Recently unsealed documents in a lawsuit against Palo Alto, Calif.-based Theranos reveal the company allegedly bought commercial lab equipment using a shell company and used the machines to mislead investors and partners, according to a report from The Wall Street Journal.
The newly unsealed documents are excerpts from depositions from 22 former employees or directors. They are part of a lawsuit filed last October by hedge fund company Partner Fund Management. The Wall Street Journal filed a legal challenge to make the court filings public.
Here are five key findings, as reported by The Wall Street Journal.
1. The depositions allege Theranos established a company called Protegic Procurement Company to discreetly buy commercial lab equipment. Theranos allegedly rigged the machines to run tests with smaller, finger-prick sample sizes, according to the report.
2. Former employees allege Theranos only conducted half of its tests with finger-prick sized blood samples. Micro blood samples were part of the original premise of the company and its proprietary technology, the Edison testing device. However, the depositions allege Theranos ran all the finger-prick tests on commercial lab equipment, according to the report.
3. The startup also allegedly misrepresented its financial outlook. According to The Wall Street Journal, the filings indicate the company told investors in January 2014 it expected a gross profit of $1 billion in 2015. However, a former controller said she published a projection shortly after January that estimated gross profits at $100 million, according to the report.
4. The hedge fund filed another lawsuit against Theranos to block a deal it offered investors earlier this month. Previously WSJ reported Ms. Holmes was offering investors company shares in exchange for an agreement not to file a lawsuit against the company.
5. The allegations the company used commercial machines to stage demonstrations have "no merit," Theranos said, according to the report. The company also submitted a court filing Friday to tighten the seal on documents involved in the case.
Read the full story here.
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