NEW YORK – Castle Biosciences reported after the close of the market on Monday that its third quarter revenues rose 3 percent year over year.
For the three months ended Sept. 30, the skin cancer diagnostics company reported revenues of $15.2 million, up from $14.8 million a year earlier, and beating the average Wall Street estimate of $15.0 million.
In Q3 2020, Castle delivered 4,404 DecisionDx-Melanoma test reports, an increase of 7 percent compared to the 4,126 reports delivered during Q3 2019, despite a reduction in melanoma diagnoses, which the company believes is due to the ongoing impact of the COVID-19 pandemic.
Castle also delivered 318 DecisionDx-UM test reports in Q3 2020, down from the 356 reports it delivered during Q3 2019. The company said it believes this decrease is due to the impact of the pandemic as fewer patients visited their physicians during the quarter.
The company's DecisionDx-SCC test, a prognostic gene expression profile test for patients diagnosed with high-risk cutaneous squamous cell carcinoma, also became commercially available during the quarter. For the period of Aug. 31 through Sept. 30, Castle said it delivered 57 DecisionDx-SCC test reports.
"The Castle team made significant progress on our strategic growth initiatives in the third quarter. We also returned to year-over-year volume growth in DecisionDx-Melanoma report volume, our current lead revenue driver," Castle President and CEO Derek Maetzold said in a statement. "We are pleased to see, in October, the posting of the expanded local coverage determination (LCD) and accompanying billing and coding article for our DecisionDx-Melanoma test, with an effective date of Nov. 22."
According to Maetzold, the company has received 282 orders for DecisionDx-SCC through October from 193 clinicians, most of whom were existing customers. Further, he noted that Castle released its DecisionDx DiffDx-Melanoma gene expression profile test for use in patients with suspicious pigmented lesions in the beginning of November, and the company now estimates that DecisionDx-Melanoma, DecisionDx-SCC, and DecisionDx DiffDx-Melanoma have a combined total addressable US market of approximately $2.0 billion.
On a conference call with analysts following the release of the earnings, Maetzold said that third-party data showed cutaneous melanoma diagnoses were down 4 percent in the third quarter compared to Q3 2019. However, the data also showed an increase of diagnoses in Q3 compared to Q2.
"If patient trends continue without a significant change, based on our third-party data, we estimate that the annual diagnoses of cutaneous melanoma may be reduced by approximately 20,000 or more compared to 2019's incidents," Maetzold said. "That is to say, we expect COVID to continue to impact our DecisionDx-Melanoma volume in the fourth quarter and into 2021, due to delays in the overall number of patients diagnosed with cutaneous melanoma."
As for DecisionDX-SCC, Castle has submitted a technical assessment dossier for Medicare coverage to Palmetto MolDX and expects a draft local coverage determination policy to be posted in 2021 with finalization expected approximately 12 months following the draft. Maetzold said the company expects Medicare to be its largest payor for DecisionDX-SCC, as the typical age of diagnosis for squamous cell carcinoma is around 17 years.
"While it's certainly early and the US is still dealing with COVID, we have seen strong interest from clinicians," he said. "You should recall that the target customer for our DecisionDX-SCC test is the same target customer for our DecisionDx-Melanoma test. Thus, we anticipate having significant leverage from our existing dermatologically focused sales team."
The firm reported a net loss for Q3 of $4.6 million, or $.23 per share, compared to net income of $5.5 million, or $.05 per share, a year earlier. Wall Street analysts had estimated a loss per share of $.11 for Q3.
Castle's Q3 R&D expenses rose 107 percent to $3.1 million from $1.5 million a year earlier, and its SG&A costs for the quarter rose 65 percent to $11.7 million from $7.1 million.
The company had cash and cash equivalents of $183.1 million at the end of the quarter.
Castle's shares fell a fraction of a percent to $47.64 in Tuesday morning trading on the Nasdaq.