🩸 It's US v. Holmes again🩸
Brian Grossman, managing director at PFM Health Sciences, which backed Theranos, will continue cross-examination today.
Brian Grossman, managing director at PFM Health Sciences, which backed Theranos, will continue cross-examination today.
While we wait to get started, let us review some of the new financial terminology we learned yesterday...
wowsy: when you take a look at one of one of the most impressive boards Thomas Laffont has ever seen 
wowzer: when Walgreens offers quite an endorsement for the company you’re considering investing in
brink bevies: when your partner emails you about work stuff on a Friday afternoon and you’re trying to plan your bevies strategy for the weekend getaway
def bevies: when it’s 35 minutes and 44 seconds till the weekend
All of which is to say the PFM emails are a lot more entertaining than the Eisenman emails.
https://twitter.com/eringriffith/status/1460708881743503364
Lance Wade is questioning Grossman about a certain document that is not in evidence and Grossman is refusing to acknowledge that it "refreshes his recollection" because he believes Wade's questions are misleading.
To get around this Grossman answers a lot of Wade's questions with "If the question is X [narrator: it is not], then the answer is Y."
More internal PFM emails!
This one is about a healthcare conference where PFM's tech expert planned to vet Theranos' tech with others in the industry w/out violating NDA. Also says he thinks Theranos's technology is "very good" and has IP and competition concerns.
This one is about a healthcare conference where PFM's tech expert planned to vet Theranos' tech with others in the industry w/out violating NDA. Also says he thinks Theranos's technology is "very good" and has IP and competition concerns.
The email also notes that Theranos's projections are "a bit aggressive" but "with excellent execution are doable and can be exceeded."
Point to show that Grossman knew the risks of backing Theranos.
Point to show that Grossman knew the risks of backing Theranos.
Grossman has not been asked about why PFM ultimately decided to invest despite all of his very diligent diligence and the doubts raised inside the firm.
We see an email that shows PFM confirms that any device outside a CLIA lab needs to FDA clearance.
Theranos often said they didn't need FDA approval for their machines in stores bc the "analysis" would be done in the cloud / in its CLIA lab.
Theranos often said they didn't need FDA approval for their machines in stores bc the "analysis" would be done in the cloud / in its CLIA lab.
We have spent... a lot of time going through every painstaking detail of Grossman's diligence. It is a lot, and I'm not 100% sure what effect this is meant to have on the jury.
Post break, Wade is asking Grossman about his conversations with Channing Robertson. Grossman's father-in-law, David Brady, knew Robertson, was a politics professor at Stanford and was involved with Hoover Institution. Brady also invested in Theranos.
We see an email between Grossman and his partner James - no mention of bevies - where Grossman says the valuation and terms "are obviously tough to swallow." But his call with Channing Robertson was "mind blowing" and gave him a lot of confidence.
To justify the valuation they suggest using Google and Facebook as comps to Theranos!?!?
To use a Grossman term... Wowzers
To use a Grossman term... Wowzers
Describing comps, Grossman testifies they were trying to find "open-ended, best-in-breed disruptive companies."
Wade then tries to call FB and GOOG "unicorns." I feel personally trolled.
Wade then tries to call FB and GOOG "unicorns." I feel personally trolled.
(The third comp Grossman suggested is Illumina.)
Unicorns are private companies with valuations above $1bn, Lance. The term you are looking for is FANG.
fortune.com/2015/01/22/the…
fortune.com/2015/01/22/the…
A few more comps added to the analysis: Salesforce, Tesla and a few others I didn't hear. Grossman repeats his line about "open-ended, disruptive technology platform companies"
Wade tries to make the point that PFM's revenue projections for Thearnos were unrealistically high. Grossman says no and gives the example of Moderna.
"They tend to be really important, open-ended technology, very disruptive, that have a big impact on society."
"They tend to be really important, open-ended technology, very disruptive, that have a big impact on society."
We get another "if that's your question, then yes."
Grossman is patiently describing in great, great detail all of the analysis PFM did on its financial models on Theranos. The room is getting restless. Not even sure Wade is enjoying this level of detail.
Grossman is patiently describing in great, great detail all of the analysis PFM did on its financial models on Theranos. The room is getting restless. Not even sure Wade is enjoying this level of detail.
Another email from Grossman's internal expert outlining more risks on the tech. Says he doesn't think Theranos has enough data to get FDA approval.
The takeaway from these hours of cross-exam from Grossman seems to (still) be: You knew about all these risks and still invested.
The takeaway from these hours of cross-exam from Grossman seems to (still) be: You knew about all these risks and still invested.
There's another email where someone at the firm says Blue Cross Blue Shield did diligence on Theranos and said it doesn't work.
And another one where someone is saying again that there's a chance it won't pass FDA review.
And another one where someone is saying again that there's a chance it won't pass FDA review.
Grossman quotes from lower in the email that his firm's expert continued to believe these risks were acceptable for investing.
There's also a cryptic email from Grossman to his teammates that simply says "real world."
There's also a cryptic email from Grossman to his teammates that simply says "real world."
