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Theranos CEO Elizabeth Holmes is Out for Blood


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Holy smokes:

With Robertson’s blessing, Holmes started her company and, a semester later, dropped out to pursue it full-time. Now she’s 30, and her private, Palo Alto-based corporation, called Theranos–the name is an amalgam of the words “therapy” and “diagnosis”–has 500 employees and has raised more than $400 million from equity sales to investors who have effectively valued the company at more than $9 billion. All these numbers, confirmed to me by an outside director, are being published here for the first time. Though Theranos is largely unknown even in Silicon Valley, that is about to change.

“This is about being able to do good,” Holmes says to me about her company. “And it’s about being able to change the health care system through what we believe this country does so well, which is innovation and creativity and the ability to conceive of technology that can help solve policy challenges.”

At first glance it’s hard to see the connection between the patch that wowed Robertson and what Theranos does now. But as we will see, to Holmes they are simply different “embodiments” of the same core insights.

HOLY SMOKES:

Still, Holmes has convinced a lot of people that she’s onto something. She has assembled what, in terms of public service at least, may be the single most accomplished board in U.S. corporate history. It includes former U.S. Secretary of State, Treasury, and Labor George Shultz; former Secretary of Defense Bill Perry; former Secretary of State and National Security Adviser Henry Kissinger; and former U.S. Senators Sam Nunn and Bill Frist (who is also a heart transplant surgeon), among others.

As a bonus, board meetings are also attended by the company’s de facto legal adviser at large, trial lawyer David Boies. At 73, Boies may be the most eminent living trial lawyer, when one tallies up such cases as his civil antitrust prosecution of Microsoft from 1998 to 2000, his role in the historic Bush v. Gore matter of 2000, and his fight to legalize same-sex marriage.

Because of his admiration for Holmes and what her company is trying to do, Boies says, he agreed to represent Theranos personally in its first challenge from patent holders claiming infringement–something of a coming-of-age ritual for tech startups. In a rare if not unprecedented rout this past March, the patent holders unconditionally surrendered midtrial, stipulating to the invalidity of their own patent. As a kicker they agreed–though the presiding judge would have been powerless to order such a thing himself–to bring no additional patent suits against Theranos for five years.

Though Holmes faces enormous challenges, she seems to consistently attract the service of extraordinary people and to inspire extraordinary fealty in them.

The whole article is worth reading, but I love this part:

“She really does want to make a dent in the universe–one that is positive,” says retired U.S. Marine Corps Gen. James Mattis, explaining why he signed up last fall as another of Theranos’s strikingly illustrious outside directors. Mattis had stepped down just months earlier as commander of the U.S. Central Command–the chief of U.S. military operations in the Middle East and Central Asia, including Afghanistan–a post he had taken over from David Petraeus in 2010.

“The strength of the leader’s vision in the military is seen as the critical element in that unit’s performance,” Mattis says. “I wanted to be around something again that had that sort of leadership.”

In a conference room at her 140,000-square-foot, open-floor-plan headquarters at the Stanford Research Park–a former home to Facebook and, before that, to the iconic Palo Alto tech firm Hewlett-Packard–Holmes grips a plastic cup of unappetizing green juice. Her first of the day, it is made from spinach, parsley, wheatgrass, and celery. Later she’ll switch to cucumber. A vegan, she long ago dropped coffee in favor of these juices, which, she finds, are better able to propel her through her 16-hour days and seven-day weeks.

She admits–laughing nervously at the eccentricity of it–that after a meal she sometimes examines a drop of her own or others’ blood on a slide, and says she can observe the difference between when someone has eaten something healthy, like broccoli, and when he’s splurged on a cheeseburger. When we dine one night at an Italian place downtown with $14 pastas, the manager knows what she’ll have: a spartan, dressing-less mixed salad and an oil-free spaghetti with tomatoes, prepared from whole-wheat noodles she has provided the restaurant in advance, since it doesn’t stock them. No wine.

During my four days at Theranos, Holmes dressed identically every day: black jacket; black mock turtleneck; black slacks with a wide, pale pinstripe; and black low-heel shoes. Steve Jobs, because of his vision and perfectionism about “great products”–words Holmes punches out with precisely Jobs’ brio–is obviously a hero to her. As an apparent memento mori, she hangs in her office a framed screenshot of his Apple Internet bio, printed out on Aug. 24, 2011, the day he stepped down as CEO because of pancreatic cancer.

From still photos of Holmes herself–young, blond, and blue-eyed–cynics might be excused for thinking, “Oh, I get it. I see why all these geezers are gushing about her company.”

And from small talk with her, one might still wonder what all the fuss was about. She is polite and soft-spoken. She listens. She laughs naturally at other people’s jokes and doesn’t try to trump them. Her voice is lower pitched than you might expect, but that’s about all you notice at first. That, and her youth.

“She looks like 19,” says board member Henry Kissinger, 91.

Asked to assess her as a leader–because he’s seen a few–he responds, “I can’t compare her to anyone else because I haven’t seen anyone with her special attributes. She has iron will, strong determination. But nothing dramatic. There is no performance associated with her. I have seen no sign that financial gain is of any interest to her. She’s like a monk. She isn’t flashy. She wouldn’t walk into a room and take it over. But she would once the subject gets to her field.”

And she does, when she begins explaining to me the “mission.”

