Shares of DermTech (DMTK -3.73%) were climbing on Tuesday after Cigna said it would begin covering the biotech company's early-detection skin cancer test.
Shares were up 15.9% as of 11:48 a.m. EDT today on the news.
Virtually all of the value for DermTech, an early-stage genomics company, is tied to forecasts for its Pigmented Lesion Assay (PLA), an adhesive patch that offers a noninvasive way of detecting melanoma, disrupting conventional biopsies that require a skin sample and testing in a lab. That Cigna, a health insurance company worth nearly $100 billion, is now covering the patch represents a significant step forward for the technology as it hopes to gain widespread adoption.
Cigna covers about 10% of the U.S. commercial market, and became the first national carrier to cover the PLA with the move.
Craig-Hallum analyst Alex Nowak issued a note saying that the news should help reverse DermTech stock's recent weakness, and reiterated a buy rating with a price target at $70.
In January, the PLA received a recommendation from the National Comprehensive Cancer Network, paving the way for insurers to cover the product, and Cigna should be followed by more of its peers.
DermTech shares soared early in the year on anticipation for the PLA and on a surge in growth stocks before fading over the last two months. High expectations are baked in as the company is now valued at $1.3 billion even though it only brought in $5 million in revenue in its most recent quarter. DermTech has estimated an addressable market in skin cancer of as much as $10 billion, so the biotech stock should have a lot of upside if the PLA gains wide adoption.