Saturday, July 25, 2020

IBI Research On Avalon GloboCare: The Therapeutic Virtuoso CAR-T Early Results

Summary
Avalon GloboCare continues to deliver innovative solutions coupled with aggressive pipeline expansion.
To fight the devastating Coronavirus pandemic, Avalon offered AVA Trap which is a drug to subdue cytokine storms. In a knockout punch combination, Avalon is also developing a COVID19 vaccine.
On the main battlefront, Avalon recently posted stellar Phase 1 data for its CAR-T franchise (i.e., AVA-001) for deadly blood cancers.
Within a relatively short time-span, Avalon inked multiple partnerships to power growth for years ahed.
Despite robust advancement, Avalon is still flying under the radar of Wall Street. This creates an excellent opportunity for you to build your shares before institutions discover this hidden gem.
Such a study indicates that the greatest investment reward comes to those who by good luck or good sense find the occasional company that over the years can grow in sales and profits far more than industry as a whole. It further shows that when we believe we have found such a company we had better stick with it for a long period of time. - Phillip Fisher (Warren Buffett's Mentor)
Back in March, there was a devastating stock decline with the emergence of the Coronavirus pandemic. Nevertheless, strong market sentiment is fueling a vigorous comeback in the past few months. Contrary to the prevailing market sentiment, I believe that the market fundamentals are deteriorating due to the ramifications of COVID19. As such, the market will feel a reverberation as earnings roll in.
Be that as it may, not all stocks behave the same. In my opinion, companies that are most immune to COVID19 (i.e., SARS-CoV-2) are bio-stocks. No matter how bad Coronavirus plays out, there is always a huge demand for novel medicine and therapeutic innovations. After all, there is no guarantee that you won't get sick, no matter how well you take care of yourself. That being said, you should capitalize on this golden opportunity of a lifetime to build shares in fundamentally robust life science innovators like Avalon GloboCare (NASDAQ:AVCO). In this research, I'll revisit your favorite bio-stock, Avalon. Moreover, I'll analyze the latest clinical data and share with you my forward expectation of this robust growth equity.
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 operations in strategic areas in the USA and China. Leading by a top-notch management team, Avalon is making history in the therapeutic and diagnostic landscapes.
Figure 2: Avalon headquarters (Source: Avalon)

Prudent Corporate Strategy

When you analyze a biotech, make sure that you focus on corporate strategy. On this front, Avalon is powered by a trident-like approach of Poseidon. Precisely, the company is poised to capture three lucrative niches. They include regenerative medicine, exosome diagnostics, and cellular immunotherapy (i.e., CAR-T).
As you can see, the pipeline diversity increases the chances that at least one molecule will become a blockbuster. For those of you new to biotech, a blockbuster is a medicine that generates at least one billion dollars in annual sales. As such, you want to pick a company with a high likelihood of delivering at least one blockbuster. That's because a stock usually enjoys multiple folds upside as they generate a successful drug.
Figure 3: CAR-T pipeline (Source: Avalon)
That aside, I like Avalon's unique multi-stream integration which enables the company to ramp up rapid grow. You may say, what do you mean by that, Dr. Tran? My friend, Avalon is built with the seamless integration of upstream, midstream, and downstream. As such, this corporate infrastructure enables the company to quickly boost its research and development (R&D) to deliver effective solutions for rapidly changing market conditions.
A prime example is the Ava Trap franchise that is poised to deliver promising answers to the coronavirus pandemic. Ultimately, Avalon's efforts translate into the alleviation of suffering for countless patients afflicted by cancers and deadly diseases worldwide.

