by Dr. Maurice Cary
Supposed I told you that investors invested $700 million in a start-up without any clue that the technology worked and even agreed – yes, agreed – to the stipulation that the start-up would only accept the money on the condition that the CEO would not reveal how the technology worked? You wouldn’t believe it, would you? Well, it happened. If you don’t believe me read it for yourself. The details of the rise and fall of the Silicon Valley blood testing technology company, Theranos, are too numerous for this blog, but are full of lessons that should be heeded by any professional or investor in the life sciences fields. They also range from jaw-dropping to just sad.
Folks, you’ve heard many times, when it sounds too good to be true… it probably is. Sounds horribly cynical, but it’s a fact. As much as we all would like to be a part of an earth-shaking, world changing event, we probably will not be. Such events are rare and should always be treated with cynicism, and rightfully so. For my colleagues in science and medicine who have not been exposed to the world of investors and VCs, upon exposure – with a few exceptions – you will quickly learn that you are not dealing with the sharpest tacks in the box. Whereas, we are driven by data, facts and verification, investors and VCs are suckers for a good story. Journalists – again with a few exceptions – are also not immune. See WSJ, Fortune, Forbes, and The New Yorker for yourself. Note that Science, Nature or not even Blood – whose by-line is “leading the way in experimental and clinical research in hematology” – are not listed. One would think that a journal called Blood would be hailing the merits of a world changing blood-testing technology, right? Well, not if there is no data to support that such technology works.
The story of Theranos is one of hype and how easily investors can be misled: this time to the tune of eventually a $9 billion evaluation. I guess when they saw Henry Kissinger and George Schultz (two former US Secretaries of State) on the board; they thought this must be the real deal. The problem is neither Mr. Kissinger nor Mr. Schultz (nor apparently did anyone else on the Board) have any background in health care. Of course now that the FDA, FBI and US Security & Exchange Commission have stepped in, we’re now talking $0 evaluation.
Pushing or hyping life science technology or a medical treatment with no data that supports it works, as crazy as that sounds, occurs more than we want to believe. In this case it’s public. In most cases it is not. In the end, it’s quite simple- insist on seeing the data and independently verify that it works. No data-no verification- it doesn’t work.
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