Nov 20, 2021 - Economy & Business

Ex-Theranos CEO Elizabeth Holmes testifies in her own fraud trial

Elizabeth Holmes. Photo: Yichuan Cao/NurPhoto via Getty Images

Taking the stand to close out the first day of her trial’s defense, ex-Theranos CEO Elizabeth Holmes highlighted to jurors some of the due diligence her early investors performed.

Why it matters: Though Holmes was included on her defense’s list of potential witnesses, it was unclear whether she would actually testify.

What she’s saying: "We worked for years with teams of scientists and engineers to miniaturize all of the technologies in a lab. The core part of that was a formula for being able to run tests on small samples….By 2009-2010 we had a breakthrough," Holmes testified, per ABC's Miles G. Cohen in the courtroom.

Details: During her testimony on Friday, according to journalists in the courtroom, Holmes began by describing her upbringing and the start of Theranos.

  • She talked about going to college at Stanford University where she did research and filed a patent for a pill that can test and release drugs.
  • Holmes dropped out in 2004 to set up her company, initially called "Real Time Cures," and financed it in part with the money her parents had set aside for her college education; she hired two people she worked with at Stanford and two from IBM.

After speaking to many people in the pharma industry, the feedback was that people were interested in a tabletop device, so Theranos shifted to developing one.

  • She went out to raise a Series B round from late 2005 to early 2006 after building a prototype, and she met with VC Don Lucas, whom she was introduced to by someone who went to college with her father. His due diligence included hiring a law firm to review patents, Theranos' contracts and audited financials. He invested and was board chairman until 2013.
  • Another Series B investor, Peter Thomas, also asked for the audited documents and patents. Holmes introduced him to David Lester at Pfizer. Investor Chris Lucas (who testified earlier as a victim of her fraud), however, did not ask for those documents.

Theranos eventually signed agreements with GSK in September 2006 and Pfizer in Nov. 2006. It also spoke with Novartis, Bristol Myers Squibb, and others.

  • The company did its first live demo in Switzerland for Novartis. Holmes sent employees an email after the demo telling them it went well based on her impression of the meeting and an email from Theranos' R&D head John Howard saying he thought it went well.
  • Soon after, she set out to fundraise again and met with Larry Ellison, who invested, along with other investors like the Carlyle Group's Bob Grady, and Greg Hall.

What's next: Holmes' testimony will resume on Monday.

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