Embattled Theranos CEO Running Out of Money Following Multiple Lawsuits

Clinton supporter Elizabeth Holmes struggles to rebuild her company (Updated)

Elizabeth Holmes / Getty Images

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Health tech company Theranos Inc. and its embattled CEO, Elizabeth Holmes, settled with drugstore giant Walgreen Co. for more than $25 million, marking the company's latest settlement in a stream of lawsuits from companies, regulators, and investors.

"Today we announced that Theranos has entered a confidential settlement agreement with Walgreens," the company said in a statement Tuesday, according to the Wall Street Journal. "The agreement will result in the dismissal of Walgreens' lawsuit against Theranos, with no finding or implication of liability."

Walgreens spokesman Michael Polzin told the Journal that the matter "has been resolved on mutually acceptable terms."

Walgreens was once a prominent partner of Theranos, but in November, the pharmacy chain sued Theranos for $140 million in damages to reclaim the money it had spent on the partnership. Walgreens alleged that Theranos breached their contract and misled it about the effectiveness of the health company's blood-testing devices.

An investigation by the Journal in 2015 found that Theranos misled the public about the capabilities of its blood-testing technology. The Centers for Medicare and Medicaid Services later banned Holmes from operating blood-testing labs for two years. Months later, Theranos shut down its blood-testing facilities and laid off 40 percent of its workforce.

The blood-testing technology was once thought to be revolutionary and helped make Holmes, a prominent Hillary Clinton supporter and "ambassador for global entrepreneurship" under former President Barack Obama, a Silicon Valley star. But the Journal‘s revelations and the subsequent fallout led to a flurry of lawsuits against Theranos. Forbes dropped Holmes' estimated net worth from $4.5 billion to zero after the revelations surfaced and led to investigations from several agencies.

Holmes, 33, had once been the youngest self-made female billionaire in the world. She also had been politically active, holding a fundraiser for Clinton during the 2016 presidential campaign. Clinton's team was not thrilled about its association with Holmes, however, debating at times over email whether the campaign should distance itself from the embattled CEO.

Theranos' $25 million settlement is no small fee for a company that was once valued at $9 billion. The company is already burning through its cash reserves while working through a series of disputes and lawsuits.

Theranos told investors in June that it had about $54 million left on hand and was seeking to raise about $50 million from existing investors to right the ship, according to the Journal.

Holmes now plans to rebuild and rebrand Theranos as a "smaller, more grounded company," Vanity Fair reported.

"Over the past 16 months, the company has built a new senior management team, changed the composition and structure of its board of directors, installed an expert technology and scientific advisory board, and implemented a new quality and compliance program," the Silicon Valley company said in a statement.

"Theranos recently closed on a recapitalization of its recent investors, unifying their support as the company moves toward commercializing its innovative technologies," the statement added.

Holmes hopes that the rebuilding effort will be free of the claims that led to her company's downfall.

The Securities and Exchange Commission is conducting a civil investigation into Theranos, which also faces a criminal probe by the Justice Department. The company is cooperating with those investigations.

However, Theranos says that lawsuits seeking class action status filed by groups of patients and investors in funds that own company shares are without merit.

UPDATED 4:20 P.M.: This post was updated to include information on Holmes being a Clinton supporter.

Katelyn Caralle

Katelyn Caralle   Email Katelyn | Full Bio | RSS
Katelyn Caralle is a media analyst at the Washington Free Beacon. Before joining Free Beacon, Katelyn worked as a Digital Strategy Intern at The Heritage Foundation. She graduated from Bloomsburg University of Pennsylvania in 2016 where she served as Editor-in-Chief of The Voice.

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