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Bad Blood: Secrets and Lies in a Silicon Valley Startup / Äóðíàÿ êðîâü: ñåêðåòû è ëîæü â ñòàðòàïàõ Ñèëèêîíîâîé äîëèíû (by John Carreyrou, 2018) - àóäèîêíèãà íà àíãëèéñêîì

×òîáû óáðàòü ðåêëàìó ñäåëàéòå ðåãèñòðàöèþ èëè àâòîðèçóéòåñü íà ñàéòå

Bad Blood: Secrets and Lies in a Silicon Valley Startup / Äóðíàÿ êðîâü: ñåêðåòû è ëîæü â ñòàðòàïàõ Ñèëèêîíîâîé äîëèíû (by John Carreyrou, 2018) - àóäèîêíèãà íà àíãëèéñêîì

Bad Blood: Secrets and Lies in a Silicon Valley Startup / Äóðíàÿ êðîâü: ñåêðåòû è ëîæü â ñòàðòàïàõ Ñèëèêîíîâîé äîëèíû (by John Carreyrou, 2018) - àóäèîêíèãà íà àíãëèéñêîì

Îò ãîëîâîêðóæèòåëüíîãî ïîäúåìà äî øîêèðóþùåãî êðàõà – òàêîâ áûë ïóòü îñíîâàòåëüíèöû ìíîãîìèëëèàðäíîãî ñòàðòàïà, êîòîðûé ðàñêóñèë íàñòûðíûé æóðíàëèñò. Åìó ïðèøëîñü âûòåðïåòü ïðåñëåäîâàíèÿ è äàâëåíèå ãåíäèðåêòîðà Ýëèçàáåò Õîëìñ è åå àäâîêàòîâ. Ãîñïîæà Õîëìñ ñîçäàëà ïðîåêò, î êîòîðîì ãîâîðèëè êàê î ðåâîëþöèîííîé ïðîãðàììå, èñïîëüçóÿ êîòîðóþ â ìåäèöèíå óäàñòñÿ äîñòè÷ü íåìûñëèìûõ âûñîò â ñèñòåìå çäðàâîîõðàíåíèÿ ãîñóäàðñòâà. Áûëà ðàçðàáîòàíà ìàøèíà, ñïîñîáíàÿ â ñ÷èòàííûå ìèíóòû âûäàâàòü àíàëèçû êðîâè. Èíâåñòîðû ãîòîâû áûëè âëîæèòü áåøåííûå äåíüãè â ðàçðàáîòêó è ïðîäâèæåíèå èäåè. Íî, óâû è àõ, òåõíîëîãèÿ äàëà ñáîé, îíà ïîïðîñòó íå ðàáîòàëà. Õîëìñ ïûòàëàñü óòàèòü ýòî îò ñïîíñîðîâ, ñîòðóäíèêîâ, ÷èíîâíèêîâ, ÑÌÈ. Íî îäíàæäû ñîòðóäíèê êîìïàíèè äîëîæèë æóðíàëèñòó, ÷òî ãåíåðàëüíûé äèðåêòîð îáìàíûâàåò îáùåñòâåííîñòü. Íåóäîáíûå âîïðîñû ïîñûïàëèñü â àäðåñ Ýëèçàáåò Õîëìñ, íà ÷òî îíà îòâå÷àëà óãðîçàìè, «òðàâèëà» íà æóðíàëèñòà ñâîèõ àäâîêàòîâ, ïûòàÿñü óòàèòü îáìàí. Êðóïíåéøåé êîðïîðàòèâíîé àôåðîé áûëà íàçâàíà åå íåóäàâøàÿñÿ ïîïûòêà ñîðâàòü êóø íà ëæè. Êîìïàíèÿ ñêîðî áûëà îöåíåíà â íîëü äîëëàðîâ.

Ðåéòèíã:
Ïðîñìîòðîâ: 409
Íàçâàíèå:
Bad Blood: Secrets and Lies in a Silicon Valley Startup / Äóðíàÿ êðîâü: ñåêðåòû è ëîæü â ñòàðòàïàõ Ñèëèêîíîâîé äîëèíû (by John Carreyrou, 2018) - àóäèîêíèãà íà àíãëèéñêîì
Ãîä âûïóñêà àóäèîêíèãè:
2018
Àâòîð:
John Carreyrou
Èñïîëíèòåëü:
Will Damron
ßçûê:
àíãëèéñêèé
Æàíð:
áèçíåñ, áèîãðàôèè
Óðîâåíü ñëîæíîñòè:
upper-intermediate
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11:37:12
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64 kbps
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mp3, pdf, doc

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×èòàòü êíèãó íà àíãëèéñêîì îíëàéí:

(×òîáû ïåðåâîäèòü ñëîâà íà ðóññêèé ÿçûê è äîáàâëÿòü â ñëîâàðü äëÿ èçó÷åíèÿ, ùåëêàåì ìûøêîé íà íóæíîå ñëîâî).


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? For Molly, Sebastian, Jack, and Francesca? Author’s Note This book is based on hundreds of interviews with more than 150 people, including more than sixty former Theranos employees. Most of the men and women who appear as characters in the narrative do so under their real names, but some asked that I shield their identities, either because they feared retribution from the company, worried that they might be swept up in the Justice Department’s ongoing criminal investigation, or wanted to guard their privacy. In the interest of getting the most complete and detailed rendering of the facts, I agreed to give these people pseudonyms. However, everything else I describe about them and their experiences is factual and true. Any quotes I have used from emails or documents are verbatim and based on the documents themselves. When I have attributed quotes to characters in dialogues, those quotes are reconstructed from participants’ memories. Some chapters rely on records from legal proceedings, such as deposition testimony. When that’s the case, I have identified those records at length in the notes section at the end of the narrative. In the process of writing this book, I reached out to all of the key figures in the Theranos saga and offered them the opportunity to comment on any allegations concerning them. Elizabeth Holmes, as is her right, declined my interview requests and chose not to cooperate with this account. Prologue November 17, 2006 im Kemp had good news for his team. The former IBM executive was in charge of bioinformatics at Theranos, a startup with a cutting-edge blood-testing system. The company had just completed its first big live demonstration for a pharmaceutical company. Elizabeth Holmes, Theranos’s twenty-two-year-old founder, had flown to Switzerland and shown off the system’s capabilities to executives at Novartis, the European drug giant. “Elizabeth called me this morning,” Kemp wrote in an email to his fifteen-person team. “She expressed her thanks and said that, ‘it was perfect!’ She specifically asked me to thank you and let you all know her appreciation. She additionally mentioned that Novartis was so impressed that they have asked for a proposal and have expressed interest in a financial arrangement for a project. We did what we came to do!” This was a pivotal moment for Theranos. The three-year-old startup had progressed from an ambitious idea Holmes had dreamed up in her Stanford dorm room to an actual product a huge multinational corporation was interested in using. Word of the demo’s success made its way upstairs to the second floor, where senior executives’ offices were located. One of those executives was Henry Mosley, Theranos’s chief financial officer. Mosley had joined Theranos eight months earlier, in March 2006. A rumpled dresser with piercing green eyes and a laid-back personality, he was a veteran of Silicon Valley’s technology scene. After growing up in the Washington, D.C., area and getting his MBA at the University of Utah, he’d come out to California in the late 1970s and never left. His first job was at chipmaker Intel, one of the Valley’s pioneers. He’d later gone on to run the finance departments of four different tech companies, taking two of them public. Theranos was far from his first rodeo. What had drawn Mosley to Theranos was the talent and experience gathered around Elizabeth. She might be young, but she was surrounded by an all-star cast. The chairman of her board was Donald L. Lucas, the venture capitalist who had groomed billionaire software entrepreneur Larry Ellison and helped him take Oracle Corporation public in the mid-1980s. Lucas and Ellison had both put some of their own money into Theranos. Another board member with a sterling reputation was Channing Robertson, the associate dean of Stanford’s School of Engineering. Robertson was one of the stars of the Stanford faculty. His expert testimony about the addictive properties of cigarettes had forced the tobacco industry to enter into a landmark $6.5 billion settlement with the state of Minnesota in the late 1990s. Based on the few interactions Mosley had had with him, it was clear Robertson thought the world of Elizabeth. Theranos also had a strong management team. Kemp had spent thirty years at IBM. Diane Parks, Theranos’s chief commercial officer, had twenty-five years of experience at pharmaceutical and biotechnology companies. John Howard, the senior vice president for products, had overseen Panasonic’s chip-making subsidiary. It wasn’t often that you found executives of that caliber at a small startup. It wasn’t just the board and the executive team that had sold Mosley on Theranos, though. The market it was going after was huge. Pharmaceutical companies spent tens of billions of dollars on clinical trials to test new drugs each year. If Theranos could make itself indispensable to them and capture a fraction of that spending, it could make a killing. Elizabeth had asked him to put together some financial projections she could show investors. The first set of numbers he’d come up with hadn’t been to her liking, so he’d revised them upward. He was a little uncomfortable with the revised numbers, but he figured they were in the realm of the plausible if the company executed perfectly. Besides, the venture capitalists startups courted for funding knew that startup founders overstated these forecasts. It was part of the game. VCs even had a term for it: the hockey-stick forecast. It showed revenue stagnating for a few years and then magically shooting up in a straight line. The one thing Mosley wasn’t sure he completely understood was how the Theranos technology worked. When prospective investors came by, he took them to see Shaunak Roy, Theranos’s cofounder. Shaunak had a Ph.D. in chemical engineering. He and Elizabeth had worked together in Robertson’s research lab at Stanford. Shaunak would prick his finger and milk a few drops of blood from it. Then he would transfer the blood to a white plastic cartridge the size of a credit card. The cartridge would slot into a rectangular box the size of a toaster. The box was called a reader. It extracted a data signal from the cartridge and beamed it wirelessly to a server that analyzed the data and beamed back a result. That was the gist of it. When Shaunak demonstrated the system to investors, he pointed them to a computer screen that showed the blood flowing through the cartridge inside the reader. Mosley didn’t really grasp the physics or chemistries at play. But that wasn’t his role. He was the finance guy. As long as the system showed a result, he was happy. And it always did. — ELIZABETH WAS BACK from Switzerland a few days later. She sauntered around with a smile on her face, more evidence that the trip had gone well, Mosley figured. Not that that was unusual. Elizabeth was often upbeat. She had an entrepreneur’s boundless optimism. She liked to use the term “extra-ordinary,” with “extra” written in italics and a hyphen for emphasis, to describe the Theranos mission in her emails to staff. It was a bit over the top, but she seemed sincere and Mosley knew that evangelizing was what successful startup founders did in Silicon Valley. You didn’t change the world by being cynical. What was odd, though, was that the handful of colleagues who’d accompanied Elizabeth on the trip didn’t seem to share her enthusiasm. Some of them looked outright downcast. Did someone’s puppy get run over? Mosley wondered half jokingly. He wandered downstairs, where most of the company’s sixty employees sat in clusters of cubicles, and looked for Shaunak. Surely Shaunak would know if there was any problem he hadn’t been told about. At first, Shaunak professed not to know anything. But Mosley sensed he was holding back and kept pressing him. Shaunak gradually let down his guard and allowed that the Theranos 1.0, as Elizabeth had christened the blood-testing system, didn’t always work. It was kind of a crapshoot, actually, he said. Sometimes you could coax a result from it and sometimes you couldn’t. This was news to Mosley. He thought the system was reliable. Didn’t it always seem to work when investors came to view it? Well, there was a reason it always seemed to work, Shaunak said. The image on the computer screen showing the blood flowing through the cartridge and settling into the little wells was real. But you never knew whether you were going to get a result or not. So they’d recorded a result from one of the times it worked. It was that recorded result that was displayed at the end of each demo. Mosley was stunned. He thought the results were extracted in real time from the blood inside the cartridge. That was certainly what the investors he brought by were led to believe. What Shaunak had just described sounded like a sham. It was OK to be optimistic and aspirational when you pitched investors, but there was a line not to cross. And this, in Mosley’s view, crossed it. So, what exactly had happened with Novartis? Mosley couldn’t get a straight answer from anyone, but he now suspected some similar sleight of hand. And he was right. One of the two readers Elizabeth took to Switzerland had malfunctioned when they got there. The employees she brought with her had stayed up all night trying to get it to work. To mask the problem during the demo the next morning, Tim Kemp’s team in California had beamed over a fake result. — MOSLEY HAD a weekly meeting with Elizabeth scheduled for that afternoon. When he entered her office, he was immediately reminded of her charisma. She had the presence of someone much older than she was. The way she trained her big blue eyes on you without blinking made you feel like the center of the world. It was almost hypnotic. Her voice added to the mesmerizing effect: she spoke in an unusually deep baritone. Mosley decided to let the meeting run its natural course before bringing up his concerns. Theranos had just closed its third round of funding. By any measure, it was a resounding success: the company had raised another $32 million from investors, on top of the $15 million raised in its first two funding rounds. The most impressive number was its new valuation: one hundred and sixty-five million dollars. There weren’t many three-year-old startups that could say they were worth that much. One big reason for the rich valuation was the agreements Theranos told investors it had reached with pharmaceutical partners. A slide deck listed six deals with five companies that would generate revenues of $120 million to $300 million over the next eighteen months. It listed another fifteen deals under negotiation. If those came to fruition, revenues could eventually reach $1.5 billion, according to the PowerPoint presentation. The pharmaceutical companies were going to use Theranos’s blood-testing system to monitor patients’ response to new drugs. The cartridges and readers would be placed in patients’ homes during clinical trials. Patients would prick their fingers several times a day and the readers would beam their blood-test results to the trial’s sponsor. If the results indicated a bad reaction to the drug, the drug’s maker would be able to lower the dosage immediately rather than wait until the end of the trial. This would reduce pharmaceutical companies’ research costs by as much as 30 percent. Or so the slide deck said. Mosley’s unease with all these claims had grown since that morning’s discovery. For one thing, in his eight months at Theranos, he’d never laid eyes on the pharmaceutical contracts. Every time he inquired about them, he was told they were “under legal review.” More important, he’d agreed to those ambitious revenue forecasts because he thought the Theranos system worked reliably. If Elizabeth shared any of these misgivings, she showed no signs of it. She was the picture of a relaxed and happy leader. The new valuation, in particular, was a source of great pride. New directors might join the board to reflect the growing roster of investors, she told him. Mosley saw an opening to broach the trip to Switzerland and the office rumors that something had gone wrong. When he did, Elizabeth admitted that there had been a problem, but she shrugged it off. It would easily be fixed, she said. Mosley was dubious given what he now knew. He brought up what Shaunak had told him about the investor demos. They should stop doing them if they weren’t completely real, he said. “We’ve been fooling investors. We can’t keep doing that.” Elizabeth’s expression suddenly changed. Her cheerful demeanor of just moments ago vanished and gave way to a mask of hostility. It was like a switch had been flipped. She leveled a cold stare at her chief financial officer. “Henry, you’re not a team player,” she said in an icy tone. “I think you should leave right now.” There was no mistaking what had just happened. Elizabeth wasn’t merely asking him to get out of her office. She was telling him to leave the company—immediately. Mosley had just been fired. | ONE | A Purposeful Life E lizabeth Anne Holmes knew she wanted to be a successful entrepreneur from a young age. When she was seven, she set out to design a time machine and filled up a notebook with detailed engineering drawings. When she was nine or ten, one of her relatives asked her at a family gathering the question every boy and girl is asked sooner or later: “What do you want to do when you grow up?” Without skipping a beat, Elizabeth replied, “I want to be a billionaire.” “Wouldn’t you rather be president?” the relative asked. “No, the president will marry me because I’ll have a billion dollars.” These weren’t the idle words of a child. Elizabeth uttered them with the utmost seriousness and determination, according to a family member who witnessed the scene. Elizabeth’s ambition was nurtured by her parents. Christian and Noel Holmes had high expectations for their daughter rooted in a distinguished family history. On her father’s side, she was descended from Charles Louis Fleischmann, a Hungarian immigrant who founded a thriving business known as the Fleischmann Yeast Company. Its remarkable success turned the Fleischmanns into one of the wealthiest families in America at the turn of the twentieth century. Bettie Fleischmann, Charles’s daughter, married her father’s Danish physician, Dr. Christian Holmes. He was Elizabeth’s great-great-grandfather. Aided by the political and business connections of his wife’s wealthy family, Dr. Holmes established Cincinnati General Hospital and the University of Cincinnati’s medical school. So the case could be made—and it would in fact be made to the venture capitalists clustered on Sand Hill Road near the Stanford University campus—that Elizabeth didn’t just inherit entrepreneurial genes, but medical ones too. Elizabeth’s mother, Noel, had her own proud family background. Her father was a West Point graduate who planned and carried out the shift from a draft-based military to an all-volunteer force as a high-ranking Pentagon official in the early 1970s. The Daousts traced their ancestry all the way back to the mar?chal Davout, one of Napoleon’s top field generals. But it was the accomplishments of Elizabeth’s father’s side of the family that burned brightest and captured the imagination. Chris Holmes made sure to school his daughter not just in the outsized success of its older generations but also in the failings of its younger ones. Both his father and grandfather had lived large but flawed lives, cycling through marriages and struggling with alcoholism. Chris blamed them for squandering the family fortune. “I grew up with those stories about greatness,” Elizabeth would tell The New Yorker in an interview years later, “and about people deciding not to spend their lives on something purposeful, and what happens to them when they make that choice—the impact on character and quality of life.” — ELIZABETH’S EARLY YEARS were spent in Washington, D.C., where her father held a succession of jobs at government agencies ranging from the State Department to the Agency for International Development. Her mother worked as an aide on Capitol Hill until she interrupted her career to raise Elizabeth and her younger brother, Christian. During the summers, Noel and the children headed down to Boca Raton, Florida, where Elizabeth’s aunt and uncle, Elizabeth and Ron Dietz, owned a condo with a beautiful view of the Intracoastal Waterway. Their son, David, was three and a half years younger than Elizabeth and a year and a half younger than Christian. The cousins slept on foam mattresses on the condo’s floor and dashed off to the beach in the mornings for a swim. The afternoons were whiled away playing Monopoly. When Elizabeth was ahead, which was most of the time, she would insist on playing on to the bitter end, piling on the houses and hotels for as long as it took for David and Christian to go broke. When she occasionally lost, she stormed off in a fury and, more than once, ran right through the screen of the condo’s front door. It was an early glimpse of her intense competitive streak. In high school, Elizabeth wasn’t part of the popular crowd. By then, her father had moved the family to Houston to take a job at the conglomerate Tenneco. The Holmes children attended St. John’s, Houston’s most prestigious private school. A gangly teenage girl with big blue eyes, Elizabeth bleached her hair in an attempt to fit in and struggled with an eating disorder. During her sophomore year, she threw herself into her schoolwork, often staying up late at night to study, and became a straight-A student. It was the start of a lifelong pattern: work hard and sleep little. As she excelled academically, she also managed to find her footing socially and dated the son of a respected Houston orthopedic surgeon. They traveled to New York together to celebrate the new millennium in Times Square. As college drew closer, Elizabeth set her sights on Stanford. It was the obvious choice for an accomplished student interested in science and computers who dreamed of becoming an entrepreneur. The little agricultural college founded by railroad tycoon Leland Stanford at the end of the nineteenth century had become inextricably linked with Silicon Valley. The internet boom was in full swing then and some of its biggest stars, like Yahoo, had been founded on the Stanford campus. In Elizabeth’s senior year, two Stanford Ph.D. students were beginning to attract attention with another little startup called Google. Elizabeth already knew Stanford well. Her family had lived in Woodside, California, a few miles from the Stanford campus, for several years in the late 1980s and early 1990s. While there, she had become friends with a girl who lived next door named Jesse Draper. Jesse’s father was Tim Draper, a third-generation venture capitalist who was on his way to becoming one of the Valley’s most successful startup investors. Elizabeth had another connection to Stanford: Chinese. Her father had traveled to China a lot for work and decided his children should learn Mandarin, so he and Noel had arranged for a tutor to come to the house in Houston on Saturday mornings. Midway through high school, Elizabeth talked her way into Stanford’s summer Mandarin program. It was only supposed to be open to college students, but she impressed the program’s director enough with her fluency that he made an exception. The first five weeks were taught on the Stanford campus in Palo Alto, followed by four weeks of instruction in Beijing. — ELIZABETH WAS ACCEPTED to Stanford in the spring of 2002 as a President’s Scholar, a distinction bestowed on top students that came with a three-thousand-dollar grant she could use to pursue any intellectual interest of her choosing. Her father had drilled into her the notion that she should live a purposeful life. During his career in public service, Chris Holmes had overseen humanitarian efforts like the 1980 Mariel boatlift, in which more than one hundred thousand Cubans and Haitians migrated to the United States. There were pictures around the house of him providing disaster relief in war-torn countries. The message Elizabeth took away from them is that if she wanted to truly leave her mark on the world, she would need to accomplish something that furthered the greater good, not just become rich. Biotechnology offered the prospect of achieving both. She chose to study chemical engineering, a field that provided a natural gateway to the industry. The face of Stanford’s chemical engineering department was Channing Robertson. Charismatic, handsome, and funny, Robertson had been teaching at the university since 1970 and had a rare ability to connect with his students. He was also by far the hippest member of the engineering faculty, sporting a graying blond mane and showing up to class in leather jackets that made him seem a decade younger than his fifty-nine years. Elizabeth took Robertson’s Introduction to Chemical Engineering class and a seminar he taught on controlled drug-delivery devices. She also lobbied him to let her help out in his research lab. Robertson agreed and farmed her out to a Ph.D. student who was working on a project to find the best enzymes to put in laundry detergent. Outside of the long hours she put in at the lab, Elizabeth led an active social life. She attended campus parties and dated a sophomore named JT Batson. Batson was from a small town in Georgia and was struck by how polished and worldly Elizabeth was, though he also found her guarded. “She wasn’t the biggest sharer in the world,” he recalls. “She played things close to the vest.” Over winter break of her freshman year, Elizabeth returned to Houston to celebrate the holidays with her parents and the Dietzes, who flew down from Indianapolis. She’d only been in college for a few months, but she was already entertaining thoughts of dropping out. During Christmas dinner, her father floated a paper airplane toward her end of the table with the letters “P.H.D.” written on its wings. Elizabeth’s response was blunt, according to a family member in attendance: “No, Dad, I’m not interested in getting a Ph.D., I want to make money.” That spring, she showed up one day at the door of Batson’s dorm room and told him she couldn’t see him anymore because she was starting a company and would have to devote all her time to it. Batson, who had never been dumped before, was stunned but remembers that the unusual reason she gave took some of the sting out of the rejection. Elizabeth didn’t actually drop out of Stanford until the following fall after returning from a summer internship at the Genome Institute of Singapore. Asia had been ravaged earlier in 2003 by the spread of a previously unknown illness called severe acute respiratory syndrome, or SARS, and Elizabeth had spent the summer testing patient specimens obtained with old low-tech methods like syringes and nasal swabs. The experience left her convinced there must be a better way. When she got back home to Houston, she sat down at her computer for five straight days, sleeping one or two hours a night and eating from trays of food her mother brought her. Drawing from new technologies she had learned about during her internship and in Robertson’s classes, she wrote a patent application for an arm patch that would simultaneously diagnose medical conditions and treat them. Elizabeth caught up on sleep in the family car while her mother drove her from Texas to California to start her sophomore year. As soon as she was back on campus, she showed Robertson and Shaunak Roy, the Ph.D. student she was assisting in his lab, her proposed patent. In court testimony years later, Robertson recalled being impressed by her inventiveness: “She had somehow been able to take and synthesize these pieces of science and engineering and technology in ways that I had never thought of.” He was also struck by how motivated and determined she was to see her idea through. “I never encountered a student like this before of the then thousands of students that I had talked” to, he said. “I encouraged her to go out and pursue her dream.” Shaunak was more skeptical. Raised by Indian immigrant parents in Chicago, far from the razzle-dazzle of Silicon Valley, he considered himself very pragmatic and grounded. Elizabeth’s concept seemed to him a bit far-fetched. But he got swept up in Robertson’s enthusiasm and in the notion of launching a startup. While Elizabeth filed the paperwork to start a company, Shaunak completed the last semester of work he needed to get his degree. In May 2004, he joined the startup as its first employee and was granted a minority stake in the business. Robertson, for his part, joined the company’s board as an adviser. — AT FIRST, Elizabeth and Shaunak holed up in a tiny office in Burlingame for a few months until they found a bigger space. The new location was far from glamorous. While its address was technically in Menlo Park, it was in a gritty industrial zone on the edge of East Palo Alto, where shootings remained frequent. One morning, Elizabeth showed up at work with shards of glass in her hair. Someone had shot at her car and shattered the driver’s-side window, missing her head by inches. Elizabeth incorporated the company as Real-Time Cures, which an unfortunate typo turned into “Real-Time Curses” on early employees’ paychecks. She later changed the name to Theranos, a combination of the words “therapy” and “diagnosis.” To raise the money she needed, she leveraged her family connections. She convinced Tim Draper, the father of her childhood friend and former neighbor Jesse Draper, to invest $1 million. The Draper name carried a lot of weight and helped give Elizabeth some credibility: Tim’s grandfather had founded Silicon Valley’s first venture capital firm in the late 1950s, and Tim’s own firm, DFJ, was known for lucrative early investments in companies like the web-based email service Hotmail. Another family connection she tapped for a large investment, the retired corporate turnaround specialist Victor Palmieri, was a longtime friend of her father’s. The two had met