When Lee Jones first heard about fecal transplant, which doctors use to treat a terrible bacterial infection known as C. diff, “it was the stupidest thing I’d ever heard,” she recalls, not to mention really gross. “Well, think about it—taking poop from one person and putting it in someone else and curing a disease. That’s ridiculous. But the results are remarkable.”
Jones went on to start Rebiotix in 2011, raising $5.5 million at first with the goal of commercializing the treatment by 2017, an effort that will take another $20 million in investment and a second clinical trial, among other steps. She believes the therapy is just the beginning in the hot young field of microbiota and health—using “good bacteria” in the gut and elsewhere to treat diseases.
A Medtronic alum, Jones is embarking on her second venture after turning around Inlet Medical and selling it to CooperSurgical in 2006, but her first in the field of drugs vs. devices. The switch—and the steep learning curve that goes along with it—is her perfect motivator. “It’s just a blast,” Jones says. “It’s the most fun thing I’ve worked on in my whole career.”
Upsize:
Describe your company as it stands today.
Lee Jones, Rebiotix:
I’m a founder with Erwyn Kelen, who was chairman of the board when I was at Inlet Medical, and Michael Berman, former president of Boston Scientific. I was working at the University of Minnesota in the Schulze Diabetes Institute.
I was hired to manage the clinical trials, but we couldn’t get the therapies to the pre-commercial stage. I returned to the group working on commercializing technologies.
A couple of scientists came in and were talking about fecal transplants. I called up Mike Berman. He’s founded a number of companies, and they had started an incubator in 2008. This was one of the technologies they looked at but passed over at the time.
I volunteered to help the scientists look at this as a business opportunity. They found someone else to give them cash. I thought this was so interesting I would do it on my own.
A lot of things had changed so the business was now fundable. So in 2011 we raised money and kicked it off. Erwyn is extremely well-connected and he and I had a success with Inlet Medical, which helped us raise $5.5 million from angels for Rebiotix.
We looked for investors who hadn’t used the angel tax credit offered by the state of Minnesota, and I got them to agree to re-invest their refunds into the company. So I hustled buns and was the last application for the fund until it ran out of money.
Upsize:
You had always been involved with devices before.
Jones:
When I was at the Diabetes Institute we were looking at cell therapies. I was fascinated that biology had such an impact on the future of medicine. But my background is in devices. As a device person you don’t know the intricacies of drugs, and vice versa.
We realized there was a big difference. So I went to Springboard, and last year went through the boot camp there. Part of their process is connecting you with coaches. I asked for investors in drug companies, and I got a rocket science education in pharma.
In the device world there’s not a lot of deal options. You very seldom license something, for instance. In the drug world they’re much more flexible. I knew I was going to need another round of funding, so we looked at, how do we position this?
We have started a B round, seeking $20 million from investors, and that would take us all the way through commercialization.
Upsize:
At Inlet, you raised about $6 million all told, and to start Rebiotix you raised $5.5 million. What do you think about raising $20 million now, a far bigger sum?
Jones:
I think it’s dirt cheap. People say, this is nothing compared to what it takes for drug companies to get their product out the door. We’re not a typical drug-maker.
We have a group of live microbes that treat a disease and nobody knows quite how it works. We’re the first group to go through the FDA with a product like this.
Upsize:
What you’re doing as a very high ‘ick’ factor, so let’s get to it. What do you make?
Jones:
In the lab, we take human fecal material from donors, who we find by word of mouth. We do blood testing, stool testing, we send out a piece to a laboratory each time to make sure the microbes are healthy, so it isn’t cheap and it’s not easy, but it is a renewable resource [laughs.] We separate the healthy microbes and we add things to it to keep them alive, then we package it in an enema delivery bag.
It’s been done since the 1950s, but no one had looked at industrializing it. Now what physicians have to do is, find a donor, test the donor, mix the sample—the donors have to poop on command and do colonoscopies.
We decided it can be much simpler. We are about to do a phase 2 clinical study; then the next step is a commercialization study. We expect to make a commercial application to the FDA in 2016 or 2017, depending on the results of our clinical study.
Upsize:
What happened with the two scientists who went with other investors? Are they your competition?
Jones:
I don’t hear much about them; they’re going in a different direction. I’m not concerned about that. We’re so far ahead of everybody else. Everybody wants to be in microbiome. It’s the hot area. There are likely many more applications for this, so it’s expanding as fast as humanly possible.
