Thread by @MilesGCohen

#ElizabethHolmes trial day 29:

Holmes' team filed a motion last night to admit certain portions of her recorded interview with @FortuneMagazine writer Roger Parloff — who could testify as soon as today.

Defense attorney John Cline offered sound bites from Holmes which "[disclose] DoD’s use of Theranos as a potential one," explain why #Theranos considers its tech/processes trade secrets, and other portions that the government's proposed plays "artificially cut out," Cline said.

Not offered by either the government or the defense — the beginning of the intvw in which Holmes tells Parloff how she got into the biz.

"I ultimately dropped out in May. But -- but when I filed the patent in September, I knew this was what I was going to be doing," Holmes said

The first witness this morning will be investor Brian Grossman who testified for much of Tuesday.

Defense attorney Lance Wade did not commit to finishing him at a specific time, but estimated he be excused today.

The government has witnesses (plural) ready to follow.

Roger Parloff will not be testifying until tomorrow, defense attorney John Cline revealed.

Thus, the government will not rest their case today.

One of Wade's first questions to Grossman this morning:

"Do you recall it was Mr. Balwani who drove that [Jan 10] meeting?"

The meeting was one of two Grossman testified to having with Holmes.

Wade tried to refresh Grossman on whether he was advised that 96% of test requisitions fall within 70 assays.

Grossman was not answering with a simple yes or no.

Wade moved to strike his explanations, and Grossman shook his head

"No it does not" he said finally.

“You’ll just have to speak one at a time,” the judge advised Grossman and Wade, coming to the defense of the court reporter.

"I can't explain that question without explaining my answer," Grossman said, but admitted the document in front of him did refresh his recollection.

"...Theranos specifically told you in that meeting that theranos had 70 small sample assays that they were working to rollout in a commercial setting?"

Grossman didn't recall specifically.

Grossman and his PFM investment team debriefed after their Jan. 10 meeting at #Theranos. Wade moved to admit an exhibit presumably showing their convos, but the gov objected via hearsay.

“I was hoping to move things along but I can lay some foundation,” Wade responded.

Grossman is not making it easy on him.

Wade got the email chain in.

"Everything I’ve heard about tech, sounds very good, but it is worth bouncing this off LH (labcorp) and DGX (Quest) and CPHD and GNMK -- obviously without disclosing anything we should not be disclosing," Dr. Rabodzey, PFM tech expert, wrote to Grossman and team.

"I think their projections are a bit aggressive for speed of ramp in 2015 and beyond, but with excellent execution are doable can be exceeded," Rebodzey wrote, as Wade highlighted.

"Do you recall recognizing the growth was a seep ramp and execution was a risk going into this investment?"

"That appears to be Dr. Rabodzey's POV," Grossman replied.

The witness recognized execution would be a risk in this case, just like with other company's he testified.

"Can I get everybody's views on the meeting and what u think next steps are?" Grossman replied.

In coordinating a time he mentioned JPM -- an "industry investment conference" held at the Westin, St. Francis, Wade pointed out.

"I checked w nstg, and they did confirm that a device used for testing outside of Clia lab as to be FDA cleared. This would apply to theranos if and when they decide to move the device out of the clia lab," Rebodzey wrote, as Wade highlighted in a Jan. 15, 2014 email to Grossman.

Understanding that an FDA clearance would be required for that? Wade asked.

"We were not sure...the company told us that if the analysis was done centrally, it was not clear they needed FDA clearance to [operate]," Grossman testified.

“It wasn’t clear whether they needed FDA approval or not,” Grossman testified.

We looked at another email sent by Grossman to Balwani in which he wrote, "We are very interested in moving forward," and added a few other questions.

"And you did have other interactions with Mr. Balwani; correct?" Wade asked.

"Yes," Grossman replied.

“At the conference, the Intermountain Health Systems announced the strategic partnership with Theranos," Balwani wrote to Grossman, referring to the JPM conference.

Grossman viewed that as a positive factor in his investment, and learned about it independently, he said.

Walgreens also endorsed the technology at the conference, as Balwani's email indicated to Grossman.

Again, a positive factor for the investor, Wade elicited.

Grossman met with Balwani (without Holmes) some time after Jan. 20 and before he invested, Wade elicited.

