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The Silicon Valley startup is expected to shutter its operations after it failed to deliver revolutionary lab-testing amid allegations of fraud.
Theranos is going out with a whisper barely. Once again, it is a new way to conduct a blood test to detect myriad diseases, with a single finger prick, the company is making preparations to close its operations, according to a letter to the shareholders.
"We are now out of time," David Taylor, the company's chief executive and general counsel, informed investors in an email first reported on Tuesday by The Wall Street Journal, whose in-depth investigation unraveled the company's claims. Mr. Taylor declined to comment further, saying the letter spoke for itself.
Theranos's efforts are now focused on avoiding bankruptcy.
It's in a bad situation with the Fortress Investment Group, Mr. Taylor told shareholders. The company is negotiating a settlement with Fortress, which would then own the company's intellectual property and allow them to distribute their remaining cash – some $ 5 million – to unsecured creditors.
"Because the company's under the plan is not enough, Mr. Taylor said in the letter.
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The Theranos board is expected to meet on Friday, and the process of dissolving the company is expected to take six to 12 months.
Founded in 2003 by Elizabeth Holmes, a 19-year-old Stanford University dropout, Theranos promised to shake up the entire industry, making blood tests much easier and less expensive than traditional methods.
A charismatic executive who is passionate about women's issues, and who is passionate about their health information, Ms. Holmes attracts high-profile investors and assembled a Who's Who, two United States Senators. Gen. Jim Mattis, the current secretary of defense, also served on the board.
At $ 9 billion, Ms. Holmes has been promoted to one of the most successful female entrepreneurs. But questions about the accuracy of the company's testing, and federal regulators.
In March, the Securities and Exchange Commission charges Ms. Holmes with widespread fraud, accusing her of exaggerating – even lying – about her technology. In announcing the charges, the S.E.C. said Theranos and Ms. Holmes agreed to a settlement.
Then in June, Ms. Holmes was indicted on criminal charges, and she pleaded not guilty.
The Wall Street Journal reporter, John Carreyrou, called "Bad Blood: Secrets and Lies in a Silicon Valley Startup," and a forthcoming movie.
Lawyers for the company and Ms. Holmes did not respond to requests for comment.
Ramesh Balwani, the company's president who continues to fight against civilians, issued a statement through a representative: "As an investor who has millions of dollars of his own money and nearly seven years of his life in Theranos, Mr. Balwani was saddened to see the letter from Theranos to investors yesterday. "
Reed Abelson covers the business of health care, focusing on health insurance and how to provide financial incentives for the delivery of medical care. She has been a reporter for The Times since 1995. @ReedAbelson
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