Small Community, Long Journey: The Power of Relationships in Biotech | Caitlyn Krebs (Part 3/4)

Intro - 00:00:06: Welcome to The Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee.

In our last episode, Caitlyn shared building one of biotech's earliest pre-accelerator programs, closing 40 deals at Entelos using technology the industry now calls AI-driven drug discovery, and landing at Tethys Bioscience to prove that prediabetes was a disease worth diagnosing. If you missed it, check out part two.

In part three, Caitlyn talks about Tethys reaching 150,000 diagnostic tests a year and securing major private insurer reimbursement only to be blindsided by Medicare on maternity leave and how she turned a shutdown into a cofounder relationship. She then traces her next stops, watching the digital health boom unfold from inside Rock Health and going COO at Neurotrack to launch an eye-tracking Alzheimer's test that hit 137 countries within days and led to selling cognitive risk scores to Chinese life insurance companies as the only woman in the room. She closes out her pre-Neylu journey at BlueStar Genomics, shaping her philosophy on capital discipline and focus that she carries directly into founding Neylu Bio.

Jon Chee - 00:01:49: Yeah. So our business model at Nalu is a licensing model. So we have a platform. We have a pipeline. We will license these compounds to pharma at phase two. They will take it forward through phase three. They will handle the regulatory. They will handle the reimbursement, but I still need to be thinking today about what is the price point. It's almost like writing the press release of when this product goes onto the market and all of the attributes because you have to think about that because that informs the clinical trial design. Right? That informs the biomarkers that you measure. That informs the preclinical studies that you do. So, yes, as you say, entrepreneurs have to be thinking about the endgame in mind, but you have bigger organizations. And if you can bring a pharma in as a collaborator early to help you with that, that's a huge value add as well.

Caitlyn Krebs - 00:02:46: Yeah. Absolutely. Because I can imagine if you just trek it out on your own—and power to those who have done it and got all the way—that's just on super hard mode. Because nowadays, I always wonder if there's gonna be a life science startup that becomes the next Pfizer and goes the distance. And you know, there's Alnylam, kind of has that energy. BioMarin has that energy. But you don't see it happening all the time. And I'm just curious why.

Jon Chee - 00:03:18: It's so hard to build a commercial organization. It's so different. Imagine, it's like I grew up snowboarding. I love to snowboard. And now I have to switch to skiing. All of my DNA is in snowboarding, and I have to switch to skiing. It's like you grow up in this R&D environment, and now it's actually all about commercialization. It's about selling to physicians, about negotiating with pharmacy benefit managers. It is so different, but I think it's really hard to fund and also change the organization. The companies do it. There's no doubt. Small companies will become commercial organizations, but it's really challenging. It's not for the faint of heart.

Caitlyn Krebs - 00:03:58: No. Does not sound like it. It does not sound like it. I mean, at that role when just like on a knife's edge...

Jon Chee - 00:04:06: Oh, for sure.

Caitlyn Krebs - 00:04:07: It just flipped.

Jon Chee - 00:04:08: It was a flip. Complete—I mean, imagine we were so surprised. It was almost a surprise. Like, we got blindsided by Medicare. And the investors were not happy. It was definitely a lesson.

Caitlyn Krebs - 00:04:21: Can you appeal it?

Jon Chee - 00:04:22: Oh, we did. We did. We had physicians writing letters. I mean, we did everything, and they just said, no. This is investigated. You know why? It was costing them a lot of money. It was costing them a lot of money. And prediabetes wasn't a diagnosis at that time. That was the other issue. But we were on the cutting edge. We were working with one of the large GLP-1 companies there. Again, this is about 12, 15 years ago. They recognized that a lot of these type two diabetes drugs were huge obesity drugs, and we were talking to them. Because when you're prediabetic, if you can prevent diabetes, you're in this ecosystem, and they were seeing all these off-label weight loss effects. So the semiglutides are not new. These drugs have been around for a while. It's just how they're marketed and the fact that CMS reimburses them.