in the late 1970s during the Carter administration when Chris Holmes worked at the State Department and Palmieri served as its ambassador at large for refugee affairs. Elizabeth impressed Draper and Palmieri with her bubbly energy and her vision of applying principles of nano- and microtechnology to the field of diagnostics. In a twenty-six-page document she used to recruit investors, she described an adhesive patch that would draw blood painlessly through the skin using microneedles. The TheraPatch, as the document called it, would contain a microchip sensing system that would analyze the blood and make “a process control decision” about how much of a drug to deliver. It would also communicate its readings wirelessly to a patient’s doctor. The document included a colored diagram of the patch and its various components. Not everyone bought the pitch. One morning in July 2004, Elizabeth met with MedVenture Associates, a venture capital firm that specialized in medical technology investments. Sitting across a conference room table from the firm’s five partners, she spoke quickly and in grand terms about the potential her technology had to change mankind. But when the MedVenture partners asked for more specifics about her microchip system and how it would differ from one that had already been developed and commercialized by a company called Abaxis, she got visibly flustered and the meeting grew tense. Unable to answer the partners’ probing technical questions, she got up after about an hour and left in a huff. MedVenture Associates wasn’t the only venture capital firm to turn down the nineteen-year-old college dropout. But that didn’t stop Elizabeth from raising a total of nearly $6 million by the end of 2004 from a grab bag of investors. In addition to Draper and Palmieri, she secured investments from an aging venture capitalist named John Bryan and from Stephen L. Feinberg, a real estate and private equity investor who was on the board of Houston’s MD Anderson Cancer Center. She also persuaded a fellow Stanford student named Michael Chang, whose family controlled a multibillion-dollar distributor of high-tech devices in Taiwan, to invest. Several members of the extended Holmes family, including Noel Holmes’s sister, Elizabeth Dietz, chipped in too. As the money flowed in, it became apparent to Shaunak that a little patch that could do all the things Elizabeth wanted it to do bordered on science fiction. It might be theoretically possible, just like manned flights to Mars were theoretically possible. But the devil was in the details. In an attempt to make the patch concept more feasible, they pared it down to just the diagnostic part, but even that was incredibly challenging. Eventually they jettisoned the patch altogether in favor of something akin to the handheld devices used to monitor blood-glucose levels in diabetes patients. Elizabeth wanted the Theranos device to be portable like those glucose monitors, but she wanted it to measure many more substances in the blood than just sugar, which would make it a lot more complex and therefore bulkier. The compromise was a cartridge-and-reader system that blended the fields of microfluidics and biochemistry. The patient would prick her finger to draw a small sample of blood and place it in a cartridge that looked like a thick credit card. The cartridge would slot into a bigger machine called a reader. Pumps inside the reader would push the blood through tiny channels in the cartridge and into little wells coated with proteins known as antibodies. On its way to the wells, a filter would separate the blood’s solid elements, its red and white blood cells, from the plasma and let only the plasma through. When the plasma came into contact with the antibodies, a chemical reaction would produce a signal that would be “read” by the reader and translated into a result. Elizabeth envisioned placing the cartridges and readers in patients’ homes so that they could test their blood regularly. A cellular antenna on the reader would send the test results to the computer of a patient’s doctor by way of a central server. This would allow the doctor to make adjustments to the patient’s medication quickly, rather than waiting for the patient to go get his blood tested at a blood-draw center or during his next office visit. By late 2005, eighteen months after he’d come on board, Shaunak was beginning to feel like they were making progress. The company had a prototype, dubbed the Theranos 1.0, and had grown to two dozen employees. It also had a business model it hoped would quickly generate revenues: it planned to license its blood-testing technology to pharmaceutical companies to help them catch adverse drug reactions during clinical trials. Their little enterprise was even beginning to attract some buzz. On Christmas Day, Elizabeth sent employees an email with the subject line “Happy Happy Holidays.” It wished them well and referred them to an interview she had given to the technology magazine Red Herring. The email ended with, “And Heres to ‘the hottest start-up in the valley’!!!” | TWO | The Gluebot E dmond Ku interviewed with Elizabeth Holmes in early 2006 and was instantly captivated by the vision she unspooled before him. She described a world in which drugs would be minutely tailored to individuals thanks to Theranos’s blood-monitoring technology. To illustrate her point, she cited Celebrex, a painkiller that was under a cloud because it was thought to increase the risk of heart attacks and strokes. There was talk that its maker, Pfizer, would have to pull it from the market. With the Theranos system, Celebrex’s side effects could be eliminated, allowing millions of arthritis sufferers to keep taking the drug to alleviate their aches and pains, she explained. Elizabeth cited the fact that an estimated one hundred thousand Americans died each year from adverse drug reactions. Theranos would eliminate all those deaths, she said. It would quite literally save lives. Edmond, who went by Ed, felt himself drawn in by the young woman sitting across from him who was staring at him intently without blinking. The mission she was describing was admirable, he thought. Ed was a quiet engineer who had gained a reputation in the Valley as a fix-it man. Tech startups stymied by a complex engineering problem called him and, more often than not, he found a solution. Born in Hong Kong, he had emigrated to Canada with his family in his early teens and had the habit common among native Chinese speakers who learn English as a second language of always speaking in the present tense. A member of Theranos’s board had recently approached him about taking over engineering at the startup. If he accepted the job, his task would be to turn the Theranos 1.0 prototype into a viable product the company could commercialize. After hearing Elizabeth’s inspiring pitch, he decided to sign on. It didn’t take Ed long to realize that Theranos was the toughest engineering challenge he’d ever tackled. His experience was in electronics, not medical devices. And the prototype he’d inherited didn’t really work. It was more like a mock-up of what Elizabeth had in mind. He had to turn the mock-up into a functioning device. The main difficulty stemmed from Elizabeth’s insistence that they use very little blood. She’d inherited from her mother a phobia of needles; Noel Holmes fainted at the mere sight of a syringe. Elizabeth wanted the Theranos technology to work with just a drop of blood pricked from the tip of a finger. She was so fixated on the idea that she got upset when an employee bought red Hershey’s Kisses and put the Theranos logo on them for a company display at a job fair. The Hershey’s Kisses were meant to represent drops of blood, but Elizabeth felt they were much too big to convey the tiny volumes she had in mind. Her obsession with miniaturization extended to the cartridge. She wanted it to fit in the palm of a hand, further complicating Ed’s task. He and his team spent months reengineering it, but they never reached a point where they could reliably reproduce the same test results from the same blood samples. The quantity of blood they were allowed to work with was so small that it had to be diluted with a saline solution to create more volume. That made what would otherwise have been relatively routine chemistry work a lot more challenging. Adding another level of complexity, blood and saline weren’t the only fluids that had to flow through the cartridge. The reactions that occurred when the blood reached the little wells required chemicals known as reagents. Those were stored in separate chambers. All these fluids needed to flow through the cartridge in a meticulously choreographed sequence, so the cartridge contained little valves that opened and shut at precise intervals. Ed and his engineers tinkered with the design and the timing of the valves and the speed at which the various fluids were pumped through the cartridge. Another problem was preventing all those fluids from leaking and contaminating one another. They tried changing the shape, length, and orientation of the tiny channels in the cartridge to minimize the contamination. They ran countless tests with food coloring to see where the different colors went and where the contamination occurred. It was a complicated, interconnected system compressed into a small space. One of Ed’s engineers had an analogy for it: it was like a web of rubber bands. Pulling on one would inevitably stretch several of the others. Each cartridge cost upward of two hundred dollars to make and could only be used once. They were testing hundreds of them a week. Elizabeth had purchased a $2 million automated packaging line in anticipation of the day they could start shipping them, but that day seemed far off. Having already blown through its first $6 million, Theranos had raised another $9 million in a second funding round to replenish its coffers. The chemistry work was handled by a separate group made up of biochemists. The collaboration between that group and Ed’s group was far from optimal. Both reported up to Elizabeth but weren’t encouraged to communicate with each other. Elizabeth liked to keep information compartmentalized so that only she had the full picture of the system’s development. As a result, Ed wasn’t sure if the problems they were encountering were due to the microfluidics he was responsible for or the chemistry work he had nothing to do with. He knew one thing, though: they’d have a much better chance of success if Elizabeth allowed them to use more blood. But she wouldn’t hear of it. — ED WAS WORKING late one evening when Elizabeth came by his workspace. She was frustrated with the pace of their progress and wanted to run the engineering department twenty-four hours a day, seven days a week, to accelerate development. Ed thought that was a terrible idea. His team was working long hours as it was. He had noticed that employee turnover at the company was already high and that it wasn’t confined to the rank and file. Top executives didn’t seem to last long either. Henry Mosley, the chief financial officer, had disappeared one day. There was a rumor circulating around the office that he’d been caught embezzling funds. No one knew if there was any truth to it because his departure, like all the others, wasn’t announced or explained. It made for an unnerving work environment: a colleague might be there one day and gone the next and you had no idea why. Ed pushed back against Elizabeth’s proposal. Even if he instituted shifts, a round-theclock schedule would make his engineers burn out, he told her. “I don’t care. We can change people in and out,” she responded. “The company is all that matters.” Ed didn’t think she meant it to sound as callous as it did. But she was so laser focused on achieving her goals that she seemed oblivious to the practical implications of her decisions. Ed had noticed a quote on her desk cut out from a recent press article about Theranos. It was from Channing Robertson, the Stanford professor who was on the company’s board. The quote read, “You start to realize you are looking in the eyes of another Bill Gates, or Steve Jobs.” That was a high bar to set for herself, Ed thought. Then again, if there was anyone who could clear it, it might just be this young woman. Ed had never encountered anyone as driven and relentless. She slept four hours a night and popped chocolate-coated coffee beans throughout the day to inject herself with caffeine. He tried to tell her to get more sleep and to live a healthier lifestyle, but she brushed him off. As obstinate as Elizabeth was, Ed knew there was one person who had her ear: a mysterious man named Sunny. Elizabeth had dropped his name enough times that Ed had gleaned some basic facts about him: he was Indian, he was older than Elizabeth, and they were a couple. The story was that Sunny had made a fortune from the sale of an internet company he’d cofounded in the late 1990s. Sunny wasn’t a visible presence at Theranos but he seemed to loom large in Elizabeth’s life. At the company Christmas party in a Palo Alto restaurant in late 2006, Elizabeth got too tipsy to go home on her own, so she called Sunny and asked him to come pick her up. That’s when Ed learned that they were living together in a condo a few blocks away. Sunny wasn’t the only older man giving Elizabeth advice. She had brunch with Don Lucas every Sunday at his home in Atherton, the ultrawealthy enclave north of Palo Alto. Larry Ellison, whom she’d met through Lucas, was also an influence. Lucas and Ellison had both invested in Theranos’s second funding round, which in Silicon Valley parlance was known as a “Series B” round. Ellison sometimes dropped by in his red Porsche to check on his investment. It wasn’t uncommon to hear Elizabeth start a sentence with “Larry says.” Ellison might be one of the richest people in the world, with a net worth of some $25 billion, but he wasn’t necessarily the ideal role model. In Oracle’s early years, he had famously exaggerated his database software’s capabilities and shipped versions of it crawling with bugs. That’s not something you could do with a medical device. It was hard to know how much Elizabeth’s approach to running Theranos was her own and how much she was channeling Ellison, Lucas, or Sunny, but one thing was clear: she wasn’t happy when Ed refused to make his engineering group run 24/7. From that moment on, their relationship cooled. Before long, Ed noticed that Elizabeth was making new engineering hires, but she wasn’t having them report to him. They formed a separate group. A rival group. It dawned on him that she was pitting his engineering team and the new team against each other in some corporate version of survival of the fittest. Ed didn’t have time to dwell on it too much because there was something else he had to deal with: Elizabeth had convinced Pfizer to try out the Theranos system in a pilot project in Tennessee. Under the agreement, Theranos 1.0 units were going to be placed in people’s homes and patients were going to test their blood with them every day. The results would be sent wirelessly to Theranos’s office in California, where they would be analyzed and then forwarded to Pfizer. They had to somehow fix all the problems before the study started. She’d already scheduled a trip to Tennessee to begin training some of the patients and doctors in how to use the system. In early August 2007, Ed accompanied Elizabeth to Nashville. Sunny picked them up from the office in his Porsche and drove them to the airport. It was the first time Ed met him in person. The extent of their age gap suddenly became apparent. Sunny looked to be in his early forties, nearly twenty years older than Elizabeth. There was also a cold, businesslike dynamic to their relationship. When they parted at the airport, Sunny didn’t say “Goodbye” or “Have a nice trip.” Instead, he barked, “Now go make some money!” When they got to Tennessee, the cartridges and the readers they’d brought weren’t functioning properly, so Ed had to spend the night disassembling and reassembling them on his bed in his hotel room. He managed to get them working well enough by morning that they were able to draw blood samples from two patients and a half dozen doctors and nurses at a local oncology clinic. The patients looked very sick. Ed learned that they were dying of cancer. They were taking drugs designed to slow the growth of their tumors, which might buy them a few more months to live. On their return to California, Elizabeth pronounced the trip a success and sent one of her cheerful emails to the staff. “It was truly awesome,” she wrote. “The patients grasped onto the system immediately. The minute you meet them you sense their fear, their hope, and their pain.” Theranos employees, she added, should “take a victory lap.” Ed didn’t feel as upbeat. Using the Theranos 1.0 in a patient study seemed premature, especially now that he knew the study involved terminal cancer patients. — TO BLOW OFF STEAM, Ed went out for beers with Shaunak on Friday evenings at a raucous sports bar called the Old Pro in Palo Alto. Often, Gary Frenzel, the head of the chemistry team, would join them. Gary was a good old boy from Texas. He liked to tell war stories about his days as a rodeo rider. He’d given up riding and pursued a career as a chemist after breaking too many bones. Gary loved to gossip and crack jokes, causing Shaunak to burst into a loud, high-pitched giggle that was the most ridiculous laugh Ed had ever heard. The three bonded during these outings and became good friends. Then one day, Gary stopped coming to the Old Pro. Ed and Shaunak weren’t sure why at first but they soon had their answer. In late August 2007, an email went out to Theranos employees to gather upstairs for a meeting. The company had grown to more than seventy people. Everyone stopped what he or she was doing and assembled in front of Elizabeth’s office on the second floor. The mood was serious. Elizabeth had a frown on her face. She looked angry. Standing next to her was Michael Esquivel, a sharply dressed, fast-talking lawyer who had joined Theranos a few months earlier as its general counsel from Wilson Sonsini Goodrich & Rosati, Silicon Valley’s premier law firm. Esquivel did most of the talking. He said Theranos was suing three former employees for stealing its intellectual property. Their names were Michael O’Connell, Chris Todd, and John Howard. Howard had overseen all research and development and interviewed Ed before he was hired. Todd was Ed’s predecessor and had led the design of the 1.0 prototype. And O’Connell was an employee who had worked on the 1.0 cartridge until he left the previous summer. No one was to have any contact with them going forward and all emails and documents must be preserved, Esquivel instructed. He would be conducting a thorough investigation to gather evidence with the assistance of Wilson Sonsini. Then he added something that sent a jolt through the room. “We’ve called the FBI to assist us with the case.” Ed and Shaunak figured Gary Frenzel was probably freaked out by this turn of events. He was good friends with Chris Todd, Ed’s predecessor. Gary had worked with Todd for five years at two previous companies before following him to Theranos. After Todd had left Theranos in July 2006, he and Gary had remained in frequent contact, talking often on the phone and exchanging emails. Elizabeth and Esquivel must have found out and read Gary the riot act. He looked spooked. Shaunak had been friendly with Todd too and was able to quietly piece together what had happened. O’Connell, who had a postdoctorate in nanotechnology from Stanford, thought he had solved the microfluidic problems that hampered the Theranos system and had talked Todd into forming a company with him. They’d called it Avidnostics. O’Connell also held discussions with Howard, who’d provided some help and advice but declined to join their venture. Avidnostics was very similar to Theranos, except they planned on marketing their machine to veterinarians on the theory that regulatory approvals would be easier to obtain for a device that performed blood tests on animals rather than humans. They’d pitched a few VCs, unsuccessfully, at which point O’Connell had lost patience and emailed Elizabeth to ask her if she wanted to license their technology. Big mistake. Elizabeth had always worried about proprietary company information leaking out, to an extent that sometimes felt overblown. She required not just employees to sign nondisclosure agreements, but anyone else who entered Theranos’s offices or did business with it. Even within the company, she kept tight control over the flow of information. O’Connell’s actions confirmed her worst suspicions. Within days, she was laying the groundwork for a lawsuit. Theranos filed its fourteen-page complaint in California Superior Court on August 27, 2007. It requested that the court issue a temporary restraining order against the three former employees, appoint a special master “to ensure that they do not use or disclose Plaintiff’s trade secrets,” and award Theranos five different types of monetary damages. In the ensuing weeks and months, the atmosphere at the office became oppressive. Document retention emails landed in employees’ in-boxes with regularity and Theranos went into lockdown. The head of IT, a computer technician named Matt Bissel, deployed security features that made everyone feel under surveillance. You couldn’t put a USB drive into an office computer without Bissel knowing about it. One employee got caught doing just that and was fired. — AMID THE DRAMA, the competition between engineering teams intensified. The new group competing with Ed’s was headed by Tony Nugent. Tony was a gruff, no-nonsense Irishman who’d spent eleven years at Logitech, the maker of computer accessories, followed by a stint at a company called Cholestech that made a simpler version of what Theranos was trying to build. Its handheld product, the Cholestech LDX, could perform three cholesterol tests and a glucose test on small samples of blood drawn from a finger. Tony had initially been brought to Theranos as a consultant by Gary Hewett, Cholestech’s founder. He’d had to step into Hewett’s shoes when Hewett was fired after just five months as Theranos’s vice president of research and development. Hewett’s conviction when he’d arrived at Theranos was that microfluidics didn’t work in blood diagnostics because the volumes were too small to allow for accurate measurements. But he hadn’t had time to come up with much of an alternative. That job now fell to Tony. Tony decided that part of the Theranos value proposition should be to automate all the steps that bench chemists followed when they tested blood in a laboratory. In order to automate, Tony needed a robot. But he didn’t want to waste time building one from scratch, so he ordered a three-thousand-dollar glue-dispensing robot from a company in New Jersey called Fisnar. It became the heart of the new Theranos system. The Fisnar robot was a pretty rudimentary piece of machinery. It was a mechanical arm fixed to a gantry that had three degrees of motion: right and left; forward and back; and up and down. Tony fastened a pipette—a slender translucent tube used to transfer or measure out small quantities of liquid—to the robot and programmed it to make the movements that a chemist would make in the lab. With the help of another recently hired engineer named Dave Nelson, he eventually built a smaller version of the glue robot that fit inside an aluminum box a little wider and a little shorter than a desktop computer tower. Tony and Dave borrowed some components from the 1.0, like the electronics and the software, and added them to their box, which became the new reader. The new cartridge was a tray containing little plastic tubes and two pipette tips. Like its microfluidic predecessor, it could only be used once. You placed the blood sample in one of the tubes and pushed the cartridge into the reader through a little door that swung upward. The reader’s robotic arm then went to work, replicating the human chemist’s steps. First, it grabbed one of the two pipette tips and used it to aspirate the blood and mix it with diluents contained in the cartridge’s other tubes. Then it grabbed the other pipette tip and aspirated the diluted blood with it. This second tip was coated with antibodies, which attached themselves to the molecule of interest, creating a microscopic sandwich. The robot’s last step was to aspirate reagents from yet another tube in the cartridge. When the reagents came into contact with the microscopic sandwiches, a chemical reaction occurred that emitted a light signal. An instrument inside the reader called a photomultiplier tube then translated the light signal into an electrical current. The molecule’s concentration in the blood—what the test sought to measure—could be inferred from the power of the electrical current, which was proportional to the intensity of the light. This blood-testing technique was known as a chemiluminescent immunoassay. (In laboratory speak, the word “assay” is synonymous with “blood test.”) The technique was not new: it had been pioneered in the early 1980s by a professor at Cardiff University. But Tony had automated it inside a machine that, though bigger than the toaster-size Theranos 1.0, was still small enough to make Elizabeth’s vision of placing it in patients’ homes possible. And it only required about 50 microliters of blood. That was more than the 10 microliters Elizabeth initially insisted upon, but it still amounted to just a drop. By September 2007, four months after he’d started building it, Tony had a functioning prototype. One that performed far more reliably than the balky system Ed Ku was still laboring on in another part of the office. Tony asked Elizabeth what she wanted to call it. “We tried everything else and it failed, so let’s call it the Edison,” she said. What some employees had taken to derisively calling the “gluebot” was suddenly the new way forward. And it now had a far more respectable name, inspired by the man widely considered to be America’s greatest inventor. The decision to abandon the microfluidic system in favor of the Edison was ironic given that Theranos had just filed a lawsuit to protect the intellectual property underpinning the former. It was also bad news for Ed Ku. One morning a few weeks before Thanksgiving, Ed and his engineers were called into a conference room one after the other. When it was Ed’s turn, Tony, a human resources manager named Tara Lencioni, and the lawyer Michael Esquivel informed him that he was being let go. The company was heading in a new direction and it didn’t involve what he was working on, they said. Ed would have to sign a new nondisclosure and nondisparagement agreement if he wanted to get his severance. Lencioni and Esquivel walked him to his workspace to retrieve a few personal belongings and then escorted him out of the building. About an hour later, Tony glanced out the window and noticed that Ed was still standing outside, his jacket slung over his arm, looking lost. It turned out he hadn’t driven his car to the office that morning and was stranded. This was before the days of Uber, so Tony went to find Shaunak and, knowing that they were friends, asked him to drive Ed home. Shaunak followed Ed out the door two weeks later, albeit on friendlier terms. The Edison was at its core a converted glue robot and that was a pretty big step down from the lofty vision Elizabeth had originally sold him on. He was also unsettled by the constant staff turnover and the lawsuit hysteria. After about three and a half years, it felt like time to move on. Shaunak told Elizabeth he was thinking of going back to school and they agreed to part ways. She organized an office party to see him off. Theranos’s product might no longer be the groundbreaking, futuristic technology she’d envisioned, but Elizabeth remained as committed as ever to her company. In fact, she was so excited about the Edison that she started taking it out of the office almost immediately to show it off. Tony quipped to Dave that they should have built two before telling her about it. Jokes aside, Tony was a bit uncomfortable with her haste. He’d had a basic safety review done to make sure it wouldn’t electrocute anyone, but that was about the extent of it. He wasn’t even sure what sort of label to put on it. The lawyers weren’t of much help when he asked them, so he looked up Food and Drug