to Tennessee, the cartridges and the readers they’d brought weren’t functioning properly, so Ed had to spend the night disassembling and reassembling them on his bed in his hotel room. He managed to get them working well enough by morning that they were able to draw blood samples from two patients and a half dozen doctors and nurses at a local oncology clinic.
The patients looked very sick. Ed learned that they were dying of cancer. They were taking drugs designed to slow the growth of their tumors, which might buy them a few more months to live.
On their return to California, Elizabeth pronounced the trip a success and sent one of her cheerful emails to the staff.
“It was truly awesome,” she wrote. “The patients grasped onto the system immediately. The minute you meet them you sense their fear, their hope, and their pain.”
Theranos employees, she added, should “take a victory lap.”
Ed didn’t feel as upbeat. Using the Theranos 1.0 in a patient study seemed premature, especially now that he knew the study involved terminal cancer patients.
* * *
—
TO BLOW OFF STEAM, Ed went out for beers with Shaunak on Friday evenings at a raucous sports bar called the Old Pro in Palo Alto. Often, Gary Frenzel, the head of the chemistry team, would join them.
Gary was a good old boy from Texas. He liked to tell war stories about his days as a rodeo rider. He’d given up riding and pursued a career as a chemist after breaking too many bones. Gary loved to gossip and crack jokes, causing Shaunak to burst into a loud, high-pitched giggle that was the most ridiculous laugh Ed had ever heard. The three bonded during these outings and became good friends.
Then one day, Gary stopped coming to the Old Pro. Ed and Shaunak weren’t sure why at first but they soon had their answer.
In late August 2007, an email went out to Theranos employees to gather upstairs for a meeting. The company had grown to more than seventy people. Everyone stopped what he or she was doing and assembled in front of Elizabeth’s office on the second floor.
The mood was serious. Elizabeth had a frown on her face. She looked angry. Standing next to her was Michael Esquivel, a sharply dressed, fast-talking lawyer who had joined Theranos a few months earlier as its general counsel from Wilson Sonsini Goodrich & Rosati, Silicon Valley’s premier law firm.
Esquivel did most of the talking. He said Theranos was suing three former employees for stealing its intellectual property. Their names were Michael O’Connell, Chris Todd, and John Howard. Howard had overseen all research and development and interviewed Ed before he was hired. Todd was Ed’s predecessor and had led the design of the 1.0 prototype. And O’Connell was an employee who had worked on the 1.0 cartridge until he left the previous summer.
No one was to have any contact with them going forward and all emails and documents must be preserved, Esquivel instructed. He would be conducting a thorough investigation to gather evidence with the assistance of Wilson Sonsini. Then he added something that sent a jolt through the room.
“We’ve called the FBI to assist us with the case.”
Ed and Shaunak figured Gary Frenzel was probably freaked out by this turn of events. He was good friends with Chris Todd, Ed’s predecessor. Gary had worked with Todd for five years at two previous companies before following him to Theranos. After Todd had left Theranos in July 2006, he and Gary had remained in frequent contact, talking often on the phone and exchanging emails. Elizabeth and Esquivel must have found out and read Gary the riot act. He looked spooked.
Shaunak had been friendly with Todd too and was able to quietly piece together what had happened.
O’Connell, who had a postdoctorate in nanotechnology from Stanford, thought he had solved the microfluidic problems that hampered the Theranos system and had talked Todd into forming a company with him. They’d called it Avidnostics. O’Connell also held discussions with Howard, who’d provided some help and advice but declined to join their venture. Avidnostics was very similar to Theranos, except they planned on marketing their machine to veterinarians on the theory that regulatory approvals would be easier to obtain for a device that performed blood tests on animals rather than humans.
They’d pitched a few VCs, unsuccessfully, at which point O’Connell had lost patience and emailed Elizabeth to ask her if she wanted to license their technology.
Big mistake.
Elizabeth had always worried about proprietary