Edison Machine Focus of $140 Million Lawsuit


Claims she would revolutionize the blood-testing industry with her patented Edison machine, a device that she said could conduct diagnostic tests with a single pinprick……………….


More than 1 in 10 test results were allegedly voided. And George P. Shultz’s grandson blew the whistle on the company!


Last week, as the country was preparing to elect Donald Trump to its highest office, Walgreens was filing a lawsuit against Theranos. According to now-available documents, Walgreens is suing the blood-testing start-up for $140 million, alleging that Theranos breached a contract between the two companies when they entered into a partnership that saw Theranos open Wellness Centers at Walgreens across the country, where customers could get their blood tested. Walgreens claims that Theranos misled them about the safety and accuracy of their proprietary blood-testing equipment and “failed to meet the most basic quality standards and legal requirements.” Walgreens, which was previously Theranos’s largest partner, terminated the relationship in June and shuttered 40 more Theranos Wellness Centers after it emerged that Theranos’s technology did not work as advertised.

According to the lawsuit, Walgreens claims to have been consistently misled by the once-vaunted biotech start-up and its charismatic founder, Elizabeth Holmes. Theranos, Walgreens claims, didn’t tell Walgreens until June 11 that 31,000, or 11.3 percent, of its blood test results given to customers were voided. To add insult to injury, Walgreens says it found out about the voided tests the same way the rest of the world did: through media reports first published in The Wall Street Journal. The next day, Walgreens says, it pulled out of its partnership with Theranos. Theranos fired back at Walgreens in a statement last week, accusing the drugstore giant of failing to meet its own commitments. “We are disappointed that Walgreens filed this lawsuit,” a spokesperson told Vanity Fair. “Through its mishandling of our partnership and now this lawsuit, Walgreens has caused Theranos and its investors significant harm. We will respond vigorously to Walgreens’s unfounded allegations, and will seek to hold Walgreens responsible for the damage it has caused to Theranos and its investors.”

The news is just the latest in a series of unflattering media reports for Theranos, which was once valued at as much as $9 billion. Last year, The Wall Street Journal published a series of critical reports questioning the legitimacy of Theranos’s technology. Holmes, who dropped out of Stanford to found Theranos at the age of 19, raised more than $686 millionfrom investors since launching the company in 2003. She won over the tech press with claims she would revolutionize the blood-testing industry with her patented Edison machine, a device that she said could conduct diagnostic tests with a single pinprick (as opposed to traditional intravenous blood extraction). In light of last year’s reports, Theranos has shut down its blood-testing facilities and laid off 340 people, or about 40 percent of its workforce, in Pennsylvania, California, and Arizona.

Meanwhile, Journal investigative reporter John Carreyrou, who has broken much of the news on the scandal, published a devastating piece on Wednesday night. The story noted that a chief whistleblower within the company was a young man named Tyler Shultz, who just happened to be the grandson of distinguished public servant, former Secretary of Defense, and Theranos counselor George P. Shultz. (Shultz was a board member before Theranos, in the wake of its scandal, cleaved its board in two.) The younger Shultz suggested that he acted, in part, to preserve his grandfather’s legacy. But he recently did not attend the elder Shultz’s 95th birthday. The complex dynamic between Holmes and her board was captured cogently in my colleague Nick Bilton’s exposé on the company in the September issue of Vanity Fair.

Still, Holmes does have at least one vocal investor in her corner. Tim Draper, the founding partner of Draper Associates and Draper Fisher Jurvetson, appeared on television on Tuesday—not for the first time—to defend Holmes and Theranos. In an interview on Closing Bell, the world’s most loyal V.C. said Holmes has been “totally attacked,” and that she is “a great example of maybe why the women are so frustrated.” Draper’s unyielding ability to give Holmes the benefit of the doubt is, if nothing else, an inspiration for the rest of the nation in these dark post-election days.