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Elizabeth Holmes SEC Deposition JULY 11, 2017 2 OF 4 redacted — Transcript

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0:03we are back on the record at the
0:05beginning of media number two of
0:07Elizabeth Holmes the time is 10 30.
0:11I just want to confirm that uh we didn't
0:13have any uh sensitive conversations
0:15during the break did they no okay and I
0:18just want to make that uh give you that
0:21question after every break has made sure
0:23that nothing was set off the Record
0:24absolutely um okay so I'm going to hand
0:27to you what's been marked as a fairness
0:30exhibit 195.
0:33foreign
0:49to be a document entitled theranos
0:52confidential summary capitalization uh
0:55the starting base number is
0:58ts-000603 I'll represent to you that
1:01this was produced by fairness to the SEC
1:04as part of a binder that was provided by
1:07theranos to Rupert Murdoch when he was
1:09considering whether to invest in
1:10fairness in December 2014 and January
1:132015.
1:15um the cover letter to the finder states
1:16that it was signed as of December 4th
1:182014. have you seen exhibit uh 195
1:22before
1:25you know I I didn't recognize this first
1:28sheet sitting here now but I'm I'm sure
1:29I did
1:31what is except at 195.
1:35um it looks like our cap table
1:38and behind it a series of projections
1:46foreign
1:48exhibit 195 honor about December 4th
1:522014.
1:56um
1:57you know I don't
1:59I have memory of whether I reviewed it
2:01at that time but I know I've seen it
2:05so I'm actually
2:06just going to start on the first page
2:08which is 603 is the base number at the
2:11bottom yes is this an accurate
2:14reflection of fairness Capital raising
2:16since it's
2:17um since the company
2:19was founded
2:23as of what period of time I guess as of
2:272013 that's a good point
2:30as of 2013
2:32um
2:37no I'm
2:40I think this was as of a later period of
2:44time
2:46okay so what what was the date at which
2:49this document was repaired then
2:52the the C2 didn't happen until
2:56um
2:57I think 2014 was the first part of the
2:59C2
3:02so
3:04um so you think that this is an accurate
3:06reflection of the capital raising the
3:07company did as of 2014.
3:11no no okay so what happened in 2014
3:17oh I'm sorry as of 2014 I was missing my
3:19years yes I think that as of the end of
3:222014 this this looks about right let's
3:24get that right okay but how much was
3:25raised during the C2 round
3:28uh it was it was several hundred million
3:31dollars I I don't know exactly the
3:33number
3:36I think it was it was over 500 million
3:38okay so if it was over 500 million then
3:41um do you think that this chart maybe
3:43isn't an accurate reflection at least um
3:46it doesn't include some of the C2 round
3:49correct it doesn't include some of the
3:51C2 I I don't know exactly when this was
3:54prepared and what period of time it was
3:55supposed to be reflective of okay
3:59um but you think that the the total for
4:01the C2 round would have been something
4:02like over 500 million dollars I believe
4:05so
4:08um so I just want to focus for a period
4:10uh
4:12on the C1 and C2 rounds
4:15what were those financing rounds what
4:17was the purpose of raising money during
4:19those rounds
4:22um
4:24so they were they were different at
4:26different points in time C1
4:29we began
4:31developing strategic relationships with
4:36long-term shareholders and some of the
4:39hospital systems that we wanted to
4:41partner with came in through a fund and
4:45then C2 we had decided that we wanted to
4:49try to structure theranos as a private
4:50company and we were looking for
4:54family-owned businesses or family
4:56controlled companies and Leadership who
5:00wanted to invest in something for the
5:02really long term and we identified a
5:05group of people to try to bring in for
5:06that
5:07so you said for Siege the C1 round I
5:10just want to make sure that I understand
5:11for the c one round
5:14um that was mainly money coming from
5:16strategic Partners like hospitals and
5:18when it started yes yeah I mean we had
5:22also
5:23um another family that invested through
5:26one of the funds that came in in C1 and
5:31um then a couple of the hospital systems
5:33that we were hoping to partner with came
5:35in in that as well which family came in
5:37and see one that you're thinking of was
5:40family and did family and the hospital
5:44systems they all come in through pure
5:45Venture group they did what is pure
5:47Venture group
5:49it is a fund
5:52um what was your relationship with them
5:55for a long time and I met him through
5:59and so how did that relationship come
6:02about I mean you know who initiated
6:04talks of
6:06um
6:08potentially investing in fairness you
6:11know and what happened how did you how
6:13did how are you able to get that
6:14investment from peer Venture group
6:16the first one was in 2010 so I don't
6:19remember specifically but I I my memory
6:22is that had expressed interest about
6:24investing in theranos and specifically
6:27through having a fund that focused on
6:29investing in theranos and strongly
6:32encouraged me to meet with him and the
6:35people that I think he was working to
6:37raise money from and
6:39until invest
6:41okay and then you mentioned for C2 that
6:44was mainly for
6:47um you'd raise money in order to
6:49establish a long-term shareholder base
6:51so right can you explain a little bit
6:53more about that yeah over over a period
6:55of time we became convinced that
6:58becoming a private company for the long
7:00term would best allow us to do something
7:03that was going to be a very long-term
7:04Venture and so we were trying to find
7:07investors who wanted to invest in
7:10private companies and wanted to make
7:12really long-term Investments and
7:15generally who had built family companies
7:17and and so we identified a series of
7:20people who had done that and went to
7:23meet with them to talk about
7:25this vision and and so that was that was
7:27the majority of the C2
7:31what was the money that you raised
7:32during the C1 and C2 rounds used for
7:36a lot of r d and operational
7:41Investments like we built a big
7:44manufacturing facility in Newark
7:46California where we do our own injection
7:48molding and machining and reagent
7:51production and
7:53um
7:54and
7:56I think primarily those two things
8:00going into both of these rounds of
8:02financing did you have a particular
8:03Target that you were aiming to raise
8:06and what were those targets
8:08I I don't I don't know I'm sure we did I
8:11can't remember exactly what the what the
8:15numbers were I I think it
8:19it was also a bit dynamic in terms of
8:21responding to interest and people who
8:24had expressed interest in being
8:25shareholders in the company
8:29so if you look
8:30um at the price at which the shares were
8:34sold during these two rounds
8:36the first C1 round that took place in
8:392010
8:40price was three dollars a share the
8:43second c one round it went up to Fifteen
8:46dollars what
8:48um what precipitated the change in price
8:54so my my memory is that that was
8:58um
8:58a price per share that was established
9:02through the relationships with the
9:04retail pharmacy Partners who were
9:06thinking about what the value of
9:08theranos could be
9:10if we had these retail Frameworks in
9:13place and that that's where that that
9:15number came from
9:17so are you saying then that the Retail
9:20Partners actually valued fairness at the
9:2415 a share
9:26I don't know if they valued it but to
9:29the extent there were Provisions in the
9:32contract that gave them potential rights
9:34to equity that was the value that they
9:37put on the equity rights that they had
9:40who came up with the fifteen dollars per
9:42share valuation
9:46I I don't I don't know
9:48I'm not sure was that a number that
9:50Theron has requested of it's it's Retail
9:53Partners
9:57you know I don't remember I I know there
9:59was a lot of work with the Retail
10:02Partners to create models together of
10:05what this could be I'm not sure if
10:08I'm not sure who who settled on that
10:10number in the end
10:13was it negotiated
10:19Who would know the answer to that
10:20question
10:24I mean I assume our team could look back
10:26at documents and and try to figure it
10:28out and I I don't remember I'm
10:33not sure would you have been involved in
10:36those discussions
10:37with your Retail Partners I would have
10:40yes would Sunny dalwani have been
10:42involved yes
10:48okay I'm going to hand you another
10:52document
10:54put that one aside
11:12[Applause]
11:22foreign
11:28ERS exhibit 186.
11:34exhibit 196 before it's to be a
11:38spreadsheet
11:39and the title at the top is detailed
11:43um 2 9 17 starting base number is
11:48ts-0558077
11:52have you seen exhibit 196 before
11:57you know I don't remember seeing this
11:59version but I I recognize it as as our
12:02cap table
12:07does your reviews of it 196 on or around
12:10February 9 2017.
12:14I I don't remember doing that
12:17I'll represent to you that that's the
12:19date of which that appears on the
12:22document and would have been around the
12:24date that Sarah knows produced the
12:26document to the SEC yep so
12:29I want to focus on some of the C1 and C2
12:33investors on this list
12:35if you go down there's an investor
12:38called Bendel fund do you see that on
12:40the first page
12:43they do
12:45uh and they invested in 249 998 shares
12:52in the C2 round
12:54who is the the Bendel fund
12:57I'm I believe
12:59this is
13:01he's he's an individual company
13:07how do you know him
13:08how did you get to know him
13:10I met him through this process of trying
13:12to find
13:14family controlled companies and
13:16investors and I'm trying to remember who
13:19made the introduction he knows a number
13:22of
13:23people affiliated with the company
13:25um
13:26I'm not quite sure who made the the
13:28final introduction to him
13:31who does he know at the company
13:34um
13:35he knows some of our investors he knows
13:38some of our board members specifically
13:39and I
13:41I'm just not sure who who made the first
13:43introduction to him
13:46who are the investors that he knew
13:49I I my understanding is he knows he
13:52knows most of our C2 investors the other
13:54large family investors
13:59what about Central Valley administrators
14:01who are they
14:05so I think that is that Walgreens
14:09introduced us to when they were talking
14:12about deploying in California
14:16who's okay and what why was he
14:19interested in fairness
14:22um I I think he really believes in
14:26um
14:27the need for lower cost more distributed
14:30testing
14:32were you in talks to partner with him in
14:36any way okay
14:37it was our hope that had we deployed in
14:40Los Angeles with Walgreens we would work
14:42with his physician groups
14:44so was this uh was he also considered a
14:47strategic partner a possible strategic
14:49partner yes
14:51so in other words even though he
14:52invested in the C2 round it looks like
14:54they were all also opportunities for
14:57strategic Partners to come in in the C2
14:59round in addition to some of these
15:00families
15:02I'm I'm trying to think if there are any
15:05others beside him I know generally the
15:07focus of C2 was the families
15:10um
15:12but had there been a a strategic I mean
15:15there's no reason why we wouldn't have
15:17looked at that in the context of
15:19involvement
15:21if you turn the page to page three
15:27uh what about Dynasty Financial
15:31it's also a C2 round investor I I
15:34believe that's the DeVos family
15:37how did you know then
15:39I met them at
15:42a
15:44conference for family controlled
15:46companies and
15:49um
15:50talk to him about our vision
15:53what conference is that that was the
15:55conference
15:58it was in Chicago
16:00and what is so they invited a number of
16:02uh family offices to come for a
16:05conference
16:06I think so when did that happen
16:09um in the fall of 2014 or maybe winter
16:13of 2014.
