What happened
Shares of DermTech (DMTK +0.00%), a biotech company focused on skin-cancer testing, gained last month as the company continued to attract positive analyst attention and build on momentum from last December. Back then, the company announced results from a TRUST study that showed that its Pigmented Lesion Assay (PLA), its non-invasive skin-cancer test, was 99% accurate when it showed negative results.
According to data from S&P Global Market Intelligence, the stock finished January up 26%. The chart below shows the stock's trajectory for the month.
So what
There was not much fundamental news out on DermTech, but attention to the stock is clearly increasing, with trading volumes up substantially following the announcement in December.
Image source: DermTech.
The stock jumped 20% over a two-day span after it announced and then priced a secondary stock offering of 4.2 million shares at $29.50, less than what the stock was trading for at that time. The company expects to bring in $125 million in gross proceeds from the offering, which it will use to fund further commercialization of its clinical tests and accelerate pipeline development. This elicited cheers from investors.
Though the stock gave back some of those gains on Jan. 8, it started rallying the following week with the help of a bullish analyst note from Lake Street, which raised its price target from $24 to $52. That same day, the company announced that PLA, its skin-care testing patch, had received a recommendation from the National Comprehensive Cancer Network.
DermTech climbed again in the third week of January as Craig-Hallum raised its price target from $23 to $49 and Oppenheimer initiated coverage on the stock with a buy rating and a price target of $53.
Now what
It's still early in February, but DermTech shares are already up 40% this month through Feb. 8, showing that investor excitement about the stock is continuing to build. Considering that the market for such melanoma testing is estimated to be worth about $10 billion, according to DermTech, and the company is only valued at $1.4 billion, the healthcare stock appears to have more upside potential -- and that doesn't include the impact of future products.
