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The Elizabeth Holmes Trial: Former Schering-Plough Scientist Cites Theranos Founder’s ‘Cagey’ Behavior

Elizabeth Holmes, founder of Theranos Inc., in dark suit, arrived Wednesday at a federal court in San Jose, Calif., where her criminal-fraud trial is in its ninth week.

Photo:

David Paul Morris/Bloomberg News

For the second time since the trial of Elizabeth Holmes began, the jury heard testimony Tuesday that Theranos Inc. altered a document to show investors that its technology had been validated by a major pharmaceutical company.

Constance Cullen, an immunology expert who helped lead test development at pharmaceutical firm

Schering-Plough Corp.


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, testified that she had been unimpressed with Theranos and found Ms. Holmes “cagey” during her process of evaluating the startup’s technology for a possible partnership. Despite that, prosecutors say, Theranos put Schering-Plough’s logo on a document it later gave to a prospective business partner and investor, purporting that the pharmaceutical company had checked out and validated its blood-testing devices.

Ms. Cullen, whose testimony comes in the ninth week of the criminal-fraud trial of a onetime Silicon Valley superstar, became the second witness to directly support the prosecution’s allegations that Theranos founder Ms. Holmes forged documents in an effort to persuade investors to put millions of dollars into her startup.

Ms. Holmes faces a dozen counts of wire fraud and conspiracy to commit wire fraud. Her defense attorneys have argued that her only crime was running a failed startup.

A former scientist for

Pfizer Inc.


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testified last month that after reviewing Theranos’s technology, he raised questions about the accuracy of the startup’s claims and decided his employer shouldn’t get into business with Theranos. He also testified that Theranos had added a Pfizer logo to a research document without Pfizer’s permission.

Both the report with the altered Pfizer logo and the one with the Schering-Plough logo were sent to

Walgreens Boots Alliance Inc.

in April 2010 as purported validation from pharmaceutical companies “after their own technical validation and experience with Theranos Systems in the field” according to an email from Ms. Holmes to Walgreens executives that was displayed in court.

Walgreens agreed to invest $140 million in a partnership in 2013 to put Theranos blood-testing centers inside its drugstores, but that relationship unraveled as Theranos missed agreed-upon deadlines.

Ms. Cullen explained that Schering-Plough, which was acquired in 2009 by drugmaker

Merck

& Co., had an agreement with Theranos to validate three tests using Theranos machines. Schering-Plough was interested in eventually having Theranos develop proprietary tests, and Ms. Cullen was part of a team investigating Theranos’s technology and other diligence related to the startup.

Related Video

As the long-awaited trial of Theranos founder and former CEO Elizabeth Holmes gets underway, WSJ looks back at the scandal’s biggest milestones and speaks with legal reporter Sara Randazzo about what we can expect to see in the fraud trial. Photo Illustration: Adele Morgan/WSJ

Ms. Cullen said she and her colleagues traveled to Theranos’s Silicon Valley headquarters in May 2009 to sort out those answers with Ms. Holmes and other Theranos employees.

“I was dissatisfied, quite honestly,” she testified. “There was insufficient technical detail for us to be able to evaluate the technology.”

She was expecting clear, direct answers to questions, and didn’t get them. “There were what I describe as cagey responses,” she said.

Ms. Holmes did all the talking at the meeting, Ms. Cullen said. Ms. Cullen said she addressed questions to other Theranos employees present, who had expertise in various areas, but Ms. Holmes would interrupt.

“Almost exclusively Ms. Holmes was the one answering the questions irrespective of to whom the questions were being asked,” Ms. Cullen said. She shared her dissatisfaction with her colleagues after the meeting, she said.

In December 2009, Theranos sent Ms. Cullen a validation report, which showed the performance of various Theranos tests on its proprietary devices. The conclusions in the report included that Theranos’s technology “has been shown to give accurate and precise results.”  Ms. Cullen said she never discussed the report or confirmed its findings.

She told Theranos they could resume their conversation in January, but those discussions never happened. Aside from a couple follow-up emails from Ms. Holmes in which the Theranos CEO asked how she could facilitate a business partnership, Ms. Cullen said she never talked to Theranos again.

The next spring, Ms. Holmes sent the same validation report to Walgreens. That copy had two distinct differences: The Schering-Plough logo was emblazoned on the top left corner, and the conclusions had been changed to read that Theranos technology “has been shown to give more accurate and precise results.” Ms. Cullen said no one at Schering-Plough had approved those findings.

Write to Heather Somerville at [email protected]

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