Avalon GloboCare Corp (NASDAQ:ALBT) has now completed its investment to take a 40% stake in drug testing firm Laboratory Services MSO (LSM).
The California based investee, LSM, has a portfolio of testing services including diagnostic tests, drug testing, toxicology, pharmacogenetics, general bloodwork, and other specialist tests.
NASDAQ-listed Avalon told investors, in a statement on Monday, that it expects the US$21 million transaction to be accretive to earnings and noted that it continues to expect to make further investment in LSM.
“We are excited to close this initial investment as a first step, and anticipate acquiring a controlling interest within the next nine months,” Avalon CEO David Jin said.
“Not only is this transaction expected to be accretive to our earnings, we believe it also adds strong clinical and roll-up synergies to the existing Avalon portfolio and future growth plan.
“By combining LSM’s established infrastructure with Avalon’s cutting-edge diagnostic and cellular immunotherapy platforms, it provides us with an established roadmap and framework in the context of integrating our CellTech/therapeutic programs with precision medicine.”
Jin added: “Our goal is to take advantage of a unique roll-up opportunity within the highly fragmented market for laboratory testing and services.
“By targeting laboratories with exceptional performance, positive revenue track record and niche-market advantage, we believe we can effectively leverage LSM’s experience and infrastructure to achieve significant synergies with respect to revenue growth and market shares.”
Avalon is investing a total of US$21 million comprising US$9 million of cash, a deferred US$1 million cash payment on 9 February 2024 and US$11 million of Avalon shares (B series preferred stock, convertible to common shares for US$3.78 per share subject to ‘leak-out’ conditions).
As part of the investment deal, Avalon is due a pro-rata percentage of LSM’s net income.
It also retains the right to acquire a further 20% interest in LSM for US$10 million, comprising US$6 million cash and a further US$4 million issue of Series B shares.