Blood testing company Theranos, which seemed headed for bankruptcy, will now avoid that fate due to a $100 million loan from Fortress Investment Group.
As a Silicon Valley startup, Theranos was flying high, attracting buzz due to its claims that it could test a person's blood by mail based on only a small finger prick. But questions over quality, an investigations into its practices and the efficacy of the test itself, resulted in a rough 2016.
For one, Theranos' founder, Elizabeth Holmes, was banned by the Centers for Medicare and Medicaid Services from owning or operating clinical laboratories for two years. Then investors and former partners sued the company for alleged fraud.
Sanctions were also levied. They included a limitation of the laboratory's CLIA certificate for the specialty of hematology; a civil monetary penalty; a plan of correction; suspension of the laboratory's approval to receive Medicare and Medicaid payments for any services performed for the specialty of hematology; and cancellation of the laboratory's approval to receive Medicare and Medicaid payments for all laboratory services.
The company has since settled lawsuits brought by former retail partner Walgreens Boots Alliance and a San Francisco hedge fund, and according to Private Equity News, it struck a $4.65 million settlement deal with the Arizona attorney general to provide refunds for customers in that state after close to 1 million blood test results were voided.
The troubles aren't over, however. Probes by the Department of Justice and the Securities and Exchange Commission are still ongoing, and two lawsuits against the company -- one from California investors and the other from Arizona customers -- are seeking class-action status.
In a recent email to investors, Holmes said the deal with Fortress grants that company 4 percent of Theranos' equity, which she expects will keep Theranos afloat financially through 2018. Theranos' current strategy is to develop and commercialize its MiniLab device, which miniaturizes various laboratory instruments, although the product would be subject to approval from the Food and Drug Administration. Theranos has closed its California and Arizona laboratories.
Holmes also said the $100 million is subject to "achieving certain product and operational milestones," according to a story first reported by the Wall Street Journal.