American Scandal - Encore: Theranos | Startup | 1

Episode Date: September 17, 2024

Elizabeth Holmes has an idea that could revolutionize medicine—and make her very rich. But first, she'll need to find investors and put together a company.Need more American Scandal? With Wondery+, enjoy exclusive seasons, binge new seasons first, and listen completely ad-free. Start your free trial in the Wondery App, Apple Podcasts, Spotify or visit wondery.app.link/IM5aogASNNb now.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Hi, this is Lindsey Graham, host of American Scandal. Our back catalog has moved behind a paywall. Recent episodes remain free, but older ones will require a Wondery Plus subscription. With Wondery Plus, you get access to the full American Scandal archive, ad-free, plus early access to new seasons and more. Join Wondery Plus in the Wondery app or on Apple Podcasts. A listener note, this episode originally aired in 2021. It's 2014 and Halloween night in Palo Alto, California.

Alan Beam weaves through a crush of bodies at a dive bar. The room smells like spilled beer and sweat, and all around Beam, people in costumes down their drinks and shout over the music. It's a surreal evening. Beam is surrounded by superheroes and skeletons. A witch shoots pool with a stormtrooper. Everyone seems happy and carefree, except Beam. Beam is the laboratory director for Theranos, a health technology company, and one of Silicon Valley's hottest startups. Beam's responsibilities at work are endless, and so are the hours. And while he's dressed like a zombie for Halloween, he feels like one too. But it's not just the crushing deadlines and intense pressure.

Beam recently learned a devastating secret. And if it gets out, he and many people he works with could be ruined. So tonight, Beam isn't in the mood to laugh and talk with adults dressed as vampires. He needs to put in just a few minutes chatting with co-workers and then get home. Across the bar, a young man dressed as a mad scientist waves at Beam, inviting him over to his table. It takes a second, but Beam realizes that it's Curtis Schneider, a friend from Theranos, and one of the smartest people Beam knows. So Beam approaches the table, trying his best to fake a smile. Hey, Curtis. Nice costume.

Costume? No. I dressed as myself. Overworked R&D scientist. Man, I hear that. I'm probably heading home soon, in fact. Oh, Alan, stay out. Don't be one of those old guys who's always clocking out at six. You'll end up in a graveyard like Yahoo or IBM. Come on, sit down. We've got a lot to catch up on. Beam sets down his glass. No, Curtis, it's late. I'll see you tomorrow, though. Wait, you heard the news,

right? No. What news? No one ever tells me anything. Well, I guess I'm the one to break it to you. Apparently, the FDA has some issues with our blood tests. They're considering holding back approval. You weren't aware of this? Beam wipes his upper lip and looks away. The truth is, he knows exactly what Schneider is talking about. Theranos is developing what promises to be revolutionary medical technology. The company has caught the attention of the entire world and its founder, Elizabeth Holmes, is now a billionaire. Things couldn't appear to be any better, but there's a hitch. Theranos needs approval from the U.S. Food and Drug Administration. And the dirty secret that Beam has discovered is that the technology doesn't work.

But Beam isn't ready to share that hard news with his co-worker. Oh, the FDA has some issues, huh? No, no, I mean, I've heard rumors. Alan, you run the lab. You're telling me Elizabeth doesn't fill you in? Well, you know how she is. Her code of silence. Well, yeah, yeah, I mean, she knows how to keep a secret, but... But I don't get it. We have a partnership with Walgreens. We are acing our proficiency test. What is the FDA seeing? Oh, man, who knows? But, you know, I don't want to think about that.

What do you watch on TV these days? Alan, stop. What the hell's going on? Nothing. I mean, it's government. You know the government types. Alan, look at you. Your hand is shaking. Man, I'm just tired. Look, is there something you're not telling me? Because I think I have a right to know. This affects me, too. Now, let's just leave it alone, okay? Huh. All right. Bean wipes the sweat from his forehead. Oh, God, I'm sorry. It has been a long week. Yeah, man, it's cool. All good.

I'm sure everything's going to be fine. Go home. Bean gives a curt nod, but he knows that Schneider isn't right. Things haven't been fine for a long time now. Beam used to believe in Theranos, but his hopes have vanished. Theranos' faulty technology could soon see a wide public distribution. And if that happens, medical patients could get the wrong diagnoses and treatments. People could die. It's a catastrophe waiting to happen. So Beam downs the last of his warm beer and gets ready to make a confession. It's time to come clean.

