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San Diego Business Journal: “DermTech Set For Growth”

March 7, 2021
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DermTech makes “smart stickers” that can rule out melanoma after application to a suspicious mole.

Precision dermatology company, DermTech (NASDAQ:DMTK) share price has more than doubled in 2021 alone, as company management touts strong future growth and inks major partnerships.

Newly publicly traded company, DermTech markets and develops products that facilitate the early detection of skin cancers, and is developing products that assess inflammatory diseases and customize drug treatments.

The Torrey Pines-based company reported Q3 revenue of $1.4 million, a 141% increase from the$0.6 million reported in the same quarter of the previous year.

The improvement was largely driven by increased revenue recognition of Medicare samples in 2020, said Kevin Sun, chief financial officer at DermTech.

In February 2020, Medicare decided to cover PLA for melanoma which set the company up for long-term success, said Sun.

Working with Medicare Insurers

Medicare insures half of the biopsy market according to the company.

Today, DermTech works with Blue Cross and Blue Shield of Texas (and its approximately 6 million covered members), Blue Cross and Blue Shield of Illinois (8.1 million members), and Blue Shield of California (3.7 million members).

The company’s flagship product, Pigmented Lesion Assay, or PLA which launched in 2016, is a skin patch that captures genetic material. The company can then say whether a mole is benign or if a biopsy would be warranted, what’s billed as precision dermatology.

Dermatology is one of the largest medical marketplaces. Skin cancer assessments alone result in approximately 15 million diagnostic surgical procedures each year in the U.S.

DermTech said it was the first company to find a solution to the early detection of melanoma without surgeries. It offers the PLA in all 50 states and processes samples in a CLIA-certified and CAP accredited laboratory in San Diego.

“DermTech is among a rare class of genomics companies whose goal is to transform the practice of medicine by making diagnosis less invasive, more accurate and less expensive,” said John Dobak, CEO of DermTech. “We were one of the first companies to bring genomics to clinical dermatology, which is a relatively uncrowded marketplace in which we are a recognized leader.”

“The PLA reduces the number of surgical biopsies needed to identify melanomas by approximately 10-fold and increases the negative predictive value to 99%, meaning the PLA has less than 1% probability of missing the disease,” he added.

Expanding Product Line by 2022

In hopes of expanding the company’s relatively small base quickly, management is exploring partnerships on a PLA home collection kit with various entities — including telemedicine providers.

In the telemedicine version, a clinician must order the test, and a doctor or nurse must provide guidance. This is to make sure the appropriate mole is checked, according to the company. The patient simply follows the instructions and returns the sample to DermTech.

In addition to PLA’s growth potential, DermTech has other shots on goal. When its Luminate sticker test is approved — currently predicted for the first half of 2022 — the company will seek to market it directly to consumers, avoiding the need for insurance reimbursement.

Luminate is an at-home test that quantifies UV damage at the molecular level in skin that appears normal to the eye. A laboratory developed test (LDT), it is not subjected to FDA approval or clearance processes.

DermTech also has nine partnerships and collaborations ongoing with big names including AbbVie, Johnson & Johnson, AstraZeneca, and L’Oreal.

Key Growth Drivers

Looking ahead, the company is primarily focused on three key growth drivers of our business in the near and mid-term, said Dobak.

“The first is to drive billable sample volume growth of the PLA test. The second is to make additional progress with commercial payer coverage. The third key driver is to deliver additional products to the market, based on our non-invasive skin genomics platform,” he added.

In September 2019, the company went public through a SPAC deal with Constellation Alpha Capital, raising $143 million. DermTech stock is up over 130% so far in 2021.

DermTech began as a CRO providing clinical trial services for pharma companies working on dermatology drugs. Founded in 2012, it employs 90 staffers.

“We believe that DermTech has a tremendous long-term growth opportunity, given the size of the markets we address and the unique attributes of our non-invasive skin genomics platform,” said Dobak. “While COVID continues to create some near-term challenges, we believe that we can achieve robust adoption, particularly when a more normalized environment resumes.”

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