Wade Miquelon — Direct/Cross/Redirect (Continued)
1,663 linesMR. SCHENK: YES. THE UNITED STATES RECALLS WADE MIQUELON.
JUDGE DAVILA: SIR, IF YOU WOULD TAKE THE STAND AGAIN. THANK YOU. AGAIN, ADJUST THE MICROPHONE AS YOU NEED, AND THE CHAIR, AND THERE'S WATER THERE FOR YOUR REFRESHMENT. I ASSURE YOU WE CHANGE THAT WATER EVERY DAY, SIR, SO IT'S FRESH.
(LAUGHTER.)
WADE MIQUELON: THANK YOU.
JUDGE DAVILA: WHEN YOU ARE COMFORTABLE, WOULD YOU PLEASE STATE YOUR NAME AGAIN, PLEASE.
WADE MIQUELON: MY NAME IS WADE MIQUELON.
JUDGE DAVILA: THANK YOU. AND I'LL REMIND YOU, SIR, YOU ARE STILL UNDER OATH.
(GOVERNMENT'S WITNESS, WADE MIQUELON, WAS PREVIOUSLY SWORN.)
JUDGE DAVILA: COUNSEL.
MR. SCHENK: THANK YOU, YOUR HONOR.
DIRECT EXAMINATION (RESUMED)
MR. SCHENK: GOOD MORNING, MR. MIQUELON. DO YOU STILL HAVE THE BINDER OF DOCUMENTS IN FRONT OF YOU?
WADE MIQUELON: I DO.
MR. SCHENK: IF YOU WOULD OPEN THE BINDER UP TO TAB 372, PLEASE. YOUR HONOR, I BELIEVE THIS IS BEING MOVED IN BASED ON A STIPULATION BETWEEN THE PARTIES.
MR. DOWNEY: THAT'S CORRECT, YOUR HONOR. NO OBJECTION.
JUDGE DAVILA: THANK YOU. IT'S ADMITTED, AND IT MAY BE PRESENTED TO THE JURY. I'M SORRY.
(GOVERNMENT'S EXHIBIT 372 WAS RECEIVED IN EVIDENCE.)
MR. SCHENK: THANK YOU, YOUR HONOR.
MR. SCHENK: MR. MIQUELON, WE'RE LOOKING AT A DOCUMENT THAT IS ENTITLED THERANOS MASTER PURCHASE AGREEMENT. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: YESTERDAY AT THE CLOSE OF YOUR TESTIMONY WE DISCUSSED EXHIBIT 300, WHICH WAS AN EMAIL THAT YOU WROTE TO OTHERS AT WALGREENS IN ADVANCE OF A PRESENTATION BY FOLKS FROM THERANOS. DO YOU RECALL THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND THAT WAS AROUND APRIL OF 2010?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND NOW WE'RE LOOKING AT THE AGREEMENT DATED IN JULY OF 2010. COULD YOU BRIEFLY DESCRIBE FOR THE JURY WHAT WAS HAPPENING IN THE THERANOS-WALGREENS RELATIONSHIP BETWEEN THOSE INTERVENING MONTHS FROM THE APRIL MEETING UNTIL THIS JULY AGREEMENT?
WADE MIQUELON: IN THOSE EARLY MONTHS THERE WAS, AGAIN, INITIAL DILIGENCE DONE IN TERMS OF UNDERSTANDING THERANOS, THE TECHNOLOGY, AND UNDERSTANDING HOW IT MIGHT FIT IN TERMS OF A PARTNERSHIP WITH WALGREENS.
MR. SCHENK: OKAY. AND DESCRIBE THE PROCESS OF GETTING TO THE STEP OF PUTTING TOGETHER A MASTER PURCHASE AGREEMENT.
WADE MIQUELON: THERE WAS A MULTI FUNCTIONAL TEAM THAT WAS FORMED, INCLUDING HEALTH CARE PROFESSIONALS. THERE WAS A CONSULTING FIRM THAT WAS BROUGHT IN THAT HAD EXPERTISE IN LABS TO LOOK AT THERANOS, AS WELL AS THE COMPETITIVE SET OF OTHER COMPANIES OUT THERE. THERE WAS ALSO A CONSULTING FIRM THAT WAS BROUGHT IN THAT SPECIALIZES IN DEFINING NEW BUSINESS MODELS AND HOW THEY MIGHT WORK.
MR. SCHENK: AND AS CFO, WHAT WAS YOUR ROLE IN THIS?
WADE MIQUELON: I WOULD SAY AN EXECUTIVE SPONSOR TO HELP SUPPORT THE TEAM TO HELP ENABLE THEM AND PROVIDE RESOURCES FOR THEM TO FORM THEIR CONCLUSIONS.
MR. SCHENK: OKAY. AND WHEN YOU SAY "TO SUPPORT THEM," WHAT DO YOU MEAN?
WADE MIQUELON: THE TEAM, THE MULTI FUNCTIONAL TEAM AT WALGREENS THAT WAS WORKING ON THE PROJECT.
MR. SCHENK: OKAY. NOW LET'S TURN TO THE DOCUMENT. ON THE FIRST PAGE TOWARDS THE BOTTOM THERE'S A SIGNATURE. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND WHOSE SIGNATURE IS THAT?
WADE MIQUELON: THAT'S MINE.
MR. SCHENK: ON THE SECOND PAGE TOWARDS THE BOTTOM THERE'S ALSO A SIGNATURE.
WADE MIQUELON: YES.
MR. SCHENK: AND WHOSE SIGNATURE IS THAT?
WADE MIQUELON: IT SAYS MS. HOLMES.
MR. SCHENK: OKAY. NOW LET'S LOOK AT THE THIRD PAGE. THE THIRD PAGE IS LABELLED SCHEDULE A, AND UNDER NUMBER 2, I'D LIKE TO ASK YOU A QUESTION. NUMBER 2 IS PROGRAM OBJECTIVES. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: IT SAYS THAT "THE OBJECTIVES OF THIS PROGRAM INCLUDE" MAKE BLOOD LAB -- I'M SORRY -- "MAKE BLOOD TESTING FASTER, FAR MORE ACCESSIBLE, EFFECTIVE, ACTIONABLE BY INTRODUCING A MORE COST EFFECTIVE, REAL-TIME BLOOD TESTING SERVICE AT WALGREENS STORES AND WALGREENS' OTHER CLINICAL OPERATIONS NATIONWIDE." IS THAT YOUR UNDERSTANDING OF WHAT THE OBJECTIVE WAS?
WADE MIQUELON: YES.
MR. SCHENK: AND IT DESCRIBES MAKING BLOOD TESTING FASTER AND MORE ACCESSIBLE, EFFECTIVE AND ACTIONABLE, WHAT DID THAT MEAN?
WADE MIQUELON: THAT WAS THE NOTION OF HAVING THERANOS LAB TESTING AT WALGREENS.
MR. SCHENK: AND WHY WAS THERANOS BLOOD TESTING AT WALGREENS FASTER?
WADE MIQUELON: AGAIN, AS WE HAVE TALKED A LITTLE BIT YESTERDAY, WHEN YOU LOOK AT THE THERANOS TECHNOLOGY AND THE ABILITY TO ENTER A BLOOD SAMPLE INTO AN EDISON AND GET RESULTS IN, YOU KNOW, 15 MINUTES THAT THEN COULD BE MOVED TO THE CLOUD FOR ASSESSMENT, THAT WOULD BE A FASTER PROCESS THAN CONVENTIONAL LAB.
MR. SCHENK: AND AT THIS STAGE OF THE RELATIONSHIP BETWEEN WALGREENS AND THERANOS, WAS YOUR UNDERSTANDING THAT THE EDISON DEVICE WOULD BE USED TO TEST PATIENT'S BLOOD?
WADE MIQUELON: YES. BUT THERE WAS A LOT OF BACK AND FORTH OVER THE SUBJECT OF MONTHS IN TERMS OF WHETHER IT WAS BETTER TO HAVE THAT DEVICE IN A STORE OR NOT IN A STORE, AND WHETHER IT SHOULD ONLY BE THE NANOTAINER OR THE BLOOD DRAW THAT WOULD BE IN THE STORE OR WHETHER THE EDISON DEVICE WOULD BE THERE AS WELL.
MR. SCHENK: OKAY. SO THERE WAS SOME DISCUSSION ABOUT WHERE THE DEVICE WOULD BE LOCATED. BUT HOW ABOUT ON WHAT DEVICE THE BLOOD WOULD BE TESTED.
WADE MIQUELON: RIGHT.
MR. SCHENK: WHAT WAS YOUR UNDERSTANDING?
WADE MIQUELON: MY UNDERSTANDING WAS THAT THE BLOOD WOULD BE TESTED ON THE EDISON DEVICE.
MR. SCHENK: AND WHERE DID YOU GET THAT UNDERSTANDING?
WADE MIQUELON: FROM MY DISCUSSIONS WITH SUNNY AND ELIZABETH, AND THROUGH OUR DILIGENCE, THAT WAS OUR COMPANY'S UNDERSTANDING.
MR. SCHENK: OKAY. IF YOU COULD TURN THE PAGE NOW TO PAGE 6. PAGE 6 IS SCHEDULE B. AND UNDER NUMBER 2, BEST PRICE GUARANTEE. DO YOU SEE THAT?
WADE MIQUELON: AGAIN, WHICH SECTION?
MR. SCHENK: PAGE 6, SCHEDULE B, AND THEN THE SECOND SECTION, 2.
WADE MIQUELON: YES.
MR. SCHENK: BEST PRICE GUARANTEE?
WADE MIQUELON: RIGHT.
MR. SCHENK: ON THE BOTTOM, TOWARDS THE BOTTOM OF THIS PARAGRAPH IT SAYS, FOR PURPOSES OF THIS AGREEMENT AVAILABLE CARTRIDGES INCLUDE FIRST GENERATION CARTRIDGES OF THERANOS SYSTEMS VERSIONS 1, 2, AND 3 AS DEFINED BELOW, AND NOW WE SEE A, B, AND C, VERSION 1, OR V1, VERSION 2 AND VERSION 3. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND WHAT WAS YOUR UNDERSTANDING ABOUT THE INFORMATION CONVEYED IN THIS SECTION OF THE AGREEMENT?
WADE MIQUELON: ESSENTIALLY MY UNDERSTANDING OF THIS SECTION WAS TO MAKE SURE THAT BY WORKING WITH THERANOS WE WOULD HAVE SOME FORM OF EXCLUSIVITY, AS WELL AS BEST -- MOST FAVORED NATION PRICING AROUND THE TESTS THAT WERE CURRENTLY AVAILABLE ALSO AROUND THE TESTS THAT WOULD HOPEFULLY BE DEVELOPED IN THE FUTURE.
MR. SCHENK: AND WHY WAS THAT IMPORTANT TO WALGREENS? WHY WAS FAVORED PRICING IMPORTANT TO WALGREENS?
WADE MIQUELON: WELL, I THINK IT WAS THE NOTION THAT IF WE WERE GOING TO HAVE A DEEP PARTNERSHIP AND BE INVESTING TOGETHER IN RESOURCES AND TIME AND MONEY, THAT THAT SHOULD GIVE THE COMPANY SOME COMPETITIVE ADVANTAGE VERSUS SOMEONE ELSE WHO HADN'T DONE THAT AND WHO MIGHT CHOOSE TO PARTNER WITH THEM.
MR. SCHENK: UNDER A VERSION 1, OR V1, IT SAYS "ALL ROUTINE LABORATORY TESTS SPECIFIED ON SCHEDULE D." NOW, IF YOU'LL FOLLOW ME TO PAGE 23. DO YOU SEE ON SCHEDULE D, PAGE 23, WHERE IT SAYS "ROUTINE LABORATORY TESTS (VERSION 1); LIST ATTACHED TO END OF AGREEMENT." DO YOU SEE THAT?
WADE MIQUELON: YES, I SEE THAT.
MR. SCHENK: AND THEN IF WE GO TO PAGE 37, THE END OF THE AGREEMENT, DO YOU SEE THE FIRST PAGE OF EIGHT PAGES OF THERANOS BASE ASSAY LIBRARY?
WADE MIQUELON: YES.
MR. SCHENK: AND IF WE COULD ON THE SCREEN SCROLL THROUGH THE NEXT EIGHT PAGES TO SHOW THE JURY THE ASSAY LIBRARY BEGINNING ON PAGE 37. MR. MIQUELON, WHAT WAS YOUR UNDERSTANDING OF WHAT THIS WAS, THE BASE ASSAYS LIBRARY?
WADE MIQUELON: THIS WAS MY UNDERSTANDING OF THE TESTS THAT THEY WOULD BE ABLE TO DO, AS WELL AS SCALE. AND BY "SCALE" I MEAN DOING ONES ON A BETA MACHINE WOULD BE ONE THING, BUT TO BE ABLE TO DEVELOP CONSISTENT MACHINES, MULTIPLE CARTRIDGES, I.T. INFRASTRUCTURE SYSTEMS AROUND IT WERE PART OF THE PROPOSITION, THIS WOULD BE KIND OF THE, KIND OF THE BASE LEVEL TESTING, IF YOU WILL, THAT WOULD BE READY FOR A LAUNCH AT SOME POINT.
MR. SCHENK: OKAY. AND NOW IF WE COULD GO BACK JUST BRIEFLY TO EXHIBIT 300. AT THE BOTTOM NUMBER 2 UNDER YOUR LIST OF REASONS, NUMBER 2 IS THE REASONS WHY WE'RE SO ENCOURAGED ARE 96 PERCENT OF TESTS DONE AT BIG LABS WILL BE ABLE TO BE DONE ON THESE DEVICES. DID YOU UNDERSTAND THAT THE THERANOS BASE ASSAYS LIBRARY WAS 96 PERCENT OF THE LAB TESTS DONE AT BIG LABS?
WADE MIQUELON: MY UNDERSTANDING WAS THAT, AGAIN, THE PLATFORM THAT WAS BUILT FOR THAT BASE LEVEL TESTING WOULD BE ABLE TO DO 96 PERCENT OF THE TESTING DONE AT LABS THROUGH, AGAIN, THE BLOOD, SALIVA OR THE URINE THROUGH THE IMMUNOASSAY TESTING.
MR. SCHENK: AND DID YOU GET THIS UNDERSTANDING FROM YOUR CONVERSATIONS WITH MS. HOLMES?
WADE MIQUELON: IT WAS FROM MY CONVERSATION WITH BOTH SUNNY AND ELIZABETH.
MR. SCHENK: AND ALSO FROM THE POWERPOINT SLIDE OR DOCUMENTS THAT THEY SHOWED TO YOU, DID YOU GET THE UNDERSTANDING FROM DOCUMENTS ALSO?
WADE MIQUELON: THAT WAS MY UNDERSTANDING.
MR. SCHENK: OKAY. NOW, IF WE COULD GO TO -- BACK TO EXHIBIT 372, PAGE 6. WE TALKED ABOUT THE V1. NOW I'D LIKE TO MOVE DOWN TO VERSION 2. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: NO, I'M SORRY. ON 372, PAGE 6 AT THE TOP 2B UNDER BEST PRICE GUARANTEE B?
WADE MIQUELON: YES.
MR. SCHENK: B READS, THE FOLLOWING LABORATORY TESTS INCLUDING, BUT NOT LIMITED TO, INFLUENZA/STREP, PREGNANCY, FERTILITY, PRENATAL/TRIMESTER, AND THEN IT CONTINUES, THAT THEY WILL MEMORIALIZE THE CPT CODES THAT ARE INCLUDED IN VERSION TO AS SUCH CODES BECOME AVAILABLE. WHAT WAS YOUR UNDERSTANDING ABOUT VERSION 2?
WADE MIQUELON: MY UNDERSTANDING ABOUT VERSION 2 IS THOSE WOULD BE PERHAPS MORE COMPLEX TESTS AND LESS COMMONPLACE THAN THE V1 TESTS, THAT THEY WERE WORKING ON THOSE TO SOME DEGREE TO BRING THEM INTO THE FUTURE.
MR. SCHENK: AND THEN HOW ABOUT VERSION 3? VERSION 3 TALKS ABOUT PREDICTIVE TESTS. DID YOU HAVE AN UNDERSTANDING ABOUT THOSE TESTS?
WADE MIQUELON: AGAIN, AS I ALLUDED TO YESTERDAY, VERSION 3 WAS IN SOME WAYS PREDICTIVE TESTS THAT WERE NEW TO THE WORLD, AND AGAIN, THEY WERE WORKING ON SEVERAL OF THOSE WITHOUT ANY GUARANTEE OR PROMISE THAT THOSE WOULD COME TO FRUITION. BUT TO THE EXTENT THAT THEY DID, WE WOULD HOPE THAT WE WOULD HAVE PRIORITY ON THOSE AS WELL.
MR. SCHENK: SO IN 2010 WHEN YOU WERE NEGOTIATING AND SIGNING THIS AGREEMENT, DID YOU HAVE AN UNDERSTANDING THAT THERANOS HAD THE ABILITY TO DO SOME TESTS, LIKE THE VERSION 1 TESTS, PRESENTLY, AND THAT THERE WERE OTHER TESTS THAT THEY WERE WORKING ON AND WOULD BECOME AVAILABLE IN THE FUTURE?
WADE MIQUELON: THAT WAS MY UNDERSTANDING. AND AGAIN, TO THE EXTENT THAT THEY BECAME AVAILABLE, OR NOT, AGAIN, VERSION 3 IS IN SOME WAYS VERY FUTURISTIC STILL, BUT IF THEY WERE TO BECOME AVAILABLE, WE WOULD BE FIRST IN THE QUEUE TO BE ABLE TO VISUALIZE THOSE.
MR. SCHENK: I SEE. IF YOU WOULD NOW TURN TO PAGE 10 IN THIS EXHIBIT, THERE'S A SECTION CALLED CRITICAL VALUES. UNDER CRITICAL VALUES IT SAYS, IN THE EVENT A RESULT REFLECTS ONE OR MORE VALUES AT SUCH VARIANCE WITH NORMAL AS TO BE POTENTIALLY LIFE-THREATENING, OTHERWISE KNOWN AS A CRITICAL VALUE, THERANOS WOULD BE SOLELY RESPONSIBLE FOR NOTIFYING THE ORDERING PRACTITIONER, THE TECHNICIAN THAT PERFORMED THE TEST, AND TO THE EXTENT REQUIRED BY STATE LAW, ANY OTHER INDIVIDUALS OR ENTITIES OF THE CRITICAL VALUE AND USING COMMERCIALLY REASONABLE EFFORTS TO VERIFY THAT THE ORDERING PRACTITIONER RECEIVED NOTIFICATION OF THE CRITICAL VALUE. DID YOU HAVE AN UNDERSTANDING REGARDING WHOSE OBLIGATION IT WAS TO NOTIFY PHYSICIANS IF A BLOOD TEST RESULTED IN A CRITICAL VALUE?
WADE MIQUELON: YEAH, I'M NOT A HEALTH CARE PROFESSIONAL, BUT MY UNDERSTANDING WAS THAT THE PATIENT WAS EFFECTIVELY THEIR PATIENT AND SO IT WAS VERY IMPORTANT BECAUSE THEY WOULD HAVE THEIR DATA, AND BECAUSE OF THE STARK LAWS THAT HAS TO BE PROTECTED, THAT IT WOULD BE THEIR RESPONSIBILITY TO DO ANY OF THE FOLLOW-UP WORK AROUND THE DATA OF THEIR PATIENT.
MR. SCHENK: AND DID YOU EXPECT THERANOS TO FOLLOW THROUGH ON THIS?
WADE MIQUELON: MY ASSUMPTION WOULD BE YES.
MR. SCHENK: IF YOU'LL TURN NOW TO PAGE 24. ON PAGE 24 THERE ARE SOME DEFINITIONS, AND THE ONE I WOULD LIKE TO ASK YOU ABOUT IS NUMBER 10, DEVICE. DEVICE READS, "DEVICE MEANS THERANOS'S READER CAPABLE OF RUNNING CARTRIDGES, EXTRACTING DATA FROM A CARTRIDGE OR OTHER ANALYTICAL DEVICE, TRANSMITTING DATA TO A DATABASE HOSTED BY THERANOS, COMMUNICATING WITH AUTHORIZED PARTIES AND PROVIDING ANALYTICAL INFORMATION." DID YOU UNDERSTAND THAT THE DEVICE THAT THERANOS WOULD BE USING TO TEST BLOOD WAS THE EDISON DEVICE?
WADE MIQUELON: THAT WAS MY UNDERSTANDING. I DON'T KNOW AT WHAT TIME IT WAS COINED AS THE EDISON, BUT IT WAS ESSENTIALLY THE SAME DEVICE.
MR. SCHENK: YOU UNDERSTOOD IT WAS A DEVICE MANUFACTURED BY THERANOS?
WADE MIQUELON: RIGHT.
MR. SCHENK: DID YOU UNDERSTAND THAT THERANOS WOULD BE TESTING PATIENT'S BLOOD ON MODIFIED THIRD PARTY OR OTHER MANUFACTURER'S DEVICE?
WADE MIQUELON: IT WASN'T MY UNDERSTANDING, NO.
MR. SCHENK: DID YOU UNDERSTAND THAT THERANOS WOULD BE TESTING BLOOD ON UNMODIFIED THIRD PARTY DEVICES, DEVICES MANUFACTURED BY OTHER COMPANIES AND NOT MODIFIED BY THERANOS?
WADE MIQUELON: AGAIN, MY UNDERSTANDING WAS TO THE EXTENT THAT THEY WERE DOING THAT, THAT WAS PART OF THE CALIBRATION PROCESS TO BE ABLE TO MAKE SURE THAT THERANOS WAS AS ACCURATE AS.
MR. SCHENK: IS THE CONCEPT THAT YOU EXPLAINED TO ME YESTERDAY, THAT THEY MAY HAVE USED, THERANOS MAY HAVE USED THIRD PARTY DEVICES, BUT FOR THE PURPOSE OF CONFIRMING THE ACCURACY OF THEIR DEVICE; IS THAT RIGHT?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, YES.
MR. SCHENK: IF NOW YOU'LL TURN TO EXHIBIT 488. DO YOU RECOGNIZE EXHIBIT 488?
WADE MIQUELON: YES, I DO.
MR. SCHENK: IS THIS AN EMAIL WITHIN WALGREENS, INCLUDING YOU, THAT CONTAINS AS AN ATTACHMENT SOMETHING CALLED PROJECT BETA SLIDES?
WADE MIQUELON: YES, THAT'S CORRECT.
MR. SCHENK: AND WERE THOSE SLIDES DISCUSSING THE THERANOS PROJECT?
WADE MIQUELON: YES.
MR. SCHENK: YOUR HONOR, THE GOVERNMENT OFFERS 488.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 488 WAS RECEIVED IN EVIDENCE.)
MR. SCHENK: THANK YOU.
MR. SCHENK: FIRST LET'S JUST TALK ABOUT THE RECIPIENTS ON THE EMAIL. DO YOU KNOW WHO THIS, GENERALLY SPEAKING, WHO THIS GROUP OF INDIVIDUALS, WHO THIS WAS?
WADE MIQUELON: YES.
MR. SCHENK: WHO?
WADE MIQUELON: THE GROUP THAT IT'S TO WOULD INCLUDE MANY OF THE SENIOR LEADERS OF THE COMPANY, AS WELL AS HEALTH CARE EXPERTS IN THE COMPANY, AS WELL AS OTHER LEADERS WHO HAVE BEEN IDENTIFIED TO BE ON THE PROJECT TEAM.
MR. SCHENK: OKAY. AND WHEN YOU SAY "THE PROJECT TEAM"?
WADE MIQUELON: THE THERANOS PARTNERSHIP PROJECT TEAM.
MR. SCHENK: OKAY. THE DATE ON THIS IS -- IT WAS SENT AT THE BEGINNING OF NOVEMBER, BUT FOR A MEETING IT LOOKS LIKE AT THE BEGINNING OF DECEMBER OF 2011. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND THE LAST DOCUMENT THAT WE WERE LOOKING AT WAS THE AGREEMENT THAT WAS SIGNED IN THE SUMMER OF 2010.
WADE MIQUELON: YES.
MR. SCHENK: NOW, WE'VE MOVED ABOUT A YEAR AND A HALF LATER TO THE END OF 2011?
WADE MIQUELON: YES.
MR. SCHENK: I WONDER IF YOU'LL EXPLAIN TO THE JURY WHAT HAPPENED IN THAT YEAR AND A HALF WITH REGARD TO THE THERANOS PROJECT? WHAT WORK WAS HAPPENING?
WADE MIQUELON: THERE WAS A LOT MORE TO DO THAN JUST SPECIFIC TO THE TECHNOLOGY. SO THERE WAS A LOT OF WORK TO DO TO UNDERSTAND, FOR EXAMPLE, THE BUSINESS MODEL. BY BUSINESS MODEL, YOU KNOW, WHERE WOULD THE MACHINES RESIDE IN A WALGREENS ESSENTIALLY? WHO WOULD OWN THE PATIENT? HOW WOULD MEDICAL BILLING WOULD WORK? WHAT I.T. AND INFORMATION WOULD BE REQUIRED? WHAT APPROVALS MIGHT BE REQUIRED? SO JUST A LOT OF OTHER WORK THAT HAD TO BE DONE TO SUPPORT THE TECHNOLOGY.
MR. SCHENK: OKAY. AND THAT WORK WAS HAPPENING AFTER SIGNING THAT PURCHASE AGREEMENT UP THROUGH THIS TIME WHEN WE'RE LOOKING AT THESE SLIDES?
WADE MIQUELON: YEAH, THAT WORK HAD CONTINUED ON FOR PROBABLY YEARS AFTER THIS AS WELL.
MR. SCHENK: OKAY. IF YOU'LL TURN NOW TO THE FIRST PAGE OF THE SLIDES, IT'S PAGE 3. IT'S CALLED PROJECT BETA. WHAT DOES THAT MEAN?
WADE MIQUELON: THE PROJECT HAD DIFFERENT CODE NAMES OVER TIME. BETA WAS ONE CODE NAME, AND I THINK AT SOME POINT IT WAS CALLED PROJECT NORMANDY. BUT IT WAS DIFFERENT NAMES FOR THE SAME PROJECT, WHICH WAS THE THERANOS PARTNERSHIP.
MR. SCHENK: WAS THAT AN INTERNAL WALGREENS NAME FOR THE PROJECT?
WADE MIQUELON: CORRECT. I DON'T KNOW -- I THINK MAYBE THE JOINT NAME WE HAD WAS NORMANDY ULTIMATELY, BUT I'M NOT CERTAIN.
MR. SCHENK: OKAY. AND NOW IF YOU'LL TURN TO PAGE 8. ON PAGE 8, NUMBER 6 IS WHAT I WANT TO ASK YOU ABOUT. NUMBER 6 SAYS, "THERANOS NATIONAL ROLLOUT WITH WALGREENS (PENDING PILOT OUTCOME)." WHAT DOES THAT MEAN?
WADE MIQUELON: THIS WAS THE HYPOTHESIS OR THE ILLUSTRATIVE VERSION OF IF WE WERE TO DO A PILOT AND GET CERTAIN SUCCESS METRICS, THEN WE WOULD EXPAND TO THE NEXT LEVEL, AND IF THAT WAS SUCCESSFUL, THEN WE WOULD EXPAND TO THE NEXT LEVEL. SO THIS WAS, AGAIN, KIND OF AN ILLUSTRATIVE TIMELINE OF WHAT SUCCESS COULD LOOK LIKE AT THAT POINT.
MR. SCHENK: WHEN YOU SAY HAVE A PILOT, WHAT DO YOU MEAN BY THAT?
WADE MIQUELON: SOME LEVEL OF YOU, YOU KNOW, NUMBER OF STORES, YOU KNOW, WHETHER ONE OR A FEW TO BE ABLE TO UNDERSTAND, YOU KNOW, WHAT IS THE PATIENT EXPERIENCE LIKE? IS IT GOING WELL? IS MEDICAL BILLING HAPPENING PROPERLY? ARE HEALTH CARE PLANS ACCEPTING IT? ARE DOCTORS RECOMMENDING IT? THOSE KINDS OF THINGS.
MR. SCHENK: AND THEN WOULD WALGREENS EVALUATE THE SUCCESS, SORT OF THE METRICS YOU'VE DESCRIBED, TO DETERMINE WHETHER TO MOVE TO THE NEXT PHASE?
WADE MIQUELON: YEAH, I WOULD SAY IT WOULD BE A JOINT EVALUATION. YOU KNOW, BOTH PARTIES WOULD WANT THE KEY METRICS THAT WERE IMPORTANT TO BE SATISFIED.
MR. SCHENK: WAS A NATIONAL ROLLOUT EVER GUARANTEED?
WADE MIQUELON: NO, NEVER GUARANTEED. ALWAYS PENDING SUCCESS.
MR. SCHENK: WAS THERE A PILOT AT SOME POINT?
WADE MIQUELON: THERE WAS A PILOT.
MR. SCHENK: AND WAS THERE ONE OR MORE PEOPLE AT WALGREENS WHOSE JOB IT WAS TO EVALUATE SUCCESS TO DETERMINE WHETHER SOME OF THE METRICS HAD BEEN MET?
WADE MIQUELON: MULTIPLE PEOPLE.
MR. SCHENK: WAS THAT YOUR JOB OR SOMEBODY ELSE'S?
WADE MIQUELON: IT WAS NOT MY JOB. IT WAS THE PROJECT TEAM'S.
MR. SCHENK: OKAY. NOW WE CAN TURN TO PAGE 5 -- I'M SORRY, EXHIBIT 503. 503 LOOKS LIKE AN EMAIL FROM DR. ROSAN TO YOU CONTAINING SOME SLIDES. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND ARE THE SLIDES, SLIDES THAT WERE PRESENTED TO WALGREENS BY THERANOS?
WADE MIQUELON: YES.
MR. SCHENK: YOUR HONOR, THE GOVERNMENT OFFERS 503.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 503 WAS RECEIVED IN EVIDENCE.)
BY MR. SCHENK:
MR. SCHENK: THE DATE ON THIS ONE IS JANUARY 2012. SO WE'VE NOW MOVED INTO THE BEGINNING OF THE NEXT YEAR, 2012. THE SUBJECT IS, HERE IS THE SLIDE SHOW THAT WAS PRESENTED TO US BY SUNNY AND ELIZABETH. MR. BALWANI AND MS. HOLMES; IS THAT CORRECT?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND NOW IF WE CAN TURN TO SOME OF THE SLIDES. THE FIRST -- LET'S LOOK AT THE FIRST PAGE OF THE SLIDES. IT'S PAGE 2 OF THE EXHIBIT. IT'S ENTITLED PROJECT NORMANDY BRIEFING. WHAT IS PROJECT NORMANDY?
WADE MIQUELON: PROJECT NORMANDY IS -- IT'S BASICALLY THE SAME AS PROJECT BETA. I THINK IT'S WHAT THE NAME MORPHED INTO.
MR. SCHENK: OKAY. THE RELATIONSHIP BETWEEN WALGREENS AND THERANOS --
WADE MIQUELON: RIGHT.
MR. SCHENK: -- WAS CALLED PROJECT NORMANDY?
WADE MIQUELON: RIGHT.
MR. SCHENK: IF WE CAN TURN TO PAGE 3. PAGE 3 IS CALLED WALGREENS THERANOS PARTNERSHIP OBJECTIVES. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND ABOUT THREE UP FROM IT THE BOTTOM WE SEE, "NEW GROWTH DRIVER FOR EMPLOYER BUSINESS. "LOWEST COST, HIGHEST QUALITY TESTING FROM A FINGERSTICK." WHEN MS. HOLMES AND MR. BALWANI WERE DESCRIBING THE BUSINESS OPPORTUNITY FOR WALGREENS, DID THEY TALK ABOUT COST?
WADE MIQUELON: WE DID.
MR. SCHENK: AND WHAT DID YOU HEAR?
WADE MIQUELON: WE TALKED ABOUT THE OPPORTUNITY AT SCALE, AGAIN, TO BE ABLE TO BE BETTER, FASTER, AND CHEAPER THAN A CONVENTIONAL LAB BECAUSE YOU WERE EFFECTIVELY CUTTING OUT A LOT OF WASTE IN TERMS OF REAL ESTATE, SUPPLY CHAIN, HANDOFFS, EXPENSES, CONVENTIONAL MACHINES.
MR. SCHENK: AND IF THERANOS USED CONVENTIONAL MACHINES, FOR EXAMPLE, WOULD YOU LOSE SOME OF THE COST BENEFIT THAT YOU JUST DESCRIBED?
WADE MIQUELON: YOU WOULD.
MR. SCHENK: AND IF YOU NEEDED TO USE COURIERS, OR HANDOFF AS YOU JUST DESCRIBED, WOULD YOU ALSO LOSE SOME OF THE COST BENEFIT?
WADE MIQUELON: YOU WOULD LOSE SOME.
MR. SCHENK: IT NEXT SAYS, "HIGHEST QUALITY TESTING FROM A FINGERSTICK." WHAT WAS YOUR UNDERSTANDING OF WHAT THAT REFERRED TO?
WADE MIQUELON: MY UNDERSTANDING WAS THAT THE TEST RESULTS FOR THE TESTS THAT THEY WERE DOING AND VALIDATING WERE AS GOOD AS, THEY WERE HIGHLY CORRELATED TO A TRADITIONAL LAB. THE QUALITY COMES IN AGAIN BECAUSE, LIKE I SAID BEFORE, A FEW REASONS. NUMBER ONE IS I WAS TOLD THAT YOU COULD CALIBRATE EVERY MACHINE VERSUS ANOTHER MACHINE SO YOU DON'T HAVE THIS ISSUE OF DIFFERENT CALIBRATIONS FOR DIFFERENT MACHINES FOR DIFFERENT TESTS, AS WELL AS THE FACT THAT SOME TESTS ARE ULTIMATELY REJECTED BY A CONVENTIONAL LAB AND THAT THEIR REJECTION RATE WAS THUS FAR LOWER THAN THAT. AND ALSO JUST IS THE FACT THAT IF YOU'RE ABLE TO, YOU KNOW, GET A TEST DONE AND RESULTS BACK SOONER, THAT'S ALSO BENEFICIAL FOR A PATIENT.
MR. SCHENK: YOU DESCRIBED THE CALIBRATION BETWEEN MACHINES. COULD YOU EXPLAIN THAT TO ME?
