Tuesday, April 28, 2020

IBI Research On Avalon GloboCare: Coronavirus Drug Discovery By Serendipity

Summary
The Coronavirus pandemic is wreaking havocs worldwide. There are still more patients being infected and dying from this virus daily.
Despite the early biotech resurgence, many fundamentally robust companies are trading at a deep bargain.
Avalon GloboCare made my Top Five Picks for the Corona bear market. In fact, the company is my number one choice.
Due to its powerful therapeutic design platforms, Avalon recently launched a highly differentiated Coronavirus franchise coined AVA Trap.
The company also implemented a Taskforce known as Avalon Combat COVID-19 Taskforce (“ACCT”). It is led by the Director/Former Congressman Billy Tauzin and the President/CEO Dr. David Jin.
Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell. - Sir. John Templeton
You are winding down the last week of April, i.e., the month of Carnage for the SARS-CoV-2 virus (i.e., Coronavirus) pandemic. Therefore, I'd like to revisit my Top Five Picks that are poised to trade several folds higher at the next raging bull market cycle. In response to IBI members' request, I created a dedicated community room where you can share your top stocks. Looking at the growing list, there are many fundamentally robust growers. In my view, the stock tips shared in "Your IBI Poll" will likely deliver you a fortune in the coming years.
That being said, I want to feature my favorite growth equity, Avalon GloboCare (NASDAQ:AVCO). As a leading CAR-T innovator, Avalon has the seamless upstream, midstream, and downstream integration. That stellar infrastructure enables the company to be highly adaptable to changing market conditions. As such, it can enjoy ingenuity through serendipity. In this research, I'll focus on Avalon's latest Coronavirus franchise and provide my forward expectations of this stellar grower.
Figure 1: Avalon chart (Source: StockCharts)

About The Company

As usual, I'll present a brief corporate overview for new investors. If you are familiar with the firm, I recommend that you skip to the subsequent section. Founded in 2016, Avalon GloboCare has strategic operations throughout various areas in the USA and China. Leading by a topnotch management team, the company sets out to make history in the therapeutic and diagnostic landscapes.
Figure 2: Avalon headquarters (Source: Avalon)
Using a trident-like approach of Poseidon, Avalon is poised to capture three lucrative niches. They include regenerative medicine, exosome diagnostics, and cellular immunotherapy (i.e., CAR-T). With prudent strategies and lofty goals, the firm seeks to alleviate worldwide sufferings for patients afflicted by cancers and other diseases. Concurrently, Avalon is unlocking tremendous value for shareholders with much more to come.
Figure 3: CAR-T pipeline (Source: Avalon)

Coronavirus Pandemic 

Before diving into Avalon's groundbreaking development, you should check the latest insight on the Coronavirus pandemic. Of note, I use the data from the two most reputable sources, i.e., the World Health Organization (i.e., WHO) and the U.S. Centers for Disease Control and Preventions (i.e., CDC).
As of April 26th, the WHO reported 2.71M people infected with the Coronavirus worldwide with 187.70K mortalities. That number jumped from 2.47M infections and 169.0K deaths for April 23rd. In the U.S., the CDC revealed 802.5K cases, with 44.5K mortalities. This increased from 776.0K infections and 41.7K deaths for the same comparison. As it is obvious by now, all countries worldwide and all states in the U.S.A. are devastated by the Coronavirus.
Figure 4: States affected buy Coronavirus (Source: CDC)
In my Pre-market commentaries, I elucidated how the epidemiology curves are plateauing earlier this month. As you can see, the Coronavirus pandemic is already in its declining phase. Following the current trend, it's likely that Coronavirus will be gone by the end of August. In fact, North Carolina will remove quarantine by May 8th. Regardless of when the countrywide quarantine is lifted, another wave of Coronavirus is likely to resurface next year like the seasonal flu. You may ask, Dr. Tran, why is that the case? My friend, that's due to the high mutation rate of the Coronavirus. Thus far, experts found 33 mutations relating to SARS-CoV-2.
Keep in mind, the next Coronavirus outbreak will not be as devastating as the current one. You can expect the next epidemiology curve to flatten out due to protective measures. In other words, we'll be much more prepared at the next cycle of Coronavirus infection. Specifically, you'll have vaccines, antivirals, great drugs, and improved diagnostics. You may say, Dr. Tran, why are you so bold? Well, my friend, there are many companies like Avalon GloboCare seeking to alleviate the disease burden for patients.
Figure 5: Epidemiology curves flattening for subsequent infection (Source: CDC)