To Schneider, his co-workers, and the rest of the world. In the past decade, Boeing has been involved in a series of scandals and deadly crashes that have dented its once sterling reputation. At the center of it all, the 737 MAX. in a series of scandals and deadly crashes that have dented its once sterling reputation. At the center of it all, the 737 MAX. The latest season of Business Wars explores how Boeing allowed things to turn deadly and what, if anything, can save the company's reputation. Make sure to listen to Business Wars wherever you get your podcasts. From Wondery, I'm Lindsey Graham, and this is American Scandal. American Scandal The tech industry is a force in the global economy. Companies like Apple, Microsoft, and Google generate billions in profits.

And they've disrupted long-established industries from manufacturing to education to food delivery. But Silicon Valley has also had a large influence on our culture. The smartphone has come to dominate our eyes and ears. Many workplaces have adopted the open floor plans that are common in the tech industry. And luminaries like Steve Jobs have given us a powerful cultural myth, the genius who dared to dream big and change the world. Elizabeth Holmes aimed to be this kind of visionary. Charismatic and confident,

Holmes founded Theranos as a medical startup. She promised cutting-edge devices that could run tests for hundreds of medical conditions using only a single drop of blood. Investors were dazzled by her vision, and seemingly overnight, Holmes had become a self-made billionaire and an icon in the tech industry.

But behind closed doors, Holmes was scrambling to hide the shocking secret. Her company rested on a foundation of lies, and when this truth came to light, it would shock the world and expose a darker side of Silicon Valley. This is Episode 1, Startup. Valley. This is Episode 1, Startup. It's 1995 in Houston, Texas. The air is hot and humid, and a scrawny blonde sixth grader named Elizabeth Holmes is running on a dirt track. Holmes is drenched in sweat. She's huffing and wheezing, pushing herself to keep going, to fight through even if she's ready to give up. Holmes is running in her school's track meet, but she's in last place and far behind the rest of the pack.

This is one feeling she can't stand. Holmes is a straight A student. She's accustomed to being the best, especially in science and her Mandarin classes. But being a good student doesn't make her popular. science and her Mandarin classes. But being a good student doesn't make her popular. If she wants to stand out, she has to excel at something people actually care about, like track and field. So Holmes grits her teeth and keeps pushing herself as sweat continues to pour down the back of her neck. But as she runs, a whistle blows somewhere far off. For a moment, Holmes is confused, but then she realizes what's happened. The announcers have

called the race. They must think all the runners have crossed the finish line. Up ahead, the audience begins to scatter, even though Holmes is still out on the track. But the announcer calls out and tells everyone to wait. There's still one runner who needs to finish. Holmes feels every head turn in her direction, and then she hears it. Jeering. People in the stands are laughing at her, yelling out that she should give up and go home. Holmes' face is red with humiliation. She wanted some attention, to be something more than just bookish. But this wasn't the attention she was looking for, to look like a fool. Holmes starts to panic, trying to figure out what to do. And then, from the corner of her eye, she spots her friend Megan Long running over. Long matches her pace, jogging beside Holmes.

She lays a hand on Holmes' arm, begging her to step off the track to call it quits. Holmes sees pity in her friend's eyes, and it fills her with even more shame. This is the worst feeling in the world. Looking like a loser, a failure in front of everyone. Hot tears burst from Holmes' eyes, but she swallows down the embarrassment and continues running down the track.

The finish line is just ahead. It would be easy to stop now and preserve some measure of dignity. But something in Holmes won't let her give up. Clenching her jaws, Holmes runs faster, and leaving her friend behind, the wind blows across her face. A moment later, she crosses the finish line, the yellow streamer already severed and flapping in the lazy wind. As she stands, catching her breath, Holmes realizes her ploy for distinction in sports was a failure. But there are other ways. She's going to find something else, something bigger than all of this. And she'll never forget this feeling.

She'll never come in last place again. Seven years later, Elizabeth Holmes is now 18 years old, a freshman at Stanford University where she studies biotechnology. But tonight, she's back home in Houston, Texas, celebrating Christmas at her parents' house. For days, she's been eager for this moment, because she has something important to announce, a major life decision.