WADE MIQUELON: AGAIN, MY UNDERSTANDING IS THAT THERE'S AN ACCEPTABLE RANGE FOR ANY GIVEN MACHINE FOR WHAT THE TOLERANCE CAN BE, BUT THAT TWO DIFFERENT MACHINES FROM TWO DIFFERENT MANUFACTURERS FOR THE SAME TEST MIGHT HAVE SLIGHTLY DIFFERENT CALIBRATION PARAMETERS. SO IF YOU -- AGAIN, I USE THE EXAMPLE IF YOU GOT A PSA TEST ONE DAY ON ONE MACHINE AND THE RESULTS CAME BACK ON ANOTHER MACHINE, THEY MAY NOT BE EXACTLY APPLES AND APPLES, BUT BECAUSE IF YOU STAYED WITHIN THE THERANOS SYSTEM ON THEIR MACHINES, THAT THOSE MACHINES ESSENTIALLY WOULD BE CALIBRATED VERSUS EACH OTHER AND THEN YOU WOULD BE RELYING UPON THAT DATA AT A HIGHER LEVEL.
MR. SCHENK: AND WHO DID YOU GET THAT UNDERSTANDING FROM?
WADE MIQUELON: JUST I THINK THROUGH THE DISCUSSIONS WITH ELIZABETH AND SUNNY.
MR. SCHENK: AND IT ALSO SAYS THIS HIGHEST QUALITY TESTING FROM A FINGERSTICK. DID YOU HAVE AN UNDERSTANDING ABOUT HOW THE BLOOD WOULD BE DRAWN?
WADE MIQUELON: I DID.
MR. SCHENK: AND WHAT WAS YOUR UNDERSTANDING?
WADE MIQUELON: AGAIN, FROM WHAT I WITNESSED AND EXPERIENCED PERSONALLY IS A FINGERSTICK WOULD GO, WOULD PROBABLY GO INTO WHAT WAS CALLED A NANOTAINER OR A BCD, AND THAT BCD WOULD GO INTO THE THERANOS MACHINE.
MR. SCHENK: YOU SAID WHAT YOU EXPERIENCED PERSONALLY. WHAT DO YOU MEAN?
WADE MIQUELON: MYSELF AND A FEW OTHER EXECUTIVES HAD OUR BLOOD TESTED. I THINK I HAD MY TESTED TWICE.
MR. SCHENK: AND DO YOU RECALL WHERE YOU WERE WHEN THAT HAPPENED?
WADE MIQUELON: I BELIEVE I WAS ONE TIME -- THE FIRST TIME WAS IN THE PALO ALTO THERANOS OFFICE, AND THE SECOND TIME I THINK I WAS AT THE PILOT IN PHOENIX.
MR. SCHENK: WOULD THAT HAVE BEEN THE MEETING IN 2010 AROUND THE MARCH TIMEFRAME WHEN YOU WENT OUT TO PALO ALTO, OR WAS THAT A DIFFERENT TIME?
WADE MIQUELON: I DON'T RECALL THE FIRST TIME EXACTLY THE DATE.
MR. SCHENK: WAS THE BLOOD DRAWN FROM YOUR FINGER?
WADE MIQUELON: YES.
MR. SCHENK: AND WHAT DO YOU RECALL FROM THAT?
WADE MIQUELON: JUST GETTING MY RESULTS LATER. AGAIN, IT HAD TO GO, FOR LEGAL REASONS, THROUGH A PHYSICIAN. SO I THINK THE FIRST TIME DR. ROSAN, WHO WAS A PHYSICIAN, GOT THE RESULTS AND THEN PROVIDED THOSE TO ME.
MR. SCHENK: AND WHEN YOU HAD THE DEMO, DID MS. HOLMES EXPLAIN ANYTHING TO YOU ABOUT THE EXPERIENCE YOUR FINGERSTICK, OR YOUR BLOOD WAS BEING TESTED VIA A FINGERSTICK, BUT IN THE FUTURE WALGREENS PATIENTS MIGHT NOT HAVE THEIR BLOOD TESTED THROUGH A FINGERSTICK? DO YOU RECALL HER SAYING ANYTHING LIKE THAT?
WADE MIQUELON: NOT AT THE TIME.
MR. SCHENK: COULD WE NOW TURN TO PAGE 8. PAGE 8, THE SLIDE IS ENTITLED PROJECT NORMANDY: THE WORLD'S FIRST FINGERSTICK BASED CLIA-CERTIFIED LAB THROUGH RETAIL. AND THE FIRST BULLET SAYS 99.9 PERCENT LESS BLOOD. WHAT WAS YOUR UNDERSTANDING THAT THAT WAS A REFERENCE TO?
WADE MIQUELON: THAT'S JUST A RELATIVE COMPARISON OF THE AMOUNT OF BLOOD IN A NANOTAINER VERSUS THE AMOUNT OF BLOOD TAKEN THROUGH VENIPUNCTURE.
MR. SCHENK: AND IF THERANOS WAS TESTING PATIENT'S BLOOD WITH A VEIN DRAW, WOULD IT DRAW LESS BLOOD THEN OR ONLY IF IT USED FINGERSTICK?
WADE MIQUELON: MY UNDERSTANDING -- I NEVER SAW -- IF YOUR QUESTION IS I NEVER SAW THE NANOTAINER DRAW BLOOD FROM A VEIN. IT WAS ALWAYS FROM A FINGER.
MR. SCHENK: NO, I'M SORRY. THE SLIDE SUGGESTS 99.9 PERCENT LESS BLOOD, AND I'M JUST WONDERING IF THAT IS ONLY TRUE IF YOU RECEIVE A FINGERSTICK AS OPPOSED TO A VEIN DRAW?
WADE MIQUELON: YES, YES.
MR. SCHENK: THE NEXT BULLET SAYS, "STATE OF THE ART RESULT TURN AROUND: 4-24 HOURS." WHAT DID YOU UNDERSTAND THAT TO MEAN?
WADE MIQUELON: AGAIN, THAT WAS THE RANGE THAT WE WERE LOOKING AT, AND HOW LONG IT TAKES WAS TO SOME EXTENT WAS DEPENDENT UPON THE BUSINESS MODEL WE RELIED UPON. IF YOU WERE GOING TO HAVE AN EDISON DEVICE IN A WALGREENS, THEORETICALLY YOU COULD GET A RESULT MUCH FASTER THAN IF YOU WERE TAKING NANOTAINERS AND MOVING THEM TO A SITE WHERE YOU HAD MACHINES AT CENTRALLY.
MR. SCHENK: AND WAS FASTER TURN AROUND TIME ATTRACTIVE TO WALGREENS?
WADE MIQUELON: I THINK IT'S ATTRACTIVE TO PATIENTS AGAIN, JUST BECAUSE IF YOU THINK ABOUT GATEWAY TO HEALTH CARE, LAB IS A LARGE GATEWAY. SO FOR SURE TO WALGREENS. ALSO WE TALKED ABOUT THE POSSIBILITY IN RURAL AREAS IN MARKETS THAT ARE LESS DEVELOPED AND WHERE PEOPLE DON'T HAVE IMMEDIATE ACCESS AND IT CAN LEAD TO VERY PROBLEMATIC HEALTH SITUATIONS.
MR. SCHENK: AND THE THIRD BULLET SAYS "NATION'S LOWEST COST AND HIGHEST QUALITY LABORATORY PROVIDER." DID YOU HAVE AN UNDERSTANDING THAT THERANOS WAS REPRESENTING ITSELF TO BE THE HIGHEST QUALITY LAB?
WADE MIQUELON: I THINK OUR COMMON UNDERSTANDING WAS THAT IF THE TECHNOLOGY WORKED AS WE WERE TOLD, THAT IT WOULD BE BETTER, FASTER, CHEAPER, AND THAT WE WOULD BE ABLE TO PROVIDE THE BEST AND LOWEST, YOU KNOW, COST NETWORK TOGETHER.
MR. SCHENK: AND WHERE DID THAT GET THAT UNDERSTANDING FROM?
WADE MIQUELON: I THINK BOTH FROM THE ATTESTATIONS THAT WERE MADE TO US ABOUT THE TECHNOLOGY, AS WELL AS OUR JOINT WORK AS FAR AS UNDERSTANDING THE MARKET SIZE, CURRENT COSTS, THE PAYOR PREFERENCES AND THE LIKE.
MR. SCHENK: THE NEXT PAGE, PAGE 9, THIS DESCRIBES THE PROCESS, THE PROJECT NORMANDY PROCESS. AND UNDER THE PSC COLUMN THERE'S A SECTION CALLED SAMPLE COLLECTION. DO YOU SEE THE SECOND BULLET UNDER SAMPLE COLLECTION?
WADE MIQUELON: YES.
MR. SCHENK: THE SECOND BULLET READS "TECHNICIAN PRICKS PATIENT'S FINGER." DOES THIS DESCRIPTION, A SAMPLE COLLECTION, DESCRIBE VEIN DRAWS?
MR. SCHENK: UNDER THE SECOND COLUMN, CLIA LAB, IN THE SECOND BULLET IT READS "SAMPLES ACCESSED AND QUEUED FOR ANALYSIS ON THERANOS DEVICES USING THERANOS LDT'S IN THERANOS LAB." DOES THIS COLUMN SUGGEST THAT THE SAMPLES ARE GOING TO BE TESTED ON THIRD PARTY DEVICES?
MR. SCHENK: WOULD YOU TURN TO PAGE 11, PLEASE. PAGE 11 IS ENTITLED FASTER SCALEABILITY AT WAG. UNDER SCALEABILITY, THE FIRST BULLET SAYS, "SMALLER SPACE REQUIREMENTS AT RETAIL." WHAT DID YOU UNDERSTAND THAT TO MEAN?
WADE MIQUELON: AGAIN, I THINK IT'S THE WHOLE NOTION THAT RATHER THAN HAVE, YOU KNOW, INCREMENTAL ASSETS OF LAB TESTING AND INDUSTRIAL COURTS AND BUILDINGS AND THEN ULTIMATELY EVEN GOING TO CONVENTIONAL LAB WITH VERY LARGE FACILITIES AND MACHINES, THAT IT DOESN'T TAKE A LOT OF INCREMENTAL SPACE TO DO THAT. IN FACT, AT THE TIME WE HAD A LOT OF TAKE CARE CLINICS, SO YOU COULD ARGUE THAT THE INFRASTRUCTURE IS ALREADY BUILT THERE AND THERE'S REALLY NO INCREMENTAL INVESTMENT FROM THAT POINT OF VIEW.
MR. SCHENK: OKAY. WAS IT ATTRACTIVE TO WALGREENS TO NEED LESS RETAIL SPACE?
WADE MIQUELON: WELL, I THINK WHAT WAS ATTRACTIVE WAS BEING ABLE TO LEVERAGE THE CURRENT FOOTPRINT OF 8,000 STORES POTENTIALLY WITHOUT ADDING EXTRA, YOU KNOW, RETAIL SPACE.
MR. SCHENK: AND WAS THE ASSUMPTION THAT THE AMOUNT OF SPACE THE DEVICE TOOK UP WAS A FACTOR IN THE AMOUNT OF RETAIL SPACE GENERALLY THAT WAS NEEDED?
WADE MIQUELON: I MEAN, AT THE END OF THE DAY IT DIDN'T TAKE UP ANY SPACE REALLY. IT'S ALSO THE OTHER NOTIONS IN HERE JUST ABOUT BEING ABLE TO LEVERAGE YOUR CURRENT STAFF, YOUR PHARMACIES, YOUR NURSE PRACTITIONERS, YOUR PHARMACY TECHS.
MR. SCHENK: AND WHEN YOU SAID IT DIDN'T TAKE UP ANY SPACE, WHAT DID YOU MEAN?
WADE MIQUELON: EFFECTIVELY HOUSING, YOU KNOW, NANOTAINERS IS NOT -- IT DOESN'T TAKE UP A LOT OF SPACE.
MR. SCHENK: I SEE. OKAY. FURTHER DOWN IN THE SLIDE IT TALKS ABOUT STAGES 1, 2, AND 3. THE THIRD ONE WAS A NATIONAL ROLLOUT. DID YOU DISCUSS THE IDEA OF A NATIONAL ROLLOUT WITH MS. HOLMES AND MR. BALWANI?
WADE MIQUELON: YES.
MR. SCHENK: AND DID YOU TELL THEM THAT A NATIONAL ROLLOUT WAS GUARANTEED?
MR. SCHENK: AND WHAT WAS NECESSARY BEFORE WALGREENS WOULD GO NATIONAL WITH THERANOS?
WADE MIQUELON: JUST TO BE SUCCESSFUL AT EVERY PHASE OF EXPANSION, SO STARTING WITH, YOU KNOW, ONE OR A FEW STORES AND MOVING TO MORE, OR A STATE AND MOVING TO MORE. BUT BEING ABLE TO BE SUCCESSFUL IN TERMS OF EFFICACY, SAFETY, BUSINESS MODEL, CLINICAL ACCEPTANCE, INSURANCE COMPANY ACCEPTANCE. I MEAN, THERE ARE A LOT OF DIFFERENT VARIABLES, BUT EFFECTIVELY TESTING FOR EACH OF THOSE TO ENSURE SUCCESS AND, IF NOT, TRYING TO MODIFY AND RECTIFY AND FIX THE BUSINESS MODEL IF POSSIBLE.
MR. SCHENK: OKAY. WOULD YOU TURN TO PAGE 28? THIS SLIDE IS ENTITLED THERANOS'S FINGERSTICK BASED LABORATORY. THE SECOND BULLET IS, "NO REGULATORY RISK." DO YOU HAVE A RECOLLECTION, WHAT DOES THAT MEAN?
WADE MIQUELON: THERE WAS, AGAIN, A LOT OF DISCUSSIONS ON WHAT REGULATORY REQUIREMENTS WERE OR WERE NOT BOTH FROM A, YOU KNOW, A CMS STANDPOINT AS WELL AS FDA. TO SOME EXTENT THIS TECHNOLOGY WAS NEW TO THE WORLD AND SO IT RAISED QUESTIONS THAT MAYBE HADN'T BEEN RAISED BEFORE. SO, FOR EXAMPLE, IF YOU NEED LAB CERTIFICATION, WHERE IS THE LAB? IF YOU HAD A THERANOS MACHINE IN A WALGREENS STORE, DOES THAT MEAN THAT'S THE LAB? OR IF THE DATA IS GOING TO PALO ALTO, IS THAT THE LAB? BUT AGAIN, THESE WERE DIFFERENT DISCUSSIONS THAT WERE EVOLVING AND WE WERE TRYING TO REFINE OUR UNDERSTANDING TO UNDERSTAND WHAT WAS REQUIRED AND WHAT WAS NOT.
MR. SCHENK: OKAY. AND WAS THERANOS SUGGESTING TO YOU THAT THERE WAS NO OR THERE WAS LESS REGULATORY RISK CREATING THIS PARTNERSHIP WITH THERANOS AND WALGREENS?
WADE MIQUELON: I THINK IN FAIRNESS, THIS WAS A DISCUSSION THAT WENT ON AT LEAST A YEAR OR MORE IN TERMS OF WHAT WAS THEIR UNDERSTANDING. WE WERE SEEKING ADVICE, INCLUDING EXTERNALLY ON THE MATTER. I'M PRETTY SURE THEY WERE SEEKING ADVICE, TOO, AND HAVING SOME CONVERSATIONS. BUT, AGAIN, BECAUSE OF THE NEW TO THE WORLD NATURE OF THIS TECHNOLOGY, IT REQUIRED SOME WORK TO UNDERSTAND.
MR. SCHENK: FROM A REGULATORY PERSPECTIVE?
WADE MIQUELON: YES.
MR. SCHENK: OKAY. AT THE BOTTOM OF THE SLIDE WE CAN SEE "LOWEST COST, HIGHEST QUALITY TESTING FROM A FINGERSTICK." AGAIN, WAS THAT SORT OF CONSISTENT WITH YOUR UNDERSTANDING OF WHAT THERANOS WAS OFFERING?
WADE MIQUELON: YES, THAT WHAT WE BELIEVED IT WAS OFFERING, YES.
MR. SCHENK: IF YOU'LL TURN TO THE NEXT PAGE, 29. IT'S ENTITLED ONE DISRUPTION AT A TIME. THERE ARE A FEW BULLETS. THE FIRST ONE IS THE FIRST LAUNCH IN 2012, AND THE SECOND LAUNCH EARLY TO MID-2013, AND THE THIRD LAUNCH 2014 AND AFTER. THE THIRD LAUNCH SAYS "THERANOS MINILABS IN ALL WALGREENS STORES (AS APPROPRIATE)." DID YOU UNDERSTAND THAT THERE WERE STAGES THAT WERE NECESSARY TO SUCCESSFULLY COMPLETE BEFORE THE THERANOS DEVICE WOULD ENTER ALL STORES, ALL WALGREENS STORES?
WADE MIQUELON: YES. EVERY STAGE IS ALWAYS CONTINGENT UPON SUCCESS OF THE PRIOR STAGE.
MR. SCHENK: AND WAS THAT COMMUNICATED TO MS. HOLMES?
WADE MIQUELON: I'M SURE THAT WAS CLEARLY UNDERSTOOD.
MR. SCHENK: AND WHY DO YOU SAY THAT?
WADE MIQUELON: WELL, FOR ONE BECAUSE WE WOULD DEFINE SUCCESS OBJECTIVES AND TALK ABOUT WHAT HAD TO HAPPENED FOR THE NEXT PHASE. I BELIEVE ALSO AS WE WENT ALONG CONTRACTUALLY, THERE WERE PARAMETERS PUT ON THE CONTRACT BECAUSE WE WERE GOING TO A NEW FRONTIER. BUT, AGAIN, AT THE END OF THE DAY, THAT'S THE REASON THAT YOU PILOT AND YOU EXPAND THE PILOT AND YOU HAVE EXPAND THE PILOT PILOT IS BECAUSE YOU WANT TO BE ABLE TO ENSURE THAT YOU'VE GOT IT RIGHT.
MR. SCHENK: IF YOU'LL NOW TURN TO EXHIBIT 617. YOUR HONOR, I BELIEVE WE'RE OFFERING THIS BASED ON A STIPULATION OF THE PARTIES.
MR. DOWNEY: WE HAVE NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 617 WAS RECEIVED IN EVIDENCE.)
BY MR. SCHENK:
MR. SCHENK: EXHIBIT 617 LOOKS TO BE AN AMENDED AND RESTATED THERANOS MASTER SERVICES AGREEMENT. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND THIS ONE IS DATED IN JUNE OF 2012. YOU DESCRIBED ONGOING WORK AND NEGOTIATION BETWEEN WALGREENS AND THERANOS. WAS THAT STILL HAPPENING NOW, BRINGING US UP TO MID-2012?
WADE MIQUELON: YES.
MR. SCHENK: ON THE SECOND PAGE OF THIS DOCUMENT THERE'S A SIGNATURE. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: IS THAT SIGNATURE ABOVE MS. HOLMES'S NAME?
WADE MIQUELON: YES.
MR. SCHENK: AND ON THE THIRD PAGE THERE'S A SIGNATURE. IS THAT YOUR SIGNATURE?
WADE MIQUELON: YES.
MR. SCHENK: AND NOW LET'S TURN TO THE FOURTH PAGE, SCHEDULE A. ON PAGE 4 THERE'S A PARAGRAPH ENTITLED PHASED DISRUPTION.
WADE MIQUELON: OKAY.
MR. SCHENK: DO YOU SEE THAT PARAGRAPH?
WADE MIQUELON: YES.
MR. SCHENK: AND THERE'S A SENTENCE WITHIN IT THAT READS, "WITH THAT IN MIND, AT THE COMMENCEMENT OF THIS AGREEMENT, IT IS THE PARTIES' INTENTION FOR WALGREENS TO ACT AS A PATIENT SERVICE CENTER AND COLLECT BLOOD SAMPLES VIA FINGERSTICK TECHNOLOGY, SMALL SAMPLES OF URINE, SALIVA, FECES OR SWABS WITH LABORATORY TESTING TO BE PERFORMED BY THERANOS IN A CLIA-CERTIFIED OFFSITE LABORATORY." DO YOU SEE THAT?
JUDGE DAVILA: MR. SCHENK, JUST GIVE ME A MOMENT.
(PAUSE IN PROCEEDINGS.)
MR. SCHENK: MS. KRATZMANN, CAN WE SHIFT TO THE ELMO?
COURT CLERK: YES, COUNSEL.
MR. SCHENK: THANK YOU.
JUDGE DAVILA: ALL RIGHT. THANK YOU, MR. SCHENK. YOU MAY PROCEED.
MR. SCHENK: THANK YOU.
MR. SCHENK: SO I JUST READ TO YOU A SENTENCE IN THE MIDDLE OF PARAGRAPH 3. DO YOU SEE THAT SENTENCE?
WADE MIQUELON: YES.
MR. SCHENK: IS THAT ACCURATE? WAS IT THE PARTIES' INTENTION AND WAS IT YOUR UNDERSTANDING THAT THERANOS WAS GOING TO OFFER THIS BLOOD TESTING SERVICES AND COLLECT BLOOD SAMPLES VIA FINGERSTICK TECHNOLOGY?
WADE MIQUELON: YES.
MR. SCHENK: AND THIS IS AN AMENDED AGREEMENT. THE FINGERSTICK ASPECT DID NOT CHANGE FROM THE FIRST TO THE SECOND; IS THAT RIGHT?
WADE MIQUELON: THAT'S CORRECT.
MR. SCHENK: YOUR UNDERSTANDING WAS STILL THAT THERANOS WAS GOING TO PERFORM BLOOD TESTING ON BLOOD DRAWN FROM THE FINGER?
WADE MIQUELON: YES.
MR. SCHENK: IF YOU COULD TURN IN YOUR BINDER TO PAGE 6. DO YOU SEE AT THE BOTTOM OF PAGE 6 THERE'S A SECTION THAT BEGINS INNOVATION FEE?
WADE MIQUELON: YES.
MR. SCHENK: AND THEN THE LANGUAGE ABOUT AN INNOVATION FEE CONTINUES ON THE NEXT PAGE. WHAT WAS THE INNOVATION FEE?
WADE MIQUELON: THE INNOVATION FEE, TO MY UNDERSTANDING, WAS THAT WE WERE AT THE POINT WHERE WE HAD EVOLVED A BUSINESS MODEL AND WE WERE GETTING READY TO COMMERCIALIZE, AND SO THIS AGREEMENT SUPERSEDED THE PRIOR AGREEMENT FROM THE STANDPOINT THAT IT REFLECTED THE LATEST UNDERSTANDING. THE INNOVATION FEE WAS DERIVED TO SECURE THE PARTNERSHIP IN EXCLUSIVITY, THE PRICING, ET CETERA, AND PROVIDE FUNDS TO THERANOS THAT WOULD HELP ENABLE THEM TO CREATE THE SCALE TO BEGIN EXPANDING THE VALUE PROPOSITION.
MR. SCHENK: MONEY WOULD BE PAID FROM WALGREENS TO THERANOS?
WADE MIQUELON: THAT'S CORRECT.
MR. SCHENK: AND IT HAS A SCHEDULE HERE, OR MILESTONES THAT SHOULD BE MET BEFORE MONEY IS DISTRIBUTED. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: DID WALGREENS END UP MAKING PAYMENTS TO THERANOS?
WADE MIQUELON: MY UNDERSTANDING IS YES.
MR. SCHENK: AND DO YOU RECALL THE AMOUNT OF MONEY THAT WALGREENS PAID TO THERANOS?
WADE MIQUELON: I BELIEVE THERE WAS $100 MILLION IN INNOVATION FEE, AND MAYBE A $40 MILLION CONVERTIBLE NOTE.
MR. SCHENK: AND WHAT IS A CONVERTIBLE NOTE?
WADE MIQUELON: A WAY TO FUND THEM, BUT IT HAS THE -- EFFECTIVELY A LOAN TO THE COMPANY THAT ALSO PROVIDED THE COMPANY WITH THE ABILITY TO CONVERT THAT INTO EQUITY.
MR. SCHENK: SO THE INNOVATION FEE AND THE CONVERTIBLE NOTE ARE DIFFERENT IN THE EQUITY ASPECT?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND THE INNOVATION FEE DIDN'T GIVE WALGREENS EQUITY, ANY OWNERSHIP OF THERANOS; IS THAT RIGHT?
WADE MIQUELON: THAT'S CORRECT.
MR. SCHENK: BUT WALGREENS ALSO PURCHASED EQUITY IN THERANOS; IS THAT RIGHT?
WADE MIQUELON: CORRECT.
MR. SCHENK: WAS WALGREENS THEREFORE AN INVESTOR IN THERANOS IN ADDITION TO BEING A BUSINESS PARTNER?
WADE MIQUELON: THAT WOULD BE CORRECT.
MR. SCHENK: IF YOU COULD TURN NOW TO PAGE 9. ON PAGE 9 THERE'S ANOTHER SECTION ABOUT CRITICAL VALUES. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND DID YOU CONTINUE TO UNDERSTAND THAT IF THERANOS TESTED A PATIENT'S BLOOD AND THE VALUE, THE RESULT WAS DETERMINED TO BE CRITICAL, THERE WAS AN OBLIGATION PLACED ON ONE OF THE PARTIES TO ALERT THE RELEVANT PHYSICIAN OR SOMEONE ELSE?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, AGAIN, BECAUSE IT WAS THEIR PATIENT, THEY HAD THE DATA, THEY HAD THE LAB EXPERTISE, SO THAT WOULD BE THEIR RESPONSIBILITY.
MR. SCHENK: OKAY. IF YOU COULD NOW TURN TO PAGE 23. ON PAGE 23 WE AGAIN SEE THE TERM "DEVICE" DEFINED. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: DID YOU CONTINUE TO UNDERSTAND THAT THE DEVICE THAT THERANOS WOULD USE TO TEST PATIENT'S BLOOD WAS THE THERANOS ANALYZER?
WADE MIQUELON: YES.
MR. SCHENK: AND DID YOU UNDERSTAND THAT THERANOS WOULD BE MODIFYING THIRD PARTY DEVICES TO TEST PATIENT'S BLOOD BY THIS TIME? DID YOU HAVE THAT UNDERSTANDING?
MR. SCHENK: HOW ABOUT USING UNMODIFIED THIRD PARTY DEVICES TO TEST PATIENT'S BLOOD? LEAVING ASIDE THE POINT YOU MADE TO ME ABOUT USING THIRD PARTY DEVICES TO CONFIRM ACCURACY OF THERANOS'S DEVICES, HOW ABOUT PURE USE OF A THIRD PARTY DEVICES TO TEST PATIENT'S BLOOD?
WADE MIQUELON: I WOULD SAY IF THAT WOULD BE DONE, THAT WOULD BE A VERY SMALL PART OF THE VALUE PROPOSITION. THERE MIGHT BE ESOTERIC TESTS OR SOMETHING THAT WOULD REQUIRE THAT. THAT WOULDN'T BE -- YOU KNOW, THAT WOULDN'T SURPRISE ME. BUT, AGAIN, THE VAST MAJORITY OF TESTS WE UNDERSTOOD WOULD BE DONE ON A THERANOS MACHINE.
MR. SCHENK: IF YOU'LL TURN TO PAGE 26. AT THE BOTTOM OF PAGE 26 THERE'S SOME CRITERIA FOR A NATIONAL ROLLOUT. AND I'M WONDERING IF IN THIS AGREEMENT THE NATIONAL ROLLOUT WAS PROMISED OR GUARANTEED, OR IF INSTEAD CERTAIN CRITERIA HAD TO BE MET BEFORE WALGREENS WOULD GO NATIONAL WITH THE THERANOS TECHNOLOGY?
WADE MIQUELON: I THINK IT WAS ALWAYS UNDERSTOOD THAT EACH LEVEL OF EXPANSION WOULD HAVE TO BE SUCCESSFUL TO MOVE TO THE NEXT LEVEL.
MR. SCHENK: OKAY. YOU SAID YOU THINK IT WAS ALWAYS UNDERSTOOD. WHERE DID YOU GET THAT UNDERSTANDING FROM?
WADE MIQUELON: I THINK THROUGH ALL OF OUR DIALOGUE AND OUR TEAM DIALOGUE AND OUR PROJECT MANAGER DIALOGUE AND THE MULTI PEOPLE THAT SUPPORTED THAT. SO, AGAIN, UNDERSTANDING A LOT OF THINGS ABOUT THE TESTING, NOT JUST THE TESTING ACCURACY, BUT ALSO THE PATIENT EXPERIENCE, THE ACCEPTANCE OF PAYORS, THE ACCEPTANCE OF CLINICIANS.
MR. SCHENK: DID YOU EVER TELL MS. HOLMES OR MR. BALWANI THAT A NATIONAL ROLLOUT WAS GUARANTEED?
MR. SCHENK: DID YOU EVER HEAR ANYONE ELSE FROM WALGREENS TELL MS. HOLMES OR MR. BALWANI THAT A NATIONAL ROLLOUT WITH WALGREENS WAS GUARANTEED?
MR. SCHENK: WOULD YOU NOW TURN TO PAGE 29. PAGE 29 IS ENTITLED CONVERTIBLE PROMISSORY NOTE. IS THIS THE PURCHASE OF EQUITY THAT YOU REFERRED TO A MOMENT AGO?
WADE MIQUELON: IT'S MY RECOLLECTION, YES.
MR. SCHENK: HOW MUCH DID WALGREENS SPEND TO PURCHASE THIS NOTE?
WADE MIQUELON: HOW MUCH MONEY?
MR. SCHENK: YES.
WADE MIQUELON: I BELIEVE IT WAS A $40 MILLION NOTE.
MR. SCHENK: I'M SORRY?
WADE MIQUELON: I BELIEVE IT WAS A $40 MILLION NOTE.
MR. SCHENK: THANK YOU. WOULD YOU NOW TURN TO EXHIBIT 971? DO YOU SEE THAT EXHIBIT?
WADE MIQUELON: YES.
MR. SCHENK: WHAT IS THIS DOCUMENT?
WADE MIQUELON: THIS IS JUST AN EMAIL CHAIN FROM ELIZABETH TO ME AND A NOTE FROM MYSELF TO MS. DEBBIE GARZA.
MR. SCHENK: THANK YOU. THE GOVERNMENT OFFERS 971, YOUR HONOR.
MR. DOWNEY: NO OBJECTION, YOUR HONOR.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 971 WAS RECEIVED IN EVIDENCE.)
BY MR. SCHENK:
MR. SCHENK: IF WE CAN START WITH AN EMAIL ON THE BOTTOM, MS. HOLMES'S EMAIL TO MR. MIQUELON IN AUGUST OF 2013. SO MORE TIME NOW HAS PASSED. THE AMENDED AGREEMENT WAS JUNE OF 2012. WE'VE NOW MOVED ABOUT A YEAR LATER, AUGUST 2013. MS. HOLMES IS WRITING YOU THIS EMAIL, AND THE SUBJECT IS FINAL ROLLOUT PLAN. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND IN THE EMAIL SHE WRITES, "WE HAVE CEMENTED WHAT WE BELIEVE TO BE THE MOST EFFECTIVE ROLLOUT STRATEGY FOR REALIZING BROAD NATIONAL SCALE AS FAR AS POSSIBLE." IN THE NEXT PARAGRAPH SHE TALKS ABOUT MAXIMIZING SPEED OF DEPLOYMENT. "THIS DEPLOYMENT PLAN ACHIEVES NATIONAL DISTRIBUTION OF THERANOS SERVICES AT WALGREENS BY THE END OF 2014." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND IF WE TURN THE PAGE, THERE'S A NUMBERED LIST THAT MS. HOLMES WRITES, THE WORK THAT NEEDS TO BE DONE IN ORDER TO ACHIEVE THAT GOAL. DO YOU SEE THAT LIST?
WADE MIQUELON: YES.
MR. SCHENK: IN THE LIST THE FIRST PARAGRAPH DISCUSSES TRAINING. WHO NEEDS TO BE TRAINED?
WADE MIQUELON: THIS WAS SPEAKING TO THE ABILITY FOR WALGREENS TO MAKE SURE OUR STAFF WAS PROPERLY TRAINED WITH RESPECT TO PATIENTS.
MR. SCHENK: OKAY. SO TO ACHIEVE THIS NATIONAL ROLLOUT, THE FIRST OBLIGATION, THE FIRST NEED WAS WALGREENS, WALGREENS NEEDED TO TRAIN?
WADE MIQUELON: RIGHT.
MR. SCHENK: THE SECOND IS TALKING ABOUT SPACE. WHAT SPACE IS BEING DISCUSSED?
WADE MIQUELON: WE JUST HAD LOTS OF DISCUSSIONS ABOUT, TO PROVIDE A GREAT PATIENT EXPERIENCE, WHAT WOULD NEED TO BE TRUE IN A WALGREENS STORE? HOW MUCH PRIVACY WOULD YOU WANT? WHAT WOULD THE ENVIRONMENT BE LIKE? AND SO THERE WAS A LOT OF DISCUSSION ON HOW WE MIGHT TIER THOSE BASED UPON PATIENT VOLUME.
MR. SCHENK: AND WAS THAT WORK THAT ALSO WALGREENS NEEDED TO DO, THE PHYSICAL SPACE INSIDE OF A WALGREENS STORE?
WADE MIQUELON: YES.
MR. SCHENK: AND THE THIRD PARAGRAPH TALKS ABOUT PREPURCHASE PAYMENTS FROM WALGREENS SOONER THAN ANTICIPATED. DO YOU SEE THAT? THAT'S IN THE THIRD LINE?
WADE MIQUELON: YES.
MR. SCHENK: AND WHAT IS THAT A REFERENCE TO?
WADE MIQUELON: I BELIEVE THAT'S A REFERENCE TO THE $100 MILLION AND ACCELERATING THAT.
MR. SCHENK: THE INNOVATION FEE?
WADE MIQUELON: THE INNOVATION FEE.
MR. SCHENK: AND MS. HOLMES WAS SUGGESTING THAT THERANOS NEEDED THAT MONEY SOONER?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND SO WALGREENS NEEDED TO PAY THE INNOVATION FEE SOONER THAN THE SCHEDULE IN THE AGREEMENT?
WADE MIQUELON: THAT WAS THE REQUEST.
MR. SCHENK: AND THE FOURTH WAS THE OPERATIONAL STRUCTURE. WHAT WAS YOUR UNDERSTANDING ABOUT THAT WORK?
WADE MIQUELON: AGAIN, I DON'T KNOW IF I HAVE A DEEP UNDERSTANDING, BUT I THINK WHAT IT'S REFERRING TO IS, AGAIN, TO MAKE SURE THAT WE HAVE THE PROPER TAKING OF THE SAMPLE, STORAGE OF THE SAMPLE, PROTECTING THE SAMPLE, SHIPPING OF THE SAMPLE TO MAKE SURE THAT THE ENTIRE SUPPLY CHAIN IN THIS BUSINESS MODEL WOULD NOT BE COMPROMISED.
