Theranos device failed pharmaceutical review, while lab director cleared it for seven tests

A scientist who worked at a partner of Theranos said her company had not “comprehensively validated” the diagnostic startup’s proprietary devices, undermining a claim founder Elizabeth Holmes allegedly made to investors.

Victoria Sung had been tasked with evaluating Theranos’ Edison device for her employer, Celgene, who had a small contract with the startup. What she saw suggested that the device was not ready for use with patients.

Initially, Celgene and another pharmaceutical company, GlaxoSmithKline, were intrigued by the promise of Theranos devices. QPS, the gold standard for diagnostic tests, requires 2 ml of blood. But Theranos promised to do it with 0.25ml, and the company claimed it was able to get good results with whole blood, which Sung described as “very nice.” The problem was that just over 14% of Theranos’ samples failed to produce usable results, compared to less than 2% for QPS. Was it good or bad, the accusation asked him? “Bad,” Sung replied.

These results, along with other data, did not constitute a complete overview of Theranos’ device, she said. “Have you already validated Theranos technology? US Attorney Robert Leach asked him. “No,” she said. Still, what Sung saw told him that Theranos’ devices still needed work.

Sung emailed Holmes and other Theranos executives to let them know that Celgene will be waiting for the next version of the Edison device. “We had decided that we would prefer to stick to at least variability in the results,” Sung told the court. She said it was the last time she worked with Theranos.

Cross-examination of laboratory director continues

Sung was the second witness called yesterday in the Holmes’ criminal trial, in which the startup founder faces 10 counts of wire fraud and two counts of conspiracy to commit wire fraud. The first witness was Dr Adam Rosendorff, who continued his third day of testimony in court.

During cross-examination by defense attorney Lance Wade, Rosendorff confirmed that, despite broader reservations, he signed the Edison device validation reports for seven tests. “Wouldn’t you have continued to sign validation reports for the Edison if you thought the Edison device was inherently unreliable?” Wade asked. “I wouldn’t,” Rosendorff said.

Rosendorff also said Holmes and Balwani were upset when an inspection revealed “minor flaws” in a laboratory in Theranos. Prior to this inspection, Holmes had asked employees to define a path for auditors to “avoid inaccessible areas.” Balwani had told employees working in the laboratory containing the Edison devices not to enter or leave while the inspectors were on site. Rosendorff said he did not recall seeing any emails on the channel and would not actively hide the lab from inspectors. He confirmed to Wade that in a typical lab inspection, employees don’t provide information to inspectors, but rather wait to be asked questions.

In anticipation of another inspection, a Theranos employee told Holmes that they were covering the notice boards “in the human resources lobby” with paper “so that the inspector could not see any of the drawings or items on the the tables “. Wade asked Rosendorff if this was to protect trade secrets, and Rosendorff in turn asked him who would pin trade secrets on a bulletin board.

Some emails also reveal that Rosendorff was not always quick to voice his concerns. On November 11, 2013, Rosendorff emailed Balwani with issues that needed to be addressed prior to the major launch of Walgreens in Arizona. Balwani replied, “As we know, we take these issues seriously. Why haven’t you told me about it before when I was having problems for months? Rosendorff replied: “My apologies for the late comments regarding our preparation…”

Personalities revealed

The ensuing exchange led to Rosendorff bickering with Wade over wages, a back-and-forth that apparently led to some laughter in the courtroom. Rosendorff said he was concerned about the quality control test results. Wade replied, “That’s why you get paid a lot of money.” Rosendorff apparently wasn’t amused: “Not as much money as you get paid.” Laughter.

Rosendorff was paid $ 240,000 while at Theranos, and the Wall Street Journal notes that partners at Wade’s law firm, Williams & Connolly LLP, earned an average of around $ 1.5 million on average. last year. Rosendorff reflected in court that his salary, while comparable to other lab directors in the San Francisco Bay Area, was not enough given the headaches he faced at work and the subsequent legal fees. “I think I should have been paid a lot, a lot more,” he said. Judge Edward Davila struck this comment from the record.

Out of court, CNBC obtained a series of notes written by Holmes for herself while she was directing Theranos. Many are linked to running a startup, and others show her closely studying Steve Jobs, her self-proclaimed idol. But one stands out for its apparent reference to Bernie Madoff, the financier whose Ponzi scheme allowed him to steal billions from investors. Holmes wrote: “Really smart people chose mado Not you.”