So for me at Nalu today, this whole world with GLP-1s is changing. The actual channels are changing. You have direct-to-consumer, with the Ro's, the Hims, basically collapsing into traditional prescriptions from docs. And so for me, I believe in endometriosis, it's such a large market, 200 million women worldwide, that we will be using—it's not gonna be us, but our partner is gonna be using some combination of the direct-to-consumer plus a traditional pharma sales model. That's just where this industry is going. So I think the landscape is changing very quickly as well.

Caitlyn Krebs - 00:05:53: Interesting. So many learned lessons from Tethys.

Jon Chee - 00:05:57: Yes. It was a great training ground for my career in general.

Caitlyn Krebs - 00:06:02: Also, just what a gut punch.

Jon Chee - 00:06:04: Oh, yeah.

Caitlyn Krebs - 00:06:05: God, that sounds brutal.

Jon Chee - 00:06:07: Yeah. I was actually on maternity leave with my son. This is actually a great story. I was on maternity leave with my son. The CEO calls me up, and he says we're shutting the company down. And he said, I'm done. And he said, but the VC firm wants to come in and sell off the tech and the assets. And, of course, I was the BD person, so I had all the relationships with the companies that would want to buy the technology. And so I think my son was three weeks, and they said, would you help us sell off the assets of the company? And I'm breastfeeding. I'm a new mom. And so I approached my husband. I'm like, what do you think about this? And he's like, what are you talking about? Is this your first kid? Don't you wanna enjoy your baby?

Caitlyn Krebs - 00:06:55: Yeah.

Jon Chee - 00:06:55: And I said, there was a woman from the venture fund who was leading this process, and I said, I think this may be a really good opportunity for me. I think I'm gonna do it. And he said, okay. Well, they better pay you a lot.

Caitlyn Krebs - 00:07:08: Yeah. Yeah.

Jon Chee - 00:07:09: So I gave them some ridiculous consulting fee, and this woman came back and she's like, that's how much I charge per hour for consulting. And she's much more senior pharma and VC and all that. I said, well, this is what it's gonna take for me to do this. And so she said yes, and she is one of my cofounders in Nalu.

Caitlyn Krebs - 00:07:29: Awesome.

Jon Chee - 00:07:30: But that's how this world works.

Caitlyn Krebs - 00:07:32: That's awesome.

Jon Chee - 00:07:33: You never know. You never know. So it was like, I was on conference calls breastfeeding my son while I'm pitching the technology. So you never know. I mean, that's the other lesson is that people are the most important thing in all of this and building relationships that are lasting, and you never know when these people will appear in your life.

Caitlyn Krebs - 00:07:57: I just wanna underline that too. It's like you just don't know where these people will play a role in your life, but also, you also don't know who they know.

Jon Chee - 00:08:07: That's correct. Yep.

Caitlyn Krebs - 00:08:08: You have no idea who they know. So whenever I see behavior that I would deem more short-termism zero-sum, I'm just like—I mean, yeah, that's one way to do it, but business is a small community, and also it's long. The journey's long.

Jon Chee - 00:08:25: Yeah. I'm with you. I take a different approach. It's like, there's pretty much zero degrees of separation in this community between investors, entrepreneurs, service providers. And so you have to treat everyone with integrity and respect because they will end up in your life again in some way, shape, or form. And you do not wanna burn bridges because it's painful if it comes back around.

Caitlyn Krebs - 00:08:50: Yeah. And age of founders are getting younger, which is like, holy moly.

Jon Chee - 00:08:54: Yeah. What's the average age now these days?

Caitlyn Krebs - 00:08:57: Especially in San Francisco, it almost feels like high school. That's what it feels like sometimes. I'm like, wow. I was out just messing around, not starting a company. But these kinds of lessons—when I speak to these young entrepreneurs, and they don't know this yet about not just maximizing short-term gain. You gotta find the win-wins here. Please.

Jon Chee - 00:09:22: It's a marathon.

