VANCOUVER — At Truvian’s San Diego headquarters last November, a group of venture capitalists considering an investment in the health-tech company made an unprecedented request. Before watching a demo of the company’s blood-diagnostic machine, they asked Truvian staff to remove its casing, so they could see its inner workings as it processed the blood samples.
“I’ve been in diagnostics a little over 20 years. I’ve never had the issue. I’ve never had an investor … at this phase, see positive data and then say, ‘And I still want to see it running in your lab,’ and, ‘Oh, and I want to see it running with the covers off,’” said Jeff Hawkins, Truvian’s CEO. He chalks it up to the fallout from the scandal at Theranos.
It’s been more than five years since The Wall Street Journal exposed a sensational alleged fraud at the Silicon Valley startup, with charges against founder Elizabeth Holmes still making their way through the courts. Given its spectacular failure, investors would “be crazy not to think of Theranos and lessons learned from there” when assessing any point-of-care blood-diagnostics company, said Megh Gupta, a partner at Wittington Ventures.
Nonetheless, last month, the Canadian venture capital firm co-led the company’s latest fundraising round, which totalled more than US$105 million. For Loblaw-linked Wittington, it’s a bet on a startup whose technology could one day be deployed at Shoppers Drug Mart pharmacies. For Truvian, the vote of confidence from Wittington and its co-investors is a sign the company has managed to escape Theranos’s long shadow.
Wittington Ventures, the venture capital firm affiliated with Loblaw, recently co-led a more than US$105-million Series C fundraising round in Truvian. The San Diego-based company is working to build a compact device to run multiple blood tests, quickly, from a small sample. Its superficial similarities to Theranos, the startup Elizabeth Holmes founded that quickly fell from its US$9-billion valuation after allegations of fraud, has changed the way the company approaches investors, and vice versa.
Truvian is building a compact device that will run a gamut of health tests using five drops of a subject’s blood, and deliver results within 20 minutes. The current machine is a beta, said Hawkins, meaning it’s been developed beyond the prototype and alpha stages, but is not yet a final-stage, clinical machine. The company expects to make its initial regulatory submission to the U.S. Food and Drug Administration by the end of this year, and projects that process will take six or seven months. If approved, the device should hit the market in the U.S. in the second half of 2022.
There are superficial similarities with Theranos, which claimed to have built a tabletop machine that could accurately conduct hundreds of tests on blood drawn from a finger prick. Its founder, Stanford University dropout Holmes, grew the company to a US$9-billion valuation. Then a 2015 Wall Street Journal investigation revealed Theranos’s so-called Edison machines conducted only a fraction of the tests the company claimed it did, and with questionable accuracy, despite being deployed in several Walgreens stores and other locations. Investors, including Rupert Murdoch and the heirs of the founder of Walmart, lost a total of more than US$600 million. The government has charged Holmes and the company’s former president (and once Holmes’s romantic partner) Ramesh “Sunny” Balwani with two counts of conspiracy to commit wire fraud and nine counts of wire fraud. The company’s rise and fall was documented in a 2018 book (Bad Blood), an HBO documentary (The Inventor) and a true-crime podcast (“The Dropout”), both released in 2019, and an upcoming television miniseries (also called “The Dropout”).
The growing profile of the problems at Theranos affected how potential investors approached Truvian, and vice versa. “People started to get more focused on some of the things they learned from reading the book and listening to the podcast and seeing the television specials,” Hawkins said. They’d ask whether the company had hired scientific advisors, and whether it understood the regulatory path for its device. To head off the inevitable questions, one of the first slides in the pitch deck Truvian showed investors as it worked to raise its first two funding rounds—including a US$27.1-million Series B announced in November 2019—preemptively addressed how it differed from the scandal-plagued Theranos. “We were a team of people that have spent our careers in the diagnostic industry. This wasn’t the first time we were building a company in this space,” said Hawkins. Truvian added scientific advisors early on and provided potential investors an abundance of data. The leadership at Theranos, meanwhile, lacked a biotech background and, according to Bad Blood, often claimed trade secrecy as a means of avoiding investor (and reporter) questions. Truvian also accepted the limits of science, said Hawkins. “To do thousands of analytes from one drop of blood just isn’t feasible, from a biology perspective.”
By the time Truvian was raising money for its most recent round, the full extent of the alleged fraud at Theranos had been exposed, and the VCs Hawkins and his team were pitching would home in on Truvian’s technology. After all, Bad Blood opens with a scene of Theranos faking tests for investors. “The level of diligence various investing groups in this round did on technology was far more than I’ve seen in my career at this stage,” said Hawkins. “That’s probably the little bit of the unspoken hangover from the Theranos days.”
Gupta and Wittington were among those VCs, and as they weighed an investment, the Theranos comparison was firmly on their minds. Wittington Ventures is affiliated with the holding company of Canada’s billionaire Weston family, which controls the Loblaw empire. Wittington’s previous investments hint at the potential future for Loblaw, Canada’s largest grocer, and its Shoppers Drug Mart pharmacy chain. Some of the startups in which Wittington has invested so far have already formed partnerships with the company. As they conducted their diligence, COVID-19 presented an obstacle. Toronto-based Gupta couldn’t fly to Truvian’s headquarters to see the machine in person. That gave Wittington some hesitation. “Like: ‘Oh, geez…. We can’t physically go and see it,” said Gupta. Wittington came up with alternatives. It enlisted the help of scientific experts to look through Truvian’s evidence and reports. It spoke with academic and clinical experts in the field, including a Theranos critic who advises Truvian. The investor group included some U.S.-based people who flew to San Diego, along with an engineering expert they recruited, and witnessed a demonstration of the machine—with the casing removed.
Gupta attended a virtual tour of the facility, where Hawkins took them into the lab, dismantled the machine so they could see inside it and ran a test that way. “So we kind of gained some comfort that way, as well, right, that this wasn’t just a whole facade or hocus-pocus type of thing,” said Gupta, who is now a member of Truvian’s board.
Hawkins, for his part, doesn’t mind the extra precautions investors now take when dealing with his company. He’s used to regulators and experts asking tough questions, and thinks “it’s necessary” for investors to do so, too. “I think, if anything, I still scratch my head when it comes to Theranos around why people weren’t asking these questions,” he said, given the potentially huge impact on the lives of patients relying on the machines for blood tests.
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Truvian’s goal is to have its countertop machine at doctor’s offices and pharmacies in the U.S., Europe and Canada. Though the company wasn’t initially focused on Canada, Hawkins said, its conversations with Wittington Ventures about the Canadian market has changed that. The timing is to be determined, as the company is still working to understand Health Canada’s requirements. “We would love to see this machine in Shoppers Drug Marts. Just like we hope to see it in, you know, CVS and Walgreens and Walmart herein the U.S.,” said Hawkins.
Wittington shares information about the deals it makes with Shoppers and welcomes their perspective on things that may be beneficial to them, said Gupta. He can see a future where the chain uses Truvian’s devices for in-pharmacy testing. “That was the premise for the investment in the sense that we see a massive opportunity to democratize access to point-of-care testing through the retail channel, irrespective of geographies.”
The deal was “mutually beneficial,” said Hawkins. Wittington wanted to make an investment in a company with the potential to disrupt the diagnostics industry, he said, and Truvian had the chance to learn about the market and opportunities in Canada. “Whenever possible, you’d like to get investments from investors who can also help you succeed.”