An Excerpt from Bad Blood by John Carreyrou

9780525431992As the calendar turned from 2009 to 2010, America remained mired in a deep economic malaise. Over the previous two years, nearly 9 million people had lost their jobs in the worst downturn since the Great Depression. Millions more had been hit with foreclosure notices. But in the 1,500-square-mile area south of San Francisco that forms the boundaries of Silicon Valley, animal spirits were stirring again.

A new luxury hotel on Sand Hill Road called the Rosewood was always full, despite room rates that reached a thousand dollars a night. With its imported palm trees and proximity to the Stanford campus, it had quickly become the destination of choice for venture capitalists, startup founders, and out-of-town investors who flocked to its restaurant and poolside bar to discuss deals and be seen. Bentleys, Maseratis, and McLarens lined its stone parking lot.

While the rest of the country licked its wounds from the devastating financial crisis, a new technology boom was getting underway, fueled by several factors. One of them was the wild success of Facebook. In June 2010, the social network’s private valuation rose to $23 billion. Six months later, it jumped to $50 billion. Every startup founder in the Valley wanted to be the next Mark Zuckerberg and every VC wanted a seat on the next rocket ship to riches. The emergence of Twitter, which was valued at more than $1 billion in late 2009, added to the excitement.

Meanwhile, the iPhone and competing smartphones featuring Google’s Android operating system were beginning to usher in a shift to mobile computing, as cellular networks became faster and capable of handling larger amounts of data. Wildly popular mobile games like Angry Birds, which millions of iPhone users were paying a dollar each to download, seeded the notion that you could build a business around a smartphone app. In the spring of 2010, an obscure startup called UberCab did a beta launch of its black car hailing service in San Francisco.

All of this might not have been enough to ignite the new boom, however, if it hadn’t been for another key ingredient: rock-bottom interest rates. To rescue the economy, the Federal Reserve had slashed rates to close to zero, making traditional investments like bonds unattractive and sending investors searching for higher returns elsewhere. One of the places they turned to was Silicon Valley.

Suddenly, the managers of East Coast hedge funds that normally invested only in publicly traded stocks were making the pilgrimage West in search of promising new opportunities in the private startup world. They were joined by executives from old, established companies looking to harness the Valley’s innovation to rejuvenate businesses battered by the recession. Among this latter group was a sixty-five-year-old man from Philadelphia who greeted people with high fives in lieu of handshakes and went by the sobriquet “Dr. J.”

Dr. J’s real name was Jay Rosan and he was in fact a doctor, though he had spent most of his career working for big corporations. He was a member of Walgreens’s innovation team, which was tasked with identifying new ideas and technologies that could reboot growth at the 109-year-old drugstore chain. Dr. J operated out of an office in the Philadelphia suburb of Conshohocken that Walgreens had inherited from its 2007 acquisition of Take Care Health Systems, an operator of in-store clinics where he’d previously been employed.

In January 2010, Theranos had approached Walgreens with an email stating that it had developed small devices capable of running any blood test from a few drops pricked from a finger in real time and for less than half the cost of traditional laboratories. Two months later, Elizabeth and Sunny traveled to Walgreens’s headquarters in the Chicago suburb of Deerfield, Illinois, and gave a presentation to a group of Walgreens executives. Dr. J, who flew up from Pennsylvania for the meeting, instantly recognized the potential of the Theranos technology. Bringing the startup’s machines inside Walgreens stores could open up a big new revenue stream for the retailer and be the game changer it had been looking for, he believed.

It wasn’t just the business proposition that appealed to Dr. J. A health nut who carefully watched his diet, rarely drank alcohol, and was fanatical about getting a swim in every day, he was passionate about empowering people to live healthier lives. The picture Elizabeth presented at the meeting of making blood tests less painful and more widely available so they could become an early warning system against disease deeply resonated with him. That evening, he could barely contain his excitement over dinner at a wine bar with two Walgreens colleagues who weren’t privy to the secret discussions with Theranos. After asking them to keep what he was about to tell them confidential, he revealed in a hushed tone that he’d found a company he was convinced would change the face of the pharmacy industry.

“Imagine detecting breast cancer before the mammogram,” he told his enraptured colleagues, pausing for effect.


A few minutes before eight a.m. on August 24, 2010, a group of rental cars pulled up in front of 3200  Hillview Avenue in Palo Alto. A stocky man with glasses and dimples on his wide nose stepped out of one of them. His name was Kevin Hunter and he headed a small lab consulting firm called Colaborate. He was part of a Walgreens delegation led by Dr. J that had flown to California for a two-day meeting with Theranos. The drugstore chain had hired him a few weeks before to help evaluate and set up a partnership it was negotiating with the startup.

Hunter had a special affinity for the business Walgreens was in: his father, grandfather, and great-grandfather had all been pharmacists. Growing up, he’d spent the summers helping his dad man the counter and stock the shelves of the pharmacies he ran on air bases in New York, Texas, and New Mexico. As familiar as he was with drugstores, though, Hunter’s real expertise was with clinical laboratories. After getting his MBA at the University of Florida, he had spent the first eight years of his career working for Quest Diagnostics, the giant provider of lab services. He had subsequently launched Colaborate, which advised clients ranging from hospitals to private equity firms about laboratory issues.

The first thing Hunter noticed as he shut the door of his rental car and walked toward the entrance of Theranos’s office was a shiny black Lamborghini parked right next to it. Looks like someone is trying to impress us, he thought.

Elizabeth and Sunny greeted him and the rest of the Walgreens team at the top of a flight of stairs and showed them to the glass conference room between their offices. They were joined there by Daniel Young, who had succeeded Seth Michelson as head of Theranos’s biomath team. On the Walgreens side, in addition to Hunter and Dr. J, three others had made the trip: a Belgian executive named Renaat Van den Hooff , a financial executive named Dan Doyle, and Jim Sundberg, who worked with Hunter at Colaborate.