Caitlyn Krebs - 00:09:23: Yeah. It really is. Because if you burn someone now, yeah, you got the win now, it comes back.

Jon Chee - 00:09:31: It comes back.

Caitlyn Krebs - 00:09:32: It comes back. And super interesting that you guys were on a tear. You got the news that no one wants to ever get. And then the process of finding a home for the technology, that's also a rare one. People do not talk about that because they think it's never gonna happen. But this happens a lot. Talk a little bit about that experience.

Jon Chee - 00:09:55: Yeah. So we have this technology. We have this test. We also had very strong IP. We had some really good IP attorneys at the company, and so the IP was very valuable. I knew all the large laboratories who'd be interested in taking this technology under their wing. And actually, the other piece was we had gotten access to a lot of clinical samples. That's the other thing that's really hard to get access to. We had access to banks of samples in freezers that you could also run other tests on. And so it was a combination of the product, the IP, and then actual tangible biological samples. And so we shopped it around to a number of organizations. One of the large labs, it was called HDL at the time, bought the technology. Of course, nothing close to what an investor would want for a return, but at least this incredible technology that could predict prediabetes was in the hands of another very capable entity. So, yeah, the process—then it's like you're selling your baby. How can you not tell me my baby is beautiful? And they tell you, no. Your baby's kinda ugly, actually. But, yeah, it's a process.

Caitlyn Krebs - 00:11:11: Yep. During this process, the technology lives to see another day, and it kind of happens. It's like the system. Again, it's a miracle when it happens. A lot of them just don't go the distance for whatever reason, but that doesn't mean it's the end necessarily.

Jon Chee - 00:11:28: No. And I think it's great that even in that outcome, the technology lived to see another day. And you're absolutely right. Maybe not in the form or fashion that investors or the team wanted, but at least patients were still getting access to this. And at the end of the day, if it's improving lives and if it's solving for disease, that's why we're all in this.

Caitlyn Krebs - 00:11:48: Yep. Exactly. Versus just like, oh, well, throw it in the trash. No, it actually lives and has another life. And so you find the home for it. What was up next for you?

Jon Chee - 00:11:57: So then, basically, it was then kind of the boom of digital health. It was called eHealth or mobile health was a term. And I was really enamored again by technology and science. And so I went to a group called Rock Health that was a venture fund and an accelerator. So, again, kind of the theme of cutting edge, but then supporting or being part of early-stage companies. And so I did the same thing, corporate development, BD for them. What that meant there was bringing in large groups—the large payers, large health systems—to basically support the accelerator, but yet they also had a fund.

And so what was really interesting there was you had a lot of tech entrepreneurs from Google, Apple, who were coming in, and they wanted to kinda reinvent healthcare, which was incredible. But also, they didn't have the kind of knowledge. They didn't understand HIPAA, you know, or privacy. So that was also a really interesting place to sit. So these incredible ideas, but then the reality of putting a healthcare lens on top of it. But it was really cool because I really understood there how VCs evaluate companies and the metrics and the pitches and the decks. And so that was a great insight into, okay, here's how an early fund values new ideas and the team. At the end of the day, it's really all about the team, and that became very clear at that point too.

Caitlyn Krebs - 00:13:35: Very cool. This is going back to what you said earlier. It's understanding much like the board. It's understanding people's incentives, the way they think, their perspectives. And another big piece of this is the investors. The VC, especially in our space, it's heavily reliant on venture capital. You gotta know what makes them tick. So I guess at Rock, what were some learnings about the kind of VC mindset and incentives and structures there that you took away from that experience?

Jon Chee - 00:14:07: Yeah. I mean, I think the first thing was just volume. The number of companies that would apply—they had these cohorts each quarter, I can't remember. And they would get hundreds and, like VCs do now, thousands of decks. And so how do you pick out the winners? And I would say the first thing that was very clear was the team. Did you have someone who really had expertise in that area, whether it was autism, whether it was—I remember there was a dream business. There were some crazy ideas that came in. So they look at the team. They'd also look at the traction. No surprise. What have they done today? Are people actually using this? Do they have any customers? Do they have any pilots? That was another piece of the criteria.

