Muller Explains Departure from Avedro; Opportunity in New Venture

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David Muller came close to writing the final chapter of Avedro’s push to have corneal cross-linking approved by the FDA. But he opted to leave the company before the final approval came through to pursue a new venture called Allotex. In this interview with OIS Podcast, Muller explains his decision to leave Avedro and tells us why he’s excited about this new entrepreneurial endeavor.

Podcast Guest

Transcript

Tom Salemi: Hi, everyone, welcome back to the OIS Podcast. It’s been a little bit since we’ve last talked. We apologize for the break, but we had some pressing issues and assignments at JP Morgan to deal with. We also had some work to do on our website. I’m happy to say it is up and running. Go to OIS.net. You’ll find all of our past Podcasts there. You’ll of course be able to register for OIS@ACRCS on May 5 in New Orleans, and you can listen to future podcasts as well. We’re back up with our weekly cycle, and we’re starting today with a story of a leadership change. Leadership changes obviously have been going on in the sector the last couple weeks. We had our old Podcast friend, Tom Frinzi taking over at AMO. That was announced the week of JP Morgan, and that certainly was an interesting development. Congratulations to Tom. We also last week had Alcon and Novartis announce some changes. Jeff George no longer will lead that group. It’ll now be led by a fellow named Mike Ball, who I do not know, but hear very good things about. So change is in the air, and we’ll address that a little more specifically in next week’s Podcast. This week I’m talking with David Muller. David is a frequent guest of the Podcast. He’s been on here a few times to tell the tale of Avedro and also to give us an update on the company’s dealings with the FDA. David, of course, has been at OIS past couple of years, giving all of you updates as well. And David has now moved on. He will not be telling the final tale of Avedro’s work with the FDA to get cross-linking approved. David has started a new venture called Allotex. So in this conversation with David, we’ll get into what he’s up to, and we’ll also talk about the decision behind leaving Avedro. So we hope you enjoy this conversation with David Muller.

TS: Hi, Dave, welcome to the Podcast.

David Muller: Thanks, Tom, nice to be here.

TS: Great. I wasn’t sure how to introduce you: former CEO of Avedro, which is how most of our OIS community knows you. But I think we’re going with serial entrepreneur now, which is certainly an apt description.

DM: Sounds good to me.

TS: Yeah. So I want to talk about the change at Avedro. We’ve seen you up on stage many times. It’s not going to be OIS without you up there telling the story, but I’m sure we’ll get by. But why the change from Avedro now? Why move on to this new venture? And we’ll get into the new venture in a few minutes.

DM: Sure. Well, I think as we discussed, I think you know the conversation with the idea of me moving out actually came up in discussions with Gil, you know, with Gil very early on in the discussions about InterWest funding the company. And it really came up in the context of OK, you’ve been here for 8 years, and we kind of look at – looking ahead to what the next phase of the business was, which is really building towards either going public or some other liquidity event. And what it clearly means is another, I would say, minimum of three years, three or four-year commitment, which is build a company, get ready to take it public, and then be prepared to remain in that seat for another couple years to, you know, for stabilizing the public company in the markets. And we decided discussing, you know, it came up in the context of is this what you want to do, and is it the right thing for the company. And I guess I kind of looked at it, you know, where I was with the company, I had brought the cross-linking through to really, I mean, we’re on the verge of FDA approval so all the work was done till we get FDA approval. I developed the PiXL platform to be able to treat myopia with cross-linking, and then in the meantime, being a serial entrepreneur, I had other irons in the fire that had been cooking for a while. And it really started to make sense that it really didn’t make sense for me to stay on through really a whole new phase of the company. And I think – so it really is as we were putting this deal together, it was really baked into the deal that I would be leaving some time after the funding closed. The actual timing of it, that was really driven by, you know, Gil and the investors. I think it was left up to them to say OK, let’s close the deal. And when do you think you’d like to make the transition? So I think probably the things that were playing into the decision making was I had taken the company to – we really were sort of at a bright line really. The FDA stuff was done, and now we were starting to build a new strategy for the PiXL process. And since we knew we were bringing in a new CEO, did it make sense for me to start developing a strategy when somebody else was going to have to inherit that and develop it on their own. So more positive for the next person coming in to give them their own headroom to develop the company as they see fit. And from my perspective, the other things that was pulling on me was having some other things that I wanted to get started, and did it make sense for me to hang around for extra some number of months waiting to get started, when the serial entrepreneur itchy feet in me wanted to get going. So I guess ultimately the timing, the ultimate timing was certainly driven by Gil at all, but the overall time for David to leave was really a mutual decision.

TS: What is that process like? I mean you’d just kind of gone through like a whole litany of thoughts in this process. Is the first reaction like what the heck are you talking about, me leaving? Or is it like, Oh, God, that sounds really great?

