Monday, June 24, 2019

Avalon Globocare: A Trifecta Biotech

Summary
Avalon Globocare is an investment gem because it is brewing a highly diversified pipeline of potential blockbusters.
Leveraging precision medicine, Avalon employs liquid biopsy with exosomes biomarkers to provide an accurate diagnosis for various cancers and even nonalcoholic steatohepatitis.
The crown jewel of the immunotherapy franchise is a premier multi-targets CAR-T. It has the power to circumvent prior limitations of the first generation drugs (Yescarta and Kymriah).
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. - Warren Buffett
In bioscience investment, it is wise to choose a young growth company with several blockbuster prospects. When there are three blockbuster franchises, chances are that you found yourself a jackpot of gold. If one or two franchises fail, there is still the third one to deliver outsized profits. That being said, Avalon Globocare Corp. (AVCO) epitomizes this type of growth equity. The young grower, Avalon is attempting to capture fortunes in regenerative medicine, CAR-T, and precision medicine diagnostics. As such, the company is positioned to hit a "trifecta." A trifecta biotech usually yields strong investment returns due to three layers of blockbuster diversification built into one firm. If you've been reading my research, you'd realized that diversification is highly imperative for successful life science investment.
Figure 1: Avalon stock chart (Source: StockCharts)
Since biotech equities are risky, there are correspondingly high rewards. To mitigate the risk, you must employ with diversification both within the stock like Avalon as well as in purchasing a basket of equities. Keep in mind that this form of diversification is different than the diversified pipeline of a giant pharmaceutical innovator. In my opinion, it's nearly impossible for a giant to double or triple in the next several years. Investing in young growers like Avalon is the way to generate outsized returns in the long run. If confirmation is needed, you can view the phenomenal profits from the SPDR S&P Biotech (XBI) that focuses on bioscience growth equities. In this research, I'll feature a fundamental analysis of Avalon and provide my expectation on this Phillip Fisher growth stock.

About The Company

Founded in 2016, Avalon Globocare operates key subsidiaries (Avactis Biosciences and Genexosome Technologies) and is headquartered in Freehold New Jersey. Only several years old, Avalon Globocare already built a reputation for itself as the leading cell-based technology company. In delivering hopes to countless patients worldwide, Avalon is focused on the development and innovation of medicines and diagnostics to serve the strong unmet needs in cancer and various diseases. As follow, the company is poised to capture three highly promising niches, including exosome diagnostics, regenerative medicine, and cellular immunotherapy.
Figure 2: Avalon subsidiary (Source: Avalon)
Powering the diagnostic portfolio is precision medicine based on "exosomal biomarkers." Accordingly, Avalon is delivering a diagnostic avalanche against oral cancer, nonalcoholic steatohepatitis ("NASH"), leukemia, colorectal cancer, and macular degeneration. Notably, exosomal biomarkers can quickly pinpoint a diagnosis to give physicians an edge against dreaded diseases. In the battle of life and death, I believe that accuracy and precision are of paramount importance. That aside, Avalon is brewing various potential blockbusters, including AVA-101, -201, and -203 as shown below.
Figure 3: Diagnostic and therapeutic pipeline (Source: Avalon)

Strong Infrastructure And Subsidiary

Aside from the strong proprietary core technology and intellectual properties, Avalon has a unique growth infrastructure. Specifically, the company has the capability to accelerate its product development and commercialization through three strategic laboratories, including Weil Cornell Medicine, Beijing Lu Daopei, and Nanjing BenQ hospitals. You guys are probably familiar with the caliber of Cornell Medicine. Lu Daopei hospital is no less than Cornell, as it's founded by a stellar physician who is held in high regards in China. That aside, the aforementioned subsidiaries allow for great flexibility in research and development. Moreover, it enabled international investors to build shares in a company that has a strong foothold in North America and especially overseas.
Figure 4: Strong vertical integration (Source: Avalon)

Precision Medicine Powered Diagnostics

Shifting gears, I'll analyze the secret sauce that differentiates Avalon from other bioscience innovators. Representing the industry tailwind and fundamental shift, precision medicine embodies a therapeutic that is tailored to the individual patient. As such, it confers excellent efficacy and safety. The fine-quality of precision medicine is like a custom-made suit that is superior to clothing available at Walmart stores (WMT). As the pinnacle of medical management, precision medicine operates on the principle that the same drug can exhibit distinctive responses in different patients. The unique genetic makeup of one individual compared to another translates different enzymatic expression and drug metabolism. By developing specific medicine for a patient, the treatment outcomes are greatly improved.
Of note, a key component of precision medicine is a liquid biopsy. Traditionally, most confirmatory tests employ a tissue biopsy. Aside from having a higher rate of potential complications, a tissue biopsy is cumbersome and time-consuming. Like a magnet that drawn innovation toward progress, the trend nowadays is shifting in favor of liquid biopsy. In a simple blood draw, a liquid biopsy provides invaluable data on molecular biomarkers that, in and of itself, improve the diagnostic "sensitivity and specificity." In other words, a liquid biopsy expedites the diagnosis time, lowering the costs, and improving the diagnostic accuracy as well as treatment outcomes.
Figure 5: Liquid biopsy (Source: Avalon)
Traditionally, there are three biomarkers employed in a liquid biopsy. They include circulating tumor cells (CTCs), circulating tumor DNA (ctDNA), and exosomes. In my view, the trend nowadays is moving away from CTCs. Only ctDNA and exosomes remain dominant. As part of cancer cells that get pinched off and travels into the bloodstream, I believe that exosomes hold the greatest promises. Exosomes are like leaves that provide invaluable information about a tree (i.e. cell). By getting a hold of the leaves, you can pretty much tell if the tree has a disease. And given that exosomes are readily accessible in many biological fluids (blood, urine, and saliva), tapping into exosomes for diagnosis is ingenious.
Figure 6: Exosomes (Source: Avalon)

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