BAD BLOOD May 21st, 2018

OVERVIEW: In Bad Blood, Wall Street Journal reporter John Carreyrou details his investigation of , a former unicorn medical device company, exposing the company’s manipulation and outright fraud all seemed to overlook. ------A UNICORN IS BORN: As Carreyrou describes, was well known for her fierce determination ingrained from an early age. Even before her teenage years had commenced, she declared her intention that she wanted to be a billionaire someday. Part of this motivation stemmed from her affluent and entrepreneurial family background. Impressed by her creativity and persistent drive, Holmes’ faculty mentor during college at Stanford – Channing Robertson – told her to “go out and pursue her dream.” That required advanced technology, yet Holmes’ scientific background consisted of a year at Stanford and an internship in a medical testing lab. Regardless, she conceived and patented the TheraPatch. Affixed to a patient’s arm, it would take blood painlessly through tiny needles, analyze the sample, and deliver a suitable drug dosage. Through her family connections into the venture capital world, she was able to raise $6 million from investors by the end of 2004, but it soon became clear that developing the patch was not possible. Undeterred, Holmes’ next idea was to have a patient prick a finger and put a drop of blood into a cartridge the size of a credit card though thicker. This would go into a “reader,” where pumps propelled the blood through a filter to hold back the red and white cells. The pumps would then push the remaining liquid plasma into wells where chemical reactions would provide the data to evaluate the sample. The results would be sent wirelessly to the patient’s doctor. Compact and easy to use, the device could be kept in a person’s home.

In 2006, Holmes hired Edmond Ku, a Silicon Valley engineer known for solving challenging problems, to turn a sketched prototype of a Theranos 1.0 card and reader into a tangible product. Yet running a tiny amount of NOTABLE QUOTES fluid through minute channels and into wells containing test reagents was a huge challenge in microfluidics. Ku never was able to get the system to perform consistently. Unhappy with his progress, Holmes insisted that “The way Theranos is operating is his engineers work around the clock. Ku argued that this would only burn them out. According to Carreyrou, like trying to build a bus while Holmes retorted, “I don’t care. We can change people in and out. The company is all that matters.” To spur you’re driving the bus. Someone Ku, she hired a second competing engineering team, sidelining Ku and eventually firing him. She also pushed the unproven Theranos 1.0 into clinical testing before it was ready. In 2007, she persuaded Pfizer is going to get killed.” ------Pharmaceuticals to try it at an oncology clinic in Tennessee. Ku tinkered with the device to get it operating “Hyping your product to get well enough to draw blood from two patients, but he was gravely concerned by the use of the machine on actual cancer patients. Meanwhile the second team entirely abandoned microfluidics and chose instead to funding while concealing your leverage a robotic arm that replicated what a human lab tech would do by taking a blood sample from a true progress and hoping that cartridge, processing it, and mixing it with test reagents. Holmes dubbed this device the “Edison” after the reality will eventually catch up to great inventor and immediately began showing off a prototype. Yet unease about the cancer test had spread internally and some employees wondered about the fidelity of the Edison. As Carreyrou details, Holmes’s the hype continues to be management style and her glowing revenue projections that, over time, never seemed to materialize were tolerated in the tech industry.” beginning to be questioned by others, in particular by Avie Tevanian, a retired Apple executive who sat on the Theranos board of directors. Holmes responded by threatening him with legal action behind closed doors. Not one to be bullied into submission, Tevanian resigned in 2007, and he warned the other board members via email that “by not going along 100% ‘with the program’ they risk retribution from the Company/Elizabeth.” ------A DESPOTIC LEADER: As Carreyrou describes in countless examples, Holmes was ruthless about perceived threats and obsessive about company security. Moreover, she marginalized or fired anyone who doubted her. Holmes’ ruthless managerial style was backed up by Theranos’ chief operating officer and president Ramesh “Sunny” Balwani. Much older than Holmes, he supposedly had prospered in the dotcom bubble and appeared to act as her mentor. Of additional note, it later became known that the two engaged in a secret relationship. To employees, his menacing management style made him Holmes’ enforcer. Yet equally horrid, Holmes continued to tout untested technology. Her lucrative deals with Safeway and remained contingent on her assurance that the Edison could perform over 200 different blood tests, while in reality the device could truly only perform about a dozen according to Carreyrou. Holmes started a program in 2010 to develop the “miniLab” to perform what she had already promised the outside world, telling employees, “The miniLab is the most important thing humanity has ever built.” But the device ran into serious issues and never functioned properly. Despite further whistleblowing efforts, Holmes and Balwani lied and maneuvered to keep the truth from investors, pharmaceutical partners and agencies. To complicate matters further, renowned board members such as former US Secretaries of State and vouched for Holmes, and retired US Marine Corps General James Mattis praised her “mature” ethical sense. Yet what the board never verified was the validity of the technology. As Carreyrou explains, Holmes never recruited any directors with biomedical expertise to justly evaluate it. ------THE INVESTIGATIVE JOURNALIST: The second half of the book details a first person account from Carreyrou recalling his experience in breaking the Theranos story of lies and fraud in the Wall Street Journal. In 2014, Carreyrou received a tip from Adam Clapper, a pathologist in Missouri who had helped Carreyrou with a previous medical story. Clapper had blogged about his doubts that Theranos could run many tests on just a drop of blood. He heard back from other skeptics and passed on their names to Carreyrou. After multiple attempts, Carreyrou connected with a man named Alan Beam, who had just left his job as lab director at Theranos. After Carreyrou promised him anonymity, Beam provided two startling revelations: First, the Edisons regularly failed quality control tests; Second, most blood test results reported by Theranos in patient trials did not come from the Edisons but, rather, were secretly obtained from standard blood testing devices. And even these results were spotty – the small Theranos samples had to be diluted to create the bigger volumes required by conventional equipment. This changed the concentrations of the compounds the machines detected, which meant they could not be accurately measured. Carreyrou goes on to describe his experience chasing the story’s evidence while Holmes and Balwani actively drove to derail his efforts. Theranos hired the infamous lawyer , who tried to stifle Carreyrou and his sources with legal threats and private investigators. Holmes also appealed directly to media magnate Rupert Murdoch, who owns the Wall Street Journal and had invested $125 million in Theranos himself. Holmes argued to him that Carreyrou was using false information but Murdoch declined to intervene.

