In new testimony yesterday at the criminal fraud trial of Theranos founder Elizabeth Holmes, former Safeway CEO Steven Burd said that the company did at least 100 hours of due diligence before signing a deal worth close to $400 million that would've put Theranos blood testing machines in almost a thousand Safeway stores.
CNBC reports that "Holmes rocketed to fame in Silicon Valley by developing technology that promised to run hundreds of diagnostic tests with just a finger prick of blood. But Theranos never realized those aspirations, and Holmes is now charged with 12 counts of wire fraud and conspiracy in connection with misleading investors and patients. She has pleaded not guilty.
"During opening statements, defense attorney Lance Wade told jurors that despite making some mistakes, leading a failed start-up doesn’t make her a criminal. Holmes faces up to 20 years in prison if convicted. With Burd on the stand, the defense tried to show that Safeway, a huge national chain, wasn’t duped in its negotiations."
However, Burd has said that he was increasingly concerned and frustrated by Theranos' inability to deliver on promises. He also has conceded that he was hoping that the opening of Theranos clinics in Safeway stores would help boost the company's stock price.
The Wall Street Journal writes that "as the two companies hammered out a deal in 2010 that would have put blood-testing devices in hundreds of grocery stores, Theranos guaranteed Safeway a $10-per-test profit, Mr. Burd testified in October. A profit seemed plausible at the time, Mr. Burd recalled, because Elizabeth Holmes told Safeway that Theranos projected $223 million in revenue in 2011 and $167 million in operating expenses, with an adjusted profit of $56 million. In reality, the company had far less revenue and substantial losses until it shut down, court testimony has shown … Mr. Burd testified that Theranos told Safeway its devices could perform 95% of all blood tests and results would be available to customers in 20 to 30 minutes, which he said was crucial so shoppers could get their results back in the time it took them to buy groceries. Theranos pitched Ms. Holmes as a Stanford University Ph.D. student in chemical and electrical engineering, according to a 2010 presentation shown in court; it didn’t mention that Ms. Holmes dropped out of Stanford after one year of undergraduate study."
- KC's View:
Burd was well known for an almost rabid focus on health care issues, but the more one reads the trial coverage the more it sounds like he may have fallen victim to the "if-all-you-have-is-a-hammer-everything-looks-like-a-nail" syndrome.
I have to be honest here. I've paid only cursory attention to the Theranos story, but all the recent. coverage makes me want to watch the 2019 documentary about it, The Inventor: Out For Blood In Silicon Valley.
Health care ambitions haven't gone away. Just yesterday, best Buy announced that it is acquiring Current Health, described as "a UK tech company that helps with remote patient monitoring and telehealth." CNBC writes that "with the move, Best Buy is pushing further into health care — a sector that CEO Corie Barry frequently describes as a growth opportunity. She has pointed to several trends that work in the retailer’s favor, such as the desire of many baby boomers to age at home, the health-care industry’s need to manage costs and the popularity of watches and other tech that tracks people’s health."
We know that companies like Amazon,Walmart and CVS all are making different bets on how they can become more immersed in the health care business. It just looks like Burd bet on the wrong horse at the wrong time.