MR. SCHENK: AND THEN FINALLY THE FIFTH AREA THAT NEEDS WORK IS MARKETING. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND IN THIS LIST THAT MS. HOLMES WROTE IN AUGUST OF 2013 OF THE THINGS THAT NEEDED TO BE DONE IN ORDER TO SPEED TOWARDS A NATIONAL ROLLOUT, DID SHE DISCUSS WORK ON THERANOS'S TECHNOLOGY?
MR. SCHENK: DID SHE TALK ABOUT THE FINGERSTICK CAPABILITY OF THERANOS'S TECHNOLOGY?
MR. SCHENK: DID SHE TALK ABOUT THE NEED TO VALIDATE ASSAYS?
MR. SCHENK: DID -- OF THESE FIVE, ARE ANY OF THEM WORK THAT THERANOS ITSELF NEEDS TO DO?
MR. SCHENK: AND THEN IF WE GO BACK TO THE FIRST PAGE AT THE TOP, YOU FORWARDED THIS EMAIL TO SOMEONE NAMED DEBBIE GARZA. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: AND WHO IS GARZA?
WADE MIQUELON: SHE WAS OUR HEAD OF GOVERNMENT RELATIONS.
MR. SCHENK: AND YOU WROTE IN THE SECOND SENTENCE, "I'M NOT WORRIED ABOUT THEM OR LABS... I'M WORRIED ABOUT US." WHAT DID YOU MEAN BY THAT?
WADE MIQUELON: MY UNDERSTANDING AT THE TIME WAS THAT THE TECHNOLOGY WAS WORKING PERFECTLY AND IT WAS ALL ABOUT RAMPING UP FOR SCALE, AND SO IT WAS, I THINK, A POINT OF FRUSTRATION THAT MAYBE WE WEREN'T DOING OUR PART BECAUSE OF THE ITEMS THAT SHE HAD LISTED, THAT MAYBE WE WEREN'T TRAINING PEOPLE FAST ENOUGH PROPERLY, MAYBE WE WEREN'T GETTING OUR EXPERIENCE RIGHT FAST ENOUGH.
MR. SCHENK: THANK YOU. WOULD YOU NOW TURN TO EXHIBIT 1254. WHAT IS THIS DOCUMENT?
WADE MIQUELON: I BELIEVE THIS IS AN EMAIL THAT FORWARDS AN ARTICLE ON THERANOS.
MR. SCHENK: FIRST AN EMAIL FROM MR. BALWANI TO FOLKS AT WALGREENS AND THEN FROM MR. -- DR. ROSAN AT WALGREENS TO YOU; IS THAT RIGHT?
WADE MIQUELON: THAT'S CORRECT. THAT'S RIGHT.
MR. SCHENK: YOUR HONOR, THE GOVERNMENT OFFERS 1254.
MR. DOWNEY: YOUR HONOR, I DON'T OBJECT TO THE EMAIL, BUT THE ARTICLE CONTAINS A GOOD AMOUNT OF HEARSAY, THE ATTACHMENT.
MR. SCHENK: YOUR HONOR, I'M CERTAINLY NOT OFFERING THE ARTICLE FOR ITS TRUTH.
JUDGE DAVILA: IT'S BEING OFFERED FOR WHAT PURPOSE?
MR. SCHENK: I'M SORRY?
JUDGE DAVILA: WHAT PURPOSE?
MR. SCHENK: TO SHOW THE STATE OF MIND OF THE INDIVIDUAL WHO SENT IT. I THINK IT'S ALSO 801(D)(2)(E).
JUDGE DAVILA: ALL RIGHT. I'LL ADMIT THIS. LADIES AND GENTLEMEN, THE ARTICLE THAT YOU'LL SEE IN JUST A MOMENT IS NOT BEING OFFERED FOR THE TRUTH OF THE MATTER ASSERTED IN THE ARTICLE. IT'S ONLY FOR THE STATE OF MIND OF THE SENDERS, SO IT WILL BE RECEIVED FOR THAT PURPOSE ONLY.
MR. SCHENK: THANK YOU, YOUR HONOR.
(GOVERNMENT'S EXHIBIT 1254 WAS RECEIVED IN EVIDENCE.)
JUDGE DAVILA: IT MAY BE PUBLISHED.
BY MR. SCHENK:
MR. SCHENK: MR. MIQUELON, LET'S START FIRST WITH THE EMAIL AT THE BOTTOM. MR. BALWANI SENT AN EMAIL TO DR. ROSAN, SOMEONE NAMED BRAD WASSON. WHO WAS THAT?
WADE MIQUELON: THAT WAS THE BROTHER OF THE CEO GREG WASSON, AND HE WAS A HEALTH CARE PHARMACY LEADER WHO WAS ON THE MULTI FUNCTIONAL TEAM AT THAT TIME.
MR. SCHENK: AND ON THE CC LINE, MR. ASHWORTH, WHO WAS THAT?
WADE MIQUELON: HE WAS ANOTHER HEALTH CARE EXECUTIVE AT WALGREENS AND HE WAS ALSO INVOLVED IN THE PROJECT IN TERMS OF I BELIEVE HELPING TO MAKE SURE THAT WE WERE OPERATIONALIZING IT TO THE BEST STANDARD POSSIBLE.
MR. SCHENK: AND THE ARTICLE WAS SENT ON NOVEMBER 18TH, 2013. DO YOU REMEMBER WHAT WAS HAPPENING SORT OF ROUGHLY AROUND THAT TIME?
WADE MIQUELON: I BELIEVE THAT WAS SHORTLY AFTER, I DON'T REMEMBER THE EXACT DATE, THAT WE HAD LAUNCHED THE PILOTS IN PHOENIX.
MR. SCHENK: LAUNCHED THE PILOTS WITH THERANOS?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND THEN JUST ABOVE THIS EMAIL, DR. ROSAN FORWARDED THIS TO YOU; IS THAT RIGHT?
WADE MIQUELON: CORRECT.
MR. SCHENK: AND IF YOU'LL NOW TURN TO PAGE 2, I WANT TO ASK YOU SOME QUESTIONS ABOUT THE ARTICLE. AND WHAT I'M WONDERING IS IF THE SENTENCES OR STATEMENTS I'M GOING TO BE READING TO YOU, IF THEY'RE CONSISTENT WITH YOUR UNDERSTANDING OF THE THERANOS TECHNOLOGY AT THE TIME, NOVEMBER OF 2013.
WADE MIQUELON: OKAY.
MR. SCHENK: SO THE ARTICLE BEGINS, "A NUMBER OF STARTUPS ARE SELLING PORTABLE DIAGNOSTIC LABORATORIES THAT REQUIRE JUST A DROP OF THE PATIENT'S BLOOD, MADE POSSIBLE BY ADVANCES IN THE FIELD OF MICROFLUIDICS. BUT PERHAPS LAB TESTS CAN BE MADE FASTER, EASIER, AND MORE ACCURATE WITH A TURN-OF-THE-LAST CENTURY TECHNOLOGY AUTOMATION." DID YOU HAVE AN UNDERSTANDING THAT THAT WAS THE DESCRIPTION OF THE THERANOS TECHNOLOGY?
WADE MIQUELON: YES.
MR. SCHENK: AND THE ARTICLE IS PLACED INTO AN EMAIL BY MR. BALWANI; IS THAT RIGHT?
WADE MIQUELON: YES.
MR. SCHENK: AND ABOVE THE ARTICLE -- OR BELOW THE ARTICLE, DOES MR. BALWANI PUT ANY CAVEATS? DOES MR. BALWANI SAY, LOOK WHAT THEY'RE WRITING, THE PRESS DOESN'T UNDERSTAND OUR TECHNOLOGY, OR WE NEED TO CORRECT THIS? OR ARE THERE ANY CAVEATS?
WADE MIQUELON: NOT THAT I SEE.
MR. SCHENK: THE NEXT PARAGRAPH READS, "THAT'S THE BET THE SILICON VALLEY COMPANY THERANOS IS MAKING AND THE COMPANY RECENTLY SEALED A DEAL WITH WALGREENS'S PHARMACY TO DELIVER ON-SITE LABORATORY SERVICES TO MANY OF ITS STORES." IS THAT CONSISTENT WITH YOUR UNDERSTANDING?
WADE MIQUELON: THAT'S CONSISTENT.
MR. SCHENK: IN THE NEXT PARAGRAPH IT TALKS ABOUT HENRY FORD AND IT SAYS, "THERANOS'S SELLING POINT IS MUCH SMALLER THAN A MODEL T, A CAPSULE-SIZED LAB VIAL, AND JUST ONE NEEDS TO BE FILLED FOR THE COMPANY TO RUN NEARLY ANY STANDARD LAB TEST." WAS THAT CONSISTENT WITH YOUR UNDERSTANDING OF THE THERANOS TECHNOLOGY CAPABILITIES?
WADE MIQUELON: YES.
MR. SCHENK: FURTHER DOWN IT SAYS, "HERE HOW IT WORKS: BLOOD IS DRAWN WITH A FINGERSTICK RATHER THAN A NEEDLE IN THE ARM. (IT CAN ALSO RUN URINE TESTS WITH JUST A DROP OF THAT.) THERE ARE NO BOTCHED STICKS - OF COURSE THERE ARE NO PHLEBOTOMISTS, ONLY MACHINES IN THERANOS LABS." IS THAT CONSISTENT WITH THE WAY THE TECHNOLOGY WAS DESCRIBED TO YOU?
WADE MIQUELON: YES.
MR. SCHENK: THE NEXT PARAGRAPH READS, "THE BAD NEWS FOR WORKERS MAY BE GOOD NEWS FOR ACCURACY BECAUSE HUMAN HANDLING OF SAMPLES ACCOUNTS FOR THE LION'S SHARE OF VARIATION AMONG RESULTS, FOUNDER AND CEO ELIZABETH HOLMES SAID LAST WEEK AT A TECHNOLOGY CONFERENCE IN NEW YORK. AUTOMATION ELIMINATES SPILLS, TESTS DONE IN ERROR, AND OTHER MISHANDLING OF THE SAMPLE." WAS THAT CONSISTENT WITH YOUR UNDERSTANDING OF THE THERANOS CAPABILITIES?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, AND ANOTHER REASON WHY THE RESULTS WOULD BE BETTER IS BECAUSE OF THE HANDLING CHAIN FOR CONVENTIONAL LAB.
MR. SCHENK: AND WHAT DO YOU MEAN BY THAT, THE HANDLING CHAIN?
WADE MIQUELON: AGAIN, IF SOMEONE IS DRAWING A VENIPUNCTURE AND MULTIPLE TEST TUBES, IT MIGHT BE COURIERRED ONCE OR TWICE, IT MIGHT BE SITTING AROUND AWHILE. THERE ARE JUST MORE THINGS THAT COULD GO WRONG.
MR. SCHENK: OKAY. NOW, IF YOU'LL TURN TO THE NEXT PAGE, PAGE 3 OF THE EXHIBIT. THE SECOND PARAGRAPH READS, "THE MACHINES METE OUT BITS OF 'MICRO-SAMPLE' FOR EACH TEST A DOCTOR HAS ORDERED. IN CONVENTIONAL TESTING, EACH TEST REQUIRED A DEDICATED VIAL, WHICH ADDS DRAMATICALLY TO THE AMOUNT OF BLOOD REQUIRED. THERANOS IS EVEN ABLE TO SAVE SOME OF THE TINY SAMPLE IN CASE THE DOCTOR REQUESTS FURTHER TESTS AFTER SEEING THE INITIAL RESULTS." WAS THAT CONSISTENT WITH YOUR UNDERSTANDING OF THE THERANOS TECHNOLOGY?
WADE MIQUELON: MY UNDERSTANDING WAS THAT THEORETICALLY IT WAS POSSIBLE. I DON'T KNOW IF THEY WERE DOING IT THEN. BUT IF YOU HAD -- AGAIN, A CARTRIDGE WOULD HAVE TESTS ON IT, YOU COULD MAYBE RUN 13 TESTS, AND THEN IF THE MARKERS CAME UP A CERTAIN WAY AND YOU WANTED TO GO BACK AND RERUN ANOTHER ONE, THAT COULD BE DONE. I DON'T KNOW IF IT COULD BE DONE AT THAT TIME OR IF THAT WAS PART OF THE VISION --
MR. SCHENK: IF -- I'M SORRY. GO AHEAD.
WADE MIQUELON: SO I DON'T KNOW IF IT WAS FUTURISTIC OR CURRENT, BUT THAT WAS PART OF THE VISION AT LEAST.
MR. SCHENK: IN YOUR DISCUSSIONS WITH EITHER MS. HOLMES OR MR. BALWANI, THEY DESCRIBED THIS CAPABILITY OR THIS POSSIBILITY?
WADE MIQUELON: I THINK MORE OF A POSSIBILITY VERSUS A CURRENT CAPABILITY TO BE HONEST.
MR. SCHENK: THE NEXT PARAGRAPH READS, "ALL OF THE DIAGNOSTIC TECHNOLOGY IS INTEGRATED, WHICH INCREASES PRECISION. EACH MACHINE IN A CONVENTIONAL LAB MAY CALIBRATE DIFFERENTLY, AND THE MIX OF BRANDS AND AGES IN MEANS RESULTS COME WITH AN IMPLIED 'OR SO' AT THE END. PLOTTING RESULTS OVER TIME IS THEREFORE MOSTLY USELESS." IS THIS THE CONCEPT THAT YOU WERE EXPLAINING TO ME EARLIER ABOUT THE CALIBRATION BETWEEN MACHINES?
WADE MIQUELON: CORRECT.
MR. SCHENK: SO WAS THIS CONSISTENT WITH YOUR UNDERSTANDING OF THE THERANOS TECHNOLOGY?
WADE MIQUELON: CORRECT.
MR. SCHENK: WAS THERE A TIME WHEN YOU WERE MEETING WITH MS. HOLMES AND MR. BALWANI THAT THEY SHOWED YOU A THERANOS DEVICE THAT WAS COVERED IN PLASTIC OR IN SOME TYPE OF COVERING?
WADE MIQUELON: YES.
MR. SCHENK: AND WHEN WAS THAT?
WADE MIQUELON: I DON'T RECALL IF IT WAS MY FIRST OR SECOND TRIP TO THERANOS, BUT IT WAS PRETTY EARLY ON IN THE CONVERSATIONS.
MR. SCHENK: AND WHAT DO YOU RECALL -- FIRST OF ALL, DO YOU RECALL EITHER MS. HOLMES OR MR. BALWANI DESCRIBING THAT DEVICE TO YOU?
MR. DOWNEY: I WOULD OBJECT TO THE FORM. I THINK HE COULD ASK INDIVIDUALLY ABOUT THE TWO INDIVIDUALS. HE'S ASKING A COMPOUND QUESTION EFFECTIVELY THAT I BELIEVE ASKS FOR AN AMBIGUOUS ANSWER.
MR. SCHENK: I CAN CLARIFY.
JUDGE DAVILA: SURE. GO AHEAD.
BY MR. SCHENK:
MR. SCHENK: DO YOU RECALL MS. HOLMES TALKING TO YOU ABOUT THIS DEVICE THAT WAS COVERED IN SOME MATERIAL?
WADE MIQUELON: MY RECOLLECTION IS MORE MR. BALWANI DESCRIBING IT AND SHOWING IT TO ME.
MR. SCHENK: OKAY. AND WHAT DO YOU RECALL MR. BALWANI SAYING?
WADE MIQUELON: THAT THEY WERE DOING SOME KIND OF WORK FOR THE MILITARY, EARLY WORK UNDER NDA, COULDN'T SAY MUCH, BUT THAT THEY HAD EFFECTIVELY HAD ONE OF THESE HELIVAC I BELIEVE IN AFGHANISTAN. BUT TO BE ABLE TO SEE IN THE FUTURE, IF THERE WAS AN OPPORTUNITY FOR THE MILITARY TO BE ABLE TO DO ACCURATE ON-LOCATION REALTIME DIAGNOSTICS WERE NEEDED.
MR. SCHENK: AND WERE YOU IMPRESSED BY THAT?
WADE MIQUELON: YES, I WAS IMPRESSED BY THAT.
MR. SCHENK: WHY?
WADE MIQUELON: AGAIN, I THINK TO BE ABLE TO HAVE, YOU KNOW, THE MILITARY PILOTING A NEW TECHNOLOGY IS -- ESPECIALLY OF THIS SORT IS IMPRESSIVE.
MR. SCHENK: THANK YOU. YOUR HONOR, MAY I HAVE JUST ONE MOMENT?
JUDGE DAVILA: YES.
(DISCUSSION AMONGST GOVERNMENT COUNSEL OFF THE RECORD.)
MR. SCHENK: NO FURTHER QUESTIONS, YOUR HONOR.
JUDGE DAVILA: CROSS-EXAMINATION?
MR. DOWNEY: YES, YOUR HONOR.
JUDGE DAVILA: FOLKS, STAND UP AND STRETCH FOR A MOMENT WHILE WE DO THE LINE CHANGE. YOU CAN STRETCH IF YOU WOULD LIKE TO, SIR. IF YOU WANT TO STAND UP, GO AHEAD AND FEEL FREE.
WADE MIQUELON: THANK YOU. I APPRECIATE THAT.
CROSS-EXAMINATION BY MR. DOWNEY:
MR. DOWNEY: GOOD AFTERNOON, MR. MIQUELON. MY NAME IS KEVIN DOWNEY AND I REPRESENT MS. HOLMES. I'M GOING TO REMOVE MY MASK SO WE CAN HEAR EACH OTHER MORE CLEARLY. I'D LIKE TO ASK YOU ABOUT WALGREENS IN 2010.
WADE MIQUELON: UH-HUH.
MR. DOWNEY: AS I UNDERSTAND IT, IN THAT TIME PERIOD YOU HAD AROUND 8,000 STORES OR SO?
WADE MIQUELON: ROUGHLY.
MR. DOWNEY: AND DID THAT NUMBER CONTINUE TO BE TRUE IN 2014 WHEN YOU LEFT?
WADE MIQUELON: MORE OR LESS.
MR. DOWNEY: OKAY. AND MOST OF THE BUSINESS OF WALGREENS AT THAT TIME WAS PHARMACY BUSINESS ON ONE SIDE OF THE BUSINESS; CORRECT?
WADE MIQUELON: THE BUSINESS -- THE PHARMACY WOULD BE BROKEN CONCEPTUALLY INTO TWO PARTS. THERE WAS WHAT WE CALL THE FRONT END, SO IT WAS THE EVERYDAY KIND OF CONSUMER PRODUCTS THAT EVERYBODY BUYS, AND THEN THE PHARMACY IN THE BACK OF THE STORE.
MR. DOWNEY: AND WERE THOSE WALGREENS STORES IN OTHER BUSINESSES AT THAT TIME?
WADE MIQUELON: WALGREENS WAS IN SOME HEALTH CARE CLINICS, SOME INFUSION AND SPECIALTY TYPE BUSINESSES IN PHARMACY.
MR. DOWNEY: AND WOULD THOSE FACILITIES TYPICALLY BE EITHER IN THE STORE OR ADJACENT TO THE STORE?
WADE MIQUELON: THE HEALTH CARE CLINICS WOULD BE IN THE STORE, BUT THE INFUSION AND OTHER SPECIALTY CLINICS WOULD BE COMPLETELY SEPARATE.
MR. DOWNEY: OKAY. AND TELL US WHETHER IN 2010 WALGREENS WAS LOOKING TO EXPAND ITS OFFERING OF HEALTH SERVICES.
WADE MIQUELON: I THINK THAT'S BEEN AN EVOLVING STRATEGY OF THE COMPANY FOR -- EVEN BEFORE THAT.
MR. DOWNEY: WOULD YOU DESCRIBE WHAT THAT STRATEGY WAS?
WADE MIQUELON: TO CONTINUE TO MOVE DEEPER INTO HEALTH CARE, TO PROVIDE SERVICES THAT MADE HEALTH CARE MORE ACCESSIBLE TO CUSTOMERS.
MR. DOWNEY: SO THAT WOULD INCLUDE THINGS LIKE THE VACCINATION THAT YOU MENTIONED?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IT WOULD ALSO INCLUDE NEW BUSINESSES, LIKE POTENTIALLY BLOOD TESTING; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IN 2010 WITHIN THE COMPANY, WAS THERE A TEAM LOOKING FOR OPPORTUNITIES IN TERMS OF PROVIDING HEALTH CARE OPPORTUNITIES WITHIN THE STORES?
WADE MIQUELON: YES.
MR. DOWNEY: AND WHO LED THAT TEAM?
WADE MIQUELON: I BELIEVE IN 2010 IT WAS COLLIN WATTS WHO WAS OUR HEAD OF INNOVATION.
MR. DOWNEY: AND WERE YOU INVOLVED IN THOSE EFFORTS?
WADE MIQUELON: I WAS ONE OF THE SPONSORS TO THAT TEAM.
MR. DOWNEY: AND CAN YOU SAY A LITTLE BIT ABOUT WHY OFFERING THESE HEALTH CARE SERVICES WAS GOOD FOR WALGREENS BUSINESS? DID IT INCREASE THE NUMBER OF CUSTOMERS WHO CAME INTO THE STORE?
WADE MIQUELON: I THINK PHILOSOPHICALLY ANYTHING THAT IS GOOD FOR WALGREENS, YOU KNOW, CUSTOMERS AS A PATIENT IS GOOD FOR EVERYONE. BUT, AGAIN, THE CONCEPT WAS TO SAY THAT IF YOU COULD MAKE THESE SERVICES MORE ACCESSIBLE TO THE AVERAGE PERSON, THAT THAT WOULD LEAD TO PEOPLE TAKING BETTER CONTROL OF THEIR HEALTH CARE WHICH WOULD LEAD TO BETTER OUTCOMES.
MR. DOWNEY: AND DID YOU ALSO BELIEVE THAT JUST AS PART OF THE BUSINESS MODEL IT WOULD BRING MORE CUSTOMERS TO WALGREENS?
WADE MIQUELON: THAT WOULD BE PART OF IT, BUT THERE ARE MANY ASPECTS OF BENEFITS.
MR. DOWNEY: AND WAS THERE ANY ANALYSIS DONE OF THE EFFECT ON NON-HEALTH CARE SERVICE SALES IF THOSE TYPES OF SERVICES WERE PLACED IN A STORE?
WADE MIQUELON: I DON'T KNOW IF THERE WAS OR NOT, WHETHER THERE WAS AN ANALYSIS AND WHAT WOULD THAT MEAN FOR INCREMENTAL PRESCRIPTIONS OR FOR FRONT-END PURCHASES. PART OF WHAT WAS VERY IMPORTANT, I THINK, WAS JUST BECOMING MORE RELEVANT TO CUSTOMERS AND MORE RELEVANT TO HEALTH PLANS.
MR. DOWNEY: OKAY. SO IN 2010, YOU WERE LOOKING AT A NUMBER OF POTENTIAL PARTNERS IN THAT SPACE; IS THAT RIGHT?
WADE MIQUELON: WE WERE.
MR. DOWNEY: AND FROM THE PERSPECTIVE OF THE POTENTIAL PARTNERS, WALGREENS WAS AN ATTRACTIVE OPTION AS WELL; CORRECT?
WADE MIQUELON: I WOULD THINK SO.
MR. DOWNEY: AND THAT'S IN PART BECAUSE YOU HAD SO MANY STORES AND LOCATIONS?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND ALSO YOUR STORES TEND TO BE CONVENIENTLY LOCATED? THEY'RE IN PLACES THAT PEOPLE CAN GET TO AND SHOP AND GET THEIR PRESCRIPTIONS; RIGHT?
WADE MIQUELON: CORRECT. ALSO I BELIEVE AT THAT TIME THE COMPANY WAS DOING CLOSE TO A THIRD OF ALL PRESCRIPTIONS IN THE COUNTRY, SO YOU COULD ARGUE THAT YOU WOULD ALREADY HAVE A LARGE PATIENT BASE FROM WHICH TO GIVE THEM ADDITIONAL BENEFITS.
MR. DOWNEY: AND DID THE COMPANY ALSO HAVE A LOT OF EXPERTISE IN RETAIL AND CONSUMER OFFERINGS?
WADE MIQUELON: I WOULD SAY YES.
MR. DOWNEY: AND WERE YOU LOOKING FOR WAYS TO TAKE THAT EXPERTISE AND PUT IT IN NEW KINDS OF SERVICES?
WADE MIQUELON: I MIGHT SAY IT DIFFERENTLY. I THINK WE WERE LOOKING FOR PEOPLE WHO HAD EXPERTISE IN DIFFERENT PARTS OF HEALTH CARE THAT WOULD MARRY NICELY WITH THE CAPABILITIES THAT WE COULD BRING.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK BACK AT EXHIBIT 300, WHICH I THINK MR. SCHENK SHOWED YOU AND WHICH I BELIEVE IS IN EVIDENCE. AND THIS IS AN EMAIL FROM YOU TO GREG WASSON AND OTHERS FORWARDING THE BRIEFING POWERPOINT THAT YOU GOT FROM THERANOS. DO YOU RECALL THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IN THE EMAIL THAT YOU SENT TO MR. WASSON, YOU SAY, I THINK YOU OMITTED A WORD, BUT YOU SAY "AS MOST OF YOU KNOW, PROVIDING DIAGNOSTIC SERVICES IN THE STORES, RETAIL CLINICS, WORKSITE HEALTH CENTERS, HOME CARE, ET CETERA, IS IN OUR STRATEGIC DOCUMENT AND HAS BEEN PART OF BOARD DISCUSSIONS." WHAT IS THE -- WHAT WAS THE STRATEGIC DOCUMENT?
WADE MIQUELON: THE COMPANY HAS, YOU KNOW, A STRATEGIC PLAN AND A PROCESS AROUND EVOLVING THAT AND DEVELOPING THAT. BUT, AGAIN, THAT EXTENSION INTO DEEPER, MORE ACCESSIBLE HEALTH CARE SERVICES WAS A MULTI-YEAR OBJECTIVE.
MR. DOWNEY: AND WAS THAT SOMETHING THAT WAS BEING ENCOURAGED BY THE BOARD OF DIRECTORS AS WELL?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT WAS THE SUBJECT OF DISCUSSION AT BOARD MEETINGS?
WADE MIQUELON: SOMETIMES.
MR. DOWNEY: YOU TALKED ABOUT THE MEETING THAT YOU HAD WITH MR. BALWANI AND MS. HOLMES IN PALO ALTO. DID YOU ALSO MEET WITH OTHER POTENTIAL PARTNERS AT CERTAIN TIMES?
WADE MIQUELON: WE DID.
MR. DOWNEY: WERE YOU PERSONALLY INVOLVED IN THAT?
WADE MIQUELON: I WAS INVOLVED IN A FEW OF THOSE.
MR. DOWNEY: AND WERE THOSE -- WERE ANY OF THOSE RELATED TO PROVIDING BLOOD TESTING SERVICES OR CLINICAL LAB SERVICES?
WADE MIQUELON: YES.
MR. DOWNEY: AND WHICH ENTITY DID YOU PARTICIPATE IN THOSE MEETINGS FOR?
WADE MIQUELON: I DON'T KNOW IF I COULD REMEMBER THE NAMES. THERE WAS A GENTLEMAN, A SMALL STARTUP OUT OF RICE UNIVERSITY; THERE WAS A STARTUP OUT OF ISRAEL; WE DID HIRE A CONSULTING FIRM TO LOOK AT THE SPACE AND THEY IDENTIFIED 180 COMPANIES THAT WERE DOING SOMETHING IN THE LAB TECHNOLOGY SPACE TO ASSESS. BUT WE DIDN'T TALK TO ALL 180, BUT WE HAD THE ANALYSIS DONE.
MR. DOWNEY: BUT THIS WAS ENOUGH OF A PRIORITY THAT YOU TOOK ALL OF THOSE STEPS; IS THAT CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: OKAY. WHEN YOU FIRST HEARD ABOUT THERANOS, FIRST OF ALL, DID YOU HEAR ABOUT IT INTERNALLY OR EXTERNALLY?
WADE MIQUELON: INTERNALLY THROUGH DR. ROSAN.
MR. DOWNEY: DR. ROSAN IS DR. JAY ROSAN?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND REMIND US WHAT HIS TITLE WAS AT WALGREENS?
WADE MIQUELON: I DON'T RECALL HIS TITLE, BUT HE WAS EFFECTIVELY THE CHIEF MEDICAL EXPERT, IF YOU WILL, FOR THE INNOVATION TEAM.
MR. DOWNEY: AND WHEN YOU SAY "INNOVATION TEAM," WHAT WAS THE INNOVATION TEAM?
WADE MIQUELON: THE INNOVATION TEAM WAS A TEAM THAT WAS LOOKING TO IDENTIFY NOT ONLY NEW, NEW PROJECTS, JOINT VENTURES AND PARTNERSHIPS IN THE HEALTH CARE SPACE, BUT ALSO ULTIMATELY PEOPLE FROM THAT TEAM WOULD BECOME PART OF THE WORKING TEAM TO HELP COMMERCIALIZE IT.
MR. DOWNEY: AND I THINK YOU INDICATED BEFORE THAT YOU WENT TO THE FIRST MEETING AT THERANOS WITH DR. ROSAN?
WADE MIQUELON: I DID.
MR. DOWNEY: AND PRIOR TO THAT MEETING, DO YOU RECALL WHAT HE SAID TO YOU ABOUT THERANOS?
WADE MIQUELON: MORE OR LESS, BECAUSE WE HAD TALKED TO THESE OTHER COMPANIES AND HE SAID THAT HE HAD HEARD ABOUT A COMPANY CALLED THERANOS, AND FROM WHAT HE HAD HEARD, THIS MAY BE THE MOST EXCITING AND FARTHEST AHEAD COMPANY IN THIS SPACE.
MR. DOWNEY: AND HE WANTED YOU TO TAKE THE TIME TO MEET WITH THEM?
WADE MIQUELON: YES.
MR. DOWNEY: AT THE TIME THAT HE MADE THAT REQUEST TO YOU, YOU WERE THE CHIEF FINANCIAL OFFICER OF THE COMPANY; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU HAD A BROAD PORTFOLIO; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU HAD SEVERAL HUNDRED PEOPLE REPORTING TO YOU AT THAT TIME?
WADE MIQUELON: MORE OR LESS, YEAH.
MR. DOWNEY: AND YOU WOULD, FROM THAT POINT FORWARD IN 2010 UNTIL THE TIME THAT YOU LEFT WALGREENS IN 2014, HAVE SOME ENGAGEMENT WITH THERANOS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND GIVE US A SENSE OF HOW MUCH OF YOUR TIME YOU SPENT DEALING WITH THERANOS DURING THE PERIOD OF 2010 TO 2014?
WADE MIQUELON: IT WOULD BE HARD TO QUANTIFY THE HOURS. I WOULD SAY I PROBABLY INTERACTED WITH, YOU KNOW, SUNNY AND ELIZABETH I'M GUESSING MAYBE 10 TO 15 TIMES. I, AGAIN, VISITED THERANOS I DON'T KNOW HOW MANY TIMES, PROBABLY FOUR OR FIVE TIMES. I MADE A LOT OF INTRODUCTIONS TO OTHER PARTNERS THAT I THOUGHT WOULD BE BENEFIT INITIAL TO THE MODEL. BUT I WOULD SAY AROUND THE LAUNCH OF THE PILOT IN 2013 IS WHERE MY INVOLVEMENT DIMINISHED BECAUSE WE HAD A WORKING TEAM THAT WAS TAKING OVER. SO I WOULD SAY THAT'S PROBABLY WHERE MY TIME BECAME, YOU KNOW, VERY MINUSCULE.
MR. DOWNEY: OKAY. AND WERE THERE OTHERS AT WALGREENS WHO SPENT A SUBSTANTIAL AMOUNT OF THEIR TIME ON THERANOS?
WADE MIQUELON: THERE WERE PEOPLE WHO WERE FULLY DEDICATED.
MR. DOWNEY: AND WOULD THAT INCLUDE DR. ROSAN?
WADE MIQUELON: I WOULDN'T SAY HE WAS FULLY DEDICATED. MAYBE HE WAS, IF I HAD TO GUESS, MAYBE A THIRD OF HIS TIME OR SOMETHING.
MR. DOWNEY: SO, SO DR. ROSAN WAS INTERACTING A LOT WITH MR. BALWANI AND MS. HOLMES?
WADE MIQUELON: MORE FREQUENTLY THAN ME FOR SURE.
MR. DOWNEY: OKAY. AND OTHERS AT WALGREENS WERE INTERACTING WITH INDIVIDUALS AT THERANOS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: IS IT FAIR TO SAY THAT GIVEN YOUR SENIOR ROLE, YOU REALLY ENGAGED ONLY ON SIGNIFICANT ISSUES?
WADE MIQUELON: THAT'S PROBABLY SAFE TO SAY. I THINK THE ROLE OF A SPONSOR ON THESE TEAMS IS TO ENABLE THE TEAM. AGAIN, I THINK AS I SAID BEFORE, I NEVER PRETENDED TO BE A HEALTH CARE PROFESSIONAL, SO MY JOB IS MORE IN LINE OF HELPING TO COMMERCIALIZE AND MAKING SURE THE TEAM HAS THE RIGHT RESOURCES TO DO THEIR JOB.
MR. DOWNEY: OKAY. AND IN CONNECTION WITH THERANOS, IS IT TRUE THAT YOU TRIED TO MAINTAIN A HIGH LEVEL RELATIONSHIP WITH MS. HOLMES AS THE PROJECT MOVED FORWARD?
WADE MIQUELON: DEFINITELY.
MR. DOWNEY: DO YOU RECALL WHEN YOU FIRST ENGAGED WITH DR. ROSAN ABOUT THERANOS AND HE DESCRIBED IT, DID HE DESCRIBE IT AS BEING THE TECHNOLOGY THAT HE SAW AS THE FURTHEREST ALONG TO BE COMMERCIALIZED?
WADE MIQUELON: THAT -- I DON'T KNOW THAT HE WAS A LAB EXPERT PER SE EITHER, BUT HIS UNDERSTANDING FROM WHAT HE HAD HEARD THAT THEY WERE FARTHEST ALONG. HE ALSO MET WITH SOME OF THE COMPANIES THAT I HAD MET WITH, BUT I BELIEVE IT MIGHT HAVE BEEN AT HIS DIRECTION THAT WE HIRED A CONSULTING FIRM TO BE ABLE TO GIVE US A BETTER ASSESSMENT OF THE LAB SPACE.
MR. DOWNEY: AND THAT CONSULTANT REPORTED TO HIM FOR PURPOSES OF ASSESSING OPPORTUNITIES?
WADE MIQUELON: I CAN'T SAY THAT FOR CERTAIN.
MR. DOWNEY: LET'S TALK A LITTLE BIT ABOUT THE FIRST MEETING THAT YOU TALKED ABOUT DURING YOUR DIRECT EXAMINATION. HOW MUCH INFORMATION DID YOU KNOW ABOUT THERANOS BEFORE YOU SHOWED UP FOR THE MEETING?