Phenomenal Phase 1 Data For AVA-001

Here is another important point for you to keep in mind as you assess Avalon. All the sound business strategy is meaningless for a life science innovator unless there are solid clinical trial results. Therefore, you should analyze the latest clinical reporting for Avalon's lead franchise, i.e., CAR-T.
On June 29, Avalon reported the successful completion of the Phase 1 first-in-human pilot study of its CAR-T dubbed AVA-001. As a third-generation CAR-T, AVA-001 modulates the CD28 co-stimulation pathway with the CD-19 target suppression.
In this trial, patients afflicted by relapsed/refractory B-cell acute lymphoblastic leukemia (i.e., R/R BALL) were given chemotherapy with cyclophosphamide and fludarabine on Days 3, 4, and 5. Thereafter, they receive AVA-001treatment.
Accordingly, this study looked at adverse events, complete remission rate (i.e., CR), and partial remission (i.e., CR) as its primary outcomes. To judge whether a study fails or passes, you size up its primary outcome which is the most important metric for a clinical investigation.
Figure 4: Phase 1 trial for AVA-001 (Source: ClinicalTrial.gov)

Stronger Efficacy Than Yescarta

As it marked a ground-breaking development in the CAR-T space, AVA-001 delivers the robust therapeutic efficacy in nine out of ten patients with RR/B-ALL. In other words, the complete response (i.e., CR) rate is 90% one month after treatment. Moreover, patients who achieved the CR successfully proceeded to allogeneic bone marrow transplantation for curative intent.
To appreciate the ramifications of the said trial, I compared AVA-001's Phase 1 data to the results of the ZUMA-1 study. Of note, ZUMA-1 evaluated the efficacy and safety of Yescarta. If you recall, Yescarta is the first CAR-T approved for adults suffering from relapsed/refractory non-Hodgkin lymphoma, i.e., a deadly blood cancer. Of note, Yescarta was developed by Kite Pharma (KITE), an IBI stock that was acquired by Gilead Sciences (GLD) for $ 11.9B.
In the figure below, you can see that AVA-011's CR is 90%. Whereas, Yescarta only posted the 51% CR. That's a huge leap in clinical advancement for CAR-T!
Yescarta 11.6 months
median follow-up (N=101)
Yescarta 27.1 months
median follow-up (N=101)
AVA-001
1-month followup
Objective response rate (%)
72
74
Complete remission rate (%)
51
54
90
Partial remission rate (%)
21
20

Figure 5: Yescarta response rate (Source: yescartahcp.com)
For more proof in the pudding of its therapeutic efficacy, Avalon conducted additional laboratory testing. And they also showed evidence of enhancement in CAR-T cell population and protection against CAR-T cellular exhaustion. Simply put, more generals of the immune systems (i.e., engineered T cells) survived after treatment. Hence, it indicates therapeutic success.

Excellent Tolerability

Aside from efficacy, you should evaluate a CAR-T's safety profile. As I expected, AVA-001 performed with flying colors. The drug was well-tolerated with minimal side effects.
If you've been following my coverage on the CAR-T space, you can appreciate that AVA-001-treated patients did not experience cytokine release syndrome (i.e., CRS). There was also no neurotoxicity. As you know, CRS is the main constraint limiting the first generation CAR-Ts. Powered by a superior safety profile, you can see that AVA-001 is on a much better footing than conventional CAR-Ts.
Riding robust data release, Avalon presented this development back on July 11th at the Eighth Annual Lu Daopei Hematology Forum. Interestingly, this event is hosted by Lu Daopei hospital network, the premier healthcare center in China in which Avalon has deep ties. Though you might not be familiar with this conference, it is the largest hematology conference in Asia. Due to issues with COVID, the conference was held online.
Figure 6: Lu Daopei Hospital (Source: Lu Daopei)

Marching Toward Therapeutic Conquest

In the grand battle of disease and therapeutic innovation, you can expect that more deadly cancers to emerge in the coming years. So too are novel therapies. With the near-perfect success rate (i.e., 90% CR), I believe that Avalon is now in a very strong position to advance its CAR-T for future battles against deadly cancers.
As Avalon enjoys uncanny early clinical development, that increases its chances of becoming a giant cancer-drug innovator in the coming years. The seed is now germinated for Avalon to ultimately transform into the most prominent CAR-T company of tomorrow. As he framed ground-breaking developments in the most poignant terms, the illustrious President and CEO (David Jin, M.D., Ph.D.) enthused,
We are excited and pleased to achieve these successful outcomes with our AVA-001 CAR T-cell therapy. This paradigm of bridging CAR T-cell therapy to bone marrow transplant creates a new therapeutic horizon with curative potential for patients with relapsed/refractory B-ALL and other hematologic cancers. We look forward to advancing our mission to improve cancer patient care and save lives.

