The Bull Case For DermTech

After a promising second quarter of 2021 and following a rocky, unpredictable year for the company, investors are more bullish on DermTech than ever before.

DermTech’s groundbreaking melanoma and skin cancer detection technology aims to eliminate the need to cut into the skin to test for various skin cancers by replacing a scalpel with a sticker. It can be placed on the area of concern and quickly lifted off to remove RNA cells from the mole. As such, it has the potential to change the way melanoma and skin cancer are detected going forward.

This new technology also hopes to go beyond just the aesthetic aspects of skin cancer by examining the skin’s genes and looking for early warning signs to detect melanoma or skin cancer earlier than ever thought possible before. But is this new tech alone isn’t enough for investors and traders to make the bull case for DermTech — There are plenty of other factors that go into it, as well.

DMTK Top Lines Growing Fast

At the close of DermTech’s second quarter of 2021, which came on June 30, 2021, the company saw a total revenue of $3.1 million for the quarter — This represents an increase of 269% from the second quarter of 2020, and a sequential increase of 24% compared to the first quarter of 2021.

This left the company with a total cash, cash equivalents, and short-term marketable securities of over $268 million dollars, which — at the company’s current rate of spending — could last DermTech four whole years on its own without needing a single cent in revenue.

Thankfully, with the increasing popularity of DermTech’s sticker technology and the new release of PLAplus, the next generation of DermTech tech that adds Telomerase Reverse Transcriptase (TERT) promoter DNA driver mutation analyses to the existing RNA gene expression based Pigmented Lesion Assay (a.k.a. PLA, or the preexisting DermTech test), DermTech shouldn’t have to worry a bit about the company’s revenue.

DermTech is moving along happily and healthily into the third and fourth quarters of 2021 and beyond.

DermTech Forecast Is Way Above Share Price

While much of DermTech’s stock performance has been trending downwards instead of upwards in 2021, this isn’t to say that DermTech’s forecast going forward isn’t looking incredibly bright for bullish investors.

Shares fell nearly 20% in July of 2021 following increased spending from DermTech, taking the company’s price per share from over $41 at the beginning of the month down to $31 at the end of the month. The stock has since recovered a little bit, but some retail investors and traders just didn’t like what they were seeing from the company for a second there.

What these investors who jumped ship failed to give credence to is that DermTech’s increased spending was done to grow its brand, with most of that money going into growing its sales force and focusing in on advertising to dermatologists.

Going forward, financial analysts see DermTech’s stock rising as high as $79 per share over the next 12 months. DermTech is a disruptive technology and has great potential over the long run. 

Major Deals on the Horizon for DermTech

For those with health insurance through Medicare Advantage and Medicare Part B, patients can expect to pay around $0 for DermTech’s melanoma and skin cancer test. For those with other forms of health insurance, the typical cost comes in around $75 at most for the test.

This is an impressively low cost, especially considering how expensive many aspects of the cancer detection and prevention journey can be.

What’s more, DermTech has hinted at several major deals with commercial payers to help bring this cost down even lower for patients.

These pending deals with payers now will only help to bring even more payers on board in the future, so it’s potentially very promising for DermTech investors.

DermTech’s Funnel of New Doctors

While DermTech’s roster of doctors who suggested the DermTech melanoma and skin cancer test to their patients did take somewhat of a hit because of the pandemic, DermTech is seeing some recovery now and going forward into the second half of 2021 and the new year.

From virtual sales calls to the distribution of online resources, COVID-19 has not stopped DermTech from marketing to dermatologists all over the country to teach them more about the company’s groundbreaking technology.

An Increased Opportunity for Telemedicine

Building off of this, there’s also a greater opportunity for DermTech and its dermatologists to utilize telemedicine for those elderly or immunocompromised patients who otherwise might not feel comfortable going into the doctor’s office because of the risks of COVID-19.

As it stands, only 7% of people in America go to the dermatologist for skin checks in the first place, and that’s before the coronavirus. An even smaller number visit the dermatologist regularly.

DermTech and its dermatologists see telemedicine as an opportunity not only to reach those elderly or immunocompromised patients, but also the patients who might not have otherwise seen a dermatologist at all.

The more patients dermatologists see, the more people they can check for melanoma and skin cancer, and the more use DermTech will have. This is only further fuel for the bull case for DermTech.

DermTech and the Growing Medicare Population

While DermTech would greatly benefit from growing its Medicare population, the issue is that this population also happens to be one of the most at-risk for contracting COVID-19.

As the pandemic rages on, DermTech has said the company is working hard to overcome this hurdle and investing more in direct-to-consumer marketing in an attempt to raise awareness about DermTech’s melanoma and skin cancer test among this growing Medicare population.

Getting the word out to seniors not only helps them to prevent skin cancer, but it also helps to strengthen bullish sentiment for DermTech investors.

Luminate and DermTech

In the near future, DermTech hopes to launch a new product called Luminate.

Luminate will take a look at UV-related gene mutations in skin that otherwise appears normal, hoping to address those sneaky forms of skin cancer that otherwise might have gone undetected for years.

Beyond detecting forms of skin cancer, the Luminate device can also help to detect sun-damaged skin.

Intended as a cash-based consumer paid product, Luminate is sure to be a huge hit and an essential device upon launch and will only drive DermTech stock higher.

The Bottom Line: What Is the Bull Case for DermTech?

While DermTech stock took a hit as a result of increased spending from the company, the truth is that there’s far more good than bad about DermTech stock.

The company’s financials are solid, and its forecast backs this up. There are some major deals being hinted at on the horizon, and this includes in the realm of telemedicine and the growing number of doctors and Medicare recipients alike who are just beginning to learn more about DermTech.

Combine this with the future release of Luminate, and the future is looking remarkably bright for DermTech — in other words, the bull case for DermTech is loud and clear.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.