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This Blood-Testing Company Could Be the New Theranos

Key Speakers At 2015 The Fortune Global ForumKey Speakers At 2015 The Fortune Global Forum
Elizabeth Holmes, founder and CEO of Theranos, speaks during the 2015 Fortune Global Forum in San Francisco on Nov. 2, 2015. Photograph by David Paul Morris — Bloomberg/Getty Images

Here’s the story of a a former darling biotech company, which was once worth as much as $4.5 billion. It has a technology that allows it to do a variety of diagnostic tests on just a few drops of blood. And this year it’s run into a world of trouble.

The company has become the subject of multiple investigations by the U.S. Department of Justice and the SEC, including two criminal probes and another inquiry into the accuracy and reliability of some of its blood-testing devices. Now, patients and investors have sued the company left and right, and the Fortune 500 firm with which it had struck a major deal is now scrambling to call it off.

Sound familiar?

No, it’s not Theranos—a Silicon Valley blood-testing startup run by CEO Elizabeth Holmes with a similar downward spiral.

Rather, the company is Alere (ALR), a publicly-traded company based in Waltham, Mass. not far from Boston. Alere was founded (under a different name) in 1981, before Holmes was even born. It makes a number of diagnostic products and doesn’t necessarily directly compete with Theranos (which was once worth $9 billion, twice as much as Alere at its peak). But while Theranos’s scandals have been mostly concentrated in its laboratories, where accuracy and quality-control problems led the U.S. health department to revoke its lab license, Alere’s difficulties run the gamut.

Alere got yet another problem Wednesday after Abbott Laboratories (ABT), a Fortune 500 health care company, sued to break its $5.8 deal to acquire Alere. Abbott had agreed to buy Alere on Jan. 30 this year, but the situation has gone downhill ever since. Alere’s stock price has fallen 31% since the deal was announced.

“Alere is no longer the company Abbott agreed to buy 10 months ago,” Abbott spokesperson Scott Stoffel said in a statement explaining why it wants to back out of the merger. “These numerous negative developments are unprecedented and are not isolated incidents brought on by chance,” he continued, adding that Abbott had been seeking more information from Alere on numerous issues “for months,” but “Alere has blocked every attempt.” Alere stock fell 8% on Wednesday alone after the announcement, dropping its market value to under $3 billion.

Abbott also published a laundry list of those negative developments that makes even the resume of a beleaguered company like Valeant (VRX) look wholesome by comparison:

In the 10 months following the Jan. 30, 2016, signing of the agreement, Alere has suffered a series of damaging business developments, including the government eliminating the billing privileges of a substantial Alere division, the permanent recall of an important product platform, multiple new government subpoenas, including two new criminal subpoenas, and a five-month delay in filing its 10K coupled with admissions of internal control failures requiring restatement of its 2013-2015 financials.

For its part, Alere called Abbott’s lawsuit “entirely without merit,” and said that “none of the issues it has raised provides it with any grounds to avoid closing the merger.” On the other hand, it did not actually deny any of Abbott’s allegations. In August, Alere had also sued Abbott to force it to proceed with completing the merger, after Abbott had begun to waver on its commitment to the deal, telling investors it wasn’t sure anymore if it would even happen at all.

The two criminal investigations of Alere include a probe into potential bribery violations concerning the company’s sales and dealings with foreign government officials in Africa, Asia, and Latin America. The second potentially criminal issue: Alere may have fraudulently billed government insurance programs like Medicare.

To be sure, Abbott’s situation has also changed since it agreed to purchase Alere, which may have contributed to its buyer’s remorse. In April, Abbott agreed to buy St. Jude Medical (STJ), a device maker, for $25 billion. Then in August, researchers accused St. Jude’s pacemaker devices of having dangerous cybersecurity flaws, though other experts have since cast doubt on those findings.

Even if Abbott got saddled with a lot more problems than it bargained for when it agreed to buy Alere, it will be up to the Delaware Chancery Court to decide whether the company will be allowed to walk away. Verizon (VZ), for one, was surprised to learn in September that Yahoo (YHOO), which it had already agreed to acquire, had been hacked long before the deal was struck. Yet Verizon may have to go ahead with the deal, whether it still wants to or not.

Abbott could find itself in the same predicament with Alere—whether it’s the next Theranos or not.