Around the time Theranos lost nearly $ 2 million a week, investors in blood test starts were told that the company would soon bring in nearly $ 1 billion a year.
It is not uncommon for start-ups to lose money in their early years, and it is not uncommon for the fastest burn rate to happen just before things turn around. Instead, Theranos continued to produce increasing losses. But that’s not what the company told investors, according to new documents shared during the jury trial against Therano’s founder and CEO Elizabeth Holmes.
In court yesterday, the jury heard testimonies from the company’s longtime CFO Danise Yam, who also resigns from So Han Spivey. Yam said Theranos lost $ 16.2 million in 2010, $ 27.2 million in 2011, $ 57 million in 2012 and $ 92 million in 2013. By 2013, it had “started to get a little crowded,” Yam said. There were weeks where the company burned through about $ 2 million a week, and there was no revenue to make up for the losses. In 2012 and 2013, Yam did not even bother to add a line of revenue – there was none.
After asking questions about Therano’s continued losses and lack of revenue, prosecutors Yam showed a document they said was shared with investors; it estimated $ 140 million in revenue in 2014 and $ 990 million in 2015. Yam said she had never seen the document before, nor did she know where those numbers came from.
“Have you ever given financial forecasts to investors?” Robert Leach, Assistant U.S. Attorney, asked Yam.
“No,” she said.
In fact, Yam relied heavily on Holmes for financial forecasts. When Yam worked with an analysis company to price options, she Holmes asked for some important financial forecasts, including estimated revenue, because the CEO had “the best information”. During that process, Yam had emailed Holmes and asked her how much revenue she was expecting. In a response, Holmes said she estimated $ 100 million for 2015, almost ten times less than what she told investors at one point.
Despite persistent losses, Holmes’ salary increased from $ 200,000 to $ 400,000, Yam sa.
The next witness was Erika Cheung, who was hired by Theranos from a degree as a lab assistant. Cheung said she joined the company largely on the star power of its CEO. “She had a charisma; she was very articulate, ”Cheung sa by Holmes. “She had a strong sense of conviction about her mission.”
Cheung quit his job after seven months and filed a whistleblower complaint with the Centers for Medicare and Medicaid Services, claiming that the company used obsolete laboratory materials for tests run on its own “Edison” test devices, which themselves had “great stability, precision, and accuracy issues. ”
She first became concerned about Therano’s own machines when she used them to test her own blood. “Employees would essentially donate their blood to Theranos for cash,” Cheung said sa. When I checked Edison’s performance on a vitamin D test, “it would always happen that I was deficient,” she added. But when she ran a test on another company’s unit, which Theranos kept if her own machine could not handle the task, her vitamin D levels seemed normal.
“I was uncomfortable processing patient samples,” she says sa. “I did not think the technology we used was sufficient enough to engage in that behavior.”
While working at Theranos, Cheung sent an email to others in the company telling him about his concerns about the Edison machines. These emails eventually reached Holmes, who asked, “How quickly can we resolve this issue?” Another employee replied that after omitting certain information, the problem seemed to be solved.
Most tests that Theranos performed for customers were performed on devices made by other companies, Cheung testified. Only 12 tests were performed on Edison devices, and “The Edison analyzer could only run one type of test for a patient at a given time,” she said.
State inspectors who arrived at Theranos in response to Cheung’s letter was found conditions similar to those in the complaint. They proposed revoking the company’s license to test human samples. Theranos eventually resolved the issue with the government and voluntarily closed all its laboratories.
After Cheung went to the federal government, Theranos hired a private detective to spy on her, according to court documents was released last week. The company spent over $ 150,000 supervising her and another whistleblower. Cheung’s testimony continues today.