Markets are dynamic. And with just a slight imbalance between buyers and sellers, more times than not, an opportunity gets exposed. That's especially true when it comes to investing, where trading imbalances of low-float companies can have an outsized effect on which way momentum trends. Take the case of Avalon GloboCare (NASDAQ: ALBT), a NASDAQ-listed company with only 3.22 million shares in the float that is better positioned than at any time in history to accelerate growth in 2023. Its reward- a more than 36% decline in share price since the start of the year, settling Monday at $3.24.
Why the weakness? Fair question. A reverse split, raising capital (at a premium), and, most conspicuous, weak broader markets all contribute. But the better question may be to ask why is the current ALBT stock prices an opportunity. Those that do will find more than a few reasons that justify a bullish sentiment.In fact, ALBT provided news over the past quarter that offers plenty to support the bullish proposition in play and, just as important, exposes a valuation disconnect between share price and performance that may be getting far too wide to ignore.
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An Impressive IP Portfolio
Part of the value is inherent to a growing and formidable IP portfolio, which for small-cap biotechs, can be revenue-generating lifeblood from a licensing and partnership perspective. Last week, ALBT announced that the USPTO has issued a patent that protects issued claims covering the composition of matter and methodology for multiple novel QTY-code modified cytokine and chemokine protein receptor molecules. The patent was jointly filed with Dr. Shuguang Zhang of the Massachusetts Institute of Technology and is considered a breakthrough technology that can turn difficult to work with water-insoluble transmembrane receptor proteins into water-soluble proteins.
That's a big deal for the entire sector, noting that its value can be leveraged by virtually any clinical-stage pharmaceutical company since it significantly enhances the solubility of designer peptides and proteins and expands the repertoire of selected therapeutic targets against cancer and other diseases.Still, the potential inherent to this particular patent should be viewed as a single contributor. ALBT has jointly filed and expects value from at least 16 other patent applications. In addition, the company has an intrinsic value from co-inventions with key strategic partners, including a top-5 U.S. university, a leading education and research center in Europe, and a premier multi-national developer of cellular therapies in the field of oncology.
Thus, while the newest issuance can enhance ALBT's position as a leader in immuno-oncology and cellular medicines, it's the totality of intellectual substance that should attract investors. After all, markets ultimately value a company on a sum-of-the-parts basis, and in ALBT's case, it's accruing quite an arsenal of IP firepower that has the potential to get monetized sooner than later. Remember, with ALBT working with some of the country's most prestigious institutions that could be happening already.
Ushering A Breakthrough In Fusion Gene Map Technologies
In fact, that's likely after ALBT announced earlier this month that it has deployed a breakthrough fusion gene map technology to develop companion diagnostic kits and devices to enhance the personalized clinical management of leukemia patients.
Specifically, in collaboration with the Lu Daopei Institute of Hematology, a fusion gene map database from over 1,000 patients with leukemia was established, with the results previously published in the Blood Cancer Journal. Notably, these fusion genes are important genetic abnormalities in leukemia, and by using advanced gene sequencing technology called "Whole Transcriptome Sequencing," multiple previously unknown fusion genes were identified that can potentially establish novel diagnostic and therapeutic targets.Avalon is applying the bioinformatics from the fusion gene map to accelerate the development and commercialization of companion diagnostic kits and devices to enhance personalized clinical management of leukemia patients. ALBT's first diagnostic prototype is expected to enter clinical study and regulatory filing stage during Q3 of 2023.
But because the fusion gene map technology also provides an unprecedented opportunity to identify and validate fusion gene products as potential novel therapeutic targets, interest from the over 20 ongoing clinical studies to treat forms of leukemia, including those by Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ), could strengthen. That would be in addition to providing ALBT its own opportunities to expand its R&D pipeline and intellectual property portfolio.
They have the capital to do so.
Strengthened Balance Sheet To Expedite Clinical Initiatives
ALBT recently announced completing a private placement of its Series A preferred stock with its Chairman, Daniel Lu. The gross proceeds of the offering were $4.0 million and added to the previously announced PPM of $5 million of Series A preferred stock, with the two used to pay a portion of the purchase price for ALBT's announced acquisition of Laboratory Services MSO, LLC., in terms, by the way, that are very shareholder friendly. In fact, the terms of that deal were signed at a premium to the shares' prices.
Perhaps more importantly, holders of the Series A preferred stock are restricted from selling the shares of common stock issuable upon conversion for nine months and are further limited to selling no more than 10% of their shares of common stock in any calendar month. That's not all that's attractive about the deal.
The newly issued preferred stock includes no warrants, and leak-out provisions further protect the deal's integrity. Even better, combining the freshly raised $4.0 million with its previously raised $5.0 million on similar terms positions ALBT to expedite closing its signed and definitive acquisition agreement to acquire a 60% interest in Laboratory Services MSO, LLC, a premier reference laboratory headquartered in Costa Mesa, California. Another $6.0 million is expected to be raised under similar terms and restrictions to fund the remaining purchase price and close the transaction. For ALBT and its investors, closing the deal will be excellent news, especially under the terms provided.
In fact, Laboratory Services can be transformative to ALBT by adding significant revenue and positive cash flow that is expected to be immediately accretive to earnings. But more than a financial win, the acquisition adds clinical synergies to the Avalon portfolio, allowing them to leverage both companies' strengths to accelerate growth and expand market interests and share. Those liking to trade ahead of catalysts, ALBT expects to close the transaction this quarter, which puts a catalyst in the near-term crosshairs.
There's more to like.
Partnerships, Acquisitions Support Clinical Progress
Several updates, including those related to clinical ambitions, its accretive acquisition, and the restructuring of its management and board to better reflect its focus on laboratory services and biotherapeutics in the United States markets, all contribute to a near and long-term commitment to increasing shareholder value. While a predominantly China-based company only a few months ago, ALBT now only maintains a small office in Shanghai, China, with all other business operations in the People's Republic of China ceased.
But while stopping in China, ALBT is enhancing its ambitions and performance domestically. The closing of the Laboratory Services deal will add appreciably to that intent by bringing together two rapidly growing medical sector companies that can pool resources to focus on a broader set of revenue-generating opportunities, accelerate the growth of each, and extend the competitive distance in their respective markets. The better news is that ALBT is proving it has the resources available to maintain an aggressive growth pace.
They have cash, access to more, are advancing compelling science, are acquiring new assets, and leveraging, in the right way, their NASDAQ listing to attract institutional investment. All of those intrinsics combine to make clinical-stage, vertically integrated Avalon a leading CellTech bio-developer. And by advancing innovative and transformative immune effector cell therapy, exosome technology, and other cell-therapy-related companion diagnostics, that leadership role can become more established. Still, ALBT does more.
Banking On Strategic Advisory
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. Further, leveraging its subsidiary structure that integrates unique verticals from innovative R&D to automated bioproduction and accelerated clinical development, Avalon has also established itself as a leading and respected player in cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.
That ability enables ALBT to advance its scientific and clinical programs more quickly, particularly those focused on immuno-oncology and cellular medicines that meet unmet medical needs. Best of all, by utilizing innovative technologies that could transform cellular therapy and regenerative medicine, ALBT appears ideally positioned to turn ambition into revenues faster than many expect.
That isn't an overzealous assumption, considering ALBT's focus on treating underserved and unmet conditions. Those focuses tend to open doors to fast-track and Orphan designations that can accelerate the pace of trials and expedite approval considerations. The better news, ALBT isn't taking on its ambitious programs alone. They are fueled and assisted by partnerships with world-renowned research centers and universities to develop and strengthen the potential of its cutting-edge, proprietary, and innovative research focused on bio-process development, the advancement of clinical programs, and product commercialization.
Partnerships Pave Road Toward Commercialization
One of its partnerships 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 it 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.
The company is also advancing 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 ALBT with an efficient tool to screen and optimize potential therapeutic targets.
The better news is that progress toward reaching that goal is being made, noting a co-developed and jointly filed patent with BOKU on a novel S-layer coated emulsome technology (SLET) platform for next-generation, targeted drug delivery and cellular immunotherapy applications. Avalon noted expectations from this novel SLET platform to accelerate the development of its mRNA-based Flash-CAR™ and other cellular therapy programs.
Fueling optimism is data showing that targeted delivery of mRNA into immune effector cells using SLET can open pathways to a new generation of cancer immunotherapy and applications, including targeted drug delivery and therapeutics, vaccine development, in vitro diagnostics, and cellular medicines. Those initiatives utilize traditional research methods. However, investors should note that ALBT also focuses on the possibilities brought about by using artificial intelligence to produce new medicine. Embracing The Medical Applications Of Artificial IntelligenceRecent updates about its enhanced protein design "QTY Code" technology show things are progressing quickly. Notably, ALBT's approach isn't more of the same. 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 27th, 2022, in QRB Discovery, a peer-reviewed research journal of biological function, structure, and mechanism.
That 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. The better news for patients, ALBT, and potential investors is that the 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.
A Case Made For Bullish Presumption
Hence, while there is a lot on ALBT's plate, the best news is that the company is taking advantage of its opportunities synergistically. And with several initiatives likely near-term value drivers, coupled with a planned acquisition that brings significant revenue and positive cash flow, ALBT, as noted, looks better positioned than ever to grow larger faster.
Thus, often the case, weak broader markets create valuation disconnects that can be compelling opportunities. Indeed, the news from ALBT over the past two quarters has been excellent and more than supports the optimism shared by investors in recent private placement deals.
Remember, they bought at a premium with considerable lock-up periods. So, considering they can see behind the business curtain, investors may be right to take that as a bullish indicator.Couple that with an imminent and company-described "transformative deal" that will immediately change the revenue-generating trajectory of the company, rightly so.
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