NEW YORK — Investment bank BTIG initiated analyst coverage of DermTech on Monday with a Buy rating and a $53 per share price target.
In a note to investors, BTIG's Sung Ji Nam said the company's pigmented lesion assay, or PLA, for the early detection of melanoma is well positioned in an estimated $3 billion-plus market in part due to its underlying noninvasive skin tissue sample collection technology.
The PLA has shown greater than 99 percent negative predictive value to rule out melanoma, Nam wrote, and is four to five times more likely to diagnose the disease versus a visual assessment by a clinician. Also supporting the test is its receipt of Medicare coverage in early 2020, its inclusion in National Comprehensive Cancer Network and American Academy of Dermatology guidelines, and a body of clinical evidence in 21 peer-reviewed publications.
While the PLA, as well as the recently introduced next-generation PLAplus, is expected to be DermTech's primary revenue driver over the next two to three years, Nam noted that the company is also poised to commercialize Luminate, a direct-to-consumer UV damage DNA risk assessment product, and Carcinome, a test for ruling out cutaneous T-cell lymphoma, in the next 12 to 18 months.
"If DermTech is successful in developing and commercializing additional products targeting non-melanoma skin cancer and/or other skin conditions, DermTech has the potential to significantly expand its [total addressable market] over the next several years," she wrote.
Earlier this year, Oppenheimer initiated coverage on DermTech with an Outperform rating at a price target of $53 per share. In March, La Jolla, California-based DermTech posted a 31 percent year-over-year increase in fourth quarter revenues.
During early morning trading on the Nasdaq, shares of DermTech were down $1.17 at $40.88.