In the Shadow of Theranos
Biotech Startups regain ground after Theranos Collapse
Yulia Krasilnikova, Hi-tech+
After the Theranos scandal, many biotech companies took a wait-and-see attitude. Bringing innovative blood test devices to the market was dangerous. Only now is the industry starting to recover – but visionary entrepreneurs have become much more modest.
In the early 2000s, the American startup Theranos was going to change the medical diagnostics market forever. Elizabeth Holmes' company was working on a portable Edison device. It was assumed that the device would be able to recognize dozens of diseases from blood taken from a finger, from herpes to cancer.
At the peak of its popularity in 2014, the company was valued at $9 billion, its investors included Rupert Murdoch, and Henry Kissinger was on the board of directors. However, years later, a grandiose project that promised to change the world failed. The startup was shut down, employees were fired, and Holmes was accused of fraud. Litigation continues, and the industry is still experiencing the consequences of the most scandalous collapse in the recent history of the biotech market.
As Bloomberg notes, startups that have been forced to remain in the shadows for the last couple of years are gradually entering the market. They introduce innovative methods of blood analysis, but try to distance themselves from Theranos as much as possible. No one is now working on a universal machine that can diagnose hundreds of diseases in one drop.
Startups have become modest and careful – any rash statement can arouse suspicion among investors.
New hopes
Theranos co-founder Daniel Levner managed to launch his project. His company Sight Diagnostics in February raised $28 million to create a device that converts data from the laboratory into digital files for computer analysis.
The algorithm studies the shape of blood cells, their size and other characteristics, and after a few minutes gives out the results of the study. So far, the device only does a general blood test, and also diagnoses malaria.
Another company, Karius, is developing a technique that will detect thousands of pathogens in the blood. However, this will require taking blood from a vein.
Orphidia startup, like Theranos, promises to diagnose diseases using a blood test from a finger. But so far, he conducts only seven types of research.
Former Theranos engineer Tyler Schultz, who contributed to the sensational Wall Street Journal investigation, also launched his project. His company Flux Biosciences plans to evaluate fertility and select a diet based on biomarkers in blood, urine and saliva.
Analysts believe that the collapse of Theranos forced many companies to cease operations – due to overestimation of prospects or lack of finances. As a result, there are fewer scammers on the market. Also, startups are increasingly trying to get regulatory approval at an early stage and are betting on scientific publications in trusted journals.
However, the trend is only gaining strength, and observers state that so far most biotech startups do not have a solid evidence base. More than a third of the companies are at the stage of preclinical trials. It can take them years to develop a finished product and certify it. That, however, does not prevent them from attracting investments. In 2018 alone, more than 52 biotech companies raised a total of $5.75 billion through an IPO. Experts fear that a multimillion-dollar bubble will form in the market, which will burst soon.
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