Indian American was a close confidante of founder Elizabeth Holmes.
The President and COO of Theranos Inc., Ramesh ‘Sunny’ Balwani, who played a key role in the blood testing laboratory’s product development, growth, and the implementation of its mission, is retiring from his position.
Theranos, who is facing regulatory probes, is also implementing a new organizational structure with dedicated corporate divisions for Technology and Clinical Operations, according to a press release. The company has been undertaking searches for multiple executive positions, and Balwani will continue to support the transition process through its completion.
“I am deeply grateful for the opportunity to contribute to Theranos’ mission to make healthcare accessible through its technology and products,” said the Indian American Balwani. “I will continue to be the company’s biggest advocate and look forward to seeing Theranos’ innovations reach the world.”
“Sunny has made invaluable contributions to Theranos’ technology and business,” the Board of Directors said in a statement. “His passion for the Theranos mission and his leadership in core product initiatives has made a tremendous impact. We will miss him as a board member and are grateful for his extraordinary service.”
The Wall Street Journal noted that the 50-year-old Balwani, a top associate of Theranos founder Elizabeth Holmes, leaves in the wake of last month’s news that the Securities and Exchange Commission and the U.S. attorney in San Francisco are investigating whether the Palo Alto-based company misled investors and regulators about the state of its technology and operations. Theranos said it is cooperating with the investigations.
Theranos also is attempting to persuade the Centers for Medicare and Medicaid Services, the federal agency that oversees clinical labs, not to shut down its northern California laboratory. Closure of the lab would result in Holmes and Balwani being barred from the blood-testing business for at least two years, under federal regulations.
Balwani joined Theranos as its No. 2 executive in 2009, five years after Holmes founded the company upon dropping out of Stanford University as a 19-year-old sophomore.
Theranos spokeswoman Brooke Buchanan said Balwani isn’t being blamed for the company’s regulatory problems. Rather, she said, his departure is merely part of a broader reorganization that will see the company appoint a new chief medical officer, to whom its labs will report, a new head of research and a new operating chief. The company is actively recruiting for those positions. Depending on the new COO’s profile and qualifications, he or she could take on both the operating chief and head of research roles, she added, the Journal reported.
Fortune noted that Balwani leaving is “as if Holmes were cutting off her own right arm.”
Theranos told the New York Times on Thursday that Balwani’s departure was unrelated to its current regulatory difficulties, but the assertion is difficult to credit.
Fortune reported: “Until Wednesday, the company had largely tried to blame the shocking inspection results on a lab director, since replaced, who was a dermatologist who had been working only part-time for Theranos. CMS inspectors found, among other things, that the Newark lab’s hematology operations posed “immediate jeopardy to patient health and safety.” It also found major deficiencies in its use and oversight of analytic systems and in the basic qualifications of the lab director, the technical supervisor, and the testing personnel.
“But faulting the former lab director, without also faulting the COO who had permitted the lab to descend to such levels, was not plausible, and CMS signaled its rejection of the company’s stance in its 45-page letter of March 18, threatening to ban Holmes and Balwani. (Theranos has replied to that letter, and it is not known when CMS will decide what final action to take. If the ultimate decision is adverse, Theranos could challenge it in administrative proceedings and, later, in court.)”.
Fortune added: “Some of the most disturbing parts of the Journal‘s first story about Theranos last October concerned email conversations between Balwani and a former lab employee, which the former employee believed showed problems with the accuracy of Theranos’ proprietary technologies and possible impropriety in the way Theranos was handling proficiency tests it was required to perform to keep its regulatory license. The company responded at the time that both the employee and the Journal misunderstood the pertinent science and rules, and that regulators were kept fully apprised of how Theranos was handling the proficiency tests.”