Holmes lays down her fork and knife and glances around the table. Hey, hey everyone. Everyone stop. I have something I want to share. Holmes' brother, mother, and father turn to her. She feels a jolt of nervous excitement. So, I've been

thinking about things and I've made a decision. I'm going to drop out. Holmes' father sets down his fork. Drop out? Drop out of what? A club on campus? No, dad, not a club. Stanford. I'm dropping out of school. Liz, what are you talking about? school. Liz, what are you talking about? Why would you drop out? Stanford was your dream. No, it was your dream. My dream is to become a billionaire. Liz, how are you going to do that without a college degree? Bill Gates, Michael Dell, Steve Jobs, they all dropped out. And all of them founded their companies before they were 30. And I can't fall behind. I can't sit around some college and waste my time.

I've got to get building. Holmes' father stands up from the table and grabs a sheet of paper from somewhere in the kitchen. He jots something down. Then he folds it into a paper airplane and tosses it across the table. It hits Holmes in the shoulder. Open it. Holmes shakes her head, exasperated,

but unfolds the paper airplane, and inside there are only three letters. P.H.D. Dad, I don't want a Ph.D. I mean, look at us. Our families founded the Cincinnati General Hospital and the Fleischman Yeast Company. Being an entrepreneur is in my DNA.

Liz. My father and my grandfather, they had more money than they knew what to do with, spending most of it on cars and homes, but none of it made them happy. Look, I've spent my entire career working in war-torn countries. Dad, I don't need a speech. It's not a speech. Happiness doesn't come from money or possessions. It comes from purpose, having a meaningful life. If you want to make a splash, that's fine. But don't do it for profit. Do it to improve the world.

Holmes crosses her arms and looks away. But when she looks back at her father, she nods. Elizabeth, that's our legacy. That's what's in your DNA. Not being an entrepreneur, but changing the damn world. Don't let me down. Holmes avoids her father's gaze. She's not ready to admit it, but he might have a point. Still, she won't budge on her intentions. At some point, Holmes will drop out of Stanford. Some opportunity will present itself, and she'll be ready for it. And when it does, maybe there's a way she can make a name for herself and improve the world.

It's the summer of 2003 in a medical laboratory in Singapore. The vast space is cold and silent, and 19-year-old Elizabeth Holmes hovers over an industrial lab bench. She's wearing a white coat and protective goggles, and from a plastic rack she removes a sample of blood. Holmes turns to a computer and logs data about the sample. Then she drops the tube into a centrifuge, where it's spun and the blood platelets separates from the plasma. And then she prepares to do the same thing again. One sample after another. First logged, then spun.

And then again. And again. It's repetitive work, part of her summer internship at the Genome Institute of Singapore. At this lab, she's testing blood samples from patients who've been infected with the SARS virus. When Holmes accepted the position, she believed she'd be doing important work. The SARS outbreak was big, a global event. But now that she's here in Singapore, Holmes can't help but feel discouraged. Lab work is boring. She wishes she could be doing something else, something more exciting.

Holmes turns, yawning into the sleeve of her lab coat. That's when she sees her supervisor, moving down the rows, checking in on the lab techs. She's a tiny, severe woman with a black bob, and she seems to have very little time for the interns. But Holmes wants to impress. Maybe if she proves that she's better than the other interns, she can do something that's a little more creative and less monotonous. When her supervisor reaches her, Holmes tells her that she's been thinking about these blood samples. It took a lot of work to collect them. All the needles and tubes. It seems needlessly painful.

And then there's the testing. It's laborious, not to mention inefficient. Holmes takes a deep breath and says she wonders if there aren't other methods to collect and test blood samples. Maybe if she and the supervisor worked together, they could find a better way. Holmes smiles, waiting for the supervisor's praise. She's hoping that she just proved she's not a passive intern, but that she's here to contribute. But her supervisor just shakes her head annoyed. She says there is no better way.

This work that Holmes is doing is the gold standard. And if Holmes is going to work in the field, she better get used to it. The supervisor turns on her heels and walks away. Holmes is shocked to be so rebuffed. She looks around for some kind of moral support, but the other interns just keep their eyes down. Holmes grumbles as she returns to her work. It's clear that this industry has no vision. There's got to be a better way to do this. If she could invent that method, she wouldn't

just improve the lives of countless interns like herself. It would be much bigger than that. Holmes could change the entire medical industry. She could be famous and rich and live a meaningful life. Holmes smiles as she logs the next blood sample. She won't be in this lab forever. And as soon as she's back in the United States, she's going to start developing the next great idea in Silicon Valley. I'm Jake Warren, and in our first season of Finding, I set out on a very personal quest

to find the woman who saved my mum's life. You can listen to Finding Natasha right now, exclusively on Wondery+. In season two, I found myself caught up in a new journey to help someone I've never even met. But a couple of years ago, I came across a social media post by a person named Loti. It read in part, three years ago today that I attempted

