Why DermTech Stock Went Up 100%

DermTech Inc (NASDAQ:DMTK) is a biotechnology and oncology company focused on identifying skin cancer. It does so with a Pigmented Legion Assay (PLA), which is now covered by Blue Cross Blue Shield of Texas, along with other insurance companies.

The recent partnership with Blue Cross Blue Shield is a big reason why DermTech stock went up.

Melanoma is a big problem in the United States, and the company is addressing a large market need. The traditional method of analyzing a mole or lesion for skin cancer involved surgically cutting it to remove samples for testing.

The company changed the game with a sticker than can pick up the same necessary cells for testing. And it doesn’t need approval from the U.S. Food and Drug Administration, which isn’t easy (nor cheap) to get. This has investors and analysts excited about the potential game-changing technology.

DermTech Revolutionizing Skin Care

In short, DermTech’s PLA is a sticker that enables early skin cancer detection. The product is undergoing clinical tests, and the results so far show a 99 percent effectiveness rate. That means there’s only a 1 percent chance the test will miss melanoma, and it’s not the only step.

Detecting melanoma typically requires a biopsy, which means your doctor will surgically remove a sample for testing. This is an invasive procedure that can be uncomfortable for most people, and the pandemic adds another difficulty level.

Rising unemployment leaves many without health insurance, and this means the company needs to partner with health insurance providers to approve its treatment. Otherwise, treatment could be out of reach of the average person’s budget.

DermTech’s PLA averages $500, which is not an easy financial pill to swallow. And that’s not all.

Many people are avoiding routine medical care due to concerns of contagion. Social distancing guidelines and general panic around COVID-19 make hospital trips more risky than usual. This at-home test is simple and can be performed without having to go into a clinic.

This brings dermatology into the telemedicine age and has investors willing to buy. And that raises prices.

Why DermTech Stock Went Up 100%

Any stock price goes up when investors want in, and DermTech is getting a lot of attention in 2021 due to its melanoma detection product. Of course, what really got investment and media interest rising was the company’s partnership with Blue Cross Blue Shield.

Blue Cross Blue Shield is a federation of 36 health insurance companies covering over 106 million people. The contract with Blue Cross Blue Shield Texas alone covers over 5 million people, and it’s likely only a matter of time before the company expands its partnerships.

Share prices more than doubled in 2021, and they’re up over 400 percent from Thanksgiving 2020. DMTK share price risen primarily from positive news coming out about the PLA’s monetization chances and the company’s fundraising efforts.

The company’s building momentum toward addressing a large portion of cancer patients while also becoming more accessible to those who need it.

Skin Cancer Treatment Market Size

According to the American Cancer Society, about 5.4 million people are diagnosed with a form of skin cancer each year. This number is increasing as people live longer and get more sun exposure; however detection technology could be a limiting factor.

Because it involves a biopsy, some people may opt not to be tested for melanoma in the first place.

Not only that, Caucasians who develop more than one melanoma have an increased risk of developing more of them. Other cancers are also more likely to develop in these individuals. And as the world gets more health conscious moving forward, preventative diagnosis could become more common.

The pandemic caused people to visit the doctor less, especially for routine diagnosis and care. This is a temporary effect, and as Gen X and Millennials age, they are going to see more doctors and hospitals for proactive treatment.

This opens the door for DermTech to continue expanding its partner base.

Future Partnership Opportunities

DermTech’s success is a collaborative effort – the company regularly partners with drug development companies working on clinical stage trials. The sticker is only one piece of the company’s proprietary technology, and its skin gene expression could change the game.

Any company working on biomarkers for conditions like Lupus, Lymphoma, Psoriasis, microbiome issues, and more can benefit from the company’s technology.

It’s a genomic analysis company that’s on the forefront of advanced disease detection and treatment. There’s a broad pipeline of companies using similar technologies, and the company can partner with any of them to broaden its revenue streams.

On top of that, Blue Cross Blue Shield is just one of many insurance providers. As the company expands, it can continue working with insurance and healthcare providers to become the go-to skin cancer detection option.

Once it becomes standardized, the sky is the limit for DermTech’s profitability.

Will DermTech Stock Go Up?

The stock market is fickle, and factors like media attention do force prices up. There’s a good chance the price will suffer a sell off at some stage due to profit taking, and it’s rarely a good idea to buy the hype immediately following a news story. Frequently, that’s the best time to sell.

Nevertheless, DermTech is addressing a necessary market that had very little innovation in our generation. This new way of diagnosis makes it easier than ever to determine if a biopsy is necessary.

Cancer is one of the leading causes of death in the United States and the world. By addressing this market, DermTech positions itself as a healthcare leader. But it’s only one product and a technology platform at the moment. The company is relatively small for its industry, and a buyout could be the eventual exit strategy.

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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.