It may be that the diagnosis of the most lethal form of skin cancer will become more accurate, easier, and safer. There is a handheld device in expedited FDA clinical trials that shows great promise in diagnosing melanoma. The company, Electro-Optical Sciences, has no earnings but about a year of monetary reserves. The MelaFind device is still in clinical trials so it is still possible that the FDA will not OK it. But, if it does, projections are for $ 10 million in sales the first year and much more thereafter.
The Food and Drug Administration (FDA) is America’s drug czar. In order for a medication or medical device to be OK’d for use it has to pass through four stages of testing to demonstrate that it causes no harm and that it does, indeed, help.
To quote a section of the FDA website on regulated devices, “The U.S. Food and Drug Administration (FDA) regulates medical devices to assure their safety and effectiveness and develops, and carries out a national program designed to control unnecessary exposures to, and assure safe and efficacious use of, ionizing and non-ionizing radiation-emitting electronic products [under the] Federal Food Drug & Cosmetic (FD&C) Act.”
The point is that MelaFind shines a beam of light onto the skin and can “see” 2.5 mm under the skin. It uses ten different wave lengths of light and is computer assisted in “reading” the findings. Because it “emits” non-ionizing radiation (light) it is regulated. A similar situation exists with the use of UV lamps in dermatologists’ offices to treat various skin diseases. So, the FDA, which has already seen that MelaFind is very effective needs to be sure that it does not cause skin problems, eye damage, or the need to shield the eyes of the clinician or patient.
This is relatively simple product with a relatively simple use. Its history demonstrates how keeping up with the development of such a device and can in substantial trading profits.
Early this year MelaFind passed its Phase III trial with flying colors. It was substantially more effective in ruling out lesions as cancer than experienced dermatologists using standard diagnostic techniques. Thus it substantially reduced the need for skin biopsies. The stock’s shares doubled in price in one day and have gone a bit higher since then.
If the MelaFind device passes its current testing and can be sold and used the company predicts a prospective market of $10 million in sales the first year and a prospective market of $40 million a year thereafter.
This projection is part of what you need to know to trade the stock. Who is the prospective market for an approved device? What will Electro-Optical Sciences sell it for and what will the production cost be?
The prospective market assumption is that every dermatologist will buy and use the device to help diagnose melanoma. That is probably short sighted. In a world of controlling medical costs the prospective market will likely include HMO’s who will probably require that the device be used to screen for melanoma BEFORE the patient is sent to a dermatologist for a more expensive consultation. That larger prospective market may mean more sales than expected causing a later rise in the price of the stock after the first jump.
We present this situation as an example of trading opportunities in small medical product companies.
Popularity: 9% [?]
Be The First To Comment
Related Post
Please Leave Your Comments Below