And then the market. Obviously, looking at is the market big enough to make this a venture-backed community, but pilots and business models. So I learned a lot about business models. A lot of those companies tried to go direct-to-consumer. Consumers don't wanna pay for their healthcare. And so, right? We know this, but all the companies would start direct-to-consumer. Like, we can go direct-to-consumer, and then you realize, guess what? Maybe they'll pay $50. Maybe they'll pay 75. There's definitely a band, but then they started selling into employers. Oh, well, employers must be easy. No. Employers are, like, 12 to 18 months. Employers don't... okay, maybe health systems, integrated health systems. So I just saw so many different business models while I was at Rock Health. Some of them succeeded, some of them—a lot of them pivoted. But to your point back to getting pilots with these large organizations, that was, I think, one of the most challenging things for me. Even these large health systems who wanted to adopt some of these technologies, it took so long, and there was so much red tape. And then they wouldn't wanna pay for the pilots. And so that was really frustrating to me—to watch that dance between nimble, innovative technology and kind of these slow—even if they wanted to adopt it, it took forever or they never got the deal done.

Caitlyn Krebs - 00:16:10: Yep. That is actually brutal.

Jon Chee - 00:16:12: It's brutal because these companies rely on these pilots to prove the technology and validate it, and it just takes so long.

Caitlyn Krebs - 00:16:21: Yeah. And especially in this climate too, as much as venture espouses to be risk takers, they want it heavily derisked.

Jon Chee - 00:16:31: Yeah. They do.

Caitlyn Krebs - 00:16:33: It's actually they love derisking. And there are players who are willing to go farther on the risk spectrum, but it always gives this pendulum of risk-on, risk-off. And there's always exceptions to the rule. There's folks who, during risk-off environments, are willing to put their neck out. But, yeah, derisk as much as you can.

Jon Chee - 00:16:55: Yes. Derisk as much as you can. Same for us now in developing therapeutics. Do everything that we can to show investors that these are safe molecules, that the efficacy works. That is the number—you know, how much risk is associated with this company. The other thing I have to say, though, from a trend perspective—as I mentioned, these companies started off direct-to-consumer and ultimately ended up at employer or healthcare system. You're seeing some large, particularly in the women's health space, companies that have typically gone through a traditional reimbursement setting who are now adding back in the direct-to-consumer lens. And I've seen a couple of these recently make these announcements. And so I believe that the pendulum is swinging back. So they've sold through physicians, they're in the traditional insurance reimbursement, but guess what? There's another channel direct-to-consumer cash pay that I'm also gonna add on top of this. Again, history repeats itself.

Caitlyn Krebs - 00:17:58: Absolutely. And is that like the Novo collaboration?

Jon Chee - 00:18:01: Definitely the Novo, but you're seeing folks like Maven Clinic, which is a big telemedicine company. They're adding on a kind of direct-to-consumer... Midi Health. So in menopause, perimenopause, they were traditionally kind of a full physician insurance pay, and now they're going direct-to-consumer. So you're seeing outside of the big pharma, I think, a shift towards DTC.

Caitlyn Krebs - 00:18:25: Very cool. And what is catalyzing the shift?

Jon Chee - 00:18:29: I think part of this is the GLP-1s for sure. I think they're seeing, like if big pharma can do this, we are more nimble than big pharma, we can do it. And then I think it's also probably pricing pressure as well. And if you can get a revenue stream outside of the traditional model and people—if their problem like endometriosis is significant enough, people will do whatever it takes to get a therapeutic, and they will pay out of pocket for it. And I think that's also driving it—the need.

Caitlyn Krebs - 00:19:02: Yep. Makes sense. That makes total sense. And so you're wrapping up your time at Rock Health. When did you know it was time to leap?

