Greyledge Technology is a biotech company that works with the patient’s own tissue samples. They take a tissue from you, typically blood or bone marrow tissue, and they manipulate that into a sample in a therapeutic that’s placed back either via injection, or as part of the surgical technique where our surgeon implants it. There are therapeutic cells within these preparations that can be used to promote and support natural healing.

Greyledge CEO Dave Karli MD, biotech startup & optimizing the process of regenerative medicine.

We’re incredibly fortunate to have Dr. Dave Karli on the show. He is the CEO of Greyledge. Greyledge is located out of Vail, Colorado in Denver. Dave is responsible for all aspects of the company development, including the integration of a strong team of professionals to support Greyledge’s innovative approach to regenerative medicine. A bit of background about Dave; after attending med school at the University of Maryland, Dr. Karli, completed his residency at Physical Medicine and Rehabilitation at Harvard Medical School. Subsequently, he joined the facility at Harvard serving as an attending physician with the Department of PM&R at Spaulding Rehabilitation Hospital as well as working in the department of Orthopedic Surgery at Mass General Hospital.

After joining the Steadman Clinic in Vail, Colorado in 2003, Dr. Karli began to adopt the use of autologous-based therapies that were emerging in the field of regenerative medicine. He has continued to lead the effort required to refine the practice of regenerative medicine. He has published pivotal clinical results and lectured extensively. His practice has grown substantially and includes treating elite-level and professional athletes. As a result, Dr. Karli has been featured in publications such as the Wall Street Journal, New York Times, ESPN Magazine and the Denver Magazine. Dr. Karli recognized early on that understanding the composition of regenerative biologic preparations used in treating his patients would be critical to refining his practice of medicine. He also realized that a one size fits all approach to creating the therapeutic preparations wouldn’t meet the need for an evidence-based precision medicine approach. In support of his concept for regenerative medicine, he completed the COLA Laboratory Director training course and obtained his MBA at Daniels College of Business, University of Denver. Greyledge has achieved sustained profitability ready for scalable expansion. Dr. Karli is positioning the company to maintain its unique technology platform offering by tracking regulatory activity, advancing biologic sample analytics and quality measures, and creating protocols that allow for customization of patient biologic preparations.

Dave, welcome to the show.

Thank you so much for having me. It’s an honor to be here.

What is Greyledge Technology?

Greyledge is an early-phase biotech company that works with the patient’s own tissue samples. You mentioned the word autologous earlier, a lot of people may not know what that word means. Autologous means from the self. It’s your tissues that are put back into you. We’ll take a tissue from you, typically blood or bone marrow tissue, and we manipulate that into a sample, a therapeutic, that’s placed back either via injection or as a part of a surgical technique where our surgeon implants it. I hesitate to use the word stem cell. There are stem cells in these preparations. That’s not a very accurate term to be using anymore, it’s been antiquated, but there are therapeutic cells within these preparations that we can use to promote and support natural healing. Our company promotes healing at the end of the day. We apply it towards orthopedic applications, arthritis, sports injuries, and things of that nature.

There are other applications that we’re not actively involved with, other active areas of research like cardiovascular medicine and wound healing, cosmetic applications and others. We’ve stayed in our wheelhouse in orthopedics, which is my background, musculoskeletal medicine, but it’s an interesting tech play. It’s something that continues to evolve in part due to advancements in science and in part due to public demand. This was something that the patients wanted. They didn’t want to go through big and dangerous procedures. They want the medical and scientific community to come up with alternatives for them and this is one of many, many companies that’s working towards that end.

We talked about what you’re doing and what Greyledge does. Specifically for Greyledge, that’s the underlying science side, but what does Greyledge bring to the table? What do they do?

We set up a laboratory processing facility within a hospital, a practice, or an academic institution for example, where we produce the sample that is implanted. We coordinate with the providers to obtain a sample, process it, analyze it, and we’ll get into the quality control component of organization, which is the unique piece, and then re-implant it via the provider. Greyledge cannot practice medicine. We’re not a medical provider. We are a service provider, so it’s a collaborative effort with the clinician. In my own practice, that clinician is me, with our partners, it’s the docs that we work with. Greyledge can’t tell the doctor what to do with our product. The field, research, and clinical judgment determines what to do with the product. We produce the product in a unique way at a very, very high level that also sets up the platform from which we can track it in research methodology that is superior to what has developed the field or lead the field to date.

We are a collaborative service provider and we’re also, at the end of the day, becoming more of a data management company as well because it’s our responsibility to validate that our products work, just like any company. In this case, it’s a biotech and medical apps company, so we have to create a platform from which we can track our outcomes with our associates or with our network. It’s multiple arms of the company and that’s been an evolution over time. The field is growing so quickly. It’s been hard to keep up with it scientifically and the public demand has created a bit of a pull instead of a push. That has led to a faster development probably than we would have liked in terms of applications and where this is being used across the country.

