HTG Molecular Diagnostics Inc (NASDAQ:HTGM): Here's Our Take

HTG Molecular Diagnostics Inc (NASDAQ:HTGM) spiked at the end of last month, running up from $1.2 a share to $3.1 a share, on volume of close to 20 million shares changing hands. That's a nearly 160% gain in a session. The company has since consolidated a little, and its shares currently trade for around $2.7 a piece. Is the correction an opportunity to load up ahead of a continuation of the upside momentum? We think it might well be. Here's why.The company is a biotechnology company that focuses on molecular diagnostics. It's one of those companies that has a really specific target focus, and as a result of this specificity, can be a little tough to figure out operationally. Take the latest press release as an example of what we mean by this. On February 27, HTG reported that its new direct-target sequencing chemistry will be available in the company’s VERI/O laboratory as a service offering beginning in the first quarter of 2017. Further, that it's designed to function with the same high sensitivity and specificity as the company’s current HTG EdgeSeq chemistry applications, and that it will detect common mutations in the EGFR, KRAS and BRAF genes for retrospective research studies especially from small and difficult samples, such as FFPE tissue.At first glance, that's a pretty tough one to interpret.Well, we've done the hard work for you here. Basically, this company is trying to solve a fundamental problem that exists in molecular diagnostics right now. That is, sample taking devices are working towards taking smaller, less invasive tissue samples, but the tech that is set up to test these samples isn’t good enough to test small amounts of tissue.Take the lung cancer diagnostic process, for example. It used to be that physicians would take a big chunk of tumor via surgical resection and then break it into various samples (around 20 separate slides) which spread across a number of different testing platforms. Now, however, surgeons want to avoid surgical resection, and use the FFPE method mentioned above. These FFPE samples can't be split into 20 separate slides, however, so the amount of tests that can be done on the sample is limited.HTG's technology can perform a full spectrum of testing on the equivalent of 2 FFPE derived slides, bringing testing side of the space in line with the sample taking process.It's a really important divergence to address, and this company has addressed it. It offers this testing service by way of the VERI/O Lab services referenced in the above discussed press release, and the release specifically just outlines an expansion of the tests available through the technology. More tests, same small sample size – in a nutshell, that's what matters.So how does this play into the macro biotech environment?Well, it's not just about diagnostics. The company offers biotechnology companies a service whereby it takes their samples (tumor samples, etc.) and profiles them using its HTG tech. It requires far less sample to do the profiling, and is much quicker than current industry standard tech, and – additionally – its an all-under-one-roof solution. As an example, if a company is doing preclinical testing in a particular cancer type to try and identify which particular versions of said cancer (i.e. which genetic mutations, that sort thing) respond best to their investigative drug, they send samples out to a bunch of laboratories that perform biomarker testing on the samples. Instead of sending all the samples to different sites, HTG offers said companies the chance to send them all to its own lab, and its tech does all the necessary testing to get the samples returned, and tested, quicker than the multiple site option. This has obvious benefits, and plays an important part in HTG's strategic expansion plans going forward. It's already spawned partnerships with Merck & Co., Inc. (NYSE:MRK) and Bristol-Myers Squibb Co (NYSE:BMY) in the form of master development agreements.So what's next?Well, this is the kind of company that – due to the seeming complexity of it's operations – puts out press releases that investors miss the implications of. That doesn't mean they aren’t value drivers, however, and it gives us an opportunity to load up ahead of an eventual revaluation. We're watching for any fresh developments, and as and when they hit press, we'll form a near term bias on our interpretation.We will be updating our subscribers as soon as we know more. For the latest updates on HTGM, sign up below!Disclosure: We have no positions in any of the securities mentioned and have not been compensated for this article.