Welcome to the October 2020 chapter newsletter. Let us know what you think, and remember, you can also read it on the chapter website. You can find previous newsletters on the website as well. And we always welcome suggestions for newsletter topics.

In this issue:

CHAPTER EVENTS

• Next Book Club: Monday, January 25th, 2021 via Zoom

NEWS

• Volunteer to be the next chapter president-elect!

• Take an Active Role! Please consider volunteering!

FEATURES

• Book club notes

CHAPTER EVENTS

Book Club hosted by Paul Mamula

Topic: Deadliest Enemy: Our War Against Killer Germs by Michael T. Osterholm and Mark Olshaker

When:  Monday, January 25th, 2021 at 11:00 am Central Time via Zoom

Details:  We will be reading the second edition (2020), which has a new section about the COVID-19 pandemic. The book is nontechnical and an easy read. It traces many diseases and also includes stories about Michael Osterholm’s life and career. See you there!

RSVP: By 9 a.m. the morning of January 18th, please email Book Club coordinator Paul Mamula to let him know you will attend: paulpat@pclink.com.

Look for details on the Zoom meeting in future newsletters.

NEWS

Take an active role in AMWA – Volunteers needed!

The AMWA North Central chapter is looking for a new president-elect. The president-elect position is critical to our status as a chapter!  Without a volunteer to fill this vital position, we will not be able to continue as a chapter. Please volunteer!

AMWA North Central is a volunteer-based organization. If members don’t take an active role, the chapter will cease to function, and members will lose access to programming, news, and networking opportunities. Consider taking your turn to lead (or join) a committee or serve as a chapter officer.

President-elect: The new president-elect role will serve a one-year term beginning in February 2021 and ideally will transition into the role of president in 2022. As president-elect, you will attend the monthly AMWA NC chapter board meetings, take minutes, and chair the meeting if the president is unable to attend. Other duties may be assigned by the president or board on an ad hoc basis. Please submit your nominations by November 15, 2020 to president (at) amwanorthcentral (dot) org.

Not ready or able to lead a committee? All our committees welcome members to share ideas and keep the workload light.

In addition to keeping our group viable, volunteering with AMWA is a great way to network with your fellow members. It’s also a good way to fortify your C.V. with an extra line showing how you give back to your profession! If you can volunteer a few hours a month to help, contact our president, Michele Cleary: president (at) amwanorthcentral (dot) org

FEATURES

Book Club Notes: Bad Blood by John Carreyrou

By Paul W. Mamula, PhD

Our virtual book club met on September 28, 2020, to discuss Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou. The story follows Elizabeth Holmes’ diagnostic company, Theranos, and its failure. A 2-time Pulitzer Prize-winning investigative reporter, Carreyrou worked for the Wall Street Journal from 1999 to 2019. The book, published in early 2018, arose from a story in 2015.1

The Book

Bad Blood has a compact 299-page text that traces Elizabeth Holmes’ background and the rise and fall of her company. It reads more like a biomedical thriller. Carreyrou also profiles the culture of the company she created at Theranos. The intense surveillance, secrecy, and intimidation by the company’s lawyers and executive board members in trying to suppress the story are absolutely chilling. The tale culminates in fraud charges against Holmes and Ramesh “Sunny” Balwani, her then-boyfriend and chief operating officer.2 The book ends with an epilogue that reports the company’s collapse and the initial indictments by the Securities and Exchange Commission.

Holmes and Spectacular Claims

Holmes charmed many researchers and investors, beginning when she was at Stanford. After dropping out, she used family influence and friends to raise money to fund the company in 2004. Holmes had a mesmerizing personality, mimicked Steve Jobs’ all-black clothing, and lowered her voice to affect an image of gravitas. The company was developing a device that purported to be able to analyze more than 200 compounds and biomarkers using only a few microliters of blood. While her company had patents for some assays, it was never able to achieve its fantastic claims. The book’s prologue sets the tone by describing how she fired the salesperson who questioned using a dummy analyzer to initially pitch the device. From this point, readers know that this book isn’t going to be a bland recap of the story.

Holmes contracted with several health organizations and companies to test patient samples; however, Carreyrou’s Wall Street Journal article in October 2015 noted discrepancies with the results.1 This “fake it until you make it” attitude risked people’s lives, and the attempts to hide shortcomings intimidated employees, squandered millions of dollars, and ultimately led to fraud charges. Mary Knatterud said, “Theranos was little more than a house of cards in which only ‘sycophants were promoted’ (page 164), rather than a science-based, ethical business. That Holmes got by with her narcissistic power grab for so many years, ruining so many onetime employees’ lives and endangering the well-being of so many patients, is a sad commentary on the segments of our society that blindly worship celebrities and greedily chase money and fame.”

