Avalon GloboCare Corp (NASDAQ:AVCO) is set to buy a 60% stake in Laboratory Services MSO as it expands its focus on lab testing and services in what it called a 'transformative' deal worth $31 million.
California-headquartered Laboratory Services has completed over 600,000 tests since inception. Last year the company posted unaudited revenue of over $25 million and net income in excess of $10 million.
As part of the deal, shares in Avalon will begin trading under a new ticker symbol 'ALBT' on the Nasdaq on November 10.
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Sarah Cox, the co-founder and CEO of Laboratory Services, who will become chief operating officer (COO) of the company on closing, said: "We could not be more excited to join forces with Avalon, as we share a common culture and commitment to putting the patient’s needs first."
She said she believed the "combination of our established infrastructure with Avalon’s resources, as well as cutting edge diagnostic and immune-therapy platform, is expected to establish Avalon as a formidable force in this rapidly growing industry."
David Jin, CEO of Avalon, added: "This is a transformative acquisition for Avalon as it brings significant revenue and positive cash flow and is expected to be highly accretive to earnings while adding strong clinical synergies to the existing Avalon portfolio.
"Laboratory Services has an impressive history of growth and is an established leader within the highly fragmented market for lab testing and services. Laboratory Services’ diagnostic business is highly synergistic with our existing precision companion diagnostic business and cellular technology platforms."
Laboratory Services offers diagnostic tests including drug testing, toxicology, and an array of test services, from general bloodwork to anatomic pathology, and urine toxicology.
The total consideration for the acquisition consists of $15 million in cash, $15 million in shares of the company’s Series B preferred stock, and $1 million, payable on the first anniversary of closing.
Avalon revealed it paid a $5 million refundable cash advance in connection with the signing of the definitive agreement.
In addition, the seller will have an earnout tied to 2022 and 2023 positive cash flow targets of up to $10 million, payable in a combination of cash and shares of the company.
In connection with the transaction, Avalon said it also completed a private placement of $5 million in shares of the company’s Series A preferred stock and it aims to raise an additional $10 million to finance the remaining cash purchase price under the same terms.
The transaction is expected to close in 30 days, subject to a 90 day right of extension by Avalon, it added.
Avalon GloboCare is a clinical-stage CellTech bio-developer advancing innovative immune effector cell therapy and exosome technology.
Contact the writer at giles@proactiveinvestors.com