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DermTech Inc: A Compelling Growth Story With Upside

Apr. 08, 2021 10:31 PM ETDermTech, Inc. (DMTK)28 Comments
Wealth Insights profile picture
Wealth Insights


  • DermTech is bringing products to market that detect skin cancers in a cheaper, less invasive, and more accurate manner than biopsies.
  • The company is set to see rapid revenue growth as new products launch, and commercial coverage expands.
  • The stock is expensive, but will burn off its lofty valuation over time. Investors can DCA and buy on opportunistic dips.

Checking benign moles. Close up detail of the bare skin on a man back with scattered moles and freckles
Photo by Anastasiia Stiahailo/iStock via Getty Images

Skin cancer is the most common form of cancer in the United States. There are more cases of skin cancer diagnosed each year than all other cancers combined. But like many aspects of the healthcare

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Wealth Insights profile picture
Using fundamental analysis and common sense, I provide straightforward insights on stocks and markets. https://www.threads.net/@wealth__insight- Bachelor's degree in Business Administration with a concentration in Financial Analysis. Been investing and following the markets for more than a decade.- Wealth Insights is an investor and investment author. His content is not geared to anyone's investment goals, time horizons, or risk tolerance. Content is for illustrative purposes only and is not intended to displace advice from a fee-based financial adviser. It is not to be taken as investment advice or influence investor decision-making. The accuracy of data is not guaranteed.

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Comments (28)

Michael Han profile picture
33% short interest doesn't bother anyone? Could be a massive fuel once they scramble to cover but, what if they are right?
anomaly1 profile picture
plenty of time to buy lower

$24 million in 2022
and a $1B market cap
Great article! Reading the comments was interesting as well.
One takeaway I have is that the competing technologies to the $Dmtk patch are useful but inferior for a couple of reasons.
Dermasensor and Nevisense rely on algorithms which I’m sure are good but not as good as actually looking at the genetics of the lesion.
The other issue is that both of those procedures have to be done at the physician’s office. Dmtk’s test could be shipped directly to the patient’s home and the sample taken by the patient with guidance from a Telemed visit.
I’m not sure if the other tests can be delegated to staff at the MD’s office but I would think Dmtk’s could.
Bottom line is all of the procedures are better than a surgical biopsy from the pt’s perspective. Acceptance by Doc’s will come down to reimbursement & profitability.
I have no position in any of the stocks mentioned but am leaning towards Dmtk, especially since the stock price has come down quite a bit.

Good luck to all whatever your position!
@6578681 what price do you think is a good entry point for DMTK?
If you like DMTK you also might like Semler Scientific SMLR. Similar thesis- cheap, simple, fast and accurate. Test for vascular disease which should pick up the pace in sales as elective procedures increase in ‘21
@dick9999 Re SMLR, UNH is a big customer. Heart disease is highly under diagnosed and we have a rapidly aging population.
cstauffer profile picture
DMTK price action since late March feels like one of DMTK's large institutional holders is liquidating. DMTK should trade as a "reopening" stock because the company's growth plans have been hampered by not being able to get its sales professionals into Dermatology offices. However, the stock has not reacted that way one would expect as the prospects of the economy reopening over the last 45 days.
I will buy under $30.
@Gerry_Che it’s a Buy under 40. Or under 30 lol.
It seems to me that if this technology begins being used by general practitioners (e.g, at an annual physical), this will significantly increase the number of screenings. I think most people wait until they have a concern about a mole or lesion before they go to the dermatologist. Maybe a combination of the Dermasensor and the Dermtech product in the hands of a GP might work well.
dOoDle (>‿◠)✌ profile picture
Thank you for writing your well researched article about Dermatech aka $DMTK Mr. Wealth Insights! I went to their website to understand all of their procedures and see their pipeline. It's unreal 'cause your image of their pipeline was all I could find??? It's not on their website so I went to Dr. Google and asked about their Luminate pipeline. Too wicked indeed discovering Luminate is actually a separate company via https://luminatedna.com/ who's possibly working through Dermatech Inc.?
$DMTK seems fascinating so BlessU for writing your story…(>‿◠)✌
grok42 profile picture
The technology seems a whole lot better than the traditional approach of visual inspection followed by a biopsy. But there is a risk of DMTK being disrupted by hand held diagnostic scanners that are being developed and close to commercialization. Those scanners will be faster and cheaper than DMTKs tech but perhaps somewhat less accurate (eg would worry a bit about false negatives).
@grok42 One such device, DermaSensor, is based on light spectroscopy technology (pioneered in the 1990s). It just launched in Australia & NZ in Dec 2020 and is aimed more as a screening device (read out is a qualitative relative risk). The genetic assessment performed by DMTK is far more precision, and the sticker approach to sample collection is as fast it gets. I

grok42 profile picture
@rfuen Good observations! What worries me is, if I recall correctly, most biopsies are negative. If the handheld dermasensor device eliminates the need for a Dermatech sticker test by indicating a skin lesion is benign in 90% of the cases, wouldn't that significantly reduce the total market for Dermatech? People disagree with my view here but do not explain why it is wrong. Dermasensor seems like it would be the more likely big winner in the marketplace. But maybe I am missing something here.
@grok42 Genomic platform (DermaTech PLA) has superior accuracy vs. light spectroscopy platform (DetrmaSensor). As shown on the respective company websites, studies show DermaSensor has 93% sensitivity vs. 97% for DMTK. Furthermore, DMTK has a 99% negative predictive value (that is, a 99% probability that a negative test means you really don’t have the disease). Payors (Medicare, BCBS, etc.) may ultimately decide the issue (so far, they're coming onboard with DMTK). PS - Luminate is the product that really has mass consumer appeal and big Pharma (J&J, Allergan, etc.) interest.
FringDook profile picture
I have been loading up on $DMTK under 60. Huge potential here.
cstauffer profile picture
IMO the only way to truly gauge valuation levels of an early stage growth company is to assess its business model, competitive landscape, expected profit margins, and the size of the addressable market. If one is satisfied with the aforementioned fundamental factors, valuation comes down to projecting reasonable market cap sizes based upon various levels of revenues into the future. Looking at DMTK in this manner, one can make a strong case that a $1.3 billion market cap looks quite cheap.
The Lawman profile picture
Strong buy.
Damend profile picture
They are working at using genetic technology to build a platform for diagnosis of a full suite of skin conditions not just cancers, that will greatly increase the TAM
@Damend Yup!
This appears to be approved game changing technology in a market worth $10B. Use DCF for valuation. Stock is super cheap compared to other pre revenue biotechs
You made a great case for the DMTK dilemma: start a position/partial position now versus put on the watchlist.

DMTK is just getting warmed up - it’s melanoma testing patch was included in the National Comprehensive Cancer Guidelines as of Jan 2021.

Was lucky to get in last fall at $11, albeit have a smallish position. I would definitely buy on pullbacks or simply just DCA over time as I believe this will 10x (love itsmarket cap!)
@Olats69 Nice trade @ 11. Outstanding!
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