The Theranos Drama Just Thickened, in a Big Way

The WSJ is out with another expose on Theranos, their favorite whipping pole in a seemingly endless field of privtely held whipping poles.

The crux of the issue is the fact that Theranos’ main pitch product, the tiny little prick of blood being able to replace drawing tubes from the arm, is 100% horseshit.

Now it’s being revealed that Safeway is taking a serious L on a joint venture they had planned, which begs the question: what the fuck were they thinking?

Safeway Inc. spent about $350 million to build clinics in more than 800 of its supermarkets to offer blood tests by startup Theranos Inc.

But the tests never began, the clinics are now used largely for flu shots and travel-related vaccines, and the two companies have been negotiating to officially dissolve their partnership, according to people familiar with the matter.

Current and former Safeway executives said Theranos missed deadlines for the blood-testing rollout. They also said several Safeway executives questioned the accuracy of results Theranos gave to Safeway employees tested at a clinic in the supermarket chain’s headquarters in Pleasanton, Calif.

Safeway was a big growth opportunity for Theranos, based in Palo Alto, Calif. The project, code-named “T-Rex” at Safeway, hasn’t been publicly disclosed by either company but goes back to at least 2011.

The deal was struck before Theranos announced in 2013 a different partnership to offer blood tests to the public through Walgreens drugstores. Safeway signed on as the exclusive supermarket provider of Theranos tests, and Safeway built clinics in roughly half of its stores at the time, one former executive said.

Walgreens Boots Alliance Inc. won’t open any new Theranos blood-testing centers beyond the current 41 until Theranos resolves questions about its technology raised by an article in The Wall Street Journal last month, according to a Walgreens official.

That article reported that the proprietary lab instrument developed by Theranos as the anchor of its growth strategy handled just a small fraction of the tests sold to consumers at the end of 2014, according to people familiar with the matter. The article also said some of the startup’s former employees were leery about the machine’s accuracy.

The valuation of Theranos, started by Elizabeth Holmes in 2003 when she was 19 and dropped out of Stanford University, jumped to $9 billion last year.

“T-Rex” was rooted in Mr. Burd’s enthusiasm for health-care innovation, according to the former Safeway executives. They said he managed the partnership directly with Ms. Holmes. Mr. Burd declined to comment, citing a nondisclosure agreement. He retired in May 2013.

The plan called for Safeway to build upscale clinics that would house Theranos’s blood analyzers and provide patients with rapid test results, according to current and former Safeway executives.

The $350 million price tag was equivalent to more than half of Safeway’s net income of $596.5 million in 2012. Safeway had revenue of $44.21 billion. Safeway also invested more than $10 million in Theranos, one former Safeway executive said.

Theranos often drew the same employee’s blood twice, first with blood from a finger prick and then the traditional method of a needle in the arm, according to one former Safeway executive.

The former executive said he worried that Theranos’s finger-prick process was still a work in progress. “If the technology is fully developed, why would you need to do a venipuncture?” this person said, using the term for a traditional blood draw.

One Safeway executive got a frighteningly high result from Theranos on a test to gauge his prostate-specific antigen, according to two former Safeway executives. They said the test suggested that the executive had prostate cancer. Retesting by another lab came back normal.

Theranos also backed away from putting its blood analyzers in Safeway’s clinics so patients could get the results quickly, the current and former executives said.

Instead, Theranos said blood samples collected at Safeway would have to be shipped to a central lab for analysis, according to the former executives.

By early 2013, some stores in California had hired phlebotomists, or the technicians who specialize in drawing blood, according to the current and former Safeway executives.

But Theranos kept delaying the rollout of its blood-testing services, those people said.

Mr. Burd retired the next month. After that, Theranos’s Ms. Holmes stopped interacting with Safeway executives and delegated the handling of the relationship to Theranos’s president and chief operating officer, Sunny Balwani, according to the former Safeway executives.

T-rex? Are these people out of their fucking minds? One must wonder if these fat hogged male executives were simply smitten by the young Miss Holmes, a woman with no medical credentials, claiming to have revolutionaized the process of testing blood.

Actually, the person who claimed to revolutionize it, who worked for her, committed suicide a few years back. But I guess that’s not really relevant information.

Good luck to the VCs who got into Theranos in the last round!