Administration regulations on his own and decided that a “for research use only” sticker was probably the most appropriate. This was not a finished product and no one should be under the impression that it was, Tony thought. | THREE | Apple Envy F or a young entrepreneur building a business in the heart of Silicon Valley, it was hard to escape the shadow of Steve Jobs. By 2007, Apple’s founder had cemented his legend in the technology world and in American society at large by bringing the computer maker back from the ashes with the iMac, the iPod, and the iTunes music store. In January of that year, he unveiled his latest and biggest stroke of genius, the iPhone, before a rapturous audience at the Macworld conference in San Francisco. To anyone who spent time with Elizabeth, it was clear that she worshipped Jobs and Apple. She liked to call Theranos’s blood-testing system “the iPod of health care” and predicted that, like Apple’s ubiquitous products, it would someday be in every household in the country. In the summer of 2007, she took her admiration for Apple a step further by recruiting several of its employees to Theranos. One of them was Ana Arriola, a product designer who’d worked on the iPhone. Ana’s first meeting with Elizabeth was at Coupa Caf?, a hip coffee and sandwich place in Palo Alto that had become her favorite haunt outside the office. After filling her in on her background and her travels to Asia, Elizabeth told Ana she envisioned building a disease map of each person through Theranos’s blood tests. The company would then be able to reverse engineer illnesses like cancer with mathematical models that would crunch the blood data and predict the evolution of tumors. It sounded impressive and world changing to a medical neophyte like Ana, and Elizabeth seemed brilliant. But given that Ana would be leaving behind fifteen thousand Apple shares if she joined Theranos, she wanted to get her wife Corrine’s opinion. She arranged to meet Elizabeth again in Palo Alto, this time with Corrine present. Any hesitations she had were put to rest when Elizabeth made a big impression on Corrine too. Ana joined Theranos as its chief design architect. This mostly meant she was responsible for the overall look and feel of the Edison. Elizabeth wanted a software touchscreen similar to the iPhone’s and a sleek outer case for the machine. The case, she decreed, should have two colors separated by a diagonal cut, like the original iMac. But unlike that first iMac, it couldn’t be translucent. It had to hide the robotic arm and the rest of the Edison’s innards. She’d contracted out the case’s design to Yves B?har, the Swiss-born industrial designer whose reputation in the Valley was second only to Apple’s Jony Ive. B?har came up with an elegant black-and-white design that proved difficult to build. Tony Nugent and Dave Nelson spent countless hours molding sheet metal in an attempt to get it right. The case wouldn’t conceal the loud noises the robotic arm made, but Ana was satisfied that it would at least make the device presentable when Elizabeth took it out on demos. Ana felt that Elizabeth could use a makeover herself. The way she dressed was decidedly unfashionable. She wore wide gray pantsuits and Christmas sweaters that made her look like a frumpy accountant. People in her entourage like Channing Robertson and Don Lucas were beginning to compare her to Steve Jobs. If so, she should dress the part, she told her. Elizabeth took the suggestion to heart. From that point on, she came to work in a black turtleneck and black slacks most days. Ana was soon joined at Theranos by Justin Maxwell and Mike Bauerly, two other recruits hired to work on the design of the Edison’s software and other parts of the system that patients would interact with, like the packaging for the cartridges. Ana and Justin had worked together at Apple and knew Mike through his girlfriend, who had been a colleague of theirs there. It wasn’t long before the Apple transplants began noticing that Elizabeth and Theranos had their quirks. Ana would arrive early every morning for a daily seven-thirty meeting with Elizabeth to update her on design issues. When she pulled her car into the parking lot, Ana would find her jamming to loud hiphop music in her black Infiniti SUV, the blond streaks in her hair bouncing wildly. One day, as Justin walked into her office to update her on a project, Elizabeth motioned him over excitedly, saying she wanted to show him something. She pointed to a nine-inch-long metal paperweight on her desk. Etched on it was the phrase, “What would you attempt to do if you knew you could not fail?” She’d positioned it so the words were facing her and clearly found it inspiring. Having an idealistic boss wasn’t a bad thing, but there were other aspects of working at Theranos that were less pleasant. One of them was having to do daily battle with Matt Bissel, the head of IT, and his sidekick, Nathan Lortz. Bissel and Lortz had the company’s computer network set up in such a way that information was split into silos, hampering communication between employees and departments. You couldn’t even exchange instant messages with a coworker. The chat ports were blocked. It was all in the name of protecting proprietary information and trade secrets, but the end result was hours of lost productivity. The situation got so frustrating that Justin stayed up late one night and wrote a long email screed to Ana about it. “We have lost sight of our business objective. Did this company set out to ‘put a bunch of people in a room and prevent them from doing illegal things,’ or did it set out to ‘do something amazing with the best people, as quickly as possible’?” he fumed. Justin and Mike also got the distinct impression that Bissel and Lortz were spying on them and reporting their findings back to Elizabeth. The IT team always wanted to know what programs they were running on their computers and at times turned suspiciously friendly in what felt like transparent attempts to elicit seditious gossip. The snooping wasn’t confined to the IT guys. Elizabeth’s administrative assistants would friend employees on Facebook and tell her what they were posting there. One of the assistants kept track of when employees arrived and when they left so that Elizabeth knew exactly how many hours everyone put in. To entice people into working longer days, she had dinner catered every evening. The food often didn’t arrive until eight or eight thirty, which meant that the earliest you got out of the office was ten. The strange atmosphere got even stranger when the Theranos board convened once a quarter. Employees were instructed to appear busy and not to make eye contact with the board members when they walked through the office. Elizabeth ushered them into a big glass conference room and pulled down the shades. It felt like CIA agents conducting secret debriefings with an undercover operative. — ONE EVENING, Ana gave Justin and Aaron Moore, one of the engineers, a ride back to San Francisco. Aaron had dropped out of a Ph.D. program in microfluidics at MIT and come to work at Theranos in September 2006 after spotting a small job ad in a trade publication. He’d worked at the company nearly a year by the time Ana and Justin came on board. Aaron was smart enough to have gone to college at Stanford and grad school at MIT, but he didn’t take himself too seriously. He was originally from Portland, Oregon, and had the Portlandian hipster’s look: shaggy hair, a three-day beard, and earrings. He was also witty, all of which made him the one person at Theranos the Apple transplants could relate to. Ana, Justin, and Aaron all lived in San Francisco and commuted by car or train to the office. During their drive home that evening, Aaron shared some gripes he had with his new colleagues as they sat in traffic in Ana’s Prius. In case they hadn’t noticed yet, people were constantly getting fired at Theranos, Aaron told them. Ana and Justin had definitely noticed. The Ed Ku layoffs had just taken place. In addition to Ed, twenty other people had lost their jobs. It happened so fast that Ed had left a bunch of work tools behind, including a nice set of X-Acto precision cutting knives that Justin had fished out of a wastebasket and claimed as his own. Aaron mentioned that he was also troubled by the study with cancer patients in Tennessee. They’d never gotten the microfluidic system anywhere close to working properly and certainly not well enough to use on live patients, and yet Elizabeth had pushed ahead with the study. The shift to the new machine Tony built was an improvement, but Aaron felt they still didn’t have a good read on its performance. The engineering and chemistry groups weren’t communicating. Each was running tests on the parts of the system it was responsible for, but no one was conducting overall system tests. Ana listened with rising unease. She’d assumed Theranos had perfected its bloodtesting technology if it was going to be used on patients. Now Aaron was telling her it was still very much a work in progress. Ana knew the Tennessee study involved people dying of cancer. It bothered her to think they might be used as guinea pigs to test a faulty medical device. What Ana and Aaron didn’t know and what might have allayed their concerns somewhat is that the test results Theranos generated from the cancer patients’ blood would not be used to make any changes to their treatments. They were to be used only for research purposes, to help Pfizer assess the effectiveness of Theranos’s technology. But that was never clear to most Theranos employees because Elizabeth never explained the terms of the study. The next morning, Ana reached out to the person who’d introduced her to Theranos: her former Apple colleague Avie Tevanian. Avie was on Theranos’s board of directors. He was the one who’d put out feelers to Ana several months earlier and arranged for her to meet Elizabeth. Ana met Avie at a Peet’s Coffee in Los Altos and mentioned what she’d learned from Aaron Moore. She worried that Theranos was crossing an ethical line with the Tennessee study. Avie listened intently and told Ana he was beginning to have doubts of his own about the company. — AVIE WAS ONE of Steve Jobs’s oldest and closest friends. They’d worked together at NeXT, the software company Jobs created after being ousted from Apple in the mid1980s. When Jobs returned to Apple in 1997 he’d brought Avie over with him and made him the head of software engineering. A grueling decade later, Avie had called it quits. He’d made more money than he knew what to do with and wanted to enjoy more time with his wife and two kids. A few months into his retirement, a headhunter recruiting new directors for Theranos had approached him. Like Ana, Avie’s first meeting with Elizabeth had been at Coupa Caf?. She’d come across as a bright young lady who was passionate about what she was doing, exactly the qualities you looked for in an entrepreneur. Her eyes had lit up when he volunteered some pieces of management wisdom he’d learned at Apple. His long association with Jobs seemed an object of fascination to her. After their encounter, Avie had agreed to join the Theranos board and bought $1.5 million of company stock in its late 2006 offering. The first couple of board meetings Avie attended had been relatively uneventful, but, by the third one, he’d begun to notice a pattern. Elizabeth would present increasingly rosy revenue projections based on the deals she said Theranos was negotiating with pharmaceutical companies, but the revenues wouldn’t materialize. It didn’t help that Henry Mosley, the chief financial officer, had been fired soon after Avie became a director. At the last board meeting he’d attended, Avie had asked more pointed questions about the pharmaceutical deals and been told they were held up in legal review. When he’d asked to see the contracts, Elizabeth had said she didn’t have any copies readily available. There were also repeated delays with the product’s rollout and the explanation for what needed to be fixed kept changing. Avie didn’t pretend to understand the science of blood testing; his expertise was software. But if the Theranos system was in the final stages of fine-tuning as he’d been told, how could a completely different technical issue be the new holdup every quarter? That didn’t sound to him like a product that was on the cusp of commercialization. In late October 2007, he attended a meeting of the board’s compensation committee. Don Lucas, the board’s chairman, told the committee members that Elizabeth planned to create a foundation for tax-planning purposes and wanted the committee to approve a special grant of stock to it. Avie had noticed how much Don doted on Elizabeth. The old man treated her like a granddaughter. A portly gentleman with white hair who liked to wear broad-brim hats, Don was in his late seventies and was part of an older generation of venture capitalists who approached venture investing as if it were a private club. He’d mentored one famous entrepreneur in Larry Ellison. In Elizabeth, he clearly thought he’d found another. Except Avie didn’t think it was good corporate governance to do what Elizabeth wanted. Since she would control the foundation, she would also control the voting rights associated with the new stock, which would increase her overall voting stake. Avie didn’t think it was in other shareholders’ interest to give the founder more power. He objected. Two weeks later, he received a call from Don asking if they could meet. Avie drove to the old man’s office on Sand Hill Road. Elizabeth was really upset, Don informed him when he got there. She felt he was behaving unpleasantly during board meetings and didn’t think he should be on the board anymore. Don asked if he wanted to resign. Avie expressed surprise. He was just fulfilling his duties as a director; asking questions was one of them. Don agreed and said he thought Avie was doing an excellent job. Avie told Don he wanted to take a few days to think things over. When he got back to his house in Palo Alto, he decided to go back and look at all the documents he’d been given over the previous year as a board member, including the investment materials he’d received before he bought his shares. As he read them over, he realized that everything about the company had changed in the space of a year, including Elizabeth’s entire executive team. Don needed to see these, he thought. — IN THE MEANTIME, Ana Arriola was getting antsy. Ana was by nature excitable. She spoke quickly and was a constant whirlwind of activity. Most of the time, it was positive energy that she channeled into her work to great effect. But at times it could also turn into stress, anxiety, and drama. After their coffee, she’d stayed in contact with Avie and had learned from her former Apple colleague that Elizabeth wanted him off the board. She didn’t know what had prompted their rift, but it was an ominous development. Ana’s own relationship with Elizabeth was deteriorating. Elizabeth didn’t like being told no, and Ana had done so on several occasions when she’d found a demand Elizabeth made unreasonable. She was also getting put off by her secrecy. A designer might not be as crucial to this little enterprise as an engineer or a chemist, but she still needed to be in the information loop about the product’s development to do her job properly. Yet Elizabeth kept Ana on a need-to-know basis. During one of their early morning meetings, Ana confronted Elizabeth with what she’d heard from Aaron Moore about problems with the Theranos system. If they were still working out kinks in the technology, wasn’t it preferable to put the Tennessee study on pause and concentrate on fixing the problems first? They could always restart it once they got the machine working reliably, she told her. Elizabeth flatly rejected the idea. Pfizer and every other big drugmaker wanted her blood-testing system and Theranos was going to be a great company, she said. If Ana wasn’t happy, then perhaps she should reflect on whether this was the right place for her. “Think about it and then tell me what you want to do,” she said. Ana went back to her desk and stewed for several hours. She couldn’t shake the thought that forging on with the Tennessee study wasn’t the right thing to do. The fact that Elizabeth wanted Avie to leave the board was also unsettling. Ana trusted Avie and considered him a friend. If Avie and Elizabeth had a beef, she was inclined to side with Avie. By midafternoon, Ana had made up her mind. She wrote up a brief resignation letter and printed out two copies, one for Elizabeth and one for HR. Elizabeth was out of the office by then, so she slipped the letter under her door. On her way out, she typed out a quick email to let her know where to find it. Elizabeth emailed her back thirty minutes later, asking her to please call her on her cell phone. Ana ignored her request. She was done with Theranos. — DON LUCAS DIDN’T USE EMAIL. He’d seen his share of litigation over the years, including a wave of class-action lawsuits targeting Oracle in the early 1990s, and didn’t like the idea of leaving behind an electronic paper trail that might one day be used against him in court. If Avie wanted Don to see what he’d found, he’d have to show it to him in person. He reached out to Don’s two assistants and set up another meeting. On the appointed day, Avie showed up at Don’s office with hard copies of all the documents he had been given as a Theranos director. It amounted to hundreds of pages. Taken together, they betrayed a series of irreconcilable discrepancies, he told Don. The board had a problem on its hands, he said. It was possible Theranos could be fixed, but it wasn’t going to happen the way Elizabeth was managing things. He suggested they bring in some adult supervision. “Well, I think you should resign,” Don replied. He quickly added, “What are you planning to do with that stack of papers?” Avie was taken aback. Don didn’t even seem interested in hearing him out. The older man seemed concerned only with whether he was going to escalate the matter to the full board. After turning the situation over in his mind for a few moments, Avie decided to stand down. He’d retired from Apple for a reason. He didn’t need the aggravation. “OK, I’ll resign and I’ll leave these papers with you,” he said. As Avie got up to leave, Don said there was something else they needed to discuss. Shaunak Roy, Theranos’s first employee and de facto cofounder, was leaving the company and selling most of his founder’s shares back to Elizabeth. She needed the board to waive the company’s rights to repurchase the stock. Avie didn’t think that was a good idea but told Don to have the board vote the motion without him since he was resigning. “One more thing, Avie,” Don said. “I need you to waive your own rights to buy the shares.” Avie was starting to get ticked off. He was being asked to put up with a lot. He told Don to have Michael Esquivel, Theranos’s general counsel, send over the requisite documents. He would review them but made no promises. When the documents arrived, Avie read them carefully and concluded that, once the company itself waived its rights to repurchase Shaunak’s shares, it was entirely within his and other shareholders’ rights to buy some of them. He also noticed that Elizabeth had negotiated a sweetheart deal: Shaunak was willing to part with his 1.13 million shares for $565,000. That translated to 50 cents a share, an 82 percent discount to what he and other investors had paid more than a year earlier in Theranos’s last funding round. Some discount was warranted because Avie’s shares were preferred shares with higher claims on the company’s assets and earnings while Shaunak’s shares were common ones, but a discount that big was unheard of. Avie decided to exercise his rights and told Esquivel he wanted to acquire the pro-rata portion of Shaunak’s stock he was entitled to. The request did not go down well. A tense email exchange ensued between the two men that stretched into the Christmas holiday. At 11:17 p.m. on Christmas Eve, Esquivel sent Avie an email accusing him of acting in “bad faith” and warned him that Theranos was giving serious consideration to suing him for breach of his fiduciary duties as a board member and for public disparagement of the company. Avie was astonished. Not only had he done no such things, in all his years in Silicon Valley he had never come close to being threatened with a lawsuit. All over the Valley, he was known as a nice guy. A teddy bear. He didn’t have any enemies. What was going on here? He tried getting in touch with other members of the board, but none would respond to his calls. Unsure what to do, Avie consulted a friend who was a lawyer. Thanks to his Apple wealth, his personal balance sheet was bigger than Theranos’s, so the prospect of costly litigation didn’t really scare him. But after he filled his friend in on everything that had happened, the friend asked a question that helped him put the situation in perspective: “Given everything you now know about this company, do you really want to own more of it?” When Avie thought about it, the answer was no. Besides, it was the season of giving and rejoicing. He decided to let the matter rest and to put Theranos behind him. But before doing so, he wrote a parting letter to Don and emailed it to his assistants, along with a copy of the waiver the company had pressured him to sign. The brutal tactics used to get him to sign the waiver, he wrote, had confirmed “some of the worse concerns” he’d raised with Don about the way the company was being run. He didn’t blame Michael Esquivel, he added, because it was clear the attorney was just acting on orders from above. He closed the letter with I do hope you will fully inform the rest of the Board as to what happened here. They deserve to know that by not going along 100% “with the program” they risk retribution from the Company/Elizabeth. … Warmly, Avie Tevanian? | FOUR | Goodbye East Paly I n early 2008, Theranos moved to a new building on Hillview Avenue in Palo Alto. It was the Silicon Valley equivalent of moving from the South Bronx to Midtown Manhattan. Appearances in the Valley are paramount and for three years Theranos had been operating on the wrong side of the tracks. The “tracks” in this case were Route 101, otherwise known as the Bayshore Freeway. It separates Palo Alto, one of the most affluent towns in America, from its poorer sibling East Palo Alto, which once held the dubious distinction of being the country’s murder capital. The company’s old office was on the East Palo Alto side of the four-lane highway, next to a machine shop and across the street from a roofing contractor. It wasn’t the type of neighborhood wealthy venture capitalists liked to be seen in. The new address, by contrast, was right next to the Stanford campus and around the corner from HewlettPackard’s plush headquarters. It was pricey real estate that signaled Theranos was graduating to the big leagues. Don Lucas was pleased with the move. During a conversation with Tony Nugent, he made clear his disdain for the old location. “It’s nice to finally get Elizabeth out of East Paly,” he told Tony. The move was not fun for the person who had to make it happen, however. That job fell to Matt Bissel, the head of IT. Bissel was one of Elizabeth’s most trusted lieutenants. He’d joined Theranos in 2005 as employee number 17 and took his duties seriously. In addition to being responsible for the company’s IT infrastructure, his role also included security. He was the one who’d done the forensic analysis of the computer evidence for the Michael O’Connell lawsuit. Planning the move had taken up a big chunk of Matt’s time over the past several months. On Thursday, January 31, 2008, everything finally seemed ready. The movers were scheduled to arrive first thing the next morning to haul everything away. But at four that afternoon, Matt got pulled into a conference room with Michael Esquivel and Gary Frenzel. Elizabeth was conferenced in by phone from Switzerland, where she was conducting a second demonstration for Novartis some fourteen months after the faked one that had led to Henry Mosley’s departure. She’d just learned that the landlord would charge them rent for the month of February if they didn’t clear the premises by midnight. There was no way she was going to let that happen, she said. She instructed Matt to call the moving company and have the movers come immediately. Matt thought the odds that would happen were very low but agreed to try. He stepped out of the conference room and made the call. The moving company’s dispatcher laughed at him. No sir, rescheduling a corporate move at the eleventh hour wasn’t possible, he was told. Elizabeth was undeterred. She told Matt to call another moving company she had once used and to give them the job. Unlike the first company, this one wasn’t unionized. She was sure it would be more flexible. But when Matt called the second moving company and explained the situation, a person there strongly advised him to drop the idea. Unionized moving companies were all mob controlled, the person said. What Theranos was proposing to do risked devolving into violence. Even after hearing that sobering answer, Elizabeth wouldn’t let it go. Matt and Gary tried to reason with her by citing other obstacles. Gary raised the issue of their stockpile of blood samples. Supposing they managed to get a crew to come that day; the movers wouldn’t unload everything at the new address until tomorrow, he pointed out. How would they keep the blood at the proper temperature in the meantime? Elizabeth said they could use refrigerated trucks and keep them running in the parking lot overnight. After several crazed hours, Matt was finally able to talk some sense into her by pointing out that even if they somehow cleared the building by 11:59 p.m. that night, they would still have to conduct walkthroughs with state officials to demonstrate that they had properly disposed of any hazardous materials. Theranos was a biotech company, after all. Those walkthroughs would take weeks to schedule and no new tenant would be able to move in until they had occurred. In the end, the move took place the next day as originally planned, but the episode was the final straw for Matt. Part of him admired Elizabeth. She was one of the smartest people he’d ever met and she could be a really inspiring and energizing leader. He often joked that she could sell ice cream to Eskimos. But another part of him was tiring of her unpredictability and the constant chaos at the company. One aspect of Matt’s job had become increasingly distasteful to him. Elizabeth demanded absolute loyalty from her employees and if she sensed that she no longer had it from someone, she could turn on them in a flash. In Matt’s two and a half years at Theranos, he had seen her fire some thirty people, not counting the twenty or so employees who lost their jobs at the same time as Ed Ku when the microfluidic platform was abandoned. Every time Elizabeth fired someone, Matt had to assist with terminating the employee. Sometimes, that meant more than just revoking the departing employee’s access to the corporate network and escorting him or her out of the building. In some instances, she asked him to build a dossier on the person that she could use for leverage. There was one case in particular that Matt regretted helping her with: that of Henry Mosley, the former chief financial officer. After Elizabeth fired Mosley, Matt had stumbled across inappropriate sexual material on his work laptop as he was transferring its files to a central server for safekeeping. When Elizabeth found out about it, she used it to claim it was the cause of Mosley’s termination and to deny him stock options. Matt had reported to Mosley until he left and thought he’d done an excellent job of helping Elizabeth raise money for Theranos. He clearly shouldn’t have browsed porn on a work-issued laptop, but Matt didn’t think it was a capital offense that merited blackmailing him. And besides, it had been found after the fact. Saying it was the reason Mosley was fired simply wasn’t true. The way John Howard was treated also bothered him. When Matt reviewed all the evidence assembled for the Michael O’Connell lawsuit, he didn’t see anything proving that Howard had done anything wrong. He’d had contact with O’Connell but he’d declined to join his company. Yet Elizabeth insisted on connecting the dots a certain way and