So far, Elizabeth Holmes’ defense has gone to great lengths to show us that Theranos has a real device and works with real pharmaceutical companies. This was in fact not questioned, particularly during the period the defense questioned. Yet the point seems to be Hey look, some things in Theranos were real.
But today, in his wire fraud lawsuit, we saw a scientific presentation – not the actual science, just the marketing version. We saw the guts of the Theranos devices. We’ve heard about the company’s iteration on the device. We have seen emails with pharmaceutical companies.
Theranos’ work with pharmaceutical companies has never been questioned; we saw the money that Theranos made from this work at the start of the prosecution case, with Comptroller Danise Yam. The problem with the pharmaceutical companies has been the “validation” reports that Theranos has produced on its own technology under these partnerships. Although these reports were written by employees of Theranos, investors said they believed the reports were written by drug companies.
To make matters worse, two reports we saw carried logos for Schering-Plow and Pfizer. The Schering-Plow memo had also been improved from its original version. When Theranos first sent the report to Schering-Plow, it did not have the drug company logo on it and read that Theranos “gives exact and precise results.” The version Walgreens saw featured the Schering-Plow logo and language that said it would “give more accurate and precise results … than current” gold standard “reference methods. “
Investors have testified that the work Theranos has done with pharmaceutical companies and the military has been important. They thought this meant pharmaceutical companies and the Defense Ministry had co-signed the technology, using it in clinical trials and in Afghanistan – a lie reporter Roger Parloff also heard. Today Holmes admitted that Theranos was not working with the Department of Defense at all.
His testimony was brief – the trial was delayed an hour and a half for a meeting in the judge’s office between lawyers for both sides. The reason for the meeting was not explained. The court session also ended relatively early, at 1 p.m. Pacific time.
Holmes, who seemed comfortable at the booth, was asked to explain why the cartridges in the 1.0-series device were not working. They were stacked and held together with adhesive, but the adhesive could come off, leaving the stacked layers peeling off and not working properly. I wasn’t quite sure how important this was – we knew Theranos was iterating on the device.
His answers were largely non-technical; whether it was because she didn’t have any technical knowledge, or because she wanted to make sure she didn’t confuse the jury, was unclear to me. Sometimes Holmes’ testimony came so close to the documents that we were shown to be funny. After reading the emails, he was asked what they wanted to say and replied, almost verbatim, a sentence in the email. In one slide show, one slide was titled “Completed Achievements.” Holmes’ attorney Kevin Downey asked him what success means in this context.
“The fact that we have successfully achieved the objectives of the program has been a success,” she replied. What about Theranos’ performance? “I remember it was really good.”
The “complete successes,” in Theranos parlance, were almost all preliminary studies by pharmaceutical companies. One exception was a study done with Stanford, which was actually published.
The outlines of working with many pharmaceutical companies were largely the same. A large pharmaceutical company would do preliminary work with Theranos, which Holmes would generally describe as successful. But no clinical trial work has emerged. This was true for Merck, Bristol Myers Squibb and Celgene. Theranos created tests for AstraZeneca and worked on a clinical trial for Centocor.
In the Centocor trial, the Theranos device was tested against standard laboratories. When asked how his device performed in comparison, Holmes said: “It worked well.” Many of her responses were short and neutral, as if she was talking about the weather.
The most interesting parts of his testimony, however, concerned Pfizer and Schering-Plow. Importantly, for Holmes to be convicted of wire fraud, the government must show that she knew she was lying when she gave wrong information to investors – mistakes are not illegal.
So we saw emails. At Schering-Plow, Constance Cullen had been Theranos’ main point of contact. (Cullen testified earlier, for the prosecution.) As Cullen said, her company was bought by Merck while she was in contact with Holmes, and since she took on a newly assigned group combined, the work with Theranos fell apart.
In an email from a Theranos employee to Holmes, the employee wrote that Cullen had been swamped with work since the acquisition. “Overall it was great,” the email continues. “I think calling him every morning for the past three weeks has finally paid off…” Holmes was asked directly if Cullen had informed her of Schering-Plow’s poor opinion of Theranos’ testing. Holmes said no.
You can see where it’s going – a very A generous read of the situation is that Holmes didn’t realize the technology was bad or that Merck didn’t want to work with her, she just thought her touch dropped the ball.
As for Pfizer, the defense produced emails showing that Holmes had continued to talk about a partnership with the company until 2015. In that email, a Pfizer employee offered to use Walgreens’ centers. Theranos as clinical trial sites. It didn’t work out and Thearnos didn’t work on a clinical trial for Pfizer.
It’s possible to believe that all of these drug companies have looked at Theranos’ device and have chosen not to go ahead for unrelated reasons – but it’s a big push. Together we have seen that many pharmaceutical companies have given up on actual work with Theranos.
The thing about today’s presentation, however, is that Theranos’ early work is not in dispute. According to the government, the fraud did not start until later. Besides, liars don’t lie all the weather.
As she draws closer to her testimony on some of the other areas of interest, I hope there will be just as much contemporary email evidence. Because having now heard the tapes of Parloff’s Holmes, I was struck by the confidence with which she had lied and how believable she looked. Being preceded by these tapes means that no matter how confident or trustworthy she seems, I always find myself doubting what she is saying unless there is something else to back it up.