Dr. J high-fived Sunny and Elizabeth, then sat down and kicked off the meeting with the same line he always used when he introduced himself: “Hi, I’m Dr. J and I used to play basketball.” Hunter had already heard him use it a dozen times in the few weeks they’d worked together and no longer thought it was funny, but for Dr. J it was a joke that never seemed to grow old. It elicited a few awkward chuckles.

“I’m so excited that we’re doing this!” Dr. J then exclaimed. He was referring to a pilot project the companies had agreed to. It would involve placing Theranos’s readers in thirty to ninety Walgreens stores no later than the middle of 2011. The stores’ customers would be able to get their blood tested with just a prick of the finger and receive their results in under an hour. A preliminary contract had already been signed, under which Walgreens had committed to prepurchase up to $50 million worth of Theranos cartridges and to loan the startup an additional $25 million. If all went well with the pilot, the companies would aim to expand their partnership nationwide.

It was unusual for Walgreens to move this quickly. Opportunities the innovation team identified usually got waylaid in internal committees and slowed down by the retailer’s giant bureaucracy. Dr. J had managed to fast-track this one by going straight to Wade Miquelon, Walgreens’s chief financial officer, and getting him behind the project. Miquelon was due to fly in that evening and join them at the next day’s session.

About half an hour into discussions centering on the pilot, Hunter asked where the bathroom was. Elizabeth and Sunny visibly stiffened. Security was paramount, they said, and anyone who left the conference room would have to be escorted. Sunny accompanied Hunter to the bathroom, waited for him outside the bathroom door, and then walked him back to the conference room. It seemed to Hunter unnecessary and strangely paranoid.

On his way back from the bathroom, he scanned the office for a laboratory but didn’t see anything that looked like one. That’s because it was downstairs, he was told. Hunter said he hoped to see it at some point during the visit, to which Elizabeth responded, “Yes, if we have time.”

Theranos had told Walgreens it had a commercially ready laboratory and had provided it with a list of 192 diff erent blood tests it said its proprietary devices could handle. In reality, although there was a lab downstairs, it was just an R&D lab where Gary Frenzel and his team of biochemists conducted their research. Moreover, half of the tests on the list couldn’t be performed as chemiluminescent immunoassays, the testing technique the Edison system relied on. They required different testing methods beyond the Edison’s scope.

The meeting resumed and stretched into the middle of the afternoon, at which point Elizabeth suggested they grab an early dinner in town. As they got up from their chairs, Hunter asked again to see the lab. Elizabeth tapped Dr. J on the shoulder and motioned for him to follow her outside the conference room. He returned moments later and told Hunter it wasn’t going to happen. Elizabeth wasn’t willing to show them the lab yet, he said. Instead, Sunny showed the Walgreens team his office. There was a sleeping bag on the floor behind his desk, his bathroom had a shower in it, and he kept a change of clothes on hand. He worked such long hours that on many nights he crashed at the office, he proudly told the visitors.

As they headed out to eat, Sunny and Elizabeth made them leave at staggered intervals. They didn’t want everyone to arrive at the restaurant at the same time on the grounds that it risked attracting notice. They also instructed Hunter and his colleagues not to use names. When Hunter got to the restaurant, a little sushi place on El Camino Real called Fuki Sushi, the hostess took him to a private room in the back with sliding doors where Elizabeth was waiting.

The cloak-and-dagger theatrics struck Hunter as silly. It was four in the afternoon and the restaurant was empty. There was no one to conceal their presence from. What’s more, if there was anything likely to draw attention, it was Sunny’s Lamborghini in the parking lot.

Hunter was beginning to grow suspicious. With her black turtleneck, her deep voice, and the green kale shakes she sipped on all day, Elizabeth was going to great lengths to emulate Steve Jobs, but she didn’t seem to have a solid understanding of what distinguished different types of blood tests. Theranos had also failed to deliver on his two basic requests: to let him see its lab and to demonstrate a live vitamin D test on its device. Hunter’s plan had been to have Theranos test his and Dr. J’s blood, then get retested at Stanford Hospital that evening and compare the results. He’d even arranged for a pathologist to be on standby at the hospital to write the order and draw their blood. But Elizabeth claimed she’d been given too little notice even though he’d made the request two weeks ago.

There was something else that bothered Hunter: Sunny’s attitude. He acted both superior and cavalier. When the Walgreens side had broached bringing its IT department in on the pilot preparations, Sunny had dismissed the idea out of hand by saying, “IT are like lawyers, avoid them as long as possible.” That kind of approach sounded to Hunter like a recipe for problems.

Dr. J didn’t seem to share his skepticism, though. He appeared taken with Elizabeth’s aura and to revel in the Silicon Valley scene. He reminded Hunter of a groupie who’d flown across the country to attend a concert played by his favorite band.

When they reconvened at the Theranos office the next morning, they were joined by Wade Miquelon, the Walgreens CFO. Wade had negotiated the pilot contract directly with Elizabeth. He too seemed to be a big fan of hers. Midway through that day’s meeting, Elizabeth made a big show of giving Miquelon an American flag that she said had been flown over a battlefield in Afghanistan. She’d written a dedication to Walgreens on it.

Hunter thought the whole thing was bizarre. Walgreens had brought him here to vet Theranos’s technology, but he hadn’t been allowed to do so. The only thing they had to show for their visit was an autographed flag. And yet, Dr. J and Miquelon didn’t seem to mind. As far as they were concerned, the visit had gone swimmingly.


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Excerpted from Bad Blood by John Carreyrou. Copyright © 2018 by Cambronne Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.