DermTech (NASDAQ:DMTK) is a small cap with a big future. The company has a new diagnostic tool for skin cancer that is easier, cheaper, and far more accurate than the current standard of care. 

Right now, diagnosing skin cancer is usually more art than science. A doctor makes a visual assessment of a suspicious mole. To determine a diagnosis, a surgical biopsy must be performed, and another visual assessment made of the mole's cells via a microscope. There's a 17% chance that a doctor using this process will fail to recognize a melanoma.

Doctor examines female patient for skin cancer

Image source: Getty Images

DermTech's solution avoids the surgical biopsy. A simple adhesive is placed over the skin that removes RNA material from it. That's all the company needs to conduct an in-depth diagnostic. Instead of subjectively analyzing the appearance of those skin cells, DermTech's solution examines them at a genetic level. It's over 99% effective at finding melanomas, and it's cheaper, too, running about $760 versus $1,000 for a biopsy.

The company has a sizable market opportunity. More people are diagnosed with skin cancer than all other cancers combined: 20% of Americans will develop skin cancer by age 70. And early detection is incredibly important. Melanoma has a 98% survival rate if it's detected early. That drops to 23% if it's not detected until it has spread to distant organs.

DermTech forecasts a possible $1.5 billion in annual sales from Medicare payments alone. Once private health insurers start paying for the solution, that's another $1 billion revenue opportunity. The future is bright for DermTech.

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