“Consumerizing this health care experience is a huge element of our mission,” Holmes says at our first meeting in April, “which is access to actionable information at the time it matters.” In our conversations over the next two months, she comes back to that phrase frequently. It is the theme that unifies what had seemed to me, at first, a succession of diverse, disparate aspects of her vision.

“There’s a lot of ways we’ve focused on access,” she explains, including the use of the minimally invasive finger stick, the affordability, the convenience of a drugstore location. The Walgreens “wellness centers,” as they are called, are open evenings and weekends so that people won’t have to miss work to get their blood test done. Each center is, within its Walgreens, an oasis, playing calming music–vaguely Eastern recorder melodies when I was there–and displaying nature scenes over a high-def LCD monitor (an aquarium video, in my case). The phlebotomist envelops the patient’s finger in a cozy, warming wrap, massages it with a soothing, milking motion, then pulls the trigger on an unusually shallow, narrow-gauge lancet.

“Anywhere from 40% to 60% of people, when they’re given a requisition by a doctor to go get tested, don’t,” asserts Holmes, “because they’re scared of needles or the locations are inconvenient or the cost is too high. And if you’re not even getting tested, how is it possible that we’re going to move toward an era of preventive medicine?”

Preventive medicine–and this relates to the “at the time it matters” portion of her mission statement–is crucial to the mission. She is making diagnostic testing so accessible in all these different ways precisely so that people can eventually do it more often, almost the way they might use a bathroom scale to watch their weight.

Today people might have their blood tested once a year, she explains. They get a snapshot of certain key values and learn whether they are “in range”–that is, statistically normal–or “out of range.” But if they were tested more often, they would begin to see a “movie” of what’s going on inside them. Sudden, rapid changes in some protein concentration–even when technically still in range–could tip off the doctor that something was amiss, and do so before it was too late to address the problem. (Theranos plans soon to display results in a way that maps them against all previous results from tests it has performed for that patient.)

“The movie goal is absolutely core to what we’re working to do,” she says. “When you have that trend, it is a much more meaningful clinical data set for the physician to use.”

She knows that, she says, “because we’ve seen it.” She’s referring to the fact that since 2005 Theranos has been doing work for major pharmaceutical companies, including Pfizer and GlaxoSmithKline, that are conducting clinical drug trials. Early on it was a way for the company, working under confidentiality agreements, to stealthily refine its technology while earning revenue needed to build out infrastructure. Theranos would test drug-trial subjects three times a week–which wouldn’t have been feasible using venipuncture–and catch adverse drug effects quickly, before they became dangerous.

“We’re building an early-detection system,” she explains. “I genuinely don’t believe anything else matters more than when you love someone so much and you have to say goodbye too soon. I deeply believe it has to be a basic human right for everybody to have access to the kind of testing infrastructure that can tell you about these conditions in time for you to do something about it. So that’s what we’re building.”

It really does sound very exciting:

“Elizabeth has had a very clear vision of where she wanted to take this since the time I met her,” says Sunny Balwani, who met her in 2002 and has been Theranos’s president since 2009. “The business strategy, the tactics of what to do first, what to offer when–that has changed, but the overall goal and direction has been linear.” Balwani, who founded and sold his own e-commerce company in the 1990s, is an expert in building software products.

For 10 years Holmes patiently raised money and refined her technologies. As much as she needed money, she turned down many offers, she says, because so many investors wanted quick returns.

“Too often the question is, What’s your exit strategy?” she recounts, “before you’re really understanding what your entry strategy is.” She is building a company, she explains, that “30, 40, even 50 years from now will be defining new standards in terms of the way in which people will be able to get access to actionable information.”

Early investors included venture capitalists Draper Fisher Jurvetson (which has funded Tesla and SpaceX), ATA Ventures, Silicon Valley legend Don Lucas Sr. (Oracle, National Semiconductor, Macromedia), and Oracle’s Larry Ellison. She will not identify later investors other than to say they include private equity funds and “strategic partners,” by which she means “entities working with the company as we scale.” Though she has now raised more than $400 million, she says she has retained control over more than 50% of the stock.

All the while, Holmes has continued to invent and to upgrade her earlier inventions. “As she likes to put it,” says board member Shultz, “the best patent is making yourself obsolete. So the person who steals your patent steals yesterday’s technology.”

Today Holmes is a co-inventor on 82 U.S. and 189 foreign patent applications, of which 18 in the U.S. and 66 abroad have been granted. Those are in addition to another 186 applications Theranos has filed worldwide that don’t list Holmes as an inventor, of which 18 have already been granted.

Although I believe Balwani when he says that Holmes’s “overall goal and direction” for the company “has been linear,” I don’t believe that Walgreens wellness centers represent the ultimate target of that vector. There are pieces of the puzzle we haven’t seen yet. In some cases she may be waiting for regulatory approval, while in others she may just be waiting, like Steve Jobs, to finish perfecting her next “great product” before unveiling it with a flourish.

As Holmes relentlessly pursues the next “embodiment” of her vision, her old chemical engineering professor, Robertson, sits about 20 yards from her office, helping her. After years of volunteer service to the company as a director, he became a paid consultant in 2009. Last June he signed up as an employee.

“I gave up two endowed chairs to do this,” he says. “I think that’s a statement.”

Then he adds, “To me, I wish I wasn’t 70 years old. I wish I was her age and could be in on this. Because this is going to be a long, exciting, fascinating, exhilarating ride.”

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