Jon Chee - 00:19:09: So one of the Rock Health portfolio companies—I met the CEO, her name is Ellie Kaplan, and she was creating, basically, a program to prevent Alzheimer's. So, you know, I was in prediabetes early days, digital health, and then someone who believed that you could actually prevent Alzheimer's. So I started talking to her, and it was a diagnostics company. So I had a lot of diagnostics experience. I had this digital health experience, so it was a perfect marriage. So I went and joined Ellie early days, and this company was pretty incredible.

It was basically, we all have an inherent preference. So when you see two images, when you walk into a museum and there's two paintings, your eyes, your gaze will basically always go to the new painting that you haven't seen before. And this is basically the mechanism. This is cognition in your brain saying, "Oh, I've already seen that painting. I'm gonna look at the new one." And so this is technology out of Emory. A scientist discovered that Alzheimer's develops in the hippocampus in your brain. And so this kind of preference for novelty is basically regulated by the hippocampus. So we created a test, basically a web-based test where you show patients images and you track their eyes. And you can tell from the amount of time they spend on the new image that they're healthy, that their hippocampus is healthy. If they don't recognize which image is new and they're oscillating or they're spending even more time on the image that you've previously shown them, you can detect cognitive decline.

Caitlyn Krebs - 00:21:17: Woah. Yeah.

Jon Chee - 00:21:18: Yeah. So, again, cutting-edge technology. I was like, alright. This woman is onto something. And what people don't know is you can prevent Alzheimer's, and there's some large randomized control studies with diet, exercise, and what they call brain games, some type of cognitive game. And the science is real, but people don't know it. So I really got excited about the science and was like, wow. This could be a game-changing product.

Caitlyn Krebs - 00:21:17: Woah. That's crazy. And so what's the name of the company? And just talk a little bit about—it sounds like you're at the ground floor of this thing.

Jon Chee - 00:21:25: Very early. So Neurotrack is the name of the company, and basically, we created an online test to identify—they call it mild cognitive impairment—so kind of the predecessor of Alzheimer's before you're actually fully diagnosed with Alzheimer's. And our goal was to test people with this test and then get them, very similar to Tethys, get them to change diet, exercise, lifestyle, which we know is really hard.

Caitlyn Krebs - 00:21:51: Cool. And I guess you're probably wearing a ton of different hats. But I guess what took most of your day, and what did you do on an ordinary day there?

Jon Chee - 00:22:00: Yeah. So I was the COO there. So in addition to moving from corporate development partnerships, really operations. So making sure that we could operationalize the test, figure out the business model, same—we started direct-to-consumer. Maybe you're not surprised. Decided... we actually launched this, this was pretty incredible. We launched the test—you could access it through the website, it wasn't an app yet. We launched it, and within days, we had folks from 137 countries take the test all over the world. We had no idea. We thought it would be somewhere in the U.S., probably California, New York. And so that was incredible. Think about product-market fit. Consumers want this. They wanna know their cognition.

Then we ran into technical challenges because it was all video. So you would have to capture the video, you'd have to slice it, upload it to the cloud, process it, then download the results to the consumers—at that point, the patients. And so that was an interesting technological challenge for the company. Again, a bunch of smart software engineers figured it out. But that company really taught me that science and data and validation is really critical. And, again, I'm a scientist, and so it's all about the data and science. And then you have to figure out the business model, obviously. They have now—they're actually sold to hospital systems, so they kind of moved up the food chain. And I think they're very successful in that.

Caitlyn Krebs - 00:23:26: Not D2C anymore?

Jon Chee - 00:23:28: No more. Nope. That didn't work. Again, same lesson. Tried it. Didn't work.

Caitlyn Krebs - 00:23:33: Yeah. And during your time there, were they purely D2C at that point?

Jon Chee - 00:23:38: No. Actually, we started off D2C, and then I had a pretty big role in selling into actually insurance companies. And think about life insurance, think about other writers on top of that for Alzheimer's. So we actually were successful selling into particularly Japanese life insurance. They wanted to know their risk of Alzheimer's, and they would set kind of the insurance policies based on the risk. That was actually really interesting.

