Theranos is closing labs and wellness centers, and laying off more than 40 percent of its full-time employees, while the embattled California blood testing company appeals a federal ban of CEO Elizabeth Holmes from owning or running a medical laboratory for two years.
In an open letter released late Wednesday, Holmes said the shutdowns "will impact approximately 340 employees in Arizona, California, and Pennsylvania," reported The Associated Press. Theranos has laboratory facilities in Newark, California, and Scottsdale, Arizona.
Holmes said the Palo Alto-based company will now focus on its miniLab portable blood-testing product.
The move comes nearly three months after federal regulators' ban of Holmes stemming from an investigation of a California facility. The probe followed reports by The Wall Street Journal in which former employees said the company's tests were unreliable, said the AP.
According to Bloomberg, inspectors found failures at the lab in Newark that were so severe they jeopardized patients’ health.
The company has a new executive team which will work on obtaining regulatory approvals, partnerships and pursuing publications in scientific journals. Holmes will remain as CEO, said a representative for the company.
Once lauded as a potentially revolutionary startup in the medical testing field, Theranos has been plagued by questions about the accuracy and viability of its technology. The shift announced Wednesday may allow Holmes to keep running the company despite being banned from the clinical lab industry, said Bloomberg..
The company caused a stir in August when scientists and researchers gathered in Philadelphia to hear a scientific presentation on Theranos’s controversial blood-testing technology -- and instead got a product launch for the miniLab.
“We will return our undivided attention to our miniLab platform,” Holmes said in the statement Wednesday. “Our ultimate goal is to commercialize miniaturized, automated laboratories capable of small-volume sample testing, with an emphasis on vulnerable patient populations, including oncology, pediatrics, and intensive care.”
Later in August, Theranos withdrew its submission for emergency clearance of a diagnostic blood test for the Zika virus after regulators found problems with how the blood-testing startup gathered patient data.
While a Zika test wouldn’t help to spare the company from the sanctions, clearance by the FDA would have helped Theranos regain some credibility in the eyes of skeptical consumers and physicians.
It’s been a stunning fall from grace for a company that at one time commanded a $9 billion private valuation. Holmes had been profiled as a wunderkind after dropping out of Stanford University to found Theranos, promising to revolutionize the blood-testing industry -- dominated by Quest Diagnostics Inc. and Laboratory Corp of America Holdings -- with cheap, less-painful tests that could be run on what the company said was a breakthrough analysis technology.
The company has said it will appeal the sanctions imposed by the Centers for Medicare and Medicaid Services, which oversees lab testing in the U.S. Holmes is the majority owner of the venture capital-backed company and the chairman of its board.
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