"Do you recall during that meeting you were also advised that theranos offered a total of 250 tests in its clia lab, and that they represented 99% of the volume?"

Yes

Balwani told Grossman PFM could bring in consultants, "as long as the discussion does not include our trade secrets," he wrote.

"Mr bałwani was unwilling to grant access...Meant that we had to again rely on the representations that the company had made to us," Grossman said.

"I did some more reading on the CLIA requirements and Theranos seems to be correct that CLIA certification does mean their tests met a certain level of accuracy. This may or may not be sufficient to meet the FDA criteria, but I have no reason to believe it wont," Rabodzey wrote.

"I asked [GLG] for two consultants one person who developed lab tests in the past and can help evaluate the tech and another person who understands CLIA and FDA regulations to evaluate the requirements thsaat Theranos and to meet to get CLIA certification," he continued on 1/21

Grossman and crew also sought out a doctor who had referred patients to a Theranos wellness center to get info, he testified.

"I wasn't the only one who did that," he said.

"Do you recall specific conversations you had with physicians about theranos?"

"Generally"

We will hear about them... but not for the truth, for the state of mind of Grossman.

Grossman listed a number factors doctors saw as having potential.

"All of those [factors] were very attractive features to the physicians we spoke to, and they would be interested in a service like this," he testified

(Not answering about those who actually used Theranos tech)

Dr. Rabodzey reviewed the slide deck and other docs which we saw on direct yesterday, and wrote his investment team.

"My concern is that their methodology is still raw and /or they may be pushing limits here," he wrote.

"I do not think it’s a deal breaker as long as they can get CLIA and FDA approval on their tests AND can maintain certification in future," he continued.

"You knew that in advance of making an investment decision correct?"

Grossman characterized Rabodzey as having a "skeptical point of view," and said "it's not a deal breaker."

"This is a good example of Mr. Rabdozey doing his job."

More emails admitted for state of mind (not truth of the matters asserted).

We will see them when we get back in about an hour.

#ElizabethHolmes #Theranos

Judge is back. Witness is on the stand. Wade is at the podium.

"We were talking about Dr. Rabodzey giving a report on the patient experience he had at Walgreens?" Wade began.

The 31-minute experience — a consideration for PFM's investment, Grossman agreed.

Rabodzey sent a detailed explanation of his experience to Grossman and team.

"Was the first person to show up at WAG this morning and it still took them 31 min to do the test," Rabodzey said.

Do you recall generally, [from] Dr. Rabodzeys report, the patient experience was far from perfect?

…yes, there was room to improve the process.

"How do they deal with the venous draw issue. I had tests done today in [Palo Alto] Walgreens and had to get venous draw. I wasn’t offered a finger stick," Grossman posed to Balwani.

Balwani told him in six months #Theranos would dramatically reduce the % of venous draws, and that they were already at 99% finger stick draws, Grossman testified.

Grossman went to a personal doctor, and asked what he thought about his Theranos blood testing experience.

Are you comfortable with us publishing this? he asked

The witness was not, so Wade chose not to.

Wade brought up Channing Robertson, Stanford professor of chemical engineering, who Grossman testified on direct gave him positive info about #Theranos.

"You recall...in his over 50 years at stanford he never encountered anything like her?"

"Something to that degree."

Grossman was connected to Channing Robertson by his father-in-law David Brady who also taught at Stanford, and was "distinguished," as Wade put.

“I had a mind blowing call yesterday w/ Elizabeth’s professor who helped her start this,” Grossman emailed his PFM partner Chris James, about 10 days before his investment Wade pointed out.

"Valuation and terms aside, which are obviously tough to swallow, I’m feeling even better about this now," Grossman wrote.

They were having some uncertainty about Theranos' asking price of $17 / share, Wade elicited.

"What we could use form you is the relevant comp group to use. GOOG. FB. Maybe ILMN what else?" Grossman wrote.

PFM looked at the revenue of those companies financial models, Grossman said.

"Have you heard of them as unicorns?" Wade asked.

"I don’t think they were."

We are looking at some of the models PFM created. Wade has the excel spreadsheet published.

Were you aware of any other company that had that revenue growth?

...Moderna

"Do you recall the revenue numbers that PFM projected were significantly higher than the number that Theranos gave?" Wade asked.

