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Walgreens' Relationship With Theranos 'An Extreme Case Study Of What Can Go Wrong'

Walgreens' Relationship With Theranos 'An Extreme Case Study Of What Can Go Wrong'
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Business textbooks looking to include a chapter on a deal gone bad should take a closer look at Walgreens Boots Alliance Inc (NASDAQ: WBA)'s partnership with Theranos Inc.

Theranos is a startup company whose testing devices called Edison examine blood samples to identify dozens of conditions.

What Happened?

Theranos and Walgreens struck a partnership in 2013, even though Walgreens executives and their advisers expressed doubts over the company and its technologies, the Wall Street Journal noted.

In fact, Walgreens' teams continuously pushed Theranos to uncover more details of its testing devices as part of a standard process of vetting new partners with promising technology but no track record.

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The Wall Street Journal added that Walgreens' top executives themselves haven't been granted access to Theranos' labs. Nevertheless, Walgreens proceeded with the partnership under the belief that if they don't ink a deal with the company, a competing firm would.

The relationship turned sour earlier this year when federal inspectors uncovered problems with the blood testing device. Federal inspectors concluded that the Edison devices fail to meet the company's own accuracy requirements.

Walgreens initially considered walking away from the agreement, but the company hesitated on the grounds that Theranos would have reason to sue for a breach of contract.

The Bottom Line

While business relationships can turn sour, the relationship between Walgreens and Theranos is described by the Wall Street Journal as "an extreme case study of what can go wrong when an established company that craves growth decides to gamble on an exciting and unproven startup."

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