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Thursday, March 15, 2018

Theranos in the news again

I've taken multiple shots at Theranos and Elizabeth Holmes before. e.g., see here for a thread of some of my prior posts on the topic.

The USA Today story.
SAN FRANCISCO — How did disgraced biotech start-up Theranos become a $9 billion darling? The old-fashioned way: Through star power, dazzling promises, deep pockets and devout believers.

But the Palo Alto company, whose founder Elizabeth Holmes was stripped of her leadership role Wednesday by the Securities and Exchange Commission, wound up with a story line worthy of Icarus.

Theranos rose quickly from being a college dropout's idea to revolutionize the blood analysis industry to a hot tech bet that accrued $700 million in funding and many famous names for its board.

Anchoring it all was Holmes, now 34, whose smarts, fierce determination and Steve Jobs-inspired look (a black turtle neck was her staple) were critical to recruiting believers for a secretive company that ultimately could not deliver the technology required to do complex blood work based not on vials but mere drops of blood…
Perhaps the civil sanctions are punishment enough. But, she and her CEO apparently committed multiple counts of criminal fraud ongoing. I would favor prosecution, for a full, on-the-record airing of the particulars. to wit, from Forbes:
Lawyers: Elizabeth Holmes Could Still Serve Time In Prison
By Ellie Kincaid and Michela Tindera

Elizabeth Holmes agreed to settle with the SEC on fraud charges that she deceived investors to raise $700 million for her blood-testing company Theranos. She and the company didn't admit or deny the allegations, but lawyers say she could still face jail time if prosecutors decide to pursue her.

“She could very well serve time,” said Elliot Lutzker, the chair of New York City commercial law and government relations firm Davidoff Hutcher & Citron’s corporate group, who has decades of experience handling noncriminal matters with the SEC. “She is subject to criminal charges because she outright lied.” Theranos declined to comment for this story…
From THCB:
On Theranos: It’s Time to Throw the Book at Healthcare Tech Frauds
Mar 14, 2018

Huge news hit today as Theranos, its Chairman and CEO Elizabeth Holmes and its former President and COO Ramesh “Sunny” Balwani were charged with “elaborate, years-long fraud” by the Securities and Exchange Commission. The litany of supposed violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 are almost as dizzying as the detailed factual allegations of repeated, willful fraud perpetuated by Holmes and Balwani on investors who likely should have known better.

Reviewing the SEC complaint against Holmes, it’s stunning to see the extent to which Holmes and Balwani were able to pull the wool over investors’ eyes…
"White collar criminals rarely face criminal investigations and charges for defrauding corporate investors. Sympathy is hard to come by for VCs who fail to do the due diligence to see through an amateurish con pulled by a neophyte founder and a President and COO shrouded in mystery..."
Yeah. But...

Search "Theranos" on Google news. Plenty of coverage.


The folks over at Naked Capitalism are not amused.
Jay Clayton’s SEC Lets Theranos Founder Elizabeth Holmes Get Away With Brazen Fraud
Posted on March 16, 2018 by Yves Smith

Due to the state of my internet connection (barely functioning), I’ll have to be terse and limit myself to a few high level comments about the pathetic punishment meted out to Theranos founder Elizabeth Holmes. This case proves that the Trump SEC is setting new lows by giving get out of jail nearly free cards to fraudsters.

Holmes settled with the SEC, paying a puny $500,000 when she raised and torched $700 million of investor funds. She also surrendered 18.9 million shares and give up control of the company by converting her Class B shares, which give her voting control, to Class A shares. She is also barred from serving as the director or officer of a public company for 10 years. That bizarrely means she remains as CEO of Theranos. She did not admit or deny guilt.

The Department of Justice is dutifully reported by the press to be looking at a case against her. If you believe that, I have a bridge to sell you. The SEC refers cases to the Department of Justice when it thinks they merit criminal charges and the two agencies work together. It is possible that the Department of Justice could pursue FDA-related charges against Holmes, but the securities law claims were a slam dunk, and the Department of Justice is highly unlikely to pursue a case on its own, particular since it is plenty busy with things like suing California over passing legislation that defies its crackdown on sanctuary cities.

We’ve embedded the filing at the end of the post for your entertainment.

As bad as the overall picture is, some of the items in the SEC filing are eyepopping. Holmes told investors she expected to have over $100 million in revenues in 2014 when she had only $100,000. She told investors that her largely vaporware blood tests didn’t need FDA approval when they did (and why did no reporter bother to check that claim out?). She presented prospective investors with a binder of endorsements with pharma company logos. But only one was real. The rest were made up by Theranos and the put the logos on the page. Holmes also claimed that Theranos was making its own equipment. That should have elicited a lot more study from investors and the press, since that would require engineering expertise that was notably absent on the Theranos team, plus seeing the facilities where the equipment was being made should have been part of the usual investor dog and pony show and apparently wasn’t.