DM: That’s actually funny you say that because it’s the first reaction was it was more like huh, hadn’t really thought about that. So but it was really one discussion, you know, sitting there, sitting on the couch chatting with Gil. And I think it really was in the course of 15, 20 minutes of you know, I hadn’t really thought about that, because that really makes sense. I think it was one of those things where you know, as an entrepreneur when you’re running this, you don’t normally think about other leaving my baby, so to speak. But then when we started having that discussion it just started seeming sensible.

TS: Was there part of you that – I referenced your appearances at OIS and you’ve sort of had a to be continued element of your presentation regarding the cross-linking and the FDA. Was there part of you that wanted to give the final end, to put the period on that story? Or are you kind of done with that one altogether?

DM: Yeah. No, I mean of course. I think it’s a – it would have been nice to be the one to get up there and say OK, we got it. But I don’t think there’s any question in anybody’s mind about who did it. So I think I can relax and rest on the knowledge that I know what I did. You know, I did the last OIS it felt to me that that was my – I felt that that was my swan song, that I was – I got it to where it needed to be and that was the end of it. So yeah, of course there’s a little bit that pulls at you, saying it would have been nice. But on the other hand, you know I’ve got a lot of excitement about what’s going on in life other than that. So it makes up for it.

TS: What was the – can you sum up the whole Avedro experience? You came on board the company, had I guess a slow start. You helped turn it around, you helped develop PiXL, which is an exciting vision correcting technology. What’s your summation of I guess your eight years there?

DM: Well, I have to say that – kind of look back at it, it was very similar to I guess the sum of the experience in that when we started Avedro, we started it – it was originally started to use microwave technology to treat nearsighted people. And Summit was started to do laser angioplasty to treat hearts. And as an entrepreneur you sort of get to be a little fleet on your feet, and you kind of follow the technology. And so in a very similar way, Avedro started with microwave stuff that brought me over to the cross-linking, and had a sort of a natural move from cross-linking away from microwave because it was clear that microwaves weren’t doing what we wanted. So it was a very interesting, exciting journey. It was a lot of – like with any startup, a lot of missionary work and a lot of convincing people that what you’re saying and doing really is true. But it was overall a very good experience, intellectual stimulation, working with a lot of good people. So I have no complaints at all about the whole Avedro experience. It was difficult, but that’s the nature of startups.

TS: Going to take a quick break in this conversation with David to remind you to go to OIS.net for all of our cool content, and also to register for OIS@ASCRS on May 5 in New Orleans. You can also, if you’ve got a great story to tell, your company has a great story to tell, you can apply to present at OIS. Go to OIS.net and you’ll find all the information you need. Now back to this conversation.

TS: Well, let’s take a few minutes and let’s move into your next chapter in life. You had an idea, a kernel of an idea you were kicking around and starting to work on things, and now it’s got a name. It’s Allotex, right?

DM: Allotex, yes. It was an idea that I actually got maybe a couple years ago. It was one of those sort of things that sort of popped into my brain. And so I’d actually spend the past couple years in my spare time, as it were, developing intellectual property and business strategy and the like and trying to understand the market space a little more. And what Allotex is doing is it’s addressing – it’s another – I call it another player in I guess what really is generically now called the inlay space, the space currently occupied by AcuFocus, ReVision Optics, and Presbia. So but we come into the space with something a little bit different, and that is I think we’re bringing history forward, so to speak. So again, you’re familiar with the current players in the inlay space. And virtually all the inlay companies currently all suffer from one commonality, which is the biocompatibility. And although over the years the biocompatibility of products with respect to being happy to be in the cornea, the products got better and better, but we still are not 100% biocompatible. There’s always some strange sequellae that goes in with these putting artificial things inside a cornea. And so the idea that I got was really to resurrect the work from – it really goes back as far as eyecare in the 80’s of being able to use human tissue for doing inlays, and even more preferably than that, doing onlays. And it was something that was tried with a lot of vigor in the early 80’s but was unsuccessful because of the really the inability to precisely shape the tissue and get the clinical result you want. But over the past really 30 years, there’s been a pile of evidence that shows you can safely and accurately put in or on human donor tissue onto normal corneas and get a safe effect and safe clear cornea, the effect that you want. And even more recently, there’s been actual high level interest to what’s now being done in tissue addition technology, coming really from a lot of the work that some of the clinicians working with Zeiss have discovered, which is when they do the Zeiss Smile procedure, they have been starting to take the forward lenticules out that the procedure forms. And so taking those, what are myopic lenticules out and placing them into hyperoptic patients, and getting nice clear corneas with nice corrections. And so the light bulbs are starting to come on in a number of places about maybe we should be using human tissue to do this. And the thing that really struck me when I started looking at it, when you look back at 30 years ago, you look at all the publications between now and then, what generally we sort of miss, you know, the elephant in the room was that now 30 years later, we actually have very precise tools between excimer laser and femtosecond lasers for actually reshaping tissues precisely as we want and we know routinely we can do that. Lasik does it millions of times a year. And then another sort of interesting thing that evolved again over the past – really the past several years was that some of the eye banks have learned how to take corneal tissue and process it in a way so that it could be room temperature stable in a package. So instead of having to do with fresh tissue all the time, now we start dealing with really a preserved tissue that has all the properties of natural tissue, but can be put on the shelf and stored and sit there. So that’s basically, fundamentally what I realized the opportunity was, was to provide an inlay which is 100% biocompatible and can – it’s not only is it 100% biocompatible, but it strikes at 2 other places where the current techniques can’t be used. One is simply being able to use it as an onlay, that is without any cutting. We can put these corneal tissue right on Bowman’s membrane with the epithelium put back over it. And secondarily, all the other materials are limited in their dimensions, so you can’t use a 5 or 6 millimeter hydrogel button, because if you try to do that, the nutrition from the posterior cornea could not move to the front of the eye, and you end up getting corneal melt. But with natural tissue, I can make the lenticules any size that I want. And so by doing so, you could imagine, for instance, there’s a lot of interest in using this technique to treat hyperopia. Because as you know, with Lasik hyperopia, lots and lots of regression, not very accurate. It’s not really a great procedure. But instead of doing it by removing tissue, if you did it by cutting a flap and adding tissue by adding lenticule, then all of a sudden you’re not subject to the same sort of reorganization, reformation of the corneas we’re subject by removing the tissue. So it’s – I believe that the Allotex product will be – the optical performance will be as good or better than the current offerings. But beyond that, it’s a much more versatile offering in that it could be used for a lot more things, and the fact that it is 100% biocompatible because it is corneal. A little long winded. Sorry about that.

