Avalon GloboCare (NASDAQ: ALBT) stock continues to attract investor attention. Since Monday, ALBT shares are more than 43% higher, fueled by several updates highlighting its clinical ambitions, planned accretive acquisition, and the restructuring of its management and board to better reflect Avalon's new focus on laboratory services and biotherapeutics in the United States. Besides holding a small office in Shanghai, China, all other business operations in the People's Republic of China have ceased. (* share price open on 12/12/22 – 12/15/22, $0.32 - $0.48, 9:48am EST, Yahoo! Finance)
The move higher this week has been one in progress, and increasing volume supporting the trend may indicate that the bullish momentum could add further gains in the coming days. Volume does have a way of preceding price, and in this case, helps create a path of least resistance to the upside. Closing an apparent valuation gap isn't surprising to those following the company. The first leg of its bull run started after ALBT announced its definitive plans to acquire 60% of Laboratory Services MSO, a leading diagnostics and medical services company that posted over $25 million in revenues (unaudited) last year.
That deal is immediately accretive to ALBT’s revenue streams. What’s more, it also brings together two rapidly growing medical sector companies that can pool resources to focus on a broader set of revenue-generating opportunities, accelerating the growth of each and extending competitive distance in their respective markets.
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Developing Better Treatments With Innovative Science
The spike since Monday is warranted. In fact, investors were right to no longer ignore the disconnect between ALBT's share price and its asset and clinically-focused portfolio. Still, with ALBT advancing compelling science, acquiring new assets, and leveraging its NASDAQ listing to attract institutional investment, the recent move could be the precursor to even greater things. Part of that calculation comes from knowing that clinical-stage, vertically integrated Avalon has already established itself as a leading CellTech bio-developer with its innovative and transformative immune effector cell therapy, exosome technology, and other cell-therapy-related companion diagnostics. While that's an impressive list, they do more than just that.
Avalon GloboCare also provides strategic advisory and outsourcing services to fuel clients' growth, assisting in project development designed to enhance competitiveness in targeted healthcare and CellTech industry markets. Moreover, leveraging its subsidiary structure that integrates unique verticals from innovative R&D to automated bioproduction and accelerated clinical development, Avalon has quickly established itself as a leading and respected player in cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.
That role enables ALBT to make significant progress in advancing its scientific and clinical programs, particularly those focused on immuno-oncology and cellular medicines. Those endeavors are beneficial to all involved parties: ALBT can benefit from the lucrative market opportunities; patients can benefit from Avalon GloboCare targeting and treating unmet needs, and investors benefit from the company successfully hitting those two targets. Best of all, by utilizing innovative technologies intending to transform cellular therapy and regenerative medicine, results on each front could come sooner than later.
That isn't an overzealous assumption. It's a sensible one given ALBT's focus on treating underserved and unmet conditions, which inherently tend to open doors to fast-track and Orphan designations that can accelerate the pace of clinical trials and expedite approval considerations. Better still, ALBT isn't taking on its ambitious programs alone. They are fueled by partnerships with world-renowned research centers and universities involved in developing and strengthening the potential of its cutting-edge, proprietary, and innovative research focused on bio-process development, the advancement of clinical programs, and product commercialization.
Impressive Partnerships To Help Advance Innovation
Considering ALBT is a smallcap in the sector, its list of partnerships is quite impressive. One is with the University of Pittsburgh Medical Center (UPMC) to develop new cancer immunotherapy approaches and streamline manufacturing processes. The collaborative study could have far-reaching effects, noting that the study intends to do more than bring effective treatments to markets; they are working to develop these powerful cancer treatments with a rapid bio-manufacturing time (1-2 days instead of weeks). The end result: getting life-saving therapeutics through the review and approval processes and reaching patients faster than ever imagined.
Avalon GloboCare is also part of a research partnership with the University of Natural Resources and Life Sciences (BOKU) in Vienna, Austria. The goal is to co-develop a novel, cell-free, in-silico system that would expand Avalon's ability to design and produce novel cell membrane proteins, including receptors found on the surface of immune and cancer cells that function in cell signaling. Expected end results could also provide Avalon with an efficient tool to screen and optimize potential therapeutic targets. Progress is definitely being made. Avalon has also co-developed and jointly filed a patent with BOKU on a novel S-layer coated emulsome technology (SLET) platform for next-generation, targeted drug delivery and cellular immunotherapy applications. Avalon expects this novel SLET platform will accelerate the development of its mRNA-based Flash-CAR™ and other cellular therapy programs.
Data thus far shows that targeted delivery of mRNA into immune effector cells using SLET can open the door to a new generation of cancer immunotherapy and other applications, including targeted drug delivery and therapeutics, vaccine development, in vitro diagnostics, and cellular medicines. Those initiatives utilize traditional research methods. However, it's important to note that ALBT also focuses on the possibilities brought about by utilizing artificial intelligence in the production of new medicine.
