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Castle Biosciences Builds Skin Cancer Assay Data, Eyes Future Expansion as Q1 Sales Jump 74 Percent


NEW YORK – Castle Biosciences said Thursday that its skin cancer test products are continuing to drive significant year-over-year sales growth, with overall test volume reaching 11,961 for the first quarter of 2024, a 20 percent increase over the same period of 2023.

For the three months ended March 31, Castle reported total revenues of $73.0 million, a 74 percent increase from $42.0 million in 2023, beating analysts' average estimate of $66.2 million. The firm delivered 20,888 total test reports in the first quarter of 2024, an increase of 40 percent compared to 14,916 in the same period of 2023.

Despite facing challenges in maintaining coverage by the US Centers for Medicare and Medicaid Services for its newer squamous cell carcinoma assay, sales of that test were up a notable 48 percent with 3,577 test reports delivered in Q1.

In a call with investors discussing the firm's quarterly financial results, CEO Derek Maetzold suggested that continued test adoption for DecisionDx-SCC is being driven by data the firm has continued to amass, including its newest study published this March, supporting the use of the test to improve risk stratification, in conjunction with staging, to help predict responsiveness to adjuvant radiation therapy (ART).

ART, he said, is a recognized effective intervention in patients with high-risk SCC, but risk can be overinterpreted using clinical factors alone. In addition, the treatment carries both significant complications as well as cost, suggesting a benefit to opting out for those who can avoid it. Based on the company's own three-year, real-world data, Maetzold said that more than 98 percent of the patients that Castle tests clinically are eligible for ART under one or more of the existing guidelines.

Alongside that newest validation data, a group of dermatologists and radiologists also authored a consensus recommendation in March, highlighting ART escalation and de-escalation as some of the most appropriate clinical niches for DecisionDx-SCC.

The panel also derived a risk-based clinical workflow for guiding radiation use in patients based on Castle testing coupled with National Comprehensive Cancer Network management guidelines and the most recent staging practices.

It has been approximately a year since the MolDx program, managed by Medicare contractor Palmetto GBA, issued a proposed non-coverage determination for a group of tests, including DecisionDx-SCC.

Maetzold said during the call that though finalization of local coverage determinations usually takes about a year, it's not unheard of for it to stretch out for a few additional months. Either way, a finalized LCD should be imminent.

Castle has been hoping that its efforts to highlight supporting data for its SCC test for MolDx may sway a change from the draft version to the final version, as was the case for its TissueCypher test, which it said was initially not covered but then became covered in the administration's later judgement.

"I think there are parallel elements between the Cypher data developments and SCC, but of course, that's in our eyes, not necessarily the eyes of MolDx ," said Maetzold.

"I'm quite hopeful that once they see the newer publications that are answering, directly, some of the questions they had about our test … [that they might see that it is] … improving appropriate care within existing treatment pathways based on both risk stratification information, as well newer data regarding adjuvant therapy response," Maetzold said.

Castle's Melanoma assay, DecisionDx-Melanoma, hasn't had the same challenge posed to its insurance coverage and reimbursement, but the company is still dedicated to building on its validity and utility evidence.

The firm delivered 8,384 DecisionDx-Melanoma test reports in the first quarter, representing an 11 percent year-over-year increase. The DecisionDx-Melanoma assay has two main applications: ruling out the need for a sentinel lymph node biopsy for low-risk patients and predicting risk of recurrence over time.

Maetzold highlighted a recent oral presentation that took place at the March 2024 meeting of the Society of Surgical Oncology. The data, from one of the company's multicenter prospective studies, showed that there were zero patients with a melanoma predicted by Castle's test to have less than a 5 percent likelihood of a positive sentinel lymph node biopsy who were later found to have a positive node. "That's a negative predictive value of 100 percent, " Maetzold said. This data is not yet published or peer reviewed.

The study also compared patients with low-risk results who elected to avoid the biopsy procedure with those who chose to undergo it. According to Maetzold, both groups have remained recurrence-free during the follow-up period — a median of two years at this point.

This new presentation adds to a peer-reviewed study that the company published in January in Cancers, suggesting that its test might offer significantly better risk stratification than the current American Joint Committee on Cancer Staging System in patients with stage I melanoma.

Maetzold said that the firm plans to increase the focus of its educational marketing efforts on this new data moving forward.

The firm's TissueCypher Barrett's Esophagus test, Castle's newest oncology assay, demonstrated strong year-over-year volume growth with 3,429 results reported in Q1 2024, a 148 percent jump over 1,383 in the first quarter of 2023.

Maetzold said during the call that Castle believes the total market opportunity for TissueCypher is about 415,000 patients annually, representing an estimated $1 billion market. "As such, we believe our TissueCypher tests represent a significant long-term growth opportunity, as we're in the very early stages of market penetration," he said.

In a few years, he said, Castle envisions having multiple tests for gastrointestinal cancer, suggesting that the firm may have ongoing internal R&D efforts to expand this part of its portfolio.

The company's pharmacogenomic testing volume also spiked year over year. The company delivered a little more than 4,000 IDgenetix test reports in Q1 this year, up 90 percent from the same period of 2023.

Apart from its more active skin cancer risk testing, gastrointestinal risk testing, and acquired pharmacogenomics testing business, the company saw its other skin cancer genomic profiling testing holding stable quarter over quarter. Test volumes for the company's uveal (inner-eye) melanoma test have also remained steady year over year.

Castle's Q1 R&D expenses were $13.9 million in Q1 2024, down about 4 percent from $14.4 million in the same quarter of 2023. It's SG&A spending rose almost 4 percent to $48.5 million from $46.8 million.

The firm's net loss was $2.5 million, or $.09 per share, compared to a net loss of $29.2 million, or $1.10 per share, for the same period in 2023.

The company ended the quarter with cash, cash equivalents, and marketable securities totaling $239.2 million.

It also said it was raising its guidance for 2024 revenues to between $255 million and $265 million compared to a previously provided guidance of between $235 million and $240 million.

Shares of Castle were up around 5 percent at $23.92 in Friday morning trade on the Nasdaq.