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This top healthcare unicorn is real or a product of hype?

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Last week we presented to you the world unicorn biotech startup in 2016. Theranos (an American privately-held health-technology and medical-laboratory-services company) topped the list among the various healthcare industries with total valuation of $9 billion. This value is exceptionally higher than any other unicorn company in this segment. Despite the financial stronghold, the entire world is currently lacking the firm belief in the credibility of this company. In this post, we will try to analyse Theranos as real unicorn or it is a product of hype?

Unicorn profile

Valuation: $9bn

Total equity funding: $750M

Specialties: blood-testing device

Location: Palo Alto, California, USA

Founded: 2003

Investors: ATA Ventures, Draper Fisher Jurvetson, Sand Hill Finance, Tako Ventures

CEO: Elizabeth Holmes (founder)

Theranos: once looked a real innovator    

Theranos stands for the integration of therapy and diagnosis by facilitating the early detection and prevention of disease. It has developed a blood-testing device called Edison, which is based on the microfluidics technology and only need few drops of blood as compared to the traditional venipuncture method. This technology wowed investors and enabled Theranos to become a unicorn company.

Theranos_edison

Photo credit: Theranos Inc. and Business Insider Inc.

How Theranos work?

People outside the company has very little information about how exactly the Theranos’ technology works, and (even in response to the accusation of The Wall Street Journal report) the company has only featured a brief data regarding its function. Original statement can be read here. To give you an insight on their claimed technology, here’s a step-by-step breakdown.

  1. The blood draw. This is the step where Theranos has claimed innovation. As claimed by the company, for the blood collection a proprietary technology called ‘nanotainer’ is utilized which can store couple of blood drops. The innovation at this stage is that the blood can be drawn with just a prick and don’t really need the use of  “big, scary needle”. To be noted that U.S. FDA has approved the commercial use of nanotainers only to test the herpes simplex 1 virus and thus the company uses the traditional method blood draws for majority of its tests.
  2. Transportation to a lab. Theranos has two labs to process the collected blood samples. One located in Newark, California, and other in Scottsdale, Arizona. Only Newark lab has “Edison” blood analysis technology available.
  3. Analysis. This is the step where problem started for Theranos. On October 15, 2015 an investigative report by The Wall Street Journal accused Theranos of relying on traditional technology instead of the company’s proprietary to analyze blood-test results. And many other similar and more serious claims afterwards-gave an impression that Theranos’ claimed revolutionary blood tests did not work at all. According to experts, the Edison machine gives different results for the same test.

Theranos: will remain a unicorn for long?

Until the final verdict on Theranos does not publish, it would be unwise for me to comment on the Edison machines or the credibility of Theranos. But one thing is evident that Theranos has already started loosing the faith and confidence from their partners, collaborators and investors. The pillars of Theranos unicorn days!

Undoubtedly, the success of Theranos has been remarkable- since it was founded in 2003, it has secured roughly $750 million in total funding with the valuation of $27 million at first raise and now the company has an astounding valuation of $9 billion. 

theranos_deal_graph

Figure: Theranos deal history

The company’s partnership with drugstore chain Walgreens with whom it partnered to launch wellness centers (Theranos lab testing locations) inside certain Walgreens stores across Arizona and California was the other feather in the Theranos’s cap.

After the mystery got unveiled in October 2015, the existing and future partners of the Theranos has been continuously distancing themselves away from the company. The old partner Walgreens held back their plans of utilizing Theranos’s testing services in their stores. Doubting about the efficiency of Theranos’s testing technology, Safeway has cancelled a $350 million agreement with them. Lately, Cleveland Clinic hospital who was announced as Theranos partner also denied that they had verified the Theranos technology earlier and also seems to back out of the partnership.

With all this buzz going on, I and rest of the world is uncertain that for how long Theranos would be able to hold the unicorn status. Until, we don’t get the conclusive results from the competent authorities of Theranos trials, it is also unwise to state that Theranos is just a product of hype.

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