Thoughts DermTech (DMTK)

I thought I would introduce DermTech to this board as it helps me articulate my own investing thesis and I haven’t really seen a deep dive presented to date.

So what does DermTech do? DermTech is disrupting the skin cancer and skin treatment industry. Traditionally a dermatologist would need to take a biopsy in order to determine if a patient had skin cancer, DermTech has developed a sticky film that the doctor can now place over the patient’s affected region. This film (Pigmented Lesion Assay - PLA) captures the skin’s genomic material which results in a much more accurate test and can also detect cancers earlier than the traditional biopsy approach, leading to better patient outcomes. It is also cheaper than a biopsy.

DermTech is in its infancy and just at the beginning of its rollout, its quarterly revenue has been a bit lumpy given the lockdowns but has managed some impressive growth rates.

Q1-2020 - 100%
Q2-2020 - -44% initial covid outbreak and lockdown
Q3-2020 - 220%
Q4-2020 - 91%
Q1-2021 - 177%

As the above shows apart from the hard lockdown, the company has still managed to maintain its hypergrowth and they have acknowledged covid was a headwind. Now with the country slowly opening and people resuming elective procedures this should help DermTech see more Dermotologists. In order to facilitate this growth they mentioned they are looking to double the sales force from about 40 to 80 sales reps this year, with 80% hiring complete. This explains why the S&M expense has risen from $2.90 per share in Q1-2020 to $6.50.

The execution also appears to be strong, what I look at is ‘Assay Revenue’ but also the number of new clinics being onboarded every quarter.

Net Increase of new clinics onboarded

Q3-2020 - 50
Q4-2021 - 90
Q1-2021 - 160

The numbers appear to show the product is resonating with the market, along with 2 economic studies which confirm how this technology helps reduce healthcare costs and has been endorsed by the National Cancer Network.


Catalyst for growth are:

  • Signing up a large healthcare provider like Sigma. To date, they continue to have dialogue, but other insurers such as Blue Cross at smaller localities do provide coverage as does Medicare.

  • New products are slated for later this year which help measure the amount of UV damage a patient’s skin has, they have teamed up with large cosmetic companies such as L’Oreal, to help provide bespoke solutions to these patients. This will be released for Q4, but won’t impact numbers until next year.

  • Currently only targeting USA, plans to also move internationally.

The above should see the company maintain its hypergrowth (100%+) for several years to come, and its capital light model should see gross margin’s rise to match those of our software companies.

Would like to give credit to Jonah Lupton who, like Saul and many others on this board, freely gives his time to help us all invest better. He first wrote up the stock on Twitter and has provided a great deep dive here - and here -

What does everyone think?


What does everyone think?

With six billion of us, it’s hard to tell! :wink:

Being non invasive
DermTech saves money
DermTech saves time
DermTech eliminates scaring

That to me sounds like an absolutely winning combination.


Denny Schlesinger


Making skin cancer detection more accurate, less invasive, more convenient, and cheaper sounds like, if not a great investment, at minimum a great contribution to society. I invest with both my head and my heart, and I love to be part of stories like that.

That said, while rates are important, absolute numbers can help paint a fuller picture. They have shown strong growth rates, but in the most recent quarter they just reached a $10M annual run rate in revenue. They could be in hypergrowth for three years or more without hitting $100M in annual revenue. That’s a narrow path to investing success for a company that’s already valued at over $1B. To grow into that valuation in less than 5 years is going to take something more than just continued execution on a hypergrowth trajectory – it will require a step change in adoption that happens without depending on a sales force of a few dozen reps at their current level of productivity. DMTK seems to think each rep can cover around 250 docs, yet in the most recent quarter the average rep only signed up 4 new clinics.

Is there a barrier to adoption that will weaken? Are docs not yet convinced of the test’s validity? Or is there a devil in the details alluded to by their targeted test volume that has “minimal impact to biopsy practice”?

Also, more than half of their projected TAM is addressed by a product that has not been released yet.

In the fall they were valued around $350M, which might be okay for a speculative play. Then, like many growth stocks, they were bid out of control in December and January, as high as a $2.5B market cap and an eye-watering ttm EV/S of over 500. They are still coming back down from that. If they return to their fall share prices, I might take a second look at the risk/reward available here. But failing that, I see too much of the business upside already baked into the price, such that even tremendous execution will not result in the kind of investing returns we seek.

