Ex-unicorn

Theranos hobbles toward gluenicorn fate

Theranos just lost a lot more blood. Once worth $9 billion, the Silicon Valley hematology upstart's value was already racing to zero. Now a US health regulator is set to ban the company founded by Elizabeth Holmes from the laboratory business for two years. It's hard to reinvent technology, regulation and governance in one go.

The company and its chief executive, a Stanford University dropout, rose to fame on the back of a vision of simplified, cheaper blood testing, offering faster results, requiring just the prick of a finger. Any user of standard US blood labs finds that appealing. So did early investors and potential partners, including pharmacy chain Walgreens, which ended its relationship with Theranos just weeks ago.

Now the Centers for Medicare & Medicaid Services have followed through on an earlier warning that they might shut down Theranos' California lab and ban its owner and operator from the business for two years, among other sanctions relating to the accuracy and quality of the company's tests.

Matching existing test results using new analytical devices that require a fraction of the amount of blood seems to have been part of the challenge. Sceptics' calls for greater transparency and academic scrutiny of Theranos' procedures fell on deaf ears, at least until recently.

Existing regulations presented another big hurdle. Sometimes, Silicon Valley's big ideas end up changing the rules they challenge for the better, cracking open sheltered markets. Some of what Uber has done to disrupt taxi oligopolies, for example, falls into that category.

But a lot of health care red tape exists to protect patients. It's less easy, and less desirable, to cut those requirements to ribbons. Theranos' novel and secretive approach ran into that problem. It's not alone. Insurance-licensing shortcomings recently led human-resources and health-insurance start-up Zenefits to write off a chunk of its once $4.5-billion valuation having already cost founder Parker Conrad his job as CEO.

Then there's governance. Holmes had a board mostly comprising ageing political and military worthies, including former secretaries of state George Shultz and Henry Kissinger. Though she later brought in more scientific experts, investor representatives who might have cast a critical eye over performance remain notably thin on the ground. What was once a much-praised so-called unicorn, worth billions of dollars, now looks more like a gluenicorn.