"That’s not my memory," Grossman replied.

“Ok let’s take a look,” Wade said.

PFM's 2014 revenue projections, as Wade showed:

1Q about $887,500
2Q about 4.4 million
3Q about 21.4 million
4Q about 70 million

Wade asked if he recalled Theranos' estimates were 25 patients per store per day, and that Balwani told him they were currently only at 10-15.

Grossman didn't.

PFM listed estimates as high as 80-90 patients per day, Wade showed, but that was in 2017, the witness shot back.

"You projected about 1500 more stores would be open than Theranos had in their model?" Wade asked.

"I don't believe that's true," Grossman replied.

"Well, let's take a look."

4,685 stores, PFM estimated, for every year between 2015 - 2018

"This was just a sanity check," Grossman said. "A secondary analysis we did."

Grossman launched into a longwinded spiel defending his data/charts.

You model was completely different methodology than the theranos methodology?

Grossman agreed

Grossman and crew had concerns about the accuracy of #Theranos tests, leading up to their investment in late Jan. 2014, he testified.

"Lot of debate internally on accuracy," Grossman wrote to a partner in the investment.

Rabdozey wrote the inv team with on 1/28

"Let me digest this in a simple way,"

1. The FDA could choose to send cease and desist order to Theranos any time because their tests are not FDA cleared.

2. CLIA does not guarantee the company that the FDA will not go after them...

"We also have to assume that there is a possibility that they will never be able to get certain tests approved by the FDA and they will remain venous blood draw tests (which they mentioned.)" Rabodzey continued, as Wade highlighted.

"They didn't tell us [that]...this is referring to the risks," Grossman said.

Wade went over the language again.

"They did mention to us a small percentage of tests were venous blood draws, that's true," Grossman conceded.

One week before their investment decision, a member of PFM's investment team wrote Grossman and crew.

"I checked with Blue Cross Blue Shield and they said they evaluated [the Theranos] service and came to the conclusion that it does not work," the team member wrote.

Wade showed another email from Rabodzey titled:

Last call with an expert takeaways

"[the expert] did believe that while miniaturizing LH (Labcorp) test menu is possible, it will be very hard to do one some tests and accuracy will deteriorate (but we already know that)" he wrote

"Got the results. Looks consistent with previous tests," Rabodzey emailed Grossman, in regard to the Theranos test he personally took, as Wade showed.

Grossman had a second call with Channing Robertson prior to his investment, which he said was consistent with his first.

It included positive representations about Theranos tech.

Wade admitted an internal PFM presentation about #Theranos.

One slide had the Theranos logo, as Wade showed.

"Did you receive permission from Theranos to use their logo?" Wade asked.

"...I did not prepare this slide," Grossman said.

One slide is titled “Business Outlook”



And this describes all of the risks?

It's really describing all of the scenarios.


Well did you want investors to know about the regulatory risks that Dr. Rabodzey identified? ….in the due diligence process?

“Yes, sure.”

Do you see anywhere where you addressed the accuracy concerns that Dr. Rabodzey identified?

"...it's not supposed to be a detailed review of every piece..." Grossman replied.

"In an hour long meeting you can't cover anything?

"And it's up to the individual investors to follow up if they have any questions?"

Grossman agreed to both.

(His two meetings w/ #ElizabethHolmes were in the range of one hour)

We're on break for 30 minutes. Judge Davila chose to "point out some statistics."

Grossman's direct: 1 hour 30 mins

Grossman's cross: over 6 hours

If Grossman goes till Friday:

"[This] could play havoc with our trial schedule. But that's entirely in your hands," he told Wade

"Just a couple more questions about the folks you were interacting with who were potentially joining the theranos investment," Wade said.

In reference to the slide we just looked at.

"Was that shared with clients in addition to people inside the firm?"

"I dont recall."

"... many internal [PFM] people decided to invest in #Theranos?"

They did

"...Friends and family invested as well?"

He agreed

"Did those people do that based upon your general recommendation... do you recall if you provided them specific info of theranos?"

I dont recall

We are now looking at a Theranos slide deck sent to PFM.

Grossman testified he wasn't shown every slide in the two meetings he had w/ Holmes, and that he didn't remember which slides he was shown.

"Do you recall many of [the slides] are actually aspirational in nature?"

"No."

