SAN JOSE — Former Safeway chief executive Steven Burd took the stand in the Theranos trial Wednesday, testifying about his frustration with the collapsed blood-testing start-up’s missed deadlines as the grocery chain’s ultimately failed partnership with the company struggled to get off the ground.
Burd told government prosecutors how he was lured in by the promise of Theranos founder Elizabeth Holmes’s pitch for a device the size of a countertop kitchen appliance that could replicate a full-scale lab performing “almost every blood test imaginable.” As time went on, he said, the start-up failed to deliver on its promised timelines and he grew anxious about the delays, pressing for details.
He said Safeway envisioned placing the devices in its stores, giving customers an experience where “while you’re shopping — and before you leave — you’re going to get the results of that blood test.” The customer would then be able to have their prescription called in right away.
Two years into the partnership, prosecutors allege, Theranos was not using the devices promised to Safeway and instead was running tests using standard equipment — something that would have blindsided Burd and his company at the time.
“If they were using other machines only, then all we were testing was the phlebotomist’s ability to prick a finger and draw blood when we wanted to test the technology,” Burd said.
Holmes is on trial here in federal court, facing charges that she misled patients and investors about her company’s technology. The closely watched trial of the dissolved Silicon Valley company is expected to stretch into mid-December.
Holmes is charged with 12 counts of wire fraud and conspiracy to commit wire fraud, and prosecutors have said in court that the case is about “lying and cheating to get money.”
Holmes has pleaded not guilty. Her defense team has said she made mistakes but acted in good faith and did not commit fraud.
Theranos marketed a device that could take a few drops of blood from a patient’s fingertip and run a slate of blood tests in a small, portable lab machine. But in reality, prosecutors and some former employees say, Theranos was using traditional lab machines to run many tests, and results on its own technology were often unreliable.
Theranos shuttered in 2018, three years after an investigation by the Wall Street Journal raised concerns about the company’s technology. The Holmes case has become somewhat of a cautionary tale about a “fake it till you make it” ethos in Silicon Valley. Holmes and Theranos have been the subject of multiple podcasts, a documentary and a best-selling book.
Burd took the stand after former lab director Adam Rosendorff wrapped up testimony that lasted for six days and at times featured tense exchanges with defense lawyers.
Burd served as CEO of Safeway for roughly 20 years, through May 2013.
Safeway reportedly dissolved a partnership with Theranos in late 2015 after reports about the technology’s reliability issues became public. A Wall Street Journal report from the time suggested the deal was supposed to be key for Safeway’s expansion into the wellness market.
Burd testified that he saw a Theranos partnership as a business opportunity as the grocery chain expanded its health offerings. He said he came away “very impressed” after meeting with Holmes.
Prosecutors showed slides from a 2010 presentation to the Safeway board in which it was told of a “Disruptive Technology Opportunity” to create a new in-store pharmacy with a “mini-diagnostic lab.”
Burd spoke of the claims made to him by Holmes that left him impressed.
“It was described as a range of 20 to 30 minutes,” they said of the timeline for results. “In one of her presentations there was some comment about the accuracy being even more accurate than traditional testing. But we never got any deep information about that. … We were consistently told that it essentially replaces a traditional full-blown lab.”
In interactions with Holmes, Burd said, the Theranos founder showed she was in command — and not acting at anyone’s direction.
“She never looked over at [ex-boyfriend and Theranos president] Sunny [Balwani] to see what he might have been thinking,” Burd said. “She answered these questions herself. … When she presented to our board when she was talking, she owned the room. Whenever she was talking, she owned the room.”
Burd said Safeway signed an agreement with Theranos in September 2010. Documents shown at trial indicated the initial business partnership had ballooned to at least $45 million over a period stretching into the next year. But Burd said he was growing increasingly frustrated by what he saw as missed deadlines.
By 2012, he said, Safeway had not rolled out any of the Theranos devices in its stores. Burd recounted explanations he received, such as concerns about the device configuration for Safeway stores generating too much heat. Burd countered that he had offered to tap his company’s vast resource network to help, but he said Theranos did not take him up on his offers. Prosecutors showed an email from Burd to Holmes in which Burd said it was “crystal clear” the medical device company’s initial timelines were “far too ambitious.”
Theranos offered other explanations, including claims of secretive work with the Defense Department placing the devices in medevac helicopters.
“I was bothered by it. I was disappointed,” he said. “It seemed plausible. It just seemed like one more delay for us.”
Holmes “said it was very confidential” work, he said.
But ultimately, Burd said of the explanations, “it made sense.”
During the trial, now in its fifth week, former employees including whistleblower Erika Cheung have raised the concerns they felt while working at the company.
“It was starting to get very uncomfortable and very stressful for me working at the company, and I was attempting to tell as many people as I could, but it was not, just not seeming to get through to people,” Cheung said on the stand.
Former U.S. defense secretary Jim Mattis testified about his time on Theranos’s board and how he came to realize over time that the company’s device could not run the multitude of tests he believed it could.
Ultimately, Burd said Theranos demonstrated the device for board members. Holmes brought it to a board meeting, he said, and board member Michael Shannon offered to be a test case. They ran a test — a prostate-specific antigen test, or PSA, that could serve as an indicator of possible cancer.
He said Shannon placed a finger in the machine and had blood drawn. The machine made a series of noises.
“The sample was extracted, which ultimately went into a cartridge,” he said. A result was not immediately available.
“[Holmes] said something that made us think we would get it later,” he said.
To his knowledge, they never received it, he said.
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