DermTechDMTK9,44 $
DermTech (NASDAQ: DMTK) - a biotechnology company from the USA, focusing on the diagnosis of skin diseases and developing non-invasive tests, which will replace biopsy and other painful diagnostic procedures. The business went public in 2019 and listed on the Nasdaq through a merger with a SPAC company..
What he earns
DermTech develops and sells several types of medical tests, which are focused on different types of skin cancers:
- DermTech Melanoma Test is a key product, which went on commercialization and brings money to the company. Consists of four stickers, which help in excluding melanoma as a potential diagnosis and may precede invasive intervention.
- Luminate - a test to determine the risk of skin cancer in a patient, which the, according to the presentation, the company plans to introduce in the first quarter of 2022.
- Carcinome - a test to rule out squamous cell skin cancer in a patient, which is in the clinical stages of development.
- CTCL is a test to rule out cutaneous T-cell lymphoma in a patient., who undergoes preclinical studies.
What's wrong
Suspicious sales of senior management. When looking for information about an issuer, the first thing that catches the eye is noticeable insider selling.. For example, in March 2022 senior management members, CEO, CFO, CCO and COO sold DermTech shares one by one, which are now trading cheaply relative to their historical values. On the other hand, attention is also drawn to that, that sales were small in volume: the amount of the largest transaction was only 36 thousand dollars.
Business is still unprofitable. Even the fact of successful commercialization of one of the products does not yet allow the company to become profitable.. Earnings per share also continue to decline, although the rate of eps reduction has slowed down significantly. Probably, with the lifting of coronavirus restrictions and the recovery of the US economy after the pandemic, business will catch up, but so far, dry numbers are unlikely to please investors.
Additional issue. The company is not bypassed by the common problem for many biotechs with the systemic dilution of the share of existing shareholders: the number of DermTech shares since the beginning of 2019 has grown by 10 once. Certainly, such legal methods of raising funds cannot be blamed on management, but at the same time, the latter should hardly expect a significant degree of investor loyalty, whose share in the company's equity is systematically depreciated.
What good
Wide range of applications. The issuer relies on the painlessness and accuracy of its tests, which cannot replace a biopsy, but can confirm its optionality, which was previously confirmed for the most part after the fact, after a painful procedure.
The company estimates the potential market for all its developments at approximately 10 billion when converted to the number of possible tests.
A good supply of money. Business emerges from coronavirus crisis with $252 million in cash. This is especially important for a biotech company., which needs not only to pay salaries and bear other expenses for equipment and personnel, but also to allocate a significant part of the funds for R & D, acting as the main driver of future growth for representatives of the sector.
Freedom from debt. In addition to a stable cash position, the company is not burdened with debts and is free from additional pressure, which over time create multiple obligations to creditors. Liabilities total 8% from capital, and negative net debt shows, that the business has more money, than the sum of all his credits.
What's the bottom line?
DermTech stands out among many representatives of the biotechnology sector by the availability of a finished product, which generates profit, but so far even this does not save her from unprofitability.
Suspicious sales of insiders add to the negative, but taking into account their minimal volumes, this fact should hardly be considered as a significant negative - it simply looks strange. Company, obviously, there are forces and resources for successful development, and it seems, that the bright future of the issuer depends entirely on the quality of business management.
Stocks will become winners or join the losers - as always, only time and the favor of the invisible hand of the market will determine.
