A hedge fund that invested $96.1 million in Theranos is suing the company, The Wall Street Journal reports.
Partner Fund Management LP invested in Theranos back in 2014. This is the first major investor who remained mostly silent over the past year.
“Through a series of lies, material misstatements, and omissions, the defendants engaged in securities fraud and other violations by fraudulently inducing PFM to invest and maintain its investment in the company,” the company said in a letter to investors that The Journal reviewed.
The suit comes less than a week after Theranos stopped all of its clinical operations, cutting 340 positions and closing its Wellness Centres where blood tests were performed.
Instead, Theranos will focus solely on its technology, namely the miniLab platform it debuted in August at a scientific conference. At the time, the product reveal didn’t go over too well, since those in attendance were hoping for large amounts of independently reviewed data that validated the company’s blood test results.
“We are fortunate to have supporters and investors who believe deeply in our mission of affordable, less invasive lab testing, and to have the runway to realise our vision,” Theranos CEO Elizabeth Holmes said in a open letter published Wednesday.
Theranos, up until Wednesday, was trying to own all the parts of the blood-testing industry: building the technology, as well as administering the tests to patients.
The company’s business model was based on offering more than 100 simple blood tests directly to patients at a much lower cost than traditional blood labs, in addition to developing its own technology to test that blood, which Holmes had emphasised would only need to be drawn in very small amounts.
In the past year, however, Theranos’ aspirations to be a one-stop-shop have led to the company having to void two years and tens of thousands of tests. The government agency that regulates clinical labs found that Theranos’ Northern California lab posed “immediate jeopardy to patient health and safety.”
The firm alleges, according to The Journal
- That Theranos said it could do additional forms of its finger-prick blood tests than they actually could.
- That the company overstated how much they had submitted to the FDA.
- That the company couldn’t uphold its partnerships with companies like Walgreens, which ended its partnership with Theranos back in June, closing 40 Wellness Center locations.
Here’s Theranos’ response:
“The suit, filed by a hedge fund, is without merit and Theranos will fight it vigorously. The hedge fund is engaging in revisionist history, making claims that are not rooted in facts. The company remains committed to its mission and is appreciative of its strong investor base that understands and continues to support those efforts.”