Toxic Corporate Culture and Deception

We had a lively discussion with a larger than normal contingent of attendees, including a new AMWA member, Amanda Martin. Three of us with experience in medical devices raised questions how the company got away with the subterfuge for so long.

Nancy Nordenson wondered why the regulatory documents required for approval were delayed and how the company was able to avoid submitting them. Additionally, we were shocked at how Holmes and her inner circle deliberately hid their device from FDA inspectors and browbeat staff who complained about device performance problems. Many of her staffers were threatened with lawsuits and physically intimidated. Some quit, and one even committed suicide. The testimony of one courageous employee, Tyler Shultz, the grandson of Theranos Board Member and Reagan Secretary of State, George Shultz, caused the deception to unravel. Tyler Shultz’s testimony in a Partner Fund lawsuit was crucial. He was later pressured by family and friends of Holmes to recant, but he remained unpersuaded. Carreyrou, too, was threatened with legal action, but his paper stood by his reporting.

Mary Knatterud said, “I was horrified at the superficial, dehumanizing corporate culture that Holmes created, a culture devoid of empathy for employees or for the patients they were supposed to be helping.” She added, “I was particularly appalled at Holmes’ proclamation to her employees that ‘she was building a religion’ that required their ‘complete devotion and unmitigated loyalty’ (page 173).”

Many prominent investors, notably Rupert Murdoch, and the Walton and DeVos families, eventually lost hundreds of millions of dollars in the debacle. Most of the big investors lacked a science or medical background but were duped by Holmes’ guile.

Developments after Publication*

The Securities and Exchange Commission charged Holmes and Balwani with fraud in March 2018, and Carreyrou speculated about potential other charges. Holmes initially settled the civil charges by paying a $500,000 fine, returned 18.9 million shares, relinquished her voting control of Theranos, and was barred from serving as an officer or director of a public company for 10 years. More charges did follow. On June 15, 2018, Holmes and Balwani were indicted on 2 counts of conspiracy to commit wire fraud and 9 counts of wire fraud.2 Fortress Investment Group LLC provided a cash infusion and obtained control of Theranos in return for the company’s assets. Although they believed the company was salvageable, Theranos still went out of business.3 The story has been the subject of documentaries and a television movie.

Interestingly, the technology exists to perform microanalyses, just not as many as Theranos claimed. The fallout from Theranos has inhibited venture capitalists from pursuing some technologies. Companies pursuing microanalytic technology include one in Minnesota that employs a printed chip for analysis.4 The legal wrangling and the COVID-19 pandemic has caused Holmes’ trial to be postponed twice; it is now scheduled for March 2021. She recently claimed that “mental disease” made her unable to determine that her fraud was wrong.5 The trial is sure to provoke lots of interest.

Up Next

Our next book club is on January 25, 2021. We will discuss Deadliest Enemy: Our War Against Killer Germs, 2nd edition (which includes a chapter on COVID-19) by Michael T. Osterholm and Mark Olshaker.Remember, reading the book is not a prerequisite for attending the book club. Come join us!

*Note: Some of the material in this Book Club Notes appeared in my “Read a Good Book?” column in the April 2019 newsletter.

References

1. John Carreyrou J. Hot Startup Theranos Has Struggled with Its Blood-Test Technology. Wall Street Journal Oct 15, 2015. Hot Startup Theranos Has Struggled With Its Blood-Test Technology – WSJ  [Accessed October 1, 2020]

2. Press Release. Founder and Former Chief Operating Officer Charged in Alleged Wire Fraud Schemes. US Attorney’s Office, Northern District of California, June 15, 2018. https://www.justice.gov/usao-ndca/pr/-founder-and-former-chief-operating-officer-charged-alleged-wire-fraud-schemes [Accessed October 1, 2020]

3. Abelson R. Built on Deception and on the Brink of Bankruptcy, Theranos is Shutting Down. New York Times, Sep 5, 2018, page B3. Theranos Is Shutting Down – The New York Times [Accessed October 1, 2020]

4. Carlson J. St. Paul startup takes run at big market with $8 blood tests. Minneapolis Star Tribune, January 14, 2019, Business Section, page D1.  Can St. Paul startup succeed where Theranos failed? Ativa bets on $8 blood tests – StarTribune.com [Accessed October 1, 2020]

5.  Lutz E. Elizabeth Holmes May Say She Committed Fraud Because of “Mental Disease.” Vanity Fair Sep 11, 2020 Elizabeth Holmes May Say She Committed Fraud Because Of “Mental Disease” | Vanity Fair  [Accessed October 1, 2020]