Caitlyn Krebs - 00:24:05: Oh, wow. They use it as an actuarial.

Jon Chee - 00:24:07: As an actuarial. That's exactly right.

Caitlyn Krebs - 00:24:10: Woah. Yeah. Okay. I kinda wanna unpack this a little bit. Insurance is a completely different mindset.

Jon Chee - 00:24:17: It is.

Caitlyn Krebs - 00:24:17: And then, obviously, there's geographic Japanese insurance companies versus American insurance companies. I guess, maybe before we go into the geographical, but what was it like selling into insurance?

Jon Chee - 00:24:29: Selling into insurance in Japan as a female was very challenging.

Caitlyn Krebs - 00:24:35: Can imagine.

Jon Chee - 00:24:35: So I show up, and I'm the most senior person, and they're kinda looking around the room. Like, wait. Who am I supposed to be negotiating with? Where's the male in the room? So I learned a lot about doing business in other cultures. That was very challenging, but I was a tough negotiator, and I just stuck my ground.

Caitlyn Krebs - 00:24:53: Do you speak Japanese?

Jon Chee - 00:24:54: No. I do not. So it's all through translation. So I had a translator. So, of course, that was another challenge. It takes twice as long. A lot of them, their English was quite good. And so depending on the age and seniority, their English was fine. But that was definitely lessons learned. So yeah, it's a much slower paced, insurance, much more conservative, new technology, wanted a lot of data. Really, at the end of the day, it was about the numbers. If we can increase the premiums or if we could decrease them based on lack of risk, how does that actually impact their financials? So it was driven by a lot of financial incentives around those companies.

Caitlyn Krebs - 00:25:38: Interesting. And I'm assuming you gathered enough data from the D2C side that could help present. It's like, "Hey. We have a wealth of data here that shows exactly what we're describing, which would then improve your actuarial assessment."

Jon Chee - 00:25:54: Yes. And you bring up a really good point is that a lot of these companies who started off D2C, including Neurotrack and others, you can show a lot of traction and lessons learned and product-market fit even if that's not your ultimate business model. You can prove it, as you say, to these larger, whether they're insurance companies or they're employers. So that actually worked out quite well for a number of companies, including Neurotrack, to kinda sandbox it with consumers, learn, and then bring it to the larger institutions.

Caitlyn Krebs - 00:26:26: That's a very interesting point because I sometimes think folks get stuck in it's either-or, but they can kind of be the overused term "synergistic." But you see this a lot in being in San Francisco—tech. My wife works at Cloudflare, and this is not novel. There's the freemium model. It's like, get your hands on the freemium level tier. And then from the tech company's perspective, there's like, "Oh, we're seeing how the thing is used. We're seeing the value here. We're seeing this is more popular than this." And you start gathering the data, and then that helps inform the product roadmap, how you go to larger institutions, whether it be an insurance company or wherever. And, obviously, free means you're losing money on it.

Jon Chee - 00:27:11: Yeah.

Caitlyn Krebs - 00:27:12: So there's still value to be had in that kind of sandboxing. And even though D2C wasn't the main thing, sounds like they figured out the main thing.

Jon Chee - 00:27:19: Yeah. I mean, I think you're absolutely right. I think D2C can either be a means to an end to get you there or just a bunch of data collection too and just functionality. You know? Learn a lot. Iterate on—you can iterate on the product quickly, like, in an employer setting or a healthcare setting. You can't change the product on a daily, weekly basis. That's not okay. But in consumer, yeah, you can do a bunch of A/B testing. Okay, this works better than this. And so I do think that there's value in whether you do it as an open D2C or just a large consumer pilot—get a bunch of people to try your product before going to some of these more buttoned-up organizations who have a lot more requirements.

