Brian Grossman had 20 years of expertise within the healthcare house — however his agency, PFM Well being Sciences, invested $96 million in Theranos anyway. On the stand, he defined that his agency had relied on Elizabeth Holmes’ details about Theranos, in addition to monetary fashions offered by the corporate, to make the decision.
Taken as a complete, Grossman’s testimony in US v Elizabeth Holmes was damning. Not like the buyers from household workplaces, he’d visited Theranos’ amenities, had his blood drawn, and despatched emails with in depth due diligence questions. He had expertise in healthcare. He’d checked out Walgreens’ public statements concerning the firm. However as a result of he’d relied on Theranos’ representations of its know-how, he was misled — and he singled out Holmes as being the supply of a lot of the deceptive info.
Holmes advised him that Theranos might match something its much-larger opponents, Quest Diagnostics and Labcorp, might do. That was “a really big statement” about how a lot the corporate had completed, Grossman mentioned.
Grossman, like different buyers testifying earlier than him, had been impressed by Theranos’ work with the navy; he was advised that Theranos’ tech was used on the battlefield and in medivacs. And when he heard that Theranos’ assessments had been utilized by drug firms to validate experimental merchandise, that dazzled him too. He knew that getting medicine via the pipeline into approval was essential to pharma firms’ companies — so for Theranos’ tech for use for that was a excessive mark of approval. The monetary projections Theranos offered to him had an estimated $30 million coming from pharma firms in 2014.
After all, neither of these items had been true. Theranos gadgets weren’t used on medivacs or on the battlefield. And whereas Theranos had labored with pharma firms, none of them selected to make use of the assessments to validate experimental merchandise, largely as a result of preliminary research confirmed the assessments sucked. The income projection was bizarre, partly as a result of Theranos had no income, from pharma firms or in any other case, in 2012 or 2013.
Grossman says that Holmes, former CEO of Theranos, and her co-defendant, Sunny Balwani, who’s being tried individually, advised him Theranos assessments took solely 4 hours to supply a end result. In a slide deck, a graphic particularly identified the consistency of Theranos’ vitamin D assessments — which was one of many assessments whistleblower Erika Cheung had frightened wasn’t correct.
And Holmes did a lot of the speaking of their conferences, Grossman testified. (This matched different investor testimony.) That’s dangerous information for Holmes’ protection, which has been attempting to argue that Holmes naively trusted Balwani and that he was the actual villain at Theranos.
Grossman adopted up after the assembly with an extended listing of due diligence questions. He wished to know, as an example, what the constraints on the tech had been. Holmes and Balwani had been “emphatic” that their gadgets had been labs shrunk right down to the dimensions of a field, he mentioned. Holmes was “very clear that this technology was not a point-of-care test, not a point-of-care testing platform, it was a miniaturized lab,” he mentioned.
That was very thrilling — a vastly disruptive know-how. Grossman was advised that all the Phoenix marketplace for Theranos might be supported in a lab of 200 sq. ft; a competitor lab at Quest Diagnostics, which he’d toured, was a whole bunch of 1000’s of sq. ft.
All through the course of the conferences and e mail exchanges, neither Holmes nor Balwani talked about that the Theranos know-how was used for only a handful of assessments. Nobody talked about that they used third-party gear.
The Walgreens deal additionally bolstered Grossman’s confidence, although Balwani was squirrely when Grossman wished to talk to representatives from Walgreens. He advised Grossman that it wouldn’t look good and he was “uncomfortable with that,” Grossman testified.
He was additionally advised that there was a take care of UnitedHealthcare, which steered legitimacy to Grossman. He wished to speak with them concerning the Theranos partnership. “We highly value their ability to vet technology and new companies,” Grossman mentioned. However Balwani nixed that concept, too.
These denials “forced us to rely on the representations they made to us,” Grossman mentioned.
Grossman went and talked to Channing Robertson, a Stanford professor who’d helped Holmes begin Theranos. Robertson advised Grossman there was no technical danger related to the corporate — the one danger was ensuring customers had a superb expertise. He additionally mentioned that the know-how was so superior that even when it fell into the fingers of opponents, it will take them years to catch up.
Grossman toured the HQ. He toured the medical lab, the place he noticed solely Theranos analyzers and not one of the modified third-party gadgets the corporate was truly utilizing. He toured the manufacturing facility. He even went to a Palo Alto Walgreens to get his blood drawn — a venous draw, one which took greater than a day to get outcomes. Balwani advised Grossman that was as a result of his physician ordered an uncommon check.
Grossman’s blood check gave us a peek behind the scenes at Theranos. The prosecution confirmed an e mail to Theranos whistleblower Adam Rosendorff and another employees in Theranos’ lab, asking them to hurry up work on a “VIP” check — Grossman’s. “This is on the Immulite, right?” an worker replied, referencing a competitor’s machine. That was confirmed by one other worker. (Grossman mentioned in court docket that if he’d identified opponents’ gadgets had been getting used, he would have requested much more questions of Theranos.)
So Grossman determined to take a position. Positive, Theranos had been weirdly secretive and security-focused when he’d visited, however Grossman shrugged that off. Sure, it was odd that he’d been discouraged from speaking to Theranos’ companions, however he shrugged that off too — hadn’t a Stanford professor advised him the tech was wonderful? Wasn’t Walgreens touting it of their quarterly earnings calls?
And now, after all, one among his investments underpins a rely of wire fraud towards Holmes.