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0001447362FALSE00014473622023-05-032023-05-03

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2023

Castle Biosciences, Inc.
(Exact name of registrant as specified in its charter)
         
Delaware   001-38984   77-0701774
(state or other jurisdiction
of incorporation)
  (Commission
File Number)
  (I.R.S. Employer
Identification No.)
505 S. Friendswood Drive, Suite 401
Friendswood, Texas
77546
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (866) 788-9007

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value per share CSTL   The Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).
Emerging growth company ☐ 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 



Item 2.02    Results of Operations and Financial Condition.

On May 3, 2023, Castle Biosciences, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2023. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information contained or incorporated in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.

Item 7.01    Regulation FD Disclosure.

On May 3, 2023, the Company made available the slide presentation attached hereto as Exhibit 99.2. Information from this slide presentation may also be used by the management of the Company in future meetings regarding the Company.

The information contained or incorporated in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.

Item 9.01    Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
99.1
99.2
104 Inline XBRL for the cover page of this Current Report on Form 8-K.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CASTLE BIOSCIENCES, INC.
By: /s/ Frank Stokes
Frank Stokes
Chief Financial Officer
Date: May 3, 2023
 



EX-99.1 2 exhibit991q12023earningsre.htm EX-99.1 Document

cstllogo01a.jpg
Exhibit 99.1



Castle Biosciences Reports First Quarter 2023 Results

Q1 2023 revenue increased 57% over Q1 2022 to $42 million
Q1 2023 total test reports increased 73% over Q1 2022
Reaffirming full-year 2023 revenue is expected to be between $170-180 million
Conference call and webcast today at 4:30 p.m. ET

FRIENDSWOOD, Texas- May 3, 2023--Castle Biosciences, Inc. (Nasdaq: CSTL), a company improving health through innovative tests that guide patient care, today announced its financial results for the first quarter ended March 31, 2023.
“Castle delivered a strong start to the year,” said Derek Maetzold, president and chief executive officer of Castle Biosciences. “Building on our strength and momentum from 2022, we delivered significant test report volume and revenue growth in the first quarter, which was driven by continued execution on our short- and long-term strategies. We remain confident in our business and are reaffirming our 2023 revenue guidance.
“Investments in our growth initiatives across our entire test portfolio, coupled with the team’s performance, continue to support the adoption of our proprietary tests. In particular, the evolution of our dermatology facing commercial team in the third quarter of 2022 helped drive first quarter test report volume for DecisionDx®-Melanoma and DecisionDx®-SCC combined, which grew nearly 40% year-over-year and nearly 10% sequentially.
“Additionally, we acquired two companies over the last eighteen months that we believe will contribute to long-term value creation. We were pleased to see the continued momentum in test report volumes we expected in these newer gastroenterology and mental health franchises, which we believe are on track to be important contributors to delivering on our financial targets.”
First Quarter Ended March 31, 2023, Financial and Operational Highlights
•Revenues were $42.0 million, a 57% increase compared to $26.9 million during the same period in 2022. Included in revenue for the period were revenue adjustments related to tests delivered in prior periods. These prior period revenue adjustments for the quarter ended March 31, 2023, were $1.3 million of net negative revenue adjustments, compared to $0.6 million of net positive revenue adjustments for the same period in 2022.
•Adjusted revenues, which exclude the effects of revenue adjustments related to tests delivered in prior periods, were $43.4 million, a 65% increase compared to $26.3 million for the same period in 2022.
•Delivered 14,916 total test reports in the first quarter of 2023, an increase of 73% compared to 8,627 in the same period of 2022:
◦DecisionDx-Melanoma test reports delivered in the quarter were 7,583, compared to 6,023 in the first quarter of 2022, an increase of 26%. DecisionDx-Melanoma test reports delivered in the fourth quarter of 2022 were 7,301.
◦DecisionDx-SCC test reports delivered in the quarter were 2,411, compared to 1,142 in the first quarter of 2022, an increase of 111%. DecisionDx-SCC test reports delivered in the fourth quarter of 2022 were 1,845.
◦MyPath® Melanoma test reports delivered in the quarter were 980, compared to 950 MyPath-Melanoma and DiffDx-Melanoma aggregate test reports in the first quarter of 2022, an increase of 3%. MyPath and DiffDx-Melanoma aggregate test reports delivered in the fourth quarter of 2022 were 822.
◦DecisionDx®-UM test reports delivered in the quarter were 409, compared to 456 in the first quarter of 2022, a decrease of 10%. DecisionDx-UM test reports delivered in the fourth quarter of 2022 were 432.



