Theranos founder Holmes denies misleading Walgreens

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Theranos founder Elizabeth Holmes arrives to attend her fraud trial at federal court in San Jose

By Jody Godoy

SAN JOSE, Calif. (Reuters) -Theranos founder Elizabeth Holmes denied lying to Walgreens about her company’s technology during her fraud trial on Tuesday, offering rationales for withholding key details about operations and internal reports.

Holmes took the stand for a third day to defend herself against fraud accusations related to Theranos, a blood testing startup that is now defunct. The company had touted technology that could run diagnostic tests faster and more accurately than traditional lab testing with a drop of blood from a finger prick.

Jurors in San Jose, California, heard from a prosecutor at the start of the trial that Holmes falsely promised miniaturized blood analyzers to cement a partnership with Walgreens, but then secretly used “the big, clunky third-party machines” to test samples from patients who came into its stores.

On Tuesday, Holmes told jurors that she had been following legal advice when she withheld Theranos’ use of third-party analyzers from Walgreens, as the modifications used to run small samples were Theranos’ trade secret.

“The big medical device companies like Siemens could easily reproduce what we had done,” she said.

Once valued at $9 billion, Theranos collapsed after the Wall Street Journal published a series of articles starting in 2015 that suggested its devices were flawed and inaccurate.

Holmes’ decision to testify is risky as it exposes her to a potentially tough cross-examination by prosecutors.

Throughout her testimony, Holmes, 37, has sought to show that she believed Theranos’ technology was capable of delivering on her claims, showing jurors encouraging emails from Theranos’ scientists discussing the potential for a small machine to run any kind of test, and progress on developing it.

Holmes on Tuesday also denied misrepresenting Theranos’ work with pharmaceutical companies Pfizer Inc and Schering-Plough by adding the companies’ logos, which prosecutors have called an attempt to pass off Theranos’ conclusions as theirs.

She admitted that she added the logos to the reports just before sending them to pharmacy operator Walgreens, which was discussing a partnership with Theranos in 2010, to convey the drugmakers’ involvement in promising studies using Theranos technology.

“I wish I had done it differently,” Holmes said.

Holmes also testified that she did not conceal the addition from Pfizer, showing jurors an email where the report with the logo was sent to individuals at Pfizer in 2014.

Over the two-month trial, jurors have heard testimony from more than two dozen prosecution witnesses, including patients and investors whom prosecutors say Holmes deceived.

Holmes has pleaded not guilty to nine wire fraud counts and two conspiracy counts.

Holmes is scheduled to resume testifying on Monday.

(Reporting by Jody Godoy in San Jose, Calif.; Editing by Matthew Lewis and Christopher Cushing)

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