I have posted a number of previous notes about Theranos (see: for example, Problems with Theranos' Lab Proficiency Testing; Another Layer of Difficulty?; Why Has Theranos Been Unable Thus Far to Defend Its Science?; Some Fundamental Flaws in the Current Theranos Business Model). None of the latest news about the company is good. Supporters of the company may have been encouraged by the fact that she has been invited to deliver a plenary lecture at the August meeting of the American Association for Clinical Chemistry (AACC). This with the ostensible purpose of finally presenting "data" about the company nanotainers and its Edison analyzer (see: Elizabeth Holmes to finally unveil Theranos data in August — if she lasts). This article struck a somewhat cynical final note by suggesting that she may not necessarily be in place as the Theranos CEO by August. Below is an excerpt from it:
[Theranos's Elizabeth] Holmes plans on finally pulling back the veil on the company’s “nanotainers,” its Edison device and other proprietary research in August at the American Association for Clinical Chemistry‘s annual scientific meeting. Of course, this begs the question: Think Holmes will still be at Theranos this August? This is clearly a damage control play, because Holmes’ reign at Theranos has become all the more tenuous in the past week. The Wall Street Journal reported...that Holmes could be booted from Theranos, citing a letter from regulators that says she hasn’t done enough to fix Theranos’ copious problems....The secretive company has been under fire since October, when the Wall Street Journal wrote a damning exposé about the failings of its single-drop-of-blood diagnostic tools.Looks like pressure from the Journal ...have finally forced Holmes’ hand far enough that she feels the need to speak out.....So let’s see if the Theranos CEO makes it to AACC. If she’s still CEO.
Here's an excerpt from the WSJ article about Theranos linked to above:
The company’s most urgent challenge is to persuade government officials not to impose the crippling penalties detailed in the 45-page [CMS] letter. The agency completed an inspection of the California lab in November and found five major categories of infractions that violate the federal law governing clinical labs.In February, Theranos submitted a correction plan to address the problems, but federal officials concluded it was insufficient, according to the March 18 letter...The letter detailed six proposed sanctions, including revoking the California lab’s federal license and barring it from the Medicare program. License revocation would result in Ms. Holmes and Mr. Balwani being barred from owning or operating any lab for at least two years, according to the copy reviewed by the Journal. CMS also proposed to fine Theranos $10,000 a day and said it wants the company to submit the names and addresses of all doctors and patients who used the lab’s services since January 2014.
In my mind, there's only one real reason why the AACC would offer a speaking invitation to Holmes: to stimulate registration at its annual meeting. However, I am sure that the organization will spin the invitation in some other way. Unfortunately for her, the legal threats to her status as CEO are coming from three different directions: regulatory, financial, and criminal. Here's an interesting quote suggesting that the fact that Theranos is privately held may not provide relief from the SEC for charges of financial malfeasance (see: Theranos, the SEC, and the Enforcement of the Securities Laws Against Private Companies):
...[T]here has long been a belief that there is a sharp distinction between privately held and publicly traded companies. Under this view the liability exposures between the two kinds of companies were perceived to be distinct, with the risk of federal securities law liability exposures limited to publicly traded companies. The D&O [Directors and officers liability] insurance marketplace is built around a basic premise that private and public companies are fundamentally different. The D&O insurance for these two categories of companies are written in entirely different forms, in part based on the assumption that public companies have potential liability exposures under the securities laws, while private companies generally do not. SEC Chair White’s recent speech and the onset of the investigation involving Theranos make it clear that private companies have potential liability exposures under the federal securities laws.
As noted in the first excerpt, there is some doubt whether Holmes will be the Theranos CEO in August in which case the AACC invitation becomes moot. I believe that she is in a very precarious position and will probably be forced out of the company before August. At the very least, her attention will be focused on defending herself and Theranos from a raft of lawsuits. The most interesting question now is whether any of the company assets such as intellectual property will be considered to be of any value by other parties.