It was disturbing to see so much of the press reports lead with the SEC’s line that the SEC had charged Holmes with “massive fraud” yet for the most part treat the punishment with “just the facts, ma’am” deference, as opposed to seeking expert comment on its suitability. In the Twitterverse, many pointed out that pharma bro Martin Skrelli was just sentenced to seven years in prison, and that even though he had engaged in brazen fraud, he had arguably not lost investors any money in the end. But he was so smug and full of himself that that alone guaranteed he’d get a harsh sentence…
Then there's this:
James Mattis is linked to a massive corporate fraud and nobody wants to talk about it
Better let a scandal slide than risk a nuclear war.

Secretary of Defense James Mattis is implicated in one of the largest business scandals of the past decades, described by the Securities and Exchange Commission as an “elaborate, years-long fraud” through which Theranos, led by CEO Elizabeth Holmes and president Ramesh “Sunny” Balwani, “exaggerated or made false statements about the company’s technology, business, and financial performance.”

Basically, their biotech startup was founded on the promise of faster, cheaper, painless blood tests. But their technology was fake.

Mattis not only served on Theranos’s board during some of the years it was perpetrating the fraud after he retired from US military service, but he earlier served as a key advocate of putting the company’s technology (technology that was, to be clear, fake) to use inside the military while he was still serving as a general. Holmes is settling the case, paying a $500,000 fee and accepting various other penalties, while Balwani is fighting it out in court.

Nobody on the board is being directly charged with doing anything. But accepting six-figure checks to serve as a frontman for a con operation is the kind of thing that would normally count as a liability in American politics.

But nobody wants to talk about it. Not just Trump and his co-partisans in Congress; the Democratic Party opposition is also inclined to give Mattis a pass. Everyone in Washington is more or less convinced that his presence in the Pentagon is the only thing standing between us and possible nuclear Armageddon…
The hits just keep on comin'.


STATnews has an interesting article up.
Getting past the bad blood of Theranos through collaboration

This week’s news that the Securities and Exchange Commission charged Theranos and its CEO with fraud put the troubles of the company back into the spotlight. For those of us in the field of liquid biopsy, Theranos has cast a long and persistent shadow on what’s clearly one of the most promising areas in cancer care — using blood tests to improve detection, diagnosis, and treatment and, more broadly, advancing the reality of precision medicine in cancer.

The long-unfolding Theranos story has chilled investment and primed clinicians to be wary of emerging blood tests, all to the detriment of patients whose cancer care may benefit from less invasive blood-based biopsies that can detect and pull critical information from genes, proteins, and cancer cells that have shed into the bloodstream.

What’s the silver lining for those of us in the field? The Theranos saga set the stage for an unprecedented level of collaboration and data-sharing across companies working to develop liquid biopsy technologies…
 "Liquid biopsy." I'll get to that in a moment. The article sums up:
Though the Theranos story served as a backdrop for the collaboration in liquid biopsy, there is a lesson here for all those innovating in the life sciences sector. Any new technology or approach can, and should, be met with healthy skepticism by all stakeholders, including investors, clinicians, professional societies, patients, and insurers. Without a critical eye on the science, we will find ourselves in a scientific Wild West instead of exploring a promising new frontier...
Doing transparent science. Real science. Check out the author's website.

apropos of which, from a recent edition of my (paywalled) AAAS Science Magazine:
Cancer detection: Seeking signals in blood

Most cancers are detected when they cause symptoms that lead to medical evaluation. Unfortunately, in too many cases this results in diagnosis of cancers that are locally invasive or already metastatic and hence no longer curable with surgical resection or radiation treatment. Medical therapies, which might be curative in the setting of minimal tumor burden, typically provide more limited benefit in more advanced cancers, given the emergence of drug resistance (1). On page 926 of this issue, Cohen et al. (2) describe a strategy for early cancer detection, CancerSEEK, aimed at screening for multiple different cancers within the general population. This study challenges current assumptions in the field of blood-based biomarkers and sets the stage for the next generation of cancer screening initiatives.

