Theranos and founder Elizabeth Holmes promised to “change the world” with how many medical tests it could wring from a single drop of blood. Now, with the company in shambles, the question is how many lawsuits investors can wring from a single start-up.
On Monday, veteran investor Robert Colman – co-founder of the boutique investment bank Robertson Stephens – filed a class-action suit against Theranos, Holmes, and former Chief Operating Officer Sunny Balwani. The law firm behind the case, Hagens Berman, calls it “the first securities class-action lawsuit against Theranos.”
The basic claim is simple: Theranos lied to investors about its main product, blood tests. “Those who solicit investments for a company should not make statements that are designed to reach potential investors that are materially false, misleading or incomplete,” the lawsuit stated. Theranos apparently missed that memo, which in addition to being a bad look is securities fraud under California law, the plaintiffs allege.
The complaint rehashes allegations made in previous lawsuits, including those of former Theranos commercial partner Walgreens and hedge fund investor Partner Investments. Theranos said it was performing a “full spectrum” of laboratory tests on its regulator-approved machines, while in reality it relied on competitors’ products and struggled to win over regulators.
So while there’s not much new to chew on here, the suit does provide a handy list of the alleged misrepresentations Theranos made to investors and the general public. For later reference – especially if you’re one of the hundreds of woebegone Theranos investors – here is that list.
- Theranos was not “now” (or ever) capable of performing its agreement with Walgreens;
- Theranos did not have necessary regulatory approval to use its “tests using micro-samples” on its proprietary device --- the nanotainer;
- Theranos’ labs were not in compliance with CLIA standards;
- Theranos proprietary technology had not “reached a point at which [it] could make actionable information accessible to physicians and patients” using its proprietary technology;
- Theranos would have to dilute “microsamples” and run them on traditional lab machines of competitors in order to create the illusion that their proprietary technology was working;
- Theranos’ processes were not faster, cheaper and more accurate than the conventional methods;
- Thus, Walgreens’ size and infrastructure could not “enable Theranos to bring its services to consumers nationwide” since the technology was not ready for commercial use;
- Theranos’ interactions with the FDA, were neither good nor voluntary;
- Theranos’ proprietary technology would not be used as the primary technology for the Walgreens partnership;
- Theranos lied to Walgreens in order to induce them to enter into a partnership;
- Theranos was lying to consumers and providing them with inaccurate blood tests;
- Theranos used equipment made by other manufacturers, as opposed to its proprietary analyzers, to test customers’ blood samples;
- Only twelve blood tests were ever run on Theranos’ equipment and [...] all tests had ceased at various points between December 2014 and June 2015.