Love to hear others’ take on it.


DMTK looks quite promising… yet, it is a tiny revenue company.

Last Q revenue was $2.5M… at this revenue stage, growth in 100% range is not very impressive… revenue needs to grow at much higher rate to justify its market cap is >$1B…

IMO - This is more like venture cap area than public markets…


I was recently at a dermatologist to get checked for skin cancer ( annual check). I asked if he had heard of dermtech. He replied that he had not, despite attending a dermatology conference recently.

Do we know if the accuracy has been demonstrated in large scale trials? ( >10 k sample)

Dermatologists earn more from doing biopsies so there will be reluctance. Unlike Cologuard (EXAS), which can be easily ordered by primary care doctors rather than gastroenterologists, Dermtech is dependent on dermatologists.


Hi MarinoT,
I too have been following DMTK and made several small buys between Jan 4 and Jan 20. It is a small 0.6% position in my portfolio and in the speculative category. At this point in time I am down 3% overall on DMTK.

Why did I buy? I’d like to say it was based on revenue growth, TAM, and recurring revenue, but It really wasn’t:

  • Revenue Growth? At the time the latest ER was Q3 – and while revenues were up 61% from Q2, they were down from Q1. And we are talking quarterly revenue measured in single digit $M’s
  • TAM? While the TAM is very large, I personally believe some of their calculated TAM is not achievable by their process and cost structure, and the barriers to adoption are notable
  • Recurring Revenue? Nope.

I bought because I believe in what they are doing and I think they will be successful in the long run or get bought out. I have several close relatives who have had forms of skin cancer and my wife goes in regularly for checkups on spots, etc. I personally have had a couple biopsies (fortunately both negative).

From a logical numbers based perspective, I believe the growth rates you are seeing will continue at a slightly lower (but still impressive) level. Since they don’t really have recurring revenues, they will rely on continued sales growth. In the medical industry there is some level of “recurring” in that once you win over a physician or clinic, they tend to stay with you. So the sale team treats those customers as almost a maintenance account and can spend more time winning new clients. Then the process starts over with each new product.

And of course they have the product COGS. Through last FY COGS were close to the total revenues. This will improve with scale since ½ are fixed and ½ are variable, but they still have the issue of fixed costs for production in the near term. While they may continue the high level of growth, their variable costs will continue to grow too (albeit at a slower rate than revenues).

They have not given guidance on a break-even point for the company. For the melanoma product it is in the 10Ks of tests, but they are investing on a platform to capture the larger market. So in the Saul process, investing for future growth is good, and I like that about DMTK.

On the positive side, they are targeting a full platform of products, investing heavily to make sure they are not a 2 product company, showing very good adoption rate for existing products, and projecting continued high growth rates. Also and the new products coming down the pipe look promising.

So for me this was really more of an personal/emotional buy and not based completely on Saul principles. That is why I haven’t brought it to this board before – I didn’t think it fit the target stock here (but I may be wrong and am glad you raised it here). They are further along than my other current medical spec plays of similar position size (CARA and NNOX) and are generating continuing product revenue today.

I am confident they will grow into their market cap and beyond, it just might take a couple years to get there. Since it is such a small part of my portfolio, I am willing to wait for that to happen.

Jeff (aka borngiantsfan)

Long DMTK (small position)


Thanks all for your feedback, good to get positive/negative thoughts to test ones own conviction. I hope this company does fit the boards rules for further discussion.

Here are my thoughts to some points raised above.

“Do we know if the accuracy has been demonstrated in large scale trials? ( >10 k sample)”

They have mentioned biopsy provide 83% accuracy as compared to their PLA tests which are 99%. Having been endorsed by the National Comprehensive Cancer Network, I assume yes??

“Dermatologists earn more from doing biopsies so there will be reluctance.”

These tests allow dermatologists to see more patients that actually have cancer. So DMTK are saying the billings are neutral to dermatologist. I tend to beleive them due to the accelerated number of clinics they are onboarding during a pandemic. In addtion they have released two independent economic studies which conclude DMTK has a product which takes cost out of the healthcare system. I beleive this is quite special.