Embracing The New Frontier In Medicine- Artificial Intelligence
Earlier this year, Avalon GloboCare announced a new study applying artificial intelligence (AI) enhanced protein design "QTY Code" technology, a novel treatment method the company believes could accelerate the development of therapeutic monoclonal antibodies to treat cancer. Notably, ALBT’s approach isn't more of the same.
In fact, ALBT describes its AI-empowered approach to drug development as appreciably different from others and is proving that point by identifying a new method for quickly predicting the design of so-called "water-loving" or hydrophilic variant structures of the 14 glucose transport membrane proteins in cells. That could be a vital contributor to drug development because it allows researchers to study specific glucose membrane transport proteins more easily in water. Results are impressive, evidenced by their publication on June 27, 2022, in QRB Discovery, a peer-reviewed research journal of biological function, structure, and mechanism.
The peer-reviewed analysis highlighted that the QTY code demonstrated a novel method for quickly predicting the structures of water-soluble versions of glucose transporter proteins, which are important in cancer. That discovery is valuable to the entire cancer drug development space since these proteins are difficult to study and poorly understood. But what is understood, and why the discovery can be a significant and contributing factor to drug development, is that these transport proteins, especially those that regulate glucose, play a vital role in cancer growth. Thus, tapping into how they work can accelerate researchers' understanding of these proteins and the development of antibodies against them to treat cancer.
From a valuation perspective, that discovery can benefit ALBT directly in its trials. Moreover, it may bring tremendous additional value related to other collaborative relationships, including partnerships and licensing opportunities. With shares trading at $0.46, despite the recent spike, this vital discovery currently appears to be overlooked as a contributor to near-term growth.
Of course, the headline value driver are the gains expected to come through its 60% stake in Laboratory Services MSO.
A Transformative Acquisition Exposes Valuation Disconnect
That definitive acquisition agreement provides the pathway for ALBT to acquire a 60% interest in Laboratory Services MSO, LLC, a premier reference laboratory. It also adds an existing and significant revenue stream, allowing ALBT to utilize and help monetize a broad portfolio of diagnostic tests that include drug testing, toxicology, and an array of test services that range from general bloodwork to anatomic pathology and urine toxicology.
As noted, the best part about this deal from an ALBT investor's perspective is that significant revenues are already being generated from these services, which include STAT blood testing, qualitative drug screening, genetic testing, urinary testing, sexually transmitted disease testing, and more. From an industry standpoint, Laboratory Services has an excellent reputation for customer service and fast turnaround times. It has completed over 600,000 tests since its inception and operates with 2021 unaudited annual revenue above $25 million through two locations in California.
Terms of the deal call for cash and stock, which has put pressure on the shares. However, as shown on Monday, when the bulls return, ALBT can significantly outperform its market peers. And with the acquisition expected to close in 30 days, subject to a 90-day right of extension by Avalon, the bulls may hold the reigns of the stock for the foreseeable future - especially after noting a $5 million private placement in its Series A preferred stock has already been completed. While an additional $10 million is expected to be raised on similar terms using shares restricted from trading for nine months, downside pressure may be capped as investors are now more aware of the ALBT interest and the deal’s dilutive effect is better understood.
Follow The Leaders, ALBT Is Optimistic
Of course, ALBT insiders understand the impact the deal immediately brings. David Jin, M.D., Ph.D., President and Chief Executive Officer of Avalon, commented, "This is a transformative acquisition for Avalon as it brings significant revenue and positive cash flow and is expected to be highly accretive to earnings while adding strong clinical synergies to the existing Avalon portfolio. Laboratory Services has an impressive growth history and is an established leader within the highly fragmented lab testing and services market. Laboratory Services' diagnostic business is highly synergistic with our existing precision companion diagnostic business and cellular technology platforms."
Indeed, the operating synergies will allow ALBT and Laboratory Services to grow quickly, fueled by established infrastructures, resources, and cutting-edge diagnostic and immune-therapy platforms that could help make ALBT one of the most valuable contributors to the rapidly growing diagnostics industry. If that's the case, which its $25 million head start makes likely, ALBT stock appears appreciably undervalued at roughly $0.46 per share. However, that's not necessarily bad news.
As is often the case, the mispricing of company stocks can present compelling investment opportunities. And when a company exposes the reasons why they are a perfect example of market makers missing an appropriate valuation, downside risk can be mitigated and upside justified. Avalon GloboCare is showing, and telling, investors why its stock presents an overlooked value-based investment opportunity. And if $25 million in shared revenues isn't enough to sway a decision, stay tuned: that number is likely to move substantially higher in 2023. If so, using industry-accepted revenue multiples to appraise company stock, the ALBT share price may never be this low again.
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