainers', or as it is also known as a Capillary Tube Nanocontainer (CTN) are essentially unacceptable for use.
For those unfamiliar, this is what a Form 483 is:
Q: What is the purpose of an FDA Form 483?
A: The FDA Form 483 notifies the company’s management of objectionable conditions. At the conclusion of an inspection, the FDA Form 483 is presented and discussed with the company’s senior management. Companies are encouraged to respond to the FDA Form 483 in writing with their corrective action plan and then implement that corrective action plan expeditiously.
Q: When is an FDA Form 483 issued?
A: An FDA Form 483 is issued to firm management at the conclusion of an inspection when an investigator(s) has observed any conditions that in their judgement may constitute violations of the Food Drug and Cosmetic (FD&C) Act and related Acts. FDA investigators are trained to ensure that each observation noted on the FDA Form 483 is clear, specific and significant. Observations are made when in the investigator’s judgement, conditions or practices observed would indicate that any food, drug, device or cosmetic has been adulterated or is being prepared, packed, or held under conditions whereby it may become adulterated or rendered injurious to health.
Here is what the FDA said today:
"You have not listed the [Capillary Tube Nanocontainer] as a Class II medical device, and you are currently identifying it as a Class I exempt medical device. You are currently shipping this uncleared medical device in interstate commerce, between California, Arizona, and Pennsylvania."
Is this transgression bad enough for the Feds to step in? We may find out very soon.
To be sure, today's FDA finding repeats what the WSJ had reported previously, although it is now clear that Theranos lied once again, explaining that its halt of the Nanotainer had been a voluntary decision, when it clearly was mandated by the FDA. From the WSJ:
The FDA inspection confirms an article published by The Wall Street Journal on Oct. 16 that said Theranos had stopped using the vials for all but one test under pressure from the agency, citing a person familiar with the inspection. After the Journal article, Theranos founder and Chief Executive Elizabeth Holmes confirmed the company had sharply curtailed its use of the vials, which it calls nanotainers, but presented it as a voluntary move.
That's ok: she lied again, something which appears to have been a recurring pattern for this 31-year-old paper multibillionaire. Sadly for her, following these escapades, "on paper" is where her young billionaire status will remain, as we doubt anyone, either in the private market, and certainly in the public one, will bother to invest even $1 more at a valuation anywhere approaching $9 billion, or even a valuation of $0 for that matter.
As for Theranos and its young founder, we wish them luck with pivoting from a company that has problems with keeping the story straight, to one that has actually cash flow. It will need it.