Theranos: A unicorn with real potential or a horse in a costume?

Theranos, the troubled healthcare startup (it feels faintly ridiculous to use that term for a company valued at $9 billion),  is now at something of a crossroads with the regulatory agencies upon whose approval its entire business model ultimately depends. Following months of apparent obfuscation and stonewalling about how (and how well) its disruptive blood testing technology works,  a scathing Wall Street Journal article exposed a degree of potential fraud and deceit surrounding this much lauded technology, that nobody outside Theranos could have imagined (especially since most of the lauding was coming from the company’s own PR machine).

Despite the clamor for Theranos to release for peer review, some of the findings and data it has generated in the course of developing its blood-testing technology that it claims can replace the use of hypodermic needles with a simple finger prick, the technology is still largely a black box to outsiders. Investors and industry observers want to know if the technology’s potential squares with the company’s stratospheric valuation, but more importantly – regulatory agencies, healthcare providers and their patients need to know if the medical diagnostic tests that use this technology, actually work and are accurate and reliable.

There’s a great deal more than money at stake here.

This week’s regulatory call for Theranos could literally make or break the company depending upon which way it goes. Failure to be in regulatory compliance could bring with it, a host of new problems for the struggling company including crippling fines and the inability to operate until such time as it can demonstrate that it has addressed the problems raised by the regulatory agencies. Most damaging of all however, this would be yet another huge blow to its already strained credibility with investors and healthcare provider partners, some of whom have already withdrawn or suspended their relationships with Theranos over doubts about the efficacy and accuracy of its blood tests. Beyond the problems that this could create for Theranos itself, many industry observers fear the effects that it could have on the entire sector if a contagion of doubt and panic were to grip investors and financiers, potentially stemming the flow of biotechnology venture funding and capital.

© The Digital Biologist

The healthcare sector now has its own technology cheating scandal.

So after the whole Volkswagen scandal, now the science and technology sector has its own “caught cheating” story as well. This time it’s the turn of Theranos – a medical diagnostic company whose technology and founder have been much lauded in the media and held up as exemplars of technological innovation and progress.

Based upon some investigative journalism by the Wall Street Journal, which includes information disclosed by Theranos employees and others with inside knowledge of the secretive company’s workings, it seems that Theranos is for the most part, using other companies’ technologies for the great majority of its diagnostic blood tests, and may even have done so in order to duplicitously win FDA approval for its own much lauded but never publicly disclosed, diagnostic technology – the same proprietary technology that underpins the company’s $9 billion valuation.

In the world of technology and medicine, it is perhaps no surprise that there are always some with serious skin in the game, who are not above resorting to hype, exaggeration and outright dishonesty where there’s money at stake. The startup world is certainly no stranger to this – and now it looks like Theranos has been caught cheating in order to advance its own blood test technology, while trying to hide this from regulatory agencies and investors in a cover-up that has some parallels with the Volkswagen scandal.

Perhaps even more interesting though, is that these kinds of problems seem to be exacerbated by the cult of celebrity that surrounds those who are perceived to be the movers and shakers of the startup world. Had Theranos founder Elizabeth Holmes not been put on such a high pedestal by her investors, peers and the press, it is interesting to wonder whether she might not have been taken to task much earlier for refusing to scientifically substantiate the efficacy and accuracy of her company’s proprietary diagnostic technology.

Even in the dry and ‘objective’ world of science and technology, people still seem to need to create heroes and to build a kind of mythology around them and their work, however disconnected the stories are from the reality.

As this Wired article points out, when this kind of bubble of delusion and deception gets built around something like a social network startup, what stands to be lost is mostly money. That’s already bad enough, but when the company in question has a hand in your healthcare, what’s at stake could be much, much more serious.

Image courtesy of PostMemes

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