Wade showed some slides.

One of them:

"Theranos Wellness centers will soon be located within Walgreens stores nationwide," read one bullet on a slide."

"This was a part of Ms. Holmes vision wasn’t it?"Wade asked.

Grossman is fighting back against the "aspirational" characterization by Wade.

Wade is showing more slides.

As a result of your tour, there was some of their tech that was patent pending or trade secret and they told you they wouldn’t show it to you?

…yes.

Wade asked Grossman if part of his involvement with Theranos was to inform his investment decisions in Walgreens.


"Do you recall after the closing [the theranos deal] you immediatley started trading Walgreens stock?" Wade asked.

Objection - sustained

"No further questions"

Prosecutor Robert Leach is on for redirect.

He brought up the internal PFM presentation which Wade showed. He had Grossman clarify he didn't attend the meeting where the presentation was showed.

Leach pointed out some of the "bear" cases, PFM revenue projections were actually lower than Theranos' (I didn't catch the year)

"Have you ever seen a company miss its revenue projections by over a billion?" Leach asked.

"Is that a risk you thought you were taking with this investment?" he continued.

"Not in the 2014-2015 period," Grossman testified testified.

Wade got Grossman to characterize one of his meetings w/ Holmes as rapport building.

"Did you rely on the statements from Ms. Holmes in that meeting?" Wade asked.

[Yes]

"When Ms. Holmes told you that the device was on medevac helicopter said you rely on that info?"

Yes.

Leach ended by asking if Grossman understood one of the risks of his investment be that the founder would not be truthful.

“I did not think that was one of the risks,” he said.

New witness: Erin Thompkins

She once received blood testing services from Theranos.

In mid-2015 Thompkins' physician ordered her blood tests.

Thompkins requested to go #Theranos — she was uninsured at the time, as she understood their prices were lower, Prosecutor John Bostic elicited

"Is there any benefit to you in tests that are not accurate or reliable?" Bostic asked.

"I can't imagine one, no," Thompkins testified.

She went to an AZ Walgreens to get the tests done.

Exhibit 5483: her 2015 #theranos test results

"Summary of Abnormal Results"

HIV 1+2 ab --- results: REACTIVE

The rest of the list:

HIV 1 Ab : Non-Reactive
HIV2Ab. : Non Reactive
HIV 2 Ab : Non Reactive
HIV 1 RNA: Not Detected

"HIV antibodies were not confirmed and HIV-1 RNA was not detected. No laboratory evidence of HIV-1 infection. Follow up testing for HIV-2 should be performed if clinically indicated," Tompkins results read.

When she got her results she dialed up #Theranos. She said she asked to speak to someone in the lab, but was told by the customer service rep they couldn't transfer her

"and that was about it,” she said.

She doesn't remember if she called back, nor did theranos reach out to her

We are now looking at Ms. Tomkins Aug, 2021 HIV test results — she went to Contra Costa Health Services for that lab.

Her result: negative.

Bostic ended his redirect there. Ms. Trefz is on for Holmes

"Do you recall how much your HIV test cost from Theranos?"

"Off the top of my head - no," she said, mentioning she received a refund in the mail 2 years later.

Tompkins discussed the results she had with her doctor, Trefz elicited. The attorney asked what her doctor told her — objection — judge ends court.

Patient will be back tomorrow for the rest of her cross.

#ElizabethHolmes #Theranos

Jury left

now attorneys discussing what patient-doc info can come out on cross.

it's highly relevant, trefz said, and was disclosed to the defense.

"Important that the jury understand that the patient was told at the time [by her doctor] this was not a positive [hiv] test result," Trefz told the judge.

Bostic had concerns about how broad Trefz question was (about what the doctor told the patient).

Trefz conceded she could limit her question, But doesn't want to be precluded from eliciting the info from either patient or doc.

Trefz also said this was "an FDA approved test run on an FDA approved method."

"We are not in fact certain the doctor will testify," Bostic said.

“[That's] frankly a surprise to us,” Trefz said, characterizing the testimony without the doctor as "highly" prejudicial.

Trefz said if that's the case they might have to consider requesting the judge strike the testimony.

"We need to be able to meet the allegations of accuracy here with meaningful cross examination," trefz said.

Bostic got in a last word before Davila called court without making a ruling