16:15why did you attend
16:16I was asked to speak at it what did you
16:19speak about had asked me to serve on a
16:22panel I think about Innovation I I don't
16:24remember what I talked about
16:26he's I'm sorry uh you don't recall what
16:29you talked about at that conference
16:32I don't I mean I guess I don't remember
16:35it specifically
16:36did you meet the DeVos family at that
16:39conference I did who is your main
16:42contact there
16:44I initially it was now it's
16:46excuse she's am I understand her boss
16:50or I I think so I'm not sure
16:55uh what about Hall Black Diamond 2 which
16:59towards the bottom of page three
17:04who are they
17:06so that is a fund that was created for
17:11one of the limited partners of Black
17:13Diamond to be able to have direct
17:16Holdings In fairness
17:18and who
17:20black diamond and I think a successful
17:22business person um
17:24how did you meet him
17:27I I believe I met him after he had
17:30invested in black diamonds fund that
17:33invested in theranos
17:34so through black diamond
17:36and was there somebody else at Black
17:39Diamond that you knew prior to this
17:42relationship who
17:45Turn the Page to page four
17:49very top
17:51who is that is my understanding is it's
17:54the
17:55foundation affiliated with his family
17:58and his uh he's a
18:02businessman when did you first contact
18:06with him
18:10um
18:11I think in 2014
18:15but I'm not completely sure
18:18how did you meet him
18:20I met him I'm
18:27I
18:28think I met him at
18:32um someone's house and we started having
18:34a conversation about Healthcare
18:37do you recalled his house he met him at
18:40I think it was a Silicon Valley venture
18:42capitalist
18:45what did you talk about
18:48we talked about the need to make lab
18:51testing lower cost and more accessible
18:53and
18:54um
18:55the need to invest in technologies that
19:00can LeapFrog over traditional lab
19:03infrastructure kind of like cell phones
19:05did over landlines and how important
19:08that's going to be for for healthcare
19:11is he in the healthcare business
19:14he is yes
19:16what is his business
19:18and also a number of other businesses um
19:22he owns retail grocery store that
19:25include pharmacies and
19:28many other businesses did you ever have
19:30any discussions with about partnering
19:33with his businesses we did
19:36and how did those how did those
19:38discussions go
19:40they were very positive he has a
19:43foundation that we've interacted with
19:45most closely that's talked to us about a
19:48number of different projects including
19:49our our current focus on on zika virus
19:52testing in
19:54low-income and distributed areas did you
19:56end up entering into a contract with
19:58them or his company
20:01I don't know if we have a contract with
20:03their Foundation I'm not sure
20:05not his his laboratory business
20:16let's turn the page to
20:20Page Six
20:22[Applause]
20:25towards the top of the page there's an
20:27investor called Stan Hill financial
20:29company Santa box co-investment fund
20:33who are they
20:35it's like these are two different ones
20:37now they're two different ones yeah
20:43then I am asking
20:46if they're a C1 investor yes so they are
20:50um
20:51as I understand it the fund that manages
20:54the Investments for the Blue Cross Blue
20:56Shield Association
20:58and how did you get in contact with them
21:02so this is
21:03I think in 2010 and I
21:08I'm not sure I think it was our board
21:11member Robert Shapiro was an advisor to
21:13the Blue Cross Blue Shield Association
21:16fund and part of sandbox and I think he
21:18made the introduction it
21:20may have come from somewhere else but
21:23that sounds right
21:25what was your understanding of why they
21:27were interested in investing in fairness
21:30because the lab companies have been
21:32charging them at extremely high rates
21:34and they've been negotiating for years
21:36to try to break up the
21:40um duopoly of pricing between Quest and
21:42LabCorp and they thought that we could
21:44build a Lab company that would offer
21:48really low cost testing
21:52and then further down the page soda
21:55spring partners
21:58who are they that is Alice Walton part
22:02of the Walton family part of the Walton
22:04family and how did you get to know the
22:05Walton family
22:07um
22:15I I can't remember the first
22:17introduction I think my first contact
22:18with them was with Greg Penner
22:21um who's the the chairman at Walmart I
22:24I don't know who introduced me to him
22:27he was certainly one of the families
22:29that as we brainstormed on who were the
22:32the types of people that would want to
22:33be part of taking something like this on
22:36um that we thought about
22:40when you're
22:41I think you just said he was one of the
22:43people so do you mean
22:45um the Walton family or do you mean
22:46Walmart
22:48well I what I was referring to was was
22:50it the Walton family is one of the the
22:52great you know sort of family controlled
22:54businesses that's been built in this
22:57country and we absolutely were also
23:00interested in the relationship with
23:01Walmart and that was that was early on
23:04part of our discussions with with Greg
23:06part of your discussions with Greg were
23:09to potentially partner with Walmart in
23:11the retail pharmacy space yes
23:15and specifically I think he wanted them
23:17to evaluate the promise of this did she
23:19ever enter into a contract with Walmart
23:22I don't think so does she have any other
23:24business relationship with them aside
23:26from having these discussions
23:29prior to meeting Greg we'd had a fair
23:33amount of interaction with them there
23:34was no formal contract about how you
23:37would roll out the concept was
23:40four dollar lab testing like they'd done
23:42four dollar Pharmacy prescriptions
23:46and did anything come of that did you
23:48end up
23:50either piloting or rolling out any
23:52Services even if you didn't have a
23:53contract no we were prohibited under the
23:56terms of our Walgreens and Safeway
23:58contracts initially from doing that for
24:00some period of time
24:03did Greg Penner introduce you to Alice
24:05Walton
24:06could someone else introduce you to that
24:09um
24:10I believe
24:12was the point person for Alice I I met
24:15Alice
24:16um
24:18at a dinner uh separately I think she
24:21was sitting near me
24:24I'm
24:27but but I know
24:29um works with her
24:31did you ever meet Rob Walton I did what
24:33do you recall about that
24:36um I recall talking to him about this
24:41concept of four dollar lab testing and
24:44the vision for what we were trying to do
24:46in the lab space in terms of access to
24:50health information I recall telling him
24:53about
24:55the technology we were working to
24:57implement and I recall initially
25:00focusing on you know what this could be
25:03if we did have the opportunity at some
25:05point to partner with Walmart and then
25:07later he became an investor he's Greg's
25:10father-in-law
25:12how did he become an investor
25:16um
25:17so you mean what what vehicles you know
25:20is he on the list or was there an entity
25:23invested through yes
25:25um The madrone Entity is is him and Greg
25:29and
25:30um the associated fund partners
25:37so um and looking through exhibit 196 we
25:41actually noticed that Rupert Murdoch
25:43doesn't appear on here
25:46um do you know why
25:48is he an investor
25:51or was he an investor In fairness
25:54he was an investor internist yes
25:58was he taken out is he still an investor
26:00In fairness today he is not is that the
26:04reason why he doesn't appear on this
26:05list
26:06I don't know why he doesn't appearance
26:08list do you know who repairs um you know
26:10the capitalization table for fairness
26:13or who maintains it
26:15um it's it's changed over time used to I
26:18think now it's done by by one of our
26:20legal firms
26:22but in the uh 2013 2014 time frame it
26:25would have you would have maintained it
26:26I believe so yes
26:30um so were you involved in discussions
26:32with the investors in the C1 and C2
26:35round to invest in thoroughness I was
26:38what was your involvement
26:41um I would talk about the kind of
26:43company we were trying to build talk
26:45about the vision talk about
26:48um why we were interested in structuring
26:50this as a private company and it was a
26:52long-term nature of it and
26:55um what we thought we have the potential
26:58to do here
27:00were you involved in providing
27:02materials to them for their due
27:04diligence purposes
27:08um I I was involved
27:10just so I answer the question correctly
27:13what what do you mean by that so um were
27:16you aware that these investors would
27:18sometimes request materials or documents
27:20from fairness yes and were you involved
27:23in compiling that information or
27:25collecting that information for them
27:27I don't know if I specifically did that
27:30but I knew that the materials were going
27:32to investors
27:34okay would you review those materials or
27:36documents before they were sent to
27:37investors
27:40you know I I would need to
27:43think about a specific instance to be
27:46able to speak about it specifically I
27:47certainly was generally aware of the the
27:51types of content that we were sending to
27:53investors what were the types of content
27:55that you were sending to investors
27:58I mean we we had a very
28:01informal process in place which was
28:06you know Decks that we used for a number
28:08of different purposes in terms of slides
28:10we would share they had data on the
28:12performance of our chemistries
28:14um
28:15we would share other information that we
28:19thought just gave people a perspective
28:20of
28:21what we were trying to do okay and it
28:24was it was
28:25it was a startup so we didn't have the
28:28systems in place to do this in a in a
28:30formal way
28:32did you would you sometimes see the
28:34person
28:38either through email or I could have
28:40been I don't I can't sit here and say I
28:43remember a specific instance in which I
28:45did but it wouldn't surprise me if I did
28:48what was Sonny balwani's role in those
28:51discussions with investors
28:54um I would generally do the the first
28:57meeting or two and talk about the vision
28:59and then he would follow up on any
29:01questions that they had from a diligence
29:03perspective and provide them with that
29:06information
29:07did he attend those initial meetings
29:09that you had with investors
29:11most of the time yes
29:13did he participate in those meetings was
29:16he would he be presenting material as
29:18well or was it mostly just you talking
29:21the meetings that I was in which were
29:23sort of the initial meetings and we
29:25didn't frequently present anything it
29:27was just discussion and yes you would be
29:29involved in the discussion as well
29:30was there anyone else from the company
29:32who was involved in those investor
29:34discussions besides you and Mr balani
29:37I'm sure there were others in the room
29:39for certain meetings I would I would
29:41need to think about a specific meeting
29:43to be able to talk about who else was in
29:45there would there be others who would
29:48um be making a presentation to investors
29:51during those meetings so I'm more
29:53interested in the people who would have
29:54been speaking at those meetings can you
29:58think of anyone who would have besides
30:00you and Mr balwani who would have been
30:01speaking at those meetings I mean if you
30:03could if you give me a specific meeting
30:04I could I could try to think back to it
30:06there was there's a lot of meetings over
30:07a period of many years now I'm
30:10we had people to
30:13we generally tried to respond to any
30:17questions that an investor had so if
30:19they wanted to focus on a specific area
30:21we might have had people who were
30:23specific to that area engaged but I I
30:25can't sit here and recall it
30:28specific example
30:30were there particular areas that you
30:33would present on in particular areas
30:35that Mr balwani would present on and
30:37what were those areas
30:39yeah I I presented the vision right what
30:41we're trying to build what we've
30:42invented and what we think it could do
30:44yeah and sunny would present on our
30:48projections and what we thought it could
30:50mean financially and
30:51on the operations of the business