WADE MIQUELON: VERY LITTLE.
MR. DOWNEY: OKAY. BUT DID YOU RECOGNIZE THAT MS. HOLMES WAS A VERY YOUNG ENTREPRENEUR?
WADE MIQUELON: YES.
MR. DOWNEY: SHE WAS IN HER MID-TWENTIES AT THE TIME?
WADE MIQUELON: YES.
MR. DOWNEY: AND I THINK YOU TESTIFIED THAT THE COMPANY WAS SIX AND A HALF, SEVEN YEARS OLD; IS THAT CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU KNEW AT THAT TIME THAT THEY WERE TRYING TO DO A CONSUMER FOCUSSED DEPLOYMENT?
WADE MIQUELON: I DON'T KNOW IF IT WAS THAT DAY OR NOT -- YOU MEAN WITH RESPECT TO SAFEWAY? IS THAT THE QUESTION?
MR. DOWNEY: THE QUESTION WAS IN GENERAL. YOU UNDERSTOOD THAT THEY WERE LOOKING FOR A RETAIL PARTNER TO DO A CONSUMER DEPLOYMENT WITH?
WADE MIQUELON: YES. WE SHARED THE VISION THAT PART OF THE DISRUPTIVE FORCE WOULD BE BRINGING LABORATORY SERVICES AS CLOSE TO THE CUSTOMER INTO THE COMMUNITY.
MR. DOWNEY: AND THIS WAS SOMETHING THAT THEY HAD NOT DONE BEFORE; CORRECT?
WADE MIQUELON: THAT THERANOS HAD NOT DONE?
MR. DOWNEY: RIGHT.
WADE MIQUELON: AGAIN, I DON'T KNOW WHAT DEGREE THEY WERE IN SAFEWAY, I DON'T HAVE KNOWLEDGE OF THAT. BUT I DO KNOW THEY WERE DOING SOMETHING WITH SAFEWAY.
MR. DOWNEY: THEY WERE HAVING DISCUSSIONS WITH SAFEWAY IN PARALLEL WITH WALGREENS?
WADE MIQUELON: I'M NOT TOTALLY PRIVY TO IT, BUT I KNEW THERE WERE SOME DISCUSSIONS, BUT I DON'T KNOW THE EXTENT OF IT.
MR. DOWNEY: AND AFTER YOU CAME BACK FROM THAT MEETING, YOU SENT AN EMAIL TO THE CEO OF WALGREENS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: I WANT YOU TO LOOK AGAIN AT THAT EMAIL WHICH IS EXHIBIT 278 WHICH MR. SCHENK SHOWED YOU DURING YOUR DIRECT EXAMINATION. AND THIS IS AN EMAIL THAT YOU SENT SHORTLY AFTER THE MEETING; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU WROTE TO INFORM GREG WASSON, WHO WAS THE CEO AT THE TIME; CORRECT?
WADE MIQUELON: YEP.
MR. DOWNEY: AND YOU SAID, "WORTH A PEEK, BUT PLEASE DON'T FORWARD DUE TO CONFIDENTIAL AGREEMENT."
WADE MIQUELON: YEP.
MR. DOWNEY: "MANY COMPANIES TECHNOLOGIES AND ACCURACY NOW SURPASS THAT OF LABS BUT THE KEY IS WHO GETS FDA APPROVAL FIRST." IS THAT -- DID YOU -- WHERE DID YOU GET THAT KNOWLEDGE?
WADE MIQUELON: I BELIEVE THAT WAS -- THAT KNOWLEDGE WAS FROM DR. ROSAN WHICH CAME TO BE NOT ONLY FOR FDA DEVICES, BUT ALSO FOR CMS APPROVALS.
MR. DOWNEY: AND THEN YOU GO ON AND SAY "AND THEY APPEAR IN THE LEAD." CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT REFERS TO THERANOS?
WADE MIQUELON: YES, BECAUSE A LOT OF THE COMPANIES THAT WE BENCHMARKED WERE ABLE TO DO, YOU KNOW, ONE TEST WELL, BUT THEY WEREN'T ABLE TO -- YOU KNOW, AGAIN, AS I DESCRIBED, THE PLATFORM TO DO A BROAD ARRAY OF TESTS ON A SINGLE PLATFORM.
MR. DOWNEY: SO WHEN YOU SAY THEY COULD DO ONE TEST WELL, THEY MIGHT BE ABLE TO SAY TEST, FOR EXAMPLE, FOR GLUCOSE?
WADE MIQUELON: RIGHT.
MR. DOWNEY: BUT NOT FOR A RANGE OF TESTS; RIGHT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND PART OF WHAT ATTRACTED YOU TO WHAT THERANOS WAS DOING WAS THAT THEY WERE DEVELOPING TESTS THAT WOULD DO IT ON A BROAD RANGE OF ASSAYS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: YOU GO ON IN THIS EMAIL TO SAY TO MR. WASSON, "NOTICE THE CORRELATION DATA OF WHAT IS THE TOUGHEST OF ALL TESTS... 99 PERCENT." AND I WANT TO ASK YOU TO LOOK AT SLIDE 8 IN THE ATTACHED SLIDES. I BEG YOUR PARDON. IT'S PAGE 10 AT THE BOTTOM OF THE ATTACHED SLIDE. IS THIS THE CORRELATION DATA THAT YOU WERE REFERRING TO IN YOUR COVER EMAIL?
WADE MIQUELON: I BELIEVE SO.
MR. DOWNEY: AND CAN YOU EXPLAIN, AS YOU UNDERSTOOD IT AT THE TIME, WHAT CORRELATION DATA WAS?
WADE MIQUELON: IT WAS THERANOS VALIDATING FOR ANY GIVEN TEST HOW ACCURATE A THERANOS MACHINE WAS VERSUS A CONVENTIONAL LAB MACHINE.
MR. DOWNEY: SO DOES, DOES -- IS THAT A COMPARISON OF HOW THE TWO TESTS PERFORM RELATIVE TO SOME FORM OF STANDARD MEASUREMENT?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, YES.
MR. DOWNEY: OKAY. AND YOU -- WHEN YOU REVIEWED THIS SLIDE IN THE POWERPOINT, YOU THOUGHT THAT THIS WAS THE CORRELATION DATA FOR THE TOUGHEST OF ALL TESTS; CORRECT?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, YES.
MR. DOWNEY: AND YOU NOTE THAT THE CORRELATION DATA WAS 99 PERCENT; CORRECT?
WADE MIQUELON: CORRECT. AGAIN, I'M NOT A HEALTH CARE PROFESSIONAL, SO THAT WAS MY UNDERSTANDING. BUT, YES.
MR. DOWNEY: AND WHY WAS THE CORRELATION DATA IMPORTANT TO YOU IN EVALUATING THIS ON WALGREENS'S BEHALF?
WADE MIQUELON: WELL, MY ASSUMPTION WAS THAT IN ORDER TO BE ABLE TO GET THE PROPER APPROVALS AND PROVIDE THE PATIENT ACCURACY, THAT THE BETTER THE CORRELATOR, THE BETTER.
MR. DOWNEY: SO YOU RECOGNIZED THE CORRELATION DATA MIGHT BE IMPORTANT FOR PURPOSES OF GETTING FDA APPROVAL, FOR EXAMPLE?
WADE MIQUELON: OR CMS. THAT WAS MY UNDERSTANDING.
MR. DOWNEY: AND ONE OF THE REGULATORS MIGHT BE INTERESTED IN THAT DATA; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IN CONNECTION WITH THIS PRESENTATION, THAT'S THE SLIDE THAT YOU POINTED OUT TO THE CEO WHEN YOU TRANSMITTED IT TO HIM AFTER THE MEETING; CORRECT?
WADE MIQUELON: IT APPEARS THAT WAY.
MR. DOWNEY: NOW, YOU TESTIFIED ABOUT THE THERANOS PLATFORM, AND I WANT TO TAKE A MOMENT JUST TO BREAK THAT DOWN TO MAKE SURE THAT WE'RE USING COMMON TECHNOLOGY, COMMON TERMINOLOGY ABOUT THE TECHNOLOGY. IN THE MEETING WITH MS. HOLMES AND MR. BALWANI, THEY SHOWED YOU A SLIDE WHICH DESCRIBED THE THERANOS SYSTEMS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IS THAT THE PLATFORM THAT YOU HAVE BEEN REFERRING TO IN YOUR TESTIMONY?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT CONSISTED OF ACTUALLY SEVERAL DIFFERENT TECHNOLOGIES, DIDN'T IT?
WADE MIQUELON: YES.
MR. DOWNEY: AND ONE OF THE TECHNOLOGIES WAS AN ANALYZER; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND ANOTHER PIECE OF THE TECHNOLOGY WAS THE ASSAY WHICH WAS PLACED IN A CARTRIDGE THAT WOULD BE PUT INTO THE DEVICE FOR PURPOSES OF BEING ANALYZED; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND YOU RECOGNIZED THAT THE ASSAYS WERE, WERE -- EACH OF THEM HAD TO BE DEVELOPED BEFORE THEY WERE CAPABLE OF BEING USED IN CONNECTION WITH A CARTRIDGE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: BUT THERANOS HAD DEVELOPED TO A CERTAIN LEVEL, AT LEAST, SOME OF THOSE ASSAYS UNDER A METHOD; CORRECT?
WADE MIQUELON: MY UNDERSTANDING WAS YES.
MR. DOWNEY: AND THEY BELIEVED THAT USING THAT METHOD, THEY WOULD BE, THEY WOULD BE ABLE TO REPLICATE IT FOR ESSENTIALLY ALL COMMONLY ORDERED ASSAYS; CORRECT?
WADE MIQUELON: THAT WAS MY UNDERSTANDING, YES.
MR. DOWNEY: AND THAT'S WHAT THEY SUGGESTED IN THAT MEETING IN MARCH OF 2010; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND ANOTHER PIECE OF THE TECHNOLOGY WAS THE GOVERNMENT SOFTWARE THAT ASSOCIATED WITH THE SYSTEM; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THERE WAS SOFTWARE THAT WAS PART OF THE DEVICE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THERE WAS SOFTWARE THAT WAS PLACED WITHIN SYSTEMS AT THERANOS TO COMMUNICATE WITH THE DEVICES; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IT WAS REALLY THAT SOFTWARE THAT OPENED UP A LOT OF THE CAPABILITIES OF THERANOS TECHNOLOGY FOR THE FUTURE; CORRECT?
WADE MIQUELON: PART OF WHAT DID, YES, CORRECT.
MR. DOWNEY: WELL, LET ME ASK YOU TO LOOK WITHIN EXHIBIT 278. THAT'S EXHIBIT 278, SLIDE 11. DO YOU SEE THAT?
WADE MIQUELON: SLIDE 11 YOU SAID?
MR. DOWNEY: IT'S LABELLED THERANOS: CUSTOMIZED DATA INTEGRATION AND STANDARDIZATION.
WADE MIQUELON: YES, I SEE THAT.
MR. DOWNEY: AND THIS IS ONE MUCH THE SLIDES THAT YOU DISCUSSED IN THAT MARCH OF 2010 MEETING; CORRECT?
WADE MIQUELON: YES, CORRECT.
MR. DOWNEY: AND ONE OF THE CAPACITIES THAT THERANOS WAS INTERESTED IN DEVELOPING WAS PREDICTIVE HEALTH ASSETS; CORRECT?
WADE MIQUELON: I BELIEVE THAT WAS KIND OF THE END GAME, IF YOU WILL, IN TERMS OF ASPIRATION FOR THEM.
MR. DOWNEY: AND EXPLAIN WHAT THAT MEANT AND WHAT THEY DESCRIBED TO YOU THAT THEY WERE TRYING TO DO?
WADE MIQUELON: A LOT OF DIFFERENT DISCUSSIONS. YOU KNOW, ONE DISCUSSION WOULD BE IF YOU HAD YOUR, YOU KNOW, LIKE A 23 & ME TEST, IT MIGHT SAY THAT YOU HAVE A MARKER FOR A CERTAIN CANCER MAYBE, BUT IT DOESN'T MEAN THAT YOU'RE GOING TO GET IT. IT JUST MEANS THAT YOU MIGHT. AND, YOU KNOW, PREDICTIVE TESTING WHERE YOU COULD BE LOOKING AT IT, AND SO THAT WAS ONLY USEFUL TO SOME EXTENT. BEING ABLE TO MEASURE BLOOD FREQUENTLY, ACCURATELY, ACROSS A LOT OF DIFFERENT MARKERS MIGHT HELP THAT PERSON INTERVENE THE PROCESS UPSTREAM, AND THAT BECOMES A MUCH HIGHER LEVEL OF CLINICAL OUTCOME THAN JUST HELPING SOMEBODY WHO IS ALREADY SICK.
MR. DOWNEY: AND WAS ANOTHER POTENTIAL CAPACITY OF THE TECHNOLOGY THAT THEY WERE INVENTING THE ABILITY TO AGGREGATE DATA TO OBSERVE EITHER TRENDS IN HEALTH IN THE LARGER POPULATION OR OTHER THINGS?
WADE MIQUELON: I THINK FOR SURE THAT WAS PART OF WHAT THEY WERE WORKING ON.
MR. DOWNEY: AND SOME OF IT COULD HAVE PUBLIC HEALTH APPLICATIONS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND ALL OF THAT WAS DISCUSSED IN THIS EARLY MEETING; CORRECT?
WADE MIQUELON: I CAN'T SAY IF ALL OF THAT WAS DISCUSSED ON THE FIRST DAY, BUT OVER TIME WE DISCUSSED A LOT OF THAT.
MR. DOWNEY: YOU RECALL AT SOME POINT DURING YOUR 10 OR 15 MEETINGS WITH THEM THOSE DISCUSSIONS?
WADE MIQUELON: YES.
MR. DOWNEY: YOUR HONOR, IS THIS A GOOD TIME TO BREAK?
JUDGE DAVILA: I'M NOT CERTAIN. I THINK WE -- PERHAPS WE SHOULD TAKE ABOUT A 25 MINUTE BREAK.
MR. DOWNEY: OKAY. I THINK I'M AT A LOGICAL POINT.
JUDGE DAVILA: OKAY. LET'S DO THAT. LADIES AND GENTLEMEN, LET'S TAKE ABOUT A 25 MINUTE BREAK NOW. BEFORE WE DO THAT, I DO WANT TO FOLLOW UP WITH MY CONVERSATION WITH YOU BOTH THIS MORNING AND YESTERDAY, LADIES AND GENTLEMEN. I DO WANT TO TELL YOU ABOUT NEXT STEPS, AND I THINK YOU INQUIRED, SOME OF YOU INQUIRED ABOUT THAT. WHAT I INTEND TO DO -- AND THIS IS IN RELATION TO OUR CONVERSATIONS REGARDING THE QUESTIONNAIRES. WHAT I INTEND TO DO IS I'M GOING TO GET -- I'VE ASKED THE LAWYERS TO PROVIDE ME ANY BRIEFING THAT THEY WISH ON SOME OF THE LEGAL ISSUES, THAT IS, THE LAWYERS IN THE COURTROOM. I'LL RECEIVE THOSE, I'LL TALK TO THE MOVING PARTY, YOU HEARD ME TALK ABOUT THE MOVING PARTY FOR THE MOTION, AND PROVIDE INFORMATION TO HIM. IN ALL LIKELIHOOD, I AM GOING TO SET ANOTHER HEARING FOR THAT MOVING PARTY'S MOTION TO RELEASE THE INFORMATION IN THE QUESTIONNAIRES.
JUST GIVEN THE BRIEFING SCHEDULE, WHAT THAT MEANS IS EACH SIDE IS PERMITTED AN OPPORTUNITY TO PRESENT TO ME THEIR LEGAL OPINIONS ABOUT WHAT THE LAW IS ON THIS ISSUE, AND THEY'RE GIVEN CERTAIN TIME, ONCE THEY RECEIVE THE OTHER SIDE'S MOTION, AND I GIVE THEM TIME TO RESPOND, SO WE HAVE A BACK AND FORTH. I THEN SET A HEARING, ANOTHER HEARING. AND THAT'S WHAT I INTEND TO DO IN REGARDS TO THIS ISSUE. THAT HEARING, I DON'T HAVE A DATE FOR IT YET, BUT I ANTICIPATE THAT HEARING WILL BE ANOTHER FIVE WEEKS AWAY, SOMETHING LIKE THAT, JUST GIVEN THE BRIEFING SCHEDULE. THAT'S MY SENSE OF IT. BUT I'LL KEEP YOU INFORMED OF THAT. AND THEN AFTER THE HEARING I'LL HEAR FROM ALL OF THE PARTIES, AND AT THAT POINT THEN I BELIEVE THAT I'LL BE ABLE TO MAKE DECISIONS AS TO THE THINGS THAT WE TALKED ABOUT AND THE THINGS THAT WERE RAISED IN THE MOTION BY THE MOVING PARTY, THE MEDIA COALITION. SO I JUST WANT TO KEEP YOU UP TO DATE ON THAT. THAT'S THE STATUS OF THINGS NOW.
NOTHING IS GOING TO CHANGE UNTIL I'VE HAD ALL OF THOSE HEARINGS. SO THE MATERIAL REMAINS AS IT CURRENTLY IS, AND THAT WON'T CHANGE UNTIL AFTER I'VE HAD AN OPPORTUNITY TO HEAR FROM EVERYONE. SO THAT'S THE LATEST UPDATE. THANK YOU VERY MUCH FOR YOUR PATIENCE THIS MORNING. ONE MORE THING. I THINK I'VE TALKED TO YOU ABOUT TOMORROW BEING -- I'VE BEEN ABLE TO CLEAR THAT FOR OUR PURPOSES. DURING THIS BREAK I'M GOING TO ASK YOU IF YOU COULD, PLEASE, TO CONTACT THE PARTIES THAT YOU NEED TO TO SEE IF YOU CAN MAKE THAT WORK, COME TO COURT TOMORROW AND MAKE IT WORK. IT WOULD BE FROM 9:00 TO 3:00. I WOULDN'T WANT TO KEEP YOU UNTIL 4:00 TOMORROW, BUT 9:00 TO 3:00 TOMORROW. IF YOU NEED TO ADJUST THAT, I'LL BE HAPPY TO HEAR THAT INFORMATION WHEN WE COME BACK FROM OUR BREAK IF YOU'RE ABLE TO MAKE IT TOMORROW OR IF WE NEED TO ADJUST THAT SCHEDULE. ALL RIGHT. LET'S TAKE OUR BREAK. SIR, YOU CAN STAND DOWN.
COURT CLERK: COURT IS IN RECESS.
(JURY OUT AT 12:38 P.M.)
JUDGE DAVILA: PLEASE BE SEATED. THANK YOU. THE RECORD SHOULD REFLECT THAT OUR JURY HAS LEFT FOR THE BREAK, AND OUR WITNESS HAS LEFT THE COURTROOM. ALL COUNSEL AND MS. HOLMES ARE PRESENT. ANYTHING FURTHER BEFORE WE BREAK, MR. SCHENK?
MR. SCHENK: NO, YOUR HONOR. THANK YOU.
MR. DOWNEY: NO, YOUR HONOR. THANK YOU.
JUDGE DAVILA: SO IF WE ARE ABLE TO CONVENE TOMORROW, HAVE A SESSION TOMORROW, YOU'LL BE ABLE TO HAVE WITNESSES I TAKE IT, MR. SCHENK.
MR. SCHENK: YES.
JUDGE DAVILA: OKAY. GREAT. THANK YOU.
COURT CLERK: COURT IS IN RECESS.
(LUNCH RECESS TAKEN AT 12:39 P.M.) AFTERNOON SESSION
(JURY IN AT 1:12 P.M.)
JUDGE DAVILA: THANK YOU. WE'RE BACK ON THE RECORD. ALL PARTIES PREVIOUSLY PRESENT ARE PRESENT ONCE AGAIN. MR. DOWNEY, YOU'D LIKE TO CONTINUE WITH YOUR EXAMINATION?
MR. DOWNEY: YES, SIR. THANK YOU.
MR. DOWNEY: MR. MIQUELON, BEFORE THE BREAK WE WERE TALKING ABOUT THE THERANOS SYSTEMS THAT WERE PRESENTED TO YOU IN MARCH OF 2010 IN YOUR VERY FIRST MEETING WITH MS. HOLMES AND MR. BALWANI. I'D LIKE TO JUST ESTABLISH WHAT THE CHRONOLOGY WAS OF YOUR RELATIONSHIP WITH THERANOS, OR I SHOULD SAY WALGREENS'S RELATIONSHIP WITH THERANOS BETWEEN THAT MEETING AND THE TIME THAT YOU LEFT IN AUGUST OF 2014. AM I RIGHT THAT YOUR FIRST MEETING AND INTRODUCTION INTO THERANOS WAS IN THE MEETING OF MARCH OF 2010; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND COMING OUT OF THAT MEETING, BOTH SIDES MET AND EVALUATED THE POSSIBILITY OF A DEAL FOR A FEW MONTHS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IN JULY OF 2010, THE PARTIES SIGNED THEIR FIRST AGREEMENT; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND THAT AGREEMENT CONTEMPLATED AT THAT TIME THAT THERANOS DEVICES WOULD BE DEPLOYED WITHIN WALGREENS STORES; CORRECT?
WADE MIQUELON: AT SOME POINT, YES, CORRECT.
MR. DOWNEY: AND FROM THAT POINT IN JULY OF 2010 FOR ABOUT A YEAR AND A HALF, THE PARTIES WORKED ON ALL OF THE THINGS THAT WOULD GO INTO HAVING THAT TYPE OF LAUNCH; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND THAT INCLUDED THINGS LIKE INSURANCE REIMBURSEMENT; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: BUSINESS MODEL; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND OTHER ITEMS?
WADE MIQUELON: YES.
MR. DOWNEY: IN EARLY 2012, THOUGH, THE PARTIES STARTED TO DISCUSS A POTENTIAL CHANGE IN THE BUSINESS MODEL; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT CHANGE WOULD INVOLVE THERANOS DEVICES NOT BEING DEPLOYED IN THERANOS STORES; CORRECT? IN WALGREENS STORES?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THE PARTIES WORKED ON A NEW AGREEMENT TO GOVERN THEIR RELATIONSHIP FOR SEVERAL MONTHS AFTER THOSE DISCUSSIONS IN EARLY 2012; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THE PARTIES ENTERED INTO A NEW AGREEMENT AMENDING THE FIRST AGREEMENT IN JUNE OF 2012; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND FROM THAT POINT FORWARD, THE INTENT WAS NOT THAT THERANOS DEVICES WOULD BE PLACED IN WALGREENS STORES, BUT RATHER THAT THERE WOULD BE CENTRAL LABS IN WHICH THE BLOOD ANALYSIS WOULD BE DONE; CORRECT?
WADE MIQUELON: MY UNDERSTANDING WAS THAT THERE WOULD BE A CENTRAL LOCATION WHERE THE THERANOS MACHINES WOULD DO THE LAB WORK.
MR. DOWNEY: AND THAT WOULD BE A LABORATORY CERTIFIED UNDER CLIA; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IT WAS POSSIBLE ALSO THAT THERE WOULD BE MORE THAN ONE LAB? THERE MIGHT BE REGIONAL LABS WHERE THAT WAS DONE; CORRECT?
WADE MIQUELON: I THINK THAT WAS PART OF THE DISCUSSIONS, THAT OVER TIME IT MIGHT MAKE SENSE TO HAVE MULTIPLE LABS WITH THERANOS MACHINES, CORRECT.
MR. DOWNEY: AND AFTER THAT POINT WHEN THAT AGREEMENT WAS REACHED IN JUNE OF 2012, A LITTLE OVER A YEAR LATER THERANOS STORES -- OR THERANOS SITES WERE LAUNCHED IN WALGREENS STORES ORIGINALLY IN PALO ALTO; CORRECT?
WADE MIQUELON: I BELIEVE THERE WAS ONE IN PALO ALTO FIRST.
MR. DOWNEY: AND THAT HAPPENED AROUND SOMETIME -- I THINK WITH FRIENDS AND FAMILY FIRST IN SEPTEMBER OF 2013; CORRECT?
WADE MIQUELON: THAT DATE SOUNDS CORRECT.
MR. DOWNEY: AND THEN THERE WAS A LAUNCH IN -- A COMMERCIAL LAUNCH IN PALO ALTO AND IN SOME STORES IN ARIZONA IN NOVEMBER OF 2013; CORRECT?
WADE MIQUELON: THAT'S ABOUT THE RIGHT TIMEFRAME.
MR. DOWNEY: NOW, WHEN YOU LOOK AT THE REPRESENTATIONS THAT WERE MADE IN THE ORIGINAL MEETING THAT YOU HAD WITH MS. HOLMES, MANY OF THOSE REPRESENTATIONS WOULD NO LONGER BE RELEVANT TO THE SECOND BUSINESS MODEL; CORRECT?
WADE MIQUELON: YOU WOULD PROBABLY HAVE TO PARSE THEM ONE BY ONE FOR ME TO SAY THAT.
MR. DOWNEY: OKAY. WELL, LET'S TALK, FOR EXAMPLE, ABOUT REPRESENTATIONS RELATED TO THE SPEED OF PROCESSING THE SAMPLES. DO YOU RECALL TALKING ABOUT THAT ON YOUR DIRECT EXAMINATION?
WADE MIQUELON: YES.
MR. DOWNEY: AND THERE WERE REPRESENTATIONS WHICH INDICATED THAT THERANOS PROJECTED THAT BLOOD TESTS COULD BE PERFORMED IN LESS THAN 30 MINUTES. DO YOU RECALL THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THE ASSUMPTION BEHIND THAT WAS THAT THE BUSINESS MODEL WOULD BE THAT THE DEVICES WORK IN THE WALGREENS STORES; CORRECT?
WADE MIQUELON: THAT WAS THE ORIGINAL -- YES, FOR THAT ASSUMPTION, THAT WAS THE ORIGINAL DESIGN.
MR. DOWNEY: BUT THE AGREEMENT THAT THE PARTIES REACHED IN THE SUMMER OF 2012 CHANGED HOW THAT MODEL WOULD WORK; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND THE TESTING WOULD NOT BE IN STORES, BUT IT WOULD BE OFFSITE; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND BOTH PARTIES AGREED TO THAT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THAT WOULD ELIMINATE THE CAPACITY TO TEST WITHIN 15 TO 30 MINUTES; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND ALSO THERE WERE DISCUSSIONS IN 2010 THAT CERTAIN COSTS ASSOCIATED WITH BLOOD TESTING WOULD BE ELIMINATED IF THE DEVICES WERE IN THE STORE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THINGS LIKE COURIER SERVICES THAT WOULD HAVE TO TAKE THE BLOOD FROM ONE LOCATION TO ANOTHER, FOR EXAMPLE?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND AN INFRASTRUCTURE TO REFRIGERATE SAMPLES FOR A PERIOD BEFORE THEY WERE TRANSPORTED?
WADE MIQUELON: THAT'S -- FROM MY UNDERSTANDING, THAT'S CORRECT.
MR. DOWNEY: OKAY. BUT WHEN THE MODEL CHANGED IN THE SUMMER OF 2012, SOME OF THOSE COSTS WOULD HAVE TO BE INCURRED; CORRECT?
WADE MIQUELON: RIGHT. AND AGAIN, FROM MY UNDERSTANDING WHAT CHANGED IN THE MODEL IS FORSAKE OF THE PILOT -- A COUPLE OF THINGS. ONE IS THAT, AS WE THOUGHT ABOUT THE APPROVALS IN THIS UNDEFINED, YOU KNOW, WHERE IS THE LAB BY BEING ABLE TO PILOT WITHOUT THE MACHINE IN THE WALGREENS STORE, IT MITIGATED THAT CONCERN UNTIL THAT COULD BE CLARIFIED. SECOND, JUST IN TERMS OF MAKING SURE THAT WE COULD EXECUTE WITH EXCELLENCE, YOU KNOW, THERE IS A LITTLE BIT MORE COMPLEXITY IN ASKING A PHARMACY TO KEEP CARTRIDGES AND TO UNDERSTAND HOW TO USE THOSE PROPERLY. AND SO WE FELT THAT IT WAS A GOOD WAY TO KEEP THE PATIENT LEARNING, WHICH WAS VERY IMPORTANT.
MR. DOWNEY: AT THE TIME THAT YOU LEFT WALGREENS IN AUGUST OF 2014, THERE WERE ABOUT 40 THERANOS LOCATIONS OPERATING IN WALGREENS STORES; CORRECT?
WADE MIQUELON: IT MIGHT HAVE BEEN. I DON'T KNOW THE EXACT NUMBER.
MR. DOWNEY: YOU KNOW THERE WERE SEVERAL DOZEN, WHATEVER THE EXACT NUMBER WAS?
WADE MIQUELON: RIGHT.
MR. DOWNEY: AND YOU KNOW THAT THOSE LOCATIONS WERE IN BOTH ARIZONA AND CALIFORNIA; CORRECT?
WADE MIQUELON: I THINK THAT'S MY RECOLLECTION.
MR. DOWNEY: OKAY. AND IN THE TERMINOLOGY THAT THE PARTIES USED, THE PHASE OF THE AGREEMENT WHEN THE DEVICES WOULD BE IN A CENTRAL LAB WAS REFERRED TO AS PHASE I; CORRECT?
WADE MIQUELON: I'D HAVE TO GO BACK TO THE AGREEMENT TO BE SURE ABOUT THAT.
MR. DOWNEY: OKAY. BUT THERE WAS A SECOND PHASE THAT ASSUMED IF THE DEVICES GOT CERTAIN REGULATORY APPROVALS, THAT THE DEVICES MIGHT THEN BE DEPLOYED TO THE WALGREENS STORES AS ORIGINALLY CONTEMPLATED WHEN YOU TALKED TO MS. HOLMES IN MARCH OF 2010?
WADE MIQUELON: YES. BUT TO SOME EXTENT THAT WAS JUST BASED UPON THE MATH. IF YOU HAD A SPECIFIC SITE THAT WAS DOING LOTS OF VOLUME, IT MIGHT MAKE SENSE TO HAVE A MACHINE THERE AND THE CARTRIDGE INVENTORY, VERSUS ANOTHER SITE WHERE YOU MIGHT HAVE VERY LOW VOLUME, THAT MIGHT MAKE SENSE. BUT I WOULD SAY THE ECONOMICS WOULD HAVE DICTATED THAT.
MR. DOWNEY: SO IN CERTAIN CASES THE ECONOMICS MIGHT LEAD THE PARTIES TO THINK THAT IT'S REALLY NOT WORTH DEPLOYING A DEVICE IN A STORE; CORRECT?
WADE MIQUELON: RIGHT. I THINK THAT WAS ALWAYS A CONSIDERATION, WHAT IS THE SMARTEST EXECUTION BASED ON WHAT IS ACCEPTABLE.
MR. DOWNEY: SO THAT STORE MIGHT STICK WITH THE MODEL WHERE THE SAMPLES WERE PROCESSED WITHIN THE CENTRAL CLIA LAB; IS THAT CORRECT?
WADE MIQUELON: RIGHT.
MR. DOWNEY: BUT WE SAW REFERENCE IN SOME OF THE DOCUMENTS THAT WE LOOK AT TO REGULATORY RISKS. IS THIS ONE OF THE ISSUES THAT MOTIVATED PEOPLE TO MOVE -- MOTIVATED WALGREENS AND THERANOS TO ELECT TO GO TO THIS MODEL?
WADE MIQUELON: AGAIN, I THINK EARLY ON THAT WAS PART OF THE CONSIDERATION, AGAIN, BECAUSE OF THIS ISSUE OF WHERE IS THE LAB? IS IT WHERE THE EDISON IS OR IS IT WHERE THE DATA ULTIMATELY RESIDES IN THE CLOUD? THAT WAS SOMETHING THAT I BELIEVE AT THAT TIME WAS NOT CLEAR YET, AND SO WHAT WAS SEEN AS THE, YOU KNOW, THE MORE PRUDENT CHOICE WAS TO KEEP THE LAB OUTSIDE OF THE STORE. BUT ALSO JUST IN TERMS OF PATIENT EXPERIENCE, MAKING SURE THERE WAS NO RISK OF STORES NOT USING THE RIGHT CARTRIDGE OR UNDERSTANDING HOW TO RUN IT. WE FELT THAT THAT WAS GOING TO BE A BETTER WAY TO LEARN.
MR. DOWNEY: OKAY. AND I WANT TO GO BACK THROUGH THAT CHRONOLOGY WITH YOU A LITTLE BIT AND FILL IN WHAT HAPPENED AT THE CRITICAL POINTS. BUT IS IT FAIR TO SAY THAT IF YOU WANT TO EVALUATE THE REPRESENTATIONS THAT THE PARTIES WERE MAKING TO EACH OTHER, YOU HAVE TO LOOK AT THE POINT IN TIME WHERE THE PARTIES WERE IN THE COURSE OF THE CHRONOLOGY THAT WE'VE JUST DISCUSSED?
WADE MIQUELON: I THINK CONTEXT IS IMPORTANT, RIGHT.
MR. DOWNEY: ALL RIGHT. NOW, WE WERE DISCUSSING BEFORE THE BREAK THE ORIGINAL MEETING THAT YOU HAD, AND THEN YOUR TRANSMISSION OF THE THERANOS POWERPOINT TO THE CEO, AND WE DISCUSSED THE TECHNOLOGY. DID -- WERE THERE THEN MEETINGS WITHIN WALGREENS TO CONSIDER WHETHER OR NOT TO PROCEED WITH A DEAL WITH THERANOS?
WADE MIQUELON: MULTIPLE.
MR. DOWNEY: AND WERE THEY AT SENIOR LEVELS?
WADE MIQUELON: AT EVERY LEVEL FROM LOWER WORKING TEAM TO HIGHER LEVEL ON THE TEAM TO THE HIGHEST LEVEL OF THE COMPANY.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT EXHIBIT 300, WHICH WILL BE IN YOUR WHITE BINDER. YOUR HONOR, I BELIEVE 300 IS --
JUDGE DAVILA: IT'S IN EVIDENCE.
MR. DOWNEY: IT'S IN EVIDENCE, YES. IT IS IN EVIDENCE.
MR. DOWNEY: THE ADDRESSEES FOR THE EMAIL THAT YOU SENT IN LATE APRIL ARE ALL OF THE -- AMONG THE MOST SENIOR EXECUTIVES, INCLUDING THE MOST SENIOR EXECUTIVES IN THE COMPANY; CORRECT?
WADE MIQUELON: THAT IS CORRECT.
MR. DOWNEY: AND DO YOU RECALL THE DISCUSSION THAT FOLLOWED FROM SETTING UP THIS MEETING?
