How blood-testing startups are pitching themselves after the Theranos scandal

The Theranos saga created interest in upending the $54 billion, but ‘antiquated,’ blood-testing industry
Startup Genalyte Inc. wants to revolutionize the way blood testing is done.
If its vision pans out, the privately held company’s proprietary technology will be able to run dozens of blood tests using a tiny amount of blood, and in a way that’s quicker and more accessible than in the traditional lab setting.

Perhaps that’s a premise that sounds familiar — and not in a comforting way. Another blood-testing startup, Theranos, the subject of a thorough Wall Street Journal exposé, was effectively labeled a “massive” financial fraud by the Securities and Exchange Commission. Last week, federal prosecutors filed criminal charges against two former top Theranos executives.“The first reaction from both investors and customers when they hear what we can do is, ‘Gee, that sounds a lot like Theranos. How are you different?’ ” Chief Executive Cary Gunn says. “I hear this multiple times a day from multiple people.”
Gunn has sought to differentiate his decade-old company by emphasizing the clinical trials it is conducting — two have been completed so far — and openly sharing information about how its technology, called Maverick, works. The company is also working closely with the Food and Drug Administration, he says, though Maverick itself is not currently approved by the FDA. (Of course, Theranos claimed to be working with the FDA as well.)

Genalyte’s approach hasn’t always worked. The company has lost “a lot” of money because investors found the Theranos similarities too striking, Gunn reports, and the fallen unicorn’s shadow has also made customer sales more difficult.
Other blood-testing startups, similarly plagued by the unflattering comparison, say they constantly have to explain why they’re different. But they also say that disgraced Theranos got at least one thing right: its vision of upending the $54 billion lab-testing industry, which has been dominated by such big-name players as Laboratory Corp. LH, -0.44% and Quest Diagnostics DGX, +2.22% .

And that’s the prize that other companies are still chasing.
Blood testing can certainly be improved, independent experts say.
Theranos pushed its finger-prick test, which collects a drop of blood from a small puncture in the finger rather than drawing a larger amount of blood from a vein. And though Theranos’s insistence that it could run its tests on a single drop of blood may seem farcical today, reducing how much blood is collected would be an important advance. It would benefit certain kinds of patients in particular, such as cancer patients and newborns.
Over the years, though, the field has already made incremental strides, according to experts. Transformation is a tantalizing promise, but blood-testing companies will have to deliver — and have rigorous, scientific proof to that effect.

No black turtlenecks
In 2016, the blood diagnostics platform that Tanay Tandon had been working on looked so promising that, after his freshman year at Stanford University, he took a leave of absence.
Those efforts have morphed into the privately held Athelas Inc., founded by Tandon and Deepika Bodapati, which uses deep learning models and an image of a blood sample to analyze different cell types.
Again, the Theranos similarities are hard to ignore. Theranos founder Elizabeth Holmes, who recently stepped down from her position as chief executive, also left Stanford to start her company. And, like Theranos, Athelas’s platform runs on a sample of blood harvested via finger prick.
“Theranos is a big crater in the industry,” Tandon says, but it is also attracted interest in what Athelas and others are doing. “People saw that Theranos, had it been legitimate, would have been this massive, multi-multi-billion-dollar business. If done right, and if done in a specific way with the right partners, it would make a massive impact in a really old, archaic industry.”
A test called a white-blood-cell count is often ordered by doctors, since the results can indicate the presence of an infection and certain cancers, among other issues.
Athelas believes that its system can do a better job of measuring white blood cells and neutrophils, a type of white blood cell, and submitted data from clinical trials to the FDA months ago, according to Tandon.
If the FDA gives it clearance, Athelas hopes to roll the product out to health-care professionals later this year. A trial for another indication, focused on sepsis patients, just finished up, and the company plans to file it with the FDA later this year.
Athelas’s data-oriented approach sets it apart, Tandon says, and the company has been working with regulatory agencies, including to design its trials. They also aren’t making grandiose, Theranos-like claims, he says: They hope the technology will help people, but it has a specific application, with a specific technological solution.
“We know this isn’t a test that’s going to replace every single blood test out there,” he says, adding, “It’s not going to replace needles completely. Or change the health care system overnight.”
Not to mention this: “We have a rule in the office — no black turtlenecks,” Tandon jokes, referencing a Holmes wardrobe staple.

