Editor's Note: Inc. Magazine announced its pick for Company of the Year on Monday, November 23. It's Slack! See which one Inc. readers chose as their favorite company of 2015. Here, we spotlight Theranos, one of the contenders for the title in 2015.

There can be no doubt that for Theranos, the Palo Alto, California, blood testing startup founded by Elizabeth Holmes, 2015 was a breakout year.

Whether, in retrospect, it'll be considered a breakout year in a positive sense or in a negative one is the somewhat scary question facing Holmes and her company now.

First, the good news. After the company racked up more than $400 million in investment--putting the company's valuation at about $10 billion--in 2015, it landed its first approval from the U.S. Food and Drug Administration. It also announced a slew of partnerships, with, among others, Amerihealth Caritas, Capital Blue Cross, the Carlos Slim Foundation, Walgreens, and the Cleveland Clinic. Holmes herself was named one of Time's 100 Most Influential People.

Then, in October, came exceedingly bad news. A Wall Street Journal article called into question a great deal of what we thought we knew about Theranos. The story said that the vast majority of Theranos's blood tests were not run on its own machines, and that instead, the company was using machines purchased from others. It said that Theranos's tests results have been wildly inaccurate, and that the company may have conducted its proficiency testing--a government-mandated quality-control procedure--incorrectly.

It's gotten worse, in multiple turn-of-the-screw-events, since then: The FDA said Theranos needs to resubmit data needed for the agency to approve its tests. It also asked Theranos to stop using its tiny samples to perform tests, on the grounds that the vials used to collect and transport the samples had not been approved. That means Theranos is using full blood draws, from patients' arms, rather than a few drops of blood from pricking patients' fingers, which up to that point had been one of the company's key competitive advantages. Walgreens said it was temporarily holding off on any further expansion of its partnership with the company. By the end of October, things were verging on the comic: In a superior display of pettiness on both sides, a Google Ventures partner explained why the firm didn't invest in Theranos, and Theranos responded with a full-on he-didn't-reject-us-we-rejected-him.

But Theranos also seems to be coming to the belated realization that its infamous opacity is not helping matters. At a conference hosted by the Cleveland Clinic, Holmes said the company would release data showing its tests are accurate, although she didn't say how or when. In the midst of all this, Holmes really did show up, defiant and unflappable, to be interviewed at the Wall Street Journal's AllThingsD conference.

At this point, there are two ways possible outcomes. It is possible that the situation could deteriorate to the point where Theranos's partners and customers no longer have faith in the company, or, even worse, that the FDA issues a warning letter to the company. A warning letter is pretty much the worst possible outcome, because it could conceivably shut down part or all of the company's operations.

Still, Theranos has the inestimable advantage of being a private company. So if it chooses, the company can get its house in order quietly, without having to make public announcements about its financials and its progress.

Remember when 23andMe got a warning letter shutting down half of its operations? That company never lost their fight, and recently announced it would pivot into drug development. Theranos is in nowhere near as a bad a situation now as 23andMe was then. Obviously, Anne Wojcicki, the co-founder and CEO of 23andMe, had to be incredibly tough to get her company through that time. There are no signs that Holmes is any less determined.

There is a best-case scenario, too. The FDA could start to approve some of the other tests Theranos has submitted, showing that the company has made significant progress in developing its own technology, and that it can handle the regulatory demands of the FDA. "There's no way to assess any of this properly," says Mark Mansour, a partner who specializes federal FDA matters with law firm Mayer Brown. "Theranos could be telling the truth and having a full-scale dialogue with the FDA that will lead to approval. But we can't tell."

Published on: Nov 5, 2015