“While they may continue the high level of growth, their variable costs will continue to grow too (albeit at a slower rate than revenues)”

The Assay Gross Margin in Q1-2020 was -46% and in Q1-2021 was 10%, doesn’t that show the leverage?

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I also have a small speculative position. I take my 87 year old Mom to see a dermatologist regularly as she has a history and needs to have spots checked. First, it appears that seeing the Doctor is a rare thing. She has had a biopsy and then a surgery to have the mole removed, all thru the PA (Phys Asst). I think the Dermatologist has 4-5 offices and is rarely there. But that’s another thing.

The PA there had never heard of Dermtech or the technology, and was somewhat skeptical.

I recently saw a different Dermatologist for a skin check on my and the PA wanted to do a biopsy to check a mole. I asked about Dermtech and she responded with “oh yeah, we have that, would you like to do it that way”? I did and all is good.

But when I asked her why she didn’t offer that as an option she said they weren’t yet confident with the results and etc. I suspected at that point in time, they can make more more money from a biopsy. This PA is not going to see “more patients” if they are not booked to be there that day. So perhaps they offer Dermtech when it’s busy, or if they get really busy, but for now, they don’t bring it up and I only got it because I asked.

This makes me think that Insurance Companies have to be the force that drives wide adoption. And frankly, it saves money, so they will. But that could be slower than I originally thought.


after looking into this, I am going to open a small (<0.5%) speculative position, mainly due to my very personal history with melanoma and frequent trips to the dermatologist. the tech looks interesting, and the fact they dont need to cut into the patient to diagnose sure looks promising. THe concerns I have are the current valuation and frankly, being burned by these types of plays in the past, but as mentioned, I have a personal stake in this.

concerns: will insurance companies pay for this? Is it as accurate as they claim? Will it be profitable for the dermatologists (sadly,we all know that plays into it).

Personal story follows, feel free to quit reading. it is meant to encourage everyone to get checked for skin cancer.

if you are on the fence on how a mole looks please do not wait. I was fortunate that the gal that cuts my hair noticed a new, odd mole on my head, and she knew my history of having a lot of dysplastic moles. (My sister had recently been diagnosed with Stage 1 melanoma, though she had avoided going to the dermatologist until she sent me a photo and I got concerned).

my barber took a photo of it, and I made an appointment that day with the dermatologist as it just looked different from my other ones. long story short, came back as the very early stages of melanoma, which we took care of with a nice scalp surgery. I now go in every 3 months and usually have 1-3 moles that are suspicious and are excised for biopsy. Needless to say, I am rather tired of the constant cutting, and a new test that can diagnose without this would be awesome. In my situation, anything dysplastic is excised further with stitches, but if I can forego the biopsies and just focus in on those that need it would be excellent. Though I do have some great scars that will be turned into fantastic stories for my future grand kids.

thanks for reading, and hope this wasnt too off topic for the board.


I disagree. Confronted by an atypical mole a primary care doctor was best off referring to a dermatologist. Now he can simply apply the DermTech patch himself. That is once the patch becomes a standard of care. Which probably won’t be too long considering it’s efficiency in detecting melanoma. Another study or two may be needed to reach standard of care status.
Even though the company made some dubious claims about patch cost and effectiveness vs biopsy, it is hard to look at the present evidence without being impressed. OTOH such an easy test may be abused , every mole gets tested, why not. No discomfort to patients but pain to insurance companies.

All the local dermatologists here are overwhelmed with work, it takes weeks to get an appointment, so I doubt if extra income from biopsy is going to make much difference to most. But doctors are conservative by nature so may be slow to change habits developed over years

Once investors have decided that DermTech patch really is a better mousetrap (as I reluctantly have) the question becomes one of whether the stock DMTK is over priced. And what it would take to ignite the sagging stock price.


One other point, there are some malignant pigmented lesions (pigmented basal cell carcinoma) that are missed by the DermTech patch. Fortunately these do not metastasize so if it was missed initially there will be time to correct the error.


Unlike Cologuard (EXAS), which can be easily ordered by primary care doctors rather than gastroenterologists, Dermtech is dependent on dermatologists.