◦TissueCypher® Barrett’s Esophagus test reports delivered in the quarter were 1,383, compared to 56 in the first quarter of 2022, following our initial offering of the test beginning in December 2021. TissueCypher Barrett’s Esophagus test reports delivered in the fourth quarter of 2022 were 1,030.
◦IDgenetix® test reports delivered in the quarter were 2,150. We began offering the IDgenetix test in April 2022, and thus no test reports were delivered by Castle in the first quarter of 2022. IDgenetix test reports delivered in the fourth quarter of 2022 were 1,214.
•Gross margin for the quarter ended March 31, 2023, was 70.5%, and adjusted gross margin was 76.5%.
•Net cash used in operations was $25.4 million, compared to $21.4 million for the same period in 2022. First quarter 2023 cash use reflects payout of employee annual cash bonuses as well as certain health care benefit payments, totaling $17.7 million, that are not expected to recur during the remainder of 2023.
•Net loss for the first quarter, which includes non-cash stock-based compensation expense of $13.5 million, was $(29.2) million, compared to $(24.6) million for the same period in 2022.
•Adjusted EBITDA for the first quarter was $(15.1) million, compared to $(11.4) million for the same period in 2022.
Cash, Cash Equivalents and Marketable Investment Securities
As of March 31, 2023, the Company’s cash, cash equivalents and marketable investment securities totaled $232.1 million.
2023 Outlook
The Company reaffirms its previously provided 2023 total revenue guidance of $170-180 million.
First Quarter and Recent Accomplishments and Highlights
Dermatology
•Earlier today, the Company announced the publication of an independent, retrospective multi-center study in the Archives of Dermatological Research providing a direct chain of evidence that use of DecisionDx-Melanoma test results to guide radiological surveillance could lead to improved patient outcomes. The study, authored by Dhillon et al., can be found here. See the Company’s news release from May 3, 2023, for more information.
•In February, the Company announced the publication of data from a prospective, multicenter study, called DECIDE. In the study, DecisionDx-Melanoma test results influenced 85% of clinicians’ decisions regarding the sentinel lymph node biopsy (SLNB) surgical procedure. Additionally, use of the tests’ results within current guideline recommendations led to a significant reduction in SLNB procedures performed, demonstrating the clinical value of the test to guide risk-aligned patient care. The publication can be found here.
•In March, the Company announced the publication of a consensus panel report from the National Society for Cutaneous Medicine recommending use of gene expression profile (GEP) testing in the clinical assessment and management of cutaneous melanoma (CM). The report provides usage guidelines and a framework for clinicians to integrate GEP testing into their CM patient management. Additionally, the consensus report endorses Castle’s DecisionDx-Melanoma GEP risk stratification test as offering more utility than other existing CM GEP assays or nomograms, supported by extensive, evidence-driven data in current literature. See the Company’s news release from March 8, 2023, for more information.
•In March, the Company shared new performance data from a novel, multi-center, independent cohort demonstrating how the independent risk-stratification of DecisionDx-SCC can significantly improve metastatic risk predictions by complementing current staging systems, American Joint Committee on Cancer 8th edition staging system (AJCC8) and Brigham and Women’s Hospital staging system (BWH). Additionally, consistent with previous studies, DecisionDx-SCC independently and significantly stratified a novel cohort according to patients’ biologic metastatic risk (p<0.0001). This study analyzed the performance of the DecisionDx-SCC test in a novel, independent performance cohort of 534 patients with primary SCC and one or more risk factors from 45 contributing centers. The data from the



study consistently demonstrