HTG Molecular Diagnostics Inc (NASDAQ:HTGM) Just Validated Our Thesis

HTG Molecular Diagnostics Inc (NASDAQ:HTGM) ran up to just short of $10 a share back at the end of March, but since corrected to settle in and around the late $5 mark. This week, however, we're seeing a bit of upside action, on the announcing of a couple of fresh deals between HTG and some entities we'll look at in a little more detail shortly.This is one we've highlighted as being very much one to watch on a number of occasions. It's a stock we feel has long been undervalued for a few reasons, but primarily because people just don't realize where it fits into the space, and the run we've seen over the last couple of months has gone some way to closing this value gap.That said, we can laud it all we like, but we were looking for (and we noted this last time) some evidence that the industry recognized its potential (even if the markets didn’t) as validative of our long term thesis.The two latest announcements are exactly what we've been looking for. Here's a look at what they are, what they mean, and what we're looking at going forward from HTG.This one's a biotech play, and as its name suggests, it's working to commercialize a diagnostics test. Specifically, the test is called EdgeSeq, and it's designed to improve the utility of certain types of samples of particular cancers. Our thesis on this one is rooted in this test – basically there's a disparity between the samples being taken (getting smaller, less invasive) and the equipment being used to test said samples (large samples needed for more extensive testing). EdgeSeq seeks to close this disparity.As we’ve said, we’ve been on the lookout for some confirmation that markets are willing to adopt the technology. If we see said confirmation, it would strengthen the above outlined thesis.And that's what we just got with the latest two announcements.HTG announced two agreements yesterday morning (April 17), and both serve to validate the technology that underpins the company's lead asset.The first is a master agreement with DAIICHI SANKYO COM NPV (OTCMKTS:DSKYF). Here's the blurb:

"(the agreement is) for work to be performed in HTG’s VERI/O laboratory. The initial project includes the development of a custom assay for the detection of nearly 3,000 mRNA targets using the HTG EdgeSeq technology."

So what does this mean?Well, HTG is going to use its technology to create an assay that works with its test, and that can be used to look for mRNA targets. Once this assay is developed (and it should be a relatively quick turnaround project, this isn’t too much of a divergence from its primary assay tech), HTG is going to use the assay to study what are called formalin-fixed, paraffin-embedded (FFPE) samples. These are industry standard samples, and are the ones that current testing systems can only really perform one test on. HTG's tech can perform upwards of 20 different tests on one sample. The data that the testing generates is then going to be used by Daiichi as the foundation of a future profiling assay in the oncology space.The second announcement sees an entity called Centre Léon Bérard adopt the HTG technology as the foundation for some oncology profiling work. Again, here's the blurb:

"The initial project utilizes the HTG EdgeSeq Oncology Biomarker Panel to retrospectively characterize immunologic profiles from advanced malignant tumor samples collected in the ProfiLER study (ClinicalTrials.gov identifier NCT01774409)."

To de-jargonize this, it basically means that the Centre has collected a bunch of tumor samples from a clinical trial (which a look at the listing on clinicaltrials.gov reveals was completed last year in a whole host of different cancer types), and that it wants to record the immunologic profiles of these samples. To do this profiling, it's going to use the HTG technology. For us, this is probably a more important announcement than the first. Not that the first isn’t great, but that a research institution would go for HTG's tech over any other in its profiling efforts is very strong validation of the product, and bodes well in terms of laying the foundation for future collaborations going forward.As ever, it's not all upside. Cash on hand is probably going to last through mid 2018, at which point (or likely before) we're going to see some degree of dilution.That said, markets are switching on to this stock, and we should see some speculative allocation build up as 2017 matures.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 position in HTGM and have not been compensated for this article.