Dermatologists are absolutely the focus, but I just wanted to point out that DermTech also wants to be available in primary care offices as well as telemedicine. DMTK had to put their sales efforts on hold because of COVID. They are planning to nearly double their sales team by the end of the year (from 40 to 75/80).

Some other comments on here have asked about valuation/TAM/does it work. I’m not that concerned with valuation. Their current PLA is a small portion of their potential market, and it hasn’t even scratched the surface. The data is out there that says this works and is more accurate. What’s really exciting isn’t the PLA, but the pipeline products for basal/squamous cell and “Luminate” to check for UV damage/risk for skin cancer. The future success of DMTK will depend on the pipeline products, as they make up the majority of the TAM.

As others have pointed out, dermatologists haven’t offered it up as a first choice and most people don’t know about it. I asked my doctor and he said “we don’t have that,” but when I pressed him on it he said “Oh yeah, but that’s usually just for people who don’t want to get cut.” That left me thinking, “so you’re saying there’s people who enjoy getting cut?”

As sales efforts ramp up and doctors are presented with the data, I think they will be willing to use the product. DMTK has also indicated their intent to increase advertising. When more patients become aware of it I expect the reaction will be: “I don’t have to get cut and it’s more accurate? Sign me up!” Patients asking for it will make a difference. 90% of the 4M or so biopsies every year come back negative for melanoma. In other words, most people get cut for no reason. Of course, it will take execution on the part of the sales team and marketing team, but it’s easy to visualize the path to get there. Time will tell.

I highly recommend anyone interested in DMTK to read the transcripts from their Cowen and UBS health conference presentations. The CEO/CFO provide more color on the questions people have been asking here.



Could it just skip over the docs/clinics and become a home test?

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90% of the 4M or so biopsies every year come back negative for melanoma.
that is because the vast majority of skin biopsies are to diagnose basal cell and squamous cell carcinoma, Which are vastly more common than melanoma. So way more than 90% of skin biopsies looking for cancer come back positive for cancer.
Patients asking for it will make a difference For sure. That is what propelled the daVinci in prostate surgery.

Just to complicate things there are melanomas with little or no color that nobody would put a patch on. on.….
and pigmented basal cell carcinomas where the patch will come back negative.….

Ultimately I expect to see a patch that can diagnose melanoma basal and squamous cell cancers. And maybe diagnosis of some other skin diseases as well.


I’ll add a couple of thoughts on this already somewhat lengthy thread, since I’m a family doctor who does quite a bit of dermatology.
I am not a dermatologist. And before I heard about it here, I had never heard of DermTech before.

As of now, I don’t typically refer to dermatology for pigmented skin lesions that I’m concerned about - I either punch-biopsy them, or completely excise them, myself or if the lesion is in a difficult location for me to excise completely, I refer directly to plastic surgery AFTER a punch biopsy confirms severe atypia or cancer. If the lesion is small enough and/or amenable to a simple excision, I just do that. One procedure and (usually) done.

I would be reluctant to rely on this test to make a clinical decision right now. Here’s a few reasons why:

  1. Someone mentioned that doctors tend to be slow to change practice. I agree this is quite true, except and until there is clear and convincing and unbiased evidence that the standard of care as it stands should be changed. I don’t see that clear evidence for DermTech - yet.

  2. Right now, the standard of care for a suspicious, pigmented lesion is to either biopsy a small piece of it or remove it entirely. I think if you asked 100 dermatologists right now: “What’s the standard of care for diagnosing malignant melanoma?”, all 100 of them would say, “Biopsy”. You need tissue.

  3. DermTech doesn’t change #2 above - what it potentially changes is the number of biopsies you might do in an average week or month. It could potentially save the system money but only if DermTech is specific enough (that is, if it has very, very few false negatives) and fast / easy enough for doctors to adopt in place of biopsy. I would be willing to use DermTech as a screen to decide which lesions to then biopsy, but ONLY if I had high-quality, verified, unbiased data. Right now I don’t see that clearly. I didn’t dig deep or read everything available, but what I did see is not convincing enough. Maybe they just need to hire more salespeople to convince docs like me.

