I am catching up on this Theranos story, which blew up after a page one story in The Wall Street Journal.
This story reminds me of some of the Chinese fraud stories which have come out over the last few years, or the Rolling Stone University of Virginia story which made allegations against a fraternity. Such shocking allegations about Theranos invite immediate reactions.
The WSJ alleges that Theranos' claims outpace their actual achievements in terms of being able to consistently produce reliable blood tests based on small blood samples at a low price.
Most of the knee jerk responses I've seen have been in favor of the Journal's conclusions. I've also seen some side with the company. One VC from Greylock tweeted this morning that the media is always "tearing down" disruptive companies.
I think history shows we need to take the allegations seriously, listen to the company's response and wait for more facts to come out -- which they inevitably will.
Here are some questions I have from reading the Journal articles and from reading the company's response on its blog -- as well as from CEO Elizabeth Holmes' response to Jim Cramer on Mad Money Thursday night:
- The most damning thing I found in the Journal report was that the paper tried to sit down with Holmes and she declined. Then the company said her schedule was too busy in the last five days to meet before the article was published. Yet she's been available to go on CNBC and Bloomberg since the story broke. And she's had time to do other press in the last year.
- On Mad Money, Holmes seemed to say the reason she didn't meet the Journal was that she didn't trust the reporter. Yet, the Journal has reiterated it stands behind this story as well-sourced. Especially after the Rolling Stone episode, the newspaper wouldn't say that lightly.
- Theranos criticized "anonymous" former employees for their claims. Why would you expect them to disclose their identities in public? Especially when the company has engaged David Boies as legal counsel.
- Holmes was very fuzzy in answering Cramer's direct question about how many tests Edison is used for.
- The Theranos board is interesting in that it's almost exclusively made up of older, well-connected political people. It was clearly put together to influence government regulations. The median age of an outside director is 76. Are these the best people to poke and prod at the claims made against the company in the last few days?
- I found it interesting that Holmes appeared on Mad Money Thursday from Boston, where they said she was attending a Board of Fellows meeting for Harvard Medical School. If I read correctly, Holmes started the company after dropping out of college and didn't go to med school. It's interesting that she sought out to be on Harvard Medical School's Board of Fellows to spruce up her bona fides.
- Theranos claims it offered to send some tests to the Journal but the paper said it asked to visit the company and was declined. Why?
- Where is the evidence to support the claim by many who say the media is always against disruptive companies? I'd say it's just the opposite. The media loves writing about hot young companies and "the next Steve Jobs" as Inc called Holmes. Does anyone ever say, "Boy, I wish Snapchat could catch a break with some positive coverage from the media?" Or Buzzfeed? Or Vice?
I think the burden is on the company to more specifically refute the claims made against it. If Theranos were a public company, I don't think it would be valued at $9 billion, the same market cap as Quest Diagnostics (DGX) after this week.