Could DermTech 10X in 10 Years?
DermTech (DMTK) develops technology that improves the accuracy and early detection of skin cancer and melanoma. The company’s most popular product makes it possible for specialists to test moles for melanoma without cutting into the body’s tissue. The DermTech Melanoma Test offers 99% accuracy by collecting tissue samples with a painless smart sticker.
DermTech has several other products in development, including a test to detect non-melanoma skin cancers and a test that identifies UV damage.
Executives and key stakeholders from DermTech held an earnings report call on November 10, 2021 to discuss the performance during the third quarter and what investors can expect for the future. Could DermTech 10X in 10 years? Here are some highlights from the conversation to help you decide whether you should buy shares in the genomics dermatology company.
Dermatologists Are Becoming More Interested in Genomics
Over the last year or so, dermatologists have started showing more interest in the value that genomics can bring to preventative care and diagnosing medical conditions. The topic has been gaining attention at dermatological conferences across North America.
It makes sense that medical professionals would see the advantages of DermTech’s products. Using a scalpel to take tissue samples leaves patients slightly wounded for days, during which they need to pay close attention to cuts on parts of their bodies that are hard to reach. Additionally, tissue samples don’t always provide accurate opportunities for diagnosing serious issues such as melanoma.
Genomics makes testing easier and more accurate. As a leader in this industry, DermTech is positioned to profit as more doctors adopt the technology.
DermTech Performed More Than Double Its Number of Tests From 2020
Between Q1 and Q3 of 2020, DermTech performed 16,000 melanoma tests. During the same period of 2021, it performed 33,000 melanoma tests, showing that it has plenty of opportunities for growth.
DermTech managed to reach this milestone despite operating with a small commercial team during the COVID-19 pandemic.
DermTech Has Added Sales Reps to Its Team
DermTech knows that its small sales team prevents it from growing as quickly as it could. The company has focused on adding sales reps to its team and improving its outreach strategies. DermTech has long-term plans to build a world-class dermatology sales organization, but it will take some time to reach that goal. The pandemic made it more challenging than usual to attract and train recruits.
The sales department did manage to grow significantly during Q3 2021. It now has 72 sales reps, nine regional directors, and two area directors. Team members have an average of 13 years of sales experience. All of them have experience launching new products.
DermTech now has a core sales infrastructure upon which it can continue to build.
DermTech Pilot Programs Show Great Success
In 2021, DermTech completed its first pilot program with an integrated primary care network. The pilot’s success allows DermTech to sell its melanoma tests to 78 clinics and about 300 providers throughout the Florida integrated primary care network.
The next step is crucial to DermTech’s ongoing success. It plans to send a sales team to work with the network’s medical science liaison team. Ideally, this will make the benefits of genomics testing more obvious to dermatologists within the network–which should include an increase in sales and revenue over the next several years.
Doctors within the network have shown enthusiastic support for DermTech’s products. The company expects this enthusiasm to contribute to word-of-mouth marketing.
DermTech also has a pilot program in the Midwest that shows promising results. The pilot should conclude within one or two quarters. When completed, the pilot could provide a robust pipeline to network opportunities throughout the Midwest and other regions.
Supply Chain Disruptions May Hamper Short-Term Product Development
There are some challenges making it difficult for DermTech to reach its potential. Supply chain disruptions have hurt companies around the globe. Disruptions have made it impossible for DermTech to access some of the parts they need for new product development.
DermTech’s executives believe that it will have its Luminate product ready for shipment by Q1 2022. This is a slight delay from the original plans to release it during Q4 2021.
Unfortunately, DermTech cannot determine how long supply chain disruptions will continue to affect product development. The company is hopeful that the situation will resolve itself within the next few months. It recognizes, however, that disruptions could continue well into 2022 as distributors try to solve problems that emerged during the pandemic.
Now to our third business driver, new product development, there are some supply chain constraints across our development programs related to sequencing flow cells.
Revenue Growth Is Modest But Positive
Although DermTech has struggled with its small sales team, it has managed to grow its revenue over the last year. During Q3 of 2020, the company earned $1.4 million. It generated $3 million in Q3 of 2021.
In actuality, the Q3 revenue might be slightly higher than reported. It’s possible that not all billable samples have been accounted for. Regardless, the number of billable samples is at least equal to those from Q2 of 2021. Compared to last year, DermTech has grown its revenues. Even if revenues are flat between Q2 and Q3, it’s impressive that the company has managed to stay relevant during supply chain disruptions.
Should Investors Buy More DermTech Shares?
DermTech shows exceptional promise that could lead to considerable growth over the next decade. While the company combats short-term challenges, it has positioned itself for a burst of growth in 2022.
Could DermTech 10X in 10 years? That’s impossible to answer with any authority but it does have a massive TAM (total addressable market). And, it does look likely that the company’s technology will gain prominence over the decade.
