Let’s open a thread for DermTech, which immediately caught my eye when it appeared on Twitter.
$DMTK - DermTech - by Jonah Lupton ← Jonah Lupton’s thoughts, from which I shamelessly build the foundation for this thread.
The company was founded in 1995, and went public in 2019 with the ticker $DMTK. Its headquarters are in California and it currently operates in the US market. I’ll copy a good summary in English from Jonah Lupton’s email here (I recommend following him on Twitter).
At the time of creating this thread:
Stock price $43
Market cap 1.86 billion
P/E and other metrics, better not to look.
"DermTech ($DMTK) is a molecular diagnostics company that develops and markets non-invasive diagnostic tests to diagnose skin cancer and other skin related conditions. The company offers Pigmented Lesion Assay (PLA), a gene expression test that helps rule out melanoma and the need for a surgical biopsy. $DMTK also provides the Nevome test, an adjunctive reflex test for the PLA and adhesive skin sample collection kits, as well as gene expression assays for the Th1, Th2, IFN-gamma, and Th17 inflammatory pathways. $DMTK is also developing non-melanoma skin cancer diagnostic and non-melanoma skin cancer risk assessment products. The $DMTK Melanoma Test is a new kind of lab test that looks for signs of melanoma in your skin’s genomic material. "
Here’s about the revenue:
- 2019 revenues: $3 million
- 2020 revenues (est): $6 million
- 2021 revenues (est): $12 million
2020 Q3 results
So, in practice, the current operating model is suspicious skin lesion → doctor’s assessment → possible monitoring or surgery and pathology.
DermTech’s test is simply rubbed on the skin lesion with several patches, and these are sent to DermTech’s own laboratory where they are analyzed (RNA analysis with a “gene expression” test). This is a completely painless method and leaves no scar, unlike surgery.
With this test, melanoma, for example, is detected much earlier than with traditional examination methods, it is cheaper, and the results are more accurate. Dermtech’s accuracy is 99% vs. the current treatment pathway’s 83% accuracy.
“Cancer starts when genes mutate within a cell. This altered cell duplicates and duplicates until enough cells exist to be seen under a microscope (and then, eventually, even without one). $DMTK’s genomic analysis can find these altered cancerous cells long before they show up under a microscope, through a proprietary gene expression test.”
The product is primarily aimed at use by doctors, but now, due to COVID, an opportunity has also arisen to sell kits directly to consumers, who then mail the samples to DermTech’s lab.
Regarding market potential, Dermtech estimates their current and future product pipeline to be worth approximately a 10 billion dollar market.
Now that Dermtech has a developed and approved product, the next challenge is to build a strong sales team to aggressively push the product into the market. Due to COVID, there have been many challenges in marketing the product, as most non-urgent doctor visits and clinics have been closed. Recruitment has been intense, and the team is starting to come together.
The valuation is tight, but Jonah Lupton’s comments describe the situation well:
"The current financials and revenue forecasts for $DMTK are nothing to get too excited about because we’re still dealing with small numbers compared to more established companies in the healthcare industry.
However I believe $DMTK could grow revenues at 100% per year for the next 3-5 years (maybe longer). I have spoken to several dermatologists over the past couple weeks and they all said that $DMTK’s new smart patch is an absolute game changer for them and their patients.
Based on $DMTK’s December 2020 estimate of 2,900 billable samples processed the 2021 revenue estimates of $12 million will end up being way too low if the company continues on this same run rate however given the number of new sales reps it’s likely this monthly sample processing number continues to increase as well."
Insiders also have skin in the game.
Marketscreener currently shows 3 analysts following the company, with a consensus target price of $52. All recommend buying.
Dermtech recently arranged a 140 million share offering, so it’s unlikely a new offering is coming soon. But I assume one will still rumble, as I have no information about profitability at this stage.
All in all, I became really interested in Dermtech and will probably open a position once I delve deeper into the company tomorrow. In the meantime, I thought I’d open a forum for Inderes as well, to gather other interested people and exchange ideas and research the company further.
Easier, safer, cheaper why wouldn’t it work and revolutionize the examination of skin lesions?