Caitlyn Krebs - 00:28:01: Absolutely. And so it sounds like you're making a lot of trips to Japan, selling to Japanese insurance companies. Was that the biggest one for you? Like, you spent most of your time there?

Jon Chee - 00:28:11: I did spend most of my time there. In fact, we got connections through one of our venture funds. So one of the venture funds that funded that company had ties. Otherwise, it would have been very hard to break into that. I mean, impossible, particularly as a white female. And so that connection—thinking about the network—was really important. They had a lot of those insurance companies for LPs in their fund, and so it was a very easy in. It's like, "Here's a portfolio company we've invested in. Check them out." But, yeah, I spent a lot of time flying to Japan. I love Japan. I love the culture. I love the food.

Caitlyn Krebs - 00:28:47: Me too.

Jon Chee - 00:28:48: I'm from Hawaii. Right? So I was in Kyoto at one point, and it reminded me of Hilo, Hawaii, and I was like, "I'm home." But, no, I'm actually in Japan.

Caitlyn Krebs - 00:28:57: Yeah. I love that. I'm jealous. That sounds like fun. I'm a big fan too. Just the food is just incredible. Actually incredible.

Jon Chee - 00:29:04: The culture—I mean, it's so clean.

Caitlyn Krebs - 00:29:07: Yeah. The public transportation is also just unbeatable.

Jon Chee - 00:29:12: Especially compared to the Bay Area.

Caitlyn Krebs - 00:29:13: Yeah. I'm like, why can't BART be this?

Jon Chee - 00:29:15: I know. Yeah. Nope. BART will never compare.

Caitlyn Krebs - 00:29:18: Yeah. No. I live in a part of the city where even Muni is not where I like, so I'm stranded. I'm like, god. Can I just please just have something out here? But, anyways, so you learn the ropes on how to appeal to these enterprise risk-averse institutions and got them on board. From there—and it sounds like they started to hit a groove—were you like, "I'm gonna stick this thing out and see this all the way through to its scale," or were you like, "Okay. I'm itching to go back into startup land"?

Jon Chee - 00:29:49: I think I was ready for a new challenge. And speaking about kind of the connectivity of all of this, then someone from Tethys, the diagnostics company, started an epigenetics company. And so I started talking to him, and it was technology out of Stanford, Steve Quake's lab. So, basically, measuring cell-free DNA in the blood for early cancer detection. And that, I was like, this is cutting edge. And the vision of that company was to create a pan-cancer test where you could test for nine different cancers: colorectal, breast, pancreatic, kidney. And so that to me, again, kind of this cutting-edge theme, I was like, this is really interesting technology.

And a lot of my experience was really relevant for that. But I knew the CEO, again, connections. Right? I knew the CEO from a previous company. And I was their chief business officer. So, again, it was a small company doing a bunch of things, but that was more research collaborations. How do we get the data that we need? How do we make sure we get the samples that we need? But it was really exciting. That company—this idea of early pan-cancer detection—it was a competitor to GRAIL at the time if you're familiar with GRAIL. And so what I learned there was small companies—it's really hard to create nine different tests within a test. It's very challenging. And so that was my lesson in focus. You know, we had this huge portfolio. We had all these different cancers, and so how do you narrow down? And so the company now has a test on the market called Avanec for pancreatic cancer. So it did detect early pancreatic cancer, which, as you might know, the outcomes are very poor. Not great. And so I felt like I had a little piece in hopefully preventing and improving lives of pancreatic cancers, but that was also another same thing. Like, how is CMS gonna look at this? How are they gonna reimburse? Some kind of behemoth in the space—Exact Sciences for colorectal cancer—we followed them very closely, obviously, GRAIL. But I love the technology. Like, this 5-HMC technology—again, hard to explain to people and what it did, but very exciting.

Caitlyn Krebs - 00:32:11: You were saying that a lot of your time was on research partnerships. Was that with academia?

