San Diego's DermTech trims staff to conserve cash as it pushes scalpel

San Diego’s DermTech has cut about 40 jobs and shelved certain research programs to focus on its main product — a non-invasive, genomics-based diagnostic test for melanoma.

The company, which went public in 2019 through a reverse merger, said the layoffs amount to about 15 percent of its workforce, which stood at roughly 280 employees prior to the reduction in staff.

The moves will save $25 million to $30 million, the company said. DermTech has a cash runway of $108.4 million, which the company thinks will get it into the first quarter of 2025 based on its projected spending rate.

DermTech did not immediately respond to requests for comment. But a leadership transition preceded the restructuring.

In March, the company announced that it has entered into a “transition agreement” with Chief Executive John Dobak. He resigned officially on May 8 as CEO and member of the board.

The next day, DermTech named industry veteran Bret Christensen as its new CEO. He previously served as chief commercial officer for Insulet Corp. He also held executive roles at Myriad Genetics and Hologic.

In a statement, Christensen said a review of DermTech’s operations led to “the tough decision to realign our organizational footprint and capital deployment.

“We are changing certain tactics to prioritize reimbursed tests and drive revenue growth, which capitalizes on our 40 percent increase in covered lives to approximately 126 million since the end of 2022,” he continued. “We have a great opportunity to integrate the DermTech Melanoma Test into the melanoma care pathway to improve patient outcomes.”

DermTech’s first commercial product uses “smart stickers” to collect samples from dark-colored skin and moles that possibly could be melanoma — eliminating the need for a scalpel to cut tissue from sensitive areas such as the face, neck and chest.

The samples collected with the smart stickers are tested at a high complexity, certified lab.

The test has not been approved by the U.S. Food and Drug Administration, but it has achieved insurance coverage with Medicare, Veterans Affairs and certain Blue Cross Blue Shield Association insurance plans. DermTech markets the test directly to dermatologists.

It is still early days. DermTech posted $14.5 million in revenue last year, up 23 percent from the prior year. But it also rang up a $116.7 million loss in 2022, compared with a $78 million loss in 2021.

The company also was working on diagnostic tests for non-melanoma skin cancer, as well as inflammatory skin diseases, such as atopic dermatitis and psoriasis.

DermTech expects to take a $2 million charge in connection with the layoffs, primarily to cover severance. The company’s shares ended trading Wednesday up 18 cents at $3.05 on the Nasdaq exchange.