GL, almost in a way, maybe slowed that down a little by saying, “Let’s put on the brakes here for a second. Let’s do this right. Let’s figure out how to do it ethically, legally, correctly, and also create a platform with science that works.” At the end of the day, if our products aren’t effective, then we’re not doing our job. It was a complicated time to develop the company, but a really important one because we were seeing development that I didn’t like the direction that it was going and this was our solution.

There’s a lot of people in this arena. What makes Greyledge different? What’s their value proposition? What’s your MO?

The field was driven and it matured with very little quality control. For example, medical devices are responsible for driving utilization in the early days on the field. In that situation you would input a sample, the device would process it, a final product would come out the other end, and you had no idea what was in it. There was no measurement, there were no analytics, there was no quality control whatsoever. I started out using these devices a number of years ago just like everyone else, and even with no quality control, we were still seeing trends towards some reasonable and healthy outcomes.

Were you still within the range of what was legal or ethical to do?

At the time, it was the best we had. Utilizing that, I just didn’t feel it was acceptable as a practitioner. The concepts of Greyledge came from feeling that that was inadequate. We had to do better. We had technology that could allow us to do better. Greyledge’s value proposition is that we provide the quality control and analytics. We have a quality management program that is set up based on something called CLIA. CLIA is a federal body that oversees hospital laboratories. When we started this, there was no one to oversee us. There was no one to regulate us. We had to go to what we felt was the closest model. We are a lab, so we went to the gold standard, which was CLIA. We set up our operating procedures in a quality program based on a CLIA standard, the organization that would come in and audit your hospital lab. We invited CLIA to come in and take a look at our stuff, and they did. They showed up and they were great. They went through and provided some useful feedback and at the end of that first audit of many audits, they said, “Dave, you would meet our criteria but technically you don’t fall under our jurisdiction.” It gave us our foundation. That was important. We looked at good manufacturing practices and good laboratory practices and different quality control measures. Then we looked at the FDA. When we organized Greyledge, we said we wanted to create an analytical platform that would allow us ultimately look at dose-response relationships.

For the audience that don’t know what a dose-response relationship is, can you dig into that a little?

To go back to my earlier analogy, you have a device which puts out a product and you don’t know what’s in it. How do you determine if it worked when ten different patients will produce ten totally different samples? If we could at least know what was in it, we can look at the components of the biologic and we can break down the different cells, cell populations, the number of platelets, different analytical measurements, and then we can run that in parallel with outcomes. How does the patient do? Then you can say, “This group of patients did well. What was it about their biologic that we might identify as a trend that would alert us or trigger us to make it better? This group didn’t do so well. Is there something as a common thread that we could find in that group that would trigger us maybe to identify a patient that may not do so well, or we have to alter their protocol or we have to process it differently or do something different?” It was dose in this case, measuring the numbers of cells and cell populations. That’s our dose and the response, “How did the patient do?”

That’s your data collection effort.

That’s the platform that’s set up now to improve the quality and statistical relevance of the research. Here’s the analogy I use. If you have a blood pressure problem and you have five different blood pressure medicines and you give that to a bunch of patients, but you don’t know which dose you gave, how do you prove what’s an effective dose? That’s the situation we were in when this whole field started probably around ’04, ’05. It didn’t feel it was acceptable, so we wanted to create a platform to address that particular problem. Let’s at least know what’s in it, if for no other reason than to provide safety measures to more patients.

We also knew that the FDA would view this not in the same way it would view a drug. We can get into later the difference between what we do and drug development, but we knew if we followed or track that standard in a language that they knew, they were less likely to be concerned about what we were doing. We designed the company from day one to meet the FDAs expectations based on our interpretation of what they wanted. We went out and found CLIA, we went out and found elements of good manufacturing practices, we went out and found elements of good laboratory practices, and we melded it into this standard operating platform and quality management platform that satisfied elements of each. Then we invited the FDA to come and have a look by registering.

I’m thinking as you’re talking about the approach that, “We’re going to go through and we’re going to create standards based on acceptable CLIA,” and going to the FDA. For many entrepreneurs, I don’t think that’s the approach necessarily. They’re trying to get to market and you’re trying to get to market correctly quickly, or correctly anyways, through standards. What do you think contributed to that thought process?

