Theranos, the company that claimed it could perform a vast array of tests from a single pinprick of blood, is officially dissolving.
With approval of the company’s board and shareholders, Theranos will begin the corporate dissolution process Monday, CEO and general counsel David Taylor said in a note to shareholders.
Theranos, which owes at least $60 million to unsecured creditors, will turn over its assets and intellectual property to credit and investment firm Fortress, says the e-mailed letter, first reported by The Wall Street Journal. This move, rather than a bankruptcy, will leave $5 million to distribute to creditors, it says.
The action is the final act in Theranos’ dramatic downfall. Founded in 2003 by then teen-age Stanford dropout Elizabeth Holmes, Theranos grew into a $9 billion firm based on its promise of a blood test requiring only a finger prick, rather than a vial of blood.
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A national partnership with Walgreens would eventually have resulted in Theranos Wellness Centers within miles of every American. As the company’s star rose, so did that of Holmes, who owned about half of the company’s bullish value. She graced magazine covers and Inc. magazine dubbed her “The Next Steve Jobs.”
Theranos collected a distinguished board of advisors and investors including Rupert Murdoch, former secretary of state Henry Kissinger, Oracle founder Larry Ellison, Netscape founder and venture capital investor Marc Andreessen, former U.S. senators Sam Nunn and Bill Frist, former secretary of Defense William Perry and current Defense Secretary James Mattis, who resigned from Theranos’ board when he become Defense secretary in 2016.
The success tale began to unravel three years ago. An investigation by The Wall Street Journal in October 2015 revealed that Theranos was having trouble with the accuracy of its results and a federal investigation began six months later.
In 2017, Theranos agreed to a two-year ban from the blood-testing business. It agreed to pay $4.65 million as part of a fraud settlement brought by more than 175,000 consumers in Arizona who purchased Theranos tests at its pilot retail locations. The company also paid a $30,000 civil penalty as part of the federal settlement with the Centers for Medicare and Medicaid Services.
In June, Holmes and the company’s former president, Ramesh “Sunny” Balwani, were charged with federal criminal wire fraud charges. That came three months after the Securities and Exchange Commission charged Theranos with “massive fraud.” Holmes agreed to pay a $500,000 penalty in the civil case and is barred from serving as an officer or director of a public company for 10 years.
A search for buyers of Theranos’ remaining assets resulted in no takers, Taylor says in the letter. “We are now out of time,” he wrote.
Shareholders will get a copy of the certificate of dissolution, for use for tax loss purposes, the letter says.
In 2014, they said she was the next Steve Jobs with her business secrets and innovation, but Elizabeth Holmes’ hot start-up Theranos didn’t last very long. USA TODAY