Theranos: Revolutionizing Diagnostic Medicine Under Heavy Secrecy

  • Healthcare company Theranos is one of the hottest names in biotech these days.
  • Theranos provides a cheap and simple way to perform blood tests using just a few drops of blood.
  • The company recently signed a partnership agreement with leading health insurers and is seeking FDS waivers for lab tests that could increase its value significantly.
Theranos IPO

Theranos is a healthcare company that is developing diagnostic blood tests that provide people with actionable health information that can be used for the early detection of disease and the prevention of future illnesses. Theranos is one of the hottest names in the biotech industry; it specializes in performing blood tests with just a few drops of blood. Theranos enables consumers to perform blood tests quickly and at low prices. Theranos has a large number of locations in which consumers can perform required blood tests at low cost and review their results using the Theranos mobile app.

Theranos is not just an advanced diagnostics lab service; it is revolutionizing the entire medical diagnostics market with its widespread locations across the U.S. and its fully transparent price list, which displays Theranos's low prices online. Unlike other private laboratories or medical diagnostics services, Theranos needs only a few drops of blood to complete required tests, which makes the entire process faster, simpler, and more accessible. According to the Wall Street Journal, Theranos unique technology and pricing plan could lower testing to total health costs to 1.5% from 2.3% which could save the Healthcare industry $61B to $96B over ten years.

The company was founded by a Stanford student, Elizabeth Holmes, who decided to follow the path of other famous startup founders and dropped out of college to focus solely on her startup initiative. Theranos is very secretive about its financial and business status and hardly shares any information with the public. This secrecy strategy goes beyond business information, and even technical medical information is not revealed, and that might be an issue when dealing with the medical industry. The company provides no comparisons showing how individual blood samples lined up against each other, no scatterplots of antibody counts, nothing quantitative that scientists can use to verify the results for themselves.

Having said that, receiving an FDA approval for performing the blood tests as well a couple of dozen patents registered to Theranos keep their customers calm about the accuracy of the tests. Moreover, Theranos signed some partnership deals recently with health insurers Capital BlueCross, AmeriHealth and Caritas in a move that can increase Theranos's potential clients significantly. If Theranos's services are mainly available right now at Walgreens locations, the new deals will probably drive Theranos to open additional dedicated Wellness Centers as the company did in Arizona when it opened dozens of centers.

To expand its reach, the company applied for more than 120 clearance approvals from the FDA that will allow it to use its technology to analyze blood tests outside of labs. This means that Theranos could implement its technology in hospitals and physicians' offices and reach out to many more customers who have not used Theranos’s services before. The company received a first clearance waiver for a herpes test last week, which could lead to many more similar waivers and substantial growth potential.

As I mentioned above, very little is known and has been published in the open media about Theranos. It is known that the company raised around $400M in five funding rounds that valued the company at $9B. Early investors in the company include leading investment firms such as Draper Fisher Jurvetson, ATA Ventures, Continental Ventures, Tako Ventures, and the Larry Ellison Revocable Trust. In a scenario in which Theranos goes public and files its S-1 with the SEC, it would be extremely interesting to see whether the disruptive diagnostic blood test provider is profiting from its technology and unique methods.

Conclusions

Diagnostic blood test service provider Theranos is one of the hottest names in the healthcare industry these days. Theranos offers innovative technology that performs blood tests using just a few drops of blood, at a substantially lower price than other private labs charge. Theranos operates under a shade of secrecy, so not much is known about its financial and business status. However, the company has a strong IP portfolio and uses FDA-approved technology to analyze blood tests in an efficient way. Estimations assume that Theranos can save between $61B and $96B for healthcare providers in the U.S. by offering low-price blood tests. The company applied for an FDA waiver for more than 120 tests that can be performed outside of a laboratory facility. Receiving such waivers could result in Theranos growing its revenues significantly. As most of Theranos’s financial data is confidential, once official documents for Theranos IPO are filed, I could assist with the opportunity of a Theranos investment.

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Disclosure: The information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer's opinion about the companies mentioned in the article. Investors should conduct their due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.

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