WADE MIQUELON: I DON'T KNOW IF I RECALL THE DISCUSSION THAT FOLLOWED. I RECALL HAVING THE MEETING.
MR. DOWNEY: AND WAS THERE A DISCUSSION IN THE MEETING ABOUT WHETHER OR NOT TO PURSUE A RELATIONSHIP WITH THERANOS?
WADE MIQUELON: YES.
MR. DOWNEY: OKAY. AND THEN WHAT WAS THE CONCLUSION OF THAT MEETING?
WADE MIQUELON: I THINK THE CONCLUSION OF THE MEETING WAS THAT THIS APPEARS TO BE REALLY EXCITING, LET'S KEEP WORKING WITH THEM, LET'S SEE WHERE THIS WILL GO.
MR. DOWNEY: AND DID THE COMPANY DECIDE THAT YOU WANTED TO TAKE FURTHER STEPS TO TRY TO EVALUATE WHETHER OR NOT SUCH A RELATIONSHIP WOULD BE GOOD FOR WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: AND WERE SOME OF THOSE STEPS TO EVALUATE HOW A BUSINESS MODEL MIGHT WORK?
WADE MIQUELON: YES.
MR. DOWNEY: AND WERE SOME OF THOSE STEPS TO EVALUATE THE FINANCIAL CONDITION OF THERANOS?
WADE MIQUELON: TO THE EXTENT THAT WE COULD.
MR. DOWNEY: OKAY. WELL, YOU BECAME A BIT FAMILIAR WITH THE INVESTOR BASE OF THERANOS; CORRECT?
WADE MIQUELON: JUST THROUGH TIDBITS OF CONVERSATION. BUT WE NEVER GOT, YOU KNOW, TO MY KNOWLEDGE A CAP TABLE, IF YOU WILL, THAT SHOWS SPECIFIC INVESTORS AND INVESTMENTS.
MR. DOWNEY: OKAY. AND DID YOU AT THE TIME ALSO LOOK AT WHETHER OR NOT IT WAS POSSIBLE THAT INSURERS MIGHT REIMBURSE FOR THERANOS SYSTEMS WHICH WOULD BE A KEY TO THE SUCCESS OF THE PROGRAM?
WADE MIQUELON: WE DID.
MR. DOWNEY: AND WHY WAS THAT IMPORTANT TO THE PROGRAM?
WADE MIQUELON: YOU KNOW, THE VAST MAJORITY OF HEALTH CARE REIMBURSEMENT COMES THROUGH SOME INTERMEDIARY, SO WHETHER IT'S A PRESCRIPTION OR A VACCINE OR A LAB, MAKING SURE THOSE PAYORS ARE WILLING TO PAY FOR IT IS FAIRLY IMPORTANT.
MR. DOWNEY: DID YOU ALSO LOOK AT THE PATENTS THAT THERANOS HAD OBTAINED?
WADE MIQUELON: I DIDN'T PERSONALLY. I DO KNOW, THOUGH, THAT THERE WAS SOME WORK TO TRY TO UNDERSTAND THE BREADTH OF PATENTS.
MR. DOWNEY: OKAY. AND DO YOU RECALL WHAT THE CONCLUSION OF THAT WORK WAS?
WADE MIQUELON: AGAIN, I'M NOT A PATENT ATTORNEY EITHER. MY RECOLLECTION IS THAT THERE WERE, YOU KNOW, DOZENS, IF NOT MORE, PATENTS.
MR. DOWNEY: OKAY. AND DO YOU KNOW WHAT THE CONCLUSION -- DO YOU KNOW WHAT THE CONCLUSION WAS, IF ANY, AS TO THE STRENGTH OF THOSE PATENTS?
WADE MIQUELON: AGAIN, I'M NOT A PATENT ATTORNEY. I CAN ONLY SPECULATE.
MR. DOWNEY: DID YOU ALSO TRY TO TAKE STEPS -- DID WALGREENS TRY TO TAKE STEPS TO EVALUATE THE TECHNOLOGY AND HOW DEVELOPED IT WAS?
WADE MIQUELON: AS BEST WE COULD.
MR. DOWNEY: OKAY. WHAT DID YOU DO TO DO THAT?
WADE MIQUELON: AGAIN, YOU KNOW, ONE OF THE STEPS WE TOOK, AGAIN, WAS TO HIRE A LAB FIRM TO LOOK AT THE SPACE AND TO DO THE BEST VETTING THAT THEY COULD. ANOTHER STEP THAT WE TOOK WAS WE INTRODUCED THERANOS TO JOHNS HOPKINS AND THERE WAS I KNOW SOME DISCUSSION THERE AS WELL.
MR. DOWNEY: DID THE LAB FIRM MAKE CONCLUSIONS REGARDING THERANOS?
WADE MIQUELON: THEY DID.
MR. DOWNEY: DID THOSE CONCLUSIONS LEAD YOU TO BELIEVE THAT A PARTNERSHIP WITH THERANOS WOULD BE WORTHWHILE?
WADE MIQUELON: I BELIEVE A GENERAL CONCLUSION THAT THEY HAD, AND I THINK THAT THEY WERE OPERATING ON, THE DATA THAT THEY WERE VERSUS TAKING A MACHINE APART, IF YOU WILL, THEY THOUGHT THERANOS WAS PROBABLY, OF THE 150 OR 180 COMPANIES IN THIS SPACE, THEY THOUGHT, FOR WHAT WE WERE LOOKING FOR, THAT WAS PROBABLY THE FARTHEST AHEAD. I THINK THE ONE CONCERN THEY VOICED WAS WHETHER THE I.T. SYSTEMS WOULD BE ABLE TO BE, YOU KNOW, READY AND BUILT OUT. BUT THAT WAS MY UNDERSTANDING OF THE CONCLUSION.
MR. DOWNEY: AND THE I.T. SYSTEMS RELATED TO THE COORDINATION BETWEEN THE CENTRAL LAB AND THE DEVICES, OR WAS IT OTHER ISSUES?
WADE MIQUELON: I MEAN, I THINK THE CLOUD FEED WAS PROBABLY NOT WHAT THEY WERE GETTING AT. IT WAS MORE AROUND SYSTEMS FOR REIMBURSEMENT, PERHAPS DATA MANAGEMENT TO DRIVE ALGORITHMS. BUT THE MORE SOPHISTICATED I.T. INFRASTRUCTURE, AS WELL AS A PATIENT CHECK-IN EXPERIENCE, HOW DO YOU MAKE SURE THAT PEOPLE HAVE PRIOR AUTHORIZATION IF THEY'RE RECEIVING SOME REIMBURSEMENT? HOW DO YOU KEEP PATIENT DATA SAFE THROUGH HIPAA AND ALL OF THE CONCERNS OF PRIVACY? I THINK THAT WAS MORE OF THE POINT.
MR. DOWNEY: OKAY. AND YOU ALSO MENTIONED THAT WALGREENS CONTACTED JOHNS HOPKINS TO UNDERTAKE SOME EVALUATION OF THE TECHNOLOGY; IS THAT RIGHT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND DID WALGREENS HAVE A RELATIONSHIP WITH JOHNS HOPKINS PRIOR TO THIS?
WADE MIQUELON: YES.
MR. DOWNEY: AND CAN YOU TELL US WHAT THAT WAS?
WADE MIQUELON: WE HAD BUILT A RELATIONSHIP WITH JOHNS HOPKINS IN THEIR BUSINESS DEVELOPMENT GROUP JUST TO BE ABLE TO COLLABORATE BACK AND FORTH, AND IT WAS MYSELF AND A FEW OTHER GENTLEMEN PUT THAT INTO PLACE. WE WORKED TOGETHER AND BUILT A PHARMACY THERE AND TRIED TO DRIVE, YOU KNOW, CLINICAL OUTCOMES FOR PATIENTS. WE WORKED TO FUND A BRANCATI FUND FOR A GENTLEMAN WHO WAS THERE AND WHO DIED OF LOU GEHRIG'S DISEASE, SO JUST A VARIETY OF FACTORS. AND WITH THERANOS WE ASKED IF THEY WERE WILLING TO MEET WITH ELIZABETH AND SUNNY, AND I THINK THEY HAD THEIR HEAD OF LABS THERE TO GIVE US THEIR UNDERSTANDING AND TAKE ON THE TECHNOLOGY.
MR. DOWNEY: AND DID THAT MEETING TAKE PLACE?
WADE MIQUELON: IT DID TAKE PLACE.
MR. DOWNEY: WERE YOU PRESENT FOR THAT MEETING?
WADE MIQUELON: I WAS NOT.
MR. DOWNEY: WAS A WRITTEN REPORT OF THAT MEETING PREPARED?
WADE MIQUELON: I HAD SEEN A REPORT.
MR. DOWNEY: LET ME ASK YOU TO LOOK IN THE GOVERNMENT'S NOTEBOOK AT WHAT IS MARKED AS EXHIBIT 302. IS THIS THE REPORT FROM JOHNS HOPKINS THAT WAS PREPARED FOR WALGREENS IN CONNECTION WITH THE POTENTIAL THERANOS DEAL?
WADE MIQUELON: THIS IS WHAT I RECALL.
MR. DOWNEY: OKAY. AND DID YOU REVIEW THIS AT THE TIME?
WADE MIQUELON: I READ THE NOTES AFTER THE MEETING, BUT, AGAIN, I WASN'T AT THE MEETING.
MR. DOWNEY: OKAY. LET ME ASK YOU TO -- YOUR HONOR, I MOVE THE ADMISSION OF 302.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 302 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: IF YOU GO TO THE TOP LIST, DO YOU SEE THAT DR. ROSAN WAS AT THIS MEETING; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND MS. HOLMES AND MR. BALWANI?
WADE MIQUELON: YES.
MR. DOWNEY: AND ARE YOU FAMILIAR WITH ANY OF THE INDIVIDUALS FROM JOHNS HOPKINS?
WADE MIQUELON: I KNEW DR. BRANCATI BEFORE HE PASSED AWAY, AND THEN I WORKED WITH MARK SHAVER ON A COUPLE OF PROJECTS.
MR. DOWNEY: OKAY. IF YOU GO TO THE VERY BOTTOM BULLET POINT ON THAT VERY FIRST PAGE, DO YOU SEE THAT IT REFLECTS THAT "DR. ROSAN COMMENTED ON WALGREENS' PRELIMINARY STRATEGY TO EXPLORE EXPANDING INTO THE LABORATORY SPACE, EXPANDING ITS HEALTH SERVICES OFFERINGS TO INCLUDE LAB AND PATHOLOGY TESTING WITHIN WALGREENS RETAIL SPACE." DO YOU SEE THAT?
WADE MIQUELON: I DO.
MR. DOWNEY: AND THAT WAS CONSISTENT WITH YOUR UNDERSTANDING OF WHERE THE COMPANY WAS AND WHAT THE COMPANY WAS EVALUATING; CORRECT?
WADE MIQUELON: GENERALLY, YES.
MR. DOWNEY: OKAY. AND IF YOU LOOK BACK AT THE MEETING OBJECTIVES, THEY'RE LISTED IN THIS DOCUMENT AS THE "HOPKINS TEAM WAS ASKED TO COMMENT ON THE VALIDITY AND USEFULNESS OF THE THERANOS PRODUCT, SPECIFICALLY RELATED TO THE SCIENCE THAT SUPPORTS THE TECHNOLOGY AND THE APPLICATION OF THE TECHNOLOGY IN A WIDE VARIETY OF SETTINGS INCLUDING HOSPITAL, CLINIC, LABORATORY, AND POTENTIALLY WITHIN WALGREENS AS AN ADD ON TO CLINICAL PROGRAMS AND RETAIN PHARMACY BUSINESS THAT CURRENTLY EXISTS." WAS THAT CONSISTENT WITH THE OBJECTIVE AND REASON THAT YOU WANTED TO ASK JOHNS HOPKINS TO EVALUATE THERANOS TECHNOLOGY?
WADE MIQUELON: YES, EFFECTIVELY THEIR HEAD OF LABS I BELIEVE WAS PARTICIPATING, AND BEING ABLE TO GET THAT LEVEL OF EXPERTISE WE FELT WAS A GOOD PART OF THE DILIGENCE PROCESS.
MR. DOWNEY: OKAY. AND THEN UNDER METHODOLOGY, IF YOU LOOK AT THE FIRST TWO BULLET POINTS, IT INDICATES THAT THE HOPKINS TEAM REVIEWED PROPRIETARY DATA, AND IT GOES ON TO DESCRIBE THAT. AND THEN IT INDICATES THAT THERANOS PRESENTED ADDITIONAL DATA ON, AND BUSINESS VISION, AND THAT IT DEMONSTRATED THE TECHNOLOGY ON SITE. WERE THOSE STEPS THAT YOU UNDERSTOOD HAD BEEN TAKEN WHEN YOU WERE EVALUATING THE DEAL?
WADE MIQUELON: THAT WAS MY UNDERSTANDING. BUT IT WAS MY UNDERSTANDING THAT HOPKINS NOR THE LAB CONSULTING FIRM EVER HAD AN ACTUAL EDISON TO PLAY WITH, IF YOU WILL.
MR. DOWNEY: THEY DIDN'T LEAVE THE TECHNOLOGY THERE?
MR. DOWNEY: BUT AT SOME POINT WALGREENS GOT AN EDISON, DIDN'T IT?
WADE MIQUELON: I DON'T KNOW IF WE HAD IT OR NOT. I CAN'T SPEAK TO THAT FOR SURE. YOU KNOW, WE WEREN'T CRACKING IT OPEN, IF YOU WILL, AND TRYING TO DO OUR OWN RESEARCH.
MR. DOWNEY: WELL, DO YOU KNOW IF DR. ROSAN AT SOME POINT AFTER THE AGREEMENT ACTUALLY GOT AN EDISON AND HOSTED IT IN HIS OFFICE?
WADE MIQUELON: I DON'T KNOW. BUT PHILOSOPHICALLY, I SEE THIS AS THE SAME AS DRUG DEVELOPMENT. YOU KNOW, IF A DRUG GETS APPROVED FROM THE FDA, WE DON'T TELL PFIZER WE WANT TO RERUN A CLINICAL TRIAL. WE JUST ASSUMED THAT'S THEIR EXPERTISE, RIGHT?
MR. DOWNEY: SURE.
WADE MIQUELON: SO I CAN'T SPEAK FOR WHAT DR. ROSAN HAD OR DID NOT HAVE.
MR. DOWNEY: OKAY. ON THE SECOND PAGE IT INDICATES KEY FINDINGS IN CONNECTION WITH THIS EVALUATION, AND IT SETS FORTH THE CONSENSUS. AND IT SETS FORTH THE CONCLUSION THAT "THE TECHNOLOGY IS NOVEL AND SOUND. IT CAN ACCURATELY RUN A WIDE RANGE OF ROUTINE AND SPECIAL ASSAYS." IS THAT THE GIST OF WHAT WAS COMMUNICATED TO YOU ABOUT THE RESULTS OF HOPKINS'S EVALUATION?
WADE MIQUELON: WHAT WAS TOLD TO ME IS BASED UPON THE DATA AND INFORMATION THAT THEY WERE GIVING. THIS WAS THEIR ASSESSMENT. BUT THAT WITHOUT ACTUALLY, YOU KNOW, HAVING THE TECHNOLOGY TO RUN ITSELF, THEY HAD TO RELY UPON THOSE ATTESTATIONS.
MR. DOWNEY: AND ESSENTIALLY THEY TOLD YOU WE'VE DONE AN EVALUATION OF WHAT'S AVAILABLE TO US, BUT WE HAVEN'T BROKEN THE TECHNOLOGY DOWN AND RECREATED IT AND EVALUATED FROM THAT PERSPECTIVE?
WADE MIQUELON: RIGHT, JUST TO BE FAIR TO THEM, YES.
MR. DOWNEY: ALL RIGHT. IF YOU LOOK AT THE THIRD BULLET POINT, IT LISTS SPECIAL STRENGTHS OF THE TECHNOLOGY. AND IT INDICATES ACCURACY, MINIATURIZATION, FLEXIBILITY, CONNECTIVITY, ADAPTABILITY FOR RESEARCH, AND COST PER STUDY. I THINK YOU WERE ASKED ON YOUR DIRECT EXAMINATION IF ACCURACY WAS IMPORTANT, AND YOU REPLIED THAT IT WAS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND POTENTIALLY MINIATURIZATION WAS IMPORTANT TO WALGREENS; CORRECT?
WADE MIQUELON: PART OF THE VALUE PROPOSITION, AGAIN, AS I UNDERSTAND IT, IS THAT THERANOS WASN'T, THEY WEREN'T REINVENTING HOW LAB GETS DONE. WHAT THEY WERE EFFECTIVELY DOING WAS COMTEMPORIZING IT. SO YOU STILL HAD ANTIGENS, YOU STILL HAD BLOOD, YOU STILL HAD OPTICAL READERS, BUT DOING IT MUCH MORE EFFICIENTLY ON, AGAIN, THAT ANALOGY OF MOVING FROM MAINFRAME TO LAPTOP IN THE LAB SPACE.
MR. DOWNEY: OKAY. AND IF YOU LOOK AT THE FOURTH BULLET POINT, UNDER KEY FINDINGS IT INDICATES, "THE HOPKINS TEAM THOUGHT THAT THE TECHNOLOGY WOULD BE USEFUL IN THE RETAIL CLINIC SETTING, WITH THE PROVISO THAT THE THROUGHPUT FOR AN INDIVIDUAL SAMPLE (30-45 MINUTES) WOULD REQUIRE MULTIPLE UNITS PER SITE AND IMPOSE AN UPPER LIMIT FOR GROUP THROUGHPUT." FIRST OF ALL, DO YOU KNOW WHAT THEY'RE REFERRING TO WHEN THEY REFERENCE "GROUP THROUGHPUT"?
WADE MIQUELON: NOT SPECIFICALLY. I KNOW MY INTERPRETATION OF THAT.
MR. DOWNEY: WHICH WAS WHAT?
WADE MIQUELON: MY INTERPRETATION OF THE GENERAL OVERALL STATEMENT IS THAT IF YOU LOOK AT THE NUMBER OF PATIENTS YOU MIGHT BE DOING PER DAY AND RECOGNIZE THAT A TEST TAKES 15 OR 20 MINUTES TO DO ON ONE MACHINE, YOUR PATIENT LOAD COULD EXCEED THE CAPABILITY OF ANY SINGLE MACHINE.
MR. DOWNEY: SO YOU MIGHT GET A LINE OF SAMPLES WAITING TO BE PROCESSED?
WADE MIQUELON: CORRECT.
MR. DOWNEY: UNDER THE INDICATION -- UNDER THE HEADING ADDITIONAL INFORMATION, IT INDICATES THE FOLLOWING, THAT DR. CLARK -- WHO YOU DON'T KNOW, I ASSUME.
WADE MIQUELON: I BRIEFLY RECALL DR. CLARK, BUT NOT AS WELL AS I RECALL THE OTHER TWO.
MR. DOWNEY: OKAY. "DR. CLARK INDICATED OVER THE PAST TWO YEARS HE HAS HAD NUMEROUS CONVERSATIONS WITH THERANOS ABOUT UTILIZING THEIR TECHNOLOGY AT JOHNS HOPKINS FOR RESEARCH ACTIVITIES. THE CONVERSATIONS CONTINUE TO BE FAVORABLE AND BOTH PARTIES WILL CONTINUE TO EXPLORE OPPORTUNITIES FOR COLLABORATION." DO YOU RECALL LEARNING THAT THAT WAS PART OF HOPKINS COMMENTARY AT THE TIME?
WADE MIQUELON: I RECALL LEARNING THAT, YES.
MR. DOWNEY: OKAY. HOW IMPORTANT WAS THE HOPKINS EVALUATION TO YOU IN YOUR DECISION TO ENTER INTO THE FIRST AGREEMENT WITH THERANOS?
WADE MIQUELON: I'D SAY JUST A PIECE OF A MOSAIC. IT'S NOT DEFINITIVE, BUT IT'S ONE OF MANY PIECES THAT FIT TOGETHER.
MR. DOWNEY: AND YOU WERE EVALUATING SEVERAL ISSUES; CORRECT?
WADE MIQUELON: SEVERAL ISSUES?
MR. DOWNEY: SEVERAL ISSUES RELATED TO A POTENTIAL DEAL, LIKE BUSINESS MODEL AND SO FORTH?
WADE MIQUELON: DOES THE TECHNOLOGY WORK? CAN THE TECHNOLOGY BE SCALED? IS THE BUSINESS MODEL SOUND? WILL THE ECOSYSTEM OF PAYORS AND PHYSICIANS AND CLINICIANS BE ACCEPTING? A LOT OF THINGS THAT HAVE TO FIT TOGETHER.
MR. DOWNEY: OKAY. AND SOME OF THAT ANALYSIS WAS DONE BEFORE THE AGREEMENT WAS SIGNED; CORRECT?
WADE MIQUELON: BEFORE WHICH AGREEMENT?
MR. DOWNEY: THE FIRST AGREEMENT BETWEEN WALGREENS AND THERANOS, WHICH WAS IN -- AT THE END OF JULY 2010 I THINK WE'VE ESTABLISHED.
WADE MIQUELON: SOME. BUT I WOULD ALSO KIND OF DEFINE DILIGENCE AS SORT OF AN UNFOLDING OVER A COUPLE YEARS, RIGHT. YOU KEEP LEARNING NEW THINGS. THINGS KEEP CHANGING. SO DILIGENCE CONTINUES, AND THAT'S ONE REASON THEN WHY YOU HAVE A REVISED AGREEMENT AND THEN AN ADDENDUM TO THAT IS BECAUSE YOU'RE DOING DILIGENCE AND LEARNING THINGS AND YOU'RE TRYING TO BUILD THAT INTO THE BEST THINKING.
MR. DOWNEY: OKAY. NOW, IS IT ALSO THE CASE THAT DURING THE PERIOD OF EVALUATING THE DEAL, WALGREENS LOOKED AT SOME OF THE POTENTIAL REGULATORY ISSUES?
WADE MIQUELON: WE DID, AND I BELIEVE WE HAD REGULATORY COUNSEL TO HELP WITH THAT ENDEAVOR AS WELL.
MR. DOWNEY: IS IT FAIR TO SAY THAT YOUR UNDERSTANDING THAT THOSE ISSUES WERE FAIRLY COMPLEX?
WADE MIQUELON: THEY'RE CERTAINLY NOT IN MY AREA OF EXPERTISE. BUT, AGAIN, AS I SAID BEFORE, YOU KNOW, ONE AREA OF COMPLEXITY WOULD CERTAINLY BE THIS NOTION OF WHERE IS THE LAB, AND I DON'T THINK THAT THAT HAD BEEN CONTEMPLATED NECESSARILY BEFORE BY REGULATORS.
MR. DOWNEY: AND WHEN YOU, WHEN YOU SAY THE ISSUE OF WHERE IS THE LAB, CAN YOU EXPLAIN WHAT THAT MEANS?
WADE MIQUELON: SURE. SO YOU HAVE THE EDISON DEVICE WHICH, YOU KNOW, WHICH PROCESSES THE CARTRIDGES AND THE BLOOD INFORMATION; AND THEN THE RESULTS FROM THAT, AFTER THE OPTICAL READER DOES ITS THING, WOULD GO INTO THE CLOUD, WHICH WOULD GO INTO THE PALO ALTO LAB WHERE YOU WOULD HAVE, I ASSUME, PATHOLOGISTS AND DATA AND OTHERS WORKING THERE. SO IF YOU WERE TO PUT AN EDISON, FOR EXAMPLE, IN A WALGREENS, BUT THE INFORMATION IS GOING TO PALO ALTO, IS THE LAB IN WALGREENS? IS IT IN PALO ALTO? IS IT IN BOTH? AND THAT WAS THAT ISSUE OF TRYING TO UNDERSTAND THAT.
MR. DOWNEY: AND DID YOU UNDERSTAND THAT IF THE LAB WERE CONSIDERED TO BE IN THE STORES, THAT THAT WOULD HAVE SOME REGULATORY CONSEQUENCES?
WADE MIQUELON: I UNDERSTOOD THAT IT MIGHT.
MR. DOWNEY: AND THAT WAS A RESULT OF WHAT THE COMPANY CONTINUED TO LEARN DURING ITS DILIGENCE PROCESS?
WADE MIQUELON: I THINK -- IF I REMEMBER THE SECOND AGREEMENT, I THINK THERE WAS SOME LANGUAGE AROUND CONTINUING TO DISCUSS WITH REGULATORS, FDA AND OTHERS, THESE CONCEPTS TO GET CLARIFICATION. SO I THINK IT WAS A WORK-IN-PROGRESS ON GETTING THAT CLARIFIED.
MR. DOWNEY: OKAY. AND BEFORE THE FIRST AGREEMENT WAS ENTERED, HOW MANY PEOPLE DO YOU THINK WERE ENGAGED IN ANALYZING THE AGREEMENT AND DILIGENCE RELATED TO IT?
WADE MIQUELON: BEFORE THE FIRST AGREEMENT?
MR. DOWNEY: YES.
WADE MIQUELON: I MEAN, I SORT OF WOULD BE GUESSING, BUT EIGHT TO TEN AT LEAST INTERNALLY, AND AGAIN, A COUPLE OF DIFFERENT EXTERNAL FIRMS. SO PROBABLY A DOZEN OR MORE.
MR. DOWNEY: OKAY. BUT ULTIMATELY AT THE END OF JULY 2010, WALGREENS DECIDED TO ENTER INTO AN AGREEMENT WITH THERANOS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND AS WE DISCUSSED BEFORE, WHEN THAT AGREEMENT WAS SIGNED, THE PRESUMPTION WAS THAT THE PARTIES WOULD TRY TO PUT THE DEVICES IN THE STORES; CORRECT?
WADE MIQUELON: I THINK THE PRESUMPTION WAS THAT WE WERE ON A PATH OF WORKING TOGETHER TO FIGURE OUT HOW TO COMMERCIALIZE IT TOGETHER.
MR. DOWNEY: OKAY. LET ME ASK YOU TO PULL BACK UP EXHIBIT 372, WHICH IS THE AGREEMENT THAT WAS SIGNED AT THE END OF JULY. I'LL ASK YOU TO LOOK AT -- AND WE'LL PUT IT ON THE SCREEN AS WELL -- AT PAGE 2. THIS IS ALREADY IN EVIDENCE, YOUR HONOR. PAGE 2 OF THE AGREEMENT, WHICH HAS THE NUMBER 8 IN THE BOTTOM RIGHT-HAND CORNER.
WADE MIQUELON: OKAY.
MR. DOWNEY: AND IT'S ON THE SCREEN. THIS STATES THE BACKGROUND THAT HAS LED TO THE AGREEMENT; CORRECT?
WADE MIQUELON: IT'S PART OF THE BACKGROUND. IT'S THE FIRST TWO PARAGRAPHS OF THE BACKGROUND SECTION.
MR. DOWNEY: OKAY. AND THE FIRST PARAGRAPH SAYS, "THERANOS HAS DEVELOPED, AND IS DEVELOPING, GENERATIONS OF MINI-LAB DEVICES THAT CAN RUN ANY BLOOD TEST IN REAL-TIME FOR LESS THAN THE TRADITIONAL COST OF CENTRAL LAB TESTS." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND DID YOU COME TO UNDERSTAND, AS A RESULT OF THE DISCUSSIONS YOU WERE PART OF, THAT THERANOS HAD ALREADY DEVELOPED SOME GENERATIONS OF A MINILAB?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT THEY WERE WORKING TO DEVELOP MORE GENERATIONS OF MINILABS?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT THOSE GENERATIONS HAD DIFFERENT CAPACITIES?
WADE MIQUELON: TECHNOLOGY IS ALWAYS AN EVOLUTION.
MR. DOWNEY: IF YOU LOOK AT PAGE 8 OF THE AGREEMENT, WHICH HAS THE BATES 12 IN THE BOTTOM RIGHT-HAND CORNER. THIS DESCRIBES -- I'LL GIVE YOU A MINUTE TO GET THERE. I'M INTERESTED IN THE PARAGRAPH THAT IS NUMBERED 6, WHICH IS CAPTIONED CARTRIDGE PRE-PURCHASE COMMITMENTS. DO YOU SEE THAT?
WADE MIQUELON: UH-HUH, YES.
MR. DOWNEY: I WANT TO GO TO THE PARAGRAPH THAT DESCRIBES HOW THE ECONOMICS OF THE DEAL WILL WORK, AND THAT'S THE PARAGRAPH THAT BEGINS "THE FIRST 30 MILLION." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IT INDICATES THAT "THE FIRST 30 MILLION PRE-PURCHASE PAYMENT WILL BE INVOICED AT THE EFFECTIVE DATE OF THIS AGREEMENT." CORRECT?
WADE MIQUELON: THAT'S WHAT IT SAYS.
MR. DOWNEY: AND THEN IT SAYS "THE SECOND 20 MILLION PAYMENT WILL BE INVOICED AFTER THERANOS OBTAINS ANY AND ALL OFFICIAL, WRITTEN FDA APPROVALS, CLIA-WAIVED STATUS AND ANY OTHER FEDERAL REGULATORY APPROVALS NECESSARY IN ORDER FOR WALGREENS TO COMMENCE UTILIZING THE THERANOS SYSTEM AND CARTRIDGES TO PERFORM TESTS," AND IT GOES ON AND DESCRIBES THE PROGRAM FURTHER. DO YOU RECALL THAT BEING A TERM OF THE AGREEMENT?
WADE MIQUELON: LOOSELY. IT'S BEEN 11 YEARS. I DON'T RECALL IT.
MR. DOWNEY: OKAY. BUT YOU RECALL THAT PRIOR TO THE AGREEMENT THEY HAD NOT OBTAINED THOSE APPROVALS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND WITH RESPECT TO CLIA CERTIFICATION, THAT WAS AN APPROVAL THAT THEY OBTAINED, BUT AFTER THE ORIGINAL AGREEMENT; CORRECT?
WADE MIQUELON: THAT'S CORRECT. ORIGINALLY THERE WAS DISCUSSION ON CLIA WAIVED VERSUS CLIA APPROVAL, AND ULTIMATELY I BELIEVE THE COMPANY SAID IT HAD TO BE CLIA-APPROVED TO BE ABLE TO MOVE FORWARD.
MR. DOWNEY: AND THE LAST SENTENCE READS, "IF THERANOS FAILS TO OBTAIN APPROVALS BY DECEMBER 31ST, 2010, SUCH FAILURE SHALL ENTITLE WALGREENS TO TERMINATE THIS AGREEMENT." SO THAT GAVE THERANOS -- WALGREENS A RIGHT TO VOID THE AGREEMENT IF THERE WAS NOT -- IF THERANOS WAS UNSUCCESSFUL IN OBTAINING THE REGULATORY APPROVALS THAT IT NEEDED; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: LET ME ASK YOU TO LOOK NOW AT BATES 22 WITHIN THE AGREEMENT, PAGE 16. I'M SORRY, BATES 22. IT WILL BE PAGE 18 OF THE AGREEMENT. YEAH. I'M LOOKING AT THE PARAGRAPH THAT IS LABELED 23(B), TERMINATION DUE TO UNSATISFACTORY PILOT. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THIS SETS FORTH TERMS UNDER WHICH THE PARTIES MIGHT HAVE THE RIGHT TO TERMINATE IT AFTER AN UNSATISFACTORY PILOT; CORRECT?
WADE MIQUELON: THAT'S WHAT IT APPEARS TO SAY, YES.
MR. DOWNEY: AND THE PILOT PROGRAM IS WHAT YOU DESCRIBED ON YOUR DIRECT EXAMINATION, A ROLLOUT TO A SMALL NUMBER OF STORES TO TEST HOW THE PROGRAM WORKED; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND BOTH PARTIES HAD THE RIGHT UNDER THE AGREEMENT TO TERMINATE THE RELATIONSHIP IF THEY WERE NOT SATISFIED WITH THE PILOT PROGRAM; CORRECT?
WADE MIQUELON: I'D HAVE TO READ IT TO BE DEFINITIVE, BUT IF THAT'S WHAT IT SAYS.
MR. DOWNEY: WELL, DO YOU RECALL THAT THAT WAS THE NATURE OF THE ARRANGEMENT?
WADE MIQUELON: AGAIN, IT'S BEEN 11 YEARS, SO WITHOUT GETTING INTO THE SPECIFICS AND REREADING IT.
MR. DOWNEY: YEAH, SURE. DO YOU RECALL HAVING A, A CONCERN IN NEGOTIATING THE AGREEMENT OR ENTERING INTO THE AGREEMENT THAT YOU WANTED TO PROTECT WALGREENS IN THE EVENT THAT THINGS DID NOT WORK OUT?
WADE MIQUELON: I THINK ALL PARTIES DO, ALL AGREEMENTS HAVE THAT MINDSET.
MR. DOWNEY: OKAY. AND SO THAT WAS PART OF HOW YOU WERE THINKING ABOUT DEALING WITH THIS SITUATION; CORRECT?
WADE MIQUELON: SURE.
MR. DOWNEY: AND THAT RELATED TO SOME OF THESE PROVISIONS THAT WOULD ALLOW YOU TO TERMINATE THE AGREEMENT UNDER CERTAIN SCENARIOS; RIGHT?
WADE MIQUELON: YOU COULD SAY THAT.
MR. DOWNEY: OKAY. I'D LIKE TO ASK YOU NOW TO LOOK AT PAGE 10. ACTUALLY, I WANT TO FLIP TO PAGE 11. AND DO YOU SEE IN THE PARAGRAPH 10(A) THAT THERE'S A LICENSE GRANT TO WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: AND WITHOUT REQUIRING US TO READ IT, CAN YOU JUST TAKE A MOMENT TO READ IT AND THEN EXPLAIN WHAT THIS TERM DID.
(PAUSE IN PROCEEDINGS.)
WADE MIQUELON: AGAIN, IT APPEARS THAT IT'S GIVING WALGREENS THE RIGHT TO USE THE THERANOS SOFTWARE.
BY MR. DOWNEY:
MR. DOWNEY: AND YOU HAD A LICENSE TO DO THAT UNDER THE AGREEMENT?
WADE MIQUELON: YES, IT APPEARS AS I READ IT.
MR. DOWNEY: OKAY. WAS THAT IMPORTANT TO OBTAIN A LICENSE TO BE ABLE TO USE THE DATA SO THAT WALGREENS MIGHT UTILIZE DATA FOR ITS OWN PURPOSES DISTINCT FROM WHAT THERANOS WAS DOING?
WADE MIQUELON: I THINK ANY TIME TWO COMPANIES THAT ARE NOT RELATED SHARE INFORMATION AND DATA, THERE'S TYPICALLY SOME TYPE OF AGREEMENT THAT GOVERNS HOW IT'S USED SO IT'S NOT MISUSED.
