Interpace Diagnostics Group Inc (NASDAQ:IDXG) is a mid December runner, gaining strength on the news that the company's thyroid cancer testing tech will now be covered by Aetna Inc (NYSE:AET). The coverage adds millions of new potential test sales to Interpace's target market, and while not an unexpected development, is nonetheless welcome for the company and its shareholders.In the wake of the gains, Interpace flattened out into the end of last week, and we think this consolidation is an opportunity to get in ahead of a return to the upside momentum. Here's a look at what's important, and why this could be just the beginning of a large upside revaluation for Interpace.For those not familiar with Interpace, the company is a biotech with a focus on the development and commercialization of tests in the oncology space. It's got three tests approved in the US – the PancraGen test, used for the diagnosis and prognosis of pancreatic cancer from pancreatic cysts, and the ThyGenX and ThyraMir tests, which are the two thyroid cancer tests now under the Aetna coverage umbrella.The justification for these tests is simple.Thyroid cancer is the the most rapidly increasing cancer in the U.S., tripling in the past three decades. The current test undertaken uses what's called fine needle aspiration (FNA) to determine whether or not thyroid nodules, which can be a precursor to the development of the cancer, are benign or not. However, up to 30% of the 525,000 FNA tests done annually in the US are indeterminate for malignancy based on standard cytological evaluation. Most of these 30% inconclusive patients choose to undergo surgery anyway, to remove the nodule, from a sort of play it safe perspective. Nearly 80% of these play it safe surgeries turn out to be benign. It's with these patients that Interpace's ThyGenX and ThyraMir come in to the picture.They are designed as a follow up to FNA, used when the FNA tests are inconclusive, and can provide a far clearer picture of the patient's risk of developing thyroid cancer, when an FNA has proven inconclusive. The two tests, when used in combination with one another, work by identifying 100 genetic alterations associated with papillary and follicular thyroid carcinomas, which are the two most common forms of thyroid cancer. ThyraMir then measures what are called microRNAs (10 in total) to consolidate the results.So what's the likely impact of the added coverage?Well, the tests are now available to more than 200 million patients, of which the latest deal adds accounts for around 46 million. They've been approved since August 2015, and in the period to date, have been used in more than 5000 cases. Purely based on the numbers, then, the latest deal should add somewhere in the region of 25% to the company's topline. During third quarter 2016, revenues hit $3.3 million, and for the nine months to the end of September, came in at $9.9 million. This suggests a full year 2016 of sales at $13.5 million. Add on the potential for Aetna's customers to write off the tests costs against their insurance policies, and it paints a picture of 2017 revenues of around $17 million. That's assuming no other growth drivers other than the expanded access. There will, of course, likely be an organic expansion outside of the Aetna population based on the increase in physician and patient awareness of the tests' existence, and application.Cash isn’t great, and the company is attempting to expand its portfolio by way of a pap smear developing product, so chances are we'll get some dilution neat term. However, even having taken into consideration the potential for value loss, there looks to be plenty of potential for market cap growth on the current $32 million.We will be updating our subscribers as soon as we know more. For the latest updates on IDXG, sign up below!Disclosure: We have no position in IDXG and have not been compensated for this article.
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