A settlement between Theranos Inc. and Walgreens drugstore chain leaves the blood-testing lab firm with little money left in its coffers.
Theranos said Tuesday it settled a lawsuit by the Walgreen Co. unit of Walgreens Boots Alliance that claimed the blood-testing firm breached their contract and misled the drugstore chain about its capabilities.
Neither Theranos nor Walgreens would disclose terms of the settlement, though people familiar with the matter said the amount was more than $25 million. The Wall Street Journal reported in June that a tentative settlement had been reached, calling for Theranos to pay Walgreens less than $30 million.
The embattled Silicon Valley firm told investors in June that it had about $54 million left on hand. It was spending about $10 million a month then, but anticipated further reducing its burn rate.
Theranos in June was seeking to raise about $50 million from existing investors. The company declined to comment on whether it had succeeded in doing so, or on its current cash position. It isn't clear when Theranos will make the payments to Walgreens.
Theranos also maintains insurance policies that could cover certain settlement and legal costs, according to court records.
Walgreens sued Theranos in November, seeking to reclaim the $140 million it spent on the partnership, including a $40 million loan that was convertible into equity and a $100 million "innovation payment" meant to help fast-track the blood-tester's rollout at Walgreens stores around the country.
The Theranos statement said the settlement resolves "all claims among those parties," and that Walgreens would drop the lawsuit "with no finding or implication of liability."
The settlement caps a series of agreements Theranos has cut with its adversaries in litigation and regulatory disputes in recent months. The company has settled with the main U.S. lab regulator, which found it didn't meet basic U.S. blood-testing standards, and the Arizona attorney general, which alleged it defrauded residents of that state. It resolved litigation with a major investor, Partner Fund Management, in May.
Theranos says it has changed its ways. In the statement, the blood tester said that over 16 months it "has built a new senior management team, changed the composition and structure of its board of directors, installed an expert technology and scientific advisory board, and implemented a new quality and compliance program."
The company said it was moving "toward commercializing its innovative technologies," the business strategy it adopted shortly after the lab regulator forced the closure of its blood-testing facilities. The company will have to attain FDA approval to sell such devices.
Without a new injection of money, it's unclear whether the firm will have the financial resources to pursue that goal much longer.
The Walgreens settlement represents roughly one-fifth of its total investment in the botched partnership. In a statement, Walgreens spokesman Michael Polzin said only: "The matter has been resolved on mutually acceptable terms."
Theranos faces a civil investigation by the Securities and Exchange Commission and a criminal probe by the Justice Department, and the company has said it is cooperating with the investigations. Groups of patients and investors in funds that own Theranos shares have also filed lawsuits that seek class action status. Theranos has said those suits are without merit.
Theranos also recently retained commercial real-estate adviser CBRE Group Inc. to search for a party to sublease its Palo Alto office space. The company said it would consolidate at its Newark, Calif., location, where it previously ran a medical laboratory, if it finds "a satisfactory subleasing scenario." A CBRE spokesman declined to comment.
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(END) Dow Jones Newswires
August 01, 2017 18:12 ET (22:12 GMT)