Partner Fund Management (PFM), a San Francisco-based hedge fund, has filed a lawsuit alleging that it invested nearly $100 million in embattled blood-testing company Theranos based on misleading statements made by the company’s founder, Elizabeth Holmes, according to a report in Forbes. Two years ago, Forbes ranked Holmes as the richest self-made woman in the world. In June 2016, the journal cut its estimate of her net worth to zero.
The lawsuit is one more headache for Theranos, which last week announced that it would stop running blood-testing centers and try to get new medical devices approved by the FDA instead.
In a letter obtained by Forbes, PFM alleges that “among other things, Theranos and its principals knowingly and repeatedly lied that they had developed proprietary technologies that worked, were on the cusp of receiving all necessary regulatory clearances and approvals, and concealed the truth about the commercial viability of their technologies and methods.” The hedge fund is seeking to rescind a stock-purchase agreement.
Holmes has said that Theranos is shifting its business focus to the miniLab, a 95-pound diagnostic tool that can fit on a tabletop. The company generated questions in August when scientists and researchers gathered in Philadelphia to hear a presentation on Theranos’ blood-testing technology––and instead got a product-launch pitch for the miniLab, according to an article in BloombergMarkets.
U.S. officials sanctioned Theranos and Holmes in July after finding systematic failures in lab testing that potentially jeopardized patients’ health. Holmes was banned for two years from owning or operating laboratories, and the company lost its eligibility to receive payments from federal health-insurance programs for laboratory services.