Just a few days ago, it seemed as though the holiday season wouldn’t do much to lift spirits over at Theranos, the one-time VC darling previously valued at around $9 billion. The blood-testing startup that was once heralded as the future of health tech has since unraveled under a string of controversies and investigations surrounding its supposedly proprietary techniques (which turned out to be anything but). Earlier this week, Theranos was ordered to issue $4.6 million in refunds to Arizona residents who used the company’s services, but now, there’s a silver lining. Theranos has secured $100 million in debt financing.
As per an investor letter seen by Business Insider, Theranos is looking to come back from years of trouble, and is hoping to attain FDA approval for its new Zika blood-testing device known as MiniLab. It’ll be able to do so thanks to the $100 million in debt financing secured from Fortress Investment Group. Of course, there are strings attached to the deal — Fortress now owns 4 percent of the company’s equity.
Still, the money represents a much-needed lifeline for Theranos. “Based on our present projections, we believe we will have sufficient liquidity through 2018, by which point we hope to have secured regulatory approval for miniLab testing for the Zika virus and begun submissions for additional assays,” Theranos CEO Elizabeth Holmes wrote in the investor letter.
The cash influx comes just in time, as Theranos is watching $4.6 million go out the door. The recent payout comes as a result of a settlement reached with Arizona attorney general Mark Brnovich earlier in 2017. Any Arizonan who used Theranos will receive a complete refund, even if their tests proved to be accurate. While the average refund will be around $61, at least one individual will receive more than $3,000 in the settlement.
According to Brnovich, Theranos’ ads “misrepresented, omitted, and concealed” information about the accuracy of its techniques, as well as the nature of the techniques themselves. In addition to the refunds, Theranos has been banned from owning or operating any lab in Arizona for the next two years.
“Our office is proactive and aggressive in protecting Arizona consumers and these refund checks are proof that we are going to go after companies that violate Arizona consumer protection laws,” Brnovich said in a statement.
Theranos, of course, denies any unlawful activity, and noted that just 10 percent of its thousands of blood tests sold between 2013 and 2016 were ultimately voided. Regardless, the company has had a very difficult time recovering from its multiple setbacks over the last several years.
At the beginning of 2017, Theranos fired over 40 percent of its workforce, leaving the company at just over 200 people. But just maybe, the Fortess investment will help the company bounce back.
Update: Theranos receives $100 million in debt financing.