suing him too, even though Howard had been one of the first people to help her when she dropped out of Stanford, letting her use the basement of his house in Saratoga for experiments in the company’s early days. (Theranos later dropped the case against its three ex-employees when O’Connell agreed to sign his patent over to the company.) Matt had long wanted to start his own IT consulting firm and he decided this was the time to walk away and do it. When he informed Elizabeth of his decision, she looked at him in utter disbelief. She couldn’t comprehend how he could possibly trade in a job at a company that was going to revolutionize health care and change the world for that. She tried to entice him to stay with a raise and a promotion, but he turned her down. During his last couple of weeks at Theranos, what Matt had seen happen to numerous other employees started happening to him. Elizabeth wouldn’t speak to him anymore or even look at him. She offered one of his IT colleagues, Ed Ruiz, his position if Ed agreed to dig through Matt’s files and emails. But Ed was good friends with Matt and refused. In any case, there was nothing to find. Matt was squeaky-clean. Unlike Henry Mosley, he was able to keep his stock options and to exercise them. He left Theranos in February 2008 and started his own firm. Ed Ruiz joined him a few months later. — THERANOS’S NEW OFFICE in Palo Alto was nice, but it was actually too big for a startup that had just shrunk back down to fifty people after the Ed Ku layoffs. The main floor was a long rectangular expanse. Elizabeth insisted on clustering employees on one side of it, leaving a big empty stretch of space on the other. Once or twice, Aaron Moore tried to put it to use by coaxing several colleagues into a game of indoor soccer. Aaron grew closer to Justin Maxwell and Mike Bauerly after Ana Arriola’s sudden departure. Ana hadn’t given any of them a heads-up that she planned on quitting. She’d just marched out one day and hadn’t come back. It unsettled Justin the most because Ana was the one who’d talked him into leaving Apple to come to Theranos, but he tried to maintain a positive attitude. He told himself that if the company was moving to prime Palo Alto office space, then it must be doing something right. Shortly after the move, Aaron and Mike decided to conduct some informal “human factors” research with two of the Edison prototypes Tony Nugent and Dave Nelson had built. It was engineering-speak for putting them in people’s hands and seeing how they interacted with them. Aaron was curious to know how people handled pricking their fingers and the subsequent steps required to get the blood into the cartridge. He’d pricked his own finger so much while running internal tests that he no longer had any feeling in it. With Tony’s permission, they put the Edisons in the trunk of Aaron’s Mazda and drove up to San Francisco. Their plan was to take them around to friends’ startups in the city. First, they stopped at Aaron’s apartment in San Francisco’s Mission District to do some staging. They placed the machines on the wooden coffee table in Aaron’s living room and made sure they had everything else they needed: the cartridges, the lancets to draw the blood, and the small syringes called “transfer pens” used to put the blood in the cartridge. Aaron took photos with his digital camera to document what they were doing. The Yves B?har cases weren’t ready yet, so the devices had a primitive look. Their temporary cases were made from gray aluminum plates bolted together. The front plate tilted upward like a cat door to let the cartridge in. A rudimentary software interface sat atop the cat door at an angle. Inside, the robotic arm made loud, grinding sounds. Sometimes, it would crash against the cartridge and the pipette tips would snap off. The overall impression was that of an eighth-grade science project. When Aaron and Mike arrived at their friends’ offices, they were greeted with chuckles and cups of coffee. Everyone was a good sport, though, and agreed to go along with their little experiment. One of the stops was at Bebo, a social networking startup that was acquired by AOL a few weeks later for $850 million. As the day progressed, it became apparent that one pinprick often wasn’t enough to get the job done. Transferring the blood to the cartridge wasn’t the easiest of procedures. The person had to swab his finger with alcohol, prick it with the lancet, apply the transfer pen to the blood that bubbled up from the finger to aspirate it, and then press on the transfer pen’s plunger to expel the blood into the cartridge. Few people got it right on their first try. Aaron and Mike kept having to ask their test subjects to prick themselves multiple times. It got messy. There was blood everywhere. These difficulties confirmed what Aaron already suspected: the company was underestimating this part of the process. To assume that a fifty-five-year-old patient in his or her home was going to immediately master it was wishful thinking. And if you didn’t get this part right, it didn’t matter how well the rest of the system functioned; you weren’t going to get good results. When they got back to the office, Aaron passed on his findings to Tony and Elizabeth, but he could tell they didn’t think they were a priority. Aaron was getting frustrated and disillusioned. He’d initially bought into Elizabeth’s vision and found work at Theranos exciting. But after nearly two years, he was getting burned out. Among other issues, he didn’t get along with Tony, who’d become his boss. To get out from under him, he had asked to transfer from engineering to sales. He’d even spent a recent Saturday driving around shopping for a suit in the hope that Elizabeth would let him tag along on her trip to Switzerland. She didn’t, but she seemed to at least be taking his transfer request under advisement. A few days after the San Francisco excursion, Aaron was sipping a beer at home and downloading the pictures he’d taken when an idea for a joke came to him. Using Photoshop software, he took one of the pictures—it showed the twin Edison prototypes sitting side by side on dinner mats on his coffee table—and made a fake Craigslist ad. Above the photo and under a headline that read, “Theranos Edison 1.0 ‘readers’—mostly functional—$10,000 OBO,” he wrote: Up for grabs is a rare matching set of Theranos point-of-care diagnostic “Edison” devices. Billed as the “iPod of healthcare,” the Edison is a semiportable immunochemistry platform capable of performing multiplexed protein assays on a fingerstick sample of human or animal whole blood… I bought these units recently when I thought I was at risk of succumbing to septic shock. Now that I’ve tested my protein C and realized that I’m safely in the 4 ug/mL range, I no longer need a pre-production blood analytic device. My loss is your gain! $10k for the pair, $6000 apiece, OBO—would also be willing to consider trade for a comparable pre-clinical diagnostic device (i.e., Roche, Becton-Coulter [sic], Abaxis, Biosite, etc.). Comes with a supply of single use cartridges, pelican shipping cases, AC adapter, EU power adapters, and assorted blood collection accessories, leeches, etc. Aaron printed out the mock ad and took it with him to work the next day. When Justin and Mike spotted it on his desk, they thought it was hilarious. Mike decided it deserved a bigger audience and posted it on the wall in the men’s room. Then all hell broke loose. Someone took the ad down and brought it to Elizabeth, who thought it was real. She convened an emergency meeting of the senior managers and the lawyers. She was treating it as a full-blown case of industrial espionage and wanted an immediate investigation to find the culprit. Aaron decided he better fess up before things got further out of control. He sheepishly came forward and confessed to Tony. It was meant as an innocent prank, he explained. He thought people would find it amusing. Tony seemed understanding. He’d taken part in a few pranks of his own at Logitech when he worked there. But he warned Aaron that Elizabeth was furious. Later in the day, she called Aaron into her office and stared at him with dagger eyes. She was deeply disappointed in him, she told him. She didn’t find his little stunt funny at all, and neither did other employees. It was disrespectful to the people who’d worked so hard to make the product. He could forget about joining the sales team. She couldn’t put him in front of customers. This showed he represented the company poorly. Aaron went back to his cubicle with the knowledge that he was now squarely in Elizabeth’s doghouse. — A MOVE TO SALES would probably have been ill-advised anyway. Unbeknownst to Aaron, trouble was brewing in that corner of the company. A new employee named Todd Surdey had come on board to head up sales and marketing, a role previously played by Elizabeth herself. Todd was the consummate sales executive. Before joining Theranos, he had worked at several established companies, including most recently the German enterprise software juggernaut SAP. He was fit and good-looking, wore nice suits, and rolled up every day in a fancy BMW. During lunchtime, he pulled a carbon fiber road bike out of his trunk and went on rides in the nearby hills. Aaron liked to cycle too and accompanied Todd a few times in an attempt to buddy up to him before his prank put him in the penalty box with Elizabeth. Todd’s two sales subordinates were based on the East Coast, where all the big pharmaceutical companies were headquartered. One of them was Susan DiGiaimo, an employee who operated out of her home in New Jersey and had worked for Theranos for nearly two years. Susan had accompanied Elizabeth on numerous sales pitches to drugmakers and had listened uncomfortably as she promised them the moon. When the drugmakers’ executives asked if the Theranos system could be customized to suit their needs, Elizabeth would always answer, “Absolutely.” Soon after he started, Todd began asking Susan a lot of questions about the revenues Elizabeth was projecting from her deals with the drugmakers. She kept a spreadsheet with detailed revenue forecasts. The numbers were big, in the tens of millions of dollars for each deal. Susan told Todd that, based on what she knew, they were vastly overinflated. Moreover, no significant revenues would materialize unless Theranos proved to each partner that its blood system worked. To that effect, each deal provided for an initial tryout, a so-called validation phase. Some companies, like the British drugmaker AstraZeneca, weren’t willing to pay more than $100,000 for the validation phase, and all could walk away if they weren’t happy with the results. The 2007 study in Tennessee was the validation phase of the Pfizer contract. Its objective was to prove that Theranos could help Pfizer gauge cancer patients’ response to drugs by measuring the blood concentration of three proteins the body produces in excess when tumors grow. If Theranos failed to establish any correlation between the patients’ protein levels and the drugs, Pfizer could end their partnership and any revenue forecast Elizabeth had extrapolated from the deal would turn out to be fiction. Susan also shared with Todd that she had never seen any validation data. And when she went on demonstrations with Elizabeth, the devices often malfunctioned. A case in point was the one they’d just conducted at Novartis. After the first Novartis demo in late 2006 during which Tim Kemp had beamed a fabricated result from California to Switzerland, Elizabeth had continued to court the drugmaker and had arranged a second visit to its headquarters in January 2008. The night before that second meeting, Susan and Elizabeth had pricked their fingers for two hours in a hotel in Zurich to try to establish some consistency in the test results they were getting, to no avail. When they showed up at Novartis’s Basel offices the next morning, it got worse: all three Edison readers produced error messages in front of a room full of Swiss executives. Susan was mortified, but Elizabeth kept her composure and blamed a minor technical glitch. Based on the intel he was getting from Susan and from other employees in Palo Alto, Todd became convinced that Theranos’s board was being misled about the company’s finances and the state of its technology. He took his concerns to Michael Esquivel, the general counsel with whom he had established good rapport. Michael, it turned out, was developing his own suspicions. During a lunchtime run with a colleague from the new office to the Stanford Dish and back, he mentioned not feeling too good about Theranos’s pharmaceutical partnerships. He wouldn’t say more, but the colleague could tell something was bothering him. In March 2008, Todd and Michael approached Tom Brodeen, one of Theranos’s board members, and told him the revenue projections Elizabeth was touting to the board weren’t grounded in reality. They were hugely exaggerated and impossible to reconcile with the unfinished state of the product, they said. Brodeen was a seasoned businessman in his mid-sixties who had headed one of the big consulting firms as well as several technology companies. He hadn’t been on the Theranos board long, having joined at the request of Don Lucas in the fall of 2007. Given how new he was as a director, he advised Todd and Michael to take their account directly to Lucas, the board’s chairman. Coming just months after Avie Tevanian had raised similar concerns, Lucas took the matter seriously this time. In a way, he couldn’t afford not to: Todd was the son-in-law of one of Theranos’s investors, the venture capitalist B. J. Cassin. Cassin and Lucas were longtime friends. They had both invested in Theranos at the same time, during the startup’s Series B round in early 2006. Lucas convened an emergency meeting of the board in his office on Sand Hill Road. Elizabeth was asked to wait outside the door while the other directors—Lucas, Brodeen, Channing Robertson, and Peter Thomas, the founder of an early stage venture capital firm called ATA Ventures—conferred inside. After some discussion, the four men reached a consensus: they would remove Elizabeth as CEO. She had proven herself too young and inexperienced for the job. Tom Brodeen would step in to lead the company for a temporary period until a more permanent replacement could be found. They called in Elizabeth to confront her with what they had learned and inform her of their decision. But then something extraordinary happened. Over the course of the next two hours, Elizabeth convinced them to change their minds. She told them she recognized there were issues with her management and promised to change. She would be more transparent and responsive going forward. It wouldn’t happen again. Brodeen wasn’t exactly dying to come out of retirement to run a startup in a field in which he had no expertise, so he took a neutral stance and watched as Elizabeth used just the right mix of contrition and charm to gradually win back his three board colleagues. It was an impressive performance, he thought. A much older and more experienced CEO skilled in the art of corporate infighting would have been hard-pressed to turn the situation around like she had. He was reminded of an old saying: “When you strike at the king, you must kill him.” Todd Surdey and Michael Esquivel had struck at the king, or rather the queen. But she’d survived. — THE QUEEN DIDN’T WASTE any time putting down the rebellion. Elizabeth fired Surdey first and Esquivel a few weeks later. To Aaron Moore, Mike Bauerly, and Justin Maxwell, this new purge was one more negative development. They weren’t privy to what had happened, but they did know that Theranos had lost two good employees. Todd and Michael weren’t just nice guys they got along with, they were smart and principled colleagues. In Mike Bauerly’s words, they were cut from good cloth. The firings caused Justin to further sour on Theranos. The staff turnover was like nothing he’d ever experienced before and he was troubled by what he saw as a culture of dishonesty at the company. The worst offender was Tim Kemp, the head of the software team. Tim was a yes-man who never leveled with Elizabeth about what was feasible and what wasn’t. For instance, he’d contradicted Justin and assured her they could write the Edison software’s user interface faster in Flash than in jаvascript. The very next morning, Justin had spotted a Learn Flash book on his desk. Elizabeth never reprimanded Tim, even when obvious examples of his duplicity were brought to her attention. She valued his loyalty and, in her eyes, the fact that he never said no to her reflected a can-do attitude. It mattered little that many of his colleagues thought Tim was a mediocrity and a terrible manager. There was one incident involving Elizabeth herself that also didn’t sit well with Justin. During an email exchange one evening, he asked her for a piece of information he needed to write a section of software. She responded that she’d look for it when she was back at work the next morning. The clear implication was that she had gone home. But minutes later, he stumbled on her in Tony Nugent’s office down the hall. Justin got angry and stormed off. Elizabeth came by his office a little later to say she understood why he was upset, but she warned him, “Don’t ever walk off on me again.” Justin tried to remind himself that Elizabeth was very young and still had a lot to learn about running a company. In one of their last email exchanges, he recommended two management self-help books to her, The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t and Beyond Bullsh*t: Straight-Talk at Work, and included their links on Amazon.com. He quit two days later. His resignation email read in part: good luck and please do read those books, watch The Office, and believe in the people who disagree with you…Lying is a disgusting habit, and it flows through the conversations here like it’s our own currency. The cultural disease here is what we should be curing before we try to tackle obesity…I mean no ill will towards you, since you believe in what I was doing and hoped I would succeed at Theranos. I feel like I owe you this bad attempt at an exit interview since we have no HR to officially record it. Upset, Elizabeth called him into her office, told him she disagreed with his criticism, and asked him to resign “with dignity.” Justin agreed to help smooth the transition by sending his colleagues an email with detailed instructions about where to find the various projects he’d been working on. But as he sat down to write it, he couldn’t resist including a few personal thoughts on the state of those projects, earning him one last reprimand from Elizabeth. Aaron Moore and Mike Bauerly stayed at Theranos a few more months, but their hearts were no longer in it. One of the nice features of the new office was that it had a big terrace above the building’s entrance. Mike had furnished it with deck chairs and a hammock. Aaron and Mike would retreat there for long coffee breaks, the afternoon sun pleasantly warming their faces as they bantered. Aaron felt someone needed to tell Elizabeth to pump the brakes and to stop pushing to commercialize a product that they were still trying to get to work. But for her to listen, the message had to come from one of the three senior managers—Tim, Gary, or Tony— and none of them were willing to tell her. Tony, who was under a lot of pressure from Elizabeth, finally had enough of hearing Aaron’s complaints and asked him to leave the company. “Go find a place where you can be a big fish in a small pond,” he told him. Aaron agreed that it was time for him to go. To his surprise, Elizabeth tried to convince him to stay. It turned out she thought highly of him despite his prank. But his mind was made up. He resigned in June 2008. Mike Bauerly followed in December. Every member of the Apple contingent had now moved on, marking the end of a chaotic period for the company. Elizabeth had survived an aborted board coup and was back firmly in control. Remaining Theranos employees looked forward to calmer and quieter times. But their hopes would soon be dashed. | FIVE | The Childhood Neighbor W hile Elizabeth was busy building Theranos, an old family acquaintance was taking an interest in what she was doing from afar. His name was Richard Fuisz. He was an entrepreneur–cum–medical inventor with a big ego and a colorful background. The Holmes and Fuisz families had known each other for two decades. They first met in the 1980s as neighbors in Foxhall Crescent, a leafy neighborhood of stately homes in Washington, D.C., surrounded by woodlands and abutting the Potomac River. Elizabeth’s mother, Noel, and Richard’s wife, Lorraine, struck up a close friendship. Both were stay-at-home mothers back then, raising children of similar ages. Lorraine’s son was in Elizabeth’s class at St. Patrick’s Episcopal Day School, the neighborhood’s private elementary school. Noel and Lorraine were in and out of each other’s houses. They shared a weakness for Chinese food and often went out for lunch while the children were in school. Elizabeth and her brother attended the Fuisz children’s birthday parties and frolicked in the Fuiszes’ pool. One evening, the power went out in the Fuisz home while Richard was away, so the Holmeses took Lorraine and her two children, Justin and Jessica, in for the night. The relationship between their husbands wasn’t as warm. While Chris Holmes had to make do on a government salary, Richard Fuisz was a successful businessman and wasn’t shy about flaunting it. A licensed doctor, he had sold a company that made medical-training films for more than $50 million a few years earlier and drove a Porsche and a Ferrari. He was also a medical inventor who licensed out his patents and reaped the royalties. During one excursion the families made together to the zoo, Justin Fuisz remembers, Elizabeth’s younger brother, Christian, told him, “My dad thinks your dad is an asshole.” When Justin later repeated the comment to his mother, Lorraine chalked it up to jealousy. Money was indeed a sore point in the Holmes household. Chris’s grandfather, Christian Holmes II, had depleted his share of the Fleischmann fortune by living a lavish and hedonistic lifestyle on an island in Hawaii, and Chris’s father, Christian III, had frittered away what was left during an unsuccessful career in the oil business. Whatever simmering resentments Chris Holmes harbored did not prevent Noel Holmes and Lorraine Fuisz from being good friends. The two women stayed in regular contact even after the Holmeses moved away, first to California and then to Texas. When the Holmeses returned to Washington for a brief period in between, the Fuiszes took them out to a nice restaurant to celebrate Noel’s fortieth birthday. Lorraine arranged the outing to make up for the fact that Chris hadn’t thrown his wife a party. Lorraine later visited Noel in Texas several times, and they also traveled to New York City together to shop and sightsee. They brought the children along once and booked rooms at the Regency Hotel on Park Avenue. In a photo from that trip, Elizabeth can be seen standing arm in arm between her mother and Lorraine in front of the hotel. She’s wearing a light blue summer dress and pink bows in her hair. On subsequent trips, Noel and Lorraine left the children at home and stayed in an apartment the Fuiszes purchased in the Trump International Hotel and Tower on Central Park West. In 2001, Chris Holmes hit a rough patch in his career. He had left Tenneco to take a position at Enron, Houston’s most prominent corporation. When Enron’s fraudulent practices were exposed and it went bankrupt in December of that year, he lost his job like thousands of other employees. In the aftermath, he paid a visit to Richard Fuisz in search of job leads and business advice. With one of his sons from a previous marriage, Fuisz had started a new company around one of his inventions: a thin strip that dissolved in the mouth and delivered drugs to the bloodstream faster than traditional pills. He and his son, Joe, ran it from a suite of offices in Great Falls, Virginia. Chris Holmes came in looking haggard and glum, Joe Fuisz recalls. He mused aloud about trying his hand at consulting and indicated that he and Noel were desperate to move back to Washington. Having just purchased a new house in the affluent Beltway suburb of McLean, Richard Fuisz offered him use of the one he and Lorraine had just vacated across the street, rent-free. They hadn’t bothered to list it yet. Chris mouthed a “thank you” but didn’t take him up on the offer. — CHRIS AND NOEL HOLMES DID eventually move back to Washington four years later when Chris got a job at the World Wildlife Fund. At first, they stayed with friends in Great Falls while they looked for a new place to live. As Noel toured houses, she called Lorraine frequently to update her on her search. Over lunch one day, the topic turned to Elizabeth and what she was up to. Noel proudly told Lorraine that her daughter had invented a wrist device that could analyze a person’s blood and started a company to commercialize it. The reality was that Theranos was already moving on from Elizabeth’s original patch idea at that point, but that lost nuance hardly mattered in the chain of events Noel’s lunchtime confidence unleashed. When she got home, Lorraine repeated what Noel had told her to her husband, thinking it might be of interest to him as a fellow medical inventor. What she probably didn’t anticipate is how he would react. Richard Fuisz was a vain and prideful man. The thought that the daughter of longtime friends and former neighbors would launch a company in his area of expertise and that they wouldn’t ask for his help or even consult him deeply offended him. As he would put it years later in an email, “The fact that the Holmes family was so willing to partake of our hospitality (New York apartment, dinners, etc.) made it particularly bitter to me that they would not ask for advice. Essentially the message was, ‘I’ll drink your wine but I won’t ask you for advice in the very field that paid for the wine.’