30:54whether it be on manufacturing or the
30:57clinical lab
30:58when you were sitting in meetings with
31:00Mr balwani and you're having these
31:03discussions with investors were there
31:05times when Mr balwani would present
31:08something to investors that you thought
31:09was not right or inaccurate
31:14I don't I don't remember
31:17an instance in which that ever happened
31:18I
31:19I generally understood
31:23um
31:25at least what I saw to be the
31:27assumptions behind how he he
31:28characterized our potential
31:31So when you say you saw the assumptions
31:33behind how you would characterize your
31:35potential what did what do you mean by
31:36that
31:38I mean our projections were generally
31:40based on an assumption that we would
31:41have a certain retail footprint and I
31:44knew that we had the ability to get that
31:46footprint if we executed and so I
31:50assumed that those numbers made sense in
31:52that context
31:54so you would you would have reviewed the
31:56assumptions before Mr balwani was
31:59presenting these financials to investors
32:01not not necessarily yeah I'm I'm sure
32:04sometimes I I did but I'm
32:07not as a necessary normal operating
32:10Cadence
32:12but you can't think of an instance in
32:13which Mr balwani would have presented
32:15for instance the financials to investors
32:17that you thought was incorrect or
32:20inaccurate
32:22you're talking about the projections I'm
32:24talking about the financial projections
32:25now yes
32:27not not at that time no
32:30can you think of any instance in which
32:32Mr balwani made any other inaccurate or
32:35incorrect statements to investors uh
32:37setting aside the financial projections
32:42I mean not not when I was in the room
32:45that I can remember
32:47had he made an inaccurate or incorrect
32:49statement to investors would you have
32:51corrected him absolutely
32:54and were there times when Mr balwani
32:57corrected you while you were making your
32:59presentation to investors
33:02I mean he was not shy about jumping in
33:04on things that I would say so
33:06um he was definitely very vocal in in
33:09those meetings
33:14was there ever a topic
33:17um in those discussions with investors
33:18in which he felt like you were
33:21not sufficiently familiar with it
33:24um and and so couldn't speak to it
33:27me personally yes for sure what were
33:30those topics
33:32I mean this is why I deferred to other
33:34people on
33:36the operations of our clinical lab on
33:38our operational infrastructure
33:40internally in terms of production on
33:43financials and financial modeling I
33:45didn't have any training or background
33:47in that
33:48were there any other areas
33:51I'm sure there were I mean I'm
33:54I'm
33:57I try to be good in a couple of things
34:00which generally have to do with
34:01inventing and sort of ideas and vision I
34:05I I tried to surround myself with people
34:08who I thought were better than I was in
34:11in other areas
34:13what about
34:14Product Development Area were you
34:16sufficiently familiar with that area to
34:18be able to speak to investors about it
34:21and so far as the architecture of our
34:24technology like the idea of for example
34:26putting a robot in a distributed testing
34:28system yes and insofar as
34:32how to interpret the data or the
34:34standards and I relied on on our teams
34:38okay and so um I think he said two
34:41things in terms of the data and what
34:43standards should be applied you relied
34:45on your team so who was in charge of
34:47those two things
34:49so it depended on what data and what
34:52standards from the perspective of r d it
34:56was our development or product leads who
34:59were the different team leads that were
35:01in place at different points in time
35:02from the perspective of our clinical lab
35:04it was so in the 2013 time frame that
35:08would have been are you talking about
35:09was there another person that you
35:11mentioned earlier yeah I'm trying to go
35:13back and remember who the team leads
35:15were in 2013 because it evolved and we
35:18were generally trying to promote these
35:20scientists from within
35:22um
35:23but yes those are the types of people
35:25who
35:27um would
35:28ensure that the assays were developed to
35:31the standards that we thought we were
35:34developing them to
35:37um and then you said the lab director
35:39for the clinical lab so was that done in
35:42the 2013 time frame at that time yes
35:45um would you
35:48be kept apprised of
35:51what assays have been developed
35:54over the course of time was that
35:56something that you would be apprised of
35:58it was yes I mean we had sort of
36:01tracking spreadsheets at different
36:02periods of time to say okay how many
36:04assays have sort of hit these different
36:07steps that we thought were required to
36:09develop and validate the assays
36:12and then would you also be kept apprised
36:14of how many of those have been
36:15transferred onto the hardware onto the
36:17devices the analyzers that would be
36:19analyzing the blood samples
36:23I don't know that we ever attracted like
36:25that
36:26um
36:27we always thought about it as your your
36:30developing chemistries that could work
36:32on small samples and with these
36:34standardized tube types you didn't need
36:36all the different color tubes
36:39um and then you could put them onto
36:41different Hardware platforms and that
36:43ultimately became a business decision
36:45around the business model that we
36:48decided to go with
36:50so you just said that you didn't really
36:52think about that too much but why wasn't
36:54that important to the process you know
36:56actually putting the assays onto the
36:58machine because the machine is the
37:00device that would actually be conducting
37:02the testing
37:04um well you first need to know what your
37:06deployment is right so if you're trying
37:09to deploy for a pharmaceutical clinical
37:12trial and you're trying to put machines
37:13in a distributed setting then getting
37:16those assays validated on those machines
37:18makes sense
37:20um and during that period of time we
37:23were mostly trying to develop a wide
37:25assay menu to show that this belief we
37:29had that any of these chemistries could
37:31be made to work with small samples was
37:34possible and so that was our our primary
37:36focus and then when it became time to go
37:39into the clinical lab we focused on
37:41putting them onto the specific Hardware
37:43platforms that we decided to put them on
37:47so were you kept apprised as to so you
37:50said at some point
37:51um it was important to actually validate
37:53the tests yes but were you apprised of
37:55that process and how many tests have
37:57been validated on the platforms
38:02I I think generally and yes
38:06um
38:08just in terms of like the total number
38:10of tests that we were working to bring
38:12up in the lab initially is what I'm I'm
38:14thinking about
38:16so generally you were apprised of the
38:19number of tests that were validated on
38:21each of the platforms
38:23I I don't think I knew specifically how
38:26many were on each platform I knew
38:29for example when we launched that
38:30generally we were working to bring up a
38:32menu of 70 tests on fingerstick and we
38:34thought that would cover the ordering
38:36patterns we were going to see I knew
38:38that there was you know certain General
38:40numbers on different platforms but it
38:42wasn't like okay today you know
38:44something came up on this platform and I
38:46was alerted to that
38:54okay and uh were there any areas going
38:57back to my question about areas that you
38:58weren't familiar with to speak with
39:00investors about were there any areas
39:02that
39:03um
39:04you had an understanding Mr balwani
39:06wouldn't have felt familiar with or
39:08comfortable talking to investors about
39:14so he would have been familiar with all
39:16aspects of the company including for
39:17instance the vision and the mission of
39:19the company as well
39:21yeah I mean he's he's very confident and
39:24he was confident that he was
39:28able to
39:30fill the role that he was in and
39:33supplement the knowledge that he needed
39:35with other people
39:44foreign
39:55so
39:56I want to go back to
39:59um
40:03the 2010 time period for the time being
40:08um and I I want to start by asking sort
40:11of a series of questions but um you know
40:14if I use the word analyzers would you
40:16understand that that's what I mean is
40:17the device that's used to process blood
40:20tests
40:22yeah and would then ask you which which
40:24analyzer okay so I think we'll go
40:26through and it would be helpful if you
40:28could actually explain what the
40:31different devices are and and the
40:33versions and if I'm not being
40:35sufficiently clear please let me know if
40:37I'm not being clear sure
40:39um so in the 2010 time period had
40:45I think you mentioned previously there
40:47were two devices that had been uh
40:50developed and that were in use there was
40:52the 3.5
40:54mini lab and the 4 Series mini lab do
40:58you remember that testimony earlier yes
41:00okay and just to be clear that's
41:03referring to
41:04what I'm sort of generally referring to
41:06as this mini lab family or the devices
41:09that were intended to be distributed
41:11okay
41:13um
41:16so
41:19and then you mentioned there was also a
41:213.0 but that was similar to the 3.5
41:23version yes but
41:25um but we're not sure as to what the
41:28difference the differences are between
41:30those two versions
41:32do you have any understanding I don't
41:34know specifically okay
41:37um
41:37so starting with 3.5 machine was that
41:41the machine that you believed would be
41:43used for clinical testing or was ready
41:46for clinical testing at that time
41:482010 we're talking about yeah I'm just
41:51talking about 2010.
41:53um
41:54used for clinical what do you mean by
41:56use for clinical testing
41:58um well you know
42:00in 2010 were you thinking about getting
42:03into a relationship with Walgreens and
42:06Safeway and thinking about rolling this
42:07out to Retail Pharmacy Partners we were
42:10okay so that's a clinical testing that
42:12I'm going to give so what
42:16um what kind of Clinic what kind of well
42:18let me step back so the 3.5 version was
42:21that the version that you were thinking
42:23would be used for clinical testing
42:25purposes at the retail pharmacies
42:28at that time we believed it could be
42:30okay you believed it could be what do
42:32you mean by that
42:34what what I understood as of that period
42:37of time is that the standards that were
42:39required to satisfy the assay criteria
42:43for a Pharma trial
42:45were the FDA standards I thought and the
42:48FDA standards that meant you your data
42:51was good enough for clinical decision
42:53making so we believed that the exact
42:56process that we'd gone through for
42:58validating the essays there would allow
43:00it to be used in a clinical setting we
43:02knew you would need to get the Clio
43:04waiver and Regulatory approval from the
43:06FDA
43:07okay I'm sorry so you said you knew that
43:10you needed to get approval from the FDA
43:12yes before using it for clinical testing
43:14yes
43:16distributed setting in a distributed
43:18setting so what do you mean by
43:19distributed setting outside of a
43:21certified clinical lab
43:23and we're talking about 2010 is that
43:26right
43:27I think so okay I think so
43:30um and then you mentioned that your
43:32understanding as to how the machines
43:33needed to be validated was how they were
43:36validated for the clinical trials you
43:40were doing for pharmaceutical companies
43:41is that right how the tests were yes
43:44okay so what was that validation process
43:46that she undertook
43:48for the pharmaceutical companies
43:51um there's my understanding was that
43:53there's an FDA guidance document on a
43:55series of steps there's like 15 Steps on
43:59sensitivity and specificity and other
44:02measurements that ensure that the data
44:06is good enough to be used for clinical
44:09decision making and at that time we
44:11thought that was what was in our
44:14development reports and what was going
44:15to be required for FDA submission
44:20okay
44:21um and who was in charge of the process
44:22of validating the devices to make them
44:25ready for clinical testing
44:28who was ever seeing that process
44:31um in 2010 and 2010.
