DermTech — a San Diego company with a scalpel-free test for skin cancer — this month raised $65 million through a private stock placement.
The funds will accelerate commercialization of its flagship test, pigmented lesion assay, or PLA.
The company’s adhesive patch — which resembles a circular Band-Aid — tells if a mole is benign or needs more attention. Patients commonly test negative for melanoma, meaning they avoided a scar from the typical method of cutting out a small skin sample.
For patients who test positive, their lesion is removed via incision and examined further.
“It’s really the capital we need to ensure we can scale the business around our first test,” CEO John Dobak told the San Diego Business Journal.
Unnamed institutional investors participated in the stock placement. DermTech sold about 2,467,724 shares of common stock at $10.50 per share, as well as 3,199 shares of series b-1 convertible preferred stock and 524 share of Series b-2 convertible preferred stock at $10,500 per share.
The company, which has about 70 employees, plans to ramp up its sales force and bolster marketing.
“Patients don’t really know much about us and the availability of our test,” Dobak said. “We’ve done a lot of market research that says they would be very interested if their doctor would offer them this test, and they would actually be upset if the doctor did not offer them our test.”
Recently, the company’s test won Medicare coverage. The move opens the door to wider insurance coverage, given that insurers take marching orders from Medicare.
Dobak said the funds would also go toward advancing other DermTech tests in development, including for inflammatory diseases.
Besides a skin cancer test, pharmaceuticals use DermTech’s technology to pinpoint which clinical trial patients will respond to dermatology drugs.
DermTech took in $3.4 million in 2019 revenue, a 38% year-over-year increase, according to financial results released March 9.
But with the company scaling up, it ended up in the red. It reported a $19.7 million net loss in 2019 and a $10 million loss in the prior year.
Last year, DermTech went public through a reverse merger with Constellation Alpha Capital. DermTech took over Constellation’s public stock listing — now trading as “DMTK” and “DMTKW” on Nasdaq — and the management of the business.
Peer-reviewed journals have validated DermTech’s commercial test, from efficacy to lowering costs.
It has a low probability of failing to detect melanoma: less than 1%, according to Dermatology Online Journal. The patch picks up genetic material from the upper layer of skin, which is then analyzed for cancer-causing genes.
Dobak last year said standard of care — looking at a slice of tissue under a microscope — has a 17% chance of missing early-stage melanoma. n