?” — FUISZ HAD A HISTORY of taking slights personally and bearing grudges. The lengths he was willing to go to get even with people he perceived to have crossed him is best illustrated by his long and protracted feud with Vernon Loucks, the CEO of hospital supplies maker Baxter International. Throughout the 1970s and early 1980s, Fuisz traveled a lot to the Middle East, which had become the biggest market for Medcom, his medical film business. On his way back, he usually spent a night in Paris or London and from there took the Concorde, the supersonic passenger jet operated by British Airways and Air France, back to New York. During one of these stopovers in 1982, he ran into Loucks at the Plaza Ath?n?e hotel in Paris. At the time, Baxter was eager to expand into the Middle East. Over dinner, Loucks offered to buy Medcom for $53 million and Fuisz accepted. Fuisz was supposed to stay on to head the new Baxter subsidiary for three years, but Loucks dismissed him shortly after the acquisition closed. Fuisz sued Baxter for wrongful termination, alleging that Loucks had fired him for refusing to pay a $2.2 million bribe to a Saudi firm to get Baxter off an Arab blacklist of companies that did business with Israel. The two sides reached a settlement in 1986, under which Baxter agreed to pay Fuisz $800,000. That wasn’t the end of it, however. When Fuisz flew to Baxter’s Deerfield, Illinois, headquarters to sign the settlement, Loucks refused to shake his hand, angering Fuisz and putting him back on the warpath. In 1989, Baxter was taken off the Arab boycott list, giving Fuisz an opening to seek his revenge. He was leading a double life as an undercover CIA agent by then, having volunteered his services to the agency a few years earlier after coming across one of its ads in the classified pages of the Washington Post. Fuisz’s work for the CIA involved setting up dummy corporations throughout the Middle East that employed agency assets, giving them a non-embassy cover to operate outside the scrutiny of local intelligence services. One of the companies supplied oil-rig operators to the national oil company of Syria, where he was particularly well connected. Fuisz suspected Baxter had gotten itself back in Arab countries’ good graces through chicanery and set out to prove it using his Syrian connections. He sent a female operative he’d recruited to obtain a memorandum kept on file in the offices of the Arab League committee in Damascus that was in charge of enforcing the boycott. It showed that Baxter had provided the committee detailed documentation about its recent sale of an Israeli plant and promised it wouldn’t make new investments in Israel or sell the country new technologies. This put Baxter in violation of a U.S. anti-boycott law, enacted in 1977, that forbade American companies from participating in any foreign boycott or supplying blacklist officials any information that demonstrated cooperation with the boycott. Fuisz sent one copy of the explosive memo to Baxter’s board of directors and another to the Wall Street Journal, which published a front-page story about it. Fuisz didn’t let the matter rest there. He subsequently obtained and leaked letters Baxter’s general counsel had written to a general in the Syrian army that corroborated the memo. The revelations led the Justice Department to open an investigation. In March 1993, Baxter was forced to plead guilty to a felony charge of violating the anti-boycott law and to pay $6.6 million in civil and criminal fines. The company was suspended from new federal contracts for four months and barred from doing business in Syria and Saudi Arabia for two years. The reputational damage also cost it a $50 million contract with a big hospital group. For most people, this would have been ample vindication. But not for Fuisz. It irked him that Loucks had survived the scandal and remained CEO of Baxter. So he decided to subject his foe to one last indignity. Loucks was a Yale alumnus and served as a trustee of the Yale Corporation, the university’s governing body. He was also chairman of its fund-raising campaign. As he did every year in his capacity as a trustee, he was scheduled to attend Yale’s commencement exercises in New Haven, Connecticut, that May. Through his son Joe, who had graduated from Yale the year before, Fuisz got in touch with a student named Ben Gordon, who was the president of the Yale Friends of Israel association. Together, they organized a graduation day protest featuring “Loucks Is Bad for Yale” signs and leaflets. The crowning flourish was a turboprop plane Fuisz hired to fly over the campus trailing a banner that read, “Resign Loucks.” Three months later, Loucks stepped down as a Yale trustee. — DRAWING TOO CLOSE a parallel between Fuisz’s vendetta against Loucks and the actions he would take with respect to Theranos would be an oversimplification, however. As much as he was annoyed by what he perceived as the Holmeses’ ingratitude, Fuisz was also an opportunist. He made his money patenting inventions he anticipated other companies would someday want. One of his most lucrative plays involved repurposing a cotton candy spinner to turn drugs into fast-dissolving capsules. The idea came to him when he took his daughter to a country fair in Pennsylvania in the early 1990s. He later sold the public corporation he formed to house the technology to a Canadian pharmaceutical company for $154 million and personally pocketed $30 million from the deal. After Lorraine relayed what Noel had told her, Fuisz sat down at his computer in the sprawling seven-bedroom home they occupied in McLean and googled “Theranos.” The house was so spacious that he had turned its great room, which had a high vaulted ceiling and a massive stone fireplace, into his personal study. His Jack Russell liked to lie in front of the fireplace while he worked. Fuisz came upon the startup’s website. The home page gave a cursory description of the microfluidic system Theranos was developing. Under the website’s News tab, he also found a link to a radio interview Elizabeth had given to NPR’s “BioTech Nation” segment a few months earlier, in May 2005. In the interview, she’d described her bloodtesting system in more detail and explained the use she foresaw for it: at-home monitoring of adverse reactions to drugs. Fuisz listened to the NPR interview several times while gazing out the window at the koi pond in his yard and decided there was some merit to Elizabeth’s vision. But as a trained physician, he also spotted a potential weakness he could exploit. If patients were going to test their blood at home with the Theranos device to monitor how they were tolerating the drugs they were taking, there needed to be a built-in mechanism that would alert their doctors when the results came back abnormal. He saw a chance to patent that missing element, figuring there was money to be made down the road, whether from Theranos or someone else. His thirty-five years of experience patenting medical inventions told him such a patent might eventually command up to $4 million for an exclusive license. At 7:30 on the evening of Friday, September 23, 2005, Fuisz sent an email to his longtime patent attorney, Alan Schiavelli of the law firm Antonelli, Terry, Stout & Kraus, with the subject line “Blood Analysis—deviation from norm (individualized)”: Al, Joe and I would like to patent the following application. It is a know [sic] art to check variou [sic] blood parameters like blood glucose, electrolytes, platelet activity, hematocrit etc. What we would like to cover as an improvement is the presence of a memory chip or other such storage device which could be programmed by a computer or similar device and contain the “normal parameters” for the individual patient. Thus if results would differ significantly from these norms—a notice would be given the user or health professional to repeat the sampling. If the significant difference persists on the retest, the device using existing technology well known in the art, to contact the physician, care center. [sic] pharma company or other or all. Please let me know next week if you could cover this. Thx. Rcf Schiavelli was busy with other matters and didn’t respond for several months. Fuisz finally got his attention on January 11, 2006, when he sent him another email saying he wanted to make a modification to his original idea: the alert mechanism would now be “a bar code or a radio tag label” on the package insert of the drug the patient was taking. A chip in the blood-testing device would scan the bar code and program the device to automatically send an alert to the patient’s doctor if and when the patient’s blood showed side effects from the drug. Fuisz and Schiavelli exchanged more emails refining the concept, culminating in a fourteen-page patent application they filed with the U.S. Patent and Trademark Office on April 24, 2006. The proposed patent didn’t purport to invent groundbreaking new technology. Rather, it combined existing ones—wireless data transmission, computer chips, and bar codes—into a physician alert mechanism that could be embedded in athome blood-testing devices made by other companies. It made no secret of which particular company it was targeting: it mentioned Theranos by name in the fourth paragraph and quoted from its website. Patent applications don’t become public until eighteen months after they’re filed, so neither Elizabeth nor her parents were initially aware of what Fuisz had done. Lorraine Fuisz and Noel Holmes continued to see each other regularly. The Holmeses settled into a new apartment they purchased on Wisconsin Avenue near the Naval Observatory. Lorraine drove over from McLean on several occasions and accompanied Noel, clad in her jogging suit, on walks through the neighborhood. One day, Noel came over to the Fuisz home for lunch. Richard joined them out on the house’s big stone patio and the conversation drifted to Elizabeth. She had just been profiled in Inc. magazine alongside several other young entrepreneurs, including Facebook’s Mark Zuckerberg. The press her daughter was beginning to garner was a source of great pride to Noel. As they nibbled on a meal Lorraine had picked up from a McLean gourmet shop, Fuisz suggested to Noel in a syrupy singsong voice he employed when he turned on the charm that he could be of assistance to Elizabeth. It was easy for a small company like Theranos to be taken advantage of by bigger ones, he noted. He didn’t reveal his patent filing, but the comments may have been enough to put the Holmeses on alert. From that point on, interactions between the two couples became fraught. The Fuiszes and Holmeses met twice for dinner in the waning months of 2006. One dinner was at Sushiko, a Japanese restaurant down the road from Chris and Noel’s new apartment. Chris didn’t eat much that evening. While visiting Elizabeth in Palo Alto, complications from a recent surgery had forced him to make a detour to Stanford Hospital. Fortunately, Elizabeth’s boyfriend, Sunny, had arranged for him to stay in the hospital’s VIP suite and covered the bill, he told the Fuiszes. The conversation turned to Theranos, which had completed its second round of funding earlier in the year. Chris mentioned that the fund-raising had attracted some of the biggest investors in Silicon Valley, which was a good thing, he added, because he and Noel had put the $30,000 they’d saved for Elizabeth’s Stanford tuition into the company. The dinner then apparently grew testy for reasons that aren’t entirely clear. Richard and Chris had never gotten along and Richard may have said something that got under the other man’s skin. Whatever the case, according to Lorraine, Chris Holmes criticized the Chanel necklace she was wearing and later, after they’d settled the bill and wandered out onto Wisconsin Avenue, made what seemed like a veiled threat by bringing up the fact that John Fuisz, another one of Fuisz’s sons from his first marriage, worked for his best friend. John Fuisz was indeed an attorney at the law firm McDermott Will & Emery, where Chris Holmes’s closest friend, Chuck Work, was a senior partner. Afterward, Noel and Lorraine’s friendship began to fray. It had always been an odd pairing. Lorraine was originally from working-class Queens, a background betrayed by her coarse New York City accent. Noel, by contrast, was the epitome of the worldly Washington establishment woman. She’d spent part of her youth in Paris, when her father was assigned to the headquarters of the European Command. In the following months, the two women got together for coffee several more times. But Chris Holmes, perhaps because he suspected that Richard Fuisz was up to something, always insisted on joining them, making their interactions awkward and tense. During one encounter, at Dean & DeLuca in Georgetown, the conversation became strained as they discussed the recent death of Lorraine’s brother and the cat he’d left behind. Lorraine agonized about what to do with the cat, which seemed to exasperate Chris. He told her to just get rid of it and mimicked grabbing it and putting it in a bag. “The cat is not important,” he said impatiently. Since the Holmeses’ move back to Washington, Noel had been going to the same hair salon as Lorraine in Tysons Corner, Virginia. They shared a hairdresser there named Claudia. As she was cutting Lorraine’s hair one day, Claudia asked whether she and Noel were having problems. Noel had apparently been venting to Claudia. Embarrassed, Lorraine said she didn’t want to talk about it and changed the subject. Lorraine Fuisz and Noel Holmes saw each other one more time when Lorraine paid a visit to the Holmeses’ apartment bearing cakes around Christmas 2007. Elizabeth, who was in town for the holidays, must have known that her parents and the Fuiszes were on the outs. She didn’t say much and stole sidelong glances at her mother’s friend. Fuisz’s patent application became available about a week later, on January 3, 2008, to anyone who performed a search in the USPTO’s online database. However, Theranos didn’t learn of its existence for another five months until Gary Frenzel, the head of Theranos’s chemistry team, came across it and called it to Elizabeth’s attention. By then, the Holmeses and the Fuiszes were no longer on speaking terms and Fuisz was referring to his patent filing in conversations with his wife as “the Theranos killer.” — THAT SUMMER, Chris Holmes went to see his old friend Chuck Work at the Washington offices of McDermott Will & Emery, two blocks east of the White House. Chris and Chuck were longtime friends. They’d met in 1971 when Chuck gave Chris a ride to an Army Reserve meeting. Although Chuck was five years older, they’d quickly realized they had a lot in common: they were both from California and had attended the same high school and college, the Webb Schools in Claremont, California, and Wesleyan University in Middletown, Connecticut. Through the years, Chuck had often lent Chris a helping hand. After Enron collapsed, he let Chris use a visitor’s office at his firm to conduct his job search. When Elizabeth’s brother, Christian, had to leave St. John’s high school in Houston because of what Chris described as a prank involving a film projector, Chuck was able to help Christian get into Webb because he served on the school’s board. And when Elizabeth later dropped out of Stanford and needed help filing her first patent, Chuck put her in touch with colleagues at McDermott who specialized in that kind of work. That was precisely the subject of Chris Holmes’s visit on that summer day in 2008. Chris was agitated. He told Chuck someone named Richard Fuisz had stolen Elizabeth’s idea and patented it. Fuisz, Chris noted pointedly, had a son who worked at McDermott named John. Chuck vaguely knew who John Fuisz was. Their paths had crossed once or twice at the firm when they’d overlapped on a case. He was also aware that McDermott had served as Theranos’s patent attorneys for several years, since he was the one who’d made the initial introduction. But the rest of what Chris was saying was out of left field. He had no idea who Richard Fuisz was nor what patent he was referring to. As a favor to his old friend, he nevertheless agreed to see Elizabeth. She came by a few weeks later, on September 22, 2008, and met with Chuck and another attorney named Ken Cage. Chuck had been McDermott’s managing partner when the firm moved to the Robert A. M. Stern limestone building it occupied on Thirteenth Street, so he had the biggest and nicest corner office on the eighth floor. Elizabeth came in wheeling her blood-testing machine and sat down in one of two love seats placed catty-corner next to the office’s big bay window. She didn’t offer to demonstrate how the device worked, but Chuck thought it looked impressive at first glance. It was a big, shiny black-and-white cube with a digital touchscreen that bore a clear resemblance to an iPhone’s. Elizabeth got straight to the point. She wanted to know if McDermott would agree to represent Theranos against Richard Fuisz. Ken said they could look into filing a patent interference case if that’s what she had in mind. Interference cases are contests adjudicated by the Patent and Trademark Office to determine who of two rival applicants vying to patent the same invention came up with it first. The winner’s application gets priority even if it was filed later. Ken specialized in these types of cases. Chuck was hesitant to do that, though. He told Elizabeth he would have to think about it and talk to some of his colleagues. Fuisz had a son who was a partner at the firm, which made the situation awkward, he said. Elizabeth didn’t blink at the mention of John Fuisz. It was the opening she was waiting for. She asked whether it was possible that John had accessed confidential information from McDermott’s Theranos file and leaked it to his father. That seemed far-fetched to Chuck. It was the sort of thing that would get an attorney fired and disbarred. John was a patent litigator. He wasn’t part of McDermott’s separate patent prosecution team that drafted and filed patents. He had no reason or justification for accessing Theranos’s file. Besides, he was a partner at the firm. Why would he commit career suicide? It didn’t make sense. What’s more, Theranos had moved all its patent work to the Silicon Valley law firm Wilson Sonsini two years earlier, in 2006. Chuck remembered Chris calling him and telling him apologetically at the time that Larry Ellison insisted Elizabeth use that firm. McDermott had obliged and transferred everything over to them. There was nothing for a McDermott attorney left to access. After Elizabeth departed, Chuck consulted the heads of the firm’s patent prosecution and patent litigation teams. The latter was John Fuisz’s boss. He was told Theranos might have a plausible interference case against Richard Fuisz, but John Fuisz was a partner in good standing and the optics of the firm going up against the parent of one of its own partners were messy. Chuck decided to turn down Elizabeth’s request. He informed her of his decision with a phone call a few weeks later. That was the last Chuck and McDermott expected to hear of the matter. | SIX | Sunny C helsea Burkett was burning out. It was the late summer of 2009 and she was working long hours at a Palo Alto startup, juggling what at a more established company would have been five different roles. Not that she was averse to hard work. Like most twenty-five-year-old Stanford graduates, striving was in her DNA. But she yearned for a little inspiration and she wasn’t getting any from her job: Doostang, her employer, was a career website for finance professionals. Chelsea had been one of Elizabeth’s best friends at Stanford. As freshmen, they’d lived in adjacent dorms in Wilbur Hall, a big residential complex on the eastern edge of campus, and had immediately hit it off. Elizabeth wore a red-white-and-blue “Don’t mess with Texas” T-shirt and a big smile the first time they met. Chelsea found her sweet, smart, and fun. Both were social and outgoing, with matching blue eyes. They did their share of drinking and partying and pledged a sorority, partly as a play for better housing. But, while Chelsea was a regular teenager still trying to find herself, Elizabeth seemed to know exactly who she wanted to be and what she wanted to do. When she returned to campus with a patent she’d written at the beginning of sophomore year, Chelsea was blown away. The two young women had stayed in touch in the five years since Elizabeth had dropped out of school to launch Theranos. They didn’t see each other often, but they texted occasionally. During one of these exchanges, Chelsea mentioned her job blues, prompting Elizabeth to write back, “Why don’t you come work for me?” Chelsea went to see Elizabeth at the Hillview Avenue office. It didn’t take her friend long to sell her on Theranos. Elizabeth talked fervently about a future in which the company would save lives with its technology. It sounded a lot more interesting and noble to Chelsea than helping investment bankers find jobs. And Elizabeth was so persuasive. She had this intense way of looking at you while she spoke that made you believe in her and want to follow her. They quickly settled on a role for Chelsea: she would work in the client solutions group, which was in charge of setting up the validation studies Theranos was conducting to try to win pharmaceutical companies’ business. Chelsea’s first assignment would be to organize a study with Centocor, a division of Johnson & Johnson. When she reported for her new job a few days later, Chelsea learned that she wasn’t the only friend Elizabeth had hired. Just a week earlier, Ramesh “Sunny” Balwani had come on board as a senior Theranos executive. Chelsea had met Sunny once or twice but didn’t know him well. She just knew he was Elizabeth’s boyfriend and that they were living together in an apartment in Palo Alto. Elizabeth hadn’t mentioned anything about Sunny joining the company, yet Chelsea now faced the reality of having to work with him. Or was it for him? She wasn’t sure whether she reported to Sunny or to Elizabeth. Sunny’s title, executive vice chairman, was both lofty and vague. Whatever his role was meant to be, he didn’t waste any time asserting himself. From the get-go, he involved himself in every aspect of the company and became omnipresent. Sunny was a force of nature, and not in a good way. Though only about five foot five and portly, he made up for his diminutive stature with an aggressive, in-your-face management style. His thick eyebrows and almond-shaped eyes, set above a mouth that drooped at the edges and a square chin, projected an air of menace. He was haughty and demeaning toward employees, barking orders and dressing people down. Chelsea took an immediate dislike to him even though he made an effort to be nicer to her in deference to her friendship with Elizabeth. She didn’t understand what her friend saw in this man, who was nearly two decades older than she was and lacking in the most basic grace and manners. All her instincts told her Sunny was bad news, but Elizabeth seemed to have the utmost confidence in him. — SUNNY HAD BEEN a presence in Elizabeth’s life since the summer before she went to college. They’d met in Beijing in her third year attending Stanford’s Mandarin program. Elizabeth had struggled to make friends that summer and gotten bullied by some of the students on the trip. Sunny, the lone adult among a group of college kids, had stepped in and come to her aid. That’s how Elizabeth’s mother, Noel, described the genesis of their relationship to Lorraine Fuisz. Born and raised in Mumbai, Sunny first came to the United States in 1986 for his undergraduate studies. Afterward, he worked as a software engineer for a decade at Lotus and Microsoft. In 1999, he joined an Israeli entrepreneur named Liron Petrushka at a Santa Clara, California, startup called CommerceBid.com. Petrushka was developing a software program that would enable companies to pit their suppliers against one another in live online auctions to secure economies of scale and lower prices. When Sunny joined CommerceBid, the dot-com frenzy was at its peak and the niche Petrushka’s company was in, known as business-to-business e-commerce, had become red-hot. Analysts were breathlessly predicting that $6 trillion of commerce between corporations would soon be handled via the internet. The sector’s leader, Commerce One, had just gone public and seen its stock price triple on its first day of trading. It finished the year up more than 1,000 percent. That November, just a few months after Sunny was named CommerceBid’s president and chief technology officer, Commerce One acquired the startup for $232 million in cash and stock. It was a breathtaking price for a company that had just three clients testing its software and barely any revenues. As the company’s second-highest-ranking executive, Sunny pocketed more than $40 million. His timing was perfect. Five months later, the dot-com bubble popped and the stock market came crashing down. Commerce One eventually filed for bankruptcy. Yet Sunny didn’t see himself as lucky. In his mind, he was a gifted businessman and the Commerce One windfall was a validation of his talent. When Elizabeth met him a few years later, she had no reason to question that. She was an impressionable eighteenyear-old girl who saw in Sunny what she wanted to become: a successful and wealthy entrepreneur. He became her mentor, the person who would teach her about business in Silicon Valley. It isn’t clear exactly when Elizabeth and Sunny became romantically involved, but it appears to have been not long after she dropped out of Stanford. When they’d first met in China in the summer of 2002, Sunny was married to a Japanese artist named Keiko Fujimoto and living in San Francisco. By October 2004, he was listed as “a single man” on the deed to a condominium he purchased on Channing Avenue in Palo Alto. Other public records show Elizabeth moved into that apartment in July 2005. Sunny spent the decade after his brief and lucrative stint at CommerceBid not doing much aside from enjoying his money and giving Elizabeth advice behind the scenes. He had stayed on at Commerce One as a vice president until January 2001 and then enrolled in business school at Berkeley. He later took classes in computer science at Stanford. By the time he joined Theranos in September 2009, Sunny’s legal record contained at least one red flag. To dodge taxes on his CommerceBid earnings, he’d hired the accounting firm BDO Seidman, which arranged for him to invest in a tax shelter. The maneuver generated an artificial tax loss of $41 million that offset his CommerceBid gains, all but eliminating his tax liability. When the Internal Revenue Service cracked down on the practice in 2004, Sunny was forced to pay the millions of dollars in back taxes he owed in a settlement with the agency. He turned around and sued BDO, claiming that he had been unsophisticated in tax matters and that the firm had knowingly misled him. The suit was settled on undisclosed terms in 2008. Tax troubles aside, Sunny was proud of his wealth and liked to broadcast it with his cars. He drove a black Lamborghini Gallardo and a black Porsche 911. Both had vanity license plates. The one on the Porsche read “DAZKPTL” in mock reference to Karl Marx’s treatise on capitalism. The Lamborghini’s plate was “VDIVICI,” a play on the phrase “Veni, vidi, vici” (“I came, I saw, I conquered”), which Julius Caesar used to describe his quick and decisive victory at the Battle of Zela in a letter to the Roman Senate. The way Sunny dressed was also meant to telegraph affluence, though not necessarily taste. He wore white designer shirts with puffy sleeves, acid-washed jeans, and blue Gucci loafers. His shirts’ top three buttons were always undone, causing his chest hair to spill out and revealing a thin gold chain around his neck. A pungent scent of cologne emanated from him at all times. Combined with the flashy cars, the overall impression was of someone heading out to a nightclub rather than to the office. Sunny’s expertise was software and that was where he was supposed to add value at Theranos. In one of the first company meetings he attended, he bragged that he’d written a million lines of code. Some employees thought that was preposterous. Sunny had worked at Microsoft, where teams of software engineers had written the Windows operating system at the rate of one thousand lines of code per year of development. Even if you assumed Sunny was twenty times faster than the Windows developers, it would still have taken him fifty years to do what he claimed. Sunny was boastful and patronizing toward employees, but he was also strangely elusive at times. When Don Lucas showed up at the office once or twice a month to visit with Elizabeth, Sunny would suddenly vanish. One employee found a note on an office printer that Elizabeth had faxed to Lucas, in which she lauded Sunny’s skills and r?sum?, so she hadn’t concealed his hiring. But people like Dave Nelson, the engineer who had helped Tony Nugent build the first Edison prototype and who now sat across from Chelsea’s cubicle, began to suspect that Elizabeth was downplaying to the board the breadth of Sunny’s role. There was also the murky question of what she told the board about their relationship. When Elizabeth informed Tony that Sunny was joining the company, Tony asked her point-blank whether they were still a couple. She responded that the relationship was over. Going forward, it was strictly business, she said. But that would prove not to be true. — CHELSEA’S CENTOCOR ASSIGNMENT took her to Antwerp, Belgium, in the fall of 2009. Daniel Young, a brainy bioengineering Ph.D. from MIT, accompanied her there. Daniel had been hired six months earlier to help add a new dimension to the Theranos bloodtesting system: predictive modeling. When Elizabeth pitched pharmaceutical executives now, she told them that Theranos could forecast how patients would react to the drugs they were taking. Patients’ test results would be input into a proprietary computer program the company had developed. As more results got fed into the program, its ability to predict how markers in the blood were likely to change during treatment would become better and better, she said. It sounded cutting-edge, but there was a catch: the blood-test results had to be reliable for the computer program’s predictions to have any value, and Chelsea started to have her doubts about that soon after she arrived in Belgium. Theranos was supposed to help Centocor assess how patients were responding to an asthma drug by measuring a biomarker in their blood called allergen-specific immunoglobulin E, or IgE, but the Theranos devices seemed very buggy to Chelsea. There were frequent mechanical failures. The cartridges either wouldn’t slot into the readers properly or something inside the readers would malfunction. Even when the devices didn’t break down, it could be a challenge coaxing any kind of output from them. Sunny always blamed the wireless connection, and he was right in some instances. The process by which test results were generated involved a transatlantic round-trip of ones and zeros: when the blood test was completed, a cellular antenna on the reader beamed the voltage data produced by the light signal to a server in Palo Alto. The server analyzed the data and beamed back a final result to a cell phone in Belgium. When the cellular connection was weak, the data transmission would fail. But there were other things besides the wireless connection that could interfere with the generation of a result. Nearly all blood tests require a certain amount of dilution to lower the concentration of substances in the blood that can wreak havoc on the test. In the case of chemiluminescent immunoassays—the class of tests the Edison performed— diluting the blood was necessary to filter out its light-absorbing pigments and other constituents that could interfere with the emission of the light signal. The amount of dilution the Theranos system required was greater than usual because of the small size of the blood samples Elizabeth insisted on. For the reader to have enough liquid to work with, the volume of the samples had to be increased significantly. The only way to do that was to dilute the blood more. And that in turn made the light signal weaker and harder to measure precisely. Put simply, some dilution was good, but too much dilution was bad. The Edisons were also very sensitive to ambient temperature. To function properly, they needed to run at exactly 34 degrees Celsius. There were two 11-volt heaters built into the reader to try to maintain that temperature when a blood test was being run. But in colder settings, like certain hospitals in Europe, Dave Nelson had noticed that the little heaters didn’t keep the readers warm enough. Sunny didn’t know or understand any of this because he had no background in medicine, much less laboratory science. Nor did he have the patience to listen to the scientists’ explanations. It was easier to just blame the cellular connection. Chelsea wasn’t much more knowledgeable about the science than Sunny was, but she was friendly with Gary Frenzel, the head of the chemistry team, and she gleaned from their conversations that the difficulties went far beyond connectivity issues. What Chelsea didn’t know at the time was that one of their pharmaceutical partners had already walked away from the startup. Earlier that year, Pfizer had informed Theranos that it was ending their collaboration because it was underwhelmed by the results of the Tennessee validation study. Elizabeth had tried to put the best spin she could on the fifteen-month study in a twenty-six-page report she’d sent to the New York pharmaceutical giant, but the report had betrayed too many glaring inconsistencies. The study had failed to show any clear link between drops in the patients’ protein levels and the administration of the antitumor drugs. And the report had copped to some of the same snafus Chelsea was now witnessing in Belgium, such as mechanical failures and wireless transmission errors. It had blamed the latter on “dense foliage, metal roofs, and poor signal quality due to remote location.” Two of the Tennessee patients had called the Theranos offices in Palo Alto to complain that the readers wouldn’t start because of temperature issues. “The solution,” according to the report, had been to ask the patients to move the readers “away from A/C units and possible air currents.” One patient had put the device in his RV and the other in a “very hot room” and the temperature extremes had “affected the readers’ ability to maintain desired temperature,” the report said. The report was never shared with Chelsea. She didn’t even know of the Pfizer study’s existence. — WHEN SHE RETURNED to Palo Alto from her three-week stay in Antwerp, Chelsea discovered that Elizabeth and Sunny’s attention had shifted from Europe to another part of the globe: Mexico. A swine flu epidemic had been raging there since the spring and Elizabeth thought it offered a great opportunity to showcase the Edison. The person who had planted that germ in her mind was Seth Michelson, Theranos’s chief scientific officer. Seth was a math whiz who’d once worked in the flight simulator lab at NASA. His specialty was biomathematics, the use of mathematical models to help understand phenomena in biology. He was in charge of the predictive modeling efforts at Theranos and was Daniel Young’s boss. Seth called to mind Doc Brown from the 1985 Michael J. Fox movie Back to the Future. He didn’t have Doc’s crazy white hair, but he sported a huge, frizzy gray beard that gave him a similar mad scientist look. Though in his late fifties, he still said “dude” a lot and became really animated when he was explaining scientific concepts. Seth had told Elizabeth about a math model called SEIR (the letters stood for Susceptible, Exposed, Infected, and Resolved) that he thought could be adapted to predict where the swine flu virus would spread next. For it to work, Theranos would need to test recently infected patients and input their blood-test results into the model. That meant getting the Edison readers and cartridges to Mexico. Elizabeth envisioned putting them in the beds of pickup trucks and driving them to the Mexican villages on the front lines of the outbreak. Chelsea was fluent in Spanish, so it was decided that she would head down to Mexico with Sunny. Getting authorization to use an experimental medical device in a foreign country is usually no easy thing, but Elizabeth was able to leverage the family connections of a wealthy Mexican student at Stanford. He got Chelsea and Sunny an audience with high-ranking officials at the Mexican Social Security Institute, the agency that runs the country’s public health-care system. IMSS approved the shipment of two dozen Edison readers to a hospital in Mexico City. The hospital, a sprawling facility called Hospital General de M?xico, was located in Colonia Doctores, one of the city’s most crime-ridden neighborhoods. Chelsea and Sunny were discouraged from going to and from the hospital on their own. A driver dropped them off inside the gates of the facility every morning and picked them up at the end of each day. For weeks, Chelsea spent her days cooped up in a little room inside the hospital. The Edison readers were stacked on shelves along one wall. Refrigerators containing blood samples were lined up along another. The blood came from infected patients who’d been treated at the hospital. Chelsea’s job was to warm up the samples, put them in the cartridges, slot the cartridges into the readers, and see if they tested positive for the virus. Once again, things did not go smoothly. Frequently, the readers flashed error messages, or the result that came back from Palo Alto was negative for the virus when it should have been positive. Some of the readers didn’t work at all. And Sunny continued to blame the wireless transmission. Chelsea grew frustrated and miserable. She questioned what she was even doing there. Gary Frenzel and some of the other Theranos scientists had told her that the best way to diagnose H1N1, as the swine flu virus was called, was with a nasal swab and that testing for it in blood was of questionable utility. She’d raised this point with Elizabeth before leaving, but Elizabeth had brushed it off. “Don’t listen to them,” she’d said of the scientists. “They’re always complaining.” Chelsea and Sunny had several meetings with IMSS officials at the Mexican health ministry to update them on their work. Sunny didn’t speak or understand a word of Spanish, so Chelsea did all the talking. As the meetings dragged on, Sunny’s face would betray a mixture of annoyance and concern. Chelsea suspected he was worried she was telling the Mexicans that the Theranos system didn’t work. She enjoyed seeing him squirm. Back in Palo Alto, word around the office was that Elizabeth was negotiating a deal to sell four hundred Edison readers to the Mexican government. The deal was supposed to bring in a much-needed influx of cash. The $15 million Theranos had raised in its first two funding rounds was long gone and the company had already burned through the $32 million Henry Mosley had been instrumental in bringing in during its Series C round in late 2006. The company was being kept afloat with a loan Sunny had personally guaranteed. Meanwhile, Sunny was also traveling to Thailand to set up another swine flu testing outpost. The epidemic had spread to Asia, and the country was one of the region’s hardest hit with tens of thousands of cases and more than two hundred deaths. But unlike in Mexico, it wasn’t clear that Theranos’s activities in Thailand were sanctioned by local authorities. Rumors were circulating among employees that Sunny’s connections there were shady and that he was paying bribes to obtain blood samples from infected patients. When a colleague of Chelsea’s in the client solutions group named Stefan Hristu quit immediately upon returning from a trip to Thailand with Sunny in January 2010, many took it to mean the rumors were true. Chelsea was back from Mexico by then and the Thailand gossip spooked her. She knew there was an anti-bribery law called the Foreign Corrupt Practices Act. Violating it was a felony that could result in prison time. — WHEN SHE STOPPED to think about it, there were a lot of things that made Chelsea uncomfortable about Theranos. And none more so than Sunny. He spawned a culture of fear with his intimidating behavior. Firings had always been a common occurrence at the company, but in late 2009 and early 2010 it was Sunny who took on the role of hatchet man. Chelsea even learned a new expression: to disappear someone. That’s how employees used the normally intransitive verb when someone was dismissed. “Sunny disappeared him,” they would say, conjuring up the image of a Mafia hit in 1970s Brooklyn. The scientists, especially, were afraid of Sunny. One of the only ones who stood up to him was Seth Michelson. A few days before Christmas, Seth had gone out and purchased polo shirts for his group. Their color matched the green of the company logo and they had the words “Theranos Biomath” emblazoned on them. Seth thought it was a nice team-building gesture and paid for it out of his own pocket. When Sunny saw the polos, he got angry. He didn’t like that he hadn’t been consulted and he argued that Seth’s gift to his team made the other managers look bad. Earlier in his career, Seth had worked at Roche, the big Swiss drugmaker, where he’d been in charge of seventy people and an annual budget of $25 million. He decided he wasn’t going to let Sunny lecture him about management. He pushed back and they got into a yelling match. After that, Sunny seemed to have it in for Seth and frequently harassed him, which led Seth to look for another job. He found one a few months later at a company based in Redwood City called Genomic Health and walked into Elizabeth’s office, resignation letter in hand, to give his notice. Sunny, who was there, opened up the letter, read it, then threw it back in Seth’s face. “I won’t accept this!” he shouted. Seth shouted back, deadpan, “I have news for you, sir: in 1863, President Lincoln freed the slaves.” Sunny’s response was to throw him out of the building. It was weeks before Seth was able to retrieve his math books, scientific journals, and the pictures of his wife on his desk. He had to enlist the company’s new lawyer, Jodi Sutton, and a security guard to help him pack his things late on a weeknight when Sunny wasn’t around. Sunny also got into it with Tony Nugent one Friday evening. He’d been giving direct orders and putting intense pressure on a young engineer on Tony’s team, causing him to fall apart from the stress. Tony confronted Sunny about it and their argument quickly escalated. Working himself into a fury, Sunny yelled that he was doing everyone a favor by volunteering his time to the company and people should be a little more appreciative. “I’ve made enough money to look after my family for seven generations. I don’t need to be here!” he screamed in Tony’s face. Tony roared back in his Irish brogue, “I don’t have a cent and I don’t need to be here either!” Elizabeth had to step in to defuse the situation. Dave Nelson thought that Tony would be fired and that he’d have a new boss by Monday morning. Yet Tony somehow survived the confrontation. Chelsea tried to complain to Elizabeth about Sunny, but she couldn’t get through to her. Their bond seemed too strong to be shaken. Whenever Elizabeth came out of her office, which was separated from Sunny’s by a glass conference room, he would immediately pop out of his and walk with her. Often, he accompanied her all the way to the bathrooms in the back of the building, prompting some employees to wonder half jokingly if they were snorting lines of cocaine back there. By February 2010, after six months on the job, Chelsea had lost all her enthusiasm for working at Theranos and was thinking of quitting. She hated Sunny. The Mexico and Thailand projects seemed to be losing steam as the swine flu pandemic subsided. The company was lurching from one ill-conceived initiative to another like a child with attention deficit disorder. On top of it all, Chelsea’s boyfriend lived in Los Angeles and she was flying back and forth between L.A. and the Bay Area every weekend to see him. The commute was killing her. As she debated what to do, something happened that hastened her decision. One day, the Stanford student whose family connections Elizabeth had tapped in Mexico came by with his father. Chelsea wasn’t there to witness the visit, but the office was buzzing about it afterward. The father was going through some sort of cancer scare. Upon hearing of his health worries, Elizabeth and Sunny had convinced him to let Theranos test his blood for cancer biomarkers. Tony Nugent, who wasn’t there for the encounter either, heard about it later that day from Gary Frenzel. “Well, that was interesting,” Gary told Tony, his voice conveying bewilderment. “We played doctor today.” Chelsea was appalled. The validation study in Belgium and the experiments in Mexico and Thailand were one thing. Those were supposed to be for research purposes only and to have no bearing on the way patients were treated. But encouraging someone to rely on a Theranos blood test to make an important medical decision was something else altogether. Chelsea found it reckless and irresponsible. She became further alarmed when not long afterward Sunny and Elizabeth began circulating copies of the requisition forms doctors used to order blood tests from laboratories and speaking excitedly about the great opportunities that lay in consumer testing. I’m done, Chelsea thought to herself. This has crossed too many lines. She approached Elizabeth and told her she wanted to resign but decided to keep her qualms to herself. Instead, she told her friend that her weekend commutes were taking too great a toll and that she wanted to move to Los Angeles full-time, which in any case was true. She offered to stay on for a transition period, but Elizabeth and Sunny didn’t want her to. If Chelsea was leaving, better she do so right away, they told her. They asked her not to say anything to the three employees who reported to her on her way out. Chelsea protested. It didn’t feel right to flee like a thief in the middle of the night. But Sunny and Elizabeth were firm: she was not to speak to them. Chelsea walked out of the building and into the Palo Alto sunshine with conflicting emotions. The dominant one was relief. But she also felt bad that she hadn’t been able to say goodbye to her team and to tell them why she was leaving. She would have given them the official reason—that she was moving to L.A.—but Sunny and Elizabeth hadn’t trusted her to do that. They’d wanted to control the narrative of her departure. Chelsea also worried about Elizabeth. In her relentless drive to be a successful startup founder, she had built a bubble around herself that was cutting her off from reality. And the only person she was letting inside was a terrible influence. How could her friend not see that? | SEVEN | Dr. J A s the calendar turned from 2009 to 2010, America remained mired in a deep economic malaise. Over the previous two years, nearly 9 million people had lost their jobs in the worst downturn since the Great Depression. Millions more had been hit with foreclosure notices. But in the 1,500-square-mile area south of San Francisco that forms the boundaries of Silicon Valley, animal spirits were stirring again. A new luxury hotel on Sand Hill Road called the Rosewood was always full, despite room rates that reached a thousand dollars a night. With its imported palm trees and proximity to the Stanford campus, it had quickly become the destination of choice for venture capitalists, startup founders, and out-of-town investors who flocked to its restaurant and poolside bar to discuss deals and be seen. Bentleys, Maseratis, and McLarens lined its stone parking lot. While the rest of the country licked its wounds from the devastating financial crisis, a new technology boom was getting under way, fueled by several factors. One of them was the wild success of Facebook. In June 2010, the social network’s private valuation rose to $23 billion. Six months later, it jumped to $50 billion. Every startup founder in the Valley wanted to be the next Mark Zuckerberg and every VC wanted a seat on the next rocket ship to riches. The emergence of Twitter, which was valued at more than $1 billion in late 2009, added to the excitement. Meanwhile, the iPhone and competing smartphones featuring Google’s Android operating system were beginning to usher in a shift to mobile computing, as cellular networks became faster and capable of handling larger amounts of data. Wildly popular mobile games like Angry Birds, which millions of iPhone users were paying a dollar each to download, seeded the notion that you could build a business around a smartphone app. In the spring of 2010, an obscure startup called UberCab did a beta launch of its black car hailing service in San Francisco. All of this might not have been enough to ignite the new boom, however, if it hadn’t been for another key ingredient: rock-bottom interest rates. To rescue the economy, the Federal Reserve had slashed rates to close to zero, making traditional investments like bonds unattractive and sending investors searching for higher returns elsewhere. One of the places they turned to was Silicon Valley. Suddenly, the managers of East Coast hedge funds that normally invested only in publicly traded stocks were making the pilgrimage West in search of promising new opportunities in the private startup world. They were joined by executives from old, established companies looking to harness the Valley’s innovation to rejuvenate businesses battered by the recession. Among this latter group was a sixty-five-year-old man from Philadelphia who greeted people with high fives in lieu of handshakes and went by the sobriquet “Dr. J.” Dr. J’s real name was Jay Rosan and he was in fact a doctor, though he had spent most of his career working for big corporations. He was a member of Walgreens’s innovation team, which was tasked with identifying new ideas and technologies that could reboot growth at the 109-year-old drugstore chain. Dr. J operated out of an office in the Philadelphia suburb of Conshohocken that Walgreens had inherited from its 2007 acquisition of Take Care Health Systems, an operator of in-store clinics where he’d previously been employed. In January 2010, Theranos had approached Walgreens with an email stating that it had developed small devices capable of running any blood test from a few drops pricked from a finger in real time and for less than half the cost of traditional laboratories. Two months later, Elizabeth and Sunny traveled to Walgreens’s headquarters in the Chicago suburb of Deerfield, Illinois, and gave a presentation to a group of Walgreens executives. Dr. J, who flew up from Pennsylvania for the meeting, instantly recognized the potential of the Theranos technology. Bringing the startup’s machines inside Walgreens stores could open up a big new revenue stream for the retailer and be the game changer it had been looking for, he believed. It wasn’t just the business proposition that appealed to Dr. J. A health nut who carefully watched his diet, rarely drank alcohol, and was fanatical about getting a swim in every day, he was passionate about empowering people to live healthier lives. The picture Elizabeth presented at the meeting of making blood tests less painful and more widely available so they could become an early warning system against disease deeply resonated with him. That evening, he could barely contain his excitement over dinner at a wine bar with two Walgreens colleagues who weren’t privy to the secret discussions with Theranos. After asking them to keep what he was about to tell them confidential, he revealed in a hushed tone that he’d found a company he was convinced would change the face of the pharmacy industry. “Imagine detecting breast cancer before the mammogram,” he told his enraptured colleagues, pausing for effect. — A FEW MINUTES BEFORE eight a.m. on August 24, 2010, a group of rental cars pulled up in front of 3200 Hillview Avenue in Palo Alto. A stocky man with glasses and dimples on his wide nose stepped out of one of them. His name was Kevin Hunter and he headed a small lab consulting firm called Colaborate. He was part of a Walgreens delegation led by Dr. J that had flown to California for a two-day meeting with Theranos. The drugstore chain had hired him a few weeks before to help evaluate and set up a partnership it was negotiating with the startup. Hunter had a special affinity for the business Walgreens was in: his father, grandfather, and great-grandfather had all been pharmacists. Growing up, he’d spent the summers helping his dad man the counter and stock the shelves of the pharmacies he ran on air bases in New York, Texas, and New Mexico. As familiar as he was with drugstores, though, Hunter’s real expertise was with clinical laboratories. After getting his MBA at the University of Florida, he had spent the first eight years of his career working for Quest Diagnostics, the giant provider of lab services. He had subsequently launched Colaborate, which advised clients ranging from hospitals to private equity firms about laboratory issues. The first thing Hunter noticed as he shut the door of his rental car and walked toward the entrance of Theranos’s office was a shiny black Lamborghini parked right next to it. Looks like someone is trying to impress us, he thought. Elizabeth and Sunny greeted him and the rest of the Walgreens team at the top of a flight of stairs and showed them to the glass conference room between their offices. They were joined there by Daniel Young, who had succeeded Seth Michelson as head of Theranos’s biomath team. On the Walgreens side, in addition to Hunter and Dr. J, three others had made the trip: a Belgian executive named Renaat Van den Hooff, a financial executive named Dan Doyle, and Jim Sundberg, who worked with Hunter at Colaborate. Dr. J high-fived Sunny and Elizabeth, then sat down and kicked off the meeting with the same line he always used when he introduced himself: “Hi, I’m Dr. J and I used to play basketball.” Hunter had already heard him use it a dozen times in the few weeks they’d worked together and no longer thought it was funny, but for Dr. J it was a joke that never seemed to grow old. It elicited a few awkward chuckles. “I’m so excited that we’re doing this!” Dr. J then exclaimed. He was referring to a pilot project the companies had agreed to. It would involve placing Theranos’s readers in thirty to ninety Walgreens stores no later than the middle of 2011. The stores’ customers would be able to get their blood tested with just a prick of the finger and receive their results in under an hour. A preliminary contract had already been signed, under which Walgreens had committed to prepurchase up to $50 million worth of Theranos cartridges and to loan the startup an additional $25 million. If all went well with the pilot, the companies would aim to expand their partnership nationwide. It was unusual for Walgreens to move this quickly. Opportunities the innovation team identified usually got waylaid in internal committees and slowed down by the retailer’s giant bureaucracy. Dr. J had managed to fast-track this one by going straight to Wade Miquelon, Walgreens’s chief financial officer, and getting him behind the project. Miquelon was due to fly in that evening and join them at the next day’s session. About half an hour into discussions centering on the pilot, Hunter asked where the bathroom was. Elizabeth and Sunny visibly stiffened. Security was paramount, they said, and anyone who left the conference room would have to be escorted. Sunny accompanied Hunter to the bathroom, waited for him outside the bathroom door, and then walked him back to the conference room. It seemed to Hunter unnecessary and strangely paranoid. On his way back from the bathroom, he scanned the office for a laboratory but didn’t see anything that looked like one. That’s because it was downstairs, he was told. Hunter said he hoped to see it at some point during the visit, to which Elizabeth responded, “Yes, if we have time.” Theranos had told Walgreens it had a commercially ready laboratory and had provided it with a list of 192 different blood tests it said its proprietary devices could handle. In reality, although there was a lab downstairs, it was just an R&D lab where Gary Frenzel and his team of biochemists conducted their research. Moreover, half of the tests on the list couldn’t be performed as chemiluminescent immunoassays, the testing technique the Edison system relied on. They required different testing methods beyond the Edison’s scope. The meeting resumed and stretched into the middle of the afternoon, at which point Elizabeth suggested they grab an early dinner in town. As they got up from their chairs, Hunter asked again to see the lab. Elizabeth tapped Dr. J on the shoulder and motioned for him to follow her outside the conference room. He returned moments later and told Hunter it wasn’t going to happen. Elizabeth wasn’t willing to show them the lab yet, he said. Instead, Sunny showed the Walgreens team his office. There was a sleeping bag on the floor behind his desk, his bathroom had a shower in it, and he kept a change of clothes on hand. He worked such long hours that on many nights he crashed at the office, he proudly told the visitors. As they headed out to eat, Sunny and Elizabeth made them leave at staggered intervals. They didn’t want everyone to arrive at the restaurant at the same time on the grounds that it risked attracting notice. They also instructed Hunter and his colleagues not to use names. When Hunter got to the restaurant, a little sushi place on El Camino Real called Fuki Sushi, the hostess took him to a private room in the back with sliding doors where Elizabeth was waiting. The cloak-and-dagger theatrics struck Hunter as silly. It was four in the afternoon and the restaurant was empty. There was no one to conceal their presence from. What’s more, if there was anything likely to draw attention, it was Sunny’s Lamborghini in the parking lot. Hunter was beginning to grow suspicious. With her black turtleneck, her deep voice, and the green kale shakes she sipped on all day, Elizabeth was going to great lengths to emulate Steve Jobs, but she didn’t seem to have a solid understanding of what distinguished different types of blood tests. Theranos had also failed to deliver on his two basic requests: to let him see its lab and to demonstrate a live vitamin D test on its device. Hunter’s plan had been to have Theranos test his and Dr. J’s blood, then get retested at Stanford Hospital that evening and compare the results. He’d even arranged for a pathologist to be on standby at the hospital to write the order and draw their blood. But Elizabeth claimed she’d been given too little notice even though he’d made the request two weeks ago. There was something else that bothered Hunter: Sunny’s attitude. He acted both superior and cavalier. When the Walgreens side had broached bringing its IT department in on the pilot preparations, Sunny had dismissed the idea out of hand by saying, “IT are like lawyers, avoid them as long as possible.” That kind of approach sounded to Hunter like a recipe for problems. Dr. J didn’t seem to share his skepticism, though. He appeared taken with Elizabeth’s aura and to revel in the Silicon Valley scene. He reminded Hunter of a groupie who’d flown across the country to attend a concert played by his favorite band. When they reconvened at the Theranos office the next morning, they were joined by Wade Miquelon, the Walgreens CFO. Wade had negotiated the pilot contract directly with Elizabeth. He too seemed to be a big fan of hers. Midway through that day’s meeting, Elizabeth made a big show of giving Miquelon an American flag that she said had been flown over a battlefield in Afghanistan. She’d written a dedication to Walgreens on it. Hunter thought the whole thing was bizarre. Walgreens had brought him here to vet Theranos’s technology, but he hadn’t been allowed to do so. The only thing they had to show for their visit was an autographed flag. And yet, Dr. J and Miquelon didn’t seem to mind. As far as they were concerned, the visit had gone swimmingly. — A MONTH LATER, in September 2010, a group of Walgreens executives met with Elizabeth and Sunny in a conference room at the drugstore chain’s Deerfield headquarters. The mood was festive. Red balloons with the Walgreens logo floated above a table laden with hors d’oeuvres. Wade Miquelon and Dr. J were unveiling “Project Beta,” the code name for the Theranos pilot, to senior Walgreens executives. Standing in front of a slide titled “Disrupting the Lab Industry” projected on a big screen, one of the Walgreens executives was singing along to “Imagine.” To celebrate the alliance, the innovation team had come up with the idea of adapting the lyrics to the John Lennon song and using it as the partnership’s anthem. When the awkward karaoke act was over, Elizabeth and Sunny encouraged the Walgreens executives to get their blood tested. They had brought along several black-and-white machines to the meeting. The Walgreens executives lined up to get their fingers pricked behind Kermit Crawford, the president of the pharmacy business, and Colin Watts, the head of the innovation team. Hunter, who was now working for Walgreens full-time as an onsite consultant for the innovation team, didn’t take part in the meeting. But when he heard that several Walgreens executives had had their blood tested, he figured this was an opportunity to finally see how the technology performed. He told himself to follow up with Elizabeth about the test results next time they talked. In a report he’d put together after the Palo Alto visit, Hunter had warned that Theranos might be “overselling or overstating…where they are at scientifically with the cartridges/devices.” He’d also recommended that Walgreens embed someone at Theranos through the pilot’s launch and had volunteered one of his Colaborate colleagues, a petite British woman by the name of June Smart who’d recently completed a stint administering Stanford’s labs, for the assignment. Theranos had rejected the idea. Hunter asked about the blood-test results a few days later on the weekly video conference call the companies were using as their primary mode of communication. Elizabeth responded that Theranos could only release the results to a doctor. Dr. J, who was dialed in from Conshohocken, reminded everyone that he was a trained physician, so why didn’t Theranos go ahead and send him the results? They agreed that Sunny would follow up separately with him. A month passed and still no results. Hunter’s patience was wearing thin. During that week’s call, the two sides discussed a sudden change Theranos had made to its regulatory strategy. It had initially represented that its blood tests would qualify as “waived” under the Clinical Laboratory Improvement Amendments, the 1988 federal law that governed laboratories. CLIAwaived tests usually involved simple laboratory procedures that the Food and Drug Administration had cleared for home use. Now, Theranos was changing its tune and saying the tests it would be offering in Walgreens stores were “laboratory-developed tests.” It was a big difference: laboratorydeveloped tests lay in a gray zone between the FDA and another federal health regulator, the Centers for Medicare and Medicaid Services. CMS, as the latter agency was known, exercised oversight of clinical laboratories under CLIA, while the FDA regulated the diagnostic equipment that laboratories bought and used for their testing. But no one closely regulated tests that labs fashioned with their own methods. Elizabeth and Sunny had a testy exchange with Hunter over the significance of the change. They maintained that all the big laboratory companies mostly used laboratory-developed tests, which Hunter knew not to be true. To Hunter, the switch made it all the more important to check the accuracy of Theranos’s tests. He suggested doing a fifty-patient study in which they would compare Theranos results to ones from Stanford Hospital. He’d done work with Stanford and knew people there; it would be easy to arrange. On the computer screen, Hunter noticed an immediate change in Elizabeth’s body language. She became visibly guarded and defensive. “No, I don’t think we want to do that at this time,” she said, quickly changing the subject to other items on the call’s agenda. After they hung up, Hunter took aside Renaat Van den Hooff, who was in charge of the pilot on the Walgreens side, and told him something just wasn’t right. The red flags were piling up. First, Elizabeth had denied him access to their lab. Then she’d rejected his proposal to embed someone with them in Palo Alto. And now she was refusing to do a simple comparison study. To top it all off, Theranos had drawn the blood of the president of Walgreens’s pharmacy business, one of the company’s most senior executives, and failed to give him a test result! Van den Hooff listened with a pained look on his face. “We can’t not pursue this,” he said. “We can’t risk a scenario where CVS has a deal with them in six months and it ends up being real.” Walgreens’s rivalry with CVS, which was based in Rhode Island and one-third bigger in terms of revenues, colored virtually everything the drugstore chain did. It was a myopic view of the world that was hard to understand for an outsider like Hunter who wasn’t a Walgreens company man. Theranos had cleverly played on this insecurity. As a result, Walgreens suffered from a severe case of FoMO—the fear of missing out. Hunter pleaded with Van den Hooff to at least let him peek inside the one black-andwhite reader Theranos had left with them after the Project Beta kickoff party. He was dying to tear the strips of security tape off its case and crack it open. Theranos had sent them some test kits for it, but they were for obscure blood tests like a “flu susceptibility” panel that no other lab he knew of offered. It was therefore impossible to compare their results to anything. How convenient, Hunter had noted. Moreover, the kits were expired. Van den Hooff said no. In addition to signing confidentiality agreements, they’d been sternly warned not to tamper with the reader. The contract the companies had signed stated that Walgreens agreed “not to disassemble or otherwise reverse engineer the Devices or any component thereof.” Trying to contain his frustration, Hunter made one last request. Theranos always invoked two things as proof that its technology had been vetted. The first was the clinical trial work it did for pharmaceutical companies. Documents it gave Walgreens stated that the Theranos system had been “comprehensively validated over the last seven years by ten of the largest fifteen pharma companies.” The second was a review of its technology Dr. J had supposedly commissioned from Johns Hopkins University’s medical school. Hunter had placed calls to pharmaceutical companies and hadn’t been able to get anyone on the phone to confirm what Theranos was claiming, though that was hardly proof of anything. He now asked Van den Hooff to show him the Johns Hopkins review. After some hesitation, Van den Hooff reluctantly handed him a two-page document. When Hunter was done reading it, he almost laughed. It was a letter dated April 27, 2010, summarizing a meeting Elizabeth and Sunny had had with Dr. J and five university representatives on the Hopkins campus in Baltimore. It stated that they had shown the Hopkins team “proprietary data on test performance” and that Hopkins had deemed the technology “novel and sound.” But it also made clear that the university had conducted no independent verification of its own. In fact, the letter included a disclaimer at the bottom of the second page: “The materials provided in no way signify an endorsement by Johns Hopkins Medicine to any product or service.” Hunter told Van den Hooff the letter was meaningless. Judging from the Belgian’s expression, he sensed that he was starting to make headway. Van den Hooff’s confidence seemed shaken. Hunter knew that Dan Doyle, the executive responsible for the innovation team’s finances, shared some of his skepticism. If he could convert Van den Hooff to their point of view, they might get Dr. J and Wade Miquelon to see the light and avert a potential disaster. — WALGREENS WASN’T the only big retail partner Theranos was courting. During this same period, Theranos employees began noticing visits to the Hillview Avenue office from an older gentleman with an earnest air who wore rimless glasses and a suit and tie. It was Steve Burd, the CEO of Safeway. Burd had been at the helm of Safeway, one of the country’s biggest supermarket chains, for seventeen years. Along the way, his disciplined focus on the X’s and O’s of the grocery business, which had earned him plaudits from Wall Street during his first decade as CEO, had given way to an intense interest in health care. He’d gotten hooked on the subject after realizing that Safeway’s rising medical costs threatened to someday bankrupt the company if he didn’t do something to tame them. He’d pioneered innovative wellness and preventive health programs for his employees and become an advocate for universal health coverage, making him one of the only Republican CEOs to embrace many of the tenets of Obamacare. Like Dr. J, he was serious about his own health. He worked out on a treadmill at five every morning and lifted weights in the evenings after dinner. At Burd’s invitation, Elizabeth came to the supermarket chain’s headquarters in Pleasanton, on the other side of San Francisco Bay, to make a presentation. As the Safeway CEO and a group of his top executives listened intrigued, she described how her phobia of needles had led her to develop breakthrough technology that made blood tests not only more convenient, but faster and cheaper. She brought along one of her blackand-white devices to demonstrate how it worked. The presentation had a strong impact on Larree Renda, Safeway’s executive vice president. Renda’s husband was battling lung cancer. His blood had to be tested frequently so that doctors could adjust his drug regimen. Each blood draw was an exercise in torture because his veins were collapsing. Theranos’s fingerprick system would be a godsend for him, she thought. Renda, who had started out at Safeway at age sixteen as a part-time bagger and worked her way up the corporate ladder to become one of Burd’s most trusted executives, could see that her boss was also very impressed. The Theranos proposition dovetailed perfectly with his wellness philosophy and offered a way to improve the supermarket chain’s stagnating revenues and razor-thin profit margins. Before long, Safeway too signed a deal with Theranos. Under the agreement, it loaned the startup $30 million and pledged to undertake a massive renovation of its stores to make room for sleek new clinics where customers would have their blood tested on the Theranos devices. Burd was over the moon about the partnership. He saw Elizabeth as a precocious genius and treated her with rare deference. Normally loath to leave his office unless it was absolutely necessary, he made an exception for her, regularly driving across the bay to Palo Alto. On one occasion, he arrived bearing a huge white orchid. On another, he brought her a model of a private jet. Her next one, he predicted, would be real. Burd was aware of Theranos’s parallel discussions with Walgreens. Elizabeth told him his company would be the exclusive purveyor of Theranos blood tests in supermarkets, while Walgreens would be granted exclusivity in drugstores. Neither company was thrilled with the arrangement, but both saw it as better than missing out on a huge new business opportunity. — BACK IN CHICAGO, Hunter’s efforts to get Van den Hooff to take his suspicions seriously were dashed in mid-December 2010 when Van den Hooff informed his colleagues that he would be leaving at the end of the year. He’d been offered a job as the CEO of a company in New Jersey that made temperature indicators for pharmaceutical companies. It was a career opportunity he couldn’t pass up. Walgreens appointed an internal replacement, a female executive named Trish Lipinski who had some exposure to the laboratory world. Before coming to Walgreens, she had worked at the College of American Pathologists, the medical association representing laboratory scientists. Hunter wasted no time letting her know how he felt about the Theranos project. “I’ve got to stop this because someday this is going to be a black eye on someone,” he told her. He also voiced his skepticism directly to Dr. J, but that was of little use. Dr. J was a staunch and tireless advocate for Theranos. If anything, he thought Walgreens was moving too slowly. After learning of the model jet Steve Burd had given Elizabeth, he’d railed to Trish that Walgreens needed to show her more love. To Hunter’s amazement, he had even stopped asking Elizabeth and Sunny about the test results from the kickoff party. He was apparently willing to let Theranos get away with not producing them. Dr. J had a powerful ally in Wade Miquelon. A sharp dresser with a taste for expensive suits and designer eyeglasses, Wade was gregarious and well liked at Walgreens. However, many of his colleagues had begun to question his judgment after a story in the Chicago Tribune revealed that he’d been arrested for driving drunk that fall for the second time in a little over a year. He shouldn’t have been behind the wheel of a car at all: his driver’s license was still suspended from the previous arrest. To make matters worse, he’d refused to take a Breathalyzer and failed field sobriety tests. The incident earned him a new nickname in the hallways of Walgreens headquarters: Michelob. Wade’s DUIs and Dr. J’s blind cheerleading for Theranos didn’t inspire confidence that Project Beta was in the best hands. But that was beyond Hunter’s purview. He focused on what he could control, continuing to ask tough questions on the weekly video calls until one day in early 2011 Lipinski told him that Elizabeth and Sunny no longer wanted him on the calls or in meetings between the companies. They felt that he was creating too much tension and that it interfered with getting work done, she said. Walgreens had no choice but to comply or Theranos would walk away, she added. Hunter tried to convince her to rebuff the demand. Why was Walgreens paying his firm $25,000 a month to look out for its best interests if it was going to keep him at arm’s length and make it harder for him to do his job? It made no sense. His protestations were politely ignored and Elizabeth and Sunny got their way. Hunter continued to work with the innovation team and to provide his expertise when asked, but his exclusion from subsequent calls and meetings marginalized him and limited his input. In the meantime, Walgreens pushed ahead with the project. As part of the pilot preparations, Hunter joined the innovation team on a field trip to an unmarked warehouse in an industrial park a few miles from the Deerfield campus. Inside, the company had built a full-scale replica of one of its stores. It featured a blood-testing laboratory, with shelves designed specifically to accommodate the dimensions of the black-and-white Theranos readers. Seeing the mock store and its little lab brought home to Hunter how real it all was. Soon, actual patients were going to get their blood drawn and tested in one of these, he thought uneasily.? | EIGHT | The miniLab W ith Walgreens and Safeway on board as retail partners, Elizabeth suddenly faced a problem of her own making: she had told both companies her technology could perform hundreds of tests on small blood samples. The truth was that the Edison system could only do immunoassays, a type of test that uses antibodies to measure substances in the blood. Immunoassays included some commonly ordered lab tests such as tests to measure vitamin D or to detect prostate cancer. But many other routine blood tests, ranging from cholesterol to blood sugar, required completely different laboratory techniques. Elizabeth needed a new device, one that could perform more than just one class of test. In November 2010, she hired a young engineer named Kent Frankovich and put him in charge of designing it. Kent had just obtained a master’s degree in mechanical engineering from Stanford. Before that, he’d spent two years working for NASA’s Jet Propulsion Laboratory in Pasadena where he’d helped build Curiosity, the Mars rover. Kent in turn recruited Greg Baney, a friend he’d met at NASA who’d gone on to work for SpaceX, Elon Musk’s Los Angeles–based rocket company. At six feet five and 260 pounds, Greg was built like an NFL lineman, but his physique belied a sharp intellect and a keen sense of observation. For a period of several months, Kent and Greg became Elizabeth’s favorite employees. She sat in on their brainstorming sessions and made suggestions about what robotics systems they should consider using. She gave them company credit cards and let them charge whatever equipment and supplies they wanted. Elizabeth christened the machine she assigned them to build the “miniLab.” As its name suggested, her overarching concern was its size: she still nurtured the vision of someday putting it in people’s homes and wanted something that could fit on a desk or a shelf. This posed engineering challenges because, in order to run all the tests she wanted, the miniLab would need to have many more components than the Edison. In addition to the Edison’s photomultiplier tube, the new device would need to cram three other laboratory instruments in one small space: a spectrophotometer, a cytometer, and an isothermal amplifier. None of these were new inventions. The first commercial spectrophotometer was developed in 1941 by the American chemist Arnold Beckman, founder of the lab equipment maker Beckman Coulter. It works by beaming rays of colored light through a blood sample and measuring how much of the light the sample absorbs. The concentration of a molecule in the blood is then inferred from the level of light absorption. Spectrophotometers are used to measure substances like cholesterol, glucose, and hemoglobin. Cytometry, a way of counting blood cells, was invented in the nineteenth century. It’s used to diagnose anemia and blood cancers, among other disorders. Laboratories all over the world had been using these instruments for decades. In other words, Theranos wasn’t pioneering any new ways to test blood. Rather, the miniLab’s value would lie in the miniaturization of existing lab technology. While that might not amount to groundbreaking science, it made sense in the context of Elizabeth’s vision of taking blood testing out of central laboratories and bringing it to drugstores, supermarkets, and, eventually, people’s homes. To be sure, there were already portable blood analyzers on the market. One of them, a device that looked like a small ATM called the Piccolo Xpress, could perform thirty-one different blood tests and produce results in as little as twelve minutes. It required only three or four drops of blood for a panel of a half dozen commonly ordered tests. However, neither the Piccolo nor other existing portable analyzers could do the entire range of laboratory tests. In Elizabeth’s mind, that was going to be the miniLab’s selling point. Greg spent a lot of time studying commercial instruments made by diagnostics equipment makers to reverse engineer them and make them smaller. He ordered a spectrophotometer from a company called Ocean Optics and broke it apart to understand how it worked. It turned into an interesting project, but it made him question their approach. Instead of building new instruments from scratch to fit the arbitrary dimensions Elizabeth had laid out, Greg felt they would do better to take the off-the-shelf components they were laboring to miniaturize and integrate them together to test how the overall system worked. Once they had a working prototype, they could then worry about shrinking it. Emphasizing the system’s size first and how it worked later was putting the cart before the horse. But Elizabeth wouldn’t budge. Greg was in the midst of a breakup with the girl he’d dated in L.A., so he came to the office on Saturdays to get his mind off it. He could see that Elizabeth really appreciated that. She saw it as a sign of loyalty and dedication. She told Greg she wanted to see Kent come in on weekends too; it bothered her that his friend didn’t. Keeping a work-life balance seemed a foreign concept to her. She was at work all the time. Like most people, Greg had been taken aback by Elizabeth’s deep voice when he’d first met her. He soon began to suspect it was affected. One evening, as they wrapped up a meeting in her office shortly after he joined the company, she lapsed into a more natural-sounding young woman’s voice. “I’m really glad you’re here,” she told him as she got up from her chair, her pitch several octaves higher than usual. In her excitement, she seemed to have momentarily forgotten to turn on the baritone. When Greg thought about it, there was a certain logic to her act: Silicon Valley was overwhelmingly a man’s world. The VCs were all male and he couldn’t think of any prominent female startup founder. At some point, she must have decided the deep voice was necessary to get people’s attention and be taken seriously. A few weeks after the voice incident, Greg picked up another clue that Theranos wasn’t your usual workplace. He had become friendly with Gary Frenzel. Although Gary looked like a slob—he weighed three hundred pounds and walked around the office in baggy jeans, an oversized T-shirt, and Crocs—Greg found him to be one of the smartest people at the company. Gary had a bad case of sleep apnea and, more than once during meetings, Greg had watched him doze off only to suddenly snap awake to refute a dumb idea someone had put forward and suggest a brilliant alternative. As they walked out of the office together one day, Gary lowered his voice and in a conspiratorial tone told Greg something that startled the younger man: Elizabeth and Sunny were in a romantic relationship. Greg felt blindsided. He thought it was inappropriate for the CEO of a company and its number-two executive to be sleeping together, but what bothered him more was the fact they were hiding it. This was a crucial piece of information that he felt should have been disclosed to new recruits. For Greg, the revelation cast everything about Theranos in a new light: If Elizabeth wasn’t being forthright about that, what else might she be lying about? — NEPOTISM AT THERANOS took on a new dimension in the spring of 2011 when Elizabeth hired her younger brother, Christian, as associate director of product management. Christian Holmes was two years out of college and had no clear qualifications to work at a blood diagnostics company, but that mattered little to Elizabeth. What mattered far more was that her brother was someone she could trust. Christian was a handsome young man with eyes the same deep shade of blue as his sister’s, but that was where the similarities between them began and ended. Christian had none of his sister’s ambition and drive; he was a regular guy who liked to watch sports, chase girls, and party with friends. After graduating from Duke University in 2009, he’d worked as an analyst at a Washington, D.C., firm that advised corporations about best practices. When he first arrived at the company, Christian didn’t have much to do, so he spent part of his days reading about sports. He hid it by cutting and pasting articles from the ESPN website into empty emails so that, from afar, it looked like he was absorbed in work-related correspondence. Christian soon recruited four of his fraternity brothers from Duke: Jeff Blickman, Nick Menchel, Dan Edlin, and Sani Hadziahmetovic. They were later joined by a fifth Duke friend, Max Fosque. They rented a house together near the Palo Alto country club and became known inside Theranos as “the Frat Pack.” Like Christian, none of the other Duke boys had any experience or training relevant to blood testing or medical devices, but their friendship with Elizabeth’s brother vaulted them above most other employees in the company hierarchy. By then, Greg had convinced several of his own friends to join Theranos. Two of them were buddies from his undergraduate days at Georgia Tech, Jordan Carr and Ted Pasco. The third was a friend he’d made in Pasadena while working for NASA named Trey Howard. Trey happened to have gone to college at Duke a few years before the Frat Pack. Jordan, Trey, and Ted were all assigned to the product management group with Christian and his friends, but they weren’t granted the same level of access to sensitive information. Many of the hush-hush meetings Elizabeth and Sunny held to strategize about the Walgreens and Safeway partnerships were off limits to them, whereas Christian and his fraternity brothers were invited in. The Frat Pack endeared itself to Sunny and Elizabeth by working long days. Sunny was constantly questioning employees’ commitment to the company—the number of hours a person put in at the office, whether he or she was doing productive work or not, was his ultimate gauge of that commitment. At times, he would sit in the big glass conference room and stare out at the rows of cubicles trying to identify who was slacking off. The numerous late nights they spent at the office left no time for exercise, so Christian and his friends snuck workouts in during the day. To elude Sunny’s watchful gaze, they ducked out of the building at different times using different exits. They were also careful never to return at the same time or together. Ted Pasco, who had left a career on Wall Street to try his luck in Silicon Valley but didn’t have any clear duties during his first few months at Theranos, amused himself by timing their exits and entries. Several members of the Frat Pack joined Greg and two of his colleagues from the engineering department for lunch on the big terrace overlooking the parking lot one day. A discussion about the low IQs of some of the world’s top soccer players led them to debate the question, Would you rather be smart and poor or dumb and rich? The three engineers all chose smart and poor, while the Frat Pack voted unanimously for dumb and rich. Greg was struck by how clearly the line was drawn between the two groups. They were all in their mid- to late twenties with good educations, but they valued different things. Christian and his friends were always ready and willing to do Elizabeth and Sunny’s bidding. Their eagerness to please was on display when news broke that Steve Jobs had died on the evening of October 5, 2011. Elizabeth and Sunny wanted to pay Jobs a tribute by flying an Apple flag at half-mast on the grounds of the Hillview Avenue building. The next morning, Jeff Blickman, a tall redhead who’d played varsity baseball at Duke, volunteered for the mission. He couldn’t locate any suitable Apple flag for sale, so Blickman had one custom made out of vinyl. It featured the famous Apple logo in white against a black background. The store he went to took a while to make it. Blickman didn’t return with it until late in the day. In the meantime, work at the company came to a standstill as Elizabeth and Sunny moped around the office, consumed by the hunt for the Apple flag. Greg had been aware of Elizabeth’s fascination