5 Reasons Why Theranos Could IPO Soon

The term “unicorn” is often bandied about in the venture capital community and refers to a privately held startup company that has reached a $1 billion valuation. The biggest unicorn in the meadow today happens to be Xiamoi, the hardware company that backed Ninebot and which has managed to achieve a valuation of 46 unicorns or $46 billion. Not far behind in 2nd place is Uber with a valuation of 41 unicorns. So which healthcare startup is the most highly valued unicorn at the moment? We might have made guesses such as Proteus, 23andMe, or Nanthealth,  but while these 3 companies are all healthcare unicorns, they’re not the biggest one. The biggest one today is a company you may never heard of called Theranos. And it’s one exciting company valued at 9 unicorns or 4.5X as many unicorns as Nanthealth.

In 2003, Elizabeth Holmes dropped out of Stanford at the age 19 to found Theranos. Since then, the Company has taken in $94 million in funding and at current valuations, has made Elizabeth the world’s youngest self-made female billionaire. The value proposition is a simple one. Theranos claims they can run up to 30 common laboratory tests within hours using just a few drops of your blood obtained by using a small lancet on your fingertip as opposed to sticking a needle in your arm and withdrawing a large vial of blood as is the typical practice. Most notably, the price points for Theranos’ 200 blood tests are incredibly low and if the company has its way, will be incredibly accessible as well.

Here’s a use case. You’re a student at the University of Phoenix and you just woke up on a Saturday morning. After a few too many adult beverages at one of those notorious sorority parties on campus, you realize you exposed yourself last night to a high-risk sexual encounter. You think about making an appointment with your doctor and having one of those awkward conversations but instead, you pop into one of the many Walgreen locations where the Theranos tests are offered:

Theranos_Phoenix_Locations

You fill out the test order form and while there are over 200 tests you can choose from, you opt for the “Sexual Health” package which pretty much covers all the bases and costs just $59.95.

Theranos_Order_Form

You submit the form and the technician (who has no idea what you’re being tested for) takes your blood sample using a small lancet on your fingertip. The entire process is over in about 20 minutes and the results are available in 24-48 hours, with the actual average being around 4 hours.

Some could argue that the availability of this test promotes irresponsible behavior, but that’s not the point we’re trying to make here. The point is that if you live in the Phoenix area, you can now access over 200 blood tests for a fraction of the price that would be charged at a laboratory. A pregnancy test for around $5? A fertility test for around $35? Those are incredibly low price points. Most importantly, these tests are accessible and the process is a comfortable one, especially if you’re as scared of needles as the founder of Theranos is.

So what technology is being used here? The Theranos process has been notoriously secretive but is known to use microfluidics. A quick USPTO patent search shows 41 patents assigned to Theranos. Right now, Theranos tests are only offered in Walgreens in Arizona because as of last April, Arizona became the first state to pass legislation that allows any lab test to be ordered by a consumer without a doctor’s request. Just 3 months later we see Theranos tests available in 16 different cities in Arizona. No doubt Theranos believes that other states will follow and ultimately would like to see their test platform available in all 8,217 Walgreen stores located in all 50 U.S. states.

So here are 5 reasons we think Theranos may IPO soon:

  1. Biotech IPOs have been hot this year. Theranos has a value proposition easily understood by everyone; the cheapest blood tests anywhere made accessible to everyone.
  2. The Company has to believe other States will pass similar legislation that Arizona has and they’ll need capital to rapidly expand their offering when that happens.
  3. With the richest valuation of any private healthcare company today, Theranos had their last funding round 5 years ago. Draper Fisher Jurvetson has participated in 3 rounds of funding with their last participation 9 years ago. Investors have to be looking for an exit soon.
  4. FDA approval of the Theranos hardware, software, and testing platform occurred earlier this month.
  5. Awareness is growing and it is becoming increasingly difficult for Theranos to continue operating in stealth mode
Theranos_Google_Searches
Google Trends: Theranos

If all the billions of blood tests performed each year in the U.S. used the Theranos platform, the Company estimates they could save Medicare $98 billion and Medicaid $104 billion over the next decade. When Theranos finally files that S-1, it’s going to be one exciting read.

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