November 29, 2016
By Alex Keown, BioSpace.com Breaking News Staff
PALO ALTO, Calif. – It’s no secret that Theranos was a darling of Silicon Valley investors. At one time the private company was valued at $9 billion thanks to big money investors—which includes Rupert Murdoch, executive chairman of News Corp., who invested about $100 million.
The Wall Street Journal continued its investigation into the embattled biotech company and revealed the names of early investors who bought stock at 15 cents per share when Theranos was still known as Real Time Cures. Other early investors included Riley Bechtel, chairman of construction business Bechtel Group, and Cox Enterprises, the Journal said.
It wasn’t just individual investors though who bought a stake in Theranos. Another big investor was Sandbox Industries, a Chicago-based venture capital firm that manages investment accounts for Blue Cross and Blue Shield. Citing Matt Downs, a Sandbox managing director, said the company invested about $10 million from two plans in 2010.
The disclosure of Theranos’ investors comes as another lawsuit has been filed against the beleaguered company. On Monday, the law firm Hagens Berman filed a class action lawsuit against Theranos, alleging the company “knowingly lured investors through false statements of revolutionary blood testing technology.” The complaint basically says Theranos engaged in a publicity campaign to raise billions of dollars despite the fact that company officials, specifically founder Elizabeth Holmes and former president Sunny Balwani, knew the blood-testing product was ineffective.
“Thousands of Theranos investors, including those who bring this class action, were spoon-fed continuous lies from the company’s CEO who touted the company’s ‘world-changing’ technology that would ‘revolutionize’ the industry,” Steve Berman, managing partner of Hagens Berman, said in a statement. “After months of wooing investors to the tune of its CEO’s $9 billion net worth, Theranos’ bubble has burst, and we now see the truth—that Theranos’ promises were built on false statements and omissions.”
The Hagens Berman lawsuit is just the latest filed against Theranos. Earlier this month, Walgreens filed a $140 million lawsuit against Theranos, claiming the company voided 11.3 percent of all blood tests the California-based company provided to customers. The Walgreens lawsuit came on the heels of a lawsuit filed by San Francisco-based investment company Partner Fund Management. The lawsuit makes similar claims to the Hagens Berman lawsuit. Although the lawsuit is sealed, the investment company issued a letter announcing its legal action against Theranos. In the letter, the hedge fund claims Theranos, specifically founder and Chief Executive Officer Elizabeth Holmes and former company president Sunny Balwani, lied about the performance of its blood-testing equipment in order to raise funds.
Theranos also faces lawsuits filed by several patients who underwent medical treatments after receiving blood tests results from Theranos—tests that were later voided by the company as part of a problem with a batch of results spanning two years. Theranos is also the subject of a criminal investigation by the U.S. Department of Justice with investigations centering on whether or not Theranos and its executives misled investors as to the efficacy of its blood-testing products.
Theranos has maintained the lawsuits filed against it are without merit, however the company has not specifically addressed the latest lawsuit filed by Hagens Berman.
The lawsuits were filed after Holmes and Theranos pivoted the focus of Theranos from its maligned blood-testing business to focus on the development of its new portable laboratory system, dubbed Edison, which the company unveiled earlier in the summer at the American Association for Clinical Chemistry. As a result, the company said it was shuttering its labs and blood-testing centers and was also terminating about 40 percent of its staff.
