Why much-hyped biotech company is fighting to save its reputation

Theranos, one of the rising stars in biotech, is battling to save its reputation. Just last year, founder and CEO Elizabeth Holmes was featured among Time magazine's "100 Most Influential People." Her company promised to offer hundreds of fast, cheap and accurate blood tests, using a few drops of blood, rather than vials.

Youngest self-made female billionaire takes high-tech approach to blood testing

But a series of articles in the Wall Street Journal raised questions about its technology and lab practices, and the Silicon Valley startup is now under review by two federal regulators. This week, the Journal reported one agency found Theranos gave results of blood-clot testing to dozens of patients, despite erratic results from quality-control checks. The company says it already notified potentially-affected patients.

"Every time you create something new, there should be questions, and to me, that's a sign that you've actually done something that is transformative," Theranos CEO Elizabeth Holmes said in her April 2015 interview with CBS News.

Last spring, we asked the then-31-year-old about her mission to disrupt the $75 billion diagnostics industry.

"You could transform healthcare not only here in America but around the world. ... But where is the revolution?" O'Donnell asked.

"First of all, making it possible to do tests on tiny samples," Holmes said.

In 2014, Theranos was valued at $9 billion, effectively making Holmes the world's youngest self-made female billionaire. Excitement about Holmes and her company grew as she appeared on the covers of Forbes, Fortune, T Magazine and Inc. On television programs, panels and stages, she described the promise of her breakthrough technology.

"We've made it possible to eliminate the tubes and tubes of blood that traditionally have to be drawn from an arm and replaced it with the Nanotainer," Holmes said in a 2014 TedMed Talk.

The Nanotainer was part of blood tests offered at Theranos Wellness Centers in more than 40 Arizona Walgreens. But Wall Street Journal reporter John Carreyrou said former employees told him that Theranos' proprietary technology wasn't being widely used, and some had concerns about its accuracy. Theranos said it validates the accuracy of every test and has voluntarily submitted more than 120 tests to the FDA.

To date, one has been cleared.

"The promise was that with one drop of blood, you could test for all of these different sorts of things. And you're telling me now it can only test for herpes?" O'Donnell asked Carreyrou.

"That was the promise. And right now, the reality on the ground is that the only thing their...device is being used for is a test for herpes," Carreyrou said.

"Well, why haven't they been able to deliver?" O'Donnell asked.

"The company says ... that they still have the capability to do many tests off a drop of blood ... but the sources I've talked to ... tell me that actually the technology is pretty limited," Carreyrou said.

Last October, the FDA released heavily redacted inspection reports calling the Nanotainer an "uncleared medical device." In January, federal laboratory regulator Centers for Medicare & Medicaid Services (CMS) said it found "deficient practices" at a California lab, one of which posed "immediate jeopardy to patient health and safety."

Theranos said it has voluntarily suspended using its Nanotainer while it waits for clearance and has submitted a plan of correction to CMS.

"I was there when it was invented. I was in the laboratory, putting the screws in the first instruments," Stanford professor emeritus and technologist Channing Robertson said.

Robertson is Holmes' former mentor and has been working with Theranos for 13 years.

"I expect we'll be under the microscope and we'll be scrutinized. We welcome that. We're not afraid of it. Because we know what we've done works," Robertson said.

Theranos board member and outside counsel David Boies said although the company is in a holding pattern now, its tests have already been shown to work in Arizona.

"The number of tests being run on Theranos proprietary technology today is zero?" O'Donnell asked him.

"Well, it depends what you mean," Boies responded.

Boies said going through the FDA is the best way for Theranos to be transparent while protecting its intellectual property.

"The company suspended using its proprietary technology in the field pending FDA review. But it's very important to keep in context that before they did that they had successfully run more than 80 tests on thousands and thousands of patients," Boies said.

"And when do you expect an answer from the FDA?" O'Donnell asked.

"We're hopeful it'll move along; we think that it will... These tests... have been demonstrated to work, demonstrated to be reliable," Boies said.

Theranos told CBS News it invited top laboratory experts to evaluate its work late last month. We were able to speak to one doctor who confirmed the meeting took place.

"We had six independent medical professionals in here, all day long, going over our data... They were -- in sort of the local vernacular -- blown away," Robertson said.

Carreyrou also cited unnamed executives from Safeway who said the company dissolved a $350 million plan to include Theranos Wellness Centers in its stores, and that sources from Walgreens told him that company threatened to end its deal. Theranos said both claims are untrue, and that Carreyrou's anonymous sources aren't credible and possibly disgruntled former employees.

"The former employees who spoke to me felt ... this story needed to come out," Carreyrou said. "Because blood tests are used by doctors and patients to make important medical decisions."

"You're saying your sources came to you not just because they thought she'd overhyped her value, but it was something more serious?" O'Donnell asked.

"The public health, patient safety," Carreyrou said.

We made requests to interview Holmes again, but she was not made available.

Walgreens said all test analysis at the Theranos California lab under CMS review has been suspended, though another lab in Arizona is still accepting patient samples.

Theranos said all of its Arizona Walgreens locations are still operating and their number of customers is increasing. Theranos also said the Wall Street Journal's reporting is "inaccurate" and "misleading."