to jump off this bridge, but this wasn't my time to go. A gentleman named Andy saved my life. I still haven't found him. This is a story that I came across purely by chance, but it instantly moved me and it's taken me to a place where I've had to consider some deeper issues around mental health. This is season two of Finding. And this time, if all goes to plan, we'll be finding Andy. You can listen to Finding Andy and Finding Natasha exclusively and ad-free on Wondery+. Join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. He was hip-hop's biggest mogul,

the man who redefined fame, fortune, and the music industry. The first male rapper to be honored on the Hollywood Walk of Fame, Sean Diddy Cone. Diddy built an empire and lived a life most people only dream about. Everybody know ain't no party like a Diddy party, so. Yeah, that's what's up. But just as quickly as his empire rose, it came crashing down. Today I'm announcing the unsealing of a three-count indictment,

charging Sean Combs with racketeering conspiracy, sex trafficking, interstate transportation for prostitution. I was f***ed up. I hit rock bottom, but I made no excuses. I'm disgusted. I'm so sorry. Until you're wearing an orange jumpsuit, it's not real. Now it's real. From his meteoric rise to his shocking fall from grace, from law and crime, this is The Rise and Fall of Diddy. Listen to The Rise and Fall of Diddy exclusively with Wondery Plus. It's the fall of 2003 in Palo Alto, California.

Shanak Roy hangs up his lab coat and pulls on a loose blazer. He glances around his small, messy office, which is cluttered with dog-eared books and stacks of paper. It's not exactly the kind of place where you'd normally hold a business meeting, but business looks a lot different here in Silicon Valley. Roy is a PhD student at Stanford. He researches biochemical reactions, but soon he'll finish his graduate studies and head out into the world to start a full-time job. He knows he should probably find something safe and stable. It would make his parents happy.

They're both immigrants, and he was raised with the values of hard work and being practical. Still, Roy can't ignore a quiet voice inside him. It whispers every time he looks online and sees a listing for another normal and boring job. Roy wants something more, something exciting, something visionary. Maybe something here in Silicon Valley at one of the tech companies. And that's why, in a few minutes, he and his academic advisor

are going to sit down with one of his lab assistants. Her name is Elizabeth Holmes, and apparently she has an innovative idea for a startup. She wants Roy to be part of the business. Outside his office, Roy hears muffled voices approaching. Then there's a knock on the door, and when he opens it, he finds Holmes standing side by side with his advisor. Holmes' blonde hair looks frizzy and matted, like she just woke up from a nap.

Her eyes are ringed with dark circles. She clearly has not been sleeping well. Still, as Holmes and the advisor enter the office, it's clear that her energy is anything but flagging. Her eyes wide with passion, Holmes tells Roy that he's about to have a life-changing meeting. Roy grins, drawn in by her magnetic charisma. Working in the lab together,

she never seemed like she was the next Mark Zuckerberg or Steve Jobs. She was always hardworking and curious, but so was every other sophomore at Stanford. Still, Holmes managed to talk her way into a graduate-level chemical engineering class, as well as a research apprenticeship. And Roy's advisor is over the moon about Holmes' business idea. So while Roy isn't easily dazzled, he's also not so close-minded. If there's something to Holmes' idea, it could be the perfect launchpad for his own career. Roy takes a seat across from Holmes

and says he's ready for the pitch. Holmes launches into it, starting with her internship in Singapore. She worked with blood samples there, but the labor was repetitive and the technology badly outdated. She knew there had to be a better way to test people's blood for diseases and other health conditions. So when Holmes returned to the States, she got right to work. She slept only maybe one or two hours every night

and spent the rest of the time developing what could be a game-changing piece of technology. It's something that she's calling the TheraPatch. Holmes reaches into her backpack and takes out a stapled set of documents, which she hands over to Roy. This, she says, is her patent for the TheraPatch. It works by applying a small adhesive patch to a patient's skin. The patch painlessly draws up a small amount of blood, and with an embedded microchip, it analyzes the blood in real time. Then the patch injects any necessary drugs into the patient and provides diagnostics to a patient's doctor. Roy studies the sketches of the patch with its series of tiny needles. The whole thing sounds like science fiction, but he's intrigued and wants to know more. So Roy asks Holmes what conditions the patch could treat, how would it diagnose illnesses,

and how would something so small actually deliver medicine? One by one, Holmes answers the questions, speaking with a fiery passion. And while her responses are still rough, Roy has to give it to her. Elizabeth Holmes is inspiring. And she's right. The blood testing industry is ripe for disruption. The right approach, something simple, something modern and efficient, could revolutionize the entire medical industry. Roy looks up from the patent files and finds Holmes beaming with a smile. She says she's really enjoyed working with him in the lab. Roy is remarkably talented, and that's why she wants him to be part of her business. She needs a skilled researcher to set up a lab and begin work on the TheraPatch prototype.