Financial Assessment

Just as you would get an annual physical for your well-being, it's important to assess the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." Therefore, I'll analyze the 1Q2020earnings report for the period that ended on March 31st.
Accordingly, Avalon procured $296.9K in revenues this quarter. This is remarkable because you don't expect early-stage biotech to garner any revenues. Moreover, the research and development (R&D) registered at $275.4K compared to $152.4K for last year. The higher R&D spending is due to the robust pipeline advancement. As such, I view the 80% R&D increase positively because the money invested today can turn into blockbuster profits tomorrow. After all, you have to plant a tree to enjoy its fruit.
Furthermore, Avalon incurred $3.2M ($0.04 per share) net loss. This is a substantial bottom-line improvement from the $4.3M ($0.06 per share) net decline for the same period of comparison. Nevertheless, I'm not worried because Avalon is a young company with developing medicines. If it's a matured blue-chip equity, then I'd analyze it differently.

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 post robust data for its CAR-T franchise. Based on my integrated system of forecasting, I ascribed the 25% chances of clinical failure for various CAR-T molecules. They include AVA-001, AVA-101, AVA-102, and AVA-011. The latest strong data presentation gave me more confidence in my forecast. But in case of a negative trial data in the future, you can expect your stock will tumble over 50% and vice versa.
There is also a small risk that Avalon might run into the potential cash flow constraints. As you know, a developmental-stage biotech consumes tremendous capital to drive the innovation process. Interestingly, this risk is mitigated due to Avalon's top-notch management. In my opinion, the Chairman Daniel Lu is a financial powerhouse. I believe he is determined to bring success to his company.

Final Remarks

In all, I maintain my strong buy recommendation on Avalon GloboCare with the five out of five stars rating. On a 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 have a long-term horizon toward the stock.
From the trading viewpoint, Avalon is a very good stock to average down whenever it dips. As I've been observing this ticker closely, I noticed that every time it tumbles Avalon shares rebounded. It's a no-brainer that this is a gold mine for you if you're into trading stocks. As of this writing, Avalon closed at $1.75. Once Avalon surpasses the $2.00 resistance, I believe it will trade at a new high.
In real estate, it's all about location, location, and location. In biotech investing, it's management, management, and management! Riding the experience and wisdom of its stellar management team, Avalon is enjoying robust pipeline advancements. The company also secured substantial deals in recent months. Multiple partnershipswere formed with reputable institutions like MIT, Cell Valley, and GE Healthcare.
With the MIT partnership, Avalon can advance AVA Trap, an ingenious solution that subdues the cytokine storms associated with Coronavirus. Not satisfied with excellence, Avalon strives for perfection in therapeutic design, through the advancement of a novel intranasal and oral COVID19 vaccine. At the same time, the firm remains focused on its core development, i.e., the CAR-T assets. And that's where I vote my utmost confidence in the company. As you read in this research, the latest Phase 1 data release was phenomenal. The 90% CR is off the chart. It's like in ten shots, AVA-001 hit nine, which is a therapeutic virtuoso. Going forward, you should continue to monitor ongoing pipeline advancement.
As usual, I'd like to remind investors that the choice to buy, sell, or hold is always yours to make. Use my research to give you an edge in your own market due diligence. Based on my market observation, you should average down on Avalon whenever the stock dips. Remember to hold it for the long haul to enjoy the most sizable gains.
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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 entered 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.

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