MR. DOWNEY: OKAY. AND, YOU KNOW, THE PARTIES HAD BEEN NEGOTIATING FOR ABOUT THREE MONTHS, I GUESS, PRIOR TO THE TIME THAT THE AGREEMENT WAS SIGNED. DO YOU RECALL THAT WHEN THE PARTIES SIGNED THE AGREEMENT, THEY INCLUDED A CLAUSE CALLED AN INTEGRATION CLAUSE?
WADE MIQUELON: I DON'T RECALL THAT.
MR. DOWNEY: OKAY. DO YOU KNOW WHAT AN INTEGRATION CLAUSE IS?
WADE MIQUELON: NOT SPECIFICALLY.
MR. DOWNEY: OKAY. COULD I ASK YOU TO LOOK AT BATES NUMBER 17. I'M SORRY. IT'S BATES 23, PAGE 17.
WADE MIQUELON: OKAY.
MR. DOWNEY: AND I WANT TO DIRECT YOUR ATTENTION TO G, THE ENTIRE AGREEMENT. AND DO YOU SEE THAT THIS IS A TERM WHICH PROVIDES "THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT, INCLUDING ALL SCHEDULES, CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PREVIOUS AGREEMENTS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT AND NO AGREEMENT OR UNDERSTANDING VARYING OR EXTENDING THE SAME SHALL BE BINDING UPON EITHER PARTY UNLESS IN A WRITTEN DOCUMENT." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND ARE PROVISIONS LIKE THIS FAIRLY STANDARD IN COMMERCIAL ARRANGEMENTS BETWEEN SOPHISTICATED PARTIES?
WADE MIQUELON: I'M NOT AN ATTORNEY, BUT IT STANDS TO REASON THAT IF YOU WANT TO MAKE SURE AN AGREEMENT STANDS BY ITSELF VERSUS THE HISTORY OF DIFFERENT AGREEMENTS, THAT MAKES SENSE.
MR. DOWNEY: OKAY. SO AT THIS POINT AFTER THE EXECUTION OF THE AGREEMENT, THIS IS JULY 2010, AND I THINK YOU MENTIONED A SERIES OF STEPS THAT WOULD HAVE TO BE TAKEN TO SEE HOW THE ARRANGEMENT WOULD WORK. IF I MIGHT USE AN ABBREVIATION, IT'S POST-AGREEMENT DUE DILIGENCE. IS THAT A FAIR TERM?
WADE MIQUELON: I WOULD ARGUE EVERY STEP OF THE WAY, RIGHT? SO EVEN WHEN YOU GET TO PILOT AND EXPANSION, YOU'RE STILL DOING DUE DILIGENCE ON IS THE BUSINESS MODEL EXPANDABLE AND DOES IT WORK?
MR. DOWNEY: AND THAT'S TO EVALUATE WHETHER THIS IS AN ARRANGEMENT THAT YOU WANT TO REMAIN A PARTY TO; CORRECT?
WADE MIQUELON: RIGHT, AND IF BOTH PARTIES FIND IT VIABLE.
MR. DOWNEY: OKAY. AND AFTER THE AGREEMENT WAS SIGNED, DID WORK WITHIN WALGREENS HAVE TO BE TRANSFERRED FROM THE INNOVATIONS TEAM TO AN OPERATIONS TEAM TO TRY TO BUILD THE PROGRAM UP?
WADE MIQUELON: WE HAD AN OPERATIONS EXECUTION TEAM, WHATEVER YOU WOULD CALL IT, THAT WE BUILT UP. WE BROUGHT IN AN EXECUTIVE WHO HAD LAB EXPERIENCE TO BE ON THAT TEAM, AND WE BROUGHT AN EMPLOYEE WHO HAD LAB EXPERIENCE IN THE COMPANY OVER ON THAT TEAM, AND WE BROUGHT A VARIETY OF DIFFERENT TALENTS TO BE ON THAT WORKING TEAM.
MR. DOWNEY: OKAY. SO THERE WAS A LOT THAT WENT INTO THAT OPERATIONS TEAM?
WADE MIQUELON: THERE WAS A LOT.
MR. DOWNEY: AND AMONG THAT IS MARKETING AND BRANDING; CORRECT?
WADE MIQUELON: FOR THE MOST PART MARKETING AND BRANDING WAS REALLY A THERANOS ACTIVITY.
MR. DOWNEY: OKAY. AND WITH INSURERS AND PAYORS -- YOU RECALL THAT WE TALKED ABOUT THAT BEFORE?
WADE MIQUELON: YES.
MR. DOWNEY: AND IT WAS IMPORTANT TO WORK OUT THE RELATIONSHIPS BETWEEN THERANOS AND THOSE INSURERS AND PAYORS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND WAS SOMEONE AT WALGREENS ASSISTING WITH THAT?
WADE MIQUELON: I BELIEVE THERE WAS WORK DONE ON BOTH SIDES, BOTH THROUGH OUR CONTACTS AND THROUGH THEIR WORK.
MR. DOWNEY: OKAY. AND WAS THERE WORK TO INTEGRATE THE I.T. SYSTEMS OF THERANOS AND WALGREENS?
WADE MIQUELON: I DON'T KNOW TO WHAT EXTENT INTEGRATE, BUT THERE WAS A LOT OF WORK ON THERANOS'S END TO SUPPORT THE SYSTEM.
MR. DOWNEY: AND WITHIN THE BUSINESS MODEL, WAS THERE ALSO AN EFFORT TO TRY TO FIGURE OUT HOW THE CUSTOMER SERVICE COMPONENTS OF THE PROGRAM WOULD WORK?
WADE MIQUELON: YES.
MR. DOWNEY: AND SOME OF THAT RELATED TO WHO WOULD EMPLOY WHO, FOR EXAMPLE?
WADE MIQUELON: RIGHT, OR JUST IF A POTENTIAL PATIENT WALKS THROUGH THE DOOR WITH A LAB PRESCRIPTION, DO THEY KNOW WHERE TO GO? ARE THEY GREETED? ARE THEY RECEIVED? YOU KNOW, ALL OF THAT FROM HOW A PATIENT PERCEIVES THE EXPERIENCE.
MR. DOWNEY: OKAY. SO ALL OF THOSE ISSUES AND OTHER ISSUES WERE ISSUES ON WHICH THE COMPANIES CONTINUED TO WORK FOR THE REST OF 2010 AND 2011; CORRECT?
WADE MIQUELON: AND I'D ARGUE 2012 AND INTO '13 AS WELL.
MR. DOWNEY: BUT AT THE BEGINNING OF 2012, DO YOU RECALL THE DISCUSSIONS BEGAN ABOUT THE MODEL EVOLVING WHERE THE DEVICES WOULD NO LONGER BE PART OF THE -- NO LONGER BE PLACED IN THE STORES BUT WOULD INSTEAD GO IN A CENTRAL LAB?
WADE MIQUELON: I REMEMBER LOTS OF DISCUSSIONS. I DON'T REMEMBER IF IT WAS IN 2012. BUT IT SEEMS TO HAVE MANIFESTED ITSELF INTO A LATER AGREEMENT.
MR. DOWNEY: OKAY. WELL, LET ME JUST ASK YOU TO LOOK AT EXHIBIT 503, THIS IS ALREADY IN EVIDENCE, BUT JUST TO HELP YOU ORIENT YOURSELF RELATIVE TO THE CHRONOLOGY. THIS IS THE POWERPOINT PRESENTATION THAT YOU LOOKED AT ON YOUR DIRECT EXAMINATION, AND I'D JUST DIRECT YOUR ATTENTION FIRST TO -- THIS WAS SENT TO YOU BY DR. ROSAN; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND THIS WAS SOMETHING THAT HE HAD RECEIVED FROM THERANOS; CORRECT?
WADE MIQUELON: THAT'S WHAT IT APPEARS TO BE.
MR. DOWNEY: AND IF YOU GO TO PAGE -- ON THE EXHIBIT NUMBER PAGE 9, WHICH IS THE CENTER NUMBER AT THE BOTTOM. THIS IS A DEMONSTRATIVE THAT BASICALLY SHOWS HOW THE MODEL THAT IS GOING TO BE ADOPTED WOULD WORK; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: OKAY. AND TO JUST TAKE THE TOP PORTION OF THE DEMONSTRATIVE, YOU SEE THAT THE FIRST ITEM -- WELL, IT'S LABELED PROJECT NORMANDY PROCESS. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND PROJECT NORMANDY WAS JUST A REFERENCE TO THE LAUNCH UNDER A MODEL WHERE THE DEVICES WERE NO LONGER IN THE STORES; CORRECT?
WADE MIQUELON: I DON'T KNOW WHAT THE BASIS WAS FOR CHANGING THE NAME, BUT WHAT BECAME BETA BECAME NORMANDY. I DON'T KNOW WHY, BUT --
MR. DOWNEY: OKAY. AND ON THE ARROWS ACROSS THERE'S A REFERENCE TO PSC ON THE LEFT-HAND SIDE. DO YOU SEE THAT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IS THAT A REFERENCE TO PATIENT SERVICE CENTER?
WADE MIQUELON: IT MIGHT BE. I DON'T RECALL.
MR. DOWNEY: OKAY. AND THEN IT HAS AN ARROW POINTING TOWARDS A CLIA LAB; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THEN FROM THE CLIA LAB, THERE'S AN ARROW WITH RESULTS REPORTING; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THIS IS SETTING FORTH THE MODEL WHERE TESTING IS DONE IN THE STORE, PATIENT SERVICE CENTER, IT'S TRANSMITTED TO THE CLIA LAB, AND THEN RESULTS ARE REPORTED BACK; CORRECT?
WADE MIQUELON: THAT'S MY INTERPRETATION.
MR. DOWNEY: OKAY. AND UNDERNEATH EACH OF THESE ITEMS THERE'S A DESCRIPTION OF DIFFERENT ELEMENTS OF THE PROCESS AS YOU MOVE THROUGH TRANSMITTING THE SAMPLE; CORRECT?
WADE MIQUELON: EFFECTIVELY WHAT HAS TO HAPPEN.
MR. DOWNEY: RIGHT. SO YOU SEE AT THE BOTTOM, FOR EXAMPLE, THAT IT SETS FORTH SHIPPING AND IT INDICATES THAT THE VESSEL IS SHIPPED TO THE THERANOS LAB, AND THAT'S A REFERENCE TO THE BLOOD SAMPLE; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: OKAY. AND THEN I THINK WE TALKED BEFORE ABOUT, YOU KNOW, SOME OF THE NEW FEATURES OF THE AGREEMENT, LIKE REFRIGERATION, AND THAT'S REFERENCED UNDER CLIA LAB; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND THIS WAS ALL PART OF THE DISCUSSION WHEN THE PARTIES BEGAN LOOKING AT A POTENTIAL PROCESS WHERE YOU WOULD SWITCH FROM DEVICES IN THE STORES TO A CENTRAL LAB; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THIS STRATEGY WAS DISCUSSED OVER A LONG PERIOD OF TIME; RIGHT?
WADE MIQUELON: YES.
MR. DOWNEY: BUT ULTIMATELY THERE WAS AN AGREEMENT, AND THAT WAS THE AGREEMENT THAT WAS ENTERED INTO LATER IN 2012; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: MAY I ASK YOU, AT THIS POINT, HAD YOU BECOME SKEPTICAL OF THE BUSINESS MODEL WHERE DEVICES WOULD BE DEPLOYED IN THE STORES?
MR. DOWNEY: OKAY. WHEN DID YOU START TO EVALUATE THE ECONOMICS ALONG THE LINES OF WHAT YOU DESCRIBED EARLIER?
WADE MIQUELON: THE ECONOMICS OF HAVING THE DEVICE IN THE LAB?
MR. DOWNEY: RIGHT. RECALL THAT YOU MENTIONED EARLIER THAT FOR SOME STORES IT MIGHT NOT MAKE SENSE TO HAVE A DEVICE?
WADE MIQUELON: RIGHT.
MR. DOWNEY: EVEN IF IT WAS LAWFUL AND OTHERWISE DESIRABLE?
WADE MIQUELON: RIGHT.
MR. DOWNEY: WHEN DID YOU START THINKING ABOUT THAT?
WADE MIQUELON: PRETTY EARLY IN THE RELATIONSHIP. I DON'T KNOW EXACTLY WHEN, BUT I THINK I HAD COME TO A CONCLUSION THAT ULTIMATELY YOU MAY HAVE VERY FEW IN STORES BECAUSE IT MIGHT BE MUCH MORE EFFICIENT TO HAVE A SECOND CLIA LAB IN NEW YORK, FOR EXAMPLE, THAT SERVICES 100 STORES THAN HAVING 100 DIFFERENT MACHINES WITH INVENTORY. SO I THINK IN MY MIND PROBABLY -- IT WOULD PROBABLY MORPH OVER TIME TO HAVING MULTIPLE LABS IN DIFFERENT MSA MARKETS, BUT NOT ONE IN EVERY STORE.
MR. DOWNEY: AND WHEN YOU SAY MSA, WHAT DOES THAT MEAN?
WADE MIQUELON: YOU KNOW, LIKE A METROPOLITAN AREA, NEW YORK, OR CHICAGO, OR, YOU KNOW, AGAIN, WHERE YOU HAVE MAYBE ONE LAB SERVICING 100, 200, 300 STORES AROUND IT. SO YOU CAN DO VERY EFFICIENT DAILY DELIVERIES AND HAVE TESTS RUN EFFICIENTLY WITH PEOPLE THAT ARE CONSTANTLY PICKING THE RIGHT CARTRIDGE. BUT THAT'S WHERE I THOUGHT THE ECONOMICS WOULD PROBABLY GO OVER TIME TO BE THE BEST FOR BOTH PARTIES.
MR. DOWNEY: OKAY. AND IF YOU LOOK AT EXHIBIT 617 IN YOUR WHITE NOTEBOOK, I JUST WANT TO ASK YOU IF THIS IS THE AGREEMENT WHICH CHANGED THE WAY IN WHICH THE PARTIES WERE PLANNING TO OPERATE.
WADE MIQUELON: I WOULD SAY THAT THIS, TO MY UNDERSTANDING, WOULD BE BASED ON EVERYTHING THAT HAPPENED IN THE PRIOR, YOU KNOW, TWO YEARS, EVERYTHING THAT WE LEARNED, THIS NOW MEMORIALIZES A NEW AGREEMENT FOR BOTH PARTIES BASED UPON ALL OF THOSE LEARNINGS.
MR. DOWNEY: AND IF YOU LOOK AT PAGE 4 OF THE EXHIBIT, IT SETS FORTH A SCHEDULE, WHICH IS THE PROGRAM OVERVIEW. DO YOU SEE THAT?
WADE MIQUELON: I DO.
MR. DOWNEY: AND IF YOU WOULD GO TO THE THIRD SENTENCE -- THE THIRD PARAGRAPH LABELLED PHASED DISRUPTION. AND IF YOU LOOK AT THE THIRD SENTENCE, IT SAYS, "NOTWITHSTANDING THE PREVIOUS, THE PARTIES ACKNOWLEDGE THE MUTUAL DESIRE TO BRING THERANOS'S TECHNOLOGY TO MARKET AS QUICKLY AS IS REASONABLY POSSIBLE. WITH THAT IN MIND, AT THE COMMENCEMENT OF THIS AGREEMENT, IT IS THE PARTIES' INTENTION FOR WALGREENS TO ACT AS A PATIENT SERVICE CENTER AND COLLECT BLOOD SAMPLES VIA FINGERSTICK TECHNOLOGY, SMALL SAMPLES OF URINE, SALIVA, FECES, OR SWABS, WITH LABORATORY TESTING TO BE PERFORMED BY THERANOS AT A CLIA CERTIFIED OFFSITE LABORATORY." CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND SO FROM THE DATE OF THIS AGREEMENT FORWARD, THE UNDERSTANDING WAS THAT THIS IS HOW THE PROGRAM WITH WALGREENS AND THERANOS WOULD WORK, AT LEAST UNTIL WALGREENS GOT CERTAIN REGULATORY APPROVAL -- AT LEAST UNTIL THERANOS GOT CERTAIN REGULATORY APPROVALS?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND I THINK FROM THIS PROGRAM FORWARD IN THE MIDDLE OF 2012, YOU WERE WORKING TOWARDS THE LAUNCH THAT ULTIMATELY HAPPENED IN THE LATTER PART OF 2013; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: NOW, AT THE TIME OF THE ORIGINAL AGREEMENT, THE CONTEMPLATION WAS THAT ULTIMATELY THE PARTIES WOULD WORK TOWARDS A NATIONAL ROLLOUT OF THERANOS TECHNOLOGY; CORRECT?
WADE MIQUELON: YES, WITH THE PREREQUISITE BEING EVERYTHING WORKING AS PLANNED.
MR. DOWNEY: BUT THAT WAS AN OBJECTIVE OF THE AGREEMENT; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND WHEN THIS -- WHEN THE 2012 AGREEMENT WAS SIGNED, IT REFERENCED EXPECTATIONS AS TO HOW THE ROLLOUT WOULD WORK; CORRECT?
WADE MIQUELON: THAT'S CORRECT.
MR. DOWNEY: AND LET ME JUST DRAW THAT UP IN EXHIBIT 617, AND THAT'S AT SCHEDULE F, WHICH IS BATES 53. AND IF YOU LOOK UNDER NUMBER 2, THAT SETS FORTH WHAT THE PROGRAM OBJECTIVES WERE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IF YOU LOOK UNDER A, IT DESCRIBES HOW THE TESTING WILL WORK, ET CETERA, AND IT SAYS, "IT WILL INTRODUCE A MORE COST-EFFECTIVE, BLOOD TESTING SERVICE AT WALGREENS STORES AND WALGREENS'S OTHER CLINICAL OPERATIONS NATIONWIDE (WHICH, BY EXAMPLE, INCLUDE BUT ARE NOT LIMITED TO)," AND IT DESCRIBES INFUSION CENTERS AND OTHER CLINICS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND FROM THAT AGREEMENT, FROM THAT TIME UNTIL THE TIME SHORTLY BEFORE THE LAUNCH, THE PARTIES CONTINUED TO DISCUSS A POTENTIAL SCHEDULE FOR A NATIONWIDE ROLLOUT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THERE WERE DIFFERENT IDEAS AT VARIOUS TIMES AS TO HOW THAT ROLLOUT MIGHT WORK; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IF YOU LOOK AT -- IN YOUR BLACK BINDER NOW AT EXHIBIT 7312.
WADE MIQUELON: IS THAT BINDER 2 OR BINDER 1?
MR. DOWNEY: IT'S THE BINDER THAT SHOULD HAVE --
WADE MIQUELON: BINDER 2 I THINK.
MR. DOWNEY: YEAH. THIS IS AN EMAIL FROM MS. HOLMES TO YOU; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND SHE ATTACHED TO THIS A POWERPOINT THAT SETS FORTH A PROPOSED ROLLOUT PLAN; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU LOOKED AT THIS ON YOUR DIRECT EXAMINATION; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: YOUR HONOR, I THINK I'VE USED A DIFFERENT EXHIBIT NUMBER FOR AN EXHIBIT ALREADY MENTIONED, BUT I THINK SINCE THE WITNESS IS OPEN TO THERE, WITH THE STIPULATION OF THE GOVERNMENT, I'LL AGREE TO MODIFY THAT NUMBER LATER.
JUDGE DAVILA: ALL RIGHT. MR. SCHENK? I THINK -- YOU'D LIKE TO INTRODUCE THIS NOW OR HAVE THIS WITNESS --
MR. DOWNEY: I THINK IT'S ACTUALLY ALREADY IN EVIDENCE.
JUDGE DAVILA: OKAY. DO WE KNOW THE NUMBER? LET'S ALLOW YOU TO GO FORWARD WITH THIS. WE'LL GET THE NUMBER IN A SECOND.
BY MR. DOWNEY:
MR. DOWNEY: WELL, IN AN ABUNDANCE OF CAUTION, LET ME SAY, IS THIS AN EMAIL COMMUNICATION FROM MS. HOLMES TO YOU IN AUGUST OF 2013?
WADE MIQUELON: YES.
MR. DOWNEY: AND SHE ATTACHED HERE A POWERPOINT THAT SETS FORTH A WALGREENS DEPLOYMENT PLAN?
WADE MIQUELON: A PROPOSAL.
MR. DOWNEY: AND THIS WAS HER PROPOSAL AS TO HOW A ROLLOUT OF THERANOS MIGHT WORK IN STORES ACROSS THE COUNTRY; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND SHE WAS SENDING THIS TO YOU FOR YOUR COMMENT AND REACTION AND FEEDBACK; CORRECT?
WADE MIQUELON: I THINK YOU'D HAVE TO ASK HER, BUT AT LEAST FOR MY INFORMATION.
MR. DOWNEY: OKAY. WELL, THAT'S WHAT YOU UNDERSTOOD. THIS WAS A DOCUMENT PROPOSING HOW IT MIGHT WORK; CORRECT?
WADE MIQUELON: RIGHT.
MR. DOWNEY: AND IF YOU LOOK AT THE SECOND PARAGRAPH OF THE EMAIL, SHE SAYS, "WE HAVE CEMENTED WHAT WE BELIEVE TO BE THE MOST EFFECTIVE ROLLOUT STRATEGY FOR REALIZING BROAD NATIONAL SCALE AS FAST AS POSSIBLE."
JUDGE DAVILA: LET ME STOP YOU THERE. I DON'T THINK THIS IS IN EVIDENCE YET. I DON'T BELIEVE IT IS.
MR. DOWNEY: OKAY. WELL, YOUR HONOR, I MOVE THE ADMISSION OF 7312.
MR. SCHENK: NO OBJECTION. I BELIEVE 971 --
JUDGE DAVILA: 971?
MR. SCHENK: 971.
MR. DOWNEY: IN THE EVENT THERE IS SOME DEVIATION, I'LL USE 7312 FOR NOW.
JUDGE DAVILA: 7312. UNDERSTOOD. SO IT'S ADMITTED, AND IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7312 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: SO IN THAT SECOND PARAGRAPH SHE TALKS ABOUT EFFECTIVELY A ROLLOUT STRATEGY FOR A BROAD NATIONAL ROLLOUT; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU LOOK AT THE DATE OF THIS, THIS IS AUGUST 7TH, 2013; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THAT IS ABOUT A MONTH BEFORE THERANOS AND WALGREENS WOULD ANNOUNCE THEIR PARTNERSHIP PUBLICLY --
JUDGE DAVILA: JUST A MOMENT. I DON'T THINK IT'S ON OUR SCREEN.
MR. DOWNEY: OH, I BEG YOUR PARDON.
COURT CLERK: LET ME DO A RESET. ONE MOMENT.
JUDGE DAVILA: WE'RE GOING TO RESET THE SYSTEM SO IT WILL HOPEFULLY CATCH UP.
(PAUSE IN PROCEEDINGS.)
JUROR: JUST ONE.
JUDGE DAVILA: I THINK ALL OF THE MONITORS ARE UP, SO SORRY FOR THE SCOREBOARD BREAKDOWN.
BY MR. DOWNEY:
MR. DOWNEY: SORRY. WE WERE DISCUSSING AN EMAIL OF A NATIONAL ROLLOUT PLAN FROM MS. HOLMES TO YOU IN AUGUST OF 2013. AND JUST TO MAKE SURE THAT WE'RE ORIENTED TO THE SCHEDULE, THIS IS ABOUT A YEAR BEFORE YOU LEAVE WALGREENS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IT'S SHORTLY BEFORE THE CONSUMER LAUNCH OF THERANOS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND MS. HOLMES WAS PROPOSING THAT THERE BE A SCHEDULE AS SET FORTH IN THE ATTACHED POWERPOINT TO THIS; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IN THE SECOND PARAGRAPH OF THE COVER EMAIL, SHE SAYS, "WE HAVE CEMENTED WHAT WE BELIEVE TO BE THE MOST EFFECTIVE ROLLOUT STRATEGY FOR REALIZING BROAD NATIONAL SCALE AS FAST AS POSSIBLE." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU LOOKED AT THIS DURING YOUR DIRECT EXAMINATION, BUT IF YOU GO TO THE FIFTH PARAGRAPH, SHE SETS FORTH THAT THERE IS A SIGNIFICANT AMOUNT OF WORK THAT THE WALGREENS TEAM WILL HAVE TO DO, INCLUDING ESTABLISHING A MORE ROBUST FORMAL TECHNICIAN TRAINING PROGRAM AND PREPARING SPACE IN NEW YORK CITY, ET CETERA; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND SO THIS EMAIL WAS ONE IN WHICH SHE WAS RAISING WHAT THERANOS WAS ASKING WALGREENS TO DO; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: OKAY. AND HER PROPOSAL IS SET FORTH IN THE ATTACHMENT, SO IF YOU GO TO THE PAGE OF THE POWERPOINT THAT HAS A 2 AT THE BOTTOM LABELLED EXECUTIVE SUMMARY. DO YOU HAVE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND SHE SETS FORTH A PLAN UNDER WHICH THERANOS WOULD OPEN ON A SMALL SCALE CERTAIN LOCATIONS IN ARIZONA IN THE NEAR FUTURE; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THEN SHE PROPOSED THAT IN THE FOURTH QUARTER THERANOS'S PRESENCE BE EXPANDED IN PHOENIX AND NEW YORK; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THEN SHE PROPOSED THAT THROUGHOUT 2014 THERANOS AND WALGREENS WOULD EXECUTE A NATIONAL ROLLOUT STRATEGY; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IF YOU LOOK AT THE PAGES THAT FOLLOW AND JUST SCROLL THROUGH THEM, YOU SEE THAT SHE WAS PROPOSING THE LOCATIONS IN THE DARKER COLOR AS TO WHAT -- WHICH STATES WOULD LAUNCH IN WHICH QUARTER; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND SHE PROPOSED THAT BY THE END OF THE YEAR THAT THERANOS BE IN ABOUT 60 -- 6,250 WALGREENS STORES AT THE END OF THE YEAR 2014; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU RESPONDED TO THIS EMAIL AFTER RECEIVING IT INTERNALLY IN EXHIBIT 971, AND MR. SCHENK SHOWED YOU THAT ON YOUR DIRECT EXAMINATION; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU'RE HAVING A DIALOGUE INTERNALLY AT WALGREENS HERE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU DISCUSSED WITH MR. SCHENK THE LAST SENTENCE WHERE YOU SAY "I'M NOT WORRIED ABOUT THEM OR LABS... I'M WORRIED ABOUT US," WITH A FROWN. I JUST WANT TO ASK YOU, WHAT DOES "LABS" REFER TO THERE?
WADE MIQUELON: I THINK I'M NOT WORRIED ABOUT THEM OR THE EFFICACY OF THEIR LAB EQUIPMENT.
MR. DOWNEY: BUT YOU'RE WORRIED ABOUT WALGREENS; CORRECT?
WADE MIQUELON: RIGHT, BECAUSE SHE'S OUTLINED AT LEAST FOUR AREAS WHERE I THINK IT'S IMPLICIT THAT SHE'S SAYING THAT WE'RE NOT DOING OUR PART.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK NOW AT EXHIBIT 1083, AND MY QUESTION WILL BE WHETHER THIS IS A RESPONSE TO YOUR PROPOSAL?
WADE MIQUELON: WHICH BOOK IS IT IN?
MR. DOWNEY: I THINK IT SHOULD BE 2.
COURT CLERK: IS THAT 1083, COUNSEL?
MR. DOWNEY: YES. THIS IS A NEW EXHIBIT.
COURT CLERK: DO YOU MEAN 10,000 --
MR. DOWNEY: NO 1-0-8-3. 1083.
MR. DOWNEY: AND IS THIS AN EMAIL FROM YOU TO MS. HOLMES SETTING FORTH A PROPOSAL ABOUT THE THERANOS-WALGREENS RELATIONSHIP?
WADE MIQUELON: THIS IS.
MR. DOWNEY: OKAY. AND IF YOU LOOK ON THE COVER -- WELL, YOUR HONOR, I MOVE THE ADMISSION OF EXHIBIT 1083.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(GOVERNMENT'S EXHIBIT 1083 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: LOOK AT THE COVER EMAIL. YOU INDICATE TO MS. HOLMES THAT, "ATTACHED IS THE CONCEPTUAL FRAMEWORK I SHARED LAST NIGHT. TAKE A LOOK AND LET ME KNOW YOUR IDEAS OF HOW YOU MIGHT MODIFY, ET CETERA." AND THIS APPARENTLY FOLLOWED A CONVERSATION THAT YOU HAD WITH MS. HOLMES?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND AMONG THE ISSUES THAT YOU WERE DISCUSSING WAS THE TIMELINE FOR ROLLING OUT THERANOS IN WALGREENS STORES; CORRECT?
WADE MIQUELON: RIGHT. THE CRUX OF THIS DISCUSSION WAS ACTUALLY THERANOS WAS WANTING US TO CREATE A VERY HIGH-LEVEL PATIENT EXPERIENCE IN ALL OF OUR PHARMACIES AKIN TO WHAT EVERY SAFEWAY HAD DONE, AND WE HAD DONE SOME THINKING AND SOME WORK TO SAY, YOU KNOW, IT'S NOT REALLY PRACTICAL, IT WOULD BE VERY EXPENSIVE, BUT PERHAPS A TIERING SYSTEM OF WHAT WE THINK WOULD BE THE MOST, THE HEAVIEST USE STORES VERSUS THE LIGHTEST AND MAYBE WE COULD ALIGN IN TERMS OF REALLY BUILDING THE EXPERIENCE TO SUIT THE SPECIFIC STORE ENVIRONMENT.
MR. DOWNEY: OKAY. SO YOU -- THERANOS THOUGHT SOME STORES WERE MORE DESIRABLE TO BE LOCATED IN THAN OTHERS?
WADE MIQUELON: WELL, I THINK THAT WAS AT LEAST OUR PROPOSAL IS THAT WE REALLY SHOULDN'T DO A ONE-SIZE-FITS-ALL. SOME STORES WE COULD USE THE CLINIC AND SOME WE MIGHT BUILD OUT A SPACE, BUT OTHERS PERHAPS JUST A SCREEN WOULD BE GOOD ENOUGH.
MR. DOWNEY: OKAY. AND SO YOU, YOU RANKED CERTAIN STORES AND INDICATED THAT BY COLOR; CORRECT?
WADE MIQUELON: I BELIEVE IT WAS -- I DON'T KNOW IF IT WAS A GOLD, SILVER, BRONZE SYSTEM OR SOME KIND OF A THREE-TIER SYSTEM I RECALL.
MR. DOWNEY: OKAY. IN GOLD STORES YOU MIGHT HAVE A FULLER FACILITY?
WADE MIQUELON: THE BEST OF THE BEST EXPERIENCE THAT WE COULD PROVIDE.
MR. DOWNEY: AND IN THE SILVER YOU MIGHT HAVE A PRIVATE BATHROOM, BUT IT WOULD NOT BE AS NICE AS THE GOLD; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THEN THE BRONZE WOULD BE THE STORES WITH JUST THE SCREENS?
WADE MIQUELON: THAT'S MY RECOLLECTION.
MR. DOWNEY: AND YOU WERE MAKING A PROPOSAL HERE AS TO HOW MANY STORES WOULD BE WITHIN EACH TIER; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU WERE PROPOSING HOW THOSE LOCATIONS MIGHT BE ROLLED OUT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IN THE PARAGRAPH LABELED 1, YOU SET FORTH THE SCALE TIMELINE AND VOLUME AND SPACE COMMITMENTS THAT YOU WERE PROPOSING; CORRECT?
WADE MIQUELON: CORRECT. EVERYTHING PREDICATED ON THE TECHNOLOGY WORKING AND THE PILOTS BEING SUCCESSFUL.
MR. DOWNEY: OKAY. AND SO YOU PROPOSED THAT AFTER COMPLETION OF THE PILOT, WALGREENS WAS WILLING TO COMMIT TO DEVELOPING SERVICES, LAB SERVICES AT 1500 LOCATIONS WITHIN THE FIRST YEAR; CORRECT?
WADE MIQUELON: ASSUMING IT WAS SUCCESSFUL, YES.
MR. DOWNEY: AND THAT WAS MORE THAN SHE HAD PROPOSED; CORRECT?
WADE MIQUELON: I'D HAVE TO GO BACK AND CHECK HER NOTES.
MR. DOWNEY: OKAY. BUT IN THE SECOND YEAR, YOU WOULD ROLL OUT AN ADDITIONAL 1500 LOCATIONS; CORRECT?
WADE MIQUELON: THAT'S WHAT IT SAYS HERE.
MR. DOWNEY: OKAY. AND YOU JUST SET FORTH BELOW THE ALLOCATION OF THOSE AMONGST THE GOLD, SILVER, AND BRONZE RANKING; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND IF YOU GO TO THE NEXT PAGE OF THE EXHIBIT, YOU SET FORTH AN INNOVATION FEE PAYMENT SCHEDULE. WHAT WAS THE INNOVATION FEE A REFERENCE TO?
WADE MIQUELON: AGAIN, THIS WAS THIS HUNDRED MILLION DOLLARS WHICH WE TALKED ABOUT EARLIER WHICH WERE PAYMENTS TO BE STAGED THAT EFFECTIVELY THERANOS WOULD BE ABLE TO USE MORE OR LESS AS WORKING CAPITAL TO INVEST IN THE SCALEUP, AND THEN I BELIEVE BASED UPON WHAT DEGREE OF VOLUME OVER TIME THOSE FEES TO SOME DEGREE WOULD BE PAID BACK OR NOT.
MR. DOWNEY: OKAY. AND THIS SETS FORTH A PROPOSAL AS TO THOSE PAYMENTS OCCURRING OVER THE REST OF THE CALENDAR YEAR 2013; CORRECT?
WADE MIQUELON: CORRECT. AND AGAIN, AS I RECALL, ELIZABETH WAS ASKING IF WE COULD AGAIN EXPEDITE THESE PAYMENTS IN ORDER TO HELP THEIR ABILITY TO SCALE THE CARTRIDGES AND THE INFRASTRUCTURE.
MR. DOWNEY: AND WAS IT ALSO AN ELEMENT OF THIS AGREEMENT THAT YOU WERE PROPOSING THAT YOU WOULD ASSIST THERANOS WITH LAUNCHING INTERNATIONALLY AND OPENING STORES ABROAD?
WADE MIQUELON: I BELIEVE THERE WAS A LOOSE AGREEMENT TO MAYBE DO SOMETHING WITH ALLIANCE BOOTS, BUT IT WAS, I BELIEVE IT WAS -- WELL, HERE'S THE COMMENT TO ASSIST THEM, BUT IT WASN'T DEFINITIVE. ALLIANCE BOOTS WAS INDEPENDENT AT THE TIME, SO THERE WAS NO WAY THAT WE COULD, YOU KNOW, GUARANTEE OR MANDATE, BUT WE COULD MAKE INTRODUCTIONS.