44:35um
44:37I I don't know we we always think about
44:39it in terms of tests not devices and I I
44:43again defer to
44:46um whoever was leading the assay
44:48initiatives at that time
44:51who was leading the assay initiatives
44:54I can't remember
44:55I don't know
44:57Who would know who is in charge of that
45:00process
45:01I'm sure we can look back and and tell
45:04you I I don't I don't know if Sonny
45:05would remember I'm I I'm
45:11we could talk to some of our other
45:13scientists internally
45:14okay and then on that version 3.5 mini
45:18lab I think you mentioned previously
45:21earlier in testimony that that version
45:24could conduct he said tons of tests
45:28I think so okay what um and I think we
45:32we talked about how that was something
45:33less than a hundred yes what types of
45:36tests could it conduct
45:38so that version of the device was
45:40focused on a method called immuno
45:42chemistry and it was running those types
45:46of tests for I believe small molecules
45:49proteins
45:51um
45:53maybe metabolites uh
45:56and antibodies I'm not completely sure
45:58fine
46:01um
46:03so what about and then I guess we talked
46:06a little bit about the four series as
46:07well the four series mini Labs so
46:10um I think you mentioned that that was
46:11in development and there were different
46:13sectors that were being developed in the
46:15machine do you remember that discussion
46:17I do so what was being done with the
46:19four series mini lab
46:22so so the core of our invention was the
46:26concept of taking a robot that could
46:29replicate what a human does and putting
46:32it into a small box that could be used
46:36outside of a Lab
46:37the three series
46:39detected the signals from the
46:42chemistries
46:44through one form of detection called
46:47luminescence which is measuring light
46:50measuring photons and what we wanted to
46:52do was add
46:54other
46:56detectors or capability of other light
47:00forms like fluorescence so we were
47:03mounting other detectors around it and
47:05that's what the four series is
47:07so what could the four series test in
47:10terms of like what were the numbers of
47:12tests that the four series could perform
47:14at that time
47:16I I don't know I I think we
47:21I I'd be I'd be guessing
47:24could it perform any number of tests
47:27we had essentially I mean my memory is
47:30we'd essentially shown
47:32proof of concept of the ability to do
47:35what I just said I I don't know
47:40um how many chemistries we'd actually
47:42put on it at that time
47:49I guess so just to understand the the
47:52adding the additional
47:54let's say the fluorescence capability
47:56would that enable the uh four series to
48:00conduct tests in theory beyond the
48:03immuno chemistry
48:05set is that a fair understanding yes and
48:09most importantly we were trying to
48:11invent a a platform
48:14that could do
48:17you know the objective was anything that
48:19a lab could do so we needed the full
48:22range of
48:24options that are in a lab so that if a
48:26test came along that we hadn't tried to
48:30develop yet we had a box that could do
48:33it right architecturally and I mean just
48:36broadly what what kind of tests are
48:38immuno chemistry tests
48:41um so those are the ones I was talking
48:42about proteins antibodies small
48:44molecules drug levels
48:46um could be metabolites and essentially
48:49anything that you bind to with an
48:51antibody and then what we're sort of
48:53other than the category of
48:55immunochemistry test what were the other
48:56kind of categories of tests that were
48:58sort of in that University that you want
48:59to have the architecture for for Series
49:01yeah and so just to be clear
49:02immunochemistry is a method right it's
49:04not a category of tests there's many
49:06different types of tests that can be
49:08done with the method of immunochemistry
49:12um we wanted to
49:16um we wanted to be able to do
49:19essentially a broad range of methods
49:22right so we wanted to have a
49:25what's called a microscope microscopy
49:27method for for Imaging of cells and we
49:30wanted to
49:33um
49:35have
49:37um fluorescence
49:39as a readout for measuring
49:43RNA and DNA for for pathogen detection
49:46and
49:47and I can list the other detectors that
49:49were in there and what they're for it's
49:51useful sure
49:52it'll be great okay so
49:55um
49:57Imaging fluorescence microscopy
50:01um
50:02we we still had the luminescence
50:04capability
50:06and absorbance
50:08that's essentially the full range of
50:10readouts what we're trying to do is take
50:11the lab and put it in a box right
50:18did she ever use that phrase when when
50:20talking to other people plab in a box
50:25I'm I wouldn't be surprised if I did I
50:27can't sit here even saying I remember a
50:29specific conversation yeah we most often
50:32talked about the concept of mini lab
50:34which was miniaturized Laboratory
50:39um so I want to skip forward then to a
50:41few years later now and we're talking
50:43again about 2013. so tell us what
50:47devices theranos had developed to
50:50process a blood tests at that time
50:54so when the clinical lab went live
50:58um
50:58which I believe was in
51:04I think we did our our first sort of
51:06official patient testing around the end
51:07of October 2013. data's probably not
51:11exact yeah and we
51:14had both our 3.5 mini lab devices as
51:20well as
51:21what we call that that time high
51:24throughput
51:25platforms which are open systems that
51:28you can put your proprietary protocols
51:32on to run small sample testing and so
51:37those included a number of different
51:39devices one of which was the Advia 1800
51:42and there was a cytometry one that was
51:46made by beckon becton Dickinson and I
51:49believe there was a couple others
51:51okay so just going back so you said
51:53there's the tsp or the mini lab what are
51:57we calling it at this time
51:59at that time we were calling it The tspu
52:01okay so there's a tspa which version was
52:04it
52:05I believe that was the 3.5 version it's
52:08still 3.5 000 okay and how many tests
52:11could be run on the 3.5
52:14do you mean how many were run in the
52:15clinical lab or could be run uh I mean
52:18how many were validated to be run for
52:21clinical testing
52:23um I believe that we brought up about 15
52:27in the clinical Lab at that time about
52:2915 yes okay and what what time frame in
52:322013 are you referring to when you say
52:35about 15.
52:37um so are you thinking about before the
52:39launch of fairness services in Walgreens
52:43um I I was thinking of sort of the
52:45initial launch of the services in
52:47Walgreens so
52:48um when the lab formally started seeing
52:52patients through to the next few months
52:55let's say three to four months after I'm
52:57not I don't know exactly when the tests
52:58were validated in that range so you
53:01think about 15 tests were validated on
53:04the tsp 3.5 and then you mentioned there
53:08were other open platforms including the
53:10Advia 1800 some machine that was
53:13manufactured by what was it Beckman
53:16yes what's the name of the company not
53:20the Advia but there was another one that
53:21was manufactured by Beckman Coulter
53:23culture okay
53:24um
53:25so what did what did theranos do to
53:28those machines you know it could have
53:29been victim Dickinson I'm sorry I'm not
53:31sure one of the two okay yeah
53:34um uh so what what had theranos done to
53:37those open platform machines in order to
53:40um
53:41uh make it capable for these machines to
53:44be processing tests on smaller samples
53:48so different
53:50modifications for different platforms
53:53I'm speaking about the Advia
53:56specifically we had
53:59taken our protocol which is essentially
54:02our formula for how to make the
54:05chemistry work with a small volume and
54:08as I understand it
54:10overtaken essentially the the software
54:13in the instrument to implement our
54:16protocol and and then we modified the
54:21physical Hardware there's little cups
54:24that are used to contain the sample and
54:27one of the reasons that people take so
54:28much blood in blood testing is that
54:31those Cups have a lot of loss so even
54:33though you only take out a tiny amount
54:36you have to leave behind a lot of loss
54:39in the cup and so we we change the
54:41geometry so that you didn't have that
54:44loss and
54:46then on other open platforms like for
54:49the cells it was our
54:52chemistries that were run on them too so
54:55we actually made like the antibody in
54:58the chemistry that binded to the cell
55:00that lit up to go into the assay
55:03so the Advia 1800 there's you mentioned
55:07a couple other machines that were made
55:09by another company these were these were
55:11all machines that weren't manufactured
55:14by fairness is that right
55:16correct we purchased the machines and
55:19then we modified the hardware we modify
55:21the hardware so
55:23um so we might be talking about this a
55:26lot during today so if I said if I refer
55:29to these machines as you know
55:31third-party commercially available
55:32machines which you understand that I'm
55:35talking about the Advia 1800 anything
55:38that the fairness did not had not
55:40manufactured would you understand that
55:42so I I think it's important to
55:44distinguish that there were also actual
55:46third-party commercial machines that
55:48were not modified that were in the
55:50laboratory as well okay so we had we had
55:53both platforms that we were doing
55:55Hardware modifications as well as
55:57unmodified commercial machines okay so
56:00it sounds like there were three
56:01categories of machines then right
56:04there's the tspu 3.5 version that their
56:08nodes have manufactured correct right
56:09and then there's the
56:12um some third-party commercially
56:13available machines that theranos had
56:15modified correct and then there were
56:18also just other third-party commercially
56:21available machines that theranos had
56:22purchased in order to conduct testing
56:25would that be via Venus draw
56:28um yes
56:29so these machines would be conducting
56:31testing and sort of the traditional
56:33venipuncture way yes and I believe there
56:36was also a couple of
56:39um
56:40point of care devices that were in the
56:42lab like I I don't think it was a
56:44glucose meter but kind of like a glucose
56:46meter but they were commercial
56:47unmodified you just wouldn't be putting
56:49venous blood on them
56:51so that makes sense okay
56:53um I think I understand that yeah can I
56:55answer just a clarification on the um
56:57the
56:58um
56:59the hardware modified commercial
57:02available devices sort of that second
57:03category that she just referenced yes
57:05and you mentioned that Hardware
57:07modification was I guess that the
57:09modifications were sort of the software
57:11programming the the machine and then the
57:13the geometry of the cup
57:16is that fair yes and and on other
57:20instruments it was it was also our what
57:23I sometimes call Chemistry which is
57:25essentially we did the work to make the
57:28antibody or the binder and then we made
57:31all the other reagents like for the
57:33cytometry assays and then put them on
57:36these platforms that could then run our
57:39our tests okay it
57:42um you know earlier we sort of talked
57:43about the the idea of you know a
57:44consumable being uh you know what was
57:47put in the device yes is the is the is
57:51the modified geometry to
57:53black but we're on my part is that sort
57:56of also a consumable for for that
57:58platform it is I was speaking
58:01specifically to the conversation about
58:04the tspu and what a consumable was to it
58:07but there's consumables there and
58:09there's other consumables like the
58:11nanotainers okay and is it is it would
58:13you consider at the time a reagent uh to
58:16be a consumable as well
58:18okay
58:20I don't think so I mean I wouldn't now
58:24so we've been going about an hour can we
58:25take another break short break sure
58:28we're off the record of it 11 30.
58:39we are back on the record at 11 46.