No black turtlenecks are in evidence at Genalyte, either. But as it fends off Theranos comparisons, its mission is significantly more similar to the stigmatized company’s.
Imagine going to the doctor, having a blood test done, and getting the results 15 minutes later. Genalyte says that with this speed, doctors can make better diagnoses and decisions.
“People need to understand that the system today is quite broken,” Gunn says, with diagnostic information that could change a doctor’s approach arriving only days after a doctor’s-office visit. “It’s a horrible way to do things.”
Genalyte’s platform, Maverick, uses a pediatric tube of blood, which is smaller than an average tube, and a certain class of blood sample, termed whole blood, is collected by way of an individual’s vein.
Whole-blood tests are very portable and used widely in the medical system, including in the glucose-monitoring tests used by diabetics. But far fewer tests can be done right now using whole blood than with a traditional lab sample, experts say. Genalyte says its 32-test menu can test complete blood-cell count, lipids, potassium levels and more.
The company’s furthest-along product right now is a panel of tests that rheumatologists, who treat autoimmune and musculoskeletal diseases, can use, but the company is also interested in primary care, other internal medicine specialties, cardiology, endocrinology and gastroenterology.
‘Nobody’s done really well’
The field of blood diagnostics does appear less dynamic than other types of specialized testing, including genetic testing and those for personalized cancer treatments, which have seen surging innovation and development in recent years.
“I don’t know that Theranos is a big driver there. It’s just that nobody’s done really well, so I think the investments haven’t paid off, just generally,” says Eric Schadt, a professor and dean for precision medicine at Mount Sinai’s Icahn School of Medicine and chief executive of the health information company Sema4, which is owned by Mount Sinai.
“Theranos certainly doesn’t help,” he added. (Schadt was among the researchers who published, in 2016, the first study that found inconsistent results from Theranos tests.)
There is room for improvement, other experts say, but that’s not because nobody’s trying.
Collecting smaller amounts of blood has become a priority because of concerns about anemia. And making tests more accessible and convenient for patients, in settings like an emergency room, at bedside and in their own homes, has obvious appeal.
There have been some advances in these areas, experts say. And any progress does come with the risk of less reliable results, a major concern when patient health is on the line.
When it comes to amount of blood collected, “we’re really hitting a wall as far as how low can you go,” says Dr. David Alter, a practicing pathologist and chairman of the College of American Pathologists chemistry committee. Strong research on how reliable a drop of blood is suggests that “droplet testing at this stage of the game is probably a recipe for failure, unless you’re trying to develop some high-end technology.”
Getting faster results in more places, likewise, is “where we’re all heading, the Holy Grail,” Alter says, but there’s typically a trade-off when it comes to cost, along with more potential for error.
And how helpful it is will depend on the situation as well as the patient, said Dr. Mark Lifshitz, a clinical professor of pathology at NYU Langone Health, giving the example of an emergency room in a hospital that’s right next to the main lab.
“Just because I can do a test in five minutes on a drop of blood doesn’t mean it is the best approach,” he says. Assuming the technology works, “there is always a play between the cost of something and the benefit that one derives from that cost, and I think that’s really the unknown with both the new technologies and new tests, as well as new ways of delivering tests.”
In today’s health-care environment, which has seen rapid consolidation, the choice to introduce new tests is also increasingly made by a health system, rather than an individual doctor, he adds. That’s a potential barrier for new entrants, as systems typically buy medical practices so that they can send tests to the in-house labs that are already part of the system and which provide additional revenue.
As for blood-testing startups, the fall of Theranos leaves them in much the same position as back when Theranos was being fêted by every venture capitalist, corporate partner and glossy magazine.
“We’ve lived in the shadow of that story,” Genalyte’s Gunn says, “both when it was sucking the oxygen out of the room and as it has unwound.”