  4. The other consideration is time and money, which to a busy doctor are the same. I would need DermTech to demonstrate why their test is both faster and easier than a simple punch biopsy, which takes about 5 minutes, is practically painless, at worst leaves a tiny (3-4mm diameter) round mark and costs about $200. Most importantly, the biopsy gives you tissue, which at least for now is still THE definitive answer, the standard of care. That’s the way I think about it, anyway.

  5. From what I have seen on the website and the description of HOW the DermTech test is done in a clinical setting, it looks like it would take about as long as doing a punch biopsy, and costs about the same or even a little more. Yes, if the punch shows cancer, then you need to proceed to a complete excision, but the same is true if the DermTech test comes back positive. I don’t think it saves the doctor time. Now, if patients eventually can do it themselves at home, that could be a real game-changer, but can you really trust patients to do the test properly themselves?

My opinion is that this new tool may eventually become widely used and supplant a quick, inexpensive punch biopsy as the diagnostic tool of choice. However, for reasons above, I am not yet sold as an investor or as a doctor.

Family Doc
New Orleans



that is because the vast majority of skin biopsies are to diagnose basal cell and squamous cell carcinoma, Which are vastly more common than melanoma. So way more than 90% of skin biopsies looking for cancer come back positive for cancer.

I just wanted to clarify that the 4M/year biopsy number is just for melanoma, so the 90% is correct - it would actually be even higher (180,000 cases out of 4M biopsies; 4.5%).

For basal and squamous cell, the number of biopsies is 11M/year. (4.5M cases out of 11M biopsies; 41%).

These numbers are from DMTK’s most recent investor presentation.


I agree that biopsy is certainly the current standard of care. As I mentioned in my previous post, one of the benefits DMTK offers is the ability to test earlier. If a spot on the patient’s skin doesn’t look like cancer or the doctor thinks it’s too early to biopsy they will watch and wait. DMTK argues that they can catch melanoma early before a doctor would be willing to biopsy. Another one of their arguments is subjective (traditional) vs objective (DMTK) treatment. I won’t spend more time on that because everyone knows their main selling point.

I think you are right about the main obstacles - what’s holding doctors back is (1) change and (2) data. Doctors are slow to change current practices and require convincing data. They mention doing “21 peer-reviewed publications” in their 10K. You may have already come across this information, but I thought I would post the below comments from their filings:

The PLA improves the assessment of pigmented lesions by reducing the probability of missing melanoma to less than 1.0% (versus approximately 11-17% with the existing standard of care) and by reducing the number of surgical biopsies required to diagnose melanoma by tenfold (from about 25:1 to about 2.5:1). In addition, the PLA improves the positive predictive value (“PPV”) approximately five-fold (from 3-4% with the current surgical techniques to 18.7% with PLA).

The performance of the PLA is supported by numerous investigational studies, which enrolled an aggregate of over 7,000 patients and yielded a total of 21 peer-reviewed publications in top-rated medical dermatology journals. A publication in JAMA Dermatology demonstrated that the PLA significantly lowers the cost to diagnose melanoma while providing a more accurate and less invasive alternative to current methods.

I think it’s up to the sales and marketing team to get the message out to patients and convince doctors of DMTK’s value. I think it is very early innings for this story and like all new medical innovations it will take some time to play out.



You may be right. The only source I was able to locate concerning number of biopsies relates to Medicare only." Between 2000 and 2015, the annual number of skin biopsies performed increased 142% (from 2,078,968 to 5,022,595)" But I would like to see a documented number from a non DTMK source. Particularly since the initial DermTech PR about biopsy cost was dubious.

Real world the failure rate of biopsy is too high
Other methods of biopsy, such as punch and shave, are not recommended as they do not allow complete histological staging.
Excision biopsy is the recommended method of diagnosing lesions suspected of being a malignant melanoma. And that gives good results. But the majority of biopsies are done with other more fallible non state of art methods. For instance 23% failure rate for punch. Note these are overall figures ,my guess is that qualified dermato pathologists do better.….