58:43response did you have any substantive
58:45conversations with the SEC staff during
58:47the great I did not
58:50so we were talking about uh modifying
58:52some of these third-party um
58:54commercially available machines in order
58:56to test smaller samples before we left
58:58on The Break
59:00um when was when were these machines
59:02modified
59:04foreign
59:10the way I think about it is the
59:12implementation of our protocols onto
59:15them happened in 2013 before the
59:19clinical lab went live I think
59:22and why did theranos have to develop
59:24these modified protocols
59:27uh during that time period
59:30um well and just to be clear the the
59:33protocols themselves date back to our
59:36original inventions in like 2005. yeah
59:40the reason that we had to
59:42Implement them on those open platforms
59:46was because we needed to process large
59:50numbers of samples in a centralized lab
59:53environment as opposed to the the tspus
59:56are designed to be near a patient and
59:59process one sample at a time and I think
1:00:01it takes like 30 minutes to an hour per
1:00:04sample and we needed to be able to run a
1:00:07lot of samples at the same time in a
1:00:10centralized setting so that was why we
1:00:12were trying to figure out how to do this
1:00:14in a high throughput way
1:00:16so the tspu could only process one
1:00:19sample at a time that's right okay and
1:00:21you mentioned it how long would it take
1:00:23to process that sample it depends on the
1:00:26chemistry it could be anywhere from
1:00:2818 minutes to an hour
1:00:32and I think you mentioned uh it could be
1:00:35different times too I mean it varied per
1:00:37test okay you mentioned before we took
1:00:40the break at the time in 2013 when you
1:00:43were getting ready to launch
1:00:44thereiness's Services
1:00:47through Walgreens that the tspu was
1:00:51validated to run about 15 tests do you
1:00:54remember that earlier testimony
1:00:57um I I do and again forgive me I I think
1:01:00there were
1:01:0115 tests in the clinical lab that were
1:01:04validated on the tsp if that makes sense
1:01:07um okay what was what was the
1:01:09distinction between what I was saying
1:01:10yeah yeah sorry
1:01:12um the way that I think about it is that
1:01:15um the the tsp itself
1:01:18we had thought at that time was
1:01:20validated to run a lot of tests which
1:01:23you know at one point we got up to about
1:01:25three over 300 chemistries that we
1:01:28developed in many of them like 90 or so
1:01:31I think were actually on the tspu 15 we
1:01:35had validated his laboratory developed
1:01:38tests in the clinical lab as of that
1:01:40time I believe
1:01:42okay so just so that I'm clear and I
1:01:44understand what you're saying so you're
1:01:46saying there were about 300 or so that
1:01:50the tsp was or that theranosa developed
1:01:53assays for right
1:01:57um about
1:01:58something I think we had talked about in
1:02:002010 something like less than 100 were
1:02:05um
1:02:07maybe you should explain it again
1:02:09because I'm not really understanding
1:02:10what the difference is between uh what
1:02:12was what was validated in 2010 and what
1:02:15was validated in 2013. yeah so so by the
1:02:19end of 2013 I believe that from a
1:02:22an r d standpoint about 90 or so
1:02:28tests had been we thought validated at
1:02:32that time on the tspu a subset of those
1:02:37went live in the clinical lab on the
1:02:40tspu I believe that was about 15 or
1:02:44around 2013
1:02:46there were also other chemistries that
1:02:49we had developed that were running on
1:02:51other platforms beside the tspu does
1:02:54that make sense okay so 90 tests were
1:02:57validated to run on the tspu in 2013.
1:03:00I believe so I'm about 90. okay but only
1:03:0415 were being run in the clinical lab
1:03:07yes why weren't she running the other
1:03:10remaining tests
1:03:13so the 90. we put
1:03:16um well out of the 90. why weren't you
1:03:19running the other 75 tests on the tsp so
1:03:23the reasons changed over time around
1:03:242013 I think we were initially working
1:03:27to bring up in the clinical lab setting
1:03:30additional tests on the tspu and then at
1:03:33some point in time we stopped and
1:03:36focused on the modified platforms as
1:03:39well as just trying to get those tests
1:03:41through the FDA so that they could be
1:03:44used in the phase two setting uh so
1:03:48different the business model evolved and
1:03:51the strategy evolved
1:03:53okay so even though you had 90 tests
1:03:56validated on the tspu you decided only
1:03:58to run 15 on the tsp because
1:04:03you had to get approval for the tests
1:04:06and you you decided to focus more on the
1:04:10modified
1:04:12protocol with the third party
1:04:14commercially available machines
1:04:16yeah and so just
1:04:18um on that point there were I believe
1:04:21about 90 development and validation
1:04:23reports with tests on the tspu and
1:04:28the um
1:04:30the remainder
1:04:33we had done through other platforms the
1:04:38subset of those went live in the
1:04:40clinical lab on the tspu the remainder
1:04:43of the focus in the clinical lab as I
1:04:46understand it was on the the systems
1:04:48that could process a lot of samples at
1:04:50the same time
1:04:53I I think there was some work to get
1:04:55more than 15 up but I know that that
1:04:58works stopped and I don't know when
1:05:02you mentioned sort of the distinction
1:05:04between the the 15 tests that were
1:05:08ready to go as ldts versus the 90 that
1:05:11were
1:05:11your words validated on the platform in
1:05:15your mind what was the difference
1:05:16between uh having a test be an ldt
1:05:20versus it being validated a platform I
1:05:23guess yeah what's the difference between
1:05:25the two sure so so when I use the words
1:05:28validated for the platform I was
1:05:30referring to our understanding of the
1:05:33development guidelines that were
1:05:34required for these tests namely the FDA
1:05:38assay development reference the clinical
1:05:41lab had its own separate validation
1:05:44process for any tests that went live and
1:05:48so there were separate activities that
1:05:49were underway for each of those 15 prior
1:05:53to the lab director signing off on them
1:05:56and did you have an understanding at the
1:05:58time about substantively what that meant
1:06:00I mean I
1:06:02in terms of I mean what the folks in the
1:06:04lab were doing Dad no I I knew that they
1:06:07had a separate validation process I
1:06:09don't I didn't know what the difference
1:06:12is between the two were in a substantive
1:06:14way
1:06:18thank you
1:06:20so it sounds like there were two
1:06:23different kinds of validation processes
1:06:25that were
1:06:27um being performed on the tsp the first
1:06:30was according to what you said the FDA
1:06:33guidelines
1:06:35I I think you know in retrospect it's
1:06:38what we had interpreted to be
1:06:41fda's guidance document for assay
1:06:43development and so when I used the words
1:06:45developed and validated that's what I'm
1:06:47referring to okay but you mentioned
1:06:49before there were some characteristics
1:06:52of that validation process including you
1:06:54know certain measures like
1:06:56test specificity and
1:06:58precision and some of these other
1:07:01categories that was what your
1:07:03understanding was with respect to
1:07:06um how to validate the device under the
1:07:08FDA guidelines
1:07:10yes those are elements of that process
1:07:13and then there were certain criteria
1:07:16that were acceptable uh
1:07:19for each of those sets of experiments
1:07:22that we had used that guidance document
1:07:25as an indicator of making sure that we
1:07:27were as good as we had wanted to be
1:07:31and then you mentioned there was a
1:07:33separate validation procedure that the
1:07:35CLIA lab was doing
1:07:37is that right correct okay and and so as
1:07:41of 2013 only 15 tests had been validated
1:07:46under the clear procedure correct on the
1:07:49tspa yes
1:07:51I I think but you're but you have no
1:07:54understanding as to what that CLIA
1:07:56procedure for validation is
1:07:59my understanding is that it's similar
1:08:01but that there's some parts that are
1:08:03different and that it's specific to
1:08:09um
1:08:11essentially what the lab director
1:08:14determines are the acceptance criteria
1:08:16for a lab develop test I I don't know
1:08:19specifically what aspects were different
1:08:21from our our own development and
1:08:23validation of the assays
1:08:26okay and then going back to then the
1:08:29third party commercially available
1:08:31machines that uh theranos had modified
1:08:34uh how many tests could those machines
1:08:38perform
1:08:40and just so we answered the question
1:08:42best
1:08:43um
1:08:44could they performed meaning how many
1:08:46ldts had we validated in the clinical
1:08:48lab
1:08:49I believe there was
1:08:53I'm about 60 or so I'm not sure what the
1:08:57exact number was
1:08:59okay so about 15 were validated pursuant
1:09:03to the clear procedure on the tspu at
1:09:05that time and 60 were on the modified
1:09:08commercially available machines
1:09:10okay and then just to include those
1:09:12numbers are not exact but it's about
1:09:14those numbers I don't know the exact
1:09:17numbers okay but in terms of the numbers
1:09:19you would think it would be something
1:09:21less than 100 on the modified machines I
1:09:24do okay and then in terms of the third
1:09:26category of machines which would have
1:09:28been just the regular third-party
1:09:31commercially available machines that
1:09:33were running Venus blood how many tests
1:09:36could those that those machines perform
1:09:39would it just be the remainder of the
1:09:41test that there is offering
1:09:43um well we ran the remainder either on
1:09:45those or by sending out to the reference
1:09:48labs and I don't know exactly how many
1:09:51were on the the commercial machines okay
1:09:53but they would either be performed on
1:09:55the third party commercially available
1:09:57machines or they would be sent out to
1:09:58reference correct yes
1:10:01just a couple clarifications there so
1:10:02the the 15 or so that were on the tspu
1:10:06and the the 60 or so that were on the
1:10:08modified commercially available are
1:10:10those mutually exclusive sets or is
1:10:12there any overlap between
1:10:14the ldts on those questions
1:10:17um
1:10:18I think the way we're counting them it's
1:10:20mutually exclusive we
1:10:23so
1:10:25the open platforms were capable of
1:10:28running a couple of the tests that we
1:10:30put on the tsp I don't know whether we
1:10:32ever ran them on both I think for the
1:10:34purpose of this discussion it's okay to
1:10:36consider them as different tests
1:10:40and then he's sort of just thinking
1:10:42thinking back through your answer about
1:10:44the you understood that there were 15
1:10:46ldts that were that were on the tspu
1:10:49they were they were about 90 again
1:10:52ballpark that were validated in the
1:10:55company's view at the time on the tsp
1:11:00um what was there was there ever a
1:11:02situation where someone at the company
1:11:04told you that additional ldts weren't
1:11:07being brought onto the tspu because of
1:11:11the challenges and and uh in getting
1:11:14those you know one of those 90 validated
1:11:17to the theranos understanding tests up
1:11:21to the ldt standard
1:11:25I so I can't remember any specific
1:11:28conversations I I knew that there were
1:11:32ongoing sort of initiatives and and
1:11:35challenges in general in bringing opts
1:11:37up but I thought that the fact that our
1:11:41lab director had signed off on the
1:11:42reports for the first 15 meant that
1:11:45there were no fundamental issues in the
1:11:48ability to bring up more tests and I
1:11:52certainly believed that you know as we
1:11:55worked to then take those
1:11:59um same test that we've done the
1:12:00development on into the pre-submission
1:12:03process for FDA
1:12:31foreign
1:13:08exhibit 197.
1:13:13reports to be a June 11th 2013 email
1:13:18from sunnybalvani to Elizabeth Holmes
1:13:21the subject line is forward demo next
1:13:23Tuesday 6 11 at noon with starting dates
1:13:27number
1:13:30ts-0902539 have you seen exhibit 197
1:13:34before
1:13:37you know I I don't remember it um I'm
1:13:40not sure
1:13:44is this your email address at fairness
1:13:46eholms thereiness.com it is do you have
1:13:49any reason to believe that you might not
1:13:50have received this
1:13:54email about
1:13:57do you mind if I take just a second
1:14:08foreign
1:14:43it looks like it's an exchange on
1:14:49I'm trying to do a demonstration of
1:14:52one of the mini lab devices
1:14:55and do you recall who that demonstration
1:14:57was for
1:15:00so if you look at the initial email on
1:15:02the bottom of the second page which is
1:15:06540.
