Biotech and Pharma

Theranos wasn't 'forthcoming': business school professors

Theranos under fire

Blood-testing start-up Theranos took a number of management missteps that led to its most recent tangle with health regulators, business school professors said Thursday on CNBC's "Power Lunch."

For several months, federal health regulators have raised concerns about the accuracy of the company's blood-testing technology. On Wednesday, The Wall Street Journal reported that the Centers for Medicare and Medicaid Services threatened to impose stiff sanctions on the company — including a ban that could prohibit Theranos CEO Elizabeth Holmes from owning or running a lab for at least two years.

In an interview with CNBC, Theranos spokesperson Brooke Buchanan stressed that the company is actively working to address issues raised by regulators.

"Elizabeth Holmes has not been banned from the industry, she hasn't been banned from Theranos and we continue to work hard to address all the concerns that have been raised by CMS," Buchanan said. "We're in constant communication with the regulators."

Elizabeth Holmes, founder and CEO of Theranos
Regulators propose banning Theranos CEO Holmes for 2 years: DJ
Elizabeth Holmes, founder and CEO of Theranos.
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News of the potential sanctions against Theranos was not surprising, Bill George, a Harvard Business School professor and CNBC contributor, said on "Power Lunch."

"Theranos has never been forthcoming about its test results," George said.

There were other warning signs, too, said Jeff Sonennfeld, senior associate dean of the Yale School of Management.

"They've gone through some traumatic changes in board governance," Sonnenfeld said, noting that the company at one point counted former U.S. Sen. Bill Frist, former Secretary of State George Shultz, and Henry Kissinger as board members.

Any sanction CMS decides to impose on Theranos would likely meet a lengthy appeal process, the Journal reported Wednesday.

If Theranos is ultimately sanctioned, however, it could spell out the company's demise, George said.

"This is very, very serious," he said.