Bad Blood: Secrets and Lies in a Silicon Valley Startup

Elizabeth had promised many more tests from her Edison device than it could perform. As well, competing blood analyzers were coming onto the market. She hired a team to develop an improved machine that she dubbed the “miniLab.” The old reader’s photomultiplier tube assembly would be augmented with “a spectrophotometer, a cytometer, and an isothermal amplifier” (96). Condensing all this into a desktop device was a challenge.

One new hire, engineer Greg Baney—formerly of NASA and SpaceX—wanted to assemble an off-the-shelf set of required components to see how they worked together, but Elizabeth insisted that they first be miniaturized. Greg noticed that Elizabeth had hired her brother, Christian, who, in turn, had recruited a group of his college frat brothers. They worked hard and dutifully under the watchful eye of Sunny. When Greg learned elsewhere that Elizabeth and her second-in-command were having an affair, he wondered what else she was hiding.

Shortly after Steve Jobs died in 2011, a biography of the great innovator came out and many at Theranos read it, including Elizabeth, a longtime fan of Jobs. She began to ape his behaviors and management style. Greg asked his sister to apply for work at Theranos. She interviewed well and received an offer but turned it down to stay at her old firm. Suddenly, Elizabeth stopped speaking to him, and Greg was no longer invited to company meetings. Apparently, she had taken his sister’s turn-down personally.

Greg’s supervisor, Kent Frankovich, mentioned to Elizabeth that he had just invented an improved bicycle light in his spare time. Outraged and feeling betrayed—she expected employees to focus exclusively on Theranos work and show up on weekends—Elizabeth demanded that Kent turn over the light’s patents, on the grounds that all his recent intellectual work was owned by her company. A standoff ensued; Kent took a leave of absence to develop the bike light project; his return to Theranos remained in doubt.

In December 2011, Elizabeth bussed all 100 of her employees to a nearby winery for a Christmas party. There, she gave a speech, calling the miniLab the most important invention ever constructed, and warning her staff that they must dedicate their lives to its completion. Supply-chain manager John Fanzio found a dent in the brand-new car of one of his workers, figured out which car in the lot had caused the dent, found the owner—an acquaintance of Sunny’s—and confronted him about it. Sunny promptly fired John. After a few more incidents like this, Greg resigned.

At Safeway’s quarterly earnings call in February 2012, analysts wanted CEO Steve Burd to explain a recent drop in profits. Burd insisted things would turn around, adding that Safeway was about to embark on “a wellness play" (109), a cryptic reference to the deal with Theranos. Already, half of Safeway’s 1,700 stores had been refitted to contain health clinics where Theranos devices would be used.

Kent Bradley, an ex-Army physician with wide experience in managing medical technology, was named Safeway’s chief medical officer and given charge of the chain’s demonstration health clinic at its Pleasanton, California campus. Theranos, however, wasn’t using its miniLabs at the clinic; instead, phlebotomists drew tubes of blood from testees along with finger-prick blood droplets. Results took two weeks to report. Bradley discovered that Theranos had farmed out some of its analysis to a lab in Utah.

The lab results run by Theranos tended to come in with much higher blood values and many more false positives than those from the Utah lab and a second lab Bradley hired to have patients retested. Bradley reported his findings to CEO Burd, who dismissed his concerns.

Theranos had recently moved to larger quarters and had set up its first testing lab in a nearby building. No Theranos devices were in use there. The lab was understaffed, and one of the technicians was so incompetent that a fellow staffer complained. The Safeway clinic phlebotomists weren’t trained to use properly their centrifuge, and they were sending samples in tubes with expired anticoagulants; sometimes foreign material appeared in the tubes. The staffer who complained about lab incompetence was fired. On all these issues, Safeway remained in the dark.

Theranos continued to delay its rollout of devices for Safeway. The chain’s new clinics remained idle. By the end of 2012, Safeway’s profit projections had proven wrong, and it was still out the $350 million it had spent in building the in-store clinics. By early 2013, Safeway’s board had decided to fire CEO Burd, but they still stuck with the Theranos deal, hoping it would soon prove out. 

Elizabeth met General Jim Mattis, tough-minded head of US Central Command, and proposed that her blood readers be deployed in the Afghan war theater. Mattis agreed to have a delegation visit Theranos. David Shoemaker, a lieutenant colonel charged with vetting medical devices proposed for use by the US military, visited Theranos in November 2011 to review their equipment. A microbiology PhD with FDA training, Shoemaker told her that Theranos’ program wouldn’t meet Army standards. Angered, Elizabeth “gave Shoemaker the cold shoulder for the rest of the day" (122).

At a second meeting in Washington in December, Shoemaker insisted Elizabeth get an approval from the FDA before he would proceed. She consented, but months went by with no message from Theranos, so Shoemaker contacted the FDA to get their views. They contacted a sister agency, the Centers for Medicare and Medicaid Services (CMS), which sent inspector Gary Yamamoto to Theranos in August 2012. He inspected their lab, which appeared ordinary but contained none of the touted blood readers. Yamamoto told Elizabeth and Sunny that any remote testing centers would need federal certification.

Elizabeth fired off an angry email to General Mattis, alleging that Shoemaker had sent “blatantly false information” (127) to the FDA that besmirched Theranos’ integrity. Incensed, Mattis demanded an explanation from Shoemaker. Shoemaker and the FDA’s Alberto Gutierrez met with General Mattis at CENTCOM’s Florida headquarters later in August. They agreed to test the Theranos blood readers using leftover samples from wounded soldiers. In the ensuing months, however, Theranos made no move to begin work on the test. By July 2013, both Mattis and Shoemaker had retired.