1:15:07is writing to give out email I do and he
1:15:12States or he writes rather Sunny
1:15:14mentioned that he'd like to run a demo
1:15:16during an exec meeting next Tuesday runs
1:15:19from 12 to 2 p.m in our office here
1:15:21do you know what he's referring to when
1:15:24he says exact meeting
1:15:27is exact short for executive
1:15:29I'm assuming so yes and did you have
1:15:32executive meetings at theraness
1:15:36honestly I'm not quite sure what isn't
1:15:38what an executive meeting is
1:15:40um
1:15:41I currently hold executive team meetings
1:15:44I don't think that's what this is
1:15:45referring to do you think it might be
1:15:48referring to a meeting with a business
1:15:51partner
1:15:52or someone from the outside I'd be
1:15:55guessing I have no idea
1:15:57so
1:16:02so if you then flip to the first page at
1:16:055 39
1:16:07you'll see that as they're setting up
1:16:11this demonstration is then writing on
1:16:13June 10th
1:16:15to a number of individuals at the
1:16:18company including and he's copying Sonny
1:16:20balwani at the bottom he says for
1:16:21tomorrow's demo is listed below we'd
1:16:23like to have a mini lab and either a 4S
1:16:25or mono Bay
1:16:27with the Normandy shell uploaded
1:16:29whichever works better so he's
1:16:31mentioning a number of different
1:16:33um devices
1:16:35there's the 4S and the mono Bay
1:16:38do you know what he's talking about here
1:16:43so I'm I'm not sure specifically I think
1:16:48just looking at the chain here in the
1:16:49reference to mobile Labs up above that
1:16:52he's distinguishing for us as the
1:16:56device that we'd been investing in for
1:17:00the dod deployments that we had wanted
1:17:02to do and the mono Bay as the version of
1:17:06it which we later began to think about
1:17:09as the
1:17:10um the mini lab that could be used at
1:17:13retail or physician offices
1:17:15what was the difference between the 4S
1:17:17and the mono Bay
1:17:18the 4S was designed to be much more
1:17:20Compact and to try to be developed to
1:17:25some of the standards that were set by a
1:17:27Special Operations Command for things
1:17:29that could be lifted and transported in
1:17:33a way that their command could handle
1:17:35and it also had a lot of investment in
1:17:37things like vibration mounts to make it
1:17:41more robust for use in more
1:17:46uh difficult settings
1:17:48and what and so how is the MonaVie
1:17:51different from that
1:17:52it was not intended to be used in
1:17:57sort of more extreme environments it was
1:17:59designed for sort of a routine
1:18:03clinical setting kind of like our
1:18:05wellness centers
1:18:09so in other words it was was it bigger
1:18:11than than the 4S
1:18:13I think it was bigger but it also it
1:18:15just didn't have the same vibration
1:18:17control and other things that would
1:18:19ultimately be required if you were going
1:18:21to do those types of
1:18:23um deployments the dod was interested in
1:18:25were there any differences in
1:18:27capabilities between the two devices
1:18:31there might have been
1:18:33I'm sure there was I don't remember
1:18:35specifically what
1:18:38um who would know the answer to that
1:18:40question
1:18:43um
1:18:46just looking at the email to
1:18:52I I don't know specifically
1:18:54um
1:18:55the product teams that we're working on
1:18:57it at the time who's listed here
1:19:01um
1:19:02I'm sure would have known what this was
1:19:04referring to at the time
1:19:07and when it mentions the Normandy shell
1:19:11being uploaded onto the machine did you
1:19:13understand what he meant by that
1:19:16I'm not completely sure what he means by
1:19:18that I
1:19:20it's a it's a piece of software and I
1:19:22don't
1:19:24know why he wants to put that software
1:19:26on it it must have been for some type of
1:19:27demonstration purposes what is the
1:19:30Normandy shell
1:19:32I don't know
1:19:33I'm not sure so you just said it's a
1:19:36piece of software so you know what the
1:19:38software did I don't I know that there
1:19:40was a reference I know it's software
1:19:42because it says Normandy shell and so
1:19:44that is probably some type of shell
1:19:45Software System I don't know
1:19:48what code it refers to it
1:19:50it might be
1:19:52a version of the software that allows
1:19:54you to report results from the device
1:19:56but I'm I'm purely
1:19:58guessing based on looking at the email
1:20:00now
1:20:01what is Normandy
1:20:04uh Normandy is a word that was used to
1:20:07refer to a number of different projects
1:20:09internally insofar as I was familiar
1:20:12with it it referred to the concept of
1:20:16having samples sent to a central lab
1:20:19through the nanotainer in phase one of
1:20:21our sort of business model and then
1:20:25later deploying the device I know Sunny
1:20:28used it in the software setting and I
1:20:30think even in the lab setting for a
1:20:32number of
1:20:33different
1:20:34uh purposes I'm not quite sure exactly
1:20:37all the use cases
1:20:40so if you look at the response then back
1:20:42front which is just about email
1:20:45he says I've just finished getting the
1:20:47device OS installed with Normandy app
1:20:50and properly running the null protocol
1:20:53on mobile labs for an eight
1:20:56so what did you understand him to be
1:20:57saying there
1:21:02it just sort of thing you're actually
1:21:03going to interpret the document now or
1:21:06are you asking whether it refreshes a
1:21:08recollection going back to that time
1:21:10period I'm asking her what her address I
1:21:13mean it sounds like she doesn't
1:21:14necessarily recall this this email but
1:21:17I'm asking what her understanding is of
1:21:19what's being written in this email now
1:21:22yeah I mean looking at it now
1:21:24um
1:21:27it says he's installed software on it
1:21:29yeah I I don't know what the null
1:21:31protocol was
1:21:33um
1:21:35and I think that the mobile Labs is a
1:21:39reference to the version of 4S at that
1:21:42time but I'm not sure so you don't know
1:21:44what and all protocol is referring to I
1:21:46don't have you ever heard that
1:21:49um
1:21:50that phrase before
1:21:52I don't recognize it I I may have heard
1:21:55it before I'm not
1:21:57I don't know what it is
1:22:00uh I would guess it's a test protocol
1:22:01but I'm not sure what do you mean by
1:22:03test protocol
1:22:05a lot of times when you want to make
1:22:06sure that the instrument is functioning
1:22:08properly you have a it's kind of like a
1:22:10QC protocol or a test protocol that
1:22:13allows you to ensure that whatever
1:22:16software you've installed or whatever
1:22:18configuration you've put the device in
1:22:20it it operates properly
1:22:23demonstrations where a blood sample was
1:22:26actually put into a device and the
1:22:29device
1:22:30you know tested the blood sample
1:22:33did you ever
1:22:35conduct an a demonstration like that yes
1:22:38when did you do that
1:22:41very frequently I'm
1:22:44many times over all the years
1:22:48and would you you know after putting the
1:22:51blood sample into the device with that
1:22:53device then generate a result
1:22:57if we put a blood sample into it yes
1:23:00if it was programmed to yes
1:23:02and were there times where you generated
1:23:04that result while you know whoever you
1:23:06were conducting that demonstration for
1:23:08was President yes
1:23:10who do you recall doing that for
1:23:13well I know we gave
1:23:15one of the early versions of the mini
1:23:17lab to Walgreens to keep at their
1:23:20headquarters so that they could do that
1:23:21themselves whenever they wanted
1:23:24um
1:23:26I I don't have specific
1:23:29Recollections of the meeting but I I
1:23:32believe we
1:23:34um brought devices to at least safe way
1:23:38to use in their conference room and run
1:23:40samples on when we were first forming
1:23:42that relationship
1:23:44I know
1:23:46we would do it
1:23:48um
1:23:51we've done it for board members a few
1:23:54times I mean whenever it was a relevant
1:23:57part of talking about that part of our
1:23:59our business model
1:24:01do you ever recall instances where you
1:24:04uh
1:24:08where you instructed others at theranos
1:24:10to
1:24:12run a program on the devices so that it
1:24:16would look like the machine was running
1:24:18even though it wasn't Ashley processing
1:24:20a test
1:24:22we have test protocols that essentially
1:24:24allow you to show the device
1:24:27functioning we
1:24:30will do that I mean a lot including for
1:24:32open systems of the open demonstrations
1:24:35of the device where you want people to
1:24:37see the architecture so it it runs
1:24:40essentially a
1:24:41for like a better word dummy protocol
1:24:44um so that you can see how the inside of
1:24:47the instrument moves or
1:24:48see the user interface or those types of
1:24:50things right so even if it's not
1:24:52processing a test you'd be able to see
1:24:54that the machine is actually running
1:24:56inside
1:24:57is that what a test protocol is for
1:24:59either running inside or seeing how the
1:25:02software GUI works on the outside
1:25:05and do you recall using those test
1:25:08protocols a lot during your
1:25:09demonstrations
1:25:11I mean again we would do demonstrations
1:25:14in response to questions or interest in
1:25:18certain parts of the system so
1:25:21um we do it a lot now because we show
1:25:25open sort of versions of the device to
1:25:28show people the architecture I know we
1:25:30did it at certain points in time in the
1:25:32past depending on what the context of
1:25:34the meeting was and what people were
1:25:36interested in seeing about the device
1:25:39was there a name for so in those
1:25:42instances in which you were actually
1:25:43testing a blood sample and it's going
1:25:45into machine was there a name for the
1:25:47program or the software that would be
1:25:48uploaded to the machine in order to do
1:25:50that
1:25:53film
1:25:54Who would know the answer to that
1:25:56question
1:25:57name for the the software to run the
1:26:00test protocol I'm actually talking about
1:26:02the instance it sounds like from what
1:26:05what I understand what you've just been
1:26:07saying is that the test protocol is
1:26:09something that can be put on the machine
1:26:10to
1:26:11to sort of mimic how the machine would
1:26:14work if it was testing a sample but is
1:26:18there a separate program that would be
1:26:19put on a machine in the case that you're
1:26:21conducting an uh a demonstration where
1:26:24you're actually putting in a blood
1:26:26sample
1:26:29um so if you're putting in a blood
1:26:31sample and you're reporting a test
1:26:33result then the test result will be
1:26:34specific to whatever chemistry is on
1:26:37that cartridge and that's what's
1:26:39reported out uh to the end user in the
1:26:43end and if you're
1:26:45I I'm not I'm not quite sure
1:26:49so maybe I don't understand how the
1:26:51machines work are they already as a
1:26:54default program to conduct tests on
1:26:56blood samples so in other words you
1:26:59would put the blood sample in the
1:27:01machine would conduct the test and the
1:27:03test result would be generated
1:27:07um so the way that our tspu systems work
1:27:10is that on each cartridge there's a
1:27:12barcode and that barcode can be specific
1:27:15to a chemistry that's loaded into the
1:27:17cartridge it could be specific to a test
1:27:20protocol
1:27:21um like a QC protocol or if it was going
1:27:24to go through the movements but not
1:27:25actually run an actual chemistry
1:27:28um and
1:27:30um
1:27:32anything else that you would want the
1:27:33instrument to do so it would be
1:27:34determined by what's ever on the
1:27:36cartridge if that makes sense whatever
1:27:38barcode is on the cartridge
1:27:41it's the barcode on the cartridge
1:27:43determines whether it's running one
1:27:45protocol versus another yes
1:27:48so when you're talking about the test
1:27:50protocol is it not a software that's
1:27:53being loaded onto the device
1:27:57I'm not aware of soft so there's an
1:28:00operating system on the device and the
1:28:03protocol I believe the barcode calls a
1:28:06server and then it determines what
1:28:09protocol to run based on what's on the
1:28:11barcode
1:28:14okay
1:28:15um and then if you look back at the at
1:28:18exhibit 197 then
1:28:22responds uh that same day
1:28:26and he says right now we're not planning
1:28:28to run anything on the mini lab
1:28:30unfortunately the general chemistry and
1:28:35Elisa assays are not performing
1:28:37adequately for a demo at the moment
1:28:40um so it
1:28:41is that right is ml referring to the
1:28:43mini lab
1:28:46I I think so given the references here
1:28:49to mobile labs and mini lab I'm not
1:28:52quite sure exactly what it's referring
1:28:53to but it could be okay and so he's
1:28:56referring he's actually responding back
1:28:58to Sonny balwani's question
1:29:00um about what you're planning to run on
1:29:02the ml do you see that I do okay
1:29:05okay
1:29:06um so
1:29:09it sounds like the general chemistry and
1:29:11the Elisa assays were not performing
1:29:15um or
1:29:16we're not I guess performing accurately
1:29:18or adequately on the mini Lab at that
1:29:21time does that refresh your recollection
1:29:23that the mini lab was not actually
1:29:26performing assays in this time frame it
1:29:30doesn't I mean there's there's a lot of
1:29:32reasons why they could have had issues
1:29:34with it we would as you know been doing
1:29:36immuno chemistries for many years on
1:29:39earlier versions of this platform
1:29:42okay but they're actually talking about
1:29:44the 4S and the mono Bay
1:29:46I I don't was it so is it your
1:29:49understanding that the 4S and the mono
1:29:51Bay could conduct testing
1:29:54yes
1:29:56how many tests could we we had this
1:29:58conversation earlier but how many tests
1:30:00could the 4S or the 4 Series mini lab
1:30:03perform
1:30:05my understanding was that we were going
1:30:07through the process to take all of the
1:30:09chemistries that we developed so the few
1:30:12hundred that we were talking about and
1:30:14put them onto the four
1:30:17series platform I don't know which of
1:30:19these this is referring to and begin the
1:30:22process of getting them into the FDA
1:30:24later in 2013.
