Thread by @doratki

Good morning from a sunny San Jose! Judge Ed Davila is on the bench for yet another day of Elizabeth Holmes' criminal fraud trial. Holmes' counsel says they can hold off on arguing over admitting Fortune Mag writer @rparloff's interview w/ Holmes, b/c Parloff will testify tmr.

The jury is in the courtroom & hedge fund manager Brian Grossman is back on the stand. Holmes counsel Lance Wade continues cross, asking him about his Jan 2014 meeting w/ Balwani & Holmes. He says "in the second half of the meeting Balwani def drove the meeting" b/c Holmes left.

Wade asks Grossman to review notes, which Grossman says aren't his. The atty asks if it refreshes his memory that he was told 96% of blood test requests "fall within 7 assays." Grossman - clearly frustrated - tries to offer an explanation, but eventually says "No, it does not."

Wade points to another note and asks him the same question. After Grossman talks over Wade and tries to explain that the tests were for the "hospital infection market," not retail, the judge tells him he just needs to answer the q of whether the note refreshes his memory.

In a Jan 2015 email, Grossman's colleague, an analyst, said he wanted to run Theranos' tech by Labcorp and Quest Diagnostics (theranos' rivals) but "obviously without disclosing anything we should not be disclosing.”

The analyst's email goes on, “I am not convinced on IP and competition" and "I think their projections are a bit aggressive for speed of ramp in 2015 and beyond, but with excellent execution are doable and can be exceeded." Gossman says "execution was a risk for sure."

Wade pulls up another email from the analyst in Jan 2014 that said he checked with another company and Theranos would have to get FDA approved to use its device for testing outside a CLIA lab.

The Jan 15 2014 email adds "not a big deal in my view, but something to keep in mind." Grossman says they asked q's re FDA approval in meetings and this is a "good example" of work they do in the "early process" of the due diligence. (They invested $96M less than 3 weeks later.)

Wade asks Grossman if he recalls that Theranos could do 250 tests in its CLIA lab, which "represented 99% of the volume." "I do remember that yes," he says but notes Balwani and Holmes never mentioned another "reference lab."

Grossman says his firm tried to hire lab consultant to vet Theranos' technology, but in a Jan 22 2014 email, Balwani refused to give him access due to confidentiality concerns. Grossman said his firm also spoke to experts, but "more at a high level and not referencing Theranos."

In a Jan 21 email, Grossman's colleague wrote that “Theranos seems to be correct that CLIA certification does mean that 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 won’t.”

The email goes on that he would "stick to the view shared by the lawyers we spoke with that the FDA will want to regulate testing, and will not buy into this idea of cloud data." Grossman explains that the lawyers are "more conservative" in their approach.

Grossman explains his firm's decision to invest, saying Theranos execs "had very good answers" for all the regulatory issues they raised and the company had board members with "extensive" government experience.

Wade points to another email from Grossman's colleague who reviewed Theranos' assay validation data and a proficiency stat, which was around .9. Grossman: "There are no hard and fast rules to these tests and getting CLIA certification, but in general a higher number is better."

We're breaking for "about an hour," because the judge has something to do (I assume it involves another case, b/c judges in the district have hundreds of cases on their dockets that have nothing to do with Holmes' criminal trial.)

We're back! Wade pulls up an email from Grossman's colleague that says he took a Theranos test at Walgreens and it took 31 mins. He notes his fingerstick blood was drawn by a Theranos phlebotomist and not Walgreens staff and there's a "a bit of a question there."

Holmes' counsel shows Grossman a 2014 email he sent after getting his blood tested at Walgreens. His blood was drawn venously. On the stand, Grossman says Balwani told him 1% patient of patients would require venous draws and it would take 6 months before that changed.

Holmes' counsel Lance Wade wants to show the jury an exchange Grossman had with a doctor about his Theranos' blood test results. He asks if he can show the email to the jury.

"I would prefer not," Grossman says.

Wade agrees to withdraw the email from evidence.

Wade moves on and asks if Grossman remembers Sanford University professor Channing Robertson told him he had never encountered anything like Elizabeth Holmes in his 50 years at Stanford. Grossman replies, yes, he remembers him saying "something like that."

Wade gets Grossman to acknowledge that his father-in-law David Brady introduced him to Robertson. In Jan 2014, Brady wrote Grossman: "I talked to [Robertson] it’s his co & he can talk anytime Headed BioX Stanford’s engineers and biologists DNA. Smart nice says whatever he wants"

On Jan 26 2014, Grossman wrote his partner, Theranos' "valuation and terms aside, which are obviously tough to swallow, I’m feeling even better about this now. I had a mind blowing call yesterday w/ Elizabeth’s professor who helped her start this. Was the original board member"

Elizabeth Holmes' counsel asks hedge fund manager Brian Grossman if his Jan 2014 call with Sanford University professor Channing Robertson about Theranos was "mind blowing."

"It was a positive call," Grossman says.

Holmes' counsel pulls up an Excel spreadsheet with a lot of data points, but he points out that Theranos had millions of dollars in deferred revenue. (A point the defense has made repeatedly, I'm guessing to counter the gov't's args that it had zero revenues in ~2013.)

Holmes counsel pulls up a Jan 2014 spreadsheet that Grossman prepared that projected Theranos' revenues would grow from $25M to $249 million by the end of the year and to $1.558 billion in 2015. Wade asks if he knows of other cos that have grown that much in 2 years. He says yes.

Holmes' counsel Lance Wade: "Do you recall that the revenue numbers that [Grossman's hedge fund] projected for 2014 were significantly higher than Theranos gave?"