TS: No, that’s fine. Does the biocompatibility make the regulatory burden higher or lower?

DM: Well, it’s an interesting conundrum. I think that the – basically the corneal tissue is not treated as a – corneal tissue is regulated under what’s called the HTCP guidelines so that the – so like for instance in Europe, there isn’t even a CE Mark required because it’s human tissue. And they’re used to putting it in in that fashion. And in the US, the tissue is sold as – the tissue is provided as a – with a prescription. You might have a -2 or -3. And that will be regulated under as a PMA. But the tissue could also be – the doctors could also take tissue and reshape it and reform it any way they want. So there’s sort of two different pathways of approval in the US. And we’re working through the strategy right now and the best way to move it forward.

TS: You do like working with the FDA, don’t you?

DM: You know, I think I guess what time shows is that if you’re patient and you wait long enough, you end up getting through. It does work, but sometimes it can be a bit painful.

TS: I guess it’s easier than the cheese farm you started last time after Summit, right?

DM: Yeah, exactly. I decided not to go to cheese this time and sticking with ophthalmology.

TS: Starting a company today in this environment, how is it different than it was 8 years ago when you were working with Avedro, or when you’ve done it in the past? What lessons are you learning today?

DM: Well, you know, it’s hard to know. I haven’t started really pounding the pavement for raising capital for it. I think what I’ve seen over all the years of entrepreneuring that the ability to raise capital is sort of cyclical. Sometimes it’s easier, sometimes it’s harder. So I don’t know what it’s going to be like at the moment going out there and starting to pound the pavement. But I think ultimately that’s really the only difference, I think. You know, clearly FDA has gotten tougher over the years, and even Europe, getting CE Mark has gotten tougher over the years. But that just comes with the territory. It’s the blessing and the curse because it does that form that barrier to entry for other competitors coming in. I think if you look at Avedro and cross-linking, the biggest barrier that kept everybody out over the past 4 or 5 years was certainly not technology; it was people watching how hard a time we were having getting through the FDA. And nobody else was willing to bite the bullet, you know, pony up the money for that.

TS: And what does this company ultimately become? Is it a larger standalone company? Or do you see this as something that’s quickly acquired by a player out there already?

DM: You know, I don’t know. I don’t really have the answer to that. I think that it’s a very likely could be part of the domino cascade that often happens in technologies like this. You know, if you look at what happened with early excimer lasers, look what happened with femtosecond lasers with cutting flaps, look at what happened with femtosecond lasers for doing cataract surgery, I think that each of those and including these onlays or inlays are clearly big ophthalmic opportunities. And ultimately they belong in the hands of the major players. It’s a question of when the dam breaks and they, the large companies decide that they want to be in.

TS: Terrific. Well, it’s great to have a new story for you to tell. I’m sure we’ll see you up on the stage at an OIS in the very near future with a whole different set of Power Point slides.

DM: I expect so.

TS: Thanks for the time, David.

DM: All right, thanks a lot, Tom. Bye-bye.

TS: David Muller, thanks again for joining us on the OIS Podcast. I think this marks your fourth visit to the Podcast, which may be a league record. So keep making the news and we’ll keep having you on. Good luck with Allotex, and of course thank you all for returning to the OIS Podcast. We apologize for the brief hiatus, but I’m telling you it’ll be totally worth it. And of course go to OIS.net to register or to fill out an application to tell your company’s story there. And we’ll see you in New Orleans.