Given the potential curative advantage of earlier diagnosis and treatment, why have so many cancer screening approaches failed? In the past, efforts at screening healthy populations for cancer have relied on tests that were insufficiently specific. For example, most men with rising serum prostate-specific antigen (PSA) do not have prostate cancer but instead have benign prostatic enlargement. However, where accurate tests exist, there have been dramatic improvements in cancer outcomes (3). For example, advanced cervical cancer has virtually disappeared in countries where Pap screening is the standard of care; although less reliable, mammography and screening colonoscopy are recommended for early detection of breast and colon cancers in individuals above ages 40 to 45 and 50, respectively, and screening heavy smokers by use of low-dose chest computed tomography (CT) scans reduces deaths from lung cancer (4). However, these tests are imperfect, and cost-effectiveness for broad deployment remains a challenge, particularly because a multitude of false-positive test results may lead to extensive diagnostic evaluations and unnecessary medical interventions. Unfortunately, for the majority of cancers no effective early screening tests are available…

Detection and localization of surgically resectable cancers with a multi-analyte blood test
SEEK and you may find cancer earlier
Many cancers can be cured by surgery and/or systemic therapies when detected before they have metastasized. This clinical reality, coupled with the growing appreciation that cancer's rapid genetic evolution limits its response to drugs, have fueled interest in methodologies for earlier detection of the disease. Cohen et al. developed a noninvasive blood test, called CancerSEEK that can detect eight common human cancer types (see the Perspective by Kalinich and Haber). The test assesses eight circulating protein biomarkers and tumor-specific mutations in circulating DNA. In a study of 1000 patients previously diagnosed with cancer and 850 healthy control individuals, CancerSEEK detected cancer with a sensitivity of 69 to 98% (depending on cancer type) and 99% specificity.

Earlier detection is key to reducing cancer deaths. Here, we describe a blood test that can detect eight common cancer types through assessment of the levels of circulating proteins and mutations in cell-free DNA. We applied this test, called CancerSEEK, to 1005 patients with nonmetastatic, clinically detected cancers of the ovary, liver, stomach, pancreas, esophagus, colorectum, lung, or breast. CancerSEEK tests were positive in a median of 70% of the eight cancer types. The sensitivities ranged from 69 to 98% for the detection of five cancer types (ovary, liver, stomach, pancreas, and esophagus) for which there are no screening tests available for average-risk individuals. The specificity of CancerSEEK was greater than 99%: only 7 of 812 healthy controls scored positive. In addition, CancerSEEK localized the cancer to a small number of anatomic sites in a median of 83% of the patients.
Given the plights of my daughters (both of whom were dx'd presenting symptoms at Stage IV), my interest here should be obvious. Won't help us, but perhaps numerous others will benefit.


...A couple of years ago, Theranos, a company claiming to be able to almost magically do all sorts of medical tests on a single drop of human blood, fell apart. A brilliant Wall Street Journal investigation showed that its technology didn’t work; this week the Securities and Exchange Commission brought fraud charges against its founder. Diagnostics start-ups extracted a few lessons: Have actual, peer-reviewed data and, like, don’t lie to investors. But the Theranos debacle didn’t stop their work. That game has been on since at least 2000, and doctors, patients, and insurers are still clamoring for those tests. Nominally they might reduce health care costs, but more than that they promise new, faster diagnoses and better care…
A good read.


More from STATnews:
Investigators say his fingerprints are all over financial crimes at Theranos. Why is he a virtual ghost?
By REBECCA ROBBINS @rebeccadrobbins, DAMIAN GARDE @damiangarde, and ADAM FEUERSTEIN @adamfeuerstein MARCH 19, 2018

Fallen wunderkind Elizabeth Holmes is the face of the Theranos scandal. But the next act of Silicon Valley’s biggest blow-up rests on a mysterious tech entrepreneur with almost no digital footprint.
Ramesh “Sunny” Balwani is a virtual ghost — despite serving nearly seven years in the No. 2 position at the blood-testing startup that turned out to be too good to be true. While the black-turtleneck-clad Holmes graced magazine covers and spoke before adoring crowds, Balwani, her former boyfriend, stayed in the shadows. He has almost no internet presence, and the only verifiable photo that STAT could find of him was a grainy image from his 1988 college yearbook.

Now, he’s at the center of a legal showdown that could tear open a new chapter in a scandal that has rocked the business world and captivated the public imagination. And it could set up a daytime-TV legal defense: My ex-girlfriend duped me…

The SEC’s court documents paint Balwani as a hyperactive manager who operated with cunning and methodical intensity. And they find Balwani’s fingerprints all over Theranos’s alleged financial crime scene. The allegations: He lied to investors and partners about the blood test’s capabilities. He falsely claimed it was being used on military helicopters. He promised $1 billion in annual sales despite booking just $100,000. He orchestrated a campaign of secrecy within the ranks of the company, instructing employees to use code names for the third-party machines used in lieu of the company’s proprietary technology to process blood tests…
Long, detailed article. Kudos to the authors. Well worth your time.

"Financial crimes?" Prosecute, I say.

More to come...

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