SAN JOSE — Theranos founder Elizabeth Holmes is on trial in Silicon Valley over allegations she defrauded investors over the capabilities of her blood-testing technology, which aimed to run hundreds of tests on just a few drops of blood.
Experts overwhelmingly agree that running hundreds of tests from just a few drops of blood in a portable machine is an incredibly difficult task to accomplish. But that hasn’t stopped a new generation of founders from attempting to make breakthroughs in less invasive blood testing, moving out of the shadow of one of most infamous tech start-up failures.
Companies like Karius and Sight Diagnostics are working on getting doctor’s results from blood tests quickly so they can diagnose patients faster than before. In 2020 alone, PitchBook Data shows diagnostic start-ups raised $5.4 billion, a spike of nearly 69 percent from the year prior.
The blood diagnostic technology field has been “exploding” in recent years, especially around molecular testing and increasing access for testing at home said investor Ron Paulus, a physician and executive in residence at investment firm General Catalyst.
“This is about as robust of a diagnostics time as I’ve ever seen,” he said.
One company, Tel Aviv-based Sight Diagnostics, is familiar with the Theranos comparison. It draws two drops of blood from patient fingertips and runs blood tests in 10 minutes, all from a doctor’s office.
Sight only runs one blood test, a complete blood count, and it has regulatory clearance to do so.
“Maybe Theranos claimed to do 200 different tests,” said Sight co-founder and CEO Yossi Pollak. “We are focusing on the one test.”
Tech companies like Airbnb and Uber have gotten their start here in the heart of tech world, where venture capitalists plow millions of dollars into new start-ups hoping to invent technology to change the world.
Health tech start-ups often face additional hurdles launching products. They have to contend with regulatory agencies, entrenched business partners that are sometimes resistant to change and the ethics of patient testing.
Complicating that area further is Theranos. Founded in 2003, by then 19-year-old Holmes, the company aimed to create a device that could run hundreds of tests from a few drops of blood. It inked deals with Walgreens and Safeway to test people’s blood in retail stores. Its investors and board members included billionaires and a former secretary of state. It raised about $900 million and became a start-up darling in the media.
But that began to crash down in 2015, when the Wall Street Journal published an investigation revealing that Theranos relied on third-party machines to run many of its tests, and the results from its own device were erratic and inconsistent. Its deals with Walgreens and Safeway fizzled. Investors lost millions. The company folded in 2018.
The idea was always ambitious, and many approached it with skepticism: was it really possible to run that many tests in an automated device on such a small amount of blood?
It’s theoretically possible, said Stephen Quake, a bioengineering professor at Stanford and co-president of the Chan Zuckerberg Biohub. But hurdles remain that the scientific industry has not yet overcome, he added.
Former employees have testified extensively during the trial about the issues Theranos allegedly faced, including consistent errors, a siloed workforce, and management that sometimes seemed to brush off concerns about incorrect test results. Holmes’s defense team has argued that she made mistakes as a young entrepreneur but acted in good faith and did not commit fraud.
Theranos collapsed in 2018 after investigations from both press and regulatory bodies — and went on to inspire multiple podcasts, an HBO documentary and a best-selling book about the founder and the company’s disintegration.
The high-profile downfall cast a shadow on the industry, some entrepreneurs and investors said. Lawyers for Holmes did not respond to a request for comment.
The complexity of running multiple blood tests on a portable machine is why some blood diagnostic companies are focusing on just running one, or a few, tests from small draws done on portable devices. Others are forgoing needles altogether to try to analyze cells from images.
Sight, which is focusing on one test, chose the complete blood count test in part because it is one of the most common blood tests that counts platelets and red and white blood cells among other measurements used to detect a variety of health conditions, often in conjunction with other tests. Sight runs it without sending samples to a central lab.
Using a portable machine and a finger prick blood sample, the company’s computer-vision technology takes more than 2,000 photos of the blood sample and analyzes its components. It can return results in minutes, the company says.
Pollak said the company went through three phases of Theranos-comparisons with investors. At first, some shrugged off his young company because Theranos was larger, so who needed Sight?
Then, when the company dissolved, some investors were wary and questioned how Sight would succeed when Theranos flamed out. Finally, Pollak said the company actually benefits from the comparison now because it’s showing the problem really can be solved in a responsible way.
Sight has now raised more than $120 million from investors.
Sight has Food and Drug Administration clearance for use in moderately complex labs, and has completed clinical trials at Boston Children’s Hospital and Columbia University Medical Center. It’s a given that biotech companies need to work with regulators, Pollak said.
“You cannot play in the health care field without going through the FDA, without proving extensive clinical trials,” Pollak said.
Emerging from under Theranos’s shadow took time, entrepreneurs said.
“There came to be this absurd connection between blood testing and fraud,” said Tim Blauwkamp, co-founder and chief scientific officer at blood diagnostic company Karius. It raised the bar for investors evaluating companies and some tech start-up ideas went unfunded, ultimately delaying research in the field, Blauwkamp said.
Karius, founded in 2014, develops a technology that can identify pathogens in a blood draw by detecting the DNA the small organisms have left behind in the bloodstream. That gives medical professionals a window into whether someone might be suffering from an infection or disease if the test finds an unusually high number of pathogens.
“Ultimately, we believe this is a fundamentally better way to identify pathogens causing human disease,” Blauwkamp said. The company has raised about $250 million from investors.
Karius’s method uses a blood draw instead of a biopsy that is sometimes necessary for diagnoses.
Karius has its entire technical process “extensively audited” by outside scientists every year, a step that is common among biotech companies but that Theranos resisted.
That missing information was one sign that Theranos was a bit fishy, said Quake, of the Chan Zuckerberg Biohub.
“Those of us that were in the legitimate diagnostic community were very puzzled by their claims without substantiating with peer reviewed publications,” he said. Karius spun out of Quake’s lab, based on his research into noninvasive diagnostic testing. It has been evaluated in more than 40 peer-reviewed articles.
Scrutiny and approval from others in the scientific community has always been paramount in the biotech industry, but it became arguably even more important for blood diagnostic companies to prove in the wake of Theranos. Paulus, who invested in Karius and in a company called Truvian, which is developing a small device to run multiple blood tests, said he and his partners call on many outside experts to evaluate the companies before investing.
“Part of doing the due diligence on the companies is finding other people that are sophisticated enough to assess what’s real and what’s not,” he said.
Theranos has been criticized for the makeup of its investors and board of directors — which featured heavy-hitting investors such as media mogul Rupert Murdoch and former secretary of state Henry Kissinger but were short on scientists and medical professionals.
Phyllis Gardner, a professor at Stanford University School of Medicine who knew Holmes when she was still studying at the university, met with the young student and told her that her early idea of administering antibiotics through a skin patch was not feasible.
Though Holmes later changed her idea, Gardner was still skeptical. In traditional blood testing, a few vials of blood are often required, said Gardner.
The vials of blood are treated with different chemical reagents to run tests. Diluting the blood — as Theranos was allegedly doing — can take away its sensitivity, Gardner said.
Theranos’s cloud hung over the blood diagnostics start-up industry for a while, striking wariness in investors, Paulus said. But the scandal eventually faded as investors and industry experts recognized the failed start-up for what it was.
“It’s almost like once it was so obvious it was sort of a house of cards, then it becomes a one-off,” he said.