A new lawsuit alleges that infamous blood-testing company Theranos Inc. misled company directors about its laboratory-testing practices; used a secret shell company to buy commercial lab equipment; and improperly created rosy financial projections for investors, according to an article in the Wall Street Journal.
Theranos––which once promised to revolutionize the blood-testing industry using tiny samples from finger pricks—also ran fake “demonstrations tests” for prospective investors and business partners using commercial devices while pretending to showcase its own technology, according to the allegations.
The accusations are based largely on testimony from 22 former Theranos employees or directors who were deposed by lawyers for Partner Fund Management LP, a hedge fund that is suing Theranos.
The company responded that the allegation about “fake” demonstrations had “no merit” and “completely distorts Theranos’ practices.”
According to the depositions, Theranos set up a shell company called Protegic Procurement Company to buy commercially available devices from companies such as Siemens to run lab tests. Theranos then modified those devices to run small finger-prick samples on them.
A former employee estimated in a deposition that Theranos was doing only about half of its tests on the smaller finger-prick samples and was running those on commercially available equipment, not devices made by Theranos.
The Wall Street Journal first reported in October 2015 that Theranos was using its own devices for few tests and that employees had concerns about the accuracy of its technology. The company eventually voided or corrected approximately 920,000 lab-test results through March 2017.
Source: Wall Street Journal; April 21, 2017.