Roy pauses as he mulls over the offer. This is exactly the kind of opportunity that he's dreamed of. At the same time, it's a risky idea. He could spend years of his life working on a silly passion project, something that might go nowhere, while his fellow grad students build their careers at real companies. But Roy can't ignore the voice that's always whispered in his ear. He was meant to do something bigger and different, and this could be the chance of a lifetime.

Roy smiles and nods. He's in. Together, Roy and Holmes will create a piece of technology that could change the world. And along the way, they could grow very rich. About ten months later, Elizabeth Holmes steps into a glass-walled conference room in Northern California. She opens her laptop and begins reviewing her PowerPoint slides. Page after page of diagrams, figures, and images. By itself, Holmes' patent means nothing.

She had to create a business, find office and lab space, hire employees. And to do that, she needs some real money. employees. And to do that, she needs some real money. So this PowerPoint presentation is the culmination of all the hard work that she and Sean Ockroy have done in the last few months, ever since she dropped out of Stanford. The presentation all leads to a single argument. The technology is too revolutionary, the potential too big. It would be crazy not to invest in her startup, a company she's now calling Theranos. A door opens down the hallway, and Holmes glances up and sees a woman with round, colorful glasses and a blonde bob. Holmes takes a deep breath.

Annette Campbell White might look like someone's sweet and caring mother, but she is one of the most powerful people in Silicon Valley. She's a venture capitalist and makes massive investments in medical startups. And while Holmes has already raised some money through family connections, she needs deeper pockets in order to build a successful company. Campbell White has that kind of money. But Campbell White is a famously shrewd investor, and if she's going to sink millions into Theranos, Holmes is going to have to impress her. to sink millions into Theranos, Holmes is going to have to impress her.

The conference room door swings open, and Campbell White approaches with an outstretched hand. Miss Holmes, I've heard a lot about you. I hope mostly good things. The Valley knows how to spot real talent. I'm curious to hear about this new device you're working on. Well, I know you see a lot of tech, and I'm sure you get a lot of good pitches. But I have no doubt you're going to remember this moment for the rest of your life. Confidence. Oh, I like it. Let's get to it. Why don't you walk me through your pitch? Holmes gathers herself as she launches her PowerPoint. She's practiced this speech a thousand times and knows every word by heart.

Well, let's go back, because even though it's unconventional, you have to understand something about my childhood. When I was young, more than anything, I hated getting my blood drawn. Genetics are funny, you know. My mother, she has a terrible fear of needles. If she even sees a syringe, she just faints. And I guess I inherited that phobia. And for some like me, it does really make life hard.

Going to the doctors, all the needles. But I'm not the only one. There are millions of people who can't stand to get their blood drawn. And all that made me wonder, what if there was a better way? Holmes turns and clicks over to the next slide in her presentation. This is the TheraPatch. It's an adhesive patch that, and this is key, painlessly draws blood from a patient and then makes a diagnosis for a wide number of medical conditions. After that, it directly administers any necessary drugs. I'm sorry, this patch draws blood, tests it, diagnoses the disease, and then medicates the patient? Exactly. Now, I don't have to explain it to you.

I'm sure you can see the way this transforms medicine. Not only that, it would change patients' lives. Holmes takes a sip of water, pleased with her delivery so far. But she notices that Campbell White is frowning. Yeah, this is an admirable goal, Ms. Holmes, but I don't understand. How would a microchip deliver medicine and communicate with your doctor? Everything would be wireless, housed directly inside the patch. Now, I gathered that, but wireless communication requires a set of components completely different from diagnostic components, and then the transdermal medication, a whole new set. That's a lot of tech to cram into a two-inch patch.

That's true. And I like the idea of getting test results from a patch, but there's already another company that's cornered the market on that sort of product. What's the differentiator? How is Theranos better? Holmes feels her face grow hot. No, I'm sorry. I think you're missing the point. Ms. Holmes, I've listened to every word of your presentation. I've seen your deck. I very rarely miss the point. This is groundbreaking technology. Yeah, in theory, that may be true.