In a study of 525 dermatopathology specimens of suspected melanocytic neoplasms, only 192 (37%) were excisional biopsies [23]. The diagnostic certainty for invasive melanoma was 95% for excisional biopsy, 82% for deep shave, 77% for punch, and 67% for superficial shave. For melanoma in situ, it was 73% for excisional biopsy, 75% for deep shave, 44% for punch, and 42% for superficial shave..

and the diagnostic accuracy for two dermatologists each with > 10 years experience in dermatology was 80%, with sensitivity of 91% and positive predictive value of 86%. Diagnostic accuracy rates for two senior registrars (each with 3-5 years experience) and six registrars (each with 1-2 years experience) were 62% and 56%, respectively. Thin and intermediate thickness melanomas generated the greatest inaccuracy Not quite sure what a Brit “registrar” is but apparently a specialist with extra training- the Dermatologists did a lot better but still a lot less than you would want if it was your biopsy.

So it is clear that present biopsy diagnosis of melanoma leaves a lot to be desired. At lot worse than I thought it was,. The DermTech procedure is better. Not a little better but real world where biopsies are often the wrong kind, a lot better So I am a convert to DMTK. But I think larger independent studies will have to be done to nudge doctors from their accustomed ways. And DermTech has a selling job ahead of them, because most practitioners do not know how the fallibility of present methodology.

Technique for preparing a tissue specimen for microscopic examination…
so what you wind up with is lots of very thin sections to be examined under the microscope. So not only is human a error possible (missing a few malignant cells) but the sections the pathologist examines arc only a small part of the biopsy.

meanwhile DMTK is the 7th most shorted stock. Will the shorts be right or wrong? TBD. But either way short squeeze or not ,it won’t make any difference to DMTK price a year from now. There are substantial costs in going short. Stock markets are up 2/3 of the time so I assume most shorts are short term oriented.


What about the margin of error in biopsies/human doctors being able to identify whether a sample is actually malignant or atypical enough for further excision/removal? For moles that were borderline atypical, would it not be better to to monitor the lesion as-is with regular visits instead of removal – making it hard to see from the surface of the skin what may be going on underneath the removed area? How often do punch-removed lesions return? I have personally had several return, requiring further procedures.

Any chance that the damage from the removal of a cancerous/precancerous lesion could cause it to mutate/spread? I’ve always been told (by legends of grandma) that damaged/scratched-off moles should be monitored even more closely as this can cause them to mutate/grow deeper into the skin tissues? My ex-dermatologist described this as his justification for performing so many further excisions/surgical procedures on myself, but this is anecdotal.

Anyways, the physical and financial scars from those punches and “surgical excisions” that some dermatologists bill a patient’s HMO into the $thousands to perform ($1900 billed for a 15-minute procedure to remove a non-cancerous lesion resulting in a 1-inch tall by 10mm wide scar on my back) would justify Dermtech’s method vs. punch-test and biopsy, especially when punching-out “of an abundance of caution” when there is a less invasive method.

Wouldn’t the Doctor’s ethical duty/oath to patients guide them the to the route of less-invasive, no matter how stubborn an aging practitioner may be in their ways? I’d personally request the procedure if available, due to my past personal experiences and number of moles from enjoyment of Sun.

Thanks for your input!


(Someone who once had to do research on his (formerly) in-network dermatologist who billed into the thousands for a series of “surgical procedures” after the punch-out that consisted of 15 minutes total office time to remove remnants of a punched-out and biopsied lesion that was not even cancerous yet)



Thank you for great input from a professional standpoint!

I think that there’s competition most investors are not aware of such as Scibase Nevisense. It is FDA approved and more suited for use in a doctors examination.

This is what made me revalue my DMTK conviction, especially considering valuations of the companies. Would love to hear what a professional doctor thinks.

From the Scibase website:
Nevisense has a proven diagnostic accuracy in the detection of malignant melanoma in three consecutive studies with more than 4,000 lesions. In the pivotal study with a total inclusion of more than 2,400 lesions, the Nevisense system achieved a sensitivity of 97% in the target population. It also has a proven specificity of 38% on lesions with clinical suspicion of malignant melanoma, representing the potential reduction of unnecessary biopsies.

Objective analysis
Visual inspection, whether through dermoscopy or with the naked eye, is inherently subjective. Nevisense enables physicians to complement their expertise with an objective analysis of cellular characteristics, thereby leading to more informed conclusions in difficult or borderline cases.

Easy procedure
The Nevisense procedure fits easily within physicians’ normal patient flow. Compared with pathology which can take time to provide results, Nevisense provides immediate diagnostic information to the physician at point-of-care.