Any startup is vulnerable, especially early on, but through the business cycle, until they achieve a critical mass. If there was a problem, we wanted to know early because we still had an opportunity to change it. As a general rule in the biotech or pharma industry, there are very specific rules you got to follow. Ours was hazy. It wasn’t completely clear because this was such a new area, the FDA literally didn’t have time to get guidance prepared for exactly what we were doing, and then it exploded and it was a situation where it couldn’t keep up and we had to do the best we could to meet a standard. We wanted to set the bar as an industry leader in terms of quality, but we had no playbook so we had to make it up. We cherry picked elements from what we felt were ideal to do create that platform.

Medical devices are responsible for driving utilization in the early days on the field.

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We took a different approach. We didn’t want to guess, have the FDA show up and be wrong, and then have to reverse engineer all kinds of different things. That would have been a cumbersome and challenging path. I guess we had to guess on some respects on what we thought they would want to see based on the Code of Federal Regulations and our interpretation and consultants and all these kinds of things that we did for background, but we wanted them to come so that we could pivot or adapt or morph the company in a direction that was harmonious with the FDA. The industry has seen a lot of the equivalent of a cease and desist letter from the FDA coming to companies or practices because they guessed wrong, where they pushed the boundaries of what the code of federal regulations allows.

We don’t want that. Greyledge was designed to provide a quality product for its users. In addition, they don’t have the time to dig into FDA protocols and Code of Federal Regulations and all the stuff that we had to do. We wanted to do that for them. We wanted this to be a turnkey model that allowed them to focus on practicing medicine, which is what they do best, and trust us to make sure that they’re in compliance with what the FDA expected and, at the state level, what their expectations were as well. Then have the confidence that our product was the very best it could be and that they trusted enough to put it into their patients.

I thought that was important to dig into because we talked about that at length before. For an average practice or potential client, they’re looking at a range of expenditure. What could they look at it as a range of expenditure to adopt your technology?

The field developed without a billing channel. As with any new medical technology, a fair amount of research has to be done before a third party payer will adopt a coding channel to be able to bill an insurance company. It was a fee for service model. That in and of itself creates a number of challenges and potential for misuse and all kinds of problems. Our challenge was to create a cost-effective platform and dump in as much value for the reasons we talked about as we could. In terms of costs, the provider sets the cost to the patient. It’s a fee for service model, which some people like and some people don’t. I personally liked the model and this is why. If I treat a patient and they spend their hard-earned money on a technique, their treatment that I’ve recommended and performed on them and they don’t do well, I’m the one who’s accountable. I’m going to hear about it.

One level, from a quality perspective, it forces us to be on our game. It forces us to be doing the best we can in providing that and also educating them correctly on the decision whether or not to do the treatment in the first place because if you push the boundaries knowing that your outcome isn’t likely, you’re going to have lousy outcomes. In that respect, it’s a good thing but it also creates the potential for misuse. We talk about the business of medicine and the doctor-patient relationship and the unique challenges we face in commercializing something that’s a medical treatment. It’s difficult. It is a unique relationship between the doctor and the patient. There is potential to do it incorrectly. We said Greyledge doesn’t practice medicine but as a clinician, my personal approach was let’s educate the patient as though they were consumer because they are investing in this, we’re going through a third party. We tell them what we know from research, we tell them what we know anecdotally, we tell them the risks, we tell them the likelihood or potential for success, and go through everything in context, and then every single patient hears for me, “It is possible that this will not work. We’re not perfect. 80% of patients do well based on what we know, but that’s not 100%.”

They need to hear that and they need to know it because they’re trying to make it a consumer decision. It’s a little different from, “Let’s run this through the insurance company and if it doesn’t work, we tried it and we’ll try something else.” It’s different now. This is an educated investment and we are ethically bound, to be fair, and that gets into your original question of price point. The physician dictates the price point to the patient. Greyledge’s costs are fixed. For us to produce a biologic depending on what we do, it can vary from several hundred dollars to a little over a thousand dollars, so relatively inexpensive compared to a surgical implant, which can be $50,000,$60,000,$70,000 or something like that, just an example. It’s relatively cost effective when we do that for a reason because we knew those costs were going to be transferred right to the patient.

We wanted to create a model that was profitable. We have to make money. We’re a business. If we don’t make money, we’re not going to be around very long, but also what’s fair to the marketplace that we were serving, which is at the end of the day is the patient even though we can’t practice medicine. We had to consider the end consumer even though that’s not our client. Our client is the physician. The end result, the consumer, is the patient. We have an intermediary to deal with there. We can control our part, we can control the doctors part, but it was in a unique position to be able as a physician to counsel them as a peer. I can counsel them as an executive for Greyledge technologies. We can’t practice medicine. We are limited in that regard, so it was a very unique position to be in and we wanted to provide a good product that again was an industry standard and part of that industry standard was ethically providing the service in a fair way.

For the physician, that sounds interesting. What does the adoption of this particular technology look like to them? Timeframe, space...