But you haven't explained how it actually works. Does it work? Holmes tries to steady herself, but she feels her face flush again. And then the words come pouring out of her mouth. You know, Annette, I thought you'd be the right partner for my business. I thought you were someone who had vision, but clearly I was wrong, so good luck with everything. Holmes stands up and leaves the office. As she exits the building and walks through the parking lot, Holmes' arms and legs start shaking. She can't believe what just happened. She was supposed to walk away with an offer for millions of dollars. Instead, she was made to sound like a child,

someone who wasn't ready for the real world. It was a humiliating experience, but Holmes won't be stopped by a small-minded venture capitalist. This meeting was just a setback, but it taught her an important lesson. She needs to find investors who understand her vision and who won't get bogged down by details. If she can find those people, she should have no trouble getting all the money she needs and building Theranos into an empire. into an empire. About a year later, Sean Ock Roy makes his way through a recently expanded office in Palo Alto, California.

As he walks through the wide open space, Roy marvels at all the employees bustling about. The past 18 months have been a whirlwind, but Elizabeth Holmes has managed to raise $6 million in venture capital. That's not only allowed them to open this office, which belongs to Theranos, but they were able to hire an entire staff and build out a professional lab. Roy looks around and shakes his head in happy disbelief. It feels like only yesterday that the two of them were running a young startup

with their backs against the wall. But everything seems to have changed overnight, and that includes Holmes herself. As Roy turns a corner in the new office, he sees his Theranos co-founder standing in front of yet another group of investors. She's wearing a black turtleneck and tailored slacks, looking just like her hero, Steve Jobs. She's also begun carrying herself with the swagger of a legendary CEO. So while Theranos may not yet be famous, that hasn't stopped Holmes from taking on the role of dynamic CEO and hatching ambitious plans. She wants to license their product to pharmaceutical companies conducting drug trials.

Holmes has promised that their devices will offer real-time data showing the companies whether the patients are having adverse reactions to the drugs. It could be a game-changer for the trillion-dollar pharmaceutical industry. But Roy worries about delivering on their promises, especially on Holmes' tight timeline. It helps that they've scrapped the original TheraPatch idea and instead are developing a handheld machine. Still, Holmes refuses to listen when Roy shares his concerns. handheld machine. Still, Holmes refuses to listen when Roy shares his concerns. That's why he's on his way to the Theranos lab. He needs to get someone else's point of view to see whether his worries are justified. Roy steps inside the lab and greets one of the technicians who lifts his protective goggles and smiles. In a hushed tone, Roy inquires whether they've made any progress on

the latest prototype. Right away, the technician's smile fades. Looking across the gleaming lab equipment, the technician tells Roy that they are still facing some fundamental struggles, like separating out the constituencies of blood samples. The mechanics are proving incredibly hard. Roy nods and asks the lab tech to be straight with him. Does he believe the product is feasible?

The technician freezes for a moment, unsure what to say. Roy knows that no one wants to be the bearer of bad news, especially in a company with such large ambitions. But then the lab tech smiles again. He tells Roy that maybe they'll get lucky. And gesturing to the decorations dangling throughout the office, he tells Roy maybe there'll be a Christmas miracle. It's that time of year.

Then the technician puts his goggles back on and returns to work. Roy's heart sinks as he turns and exits the lab. He told himself he wanted to hear the truth, even if it made him uncomfortable. But if he's being honest with himself, what Roy really wanted to hear was that they were on track, that everything would be alright. Because if that were true, if Theranos was actually getting closer to a viable product, then Roy could rest easy, knowing that he'd made the right choice in getting involved in this startup. As things stand now, Roy isn't sure what the future will hold.

And increasingly, it seems like he's made a big mistake. On January 5th, 2024, an Alaska Airlines door plug tore away mid-flight, leaving a gaping hole in the side of a plane that carried 171 passengers. This heart-stopping incident was just the latest in a string of crises surrounding the aviation manufacturing giant, Boeing. In the past decade, Boeing has been involved in a series of damning scandals and deadly crashes that have chipped away at its once sterling reputation. At the center of it all, the 737 MAX. The latest season of Business Wars explores how Boeing, once the gold standard of aviation engineering, descended into a nightmare of safety concerns and public mistrust.