Jon Chee - 00:32:16: Yeah. So a lot of academic and then some kind of large labs that had access to basically validation sets that we needed for the test. So both academia, a lot of samples coming out of Europe as well. So some large groups out of Europe. But, again, a lot of board support to the CEO, a lot of strategy, a lot of fundraising. How do we fund this? That was actually a really interesting company. Early days, it was funded by one high-net-worth individual. I had never experienced that before. So, actually, that creates a different dynamic in the boardroom.

Caitlyn Krebs - 00:32:55: I'm sure.

Jon Chee - 00:32:55: Very different dynamic for good and for bad. I mean, this individual was so driven to detect cancer early and have this impact—almost philanthropic in a way. Sometime, I had a conversation with him once. I'm like, "Are you doing this for the outcome, or is this more about doing better in the world?" And it was both. But that was also a really unique way to fund a company early days. That's not how they're funded anymore, but early days.

Caitlyn Krebs - 00:33:24: Really interesting. And we talked about you learning how to interface with insurance companies. Curious, what are some differences when it comes to, I guess, first, academic institutions? What is the mindset going into that? And then the follow-on question is, what is the mindset you had to go into when it came to getting those samples at these large—I'm assuming there's these large laboratories or healthcare systems?

Jon Chee - 00:33:47: Yeah. I mean, very different mindset as you highlight. Right? Academics, they're very obviously focused on the science. They treat kind of their technology as their baby. Licensing anything out of academia, as you probably know, is much harder than getting it out of a commercial organization because they don't have standards. They don't have templates. They don't have kind of the rules and guidelines. It seems like it's a one-off a lot of times, and they're so slow. Just the contracting and the negotiation is so slow. So you have to be patient. Right? You have to really understand the science and show them that there's gonna be value in the product that you're developing versus these larger organizations. It's more of a transaction. It's a commercial interaction. Yes, they wanna do good, but at the end of the day, they're making money if you're making money. And it's a different timescale. They move much faster as commercial organizations.

Caitlyn Krebs - 00:34:44: Yep. And so it sounds like in the very beginning, it was the test that had a very broad scope. Was there a moment where you're like, "Oh, we need to narrow this thing down"?

Jon Chee - 00:34:53: Yes. There was a moment we needed to narrow it down, and there was also a moment where some of the technology just performed better than others. And so part of it was the science and data led us that way. Also, a bunch of market analysis, market research with physicians—what they wanted. So it was both the data and the market. But I carry that forward today. You know, as a startup, you wanna do everything, but we are laser-focused on endometriosis. Post-surgical is second, but you have to really know your lane and stay in your lane or else you can get very distracted. That was really the takeaway there.

Caitlyn Krebs - 00:35:31: Absolutely. And I think this gets back to something I was thinking about earlier about just when I mentioned financial discipline. When you get a boatload of money, the focus is—human nature, it just kicks in. You're like, "I have all this money. I must spend it." And that kind of is the enemy of focus. It takes a special individual to be able to just get it—it's kind of like that thing when you hear about people winning the jackpot lottery, the Powerball, and then that money just blown immediately.

Jon Chee - 00:36:03: It's human nature. Yeah. I think the less capital you have, the more you're scrappy or efficient with it. I actually remember a board meeting from that company where we had a lot of capital, and we're like, "We wanna do this. Actually, maybe we wanna do a later-stage cancer test, and we're gonna do this." And the board was like, "What are you guys doing? Like, no. You—there's no way. You're early cancer detection. Why would you start measuring tumors like within late-stage patients?"

Outro - 00:36:34: That's all for this episode of The Biotech Startups Podcast featuring Caitlyn Krebs. Join us next time for part four where Caitlyn recounts the moment a cofounder called with an idea no one had heard of—the endocannabinoid system—cofounding Nelu Bio with two VCs, building the technology entirely in-house rather than spinning out of Stanford, and why CB1 and CB2 receptors present pharma's most underestimated therapeutic frontier, targeting a disease where 55 percent of patients are already self-medicating with cannabinoids just to get through the day.

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