with Jobs. She referred to him as “Steve” as if they were close friends. At one point, she’d told him that a documentary espousing a 9/11 conspiracy theory wouldn’t have been available on iTunes if “Steve” hadn’t believed there was something to it. Greg thought that was silly. He was pretty sure Jobs hadn’t personally screened all the movies for rent or sale on iTunes. Elizabeth seemed to have this exaggerated image of him as an all-seeing and all-knowing being. A month or two after Jobs’s death, some of Greg’s colleagues in the engineering department began to notice that Elizabeth was borrowing behaviors and management techniques described in Walter Isaacson’s biography of the late Apple founder. They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating. Elizabeth even gave the miniLab a Jobs-inspired code name: the 4S. It was a reference to the iPhone 4S, which Apple had coincidentally unveiled the day before Jobs passed away. — GREG’S HONEYMOON PERIOD at Theranos ended when his sister applied for a job at the company. After interviewing with both Elizabeth and Sunny in April 2011, she received an offer to join the product management team the following month but decided to turn it down and stay with her employer, the accounting firm PwC. The next day, a Saturday, Greg was at the office working. Elizabeth was there too but wouldn’t acknowledge his presence, which he found odd since she usually made a point to, especially on weekends. The following week, Greg stopped being invited to her brainstorming sessions with Kent. It dawned on him that she’d taken his sister’s decision personally and that he was now paying the price for it. Not long after, a chill descended on Kent’s own relationship with Elizabeth. For all intents and purposes, Kent was the chief architect of the miniLab. A talented engineer who loved to build stuff, he was also dabbling with a side project in his spare time: bicycle lights that lit up both wheels and the road, providing improved visibility and safety for the rider at night. He’d pitched the concept on Kickstarter and, much to his surprise, was able to raise $215,000 in forty-five days. It was the seventh-largest sum raised on the crowdfunding platform that year. What had been a hobby suddenly looked like it could become a viable business. Kent told Elizabeth about his successful Kickstarter campaign, thinking she wouldn’t mind. But he badly miscalculated: she and Sunny were furious. They viewed it as a major conflict of interest and asked him to transfer his bike-lights patent to Theranos. The paperwork Kent had signed when he joined the company entitled them to any intellectual property he produced while employed there, they contended. Kent disagreed. He’d worked on his little venture during his free time and felt he had done nothing wrong. He also failed to see how a new type of bicycle light posed a threat to a maker of blood-testing equipment. But Elizabeth and Sunny wouldn’t let it go. In meeting after meeting, they tried to get him to turn over the patent. They ratcheted up the pressure by bringing Theranos’s new senior counsel, David Doyle, to some of the meetings. As he watched the standoff unfold, Greg became convinced that it wasn’t so much about the patent as it was about punishing Kent for his perceived disloyalty. Elizabeth expected her employees to give their all to Theranos, especially ones like Kent whom she entrusted with big responsibilities. Not only had Kent not given his all, he’d devoted part of his time and energy to another engineering project. It explained why he hadn’t been coming in on weekends like she wanted him to. As she saw it, Kent had betrayed her. In the end, a fragile compromise was reached: Kent would go on a leave of absence to give his bicycle-light venture a shot. When he was done indulging his pet project, they’d have a conversation about whether, and under what conditions, he could return. Kent’s departure put Elizabeth in a foul mood. She now looked to Greg and others to pick up the slack. Greg also sensed a growing urgency in Elizabeth and Sunny’s behavior. They seemed to be squeezing the engineering team to meet some sort of deadline without communicating to them what that deadline was. They must have promised someone something, he thought. As Elizabeth grew impatient with the pace of the miniLab’s development, Greg bore the brunt of her frustration. When the engineering team gathered for weekly status updates, she opened the meetings by staring at him silently without blinking until he broke the ice with a polite “Hello Elizabeth, how are you today?” He began keeping detailed notes of what was discussed and agreed to at each meeting that he could refer back to the following week to keep emotions out of it. Several times, Elizabeth came downstairs to the engineers’ workshop and hovered over Greg while he worked. He politely acknowledged her, then resumed working in silence. It was some sort of strange power play and he was determined not to get rattled by it. One afternoon, Elizabeth called him into her office and told him she sensed cynicism emanating from him. After a long silence in which he debated telling her she was right, Greg decided to keep his growing disenchantment to himself and told a fib: he was upset because Sunny had rejected several job applicants that he thought were well qualified and hoped the company would hire. Elizabeth must have believed him because she relaxed noticeably. “You need to tell us about these things,” she said. — ON A WEEKDAY EVENING in December 2011, Theranos chartered several buses to transport its employees, which now numbered more than one hundred, to the Thomas Fogarty Winery in Woodside. It was Elizabeth’s favorite place to hold corporate events. The winery’s main building and its adjacent events facility were built on stilts into the hillside and offered panoramic views of the estate’s rolling vineyards and of the Valley beyond. The occasion was the company’s annual Christmas party. As employees sipped drinks from an open bar inside the winery’s main building before sitting down to dinner, Elizabeth gave a speech. “The miniLab is the most important thing humanity has ever built. If you don’t believe this is the case, you should leave now,” she declared, scanning her audience with a dead serious look on her face. “Everyone needs to work as hard as humanly possible to deliver it.” Trey, the friend Greg had met while living in Pasadena and recruited to Theranos, tapped Greg’s foot. They glanced at each other knowingly. What Elizabeth had just said confirmed their armchair psychoanalysis of their boss: she saw herself as a world historical figure. A modern-day Marie Curie. Six weeks later, they were back at the Fogarty Winery, this time to celebrate the Safeway alliance. Standing on the deck of the open-air events house, Elizabeth harangued employees for forty-five minutes as the fog rolled in, like General Patton addressing his troops before the Allied landings. The sweeping view before them was appropriate, she said, because Theranos was about to become Silicon Valley’s dominant company. Toward the end she boasted, “I’m not afraid of anything,” adding after a brief pause, “except needles.” By this point, Greg had become fully disillusioned and resolved to stick around only two more months until his stock options vested on the first anniversary of his hiring. He’d recently gone to a job fair at his alma mater, Georgia Tech, and had found himself unable to talk the company up to students who stopped by the Theranos booth. Instead, he’d focused his advice on the merits of a career in Silicon Valley. Part of the problem was that Elizabeth and Sunny seemed unable, or unwilling, to distinguish between a prototype and a finished product. The miniLab Greg was helping build was a prototype, nothing more. It needed to be tested thoroughly and fine-tuned, which would require time. A lot of time. Most companies went through three cycles of prototyping before they went to market with a product. But Sunny was already placing orders for components to build one hundred miniLabs, based on a first, untested prototype. It was as if Boeing built one plane and, without doing a single flight test, told airline passengers, “Hop aboard.” One of the difficulties that would need to be resolved through extensive testing was thermal. When you packed that many instruments into a small, enclosed space, you introduced unanticipated variations in temperature that could interfere with the chemistry and throw off the performance of the overall system. Sunny seemed to think that if you just put all the parts in a box and turned it on, it would work. If only it were that easy. At one point, he pulled Greg and an older engineer named Tom Brumett into the big glass conference room and questioned their passion. Greg prided himself on never losing his cool, but this time he did. He leaned menacingly over the conference table. His huge, muscular frame towered over Sunny. “God damn it, we are working our asses off,” he growled. Sunny backed off and apologized. — SUNNY WAS a tyrant. He fired people so often that it gave rise to a little routine in the warehouse downstairs. John Fanzio, the affable supply-chain manager, worked down there, and it had become the trusted place where employees came to vent or gossip. Every few days, Edgar Paz, the head of Theranos’s security team, would come down with a mischievous look on his face, a badge hidden in his hand. At the sight of him, John and the logistics team would gather in excitement, knowing what was coming. As Paz drew closer, he would slowly spin the badge from its necklace and reveal the face on the front, eliciting gasps of surprise. It was Sunny’s latest victim. John had become good friends with Greg, Jordan, Trey, and Ted. Together, the five of them formed a little island of sanity at the company. John was probably the only strategic supply-chain manager in the Bay Area who worked just feet away from the cold roll-up door of the loading dock, but he liked it because it kept him away from Sunny’s scrutiny and his obsessive focus on the number of hours people worked. Unfortunately, working in the warehouse is what eventually brought about John’s own demise. One morning in February 2012, one of the receiving guys who worked there with him arrived at work in a shiny new Acura. He proudly showed it to John, who complimented him on it. The next day, though, the car had a big dent in it. Someone had hit it in the office parking lot. John found the culprit by checking all the other cars in the lot for signs of a collision. It belonged to one of the Indian consultants Sunny had brought in to help with software development. John confronted the owner when he came outside for a smoke break with his friends. He denied it even though John had used a tape measure to match the size of the dent on the Acura to the scrape on his car, a trick he’d learned from watching cops do it. John advised his warehouse colleague to report the accident to the police and show them the evidence. That’s when the situation escalated. The Indian software consultants went upstairs to complain to Sunny, who came down in such a fury that his hands were visibly shaking. “Oh really, you want to be a cop?” Sunny yelled at John, his voice dripping with sarcasm. “Go be a cop!” He then turned to one of the security guards who was standing nearby and, motioning toward John, told him, “Get him out of here.” After watching Edgar Paz playfully reveal the identity of scores of employees Sunny had fired over the previous year, it was John’s turn to get the boot. His friend’s firing didn’t sit well with Greg, and solidified his resolve to leave the company. A month later, a young engineer he worked with inadvertently fried some miniLab electrical boards. Sunny summoned Greg and Tom Brumett to his office and angrily demanded that they tell him who was to blame. They refused, knowing full well that Sunny would fire the young man if they gave him his name. As it happened, Greg’s stock options had just vested. Later in the day, he returned to Sunny’s office and handed him his letter of resignation. Sunny calmly accepted it but, as soon as Greg left, he summoned Trey, Jordan, and Ted one after the other to gauge their intentions. All three assured him that Greg’s decision didn’t affect them and that they remained committed to working at Theranos for the long haul, knowing that was what Sunny wanted to hear. Greg worked one last Saturday during his notice period. Sunny was grateful and invited him to a meeting Elizabeth was holding the following Monday in Newark, a small city directly across San Francisco Bay from Palo Alto. Theranos had just leased a huge manufacturing facility there to produce the miniLab in large quantities. Elizabeth was unveiling the cavernous, empty space to employees. She caught sight of Greg in the audience as she spoke and locked her gaze on him. “If anyone here believes you are not working on the best thing humans have ever built or if you’re cynical, then you should leave,” she said, reprising the themes of her Christmas speech. Then, while continuing to look directly at Greg, she singled out Trey, Jordan, and Ted for special praise. There were some 150 employees assembled and she could have called out the names of any one of them, but she chose to commend the three people she knew were his friends. It was a final public rebuke. — IN THE MONTHS after Greg left, the revolving door at Theranos continued to swing at a furious pace. One of the more surreal incidents involved a burly software engineer named Del Barnwell. Big Del, as people called him, was a former Marine helicopter pilot. Sunny was on his case about not working long-enough hours. He’d gone as far as to review security footage to track Big Del’s comings and goings and confronted him in a meeting in his office, claiming the tapes showed he worked only eight hours a day. “I’m going to fix you,” Sunny told him, as if Del were a broken toy. But Big Del didn’t want to be fixed. Shortly after the meeting, he emailed his resignation notice to Elizabeth’s assistant. He heard nothing back and dutifully worked the last two weeks of his notice period. Then, at four p.m. on a Friday, Big Del picked up his belongings and walked toward the building’s exit. Sunny and Elizabeth suddenly came running down the stairs behind him. He couldn’t leave without signing a nondisclosure agreement, they said. Big Del refused. He’d already signed a confidentiality agreement when he was hired and, besides, they’d had two weeks to schedule an exit interview with him. Now he was free to go as he pleased and he damn well intended to. As he pulled out of the parking lot in his yellow Toyota FJ Cruiser, Sunny sent a security guard after him to try to stop him. Big Del ignored the guard and drove off. Sunny called the cops. Twenty minutes later, a police cruiser quietly pulled up to the building with its lights off. A highly agitated Sunny told the officer that an employee had quit and departed with company property. When the officer asked what he’d taken, Sunny blurted out in his accented English, “He stole property in his mind.” | NINE | The Wellness Play S afeway’s business was doing poorly. The supermarket chain had just announced a 6 percent drop in its profits for the last three months of 2011, a disappointing performance its longtime CEO Steve Burd was struggling to explain to the dozen analysts who had dialed in to the company’s quarterly earnings call. One of them, Ed Kelly from the Swiss bank Credit Suisse, was gently needling Burd for using stock buybacks to mask the bad results. By reducing the number of shares it had outstanding, buybacks could artificially raise a company’s earnings per share—the headline number investors focused on—even if its actual earnings fell. It was an old trick that astute Wall Street analysts versed in corporate sleights of hand saw right through. Piqued, Burd said he disagreed. He was confident that Safeway’s fortunes were about to improve, which would make purchasing its own shares a smart investment. To justify his optimism, he cited three initiatives the company was pursuing. The first two were shrugged off as old news by his hard-to-please audience, but the analysts’ ears pricked up when he got to the third. “We’re contemplating a significant…huh—I’m just going to call it a wellness play,” he said cryptically. It was the first time Burd had made any public mention of this. He didn’t elaborate, but the message the analysts took away was that the stodgy, ninety-seven-year-old grocery chain had a secret plan to jump-start its stagnating business. Inside Safeway, this secret plan was code-named “Project T-Rex.” It referred to none other than the company’s partnership with Theranos, which by now—February 2012—was two years in the making. Burd had high hopes for the venture. He’d ordered the remodeling of more than half of Safeway’s seventeen hundred stores to make room for upscale clinics with deluxe carpeting, custom wood cabinetry, granite countertops, and flat-screen TVs. Per Theranos’s instructions, they were to be called wellness centers and had to look “better than a spa.” Although Safeway was shouldering the entire cost of the $350 million renovation on its own, Burd expected it to more than pay for itself once the new clinics started offering the startup’s novel blood tests. A few weeks after the earnings call, Burd and his executive team took a group of analysts on a tour of a Safeway store a few miles from his home in the scenic San Ramon Valley east of Oakland. The analysts were shown the store’s new wellness center, but Burd remained evasive about what sort of service it was going to offer. Even the store’s manager was in the dark. Theranos had insisted on absolute secrecy until the launch. There had been quite a few delays since the companies had first agreed to do business together. At one point, Elizabeth told Burd that the earthquake that struck eastern Japan in March 2011 was interfering with Theranos’s ability to produce the cartridges for its devices. Some Safeway executives found the excuse far-fetched, but Burd accepted it at face value. He was starry-eyed about the young Stanford dropout and her revolutionary technology, which fit so perfectly with his passion for preventive health care. Elizabeth had a direct line to Burd and answered only to him. A war room had been set up in the Pleasanton headquarters where a small group of Safeway executives privy to Project T-Rex met once a week to discuss its progress. Burd attended all the meetings, either in person or via conference call if he was traveling. When questions or issues came up that had to be taken back to Theranos, he would pipe up with what became a refrain: “I’ll talk to Elizabeth about it.” Larree Renda, the executive who had started out at Safeway as a teenage bagger in 1974 and climbed the corporate ranks to become one of Burd’s top deputies, and other executives involved in the project were surprised by how much latitude he gave the young woman. He usually held his deputies and the company’s business partners to firm deadlines, but he allowed Elizabeth to miss one after the other. Some of Burd’s colleagues knew he had two sons. They began to wonder if he saw in Elizabeth the daughter he’d never had. Whatever it was, he was in her thrall. — AFTER ALL THE DELAYS, the partnership seemed to finally be getting off the ground in the early months of 2012: as a beta run before a full launch, the companies had agreed that Theranos would take over the blood testing at an employee health clinic Safeway had opened on its corporate campus in Pleasanton. The clinic was part of Burd’s strategy to curb the supermarket operator’s health-care costs by encouraging its workers to take better care of themselves. It offered free checkups. Employees who scored well on them were entitled to discounts on their health plan premiums. Conveniently located next to the gym on the Safeway campus, it was staffed with a doctor and three nurse practitioners and featured five exam rooms. It also had a little lab. A new sign in the reception area read, “Testing done by Theranos.” The employee clinic was part of Renda’s portfolio. Among other responsibilities, she oversaw Safeway Health, the subsidiary Burd had created to sell the retailer’s health benefits expertise to other companies. Renda’s husband had lost his battle with lung cancer since Elizabeth had first showed up in Pleasanton two years before, but she hoped Theranos’s painless finger-stick tests would spare others the torment he’d endured getting repeatedly stuck with needles in the last months of his life. Renda had just hired Safeway’s first chief medical officer. His name was Kent Bradley and he came from the U.S. Army, where he had served for more than seventeen years after attending West Point and the armed forces’ medical school in Bethesda, Maryland. Bradley’s last military assignment had been to run the European wing of Tricare, the health insurance program for active and retired servicemen. Among other responsibilities, Renda gave the soft-spoken former army doctor oversight of the campus clinic. Bradley had worked with a lot of sophisticated medical technologies in the army, so he was curious to see the Theranos system in action. However, he was surprised to learn that Theranos wasn’t planning on putting any of its devices in the Pleasanton clinic. Instead, it had stationed two phlebotomists there to draw blood, and the samples they collected were couriered across San Francisco Bay to Palo Alto for testing. He also noticed that the phlebotomists were drawing blood from every employee twice, once with a lancet applied to the index finger and a second time the old-fashioned way with a hypodermic needle inserted in the arm. Why the need for venipunctures—the medical term for needle draws—if the Theranos finger-stick technology was fully developed and ready to be rolled out to consumers, he wondered. Bradley’s suspicions were further aroused by the amount of time it took to get results back. His understanding had been that the tests were supposed to be quasiinstantaneous, but some Safeway employees were having to wait as long as two weeks to receive their results. And not every test was performed by Theranos itself. Even though the startup had never said anything about outsourcing some of the testing, Bradley discovered that it was farming out some tests to a big reference laboratory in Salt Lake City called ARUP. What really set off Bradley’s alarm bells, though, was when some otherwise healthy employees started coming to him with concerns about abnormal test results. As a precaution, he sent them to get retested at a Quest or LabCorp location. Each time, the new set of tests came back normal, suggesting the Theranos results were off. Then one day, a senior Safeway executive got his PSA result back. The acronym stands for “prostate-specific antigen,” which is a protein produced by cells in the prostate gland. The higher the protein’s concentration in a man’s blood, the likelier he is to have prostate cancer. The senior Safeway executive’s result was very elevated, indicating he almost certainly had prostate cancer. But Bradley was skeptical. As he had done with the other employees, he sent his worried colleague to get retested at another lab and, lo and behold, that result came back normal too. Bradley put together a detailed analysis of the discrepancies. Some of the differences between the Theranos values and the values from the other labs were disturbingly large. When the Theranos values did match those of the other labs, they tended to be for tests performed by ARUP. Bradley shared his concerns with Renda and with Brad Wolfsen, the president of Safeway Health. Her faith already shaken by the delays of the past two years, Renda encouraged him to talk to Burd about them, which Bradley did. But Burd politely brushed him off, assuring the ex–army doctor that the Theranos technology had been vetted and was sound. — THE BLOOD SAMPLES DRAWN from Safeway employees in Pleasanton were being couriered to a one-story building with a stone fa?ade on East Meadow Circle in Palo Alto. Theranos had temporarily set up its fledgling lab there in the spring of 2012 while it moved the rest of its growing operations from Hillview Avenue to a larger building nearby formerly occupied by Facebook. A few months earlier, the lab had obtained a certificate attesting that it was in compliance with CLIA, the federal law that governed clinical laboratories, but such certificates weren’t difficult to obtain. Although the ultimate enforcer of CLIA was the Centers for Medicare and Medicaid Services, the federal agency delegated most routine lab inspections to states. In California, they were handled by the state department of health’s Laboratory Field Services division, which an audit had shown to be badly underfunded and struggling to fulfill its oversight responsibilities. Had Steve Burd been allowed inside the East Meadow Circle lab, a network of rooms located in the center of the low-slung building, he would have noticed that it didn’t contain a single Theranos proprietary device. That’s because the miniLab was still under development and nowhere near ready for patient testing. What the lab did contain was more than a dozen commercial blood and body-fluid analyzers made by companies such as Chicago-based Abbott Laboratories, Germany’s Siemens, and Italy’s DiaSorin. The lab was run by an awkward pathologist named Arnold Gelb, who went by Arne (pronounced “Arnie”), and staffed with a handful of clinical laboratory scientists, or CLSs—lab technicians who are certified by the state to handle human samples. Although it made use of only commercial instruments at this juncture, there were still plenty of things that could and did go wrong. The main problem was the lab’s dearth of experienced personnel. One of the CLSs, a fellow by the name of Kosal Lim, was so sloppy and poorly trained that one of his counterparts, Diana Dupuy, was convinced he was jeopardizing the accuracy of test results. Dupuy was from Houston and had trained at MD Anderson, the city’s worldrenowned cancer center. She’d spent most of her seven years since becoming a CLS as a blood-transfusion specialist, which had given her extensive exposure to CLIA regulations. She operated strictly by the book and didn’t hesitate to report violations when she saw them. To Dupuy, Lim’s blunders were inexcusable. They included ignoring manufacturers’ instructions for how to handle reagents; putting expired reagents in the same refrigerator as current ones; running patient tests on lab equipment that hadn’t been calibrated; improperly performing quality-control runs on an analyzer; doing tasks he hadn’t been trained to do; and contaminating a bottle of Wright’s stain, a mixture of dyes used to differentiate blood cell types. Dupuy, who had a fiery streak, confronted Lim on several occasions, telling him at one point that she was going to become a laboratory inspector to root out bad lab technicians like him. When he proved unable to meet her standards, she began documenting his poor practices in regular emails she sent to Gelb and to Sunny, often attaching photos to prove her point. Dupuy also had concerns about the competence of the two phlebotomists Theranos had stationed in Pleasanton. Blood is typically spun down in a centrifuge before it’s tested to separate its plasma from the patient’s blood cells. The phlebotomists hadn’t been trained to use the centrifuge they’d been given and didn’t know how long or at what speed to spin down patients’ blood. When they arrived in Palo Alto, the plasma samples were often polluted with particulate matter. She also discovered that many of the blood-drawing tubes Theranos was using were expired, making the anticoagulant in them ineffective and compromising the integrity of the specimens. Shortly after making one of her complaints, Dupuy was sent to Delaware to train on a new Siemens analyzer Theranos had purchased. When she returned from her trip a week later, she noticed that the lab was spotless. Sunny, who appeared to have been waiting for her, summoned her into a meeting room. In an intimidating tone, he informed her that he had taken a tour of the lab in her absence and found not a single one of her complaints to be justified. He then brought up the fact that she had allowed her boyfriend into the building to help her carry out her luggage on the day she’d flown to Delaware. It was a serious breach of the company’s secu