Theranos Inc., the Palo Alto-based blood-testing company whose former CEO and chief operating officer were indicted by a federal grand jury earlier this year for allegedly defrauding investors and patients in a multimillion-dollar scheme, is shutting down, according to the company's CEO and general counsel David Taylor.
In a letter to stockholders, Taylor said Theranos had been working with an investment bank that had reached out to more than 80 potential buyers over the past four months.
"Unfortunately, none of those leads has materialized into a transaction. We are now out of time," Taylor wrote.
Taylor said the company plans to seek board and shareholder consent to begin dissolving Theranos on Sept. 10.
The company has already begun negotiating a settlement with Fortress Credit to take ownership of Theranos, Taylor said. Theranos was in default for a loan with Fortress and owes at least $60 million to unsecured creditors, Taylor said.
Under the settlement, Fortress would take ownership of all assets, and Theranos would be allowed to distribute its remaining cash, about $5 million, to creditors.
Because the company's cash is not nearly sufficient to pay all of its creditors in full, there will be no distributions to shareholders, according to Taylor.
Chief Operating Officer Ramesh "Sunny" Balwani and Theranos founder Elizabeth Holmes, who dropped out of Stanford University at the age of 19 to found Theranos in 2003, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud last March. The pair allegedly carried out a multimillion dollar scheme against their investors and a separate one against doctors and patients. Holmes and Balwani allegedly used advertisements and solicitations to persuade doctors and patients to use the company's services, despite knowing certain blood tests wouldn't provide accurate results, according to the indictment. Neither Theranos nor Holmes admitted or denied any wrongdoing.
In early April, the company laid off most of its employees, save for two dozen or fewer, the Wall Street Journal reported at the time.
In June, Holmes resigned as CEO and Taylor replaced her.