Palo Alto-based health-technology company Theranos announced on Wednesday, Oct. 5, that it will lay off 340 employees, or about 43 percent of its workforce.
Company CEO Elizabeth Holmes announced the layoffs in an open letter on the company's website, stating that the firm would close its clinical labs and Theranos wellness centers, affecting approximately 340 employees in California, Arizona and Pennsylvania. The company will return its attention to its miniLab platform, a portable device designed to process and analyze very small samples of blood.
"Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care," Holmes wrote.
Theranos has a new executive team leading work toward obtaining Food and Drug Administration clearances, building commercial partnerships and pursuing publications in scientific journals, according to the company.
"After many months spent assessing our strengths and addressing our weaknesses, we have moved to structure our company around the model best aligned with our core values and mission," Holmes said in her statement. "We are profoundly grateful to these team members, many of whom have devoted years to Theranos and our mission, for their commitment to our company and our guests."
Theranos was started in 2003 by Holmes, who left Stanford University's School of Engineering to create technological innovations to quickly process laboratory tests from small, less-invasive blood samples. One of its goals is to make medical testing financially accessible to everyone, according to the company's website. Theranos publishes all its prices and offers its tests at at least 50 percent below Medicare reimbursement rates.
The company opened its wellness centers in late 2013 to officer blood tests by taking just a few drops of blood rather than entire vials. But the company has gone through a turbulent period. An October 2015 investigative report by the Wall Street Journal alleged that the company, which then had a $9 billion valuation, was relying on conventional, third-party machinery rather than its own technologies to do most of its lab testing and that some of its testing was not reliable. The company vociferously denied those allegations.
In July 2016, Theranos' Newark lab was sanctioned by the Centers for Medicare and Medicaid Services for deficiencies found in 2015, and Holmes was banned for two years from operating the lab. The company said in a statement that it was shutting down and rebuilding the Newark lab from the ground up, as well as rebuilding quality systems, adding expert leadership and changing its quality and training procedures.
In August, Theranos filed an appeal and the sanctions are on hold until a hearing scheduled for the end of this year.
The company faces class-action lawsuits claiming its testing on its Edison machine is inaccurate and potentially put thousands of patients at risk. The company denied the accusations, according to multiple news reports.
Theranos announced in April that the Securities and Exchange Commission and the U.S. Attorney's Office are investigating the company for allegedly misleading investors.
In June, Walgreens ended its business relationship with Theranos and shut down the wellness centers at its stores, the drugstore announced. Theranos responded with a statement that the company was disappointed that its partnership with Walgreens ended.
In another blow, Theranos voluntarily withdrew its Zika virus blood test, which it had submitted for Food and Drug Administration approval, the company announced on Aug. 31.