MR. DOWNEY: AND ALL OF THESE -- SO, IN OTHER WORDS, WALGREENS HAD AN AFFILIATION WITH ALLIANCE BOOTS AND YOU WERE GOING TO USE THAT RELATIONSHIP TO ENCOURAGE THE OPENING OF STORES OVERSEAS; IS THAT RIGHT?
WADE MIQUELON: RIGHT. WE HAD A MINORITY INVESTMENT STAKE.
MR. DOWNEY: OKAY. AND THE DOCUMENTS THAT WE JUST LOOKED AT, THEY'RE BASICALLY PART OF THE NEGOTIATION BETWEEN THERANOS AND WALGREENS AS TO HOW A ROLLOUT WOULD WORK; CORRECT?
WADE MIQUELON: CORRECT. I THINK IT'S SAFE TO SAY WHEN YOU'RE DOING SOMETHING NEW TO THE WORLD, THINGS CHANGE, AND IT NEEDS TO KEEP BEING REFLECTED THAT IT'S THE BEST AGREEMENT FOR BOTH PARTIES.
MR. DOWNEY: AND YOU CONTINUED TO NEGOTIATE THAT AGREEMENT THROUGHOUT THE REMAINDER OF 2013; CORRECT?
WADE MIQUELON: I DON'T RECALL. I BELIEVE THERE WAS AN ADDENDUM THAT REFLECTED WHAT YOU'VE SHOWN ME, BUT I DON'T RECALL IF THERE WAS ANOTHER AGREEMENT OR NOT.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK AT EXHIBIT 1387, WHICH WOULD BE IN NUMBER 2, THE DEFENSE BINDER. I BEG YOUR PARDON. IT'S ACTUALLY IN YOUR WHITE BINDER.
JUDGE DAVILA: 1387?
MR. DOWNEY: 1387.
JUDGE DAVILA: THERE IS SUCH A DOCUMENT IN THE BLACK BINDER.
MR. DOWNEY: YOU HAVE A BETTER BLACK BINDER THAN I DO.
MR. DOWNEY: MY QUESTION TO YOU SIMPLY, MR. MIQUELON, IS, IS THIS THE AGREEMENT THAT WAS ENTERED INTO BETWEEN THERANOS AND WALGREENS THAT WAS DESIGNED TO ADDRESS THERANOS'S ROLLOUT IN WALGREENS STORES?
WADE MIQUELON: I BELIEVE SO.
MR. DOWNEY: AND IF YOU LOOK AT PAGE 2 OF THAT EXHIBIT, THE FIRST PARAGRAPH IS NATIONAL, NUMBER 1 SAID NATIONAL ROLLOUT, NEW MARKET ENTRY, AND IT INDICATES THE PARTIES SHALL WORK TOGETHER TO DEVELOP A FORECAST --
MR. SCHENK: YOUR HONOR, BEFORE WE READ THE DOCUMENT, LET'S MOVE IT INTO EVIDENCE. NO OBJECTION.
MR. DOWNEY: I BEG YOUR PARDON. YES, I DO MOVE IT INTO EVIDENCE.
JUDGE DAVILA: IT'S IN EVIDENCE AND IT MAY BE PUBLISHED.
MR. DOWNEY: I MISTAKENLY THOUGHT HE HAD SHOWN THE WITNESS THE DOCUMENT.
(GOVERNMENT'S EXHIBIT 1387 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: IF YOU LOOK AT THE FIRST PARAGRAPH, IT SAYS, "THE PARTIES SHALL WORK TOGETHER TO DEVELOP A FORECAST THAT DETAILS THE ANTICIPATED ROLLOUT DATES FOR THERANOS SERVICES IN INDIVIDUAL U.S. STATES/TERRITORIES," ET CETERA. AND THEN THE SECOND SENTENCE SAYS, "THE PARTIES ARE COMMITTED TO TAKING ALL STEPS REASONABLY NECESSARY TO ENSURE A SUCCESSFUL NATIONAL ROLLOUT OF THE THERANOS SERVICES, AND AGREE THAT A QUALITY STORE AND PATIENT EXPERIENCE IS AN IMPORTANT COMPONENT OF THIS SUCCESS AS PATIENT ADOPTION AND ACCEPTANCE OF THERANOS'S LABORATORY SERVICES WILL BE HIGHLY IMPACTED BY THE PATIENT EXPERIENCE." SO THAT'S WHAT THIS AGREEMENT RELATED TO, AT LEAST CREATING A PROCESS UNDER WHICH THAT ROLLOUT WOULD BE -- WOULD TAKE PLACE?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THEN IF YOU LOOK BACK AT THE FIRST PAGE OF EXHIBIT 1387, THE SECOND PARAGRAPH SAYS, "IT IS THE INTENTION OF THE PARTIES TO DEVELOP A MUTUALLY BENEFICIAL STRATEGIC RELATIONSHIP THAT FACILITATES THE SUCCESSFUL DEPLOYMENT OF THERANOS NATIONALLY, ESTABLISHES WALGREENS AS THE NATIONAL PARTNER FOR LABORATORY SERVICES THAT THERANOS IS ABLE TO PROVIDE AND THERANOS AS WALGREENS NATIONAL PARTNER FOR SUCH THERANOS SERVICES AND PROTECTS THE LONG-TERM STRATEGIC AND COMPETITIVE POSITIONING OF THERANOS AND WALGREENS WITH RESPECT TO COMPETITIVE TECHNOLOGIES AND SERVICES." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: SO THAT IS THE INTENT WITH WHICH THE PARTIES WERE ENTERING INTO THIS AGREEMENT; CORRECT? BUT THERANOS WOULD HAVE TO BE ABLE TO SCALE ITS SERVICES; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IT HAD NOT YET DONE THAT; CORRECT?
WADE MIQUELON: AT THAT POINT IN TIME?
MR. DOWNEY: YES.
WADE MIQUELON: I MEAN, IT HAD SCALED TO WHAT WAS BEING PILOTED.
MR. DOWNEY: IT HAD SCALED TO THE PILOT PROJECT?
WADE MIQUELON: RIGHT.
MR. DOWNEY: BUT IT HAD NOT YET SCALED TO BEYOND THAT; CORRECT?
WADE MIQUELON: NO. BUT THAT'S PART OF WHAT THIS ACCELERATED FUNDING WAS FOR WAS TO HELP WITH THAT.
MR. DOWNEY: THAT'S RIGHT. SO PART OF THE MONEY -- PART OF THE AGREEMENT WAS THE EXCHANGE OF MONEY THAT YOU DESCRIBED; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THAT WAS FOR PURPOSES OF ALLOWING THERANOS TO BUILD UP TOWARDS THIS NATIONAL ROLLOUT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: I'D LIKE TO ASK YOU TO LOOK AT, IN THE DEFENSE BINDER, EXHIBIT 7383. THIS IS A -- IS THIS AN EMAIL FROM AMONGST EXECUTIVES AND EMPLOYEES AT WALGREENS?
WADE MIQUELON: IT'S AN EMAIL FROM MARK VAINISI.
MR. DOWNEY: AND YOU SEE THAT THE RECIPIENTS APPEAR TO ALL BE WALGREENS PERSONNEL?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT YOU WERE COPIED ON THIS EMAIL?
WADE MIQUELON: YES.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF EXHIBIT 7383.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7383 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: WHO IS MARK VAINISI, THE SENDER OF THIS EMAIL?
WADE MIQUELON: MARK WAS THE HEAD OF MERGERS AND ACQUISITIONS AND HE WAS, I WOULD SAY, THE QUARTERBACK OF MOST OF THE AGREEMENTS BETWEEN THERANOS AND WALGREENS.
MR. DOWNEY: AND IN THIS EMAIL, IS HE SUMMARIZING THE TERMS OF THE AGREEMENT THAT HAD JUST BEEN REACHED BETWEEN THERANOS AND WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU LOOK UNDER HIS DESCRIPTION OF KEY TERMS, HE DESCRIBES THE RESTATEMENT OF INTENT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THAT'S CONSISTENT WITH WHAT WE JUST READ IN THE AGREEMENT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND HE SETS FORTH THE TERMS UNDER WHICH THERE WILL BE AN ACCELERATED PAYMENT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND HE ALSO REFERENCES ENHANCED EXCLUSIVITY. WHAT IS THAT A REFERENCE TO?
WADE MIQUELON: WELL, AS I READ THE NOTES, HE'S JUST TALKING ABOUT MAKING SURE THAT CERTAIN COMPETITORS ARE NOT GOING TO BE ABLE TO HAVE THE SAME RIGHTS THAT WALGREENS WOULD HAVE.
MR. DOWNEY: IN EXCHANGE FOR ENTERING THE AGREEMENT, WALGREENS WOULD OBTAIN A CERTAIN PERIOD UNDER WHICH COMPETITORS COULD NOT USE THERANOS'S TECHNOLOGY OR SERVICES; CORRECT?
WADE MIQUELON: I BELIEVE THAT'S PROBABLY PART OF THE TRADEOFF FROM ACCELERATING PAYMENTS IS MAKING SURE THAT WE GET BETTER DEFINITION OF EXCLUSIVITY.
MR. DOWNEY: OKAY. AND THEN IF YOU SEE AT THE BOTTOM OF THE FIRST PAGE OF HIS EMAIL, HE REFERENCES ROLLOUT PLANS AND HE SAYS, "BOTH SIDES AGREED TO WORK IN GOOD FAITH TO DEVELOP A NEW MARKET ENTRY PLAN." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND DID BOTH PARTIES THEN BEGIN TO WORK ON THAT IN EARLY 2014 IF YOU KNOW?
WADE MIQUELON: WORK ON IT OR WORK IN GOOD FAITH? IT'S SOME --
MR. DOWNEY: WELL, WERE THERE EXCHANGES BETWEEN THE PARTIES AS TO HOW A ROLLOUT PLAN MIGHT WORK?
WADE MIQUELON: I CAN'T SAY DEFINITIVELY SO. I DON'T RECALL.
MR. DOWNEY: OKAY. IT WAS NOT SOMETHING THAT YOU PERSONALLY WERE INVOLVED IN?
WADE MIQUELON: NOT IN THAT GRANULARITY AT THAT TIME, NO.
MR. DOWNEY: OKAY. BUT LET ME ASK YOU TO REORIENT US FOR TIME PURPOSES. THIS AGREEMENT IS SIGNED AND THERANOS IS ALREADY IN CERTAIN WALGREENS STORES; CORRECT?
WADE MIQUELON: PRIMARILY THE PHOENIX MARKET.
MR. DOWNEY: OKAY. AND THAT, THAT PARTNERSHIP HAS BEEN ANNOUNCED PUBLICLY; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THE PARTIES EACH HAD MADE PUBLIC STATEMENTS ABOUT THE PARTNERSHIP CHARACTERIZING IT; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: LET ME ASK YOU TO LOOK AT EXHIBIT 1113. DO YOU SEE THIS DOCUMENT AND DO YOU RECOGNIZE IT AS A JOINT ANNOUNCEMENT BY THERANOS AND WALGREENS IN SEPTEMBER OF 2013?
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU LOOK AT THE SECOND PAGE OF THIS EXHIBIT, PAGE 2 IN THE LAST PARAGRAPH WHERE -- ABOVE WHERE IT SAYS ABOUT THERANOS, THIS JOINT ANNOUNCEMENT SAID, "AS THE NATION'S LARGEST RETAIL PHARMACY CHAIN WITH MORE THAN 8100 NEIGHBORHOOD PHARMACIES, WALGREENS HAS THE INFRASTRUCTURE TO HELP BRING THERANOS TO CONSUMERS NATIONWIDE." AND THAT'S A STATEMENT THAT WALGREENS SIGNED OFF ON JOINTLY MAKING?
WADE MIQUELON: SURE.
MR. DOWNEY: OKAY. AND THEN THERE WAS ANOTHER JOINT ANNOUNCEMENT A COUPLE MONTHS LATER IN 2013. LET ME ASK YOU TO LOOK AT EXHIBIT 4036. I'LL ASK YOU IF THAT IS ANOTHER JOINT ANNOUNCEMENT WHEN YOU HAVE A CHANCE TO TAKE A LOOK AT IT.
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU LOOK AT THE FIRST PARAGRAPH. YOUR HONOR, I MOVE THE ADMISSION OF 4036.
MR. SCHENK: YOUR HONOR, FOUNDATION.
BY MR. DOWNEY:
MR. DOWNEY: WELL, DO YOU RECOGNIZE THIS AS A JOINT ANNOUNCEMENT BETWEEN THERANOS AND WALGREENS ISSUED WHEN YOU WERE THE CFO OF WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: I MOVE THE ADMISSION OF 4036.
MR. SCHENK: YOUR HONOR, IT LOOKS LIKE A DRAFT TO ME.
WADE MIQUELON: IT'S MISSING A QUOTE I CAN SEE, SO IT MIGHT BE A DRAFT.
MR. DOWNEY: OH, YOU'RE RIGHT. LET ME SEE IF I CAN, IF I CAN CORRECT THAT. I DON'T KNOW -- LET ME SEE IF I CAN GET YOU THAT EXHIBIT. BUT LET'S MOVE FORWARD FROM HERE.
MR. DOWNEY: NOW, THE THERANOS -- AFTER THE THERANOS PARTNERSHIP WAS ANNOUNCED --
JUDGE DAVILA: YOU'RE GOING TO PASS THIS?
MR. DOWNEY: I'LL PASS THIS EXHIBIT AND COME BACK.
JUDGE DAVILA: ALL RIGHT.
BY MR. DOWNEY:
MR. DOWNEY: AFTER THE PUBLIC ANNOUNCEMENT OF THE PARTNERSHIP, DID YOU, DID YOU HAVE DISCUSSIONS -- WELL, STRIKE THAT. CAN YOU EXPLAIN TO US WHAT AN EARNINGS CALL IS?
WADE MIQUELON: AN EARNINGS CALL IS A QUARTERLY CALL FOR PUBLIC COMPANIES WHICH BASICALLY DISCUSSES THE PUBLISHED FINANCIAL RESULTS FOR THE QUARTER.
MR. DOWNEY: AND IS THAT A CALL DURING -- IN WHICH YOU PERSONALLY PARTICIPATED?
WADE MIQUELON: ALL CFO'S AND CEO'S PARTICIPATE.
MR. DOWNEY: AND DURING THOSE CALLS, DO ANALYSTS WHO FOLLOW THE COMPANY FOR PURPOSES OF PREPARING ADVICE AND SO FORTH, DO THEY PARTICIPATE IN THOSE CALLS?
WADE MIQUELON: THEY PARTICIPATE, THEY LISTEN, AND THEN THEY'RE ALLOWED TO ASK QUESTIONS AS WELL.
MR. DOWNEY: OKAY. DO YOU REMEMBER PARTICIPATING IN A DECEMBER 2013 EARNINGS CALL WHERE THE SUBJECT OF THERANOS CAME UP?
WADE MIQUELON: NOT SPECIFICALLY.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK AT EXHIBIT 12510. AND I'M NOT REALLY INTERESTED IN THE BREAKDOWN OF THE CALL THAT IS CONTAINED IN THE EMAIL. I'M REALLY JUST INTERESTED IN THE ATTACHMENT TO THE EMAIL, AND I WOULD JUST ASK IF YOU RECOGNIZE THIS AS A TRANSCRIPT OF AN EARNINGS CALL WITH WALGREENS SENIOR MANAGEMENT IN DECEMBER OF 2013?
WADE MIQUELON: IT'S WHAT A TRANSCRIPT LOOKS LIKE, SO --
MR. DOWNEY: OKAY. YOUR HONOR, I MOVE THE ADMISSION OF 12510, ALTHOUGH I REALLY ONLY NEED THE ATTACHMENT. I DON'T NEED THE EMAIL DISCUSSION.
JUDGE DAVILA: WHAT PAGES THEN WOULD YOU SEEK TO INTRODUCE?
MR. DOWNEY: I THINK THE PAGES WHERE THE BATES LABEL IN THE BOTTOM RIGHT-HAND CORNER IS 6786 THROUGH 6804.
JUDGE DAVILA: MR. SCHENK?
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: THOSE PAGES ARE ADMITTED AS THIS EXHIBIT NUMBER AND THEY MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 12510, BATES PAGES 6786 THROUGH 6804, WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: AND THESE CALLS ARE AN OPPORTUNITY FOR ANALYSTS TO ASK QUESTIONS ABOUT THE PERFORMANCE OF THE COMPANY; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND EXPECTATIONS THAT THE COMPANY HAS AS TO WHAT ITS PERFORMANCE IN THE FUTURE MIGHT BE?
WADE MIQUELON: TO THE EXTENT THAT THE COMPANY PROVIDES THAT GUIDANCE, CORRECT.
MR. DOWNEY: IN SOME INSTANCES THE COMPANIES DECLINE TO PROVIDE GUIDANCE; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND THESE ARE CALLS FOR WHICH YOU PREPARE?
WADE MIQUELON: YES, DOZENS OF PEOPLE PREPARE.
MR. DOWNEY: AND THEY'RE IMPORTANT CALLS BECAUSE THEY CAN INFLUENCE THE VALUE OF WALGREENS STOCK; CORRECT?
WADE MIQUELON: THEY'RE IMPORTANT FOR LOTS OF REASONS.
MR. DOWNEY: OKAY. NOT JUST THE REASON THAT I NOTED, BUT THEY'RE IMPORTANT CALLS?
WADE MIQUELON: IMPORTANT CALLS.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK IN THE EXHIBIT THAT I'M SHOWING YOU, 12510, AT THE PAGE THAT -- WHERE THE BATES LABELLED NUMBER IS 6778. I'LL PUT THAT UP ON YOUR SCREEN IF THAT MAKES IT EASIER FOR YOU. I THINK WE HAVE IT UP ON THE FIRST PAGE JUST TO FAMILIARIZE YOU WITH THE PARTICIPANTS IN THE CALL. AND DO YOU SEE THAT THERE ARE SEVERAL -- WOULD YOU JUST GO BACK TO THAT? DO YOU SEE AT THE TOP THIS LIST OF PARTICIPANTS IN THE EARNINGS CALL AND DO YOU SEE THAT -- WELL, DO YOU SEE THAT, THE PARTICIPANTS ON TOP OF THE EARNINGS CALL TRANSCRIPT?
WADE MIQUELON: YES.
MR. DOWNEY: AND DO YOU SEE AT THE TOP THERE'S A GROUP OF CORPORATE PARTICIPANTS FROM WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT INCLUDES YOURSELF; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THEN UNDER THAT THERE'S A LIST OF OTHER PARTICIPANTS; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THOSE ARE ANALYSTS WHO FOLLOW WALGREENS'S PERFORMANCE; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND LET ME ASK YOU TO LOOK NOW AT THE NEXT PAGE. AT THE BEGINNING OF THE CALL THERE IS A DISCUSSION BY MR. WASSON, WHO WAS THE CHIEF EXECUTIVE OFFICER. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU GO DOWN TO THE SECOND PARAGRAPH, HE NOTES THAT HE'S GOING TO GET INTO SOME HIGHLIGHTS OF THE COMPANY. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND IF YOU GO FURTHER DOWN ON THAT PAGE, IF YOU BRING UP THE SECOND HALF, DO YOU SEE THE DISCUSSION OF WALGREENS AND THERANOS THERE?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU SEE THAT HE REFERENCED THAT -- IT SAYS THAT "WALGREENS AND THERANOS ALSO TOOK THE NEXT STEP IN OUR PLANNED NATIONAL ROLLOUT OF GROUND BREAKING NEW LAB SERVICES WITH THE OPENING OF THERANOS WELLNESS CENTERS IN TWO STORES IN PHOENIX." DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND AS OF THIS DATE, DECEMBER 20TH OF 2013, THERE WAS STILL A PROJECTION THAT THERE WOULD BE A NATIONAL ROLLOUT; CORRECT?
WADE MIQUELON: I THINK THERE'S A PROJECTION -- EVERYTHING IS PREDICATED ON EACH STEP BEING SUCCESSFUL, SO ASSUMING THE PILOT IS SUCCESSFUL, YOU'LL MOVE TO THE NEXT STEP.
MR. DOWNEY: AND THAT'S BEEN TRUE SINCE THE BEGINNING OF THE AGREEMENT; RIGHT?
WADE MIQUELON: THAT'S ALWAYS IMPLICIT.
MR. DOWNEY: RIGHT. IF YOU GO TO PAGE 9 OF THE TRANSCRIPT, BOTTOM RIGHT-HAND CORNER, I WANT TO FOCUS ON AN EXCHANGE BETWEEN YOU AND AN ANALYST, MARK MILLER. IT'S AT THE BOTTOM OF THAT PAGE IF YOU HAVE IT. DO YOU SEE THE DISCUSSION OF THERANOS IN THE LAST FEW SENTENCES THERE?
WADE MIQUELON: YES.
MR. DOWNEY: AND THIS IS AN EXCHANGE BETWEEN YOU AND AN ANALYST FROM WILLIAM BLAIR & COMPANY; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND HE WAS ASKING A QUESTION ABOUT WHAT THE BUSINESS EXPANSION PLANS AND NEW INITIATIVES OF THE COMPANY WERE; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: AND YOU REPLIED IN PART SAYING, "ALSO, THINGS LIKE THERANOS, WHICH WE BELIEVE HAS VERY MEANINGFUL POTENTIAL. WE'RE VERY EXCITED ABOUT. IN VARIOUS GEOGRAPHIES, WE'VE GOT A STRONG FOOTPRINT, BUT WE'VE GOT OPPORTUNITIES TO DO EVEN MORE BREADTH OF SERVICES IN THOSE MARKETS AND GET DEEPER AND BROADER AND WORKING WITH OUR PARTNERS, ALLIANCE BOOTS, WE'RE DOING EXACTLY THAT." SO THAT WAS A DESCRIPTION OF YOUR THINKING ABOUT THERANOS AS OF THIS DATE; CORRECT?
WADE MIQUELON: I'M NOT SURE I BELIEVED THAT "IN VARIOUS GEOGRAPHIES" MIGHT BE IN REFERENCE TO ALLIANCE BOOTS.
MR. DOWNEY: OKAY. THAT MIGHT BE RELATED TO INTERNATIONAL?
WADE MIQUELON: YES. I THINK WHAT WE WERE EXCITED ABOUT IS THE END OF MY THOUGHTS ON THERANOS.
MR. DOWNEY: OKAY. BUT, BUT YOU REFERENCED YOU THOUGHT THE COMPANY HAD VERY MEANINGFUL POTENTIAL; CORRECT?
WADE MIQUELON: YES.
MR. DOWNEY: ALL RIGHT. LET ME ASK YOU TO LOOK NOW AT PAGE 12 OF THAT TRANSCRIPT, AND I'M LOOKING AT THE -- DO YOU SEE WHERE, ABOUT A THIRD OF THE WAY DOWN THE PAGE, IT SAYS, "OKAY. AND THEN," NEXT TO RICKY GOLDWASSER?
WADE MIQUELON: YES.
MR. DOWNEY: AND MR. GOLDWASSER WAS ANOTHER ANALYST; CORRECT?
WADE MIQUELON: I BELIEVE IT WAS A SHE.
MR. DOWNEY: EXCUSE ME. MS. GOLDWASSER WAS ANOTHER ANALYST?
WADE MIQUELON: YES.
MR. DOWNEY: AND SHE SAYS TO YOU, "AND THEN, I KNOW YOU'VE TALKED VERY POSITIVELY ABOUT THERANOS. CAN YOU SHARE WITH US KIND OF LIKE YOUR EXPERIENCE, I THINK, THE TECHNOLOGY HAS BEEN IN YOUR PHARMACIES FOR A COUPLE OF MONTHS NOW. WHAT ARE YOU SEEING IN THE MARKETPLACE?" SHE ASKED YOU THAT QUESTION; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND YOU RESPONDED, "YEAH, I MEAN, WE'RE VERY, VERY POSITIVE ON THERANOS. I MEAN, IT'S REALLY A -- ONE OF THE DISRUPTIVE PLAYS, IT'S A BETTER PATIENT EXPERIENCE WITH A PRICK OF BLOOD. IT'S THE HIGHEST STANDARD OF QUALITY IN LAB WITH COSTS, HALF OF THE COST OF MEDICARE. AND THE PATIENT FEEDBACK WE'RE GETTING IS VERY GOOD, BUT IT'S REALLY A BETTER, FASTER, CHEAPER, MORE CONVENIENTLY PLAY. AND WE'RE GOING TO -- AS WE EXPAND HERE, WE'LL KEEP LEARNING AND PERFECTING THE PATIENT EXPERIENCE WHICH IS REALLY THE CASE -- THE KEY THING. BUT WE'RE VERY, VERY POSITIVE." AND THEN YOU GO ON TO DESCRIBE THAT THIS IS ANOTHER EXAMPLE OF HOW A COMMUNITY PHARMACY CAN PROVIDE BROADER HEALTH CARE. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THAT'S WHAT YOUR THINKING WAS ABOUT THERANOS AS OF THAT TIME; CORRECT?
WADE MIQUELON: THAT'S HOW I FELT AS OF THE TIME, YES.
MR. DOWNEY: OKAY. I WANT TO ASK YOU ABOUT YOUR INTERACTIONS WITH A WALGREENS SHAREHOLDER RELATED TO THERANOS, AND I WANT TO PUT YOUR MIND IN THE TIMEFRAME OF ABOUT EARLY 2014. SO THIS WOULD BE --
JUDGE DAVILA: MR. DOWNEY, BEFORE YOU GO THERE, LET ME ASK YOU, WE HAD SOME CONVERSATION ABOUT TAKING A WITNESS OUT OF ORDER. IS THAT SOMETHING WE SHOULD CONSIDER DOING?
MR. DOWNEY: IT'S FINE WITH ME IF -- I DON'T THINK I HAVE JUST TEN MINUTES. I THINK I HAVE A LITTLE MORE THAN THAT. SO I THINK IF THE WITNESS IS HERE AND THAT'S THE GOVERNMENT'S PREFERENCE, IT'S FINE WITH ME.
JUDGE DAVILA: LET'S, LET'S CHECK ON THAT. LET ME TURN TO THE JURY. MAYBE WE SHOULD TAKE A TEN MINUTE BREAK HERE AND THEN COME BACK. MR. SCHENK, WHAT ARE YOUR THOUGHTS ON A WITNESS OUT OF ORDER?
MR. SCHENK: I'VE TALKED TO THE TEAM. I DO NOT THINK IT'S NECESSARY. BUT THE TEN MINUTE BREAK MIGHT BE HELPFUL FOR US TO CONFER.
JUDGE DAVILA: OKAY. LET'S DO THAT. LET'S TAKE 12 MINUTES. I'LL BE GENEROUS. LET'S TAKE 12 MINUTES. YOU CAN STAND DOWN, SIR. THANK YOU.
(LAUGHTER.)
(JURY OUT AT 2:48 P.M.)
JUDGE DAVILA: PLEASE BE SEATED. THANK YOU. THE RECORD SHOULD REFLECT THAT OUR JURY HAS LEFT AND OUR LAST WITNESS HAS LEFT THE COURTROOM NOW. WE'LL TAKE OUR BREAK, AND THEN DO YOU WANT TO JUST CHECK AND SEE, MR. SCHENK, WHETHER OR NOT THAT'S SOMETHING THAT YOU WOULD LIKE TO GO FORWARD WITH?
MR. SCHENK: YES. CAN I ASK IF THE COURT HAS HEARD FEEDBACK FROM THE JURY ABOUT TOMORROW? IT MIGHT HELP IN OUR CONVERSATION.
JUDGE DAVILA: OH. I MEANT TO ASK THEM THAT BEFORE THE BREAK. I'LL GET THAT WHEN THEY COME BACK, BUT WE'LL JUST HAVE TO DO IT THAT WAY WHEN THEY COME BACK AND WE'LL SEE.
MR. DOWNEY: YOUR HONOR, WE'LL KEEP MS. KRATZMANN APPRISED. A SLIGHT CONCERN THAT WE MIGHT BE JUST A LITTLE OVER 10 MINUTES, MAYBE MORE LIKE 15, BUT WE'LL STAY IN TOUCH WITH MS. KRATZMANN.
JUDGE DAVILA: OKAY. ON YOUR -- AS TO THIS OTHER WITNESS?
MR. DOWNEY: NO, JUST A COMFORT BREAK.
JUDGE DAVILA: OH, OKAY. WELL, LET'S GO 15. I DON'T THINK THAT THE JURY WILL OBJECT. ALL RIGHT. THANK YOU.
COURT CLERK: COURT IS IN RECESS.
JUDGE DAVILA: TAKE 20 IF WE NEED 20.
(RECESS FROM 2:49 P.M. UNTIL 3:11 P.M.)
(JURY IN AT 3:11 P.M.)
JUDGE DAVILA: ALL RIGHT. THANK YOU. PLEASE BE SEATED. WE'RE BACK ON THE RECORD. OUR JURY IS PRESENT AND ALL PARTIES PREVIOUSLY PRESENT ARE PRESENT AGAIN. LADIES AND GENTLEMEN, BEFORE WE START AGAIN, CAN I ASK THE JURY, DURING THE BREAK, WERE YOU ABLE TO DISCERN WHETHER YOU ARE ABLE TO COME TOMORROW, THURSDAY, FOR A SESSION? LET ME ASK FOR A SHOW OF HANDS. IS THERE ANYONE WHO CANNOT DO THAT? OH MY GOODNESS, WHAT A WONDERFUL JURY. I SEE NO HANDS. IS THERE ANY -- DO WE NEED TO MAKE AN ADJUSTMENT OF THE SCHEDULE AT ALL? THE PROPOSED SCHEDULE TOMORROW WOULD BE 9:00 UNTIL 3:00. DO WE NEED TO ADJUST THE SCHEDULE FOR ANYONE OTHER THAN THAT 9:00 TO 3:00? I SEE NO HANDS. OKAY. THANK YOU VERY MUCH. THANK YOU. LET ME ASK THE QUESTION THEN OF MR. SCHENK. SHOULD WE TAKE A WITNESS OUT OF ORDER?
MR. SCHENK: NO, THAT IS NOT NECESSARY. THANK YOU.
JUDGE DAVILA: ALL RIGHT. THANK YOU VERY MUCH. MR. DOWNEY.
BY MR. DOWNEY:
MR. DOWNEY: MR. MIQUELON, I WANT TO ASK YOU ABOUT AN INVESTOR IN WALGREENS CALLED PARTNER FUND MANAGEMENT. IS THAT AN INVESTOR THAT YOU'RE FAMILIAR WITH?
WADE MIQUELON: IT DOESN'T RING A BELL.
MR. DOWNEY: THEY SOMETIMES GO BY THE ACRONYM PFM.
WADE MIQUELON: I'M SORRY.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK AT EXHIBIT 13952. DO YOU RECOGNIZE THIS AS AN EMAIL EXCHANGE BETWEEN YOU AND ASHISH KOHLI AT WALGREENS IN 2014?
WADE MIQUELON: I DO.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 13952.
MR. SCHENK: YOUR HONOR, I BELIEVE THIS IS BEYOND THE SCOPE.
MR. DOWNEY: YOUR HONOR, I THINK THIS RELATES TO THE QUESTION OF WHICH WE'VE BEEN --
JUDGE DAVILA: WHY DON'T YOU LAY A FOUNDATION FOR THIS IF YOU CAN, AND THEN WE'LL SEE.
MR. DOWNEY: OKAY.
MR. DOWNEY: I'LL DIRECT YOUR ATTENTION TO THE BOTTOM. IS THE NAME VIVEK KHANNA KNOWN TO YOU?
WADE MIQUELON: I DON'T REMEMBER THAT.
MR. DOWNEY: OKAY. AND IS IT THE CASE THAT IF YOU WERE GOING TO CHANGE ANY ASPECTS OF YOUR RELATIONSHIP WITH THERANOS, YOU WOULD WANT TO ANNOUNCE IT TO ALL INVESTORS AT THE SAME TIME?
WADE MIQUELON: THAT'S THE POLICY. ANYTHING THAT WOULD BE MATERIAL AND OF IMPORTANCE SHOULD BE GIVEN TO EVERYONE EQUALLY.
MR. DOWNEY: OKAY. AND AS OF MARCH 2014, WERE YOU SOMETIMES ASKED FOR COMMENT ON HOW THE THERANOS PROJECT WAS GOING?
WADE MIQUELON: I DON'T RECALL, BUT PROBABLY --
MR. DOWNEY: OKAY.
WADE MIQUELON: -- AT SOME POINT.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 13952. THIS RELATES TO THE QUESTIONING ON DIRECT ABOUT TIMING OF THE ROLLOUT, ET CETERA, AND THIS IS COMMENTARY ON IT.
MR. SCHENK: SAME OBJECTION.
JUDGE DAVILA: YOU KNOW, I THINK YOU CAN USE THIS TO REFRESH HIS RECOLLECTION AS TO WHETHER OR NOT HE DID SOMETHING, BUT THE DOCUMENT ITSELF I DON'T THINK NEEDS TO BE -- FOR THE INFORMATION THAT YOU WANT TO GET IT IN, I THINK YOU CAN SEE IF YOU CAN REFRESH HIS RECOLLECTION OF THAT.
MR. DOWNEY: WELL, LET ME ASK HIM.
JUDGE DAVILA: SURE.
BY MR. DOWNEY:
MR. DOWNEY: DO YOU RECALL THIS EMAIL EXCHANGE IN MARCH OF 2014?
MR. DOWNEY: OKAY. YOUR HONOR, I HATE TO HAVE HIM BACK FOR ONE QUESTION.
JUDGE DAVILA: WELL, I -- THE QUESTION I WAS SUGGESTING -- AND AGAIN, I DON'T MEAN TO TELL YOU HOW TO ASK QUESTIONS -- BUT IF HIS MEMORY OF THIS CAN BE REFRESHED -- HE DOESN'T REMEMBER THIS, BUT IF THIS REFRESHES HIS RECOLLECTION ABOUT SOMETHING THAT HE DID, THAT MIGHT SUFFICE FOR YOUR PURPOSE I THINK.
MR. DOWNEY: LET'S TRY IT THAT WAY.
MR. DOWNEY: HAVE YOU HAD THE OPPORTUNITY TO REVIEW EXHIBIT 13952?
WADE MIQUELON: YES.
MR. DOWNEY: DOES THAT REFRESH YOUR RECOLLECTION THAT YOU WERE ASKED A QUESTION BY ASHISH KOHLI IN MARCH OF 2014 ABOUT THERANOS?