In October of 2015, Carreyrou’s story was published on the front page of the newspaper, detailing Beam’s claims about the Edisons and the company’s secret use of conventional testing. There was an immediate media uproar, but Holmes and Balwani fought back, denying the allegations in press releases and media appearances and appealing to company loyalty. As Carreyrou describes at one memorable meeting after the story broke, Balwani led hundreds of employees in a defiant chant: “Fuck you, Carreyrou! Fuck you, Carreyrou!” Yet problems arose faster than Holmes could bury down the hatches. When Theranos submitted poor clinical data to the FDA, the agency banned the “nanotainer,” the tiny tube used for blood samples, from further use. The Centers for Medicare and Medicaid Services ran inspections that supported Carreyrou’s reports and banned Theranos from all blood testing. Eventually the company had to invalidate nearly a million blood tests in California and Arizona. In another blow, on March 14th, 2018, the Securities and Exchange Commission charged Theranos, Holmes, and Balwani with fraud. Holmes was required to surrender control over the company and pay a $500,000 fine. Moreover, she was barred from holding any office in a public company for 10 years. ------MANIPULATOR: While Carreyrou questions how so many could fail to conduct basic due diligence, he ultimately concludes that Holmes was a master manipulator. As he writes, “I’ll leave it to the psychologists to decide whether Holmes fits the clinical profile [of a sociopath], but… her moral compass was badly askew… By all accounts, she had a vision that she genuinely believed in… But in her all-consuming quest to be the second coming of Steve Jobs… she stopped listening to sound advice and began to cut corners. Her ambition was voracious and it brooked no interference. If there was collateral damage on her way to riches and fame, so be it.”