1:30:27and so was it your understanding then
1:30:29that those tests were validated on the
1:30:32mini lab 4S
1:30:34the development and validation work I
1:30:36don't think was on the 4S device but it
1:30:39was my understanding that the validation
1:30:40on the 3 Series translated to the 4
1:30:43Series so you would have to run it again
1:30:45on the 4 Series Hardware but it was
1:30:48essentially the same architecture of a
1:30:50robot moving fluid around now with more
1:30:53detectors for different readouts
1:30:56so maybe I don't understand so art
1:31:01was the four was the mini lab four
1:31:03series performing any tests in 2013 was
1:31:07it capable of performing any tests
1:31:10I I thought it was yeah I mean I'm
1:31:13saying that just based on remembering
1:31:15engaging with the FDA we brought it to
1:31:18the FDA and we began the pre-submission
1:31:20process on it with the FDA that year and
1:31:23had you validated those tests on the
1:31:26mini lab for us
1:31:28again I think the the development and
1:31:30validation reports were on earlier
1:31:32iterations of the hardware but we
1:31:36um believed and I believed that you
1:31:38could basically take the same chemistry
1:31:40that's been created and run it on this
1:31:42iteration of the hardware just to be
1:31:45clear you said for us I'm speaking
1:31:47generally about minilab I don't know if
1:31:49it was for us or another version of the
1:31:524 Series platform okay
1:31:54um I think probably we should clarify
1:31:57that we're when we're talking about the
1:31:58mini Lab at least with respect to this
1:32:00email we're talking about the four
1:32:02Series yeah exactly okay
1:32:05um okay so you think that maybe during
1:32:07this time frame there were some issues
1:32:09with being able to adequately perform
1:32:12the general chemistry or Eliza assays on
1:32:15the mini lab 4S but that generally
1:32:18speaking
1:32:19your understanding was that these
1:32:20devices could conduct the test
1:32:23my understanding was that
1:32:25architecturally what we had created with
1:32:27the four series from a hardware
1:32:29perspective
1:32:30was sound and that all the chemistries
1:32:33that we'd made over the years
1:32:35could be put on it and taken through the
1:32:38FDA as we later did with HSV which got
1:32:42cleared and I I certainly knew that like
1:32:46with any new technology that was coming
1:32:48up there would be issues but
1:32:51I I was never aware that there were any
1:32:53showstoppers in being able to do that
1:32:56with the 4 Series platform
1:33:05okay you can put that one aside
1:33:41it's another time to you
1:33:44what's been marked during this exhibit
1:33:46198.
1:33:54let's tap four
1:33:58is that at 198 reports to be a January
1:34:0123rd 2014 email
1:34:04from to Elizabeth Holmes with a copy to
1:34:08a number of individuals starting base
1:34:10number is
1:34:13ts-0469692 have you seen exhibit 198
1:34:17before
1:34:19I I recognize it I don't know if I've
1:34:22seen it since sending it but I recognize
1:34:24it what is exhibit 198.
1:34:27it's an email exchange between me and
1:34:30the FDA
1:34:34so if you look at your initial email
1:34:37on January 22nd
1:34:402014. you're noting in your email
1:34:46I think you're getting ready to provide
1:34:47a copy of some updated plans for some
1:34:51pre-submissions to the FDA do you see
1:34:53that
1:34:55I'm sorry where are you your your email
1:34:57too okay do you see that you're
1:34:59providing him with a copy of an updated
1:35:01plan yes that's in the first sentence
1:35:03with your email yes you then say for
1:35:05your reference as of now Vit D is that
1:35:08short for vitamin D yes TSH
1:35:12PSA and ft4 Elisa assays are the only
1:35:16assays run through the fairness
1:35:18processing device
1:35:19in theranos's Cleo lab on patient
1:35:21samples collected they're in his
1:35:23wellness centers was that consistent
1:35:25with your understanding that
1:35:27there were only four tests that were
1:35:31being run on the theranos I guess the
1:35:34tsp from patient samples being obtained
1:35:37from the wellness wellness centers at
1:35:40Walgreens
1:35:41I'm I'm sure it was at that time we were
1:35:44making sure to keep the FDA completely
1:35:46apprised of everything we were doing
1:35:50do you know why only four of the assays
1:35:53were being run on the tsp during this
1:35:55time and since January of 2014.
1:35:58I I don't if all 15 of them had been
1:36:01brought up by then then this is probably
1:36:03just based on the orders we and we also
1:36:06hadn't really seen that many patients on
1:36:07finger stick by this period of time
1:36:13do the um was there a time when uh the
1:36:18number of tests that were being
1:36:20performed on the tsp changed was it just
1:36:23a matter of bringing the next
1:36:26uh 11 or so tests online and having them
1:36:29validated
1:36:32no
1:36:34um we generally looked at this based on
1:36:37ordering patterns and our belief was and
1:36:40and still is that about 70 assays will
1:36:44cover almost 100 percent of the orders
1:36:48that
1:36:49um you'll get from the types of practice
1:36:51physician practices that we were trying
1:36:53to serve so the goal was to match that
1:36:58test menu
1:36:59as I said earlier I think there was a
1:37:01period of time which we thought more
1:37:03than 15 would go up I know that that
1:37:06changed and I'm not sure exactly when it
1:37:08changed but
1:37:09we weren't necessarily just linearly
1:37:12looking at bringing up more assays on an
1:37:15ongoing basis
1:37:17so what is your understanding as to the
1:37:19maximum number of tests that the tsp
1:37:21ever performed on patient samples from
1:37:23Walgreens
1:37:24I think it's that 15 numbers yeah
1:37:34you can put that one aside
1:37:42[Music]
1:37:52foreign
1:38:03exhibit 199.
1:38:14supersize the difference here of the
1:38:16bunch two-sided yes okay that's why it
1:38:18looks a little thicker
1:38:19um
1:38:21exited 199 purports to be
1:38:25defendant fairness
1:38:27responses and objections to the
1:38:30plaintiff's first set of interrogatories
1:38:32that were filed in the order of Chancery
1:38:35of the state of Delaware in the partner
1:38:37Investments LP versus fairness Inc
1:38:42case
1:38:44have you seen exhibit 199 before
1:38:49I don't know
1:38:51I I might have
1:38:55are you aware that there was a lawsuit
1:38:57that was filed by partner Investments
1:39:00and pfn health or Master fund against
1:39:02fairness yes
1:39:07would you have been involved and were
1:39:09you involved in preparing responses to
1:39:12their
1:39:13interrogatories
1:39:16I certainly was engaged with our legal
1:39:19team on responding to them I I don't
1:39:22know what my specific role was in
1:39:24responding to the interrogatories I'm
1:39:26sure I talked with our team about it
1:39:29I may have seen some of the documents I
1:39:31I don't have a specific memory of you
1:39:33know what exact documents I looked at
1:39:35sitting here sure if you could just turn
1:39:38to
1:39:39page with Base number ending three four
1:39:42six five
1:39:48and just for the record the starting
1:39:49base number on this document is SEC Dash
1:39:52PRN Dash e-0003430
1:39:57so are you on three four six five
1:40:00yes okay so here in interrogatory number
1:40:0415 thurness has submitted a response and
1:40:08it looks like pfm is asking the about
1:40:12the number of
1:40:14um
1:40:15blood tests that were being processed
1:40:17through the tspu beginning in January
1:40:201st 2013.
1:40:23for clinical patient testing do you see
1:40:26the response here
1:40:27I do okay and there are no response that
1:40:31there are a number of tests that were
1:40:32being performed on the tspu and by my
1:40:34count there are about 12 of them
1:40:36uh that start and those that list starts
1:40:39in at three four six five and ends on
1:40:42three four six six yes you see that is
1:40:45that consistent with your understanding
1:40:47of the tests that were performed on the
1:40:49tspu
1:40:56um
1:40:56yeah I don't have any reason to doubt
1:40:58this
1:40:59and looking at the list were there any
1:41:02other tests that you believed were being
1:41:06tested or performed on the tsp that
1:41:08aren't being listed here
1:41:11you know if there's 12 here I had the
1:41:13number 15 in my head it may have been
1:41:15that
1:41:16either they weren't up by this period of
1:41:18time or they were never run they were
1:41:20validated or I could be wrong about the
1:41:2215 number I'm not sure
1:41:24do you have any reason to believe that
1:41:27um only otherwise I'd only tests that
1:41:30only 12 tests were being performed on
1:41:31the tsp
1:41:34I I don't know I if that's what this
1:41:37says I don't have any reason to doubt it
1:41:40did you ever share the fact that the
1:41:42tspu was only performing about 12 tests
1:41:47with Walgreens
1:41:51I I don't
1:41:53I don't think so I don't know
1:41:58you're not aware of an instance in which
1:41:59you might have told Walgreens that the
1:42:01tsp was only performing 12 tests I am
1:42:04not
1:42:06sure
1:42:07are you aware of ever informing Safeway
1:42:10that the tspu was performing 12 tests in
1:42:13this time frame 2013. I mean after the
1:42:16Cleo lab went live I don't think we had
1:42:18any discussions with them about
1:42:21what we were doing in the clinical labs
1:42:24did you ever share or did you ever
1:42:27discuss the fact that the tsp was
1:42:29performing about 12 tests with Sonny
1:42:32balwani
1:42:34I can't remember a specific discussion
1:42:36about it yeah I'm I I know there were
1:42:39discussions that we had about
1:42:42sort of
1:42:44stopping using the 3 Series platform
1:42:46working to get the four series into the
1:42:48FDA and then our Our Hope and goal was
1:42:51that we would be putting all the tests
1:42:52on that platform as fast as we could
1:42:55so do you know whether Mr balwani knew
1:42:58that the tspu was only running something
1:43:00like 12 or 15 tests
1:43:02a Time
1:43:04I don't know
1:43:05um but I I assume he would have
1:43:08why do you say that you've seen me with
1:43:10it
1:43:11because he was managing the clinical lab
1:43:14what about others at the company
1:43:17did you ever discuss the fact that the
1:43:20tsp was running about 12 tests with for
1:43:22instance I I don't think I ever had a
1:43:25specific discussion about
1:43:27the number of tests on the tspu within
1:43:30that I can recall I'm
1:43:32we had a lot of discussions about
1:43:34technology including the tspu so
1:43:38it may have been an element of a
1:43:40discussion but I can't remember a
1:43:41specific discussion about it only
1:43:42running 12.
