Why the DermTech share has jumped today

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What happened

Actions of DermTech (NASDAQ: DMTK) were rising today after biotech announced an agreement with Blue Cross Blue Shield of Texas (BCBSTX) to make the company’s Pigmented Legion Assay (PLA) available to the insurer’s estimated 6 million members in that state .

As a result, the stock was up 23.6% as of 12:13 p.m. EST Thursday.

The DermTech PLA patch. Image source: DermTech.

So what

DermTech’s PLA makes it easy to test for melanoma, and the technology may help increase early detection of skin cancer. Recent tests have shown that the PLA patch has a negative predictive value of 99%, meaning that there is less than a 1% chance of missing melanoma when used correctly.

Momentum has grown for the PLA in recent months, and opening the market to an additional 6 million people is a big step forward.

Dan Visage, DermTech’s senior vice president for Payor Access, said, “We are pleased to announce our test as a network option for our current PLA users. This agreement with BCBSTX demonstrates DermTech’s commitment to making its transformative PLA test accessible to more patients. “

Now what

DermTech shares have now doubled this year and have risen over 400% since early December as excitement mounts for PLA. The stock surged as the company announced positive test results, raised funds for the commercialization of PLA and for research into new products, and received a number of upgrades from analysts. This morning, Lake Street raised its price target on the DermTech share from $ 52 to $ 79 and maintained its buy rating.

The company sees a addressable market nearly $ 10 billion for technology, indicating a long growth path. Considering that the health care stock is still valued at less than $ 2 billion, it should have more advantages from here if it can break into that market.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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