Former Walgreens CFO says drugstore chain sought out experts who believed blood-testing startup’s technology claimed
Testimony has shown how executives from both chains were persuaded to believe Theranos’ claims, which would eventually collapse after years of diligence, pilot projects, consultations with lawyers and medical experts, and negotiations with startups. .
What was missing from the due diligence, according to court testimony over the past two days, is that neither company spent significant time studying the Theranos device and testing it for reliability or accuracy.
“Our common sense technology worked as we were told,” Wade Miquelon, former chief financial officer of Walgreens, said in court testimony Wednesday.
Theranos said its proprietary technology can test for more than 200 health conditions using a few drops of blood from a finger prick. Reporting in 2015 and 2016 from the Wall Street Journal showed that Theranos’ blood testing equipment was unreliable and inaccurate, and the company could only perform a fraction of the tests on its proprietary machines and the rest for off-the-shelf commercial analyzers. depended on.
Ms Holmes’ lawyers have said running a failed company is not a crime and tried to blame her top deputy and ex-boyfriend, Ramesh “Sunny” Balwani, for any misrepresentation about Theranos’ technology and operations.
Mr Balwani has a dozen similar cases facing him and a separate trial is planned early next year. He has pleaded not guilty.
Mr Miquelon, who helped oversee the early years of Walgreens’ ultimately turbulent relationship with Theranos, testified on Wednesday that the company did its due diligence on Theranos, relying on staff health experts. Walgreens also hired a lab firm to provide the evaluation, and it told Walgreens that Theranos was “at the forefront” of the 200 diagnostic companies Walgreens considered working with, Mr. Miquelon. testified.
Walgreens turned to experts at Johns Hopkins University and asked doctors to meet with Ms. Holmes and Mr. Balwani. According to a document shown in court, doctors did, and determined the technology was sound and would be useful in a retail clinic setting. But he never got the Theranos device to “play along”, Mr Miquelon said.
Steven Bird, the former chief executive of Safeway, testified Tuesday that he consulted with lab directors at Johns Hopkins as well as those at the University of California, San Francisco, about Theranos’ claims. He invites a doctor to accompany him and Ms. Holmes to dinner to discuss Theranos business. Mr Bird said his contacts at Johns Hopkins had received the Theranos testing device, but the company withdrew it before researchers could validate its functionality.
An email displayed in court on Mr Bird’s behalf revealed that Safeway had completed hundreds of hours of due diligence on Theranos and had almost daily communication with Holmes for more than a year.
A Safeway board member got his blood tested via a finger prick, though the machine malfunctioned and did not provide results, Mr. Bird testified. Mr Miquelon said he had his blood tested twice via finger pricks and received the results from his doctor after some time.
Safeway and Walgreens signed a deal with Theranos in 2010. Safeway ran a pilot program to test the blood of employees at its corporate premises. However, Theranos devices never ended up in Safeway stores, even though the grocery store spent more than $350 million building store clinics for that purpose.
The Walgreens project went through phases from “Project Beta” in 2011, with Mr Miquelon calling for “Project Normandy” in 2012, as the companies hammered out the details. Mr. Miquelon said Walgreens and Theranos each sought the advice of outside experts on regulatory questions, such as whether a Walgreens store or Theranos’ headquarters will be considered the laboratory that needs to be regulated.
“Due to the new-to-the-world nature of the technology, some work is needed to understand this,” Mr Miquelon said in court testimony.
Both Safeway and Walgreens’ agreements with Theranos gave retailers the option to terminate the relationship.
Mr Miquelon said Walgreens agreed to pay Theranos a $100 million “innovation fee” and $40 million for convertible notes, effectively a loan that helped the startup meet the partnership’s demands. given the option to convert into an equity ownership stake in Theranos.
Walgreens and Theranos introduced in-store blood tests in 2013, starting with friends and family and then spreading to the public. Court records show Theranos’ relationship with Walgreens began to deteriorate in 2014, when the startup passed a critical deadline.
Later, Theranos scrapped the results of thousands of patients tested at Walgreens and stopped collecting blood via its signature finger-prick method under pressure from federal regulators. Walgreens sued Theranos for $140 million in 2016, and a year later they reached a confidential settlement that required Theranos to pay Walgreens more than $25 million, Businesshala reported at the time. Of.
Heather Somerville at [email protected]