QTY Therapeutic Protein

If you recall from my previous research, I wrote that Avalon entered into a strategic agreement with the Massachusetts Institute of Technology (MIT) back on May 21st last year. In that partnership, Avalon harnesses the power of MIT's artificial intelligence ("AI") algorithm to develop QTY protein. Asides from allowing Avalon to develop stellar CAR-Ts, MIT's cutting-edge technology enabled the company to innovate therapeutic proteins with excellent versatility and stellar efficacy, second to none.
You may be wondering how it works. As follows, the novel QTY protein acts as a recombinant monoclonal antibody. In doing so, it binds to the ligand (i.e., drug target) as a decoy receptor to improve the membrane's solubility and therapeutic efficacy. I mentioned in the prior article,
As a ramification of this upstream boosting, QTY proteins have vast applications such as antibody-dependent cellular cytotoxicity (i.e., ADCC) drugs , bi-specific antibodies, and CAR-T. As I now realized, you're only seeing a glimpse of Avalon's innovative capability. In the coming years, I anticipate much more exciting development as this small seed is growing into an oak tree. After all, large pharmaceutical companies started as tiny operators. I firmly believe it'll happen. Just don't expect it to occur overnight. As with anything that is worthwhile in life, patience is needed.

Figure 6: QTY protein Applications (Source: Avalon)

AVA Trap

Shifting gears, you should check how Avalon harnesses the power of QTY Proteins against the Coronavirus. On April 20th, the company disclosed a serendipitous development. Specifically, the firm is harnessing the power of its QTY Proteins to deliver the ultimate solution to Coronavirus. Due to the large prevalence of Coronavirus infection, I believe this development has crucial ramifications to your investment thesis. If successful, Avalon can capture the vast SARS-CoV-2 market. In the coming years, that can translate into multiple folds stock appreciation.
In hindsight of the recent development, I can see why Avalon would eventually deliver the silver bullet to Coronavirus. After all, QTY Proteins have therapeutic applications for many conditions. More importantly, the Founder and CEO (David Jin, M.D., Ph.D.) has a knack for finding innovative solutions against deadly diseases. Hence, it made sense that Dr. Jin would collaborate with his esteemed MIT colleague (Professor Shuguang Zhang) to develop "AVA Trap'' against Coronavirus.
If you recall from my initial research, I wrote that Dr. Jin has the expertise to size up a drug's chances of success. As a result of his infinite wisdom, Avalon now has what is potentially the best Coronavirus franchise in the market. Though AVA Trap is in its early phase, the company mentioned that Cambridge's Journal QRB Discovery already accepts its scientific manuscript. Therefore, I believe that you'll get to read more about it later on. As he framed recent developments in the most poignant terms, the President and CEO (David Jin, M.D., Ph.D.) enthused,
An overactive cytokine response, or cytokine storm, is directly associated with increased mortality. We have been studying and developing therapies for these cytokine storms long before COVID-19, as it relates to other illnesses and immunotherapies. We have applied this knowledge towards COVID-19, and believe our AVA-Trap holds promise in addressing the most serious morbidities related to COVID-19, which in turn, holds the potential to reduce mortality rates. Moreover, we believe the fact that this innovative research has been accepted for publication in a leading industry journal further validates the work we are doing.