Grossman: "That’s not my memory."

Wade points to the different Excel spreadsheets and their revenue estimates and tries to get Grossman to concede his financial model was done independently. He refuses to concede the point, and says he added data to Theranos' projections and it was based on assumptions.

Grossman says his hedge firm's financial projections were just "a sanity check" to see if their estimates were realistic, and "this was a secondary analysis we did to see how far we could go with Walgreens and to see if [Theranos] needed to go with other partners."

Wade shows an email from Grossman's colleague saying there's a risk the FDA could issue a cease and desist letter to Theranos "anytime bc their tests are not cleared. The FDA has not done this so Theranos is correct that such an aggressive scenario is unlikely in the near future"

The email goes on saying CLIA does not guarantee that the FDA will not go after Theranos, and "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."

Holmes' counsel is trying to get Grossman to concede that he the email shows he knew Theranos was using venous blood draws and that there was a risk it always would. Grossman is trying to downplay the email and says regulatory issues are "just part of this industry."

In another Jan '14 email, Grossman's colleague said he had a due diligence call with a scientist who develops lab tests and said Theranos would need FDA approval to put its devices in Walgreens. "There's a 10-20% chance that the implementation gets derailed by the FDA," he adds.

In an interesting twist, Holmes' counsel shows hedge fund manager Brian Grossman an analysis that he prepared on Theranos, which he showed to investors. The attorney asks if Grossman got Theranos' approval to use the Theranos logo. He says no, but he didn't think he needed to.

Holmes' counsel points to a "business outlook" page and notes that it doesn't mention the accuracy concerns expressed that the hedge fund's analyst expressed. Grossman says: "That was not a risk that we thought was a major risk at this point of the investment.”

Holmes' counsel points to a page in the analysis that projects Theranos to have a $20.3 billion valuation by 2020. Grossman says he "wasn’t part of this meeting," but acknowledges the stat is in the presentation.

We're taking a 30 minute break. It seems unlikely that we'll be getting to another witness today. 0_0

The judge says Grossman's direct exam took 1hr and 30 mins and his cross has "exceeded 6 hrs." He says his estimate that this witness won't be done until Friday seems to be coming to fruition, which will "wreak havoc" on the trial schedule, "but that’s entirely in your hands."

The seasons may change, but us reporters will still be in the San Jose federal courthouse covering Elizabeth Holmes' criminal fraud trial.

The jury is back, and Grossman is on the stand. Holmes' attorney gets Grossman to acknowledge that investors within his hedge fund invested in Theranos after seeing the presentation and analysis. Those investors included "friends and family."

Holmes' attorney Lance Wade is now going through Theranos' slides, which describe the company's services and goal to have 95% patients w/in Theranos testing locations.

Grossman concedes that Theranos' national rollout was "aspirational," and that some technology had patents pending. Wade points out Grossman was trading Walgreens' stock after he invested in Theranos, but the gov't objects and the judge sustained it. After +6.5 hrs cross wrapped.

Prosecutor Robert Leach begins redirect by asking Grossman if anyone at Theranos ever told him in 2014 that 40% of patients had their blood drawn venously. He says no, he thought it was ~1-3%.

Grossman says Theranos was in a better position to know the projected revenues than his firm, and Theranos' financial projections didn't mention that it was using modified non-Theranos blood-testing devices.

Prosecutor: Did you ever see a company miss it’s projections by over a billion dollars?

Grossman: It’s unusual.

Prosecutor: Was that a risk you thought you were taking?

Grossman: Not in 2013 or 2014. No.

Redirect wraps with Grossman saying the fact that Theranos said its tests had been validated in a CLIA lab was a "huge statement." The parties wrapped w/ Grossman. The gov't call the next witness Erin Tompkins

Tompkins, who lives in Pheonix, Arizona, first heard of Theranos after "skimming" a Fortune Magazine article about it in 2013 and reading more about the startup on Facebook.

Tompkins said she thought Theranos could run blood tests w/ blood drawn from a fingerstick and not blood vial, so she decided to get her blood tested. She noted that she was uninsured at the time, and paid in either cash or card.

Prosecutor John Bostic asks if she cared more about accuracy or cost if she had to choose. She replies "accuracy is the most important any time you're getting a medical procedure, but cost is a close second."

Tompkins got her blood tested in May 2015, and she received the results, which indicated that she had HIV antibodies.

Tompkins says she has never been diagnosed with HIV or AIDS and she never had symptoms and never received treatment. The report said the HIV antibodies "were not confirmed and HIV-1 RNA was not detected. No laboratory evidence of HIV-1 infection" and recommended a follow-up.

Tompkins said she called Theranos to ask how it was possible to get the result, but the customer service couldn't help. "I was quite emotional at the time," she says. She didn't call back, but she got tested again and her HIV results came back negative.

Tompkins said in August of this year she was tested again, and her HIV test results came back negative. Prosecutors finished direct. Defense counsel has a few questions, which will likely go until tomorrow.

Holmes' counsel asks Tompkins if she remembers how much her blood test cost in 2015. She says she doesn't remember, but she received a refund check about two years later in the mail.

Trial is breaking for the day and Tompkins' cross examination, which will likely be brief, will continue at 9 a.m. ✌️

Yesterday, jurors heard from the second patient to testify in Elizabeth Holmes' criminal fraud trial. She said she received an inaccurate test that suggested she had HIV or AIDS. Her cross will continue this morning. Catch up on yesterday's trial action! law360.com/articles/14413…