WADE MIQUELON: NO, BUT I WOULD GET HUNDREDS OF EMAILS A DAY, SO --
MR. DOWNEY: OKAY. YOUR HONOR, I THINK I NEED TO MOVE ITS ADMISSION.
JUDGE DAVILA: I UNDERSTAND WHY YOU WANT TO MOVE IT IN. THE QUESTION THAT MR. SCHENK SUGGESTS IS IT'S NOT APPROPRIATE BECAUSE IT'S BEYOND THE SCOPE. I'LL ALLOW IT TO COME IN, AND SO I'LL OVERRULE THE OBJECTION. IT'S ADMITTED, AND IT CAN BE PUBLISHED.
(DEFENDANT'S EXHIBIT 13952 WAS RECEIVED IN EVIDENCE.)
JUDGE DAVILA: IS SOMETHING WRONG WITH OUR SCREENS?
COURT CLERK: I DID A TEST ON THE BREAK. LET ME TRY IT AGAIN.
JUDGE DAVILA: JUST A MOMENT. I'M SORRY.
(PAUSE IN PROCEEDINGS.)
COURT CLERK: NO?
JUDGE DAVILA: NOT MINE OR IRENE'S.
COURT CLERK: HOW ABOUT IF WE TURN OFF THE MONITOR?
JUDGE DAVILA: THIS BUTTON HERE (INDICATING)? THAT WORKED FOR ME. I AM JUST GOING TO POUR WATER. ALL RIGHT. I THINK WE'RE READY.
MR. DOWNEY: OKAY.
MR. DOWNEY: WHO WAS ASHISH KOHLI?
WADE MIQUELON: HE WAS THE DIRECTOR OF INVESTOR RELATIONS, SO THE SECOND HIGHEST PERSON IN INVESTOR RELATIONS.
MR. DOWNEY: OKAY. SO HE WOULD SOMETIMES FIELD QUESTIONS FROM INVESTORS, OR POTENTIAL INVESTORS?
WADE MIQUELON: YES.
MR. DOWNEY: OKAY. DOES THIS APPEAR TO BE AN EXCHANGE THAT YOU HAD WITH MR. KOHLI IN MARCH OF 2014?
WADE MIQUELON: YES.
MR. DOWNEY: AND DO YOU SEE AT THE BOTTOM MR. KOHLI WAS ASKED A QUESTION, "I CANNOT HELP NOTICE NO MENTION OF THERANOS IN THE PRESS RELEASE OR IN THE PREPARED COMMENTS. IS THERE A CHANGE IN UPTAKE OR ROLLOUT SCHEDULE?" DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. DOWNEY: AND THEN HE ASKED, "HOW WOULD YOU LIKE ME TO RESPOND?" AND YOU RESPONDED, "PROJECT IS GOING WELL. WHEN WE HAVE A NEW MILESTONE TO SHARE WE WILL SHARE IT." SIGNED WADE?
WADE MIQUELON: YES.
MR. DOWNEY: OKAY. DO YOU KNOW AN INVESTOR NAMED BRIAN GROSSMAN?
WADE MIQUELON: I DON'T RECALL.
MR. DOWNEY: DO YOU RECALL HAVING ANY CONVERSATIONS WITH MR. GROSSMAN ABOUT THERANOS?
WADE MIQUELON: NOT SPECIFICALLY.
MR. DOWNEY: LET ME SHOW YOU A DOCUMENT FOR PURPOSES OF SEEING IF IT REFRESHES YOUR RECOLLECTION.
WADE MIQUELON: OKAY.
MR. DOWNEY: IT'S EXHIBIT 4170. AND THERE'S A FAIRLY LONG DISCUSSION HERE, BUT I'M ONLY INTERESTED AND WOULD DRAW YOUR ATTENTION TO THE SECOND TO THE LAST PARAGRAPH DOWN THE SECOND PAGE WHICH STARTS THERANOS. THAT PARAGRAPH AND THE FOLLOWING TWO PARAGRAPHS.
WADE MIQUELON: YES.
MR. DOWNEY: DOES THAT REFRESH YOUR RECOLLECTION OF HAVING A CONVERSATION WITH MR. GROSSMAN IN THE SUMMER OF 2014?
WADE MIQUELON: IT DOES NOT.
MR. DOWNEY: OKAY. YOU LEFT FOR REASONS UNRELATED TO THERANOS IN THE LATE SUMMER OF 2014; CORRECT?
WADE MIQUELON: CORRECT.
MR. DOWNEY: AND AFTER THAT TIME DID YOU STAY IN TOUCH WITH MS. HOLMES AND OTHERS AT THERANOS?
WADE MIQUELON: MS. HOLMES.
MR. DOWNEY: OKAY. LET ME ASK YOU TO LOOK IN YOUR NOTEBOOK AT EXHIBIT 7168?
WADE MIQUELON: YEP.
MR. DOWNEY: IS THIS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN OCTOBER OF 2015?
WADE MIQUELON: YES, IT IS.
MR. DOWNEY: YOUR HONOR, I MOVE TO ADMIT 7618.
JUDGE DAVILA: 7618?
MR. DOWNEY: 7618.
COURT CLERK: OR 7168?
JUDGE DAVILA: TELL US THE NUMBER AGAIN, PLEASE.
MR. DOWNEY: 7618.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7618 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: OKAY. AND THIS IS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES. AND I REALLY WANT TO JUST FOCUS ON THE BOTTOM EXCHANGE. DO YOU RECALL AT SOME POINT DURING THE FALL OF 2015 THERE WAS A LOT OF CRITICISM OF MS. HOLMES AND THERANOS?
WADE MIQUELON: I DO.
MR. DOWNEY: AND IS THIS AN EMAIL THAT YOU SENT IN THIS TIMEFRAME TO MS. HOLMES?
WADE MIQUELON: YES.
MR. DOWNEY: LET ME ASK YOU NOW TO LOOK AT EXHIBIT 7622.
WADE MIQUELON: YEP.
MR. DOWNEY: IS THIS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN DECEMBER OF 2015?
WADE MIQUELON: YEP.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 7622.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7622 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: AND I WANT TO FOCUS YOUR ATTENTION FIRST ON THE DATE. DO YOU SEE THAT THIS IS DECEMBER 1ST, 2015?
WADE MIQUELON: YES.
MR. DOWNEY: AND THIS IS A YEAR AND A QUARTER OR SO AFTER YOU LEFT WALGREENS?
WADE MIQUELON: YES.
MR. DOWNEY: AND IN THE FIRST PARAGRAPH YOU MENTION COMING BACK WITH MORE DETAILED THOUGHTS ON HOW WE COULD DO SOMETHING REALLY GAME CHANGING AS TALKED.
WADE MIQUELON: YEP.
MR. DOWNEY: AND DO YOU RECALL WHAT THAT RELATES TO?
WADE MIQUELON: I BELIEVE IT WAS SOME WORK THAT I WAS DOING IN THE MIDDLE EAST WITH SOME OF THE SOVEREIGN FUNDS AND OTHER FUNDS IN ABU DHABI AND OTHER AREAS WHERE I THOUGHT THERE WOULD BE A LOT OF INTEREST IN WHAT THERANOS HAD TO OFFER.
MR. DOWNEY: OKAY. AND WAS THAT FOR PURPOSES OF OFFERING THE SERVICE OR WHAT PURPOSE WAS THAT FOR?
WADE MIQUELON: JUST THE TECHNOLOGY. AGAIN, WHEN I LEFT WALGREENS IN AUGUST I WAS STILL VERY, YOU KNOW, POSITIVE ON THE TECHNOLOGY. OBVIOUSLY LATER ON, YOU KNOW, THINGS WERE WRITTEN, BUT I STILL VERY MUCH BELIEVED IN ELIZABETH AND WHAT SHE WAS UP TO, AND I REALLY WANTED HER TO HAVE A CHANCE TO BE ABLE TO LEVERAGE THAT FOR GOOD.
MR. DOWNEY: OKAY. ALL RIGHT. LET ME ASK YOU TO LOOK AT EXHIBIT 7657 AND JUST ASK YOU BRIEFLY TO CONFIRM WHETHER THIS IS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN MARCH OF 2016?
WADE MIQUELON: IT IS.
MR. DOWNEY: YOUR HONOR, I MOVE THE ADMISSION OF 7657.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7657 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: AND DO YOU SEE IN THE ADDRESS LINE THAT THIS IS AN EMAIL FROM YOU TO MS. HOLMES COPYING SOME OTHER PARTIES?
WADE MIQUELON: YES.
MR. DOWNEY: AND IN THE SECOND PARAGRAPH HERE YOU REFERENCE GCC BEING A FABULOUS ENVIRONMENT FOR THERANOS. WHAT IS GCC?
WADE MIQUELON: IT'S THE MIDDLE EAST, THE GREATER AREA THAT INCLUDES SEVERAL COUNTRIES.
MR. DOWNEY: OKAY. AND IS THAT A -- WHAT WERE YOU DISCUSSING HERE WHEN YOU SUGGESTED GCC WOULD BE A FABULOUS ENVIRONMENT FOR THERANOS?
WADE MIQUELON: WELL CAPITALIZED IN TERMS OF FUNDS, ACTUALLY EMBRACING TECHNOLOGY IN MANY WAYS, IN HEALTH CARE IN PARTICULAR, AND I FELT IT WOULD BE A GREAT OPPORTUNITY FOR HER TO SEE WHAT WAS POSSIBLE THERE.
MR. DOWNEY: OKAY. AND DID YOU CONTINUE THEREAFTER TO HAVE EMAIL EXCHANGES WITH MS. HOLMES ABOUT PERSONAL MATTERS AND PROFESSIONAL OPPORTUNITIES?
WADE MIQUELON: I DON'T KNOW AFTER THIS IF I DID OR NOT, BUT --
MR. DOWNEY: WELL, LET ME SHOW YOU ONE MORE EMAIL.
WADE MIQUELON: OKAY.
MR. DOWNEY: EXHIBIT 7676. IS THIS AN EMAIL EXCHANGE BETWEEN YOU AND MS. HOLMES IN AUGUST OF 2016?
WADE MIQUELON: IT IS.
MR. DOWNEY: OKAY. YOUR HONOR, I MOVE THE ADMISSION OF EXHIBIT 7676.
MR. SCHENK: NO OBJECTION.
JUDGE DAVILA: IT'S ADMITTED. IT MAY BE PUBLISHED.
(DEFENDANT'S EXHIBIT 7676 WAS RECEIVED IN EVIDENCE.)
BY MR. DOWNEY:
MR. DOWNEY: IF WE CAN LOOK AT THE EMAIL ON THE BOTTOM. YOU SAY TO MS. HOLMES, "NICE JOB WITH DR. GUPTA." WHAT WAS THAT A REFERENCE TO?
WADE MIQUELON: HONESTLY, I CAN'T REMEMBER.
MR. DOWNEY: YOU SAY, "I HOPE YOU ARE WELL. DON'T STOP WORKING TO HELP THE WORLD." MS. HOLMES'S RESPONSE TO YOU, "YOU KNOW HOW MUCH THAT MEANS TO ME. HOPE ALL IS WONDERFUL WITH YOU." AND DO YOU RECALL ANY CONTACT WITH MS. HOLMES AFTER THIS EMAIL EXCHANGE?
WADE MIQUELON: I DON'T RECALL THE LAST TIME, BUT I DEFINITELY CARED ABOUT HER VERY MUCH AND WANTED HER TO BE SUCCESSFUL.
MR. DOWNEY: OKAY. YOUR HONOR, I THINK I'M DONE WITH CROSS-EXAMINATION, BUT LET ME HAVE JUST ONE MOMENT.
JUDGE DAVILA: SURE.
(DISCUSSION AMONGST DEFENSE COUNSEL OFF THE RECORD.)
BY MR. DOWNEY:
MR. DOWNEY: THANK YOU, MR. MIQUELON. THAT'S ALL I HAVE FOR CROSS-EXAMINATION.
JUDGE DAVILA: ALL RIGHT. ANY REDIRECT? MR. SCHENK?
MR. SCHENK: YES.
REDIRECT EXAMINATION BY MR. SCHENK:
MR. SCHENK: GOOD AFTERNOON AGAIN, MR. MIQUELON.
WADE MIQUELON: GOOD AFTERNOON.
MR. SCHENK: I'D LIKE TO COVER SOME OF THE TOPICS THAT YOU DISCUSSED WITH MR. DOWNEY, AND THE FIRST PLACE I'D LIKE TO START IS WITH THE PHASED ROLLOUT. MR. DOWNEY ASKED YOU SOME QUESTIONS ABOUT PHASE I AND PHASE II. DO YOU RECALL THOSE QUESTIONS?
WADE MIQUELON: BRIEFLY.
MR. SCHENK: GENERALLY AT LEAST.
WADE MIQUELON: GENERALLY, YEAH.
MR. SCHENK: THE REASON FOR THE DIFFERENT PHASES, I THINK YOU TESTIFIED TO, WAS SOME REGULATORY CONCERNS, OR REGULATORY ISSUES THAT HAD BEEN IDENTIFIED AND THE QUESTION IS WHAT IS THE LAB? AM I RIGHT ABOUT THAT?
WADE MIQUELON: CORRECT. THAT IS ONE OF THE QUESTIONS WHICH, AGAIN, WHAT IS THE LAB AND WHERE IS THE LAB, IF YOU HAVE AN EDISON DEVICE THAT FEEDS TO THE CLOUD THAT FEEDS INTO A LABORATORY OF ANALYTICS. AGAIN, THAT IS SOMETHING THAT I THINK HAD NEVER BEEN CONTEMPLATED BY REGULATORS.
MR. SCHENK: SO THE DECISION WAS MADE TO ROLL OUT IN PHASES TO HAVE THE EDISON DEVICE AT A CENTRAL LAB INITIALLY AND THEN EVENTUALLY AS I THINK YOU SAID DEPENDING ON THE ECONOMICS OF IT PUTTING THE DEVICE IN STORES?
WADE MIQUELON: AND I THINK IT WAS PRACTICAL IF YOU WERE GOING TO HAVE, LET'S JUST MAKE IT FIVE LAB TESTS A DAY IN A GIVEN WALGREENS, IT DOESN'T MAKE A LOT OF SENSE TO HAVE EQUIPMENT AND INFRASTRUCTURE THERE.
MR. SCHENK: I SEE. WHEN YOU WERE DISCUSSING THIS PHASED APPROACH WITH MS. HOLMES, DID SHE EVER TELL YOU ONE REASON WE COULDN'T PUT THE DEVICE IN THE STORES WAS BECAUSE THEY DIDN'T DO THEIR BLOOD TESTING FULLY ON THE DEVICE, THAT IT WASN'T ACTUALLY REGULATORY BUT RATHER IT WAS A DEVICE ISSUE? DID YOU EVER TALK ABOUT THAT?
WADE MIQUELON: I NEVER HEARD THAT.
MR. SCHENK: IF WE COULD BRING UP GOVERNMENT'S EXHIBIT 302. DO YOU REMEMBER THAT YOU TALKED TO MR. DOWNEY ABOUT THE JOHNS HOPKINS DOCUMENT? DO YOU RECALL THAT LINE OF QUESTIONING?
WADE MIQUELON: I DO.
MR. SCHENK: YOU WEREN'T AT -- YOU DIDN'T GO TO BALTIMORE FOR THE MEETING; IS THAT RIGHT?
WADE MIQUELON: I DID NOT.
MR. SCHENK: DO YOU KNOW HOW LONG THE DEVICE WAS WITH THE FOLKS AT HOPKINS?
WADE MIQUELON: I HAVE NO IDEA.
MR. SCHENK: DO YOU KNOW HOW LONG THE MEETING LASTED?
WADE MIQUELON: I HAVE NO IDEA.
MR. SCHENK: DO YOU KNOW WHO PREPARED THE DATA THAT JOHNS HOPKINS LOOKED AT?
WADE MIQUELON: I HAVE NO IDEA.
MR. SCHENK: IF YOU COULD TURN TO THE SECOND PAGE OF THIS DOCUMENT. AT THE VERY BOTTOM THERE'S A SECTION CALLED DISCLAIMER. DO YOU SEE THAT?
WADE MIQUELON: YES.
MR. SCHENK: DID YOU READ THAT WITH MR. DOWNEY DO YOU RECALL?
WADE MIQUELON: ASK THE QUESTION AGAIN, I'M SORRY.
MR. SCHENK: WHEN YOU WERE BEING ASKED QUESTIONS ABOUT THIS ON CROSS-EXAMINATION --
WADE MIQUELON: RIGHT.
MR. SCHENK: -- DID YOU READ THIS OUT LOUD?
MR. SCHENK: LET'S TAKE A LOOK AT IT NOW. IT SAYS, "THIS INFORMATION IS BEING PROVIDED SOLELY FOR THE BENEFIT OF WALGREENS AND SHALL BE USED BY WALGREENS FOR ITS INTERNAL PURPOSES ONLY. IN ADDITION, THE MATERIALS PROVIDED IN NO WAY SIGNIFY AN ENDORSEMENT BY JOHNS HOPKINS MEDICINE TO ANY PRODUCT OR SERVICE." DID YOU GIVE MS. HOLMES PERMISSION TO SHARE THIS DOCUMENT WITH INVESTORS?
WADE MIQUELON: I DIDN'T PERSONALLY, NO.
MR. SCHENK: DO YOU KNOW WHETHER ANYBODY AT WALGREENS GAVE THERANOS OR MS. HOLMES THAT PERMISSION?
WADE MIQUELON: I DON'T KNOW.
MR. SCHENK: MR. DOWNEY ASKED YOU SOME QUESTIONS ABOUT WHAT HE WAS CALLING AN INTEGRATION CLAUSE. DO YOU REMEMBER THAT?
WADE MIQUELON: YES.
MR. SCHENK: ALL OF THE AGREEMENTS OF THE PARTIES ARE CONTAINED IN THIS DOCUMENT; IS THAT RIGHT?
WADE MIQUELON: THAT'S MY UNDERSTANDING.
MR. SCHENK: WAS YOUR UNDERSTANDING THAT WHEN YOU INTERACTED WITH MS. HOLMES OR MR. BALWANI THAT EVEN IF THERE WAS AN INTEGRATION CLAUSE, THEY STILL HAD TO BE TRUTHFUL TO YOU?
WADE MIQUELON: THAT WOULD BE MY ASSUMPTION, YES.
MR. SCHENK: IF WE COULD NOW BRING UP EXHIBIT 617, AND I THINK IT'S ON PAGE 4. UNDER PROGRAM OBJECTIVES (A), MR. DOWNEY ASKED YOU A QUESTION ABOUT THIS. DO YOU RECALL UNDER (A) I THINK HE ASKED YOU ABOUT THE NATIONWIDE ROLLOUT. DO YOU SEE IN THE THIRD LINE OF (A) THE WORD NATIONWIDE?
WADE MIQUELON: YES.
MR. SCHENK: AND IF YOU GO A LITTLE FURTHER UP IN (A), STILL WITHIN (A) IT SAYS, "MAKING TESTING LESS INVASIVE, FASTER, AND FAR MORE ACCESSIBLE, EFFECTIVE, AND ACTIONABLE BY INTRODUCING A FAR MORE COST-EFFECTIVE, BLOOD TESTING SERVICE AT WALGREENS STORES AND WALGREENS'S OTHER CLINICAL OPERATIONS NATIONWIDE." DID YOU UNDERSTAND THAT IN ORDER TO ACHIEVE THE NATIONWIDE OBJECTIVE THAT TESTING WOULD HAVE TO BE LESS INVASIVE?
WADE MIQUELON: YES. I MEAN, MY UNDERSTANDING WAS, YOU KNOW, THE VAST MAJORITY OF TESTS WOULD BE ON A FINGER PRICK.
MR. SCHENK: LESS INVASIVE IS A REFERENCE TO?
WADE MIQUELON: I THINK IT'S TALKING FINGERSTICK VERSUS A VENIPUNCTURE.
MR. SCHENK: FINGERSTICK VERSUS A VEIN DRAW?
WADE MIQUELON: THAT'S HOW I INTERPRET IT.
MR. SCHENK: IF WE CAN NOW SWITCH TO THE ELMO, MS. KRATZMANN?
COURT CLERK: YES, COUNSEL.
MR. SCHENK: THANK YOU.
COURT CLERK: THIS IS ADMITTED?
MR. SCHENK: YES.
MR. SCHENK: MR. MIQUELON, I'M SHOWING YOU EXHIBIT 7312. THIS WAS ADMITTED DURING CROSS-EXAMINATION, SOME SLIDES THAT MS. HOLMES SENT TO YOU. DO YOU RECALL THAT?
WADE MIQUELON: I RECALL BEING SHOWN IT.
MR. SCHENK: SO I'M SHOWING YOU THE FIRST PAGE OF THE EXHIBIT. THIS WAS THE EMAIL THAT MS. HOLMES SENT TO YOU IN AUGUST OF 2013 ATTACHING THESE SLIDES. THE EMAIL HAD THAT NUMBERED LIST?
WADE MIQUELON: YES, I RECALL.
MR. SCHENK: AND IN THE EXECUTIVE SUMMARY THE FIRST BULLET SAYS THAT "THERANOS WILL OPEN ITS FIRST PATIENT SERVICE CENTER IN DOWNTOWN PALO ALTO RIGHT AFTER LABOR DAY OF 2013." LABOR DAY IS NOT IN NOVEMBER, RIGHT, IT'S IN SEPTEMBER?
WADE MIQUELON: RIGHT.
MR. SCHENK: AND IS IT YOUR UNDERSTANDING THAT THERANOS WAS GOING TO OPEN ITS FIRST PATIENT SERVICE CENTER IN SEPTEMBER OF 2013?
WADE MIQUELON: THAT SOUNDS ABOUT RIGHT.
MR. SCHENK: AND THAT'S ALSO WHAT THE DOCUMENT SAYS; IS THAT RIGHT?
WADE MIQUELON: YES.
MR. SCHENK: MR. DOWNEY ASKED YOU SOME QUESTIONS ABOUT THE EARNINGS CALL, AND IN THE EARNINGS CALL TRANSCRIPT YOU WERE VERY, VERY EXCITED OR INTERESTED IN THE PROSPECTS OF THERANOS?
WADE MIQUELON: YES.
MR. SCHENK: WAS YOUR EXCITEMENT BASED ON WHAT YOU LEARNED ABOUT THERANOS, BASED ON REPRESENTATIONS THAT MS. HOLMES AND MR. BALWANI HAD MADE TO YOU?
WADE MIQUELON: YES.
MR. SCHENK: AND DID THAT INCLUDE THAT THE TECHNOLOGY WORKED?
WADE MIQUELON: YES.
MR. SCHENK: DID THAT INCLUDE THAT THE TESTS, THE BLOOD TESTS WERE DONE VIA FINGERSTICK?
WADE MIQUELON: AT LEAST THE VAST MAJORITY WOULD BE.
MR. SCHENK: AND IF THOSE THINGS HAD NOT BEEN TRUE, WOULD YOU HAVE BEEN AS EXCITED?
WADE MIQUELON: I WOULD HAVE SERIOUS CONCERNS THAT THEY WEREN'T TRUE.
MR. SCHENK: YOU WOULD HAVE --
WADE MIQUELON: I WOULD HAVE SERIOUS CONCERNS.
MR. SCHENK: WHY?
WADE MIQUELON: WELL, IT WOULD GO TO THE HEART OF A FEW THINGS. IT WOULD GO TO THE HEART OF THE VALUE PROPOSITION, CAN YOU DO IT BETTER, FASTER, CHEAPER, OR ONLY ONE OR ONLY TWO OF THE ABOVE? IT WOULD ALSO PROBABLY GO TO THE HEART OF JUST CREDIBILITY IN TERMS OF WHAT HAD BEEN REPRESENTED TO ME.
MR. SCHENK: AND WHOSE CREDIBILITY? WHAT DO YOU MEAN?
WADE MIQUELON: THERANOS'S CREDIBILITY.
MR. SCHENK: AND WOULD THAT INCLUDE MS. HOLMES?
WADE MIQUELON: ANYONE WHO WOULD MAKE THOSE ATTESTATIONS IT WOULD INCLUDE.
MR. SCHENK: AND WHO MAKE THOSE REPRESENTATIONS TO YOU?
WADE MIQUELON: OVER TIME SUNNY AND ELIZABETH GAVE US ATTESTATIONS THAT THE TECHNOLOGY WORKED AND NEEDED TO BE SCALED AND SO THAT'S WHAT I BELIEVED.
MR. SCHENK: WHEN MS. HOLMES WOULD MAKE A REPRESENTATION TO YOU, WERE THERE OCCASIONS WHEN MR. BALWANI WAS PRESENT?
WADE MIQUELON: MOST OF THE TIME WHEN I WAS WITH WALGREENS MY CONVERSATIONS WERE WITH BOTH OF THEM TYPICALLY.
MR. SCHENK: AND THEY WERE BOTH PRESENT YOU SAY?
WADE MIQUELON: TYPICALLY, YES.
MR. SCHENK: AND WAS THERE EVER AN OCCASION WHEN MS. HOLMES SAID SOMETHING TO YOU AND MR. BALWANI SAID, WAIT, THAT'S NOT TRUE, I NEED TO CORRECT THAT? DO YOU RECALL THAT EVER HAPPENING?
WADE MIQUELON: NOT THAT I RECALL.
MR. SCHENK: HOW ABOUT THE REVERSE? WAS THERE EVER A TIME THAT MR. BALWANI SAID SOMETHING TO YOU AND MS. HOLMES SAID, WAIT, I NEED TO CORRECT THAT, THAT'S NOT TRUE?
WADE MIQUELON: I DON'T RECALL THAT.
MR. SCHENK: MR. DOWNEY SHOWED YOU SEVERAL EMAILS THAT YOU SENT TO MS. HOLMES IN THE 2015 AND 2016 TIMEFRAME, SUPPORTIVE EMAILS?
WADE MIQUELON: RIGHT.
MR. SCHENK: AND I THINK YOU SAID THAT YOU HAD POSITIVE FEELINGS ABOUT MS. HOLMES AND ABOUT THERANOS AT THE TIME?
WADE MIQUELON: CORRECT. WHEN I LEFT THE COMPANY I STILL FELT VERY GOOD ABOUT THE COMPANY, AND AGAIN, OBVIOUSLY THERE WAS -- LATER ON THERE WERE, YOU KNOW, THERE'S BAD PRESS, ET CETERA, BUT HONESTLY, I DON'T PAY MUCH ATTENTION TO IT, RIGHT? SO MY LAST EXPERIENCE WHEN I LEFT THE COMPANY WAS FAVORABLE.
MR. SCHENK: AND YOU SAID THAT THERE WAS BAD PRESS, BUT YOU STILL HAD A FAVORABLE IMPRESSION OF THERANOS?
WADE MIQUELON: YEAH.
MR. SCHENK: AND WHERE DID YOU GET THAT FAVORABLE IMPRESSION FROM?
WADE MIQUELON: I THINK I DIDN'T WANT TO BELIEVE THERE WERE THINGS THAT I BELIEVED WEREN'T TRUE IN TERMS OF TECHNOLOGY BEING ABLE TO WORK THEY WAY THAT IT WAS REPRESENTED TO US.
MR. SCHENK: YOU STILL WANTED TO BELIEVE THAT THE TECHNOLOGY WORKED?
WADE MIQUELON: YES. I MEAN, I -- YES.
MR. SCHENK: WAS THERE A POINT IN TIME AFTER -- I THINK THE MOST RECENT EMAIL THAT MR. DOWNEY SHOWED YOU WAS IN AUGUST OF 2016?
WADE MIQUELON: YEAH.
MR. SCHENK: AND WAS THERE A PERIOD OF TIME AFTER THAT WHERE YOUR OPINION CHANGED AND YOU NO LONGER HAD A FAVORABLE IMPRESSION?
WADE MIQUELON: I WOULD JUST SAY THIS, I WOULD SAY THAT I DON'T HAVE ALL OF THE FACTS. I ONLY KNOW WHAT WAS REPRESENTED TO ME SO I CAN ONLY REALLY SPEAK TO WHAT I WAS TOLD. THAT'S ALL I KNOW REALLY.
MR. SCHENK: AND IN THE 2015 TO 2016 TIMEFRAME WHEN YOU WERE SENDING THESE EMAILS, THESE SUPPORTIVE EMAILS TO MS. HOLMES --
WADE MIQUELON: YEAH.
MR. SCHENK: -- DID YOU KNOW WHAT MS. HOLMES HAD TOLD HER INVESTORS?
MR. SCHENK: WHEN YOU WERE SENDING THESE SUPPORTIVE EMAILS TO MS. HOLMES, WERE YOU DOING THAT BASED ON YOUR INTERACTIONS WITH HER, THAT'S WHERE YOU --
WADE MIQUELON: YES.
MR. SCHENK: -- GOT THE INFORMATION?
WADE MIQUELON: YES.
MR. SCHENK: AND WAS THERE A TIME WHILE YOU STILL WORKED AT WALGREENS BUT TOWARDS THE END WHEN YOU HAD A PHONE CALL WITH MS. HOLMES?
WADE MIQUELON: MAYBE. PROBABLY. WE HAD, YOU KNOW, MULTIPLE PHONE CALLS OVER THE COURSE OF OUR FRIENDSHIP.
MR. SCHENK: AND WAS THERE ONES WHEN YOU DISCUSSED VENOUS DRAWS IN WALGREENS STORES?
WADE MIQUELON: THERE WAS.
MR. SCHENK: AND WHAT DO YOU RECALL ABOUT THAT?
WADE MIQUELON: WHAT I RECALL IS THAT IN THE EARLY PILOTS WE, I THINK, INITIALLY THOUGHT 90 PERCENT OF A TEST WOULD BE DONE VIA A FINGERSTICK, BUT IT ENDED UP BEING VERY LOW FOR A WHILE, ALMOST CLOSE TO ZERO, AND JUST HAVING A CONVERSATION TO UNDERSTAND WHY VENOUS PUNCTURE WAS THE PREDOMINANT METHOD VERSUS FINGERSTICKS.
MR. SCHENK: AND DID MS. HOLMES GIVE YOU SOME REASONS?
WADE MIQUELON: SHE DID. SHE EXPRESSED THERE WAS A COUPLE REASONS. ONE IS THE DIFFICULTY OF GETTING CLINICIANS TO DO THE KIND OF MASSAGE, THE FINGER MASSAGE PROPERLY TO GET THE PROPER BLOOD SAMPLE. SHE ALSO EXPRESSED THAT THERE WAS A POSSIBILITY THAT SOME OF THE MORE OBSCURED TESTS WERE BEING ORDERED AT A MAGNITUDE FAR HIGHER THAN THEY SHOULD HAVE BEEN SO PERHAPS CLINICIANS OR LAB PREPARERS MIGHT BE TRYING TO TEST THE WATERS TO SEE WHAT WAS POSSIBLE. SO WE TALKED ABOUT THAT A BIT. AND LIKE THE TEAM HAD TALKED TO ME ABOUT IT AS WELL. SHE GAVE ME SOME PERSPECTIVE ON WHAT WE MIGHT LOOK TO IN TERMS OF HOW THAT MIGHT RAMP OVER TIME.
MR. SCHENK: SO WHEN YOU WERE ASKING MS. HOLMES ABOUT THE AMOUNT OF VEIN DRAWS THAT WERE HAPPENING, DID SHE TELL YOU ANYTHING ABOUT TECHNOLOGICAL LIMITATIONS OF THE THERANOS DEVICE?
WADE MIQUELON: NOT THAT I RECALL.
MR. SCHENK: AND WAS IT THAT KIND OF PHONE CALL THAT YOU WERE THINKING ABOUT IN 2015 AND 2016 WHEN YOU WERE SENDING THESE SUPPORTIVE EMAILS TO MS. HOLMES? WERE YOU THINKING THAT THE THINGS THAT SHE TOLD YOU ON THE PHONE CALL WE JUST DISCUSSED WERE TRUE?
WADE MIQUELON: YES.
MR. SCHENK: THANK YOU. NO FURTHER QUESTIONS, YOUR HONOR.
MR. DOWNEY: NOTHING FROM US, YOUR HONOR.
JUDGE DAVILA: MAY THIS WITNESS BE EXCUSED?
MR. SCHENK: YES, YOUR HONOR.
JUDGE DAVILA: MR. DOWNEY?
MR. DOWNEY: YES.
JUDGE DAVILA: THANK YOU, SIR. YOU'RE EXCUSED. YOU CAN STAND DOWN.
WADE MIQUELON: THANK YOU, YOUR HONOR.
JUDGE DAVILA: THANK YOU VERY MUCH. JUST LEAVE ALL OF THOSE BINDERS THERE. THANK YOU. DOES THE GOVERNMENT HAVE A WITNESS YOU WISH TO CALL THIS AFTERNOON?
MR. BOSTIC: WE HAVE A WITNESS READY, YOUR HONOR, AND WE CAN MOVE FORWARD TODAY. WE WON'T FINISH THE WITNESS BEFORE 4:00 P.M., OR WE CAN START WITH THIS WITNESS TOMORROW.
JUDGE DAVILA: WHY DON'T WE AT LEAST INTRODUCE THE WITNESS TO THE PROCEEDINGS. MS. KRATZMANN NEEDS A COUPLE OF MINUTES, BUT LET'S DO THAT.
MR. BOSTIC: YES, YOUR HONOR. THE GOVERNMENT CALLS ROBERT AMENTA.
(PAUSE IN PROCEEDINGS.)
JUDGE DAVILA: THANK YOU, MR. WADE. THANK YOU.
COURT CLERK: THANK YOU.
JUDGE DAVILA: SIR, IF YOU COULD JUST STAND THERE FOR JUST A MOMENT. AND IF YOU COULD FACE OUR COURTROOM DEPUTY WHILE YOU RAISE YOUR RIGHT HAND, SHE HAS A QUESTION FOR YOU.
(GOVERNMENT'S WITNESS, ROBERTO AMENTA, WAS SWORN.)
WADE MIQUELON: YES.
JUDGE DAVILA: LET ME INVITE YOU TO HAVE A SEAT HERE, SIR, AND MAKE YOURSELF COMFORTABLE.
WADE MIQUELON: THANK YOU.
JUDGE DAVILA: YOU'RE WELCOME. FEEL FREE TO ADJUST THE CHAIR AND MICROPHONE AS YOU NEED. I'LL ENCOURAGE YOU TO SPEAK DIRECTLY INTO THE MICROPHONE. WHEN YOU ARE COMFORTABLE, WOULD YOU PLEASE STATE YOUR NAME AND THEN SPELL IT, PLEASE.
WADE MIQUELON: SURE. IT'S ROBERTO. LAST NAME IS AMENTA, A-M-E-N-T-A.
JUDGE DAVILA: THANK YOU. MR. BOSTIC.
MR. BOSTIC: THANK YOU, YOUR HONOR.