1:43:44what about the project managers did you
1:43:46ever discuss with them the fact that the
1:43:48tsp was running something like 12 to 15
1:43:50tests
1:43:53I I don't think so I mean what the
1:43:55chemistries were running on in the
1:43:57clinical lab was not a focus of any of
1:43:59our discussions internally or really
1:44:01externally at that point in time why
1:44:04wasn't it a focus of discussions
1:44:07because in phase one of our model it was
1:44:09about the chemistry it was about
1:44:10redeveloping the assays to work with
1:44:12small volumes and then phase two was
1:44:15about use of the the tspu in a
1:44:17distributed setting and that was the
1:44:20vision that was what we were spending
1:44:21most of our time working on but how we
1:44:24operationalize the tests in the clinical
1:44:26lab
1:44:27in the meantime was was just not
1:44:31not something that any of us really
1:44:33focused on very much
1:44:35in conversation
1:44:37it keeps my friend I guess
1:44:40why theranos decided to pursue
1:44:42commercial testing in phase one so I I
1:44:45think I understand what you described
1:44:47there phase one is about getting the
1:44:48chemistries ready phase two is about the
1:44:50tsp being out there
1:44:53why conduct commercial testing in in
1:44:55Phase One at all
1:44:57yeah so
1:44:58um
1:45:01I I think there's there's two parts to
1:45:03that
1:45:04um the first is
1:45:06um our business model
1:45:09shifted when we formed the partnership
1:45:12after we formed the partnership with the
1:45:14retail pharmacies and there was a lot of
1:45:16discussion about getting Cleo waiver on
1:45:19the devices and a concern about how long
1:45:23that would take in the regulatory model
1:45:24for it no one had done this before and
1:45:28so the decision was made to become a
1:45:30clinical lab the concept with phase one
1:45:33was that the value is the retail
1:45:36footprint right bringing lab to the
1:45:39retail footprint and you've seen now
1:45:41Quest and lab core you immediately go
1:45:44partner with Walgreens and Walmart to to
1:45:47do that
1:45:48to the extent we were focused on small
1:45:50samples we invented the nanotainer
1:45:53to be able to work with the chemistries
1:45:55that we had redeveloped for small assays
1:45:58and that was the concept for finger
1:46:00stick based testing in Phase One in
1:46:02phase two
1:46:04the value proposition was to bring the
1:46:06device to the wellness centers to get
1:46:08tests even faster and so that's what
1:46:12tspu was about because it processed one
1:46:15sample at a time and in phase one you
1:46:18were going to have a lot of samples
1:46:19coming in at the same time so phase one
1:46:22was retail footprint access low-cost
1:46:24transparent pricing the four dollar lab
1:46:26test concept and then to the extent you
1:46:29were doing small samples the nanotainer
1:46:31implemented with our chemistries and
1:46:34then phase two was distribute the device
1:46:37right and phase two was what we really
1:46:40wanted to do and is what we're still
1:46:42trying to do right now
1:46:47is there a business plan or anything
1:46:48that articulated that
1:46:51I'm not in a systematic way at that time
1:46:57we did not have
1:47:00um
1:47:03organized documents the way we do now
1:47:05that really lay all of this out
1:47:16okay you put that aside
1:47:18naturally let's make a separate pile
1:47:59guarantee what's the March there it is
1:48:02exhibit 200.
1:48:11tab nine
1:48:17exhibit 200.
1:48:19for it to be defendant fairness inc's
1:48:22first supplemental responses and
1:48:23objections to plaintiff's first set of
1:48:25interrogatories
1:48:27uh in the cloud in the Court of Chancery
1:48:30of the state of Delaware and the partner
1:48:32Investments versus fairness Inc case
1:48:35with starting base number SBC
1:48:40prm-e-0005120 have you seen an exhibit
1:48:43200 before
1:48:46I don't know um but again I I worked
1:48:49with our legal teams as we worked to
1:48:52respond to CFM
1:48:58so if you take a look at 5128
1:49:03foreign
1:49:07there's a supplemental response to that
1:49:09same interrogatory that we were just
1:49:11looking at in exhibit 199 in to auditory
1:49:15number 15.
1:49:17um and it says here by way of further
1:49:19response they're in Estates the version
1:49:213.5 of the spu is the only version of
1:49:23the SP used since January 1st 2013 the
1:49:27process blood tests for commercial
1:49:28testing summer patients that's
1:49:30consistent with your understanding that
1:49:31the tsp version 3.5 was the only device
1:49:34ever used for patient testing is that
1:49:36right
1:49:38the only
1:49:40version of the money lab family yeah the
1:49:43only device manufactured by there it is
1:49:45that was used for patient testing is
1:49:47that right
1:49:49um
1:49:49that's right and just for the sake of
1:49:52being explicit we we considered the we
1:49:56actually injection molded and made the
1:49:58little cups that went into the hardware
1:49:59ourselves in our Factory so we
1:50:01considered ourselves as manufacturing
1:50:03some elements of the hardware for the
1:50:05other platforms as well okay so the
1:50:07sample cuts that you were using with the
1:50:09Advia 1300 but those were theranos
1:50:13manufactured yes cups as well we made
1:50:15them yeah what were those called
1:50:18internally at the time
1:50:20so I don't know I've seen a lot of
1:50:23references to different
1:50:26um words used I think in describing the
1:50:29general concept I've seen the word
1:50:31teacup I I don't know if that I'm
1:50:34explicitly refers to what I'm referring
1:50:36to I I had understood that to refer to
1:50:39theranos cup but I I could be wrong
1:50:41about that
1:50:46okay
1:50:47um
1:50:48and then if you turn to
1:50:55and actually um yeah turning to the next
1:50:57page 5129
1:51:02actually at the bottom of 5128 if you
1:51:04want to follow through it says by
1:51:06further by way of further response
1:51:07thereiness identifies all other
1:51:09iterations of the spu since January 1st
1:51:122013 as follows and then there's a list
1:51:14on 5129
1:51:18um which lists you know 3.0 the 4.0 the
1:51:22mini lab Tower the 4S and the 4.1
1:51:26um if you take a quick review of that of
1:51:29the descriptions of all of those
1:51:31versions is this consistent with your
1:51:34understanding of
1:51:35those versions and what they were used
1:51:37for
1:51:43I I think so generally I don't have any
1:51:46reason to doubt it
1:51:49um and what did the tspu
1:51:52look like
1:51:54and maybe there were different they
1:51:56looked differently so what did the 3.5
1:51:57look like
1:52:00so they all look like a box with a
1:52:03screen on it yeah with a hole on the
1:52:06front that has a door and you can stick
1:52:08what we call a cartridge which is the
1:52:11piece of plastic that has all the
1:52:12chemicals in it into it and and the
1:52:16cartridge has a little hole where you
1:52:18can put samples you can put urine or you
1:52:21can put blood from your arm or you can
1:52:23put the little nanotainers with the
1:52:24finger stick in there and you said they
1:52:27all look very similarly
1:52:30generally yes generally
1:52:33um what was the size of one of the 3.5s
1:52:38what were they used to what were the
1:52:40dimensions of that that I don't I don't
1:52:42know the specific dimensions but we
1:52:44would sort of refer to it as being
1:52:46similar in size to a desktop computer
1:52:49that you would have under your desk
1:52:52and then turning to 5155
1:52:58she's going to exhibit 200.
1:53:06foreign
1:53:14you'll see there's a supplementary a
1:53:16supplemental response to an
1:53:17interrogatory number 27. do you see that
1:53:20I do
1:53:22um and what pfm is asking Theron is is
1:53:25to identify any non-proprietary or
1:53:27commercially available machine equipment
1:53:29or technology that you use to perform
1:53:30tests
1:53:33do you see that yes okay and on the next
1:53:35page fairness provides its response with
1:53:38a table devices purchased from third
1:53:40parties and it goes from 5156 to 5158
1:53:47is this consistent with your
1:53:48understanding of the third-party devices
1:53:51that fairness was using to conduct
1:53:53patient testing
1:53:55you know I wouldn't know but I don't
1:53:58have reason to doubt this document
1:54:04and was that also your understanding
1:54:06um you know in 2014 so this was as as of
1:54:102013 or since January 1st 2013 but with
1:54:15this list be of devices that were being
1:54:18used by fairness that were purchased
1:54:20from third party companies was that
1:54:23consistent with your understanding as of
1:54:252014
1:54:26again I wouldn't know I
1:54:29didn't have direct involvement in what
1:54:31devices were being procured for the
1:54:33clinical lab but you don't have any
1:54:34reason to believe that this information
1:54:36is incorrect as of 2014 either
1:54:40I I don't know I I don't know I know
1:54:43that the business model shifted
1:54:46um I know that as of a period of time we
1:54:49were
1:54:50understanding the value proposition on
1:54:53low cost and therefore trying to achieve
1:54:56Automation and standardization in the
1:54:58clinical lab so there was a big
1:54:59investment in standardizing on Siemens
1:55:01equipment I don't know when exactly that
1:55:04happened so it
1:55:06um these might have been different in in
1:55:08different periods of time
1:55:19it's got two minutes left those yeah
1:55:21yeah no weren't we why don't we switch
1:55:24the tape up you guys don't mind go ahead
1:55:25and switch the tape we are off the
1:55:27Record yeah this concludes media number
1:55:29two of Elizabeth Holmes we're off the
1:55:31Record at 12 43.
1:55:35um

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This page contains the full transcript of Elizabeth Holmes SEC Deposition JULY 11, 2017 2 OF 4 redacted by ANTL Media, generated from the public captions YouTube serves with the video. The transcript has 15,525 words across 2,595 segments, with the original timestamps preserved so you can click any line to jump to that moment in the embedded player.

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