Upsize:
The topic is all the rage in the press today—about “good” or “bad” gut bacteria, possible links to the obesity epidemic, and so on. Is that why you were attracted to it?
Jones:
These people are desperate, who have C. diff.
Upsize:
That stands for C. difficile, the bacterial infection typically acquired during hospital stays after people have used antibiotics, I’ve read.
Jones:
What intrigued me was the fact, this is something that’s already proven to work. It cuts down on the risk for development. The industry hasn’t taken off until the last two years. It was the stupidest thing I ever heard of, when I first learned about it. In fact, that’s what intrigued me.
Upsize:
Why did it seem stupid to you?
Jones:
Well, think about it. Taking poop from one person and putting it in someone else and curing a disease? That’s ridiculous, but the results are remarkable. In our trial, the first-ever for MRT, or microbiotic restoration therapy, it doesn’t target the disease. It fixes the person so they can resist the disease. That’s why we’re so excited.
Upsize:
It sounds like you see a much bigger horizon ahead for what you do.
Jones:
You have to focus. At first I felt bad because I thought we were behind, but our goal is to use this as a first step to get to the next thing. It’s going to be like anything else—it always starts one way and ends up someplace else.
Upsize:
And I take it you like that.
Jones:
It’s all so interesting. If I had stayed at Medtronic I would have made a lot more money and had less stress. I’d be the last person to hire to manage something day in and day out. That’s just not me. I find it tremendously interesting. I like seeing the potential.
I believe biology is the next subject in medicine. It’s a lot more complicated than I expected. I’m looking forward to 20 years from now and looking back to see what’s changed.
We had 40 people in our study, and we don’t know them but the clinical centers do and it’s changed their lives. How could you not want to work on this?
Upsize:
This is your second venture, after you joined Inlet Medical, turned it around and sold it. What did you learn from that?
Jones:
I knew how to run a business from my time at Medtronic. What I didn’t know was how to get money from strangers. I learned that at Inlet.
Upsize:
And how do you get money from strangers? Many of our readers would like to know.
Jones:
You have to have an absolutely good story, and part of that is getting the right advisers around you and learning what those investors are looking for. I was lucky with my partners and the people through Springboard because they’re tremendously well connected.
And you have to raise enough money. When we started, Mike and I said if we don’t raise at least $3 million we’re not going to start it.
I look at so many small companies and they think the $10,000 or $5,000 is going to move their bar but then they can’t hit a milestone because they didn’t raise enough money. I’ve seen that over and over again. It’s better to focus on getting something done, to reach a milestone, so you can show someone.
I’m part of Sofia, the women-focused venture capital group. Sofia I is now finished but they’re raising Sofia 2, so I see a lot of companies pitching. You know when the CEO isn’t asking for enough money, because you know it’s going to take much more than that, and then you don’t want to invest.
That networking with people in your line of business is so important. That’s what I’m doing here; I met with lots and lots and lots of people investing in pharma so I would know what they’re looking for, what the lingo is.
Bill McGuire, the former CEO of UnitedHealth Group, joined our board last year, and he’s a tremendous resource in a different way. He’s not a device person or a pharma person, but he asks the questions that a provider would ask.
I got an understanding of the data that someone like him , a provider and an insurer, would need to purchase my product. It’s really important to get input like that.
Upsize:
You told Upsize in 2006 about the importance of the right capital structure for the business. How did you apply that lesson to Rebiotix?
Jones:
This is a dilemma that all start-ups face. You have to balance having enough shares out there but not too many. We planned all the rounds of financing, A, B, C and so on, so at the end there was still a way for people to make money.
Upsize:
This is the second time around for you as an entrepreneur. Why do you keep coming back for more?
Jones:
I never thought of myself as an entrepreneur. I think of entrepreneurs as the inventors of a great idea. For me, I see a good idea and know how to implement it. That’s what I’m good at. For me, I can imagine how it goes all the way through to the end. That’s why I don’t think this is risky.
People say to me, That’s so risky. I say all I have to do is this, this, and this. Part of me is really curious about how it will turn out and I have faith in myself that I’m going to get a good outcome.
And what’s the worst thing that can happen? I could be out of a job, but that’s happened to me many times before.
Lee Jones is CEO and co-founder of Rebiotix in Roseville, formerly called Microbex: 651.705.8770; ljones@rebiotix.com; www.rebiotix.com