Holy Grail To Treating Coronavirus

When a patient is infected with the Coronavirus, it traverses down to his or her lungs and thereby causes a massive release of cytokines. As chemical messengers of the immune system, cytokines are like artillery and fire powder used by an army. When a massive and uncontrollable amount of cytokines are released, the phenomenon is known as "cytokine storm." And it's quite similar to the "cytokine release syndrome" that Avalon's CAR-T can subdue.
As cytokine storms ravage the patient, it causes water to fill up their lungs to result in acute respiratory distress syndrome (i.e., ARDS). As you can see, treating cytokine storms  and resolving ARDS is crucial to the patient's survival. In my view, that's the holy grail toward Coronavirus management.
The good news for patients is that there is light at the end of the tunnel, i.e., AVA Trap. Precisely, the water-soluble antibody of AVA Trap acts as a "molecular sponge" to absorb these cytokines. In the process, AVA Trap sucks up these rogue chemical messengers to diminish cytokine storm's devastating ramifications, i.e., lung damage/fibrosis and ARDS.


Keep in mind, the Coronavirus itself doesn't kill you. Instead, the damaging secondary effects of cytokine storms kill the patients. By resolving cytokine storms, you bought extra time for the patient's immune system to ultimately render the virus obsolete. You don't have to believe me. And yet, the only way for your body to defeat any virus is by your own immune (i.e., natural defense) system gaining immunity against the virus. As you can see, AVA Trap is an ingenious and most effective solution to the Coronavirus.
You may say, Dr. Tran, there are also other drugs that tackle cytokines. You are right, my friend. However, AVA Trap is unique because it hits all six different cytokines. As an eagle dominating its niche, AVA Trap is the only one of its kind that can subdue all six molecules. In contrast, other drugs are lucky to hit only one cytokine (i.e., IL6).
That's why Avalon is an enticing investment. In bio-stock investing, you should focus on companies having differentiated medicines. Investing in a "me-too" drug usually doesn't pay off. Your mega profits reside in unique and best-in-class medicines like AVA Trap.
Looking ahead, when the Coronavirus recurs yearly like the seasonal flu, you can bet that AVA Trap will flatten out that epidemiology curve. Ultimately, it'll deliver hopes to countless patients while boosting your investment returns to a new level.

Dedicated Taskforce Against Coronavirus

You can say that I wrote sounds too good to be true. But in fact, Avalon is dead serious about fighting Coronavirus. Their valiant efforts span beyond the laboratory. In other words, the company recently launched a Taskforce to fight the Coronavirus known as Avalon Combat COVID-19 Taskforce (“ACCT”). And it's being spearheaded by the renowned former Congressman Billy Tauzin and Dr. Jin.
With his insight, strong voice, and deep experience in the pharmaceutical space, Congressman Tauzin will help Dr. Jin to accelerate the scientific and clinical programs to resolve the COVID-19 pandemic. Resonating determination and genius, Dr. Jin remarked,
The sickness and ripple effect of the COVID-19 global pandemic has been severely affecting all walks of life, imposing tremendous medical, social and financial burdens to our society. At Avalon GloboCare, we are ready to mobilize our resources and accelerate our scientific/clinical development on multiple fronts to help combat this pandemic through a strategic combination of therapeutic, diagnostic and preventative approaches.

Potential Risks

Since investment research is an imperfect science, there are always risks associated with your stock regardless of its fundamental strength. At this point in its growth cycle, the main concern is whether Avalon can generate robust data for its CAR-Ts. As I'm confident in Avalon's CAR-T success, I ascribed the corresponding 25% chances of clinical failure for AVA-001, AVA-101, and AVA-102. Simply put, the risks are low. Nonetheless, you can expect this stock to tumble over 50% if these drugs fail to deliver positive outcomes. Low risks are still risks because there is no guarantee in drug development. That aside, Avalon's AVA Trap might not bear good results.
That aside, Avalon can expand too aggressively. Hence, it can potentially run into a cash flow constraint. Be that as it may, that risk is minimized because of the Titan Lu, who recently injected the $20M credit facility into Avalon. With Chairman Lu backing his company, I believe that he'll do whatever it takes to finance Avalon to success. Wouldn't you do the same for your company? The other risk is that as a young company, Avalon may fly under the radar of investors.

