The Theranos trial is a legal battle between former Safeway CEO Steve Burd and the company. The story of how he went from being an early investor in the company to its CEO, leading it onto a path to success before everything fell apart.
Executives from the company that partnered with Theranos, which fell apart after their technology was revealed not to work as advertised. What’s next for the disgraced health care startup? They’re likely to be fined and face a congressional investigation.
Elizabeth Holmes, founder of the blood-testing company Theranos, has been on trial for over a year. The former Safeway CEO testified in front of the US House Committee on Energy and Commerce today.
SAN JOSE (California) — When Safeway Inc. agreed to spend over $350 million in a partnership with Theranos Inc., its former top executive testified on Wednesday that the grocery store chain relied on the assurances of Theranos Inc. founder Elizabeth Holmes.
Ms. Holmes’ relationship with Safeway’s then-chief executive, Steven Burd, began with a shared goal of making healthcare more accessible, but it deteriorated as Mr. Burd neared the end of his career with little to show for the costly endeavor of establishing Theranos clinics in hundreds of stores.
Mr. Burd expressed his excitement in his testimony about the possibility of bringing more customers and money to his low-margin store. But it was about more than statistics; Mr. Burd expressed his admiration for Ms. Holmes, a young first-time entrepreneur with a commendable idea.
Mr. Burd described her as “obviously charming.” “She controlled the room when she presented to our board, when she was talking,” he added, comparing her to leaders he’d met in the United States.
That admiration began to wane. According to emails in the court record, the anticipated launch date of the Theranos collaboration continued being pushed back in the years after their meeting in 2010, and Mr. Burd’s patience started to wear thin.
Mr. Burd wrote to Ms. Holmes in November 2012, “I feel like a runner jogging in place waiting for the stop signal to turn green.”
Mr. Burd’s testimony may aid prosecutors in building their case that Ms. Holmes misled to investors about Theranos’ capabilities. Safeway put up $30 million in convertible notes that may be converted into Theranos stock in the future. Theranos’ strong revenue projections were based on retail agreements like the one with the supermarket chain, but the company never delivered on them.
Mr. Burd championed efforts to enhance the health of workers and consumers over his two decades as CEO of the California-based supermarket company. Within Safeway, he founded a healthcare business and started providing vaccines at retail pharmacies.
Mr. Burd signed a deal with Theranos in September 2010 after six months of talks, and the company’s promise of a tiny machine that could test for a variety of health problems with a few drops of blood from a finger prick matched his vision.
Mr. Burd testified that the supermarket expected pharmacy sales to increase as a result of the new Theranos clinics. He imagined customers coming at the grocery store, receiving a finger-prick test, and having their findings available at the pharmacy by the time they completed picking up their weekly groceries.
Mr. Burd sought an exclusive relationship with Theranos, similar to what he had with certain fruit suppliers; for a while, Safeway was the only supermarket selling a particular kind of watermelon, he said.
He said that since Safeway’s name was on the exterior of the building, its brand would be linked to Theranos, and he wanted to be cautious.
Ms. Holmes made claims to Safeway executives and board members in 2010 that Theranos’ blood tests could be done with a finger-stick test, that results could be ready in 20 minutes, that tests were cheaper than competing labs, that tests could be done on saliva, urine, and blood—and that the company was cash-flow neutral.
Mr. Burd said, “They were ready to go.”
With Elizabeth Holmes, the founder and former CEO of Theranos, on trial, the Wall Street Journal looks back at the scandal’s major turning points and talks with legal writer Sara Randazzo about what to anticipate in the fraud trial. Adele Morgan/WSJ photo illustration
None of it was accurate, according to witness evidence during the last month of the trial. Many of Theranos’ blood tests were done using the old-fashioned needle-in-the-arm method, test results took two or three days to arrive due to frequent mistakes, and the business lost a lot of money.
After The Wall Street Journal revealed in 2015 that Theranos’ unique blood-testing technology was faulty and the business often utilized off-the-shelf blood analyzers, the partnership between Safeway and Theranos ended.
Safeway’s relationship with Theranos predates the supermarket chain’s 2015 merger with Albertsons Cos., according to a spokesperson, and the business is now under new management.
According to the Journal, an early phase of the Safeway collaboration included Theranos analyzing Safeway workers’ blood from a clinic at their headquarters. According to court documents, the blood was mostly taken through venous draws rather than finger sticks, and the results might take up to five days to arrive.
Mr. Burd wrote to Ms. Holmes in September 2012, “I am really worried that Safeway’s lab reputation is deteriorating by the day,” according to court documents. “We’ll be better off if we can get to ‘finger stick’ as soon as possible.”
Safeway workers were informing patients that results might come back in less than 24 hours without contacting Theranos beforehand, according to Ms. Holmes.
Mr. Burd wrote in an email the following month that he had recruited a few dozen phlebotomists and vetted 181 more in preparation for a larger launch. However, no launch date has been set as of November 2012.
On Nov. 12, 2012, he wrote to Ms. Holmes, “As I am sure you know, I am not easily discouraged.” “In fact, in the past 62 years, I can only remember being disheartened once.” Having said that, I’m nearing the end of my second event.”
He stated that they needed to complete 29 tasks but that the roadblocks were unclear to him, adding, “I believe all of this is exacerbated by the fact that I personally have so much at stake.”
As the year passed, Mr. Burd informed Ms. Holmes that Safeway had spent $367 million and 50,000 man-hours to build 963 facilities in its shops. “I despise wasting time.” Mr. Burd said in an email in January 2013 that “this does not seem like a partnership,” setting out numerous concerns on his mind, including a Theranos rebranding that he wasn’t told of ahead of time.
“I have faith in you.” I have faith in your business. And I agree with you. “I am so eager to assist you in changing the world,” he added. “When we work together, we’re incredible. But I’ve never been more irritated in my life.”
Ms. Holmes issued Safeway a $25 million invoice in February, claiming it was due under their contract.
No Theranos testing services had been offered at Safeway stores by the time Mr. Burd resigned in May 2013, and none would ever be.
Theranos and the Trial of Elizabeth Holmes
Dow Jones & Company, Inc. All Rights Reserved. Copyright 2021 Dow Jones & Company, Inc. 87990cbe856818d5eddac44c7b1cdeb8
- elizabeth holmes interview