CASTLE BIOSCIENCES INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Introduction: Camilla Zuckero welcomed attendees, noted forward-looking statements, and non-GAAP measures. Derek Maetzold highlighted 21% revenue growth to $88M and 33% growth in core test report volume. Mentioned acquisition of Previse to strengthen GI space.
• DecisionDx-Melanoma: Surpassed 200,000 test orders. Recent publications showed 0% SLNB positivity in low-risk patients and 100% recurrence-free survival. Presented data at NCCN validating its mortality prediction in early-stage melanoma.
• DecisionDx-SCC: Delivered 4,375 test reports. New data at NCCN enhanced risk stratification. Facing Novitas LCD noncoverage but continuing to offer the test due to clinical utility.
• TissueCypher: Q1 2025 saw 117% Y/Y growth. Driven by commercial team expansion, unmet clinical need, and education. Collaborated with NCI's SEER program to validate risk stratification.
• Previse Acquisition: Signed definitive agreement to acquire Previse, a GI company with methylation and pipeline technology. Expected to close in weeks, complementing TissueCypher in GI vertical.
• IDgenetix Discontinuation: Discontinued effective May 2025, reallocated resources to other disease states with unmet needs.

Segment Performance

• DecisionDx-Melanoma: Delivered 8,621 test reports in Q1 2025, a 3% increase compared to Q1 2024. Anticipates high single-digit volume growth for 2025. Recent publications and study data at NCCN validated its risk stratification and mortality prediction performance. Revenue contribution not explicitly stated by percentage but is a key segment.
• DecisionDx-SCC: Delivered 4,375 test reports in Q1 2025. Presented new data at NCCN 2025 Annual Conference enhancing risk stratification. Facing reimbursement challenges with Novitas Local Coverage Determination policy but continuing to offer the test. Revenue contribution not explicitly stated by percentage.
• TissueCypher: Delivered 7,432 test reports in Q1 2025, a 117% year-over-year increase. Driven by commercial team expansion, unmet clinical need, and education. Revenue contribution not explicitly stated by percentage.
• Mental Health (IDgenetix): Discontinued effective May 2025, with resources reallocated to other disease states.

Guidance

• Revenue: Raised 2025 revenue guidance to $287M-$297M from $280M-$295M.
• Gross Margin: Adjusted gross margin expected in mid-70s range for remaining quarters of 2025.
• Cash Flow: Expect positive net cash flow from operations for full year 2025. Cash, cash equivalents, and marketable securities at $275.2M as of March 31, 2025.

Risks

• Forward-Looking Statements: Inherent risks and uncertainties exist, as detailed in SEC filings. Factors like reimbursement, market acceptance, and operational execution could affect actual results.
• Reimbursement Uncertainty: DecisionDx-SCC faces challenges with Novitas and MolDX LCDs, impacting revenue and margin expectations.

Question and Answer

Q: [Sung Ji Nam] Clarification on mid-70% gross margin guidance (GAAP/non-GAAP) and Previse technology.

A: [Frank Stokes] Adjusted gross margin, includes DecisionDx SCC contribution.

Q: [Kyle Mikson] Previse technology type and immediate sales contribution.

A: [Derek Maetzold] Previse has tissue-based methylation technology and non-endoscopic sponge-based tech; no immediate meaningful revenue/EBITDA impact this year.

Q: [Puneet Souda] DecisionDx-Melanoma volume growth and TissueCypher growth expectations.

A: [Frank Stokes] Mid to high single-digit growth for DecisionDx-Melanoma; TissueCypher has consistent linear growth.

Q: [Tom Peterson] Sales/marketing efforts for DecisionDx-SCC/Melanoma and reconsideration of SCC reimbursements.

A: [Derek Maetzold] Shifting sales force to heavily weighted melanoma; timing of SCC reimbursement reconsideration unclear.

Q: [Paul Knight] Sales force distribution and build/ramp.

A: [Frank Stokes] GI sales force ~60s, derm ~70s; episodic growth in derm sales force, settled approach for TC.

Q: [Subbu Nambi] Previse acquisition lessons vs MyPath.

A: [Frank Stokes] Previse different, with interesting GI pipeline and multiomics potential; MyPath helped with reimbursement and differential diagnosis.

Q: [Mason Carrico] SCC volumes and DecisionDx-Melanoma growth algorithm.

A: [Derek Maetzold] SCC volumes expected to slow; DecisionDx-Melanoma growth via balancing nurturing existing customers and hunting new clinicians.

Q: [Thomas Flaten] Duration of offering SCC despite reimbursement issues.

A: [Derek Maetzold] Uncertain, depends on Medicare reconsideration interactions.

Q: [Mark Massaro] Previse revenue, Medicare coverage for Sponge technology.

A: [Frank Stokes] Previse revenue not material; Sponge technology not seeking Medicare coverage yet, similar to other non-endoscopic methods.