So Grossman delivered a presentation to some other investors summarizing PFM's own research about Theranos. It has Theranos's logo on the front of it and Wade asks "did you get Theranos's permission to use their logo?"
wade points out that the presentation doesn’t include the accuracy risks or highlight the “limited operating experience” theranos had.
Ok just before the break my laptop died, but Judge Davila expressed the most frustration I've ever seen over how long Wade's x-exam is lasting (6+ hours).
Wade is showing Grossman a slide deck presented by Theranos and is pointing out that many of the claims were "aspirational."
Wade: Was part of investing in Theranos a part of your desire to get information for your investment in Walgreens?
Grossman: No
Is it true that after you invested in Theranos you started trading Walgreens stock?
Prosecution objects and is sustained.
And that's it, finally!
Grossman: No
Is it true that after you invested in Theranos you started trading Walgreens stock?
Prosecution objects and is sustained.
And that's it, finally!
Prosecutor Leach is back up for redirect.
Leach asks: Who was in a better position to judge Theranos's projected revenue for 2014 and 2015, you or the company?
Grossman: The company.
Leach asks: Who was in a better position to judge Theranos's projected revenue for 2014 and 2015, you or the company?
Grossman: The company.
This is related to Wade's argument that PFM's revenue projections for Theranos were overly rosy. (Grossman has testified that they were based largely on Theranos's own projections)
Leach pulls up the "bear case" projections (Wade had used the bull case projections).
Have you ever seen a company miss its revenue projections by over $1 billion?
BG: "It's unusual."
Was that a risk you thought you were taking with this investment?
BG: "Not in 2014 no."
Have you ever seen a company miss its revenue projections by over $1 billion?
BG: "It's unusual."
Was that a risk you thought you were taking with this investment?
BG: "Not in 2014 no."
Talking about Moore's law. The jury is getting such an education in business terminology.
A PGM email discusses how Theranos plans to drive down costs of making its devices. That wouldn't apply to third-party devices, Grossman said.
A PGM email discusses how Theranos plans to drive down costs of making its devices. That wouldn't apply to third-party devices, Grossman said.
A major theme seems to be EXECUTION RISK.
Was Theranos past the point of "proof of concept"? Should investors have anticipated the risk of the technology not working?
Was Theranos past the point of "proof of concept"? Should investors have anticipated the risk of the technology not working?
If I had known how many times Grossman would use the term "hub and spoke model" to describe the Walgreens partnership I might have created a drinking game (byob, aka brink your own bevies)
Leach: "Did you think one of the risks here was that the founder and CEO was not being truthful to you?"
Grossman: "We did not think that was one of the risks."
And that's it for Grossman.
Wowsy!
Grossman: "We did not think that was one of the risks."
And that's it for Grossman.
Wowsy!
The US has called Erin Tompkins, a Theranos patient.
She testifies first saw an article about Theranos in Forbes, she said she also heard about it on Facebook - a rec from a friend who was trying to find affordable healthcare options to people without insurance.
She chose Theranos for a blood test her doctor ordered because it was cheap and she didn't have insurance.
"Is there any benefit to you with blood test results that were not accurate or reliable?"
"I can’t imagine no."
"Is there any benefit to you with blood test results that were not accurate or reliable?"
"I can’t imagine no."
We see a copy of her Theranos blood test results stating that Ms. Tompkins had HIV antibodies. She testifies that she has never had HIV or AIDS, and a different test a few months later said negative.
She tried to call Theranos to get more information but spoke to no one.
She tried to call Theranos to get more information but spoke to no one.
We also see test results from August of this year that says she is negative.
In cross-exam Katie Trefz asks how much her Theranos test cost. Tompkins doesn't remember but says she got a refund about two years later.
In cross-exam Katie Trefz asks how much her Theranos test cost. Tompkins doesn't remember but says she got a refund about two years later.
The jury and Tompkins have left.
Holmes layer Katie Trefz is arguing that the patient was told at the time by her doctor that this was not an indication of a positive test result.
Holmes layer Katie Trefz is arguing that the patient was told at the time by her doctor that this was not an indication of a positive test result.
Bostic argues that he believes the doctor was in disbelief and had skepticism over the accuracy of the results. It wasn't him saying that the results were accurate yet she wasn't positive.
Sounds like Tompkins's doctor is also going to testify.
The judge has also made a not very pleased reference to the case's "untoward delays."
The judge has also made a not very pleased reference to the case's "untoward delays."
Trefz is arguing that the confusion comes from the way the results were *presented* in the results, not the actual results themselves.
Bostic says her doctor's concern about the accuracy of the results was "inadmissible hearsay."
Bostic says her doctor's concern about the accuracy of the results was "inadmissible hearsay."
Bostic notes that he's not certain whether the doctor will testify because they're trying to "streamline" their case and the witness list because of time concerns.
Trefz argues for expert testimony on the accuracy of the tests since they've been run on different methods. "If a patient is going to testify about their allegedly inaccurate tests, we should get to explore the depths of that patient's knowledge as to what the test results mean"
Ok that’s all the lawyer fighting for today. 😵💫
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