TearLab Corp (NASDAQ:TEAR) Is Set To Run Further On Discovery Approval

TearLab Corp (NASDAQ:TEAR) was a real end of the week runner last week. The company closed out the session on July 20 in around $1.76 a share. By session open on July 21, it was up at $3 a piece and – mid session – rose to highs in around $4 flat. Right now, the company trades at $3.34. To highs, that is a 127% appreciation. To current prices, it's a close to 90% gain.Here is a look at what is driving the action and what we expect next from this company.First, then, let kick things off with a quick introduction to TearLab. There is a good chance that this one wasn't on the radar of many reading before today. It is a microcap biotechnology company valued at less than $20 million (even when the latest gains are taken into consideration) and that – on a good day – trades around 50,000 shares in volume.With that said, however, we don't expect it to remain under the radar for long.First, the company generates around $7 million in quarterly revenues. Last year, annual revenues came in at more than $28 million for a gross profit of just shy of $16 million. Cash on hand at the end of March was $13 million. Debt, while up at $26 million, is long term and very serviceable. For a company of this size, these aren’t bad numbers.It's not a sudden attention to the numbers that is driving this one right now, however. Instead, the gain is rooted in the company's latest announcement detailing an approval in Europe for what is called TearLab Discovery System.Back in 2012, the company picked up a CE Mark for a technology called the TearLab Osmolarity System. It is a piece of kit that allows a position to test for dry eye disease using a patient's tears. Why is this necessary? Because symptoms of various eye conditions vary from patient to patient and this variability will often make diagnosis difficult. When diagnosis is difficult, prescribing the right sort of treatment is equally difficult, and the TearLab Osmolarity System seeks to remove this difficulty with its patient-specific diagnostic capabilities.Even with the Osmolarity System, however, things remain difficult.A patient needs to provide quite a substantial amount of test material and the system can only test for dry eye disease. The Discovery System builds on the Osmolarity System in a number of ways. First, it reduces the sample requirements to just one tear. Second, it is able to test for various proteins in this sample and use these proteins to identify biomarkers associated with a range of different eye diseases. This both expands the use case argument for the device and reduces the sample necessity for patients.it is in these advantages that the latest round is rooted. Markets expect the addition of the Discovery System to the company's portfolio to help TearLab grow revenues across the physician base that already exists in Europe.And what are we looking for going forward?Well, this European approval is important for the reasons outlined above, but it's also important for the company's efforts to get this technology approved in the US. Management expects to collect data from the commercial application of Discovery in Europe and to use this data to underpin a 510(k) submission to the U.S. Food and Drug Administration. This application is expected during the second half of this year, so that is the next major catalyst from our perspective for TearLab.Keep in mind that there's a good chance we will see a cash raise near term, as the company looks to capitalize on its recent share price appreciation and bring in some funds with which it can foot the bill for a commercialization run on the just approved product. With that said, however, there's plenty of room for top line expansion here and – in turn – the potential for dilution is far from prohibitive to an exposure at current prices.We will be updating our subscribers as soon as we know more. For the latest updates on TEAR, sign up below!Image courtesy of LMAP via FlickrDisclosure: We have no position in TEAR and have not been compensated for this article.