The decisions, denials, and devastating consequences bringing the Titan to its knees. And what, if anything, can save the company's reputation? Now, follow Business Wars on the Wondery app or wherever you get your podcasts. You can binge Business Wars, The Unraveling of Boeing, early and ad-free right now on Wondery Plus. It's 2006 in Palo Alto, California, and late at night. By now, most of the employees at Theranos have gone home for the evening. But not Elizabeth Holmes. Theranos' founder and CEO is still at the company office, getting ready for an important meeting.

Holmes knows it's unusual to do business this late. But some things can't wait. Holmes just bought a $2 million packaging system designed to ship Theranos' blood testing product as soon as it's ready. But the product is still far from done. There always seems to be some kind of delay. And that's left Theranos in crisis mode. They've already blown through their first $6 million in funding. Holmes has put on a good performance and managed to raise another $9 million.

But she's worried that it won't last long. And if Theranos runs out of money, it'll be seen as one of the biggest embarrassments in Silicon Valley. So it's time to put some pressure on one of Theranos' top employees. Holmes walks through the office and approaches a man with slumped shoulders. His name is Edmund Koo, and he's the head of engineering for Theranos. Oh, Elizabeth. I'm sorry I'm here so late. I've lost track of time. That seems like a habit of yours, isn't it? Sorry? Here, have a seat. No, Ed, I'll stand. This won't take long.

Okay. But look, I want to apologize about something. Ed, it's time to stop apologizing. Now tell me what I want to hear. Uh, no, okay, I won't apologize. I'll be honest. My team is still struggling with the prototype. Now, I know you've had some qualms about this, but if we could just, if we just use more blood in the samples,

it could change everything. The product would have a much better chance of working if we weren't using so little blood. And I made myself clear. No more blood. Now, you're an engineer and you fix technical problems. And that's what I hired you for. No more blood. As CEO of this company, I've made promises to my investors.

I said we could create a device that fits in the palm of your hand and that works with just one drop of blood. I understand. So you also understand how important it is to keep that promise. Yes, yes, I do. But Ed, if we don't build this product, some other company will. And I won't let you be the reason why we fail. Coup freezes.

Stunned. Liz, I'm doing the best I can. But issues keep stacking up. Coup freezes. Stunned. Liz, I'm doing the best I can, but... Issues keep stacking up. Using so little blood. Cross-contamination. Nothing is impossible, but... I need to speak to the guys in chemistry.

Maybe we can solve this together. No, that's another thing I've made perfectly clear. You and every other employee are only allowed to speak with your direct teams. But we could solve this problem if we were able to talk together. You could also leak company secrets. Liz. No, no, no. We're done here.

No more delays. Make this work. Ku dips his head and nods before walking away. When he's gone, Holmes takes a deep breath and tries to figure out her next steps. Coup wasn't wrong. The departments would work better if they could team up and collaborate. But Holmes wasn't wrong either. In Silicon Valley, people talk. And if sensitive details about Theranos were to go public, they could lose their advantage and get beaten to market by someone else. So Holmes made a final decision. She will be the only person who will

see the full picture of Theranos. And no matter what she has to do, hire people, fire people, raise millions more from venture capitalists, somehow Theranos will succeed. Later in 2006, Theranos chief financial Officer Henry Mosley heads through the company office. Under his arm is a notebook, and inside is a set of records that paints a troubling picture. Mosley is a numbers guy, and for the last eight months he's overseen every aspect of Theranos' financial operations. And that includes projected revenues once Theranos begins selling its blood testing technology. The company is currently valued at $165 million. It's a strong valuation.

But the problem is, Mosley believes the numbers are inflated. It's a worry that's grown especially strong after he learned something troubling. Mosley needs to speak with Elizabeth Holmes to share his worries. If she's the visionary leader that everyone thinks she is, Mosley is certain she'll do the right thing. When Mosley reaches Holmes' office, the CEO smiles and invites him in. She tells Mosley that it's time to celebrate. She was recently in Switzerland meeting with Novartis, the Swiss pharmaceutical giant. It turns out the company is interested in working with Theranos. Mosley swallows hard at the mention of this meeting.

That's exactly what he wanted to talk about. So he steps forward and tells Holmes that from what he heard, the meeting didn't go so well. Apparently there was something wrong with the demonstration of Theranos' technology. Holmes smiles and waves her hand dismissively. She tells Mosley that that was just a minor issue, nothing to be concerned about. But Mosley presses the issue, telling Holmes that it didn't sound minor. Just this morning, Theranos' co-founder, Seanok Roy,

admitted that during the meeting, their devices started malfunctioning. The team resorted to a workaround. They showed pre-recorded test results. It made it look like the technology was doing what it was supposed to do, but it was a fake presentation. Holmes taps her desk, her smile growing icy, and explains that everything is fine. Their technology will work just as promised.

It was just a tactic to buy time. Mosley can't believe what he's hearing. Sounds like the devices are still far from operational. And if the company is lying to their investors, they're committing fraud. Holmes rises from her desk, a menacing look in her eyes now. And she tells Mosley that he's clearly not a team player. He should leave. He doesn't belong with Theranos.

For a moment, Mosley stands staring in confusion. But then the truth sinks in. He was just fired. Mosley begins staring in confusion. But then the truth sinks in. He was just fired. Mosley begins to leave the office, but before he steps out, he takes one last look at Holmes. When he first met her, she was charismatic, a brilliant dreamer who could change the world. Looking at her now, Mosley can see that that old Elizabeth is gone. Maybe she was never there in the first place. old Elizabeth is gone. Maybe she was never there in the first place.

It's November 2007 in Palo Alto, California. Theranos co-founder Shanak Roy exits the company break room and trudges past a group of employees working silently in their cubicles. They look weary and beaten down, and Roy can't blame them. In recent months, the atmosphere at the office has grown increasingly oppressive. Word has gotten out that Elizabeth Holmes is now suing three former employees, claiming they stole the company's intellectual property. She somehow even got the FBI involved. But her paranoia didn't end there. It seems that every day, Holmes institutes some new security protocol, or reminds employees that if they slip up, they could be sued.

But in public, Holmes continues to sell her grand vision for Theranos. Behind closed doors, the company is under lockdown. It can't go on like this. Things have gotten out of control, and Roy is determined to make some changes. No more secrets. No more impossible promises to investors or half-truths. This culture of fear has to end. So Roy heads toward Holmes' office,

ready to have a word with her. But as he rounds the corner, he can hear she's already with someone. Muffled voices rise and fall, and Roy slows to a stop as her glass-walled office comes into view. Behind her desk, Holmes is flanked by a group of people, including her lawyer. And across from them sits a man with dark hair whose head is hanging low.

It's Roy's friend and colleague, Edmund Koo, the head of engineering at Theranos. Roy's heart starts to pound as he looks into the room. It's obvious what's happening as he looks into the room. It's obvious what's happening. Coup is being fired. A moment later, the door swings open and Coup exits. He looks defeated and drained, unsure where to go or what to do next. Roy doesn't know what to do either, so he lays a hand on his friend's shoulder. Suddenly, Coup looks up, his face bitter and angry. Suddenly, Ku looks up, his face bitter and angry. He tells Roy that he's heartbroken.

It wasn't supposed to be this way. They were supposed to be changing the world. Ku furrows his eyebrows and tells Roy that he's a smart man, too smart to keep working with Holmes. Roy ought to leave. Otherwise, Theranos and Elizabeth Holmes will ruin him. Roy searches for a response, but he doesn't have one. And soon, Ku turns and heads for the exit.

Roy stands alone in the hallway. Several years ago, he took a risk. His former lab assistant, a teenage undergrad, convinced him to abandon a safe career to join a startup. It had been so exhilarating at the time. But now Roy feels nothing but regret. This may have been the biggest mistake of his life. He helped create a toxic company that's burning through money and may never accomplish anything. This whole thing could turn out to be an incredible waste of time and money. Part of Roy still wishes he could change the company, to force a new era

of transparency and openness to stop bleeding money and firing talented employees. Theranos could still be something special. But deep in his heart, Roy knows the truth. Theranos is unfixable. He can only try to leave before it's too late. before it's too late. Next on American Scandal, Elizabeth Holmes enters into a high-profile partnership, one that increases the pressure at Theranos, but doubts about the company continue to grow.

From Wondery, this is Episode 1 of Theranos for American Scandal. If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery Plus. Binge new seasons first and listen completely ad-free when you join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. And before you go, tell us about yourself by filling out a survey at wondery.com slash survey. A quick note about our reenactments. In most cases, we can't know exactly what was said, but all our dramatizations are based on historical research. And while many of the people involved in this story have gone on record, some have only been willing to speak under the protection of pseudonyms.

If you'd like to learn more about Theranos, we recommend the book Bad Blood, Secrets and Lies in a Silicon Valley Startup by John Kerryrook. American Scandal is hosted, edited, and executive produced by me, Lindsey Graham, for Airship. Thank you.