Theranos Lays Off Most of Its Remaining Workforce

Elizabeth Holmes, the Silicon Valley firm’s founder and CEO, announced the layoffs less than a month after settling civil fraud charges with the SEC. Above, Ms. Holmes in 2015.
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Blood-testing firm Theranos Inc. laid off most of its remaining workforce in a last-ditch effort to preserve cash and avert or at least delay bankruptcy for a few more months, according to people familiar with the matter.

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The layoffs take the company’s head count from about 125 employees to two dozen or fewer, according to people familiar with the matter. As recently as late 2015, Theranos had about 800 employees.

Elizabeth Holmes,

the Silicon Valley firm’s founder and chief executive officer, announced the layoffs at an all-employee a meeting at Theranos’s offices in Newark, Calif. on Tuesday, less than a month after settling civil fraud charges with the U.S. Securities and Exchange Commission.

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Under the SEC settlement, Ms. Holmes was forced to relinquish her voting control over the company she founded 15 years ago as a 19-year-old Stanford dropout, give back a big chunk of her stock, and pay a $500,000 penalty. She also agreed to be barred from being an officer or director in a public company for 10 years.

Neither she nor Theranos admitted or denied wrongdoing. Ms. Holmes and her former No. 2 executive,

Sunny Balwani,

remain under criminal investigation by the U.S. attorney’s office in San Francisco, according to people familiar with the investigation. Mr. Balwani, who didn’t settle with the SEC, is also being sued by the agency in federal court in California.

The company didn’t immediately respond to requests for comment.

The latest round of layoffs is the company’s third since The Wall Street Journal revealed in October 2015 that it was misleading investors and the public about the state of its technology. At the time, Theranos was using its proprietary blood-testing devices for only a fraction of the nearly 250 tests it offered consumers in Walgreens stores and was performing the rest on commercial analyzers, the Journal revealed.

This belied Ms. Holmes’s claims that she had invented groundbreaking new technology that enabled Theranos to run “the full range” of laboratory tests from just a drop or two of blood pricked from a patient’s finger.

Theranos has since voided nearly 1 million blood-test results in Arizona and California. Federal inspections of its two labs uncovered numerous problems, including clinical data showing that its proprietary machines were producing unreliable test results. The company shut both labs down in late 2016 and pivoted to trying to produce and sell a new device called the miniLab.

In late 2017, Theranos secured a $100 million loan from the private-equity firm Fortress Investment Group LLC, but the company had to meet certain product and operational milestones to access the full amount, according to an email it sent investors just before Christmas.

One of those milestones is obtaining Food and Drug Administration approval for a blood test to detect the mosquito-borne virus that deforms the brains of infants, Zika on the miniLab—something Theranos has so far been unable to accomplish, people familiar with the matter said.

Write to John Carreyrou at john.carreyrou@wsj.com

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