Elizabeth Holmes,
Theranos’s founder and chief executive, at the Clinton Global
Initiative’s
annual meeting in New York in Sept. 2015.
Photo:
Brendan Mcdermid/Reuters
Company led by Elizabeth Holmes will shut down facilities and shed more than 40% of its workforce as it shifts to developing products for outside labs
Theranos Inc. said it will shut down its blood-testing facilities and shrink its workforce by more than 40%.
The moves mark a dramatic retreat by the Palo Alto, Calif., company and founder Elizabeth Holmes from their core strategy of offering a long menu of low-price blood tests directly to consumers. Those ambitions already were endangered by crippling regulatory sanctions that followed revelations by The Wall Street Journal of shortcomings in Theranos’s technology and operations.
The shutdowns and layoffs could help the closely held company accelerate its shift to developing products that could be sold to outside laboratories. Ms. Holmes announced in August a new blood-testing device called miniLab, which is about the size of a printer but hasn’t been approved by regulators.
In a statement posted on Theranos’s website late Wednesday, Ms. Holmes said: “We will return our undivided attention to our miniLab platform. Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care.”
Theranos has labs in Newark, Calif., and Scottsdale, Ariz., and five blood-drawing sites that send samples to the Arizona lab. The California lab has been closed since regulators decided in July to revoke Theranos’s license to operate the facility, a move Theranos is appealing.
As part of the restructuring, Theranos will shut down those operations entirely. Ms. Holmes said the restructuring “will impact approximately 340 employees” in Arizona, California and Pennsylvania. The company said it had 790 full-time employees as of August 1.
The impact on Theranos’s ongoing appeal of regulatory sanctions is unclear. Regulators also sought in July to ban Ms. Holmes from owning or operating any lab for two years, throwing the future of the Arizona lab into doubt. Theranos has appealed her ban, which hasn’t taken effect.
A retreat from the strategy that won the company a valuation of $9 billion in 2014 could make it less complicated for Ms. Holmes, 32 years old, to keep running Theranos as chief executive if the ban is imposed. She also controls a majority voting stake in the company and can’t be easily removed from her position, according to people familiar with the matter.
Theranos has said it accepted “full responsibility for the issues” at its California lab and had “worked to undertake comprehensive remedial actions,” including improvements in quality, training procedures and systems.
After the regulatory sanctions were announced, Theranos said its research and development unit “has developed many technologies that are not dependent on running a clinical laboratory.”
The miniLab was unveiled at a conference of lab scientists, and Ms. Holmes said it could run accurate tests from a few drops of blood. Theranos sought emergency clearance of Zika-virus blood test but then withdrew its request after federal regulators found that the company didn’t include proper patient safeguards in a study of the new test.
Theranos told the Food and Drug Administration it hadn’t reported results of the tests to doctors or patients, according to a letter obtained by the Journal in a public-records request....MUCH MORE
