Disinfecting Hospitals, Impacting Healthcare: Morris Miller, CEO of Xenex (Part 6)

Sramana Mitra: Did you take some time off then?

Morris Miller: I did. I took a little time off. I realized that it isn’t consistent with what I wanted to do at all. Then we started looking at different kinds of deals. We invested in a medical startup. That was my first really big investment after that. It was a company called CardioSpectra. It had some interesting technology to help cardiologists figure out the correct treatment for patients with heart disease. Within 18 months, we ended up growing that company and selling it. It was a huge success.

I felt good about what we did in the healthcare business. It reinforced this idea that my dad had instilled many years ago that there’s an opportunity in business to do great things that affect people and improve the world. That really guided my focus in terms of the next company. Also, we decided that we wanted a company that we could run and grow versus just an intellectual property company that ends up getting acquired because of its IP. There’s a nice combination between them. That’s when Xenex came onto the radar.

Sramana Mitra: How did it come onto the radar?

Morris Miller: There was a fellow up in Austin named Bryan. Bryan would bring me deals periodically. I’d just frequently say, “That’s not what I want to do.” He showed me Xenex and explained what it was; he basically said, “I don’t know if you realize this, but hospital acquired infections are the fourth leading killer of people in the United States. Every year, two million people get infected and a hundred thousand die.” He added, “I’ve come across technology that can fix this. ” He arranged a meeting with the founders of the company, Mark Stibich and Julie Stachowiak. Mark went to Yale for undergrad and has a Ph.D. in Epidemiology from John Hopkins. Julie studied at Columbia University and has a Ph.D. in Epidemiology from John Hopkins. They drove over from Houston and met me. They literally sat there and answered questions for almost three hours.

It became apparent to me that if the technology would work, we could have a dramatic effect on people’s health. We could grow a great business. These were the kinds of complementary entrepreneurs similar to what I found in Rackspace that would be fun to work with. Bryan on the business side. Mark on the publishing side and Julie on the science side. I saw that complementary team coming together and basically, without having a deal in place, I said, “Let’s go prove it.”

I talked to my dad about it. My dad was like, “Mercury light bulbs have been used for 100 years in hospitals for different kinds of disinfection but they take a long time to disinfect anything.” We’re really good friends with the Dean at the medical school and he said the same thing, “If this is new technology that could do this kind of disinfection fast, it could be miraculous.” We went to an independent lab and tested it against about 2,000 samples of bacteria, viruses, and spores. It worked.

Sramana Mitra: What was the technology? How did it do what it’s supposed to do?

Morris Miller: All of the UV technology that you basically heard of till now is based on mercury lamps. Even within the healthcare system, there’s an organization of professional infection control experts called APEC. APEC will tell you, “If you’re willing to run a mercury lamp three times a day, 45 minutes per position, you could theoretically disinfect a hospital room.” That’s a professional guideline. This prototype that they had was a xenon lamp instead of a mercury lamp. It’s a noble gas. It’s a green gas. People are trying to get mercury out of the hospitals because mercury is toxic. This is green and it’s not going to hurt anything. When you pulse it with high power, it puts out light that is 25,000 times more intense than mercury. As a result, it is tremendous at disinfecting and at disrupting the DNA chains on these pathogens. When their DNA is scrambled, they can’t replicate. When they can’t replicate, they can’t infect a patient.

Around that time, there were some interesting studies that came out that showed that the average housekeeper has somewhere between 22 to 42 minutes to clean a hospital room. In that time, they can only get to about 50% of the surfaces. You’re used to finding problems and solutions. Problem is they can’t clean all of the surfaces in the room in the allotted time that they’re given. There’s a budget crunch on the hospitals to reduce the number of housekeepers. This is a tool and what they showed me is that within five minutes, they could run a cycle and disable these pathogens.

Sramana Mitra: Wow! It’s very powerful.

Morris Miller: Incredibly. The next question is can you make it economically? They estimated that you could do 30 plus rooms a day, which means it’s costing about $3.50 a room. We see our customers getting 50 to 60 rooms a day. Arguably, it’s one half of that per room. It’s $1.75. It’s nothing in terms of cost. Yet, if you can get rid of these pathogens, then at least, in theory, the next patient wouldn’t get sick. Just like you may have done in your businesses, the first thing I did was I said, “We’ve got a prototype. Let’s go try and sell it and see what the market tells us.” We cold-called hospitals. They laughed. They said, “After selling Rackspace, you’re willing to go making cold calls.”

We drove up to Dallas with the robot. We cold-called Kindred Hospital, Presbyterian Hospital, and Baylor Hospital. All of them said the same thing, “That’s incredible. It’s some of the best lab data we’ve seen. Do you have a peer-reviewed published study?” The answer was no. They said, “We’ll be very interested in it if you had that.” The founders came back and said, “What do you think?” I said, “They told us clearly we need a peer-reviewed published study. As soon as we get that, then they’ll consider it.”

Sramana Mitra: You have to get that first.

Morris Miller: Right. They’re from Houston. MD Anderson is one of the best hospitals in the nation. It happens to be in Houston. I said, “You’re talking about one of the most prestigious hospitals in the country with an extremely immuno-compromised set of patients. If you can go prove it at MD Anderson, that should be very influential on other customers.” They went to MD Anderson and proved it. The study came out that this was 20 times better at disinfecting than any previous housekeeping.

Housekeepers cleans a room. Then they get a petri dish and they test the surfaces to see how much bacteria there is. Then they’d run Xenex and then they take a petri dish and test the surfaces. It had 20 times less bacteria. Where they could never get rid of a pathogen called Vangomycin-Resistant Enterococci, Xenex was able to get rid of it. MD Anderson was convinced. The last thing that I said was, “The way that you know that they really believe in their research is that they’ll buy the system. Let’s take the system away and let’s go present it to them as a buying proposition. If they buy it, you know they believe it.” To MD Anderson’s credit, they bought the system.

This segment is part 6 in the series : Disinfecting Hospitals, Impacting Healthcare: Morris Miller, CEO of Xenex
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