Final Remarks

In all, I maintain my strong buy recommendation on Avalon with the five out of five stars rating. On a one to two years horizon, I expect the $12.5 price target to be reached. I also scored the firm with medium investment risk. And, I ascribed it with the 75% investment profitability. In a nutshell, you're going to make money on Avalon. Provided that you overcome your fear and thereby hold Avalon for the long haul.
From the trading viewpoint, my gut instinct (i.e., intuition) tells me that Avalon will never trade at its former low again. The strong recent share price appreciation supports my assertion. I believe Avalon is likely to exchange hands above $2 in the coming months. Every time it drops, I've seen Avalon rebound much higher.
By my high standard, Avalon GloboCare is a different and stellar innovator. First, the company is led by the cream of the crops management team. The leadership has strong financial, scientific, and medicinal expertise. Interestingly, Avalon's management put their money where their mouth is by holding a majority stake. Second, Avalon has the best CAR-T in the market, i.e., the Dragon or Bentley of all CAR-Ts. Avalon's CAR-Ts have strong advantages over conventional drugs. Third, various colossal partnerships are solid proofs in the pudding of Avalon's powerful growth infrastructure. Fourth, the firm launched a highly differentiated solution against the Coronavirus. 
Riding the robust and versatile multi-streams integration, I strongly believe that Avalon will serve the shareholders and patients well in the coming years. The upstream growth with MIT will be one of the low hanging fruits. That aside, the GE Healthcare and Cell Valley partnerships also improved Avalon's midstream by leaps and bounds. Moreover, Avalon has vast downstream expansion in both China and the U.S.A. to galvanize future growth progress. I know you're focused on the U.S. drug market. However, China has a vast and increasingly wealthy and highly educated population. Asides from the U.S.A., I believe your other land of mega biotech profits is China. And Avalon has a dominating position there.
Going forward, you should keep taps on the CAR-T developments. AVA-001's Phase 1 trial is set for completion in 2021. Don't be surprised if the company decides to report the interim results later this year. In the coming years, the Dragon CAR-T (i.e., AVA-101) can bring you pleasant surprises. It's also likely that Avalon will commence the Phase 1/2 studies for AVA-101 and AVA-102 later this year. In the intervening time, it's possible that you'll hear more about AVA Trap's development.
As usual, the choice to buy, sell, or hold is always yours to make. In my view, the Coronavirus bear market your golden opportunity to build more shares on Avalon at any dip. Leveraging powerful fundamental improvements, Avalon has transitioned itself from a trading stock to an investing equity for you to hold for many years. If you overcome your fear to pick Avalon now (and thereby ride through the next raging bull market cycle), you can profit multiple folds on this stock. While you can say never, I highly doubt that Avalon will reach the former low. Last but not least, remember to check out my recent video where I discussed Avalon.


Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Business relationship disclosure: Due to my medical and market expertise, companies and third parties like GuidePoint Advisors hired me as a paid consultant. Though being in the industry gives me expert insight on the forefront, my views may not be completely objective. On October 4th, 2019, I established a paid consulting relationship with Avalon. And, I renewed my consulting relationship with Avalon thereafter. See complete disclosure and disclaimer http://www.drtranbiosci.com/p/dr-trans-complete-disclaimer-and.html.
Additional disclosure: As a medical doctor/market expert, I’m not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself and my affiliates pertaining to any security without notification except where it is required by law. I am also NOT responsible for the actions of my affiliates. The thesis that I presented may change anytime due to the changing nature of information itself. Investment in stocks and options can result in a loss of capital. The information presented should NOT be construed as a recommendation to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. That said, you are expected to perform your own due diligence and take responsibility for your actions. You should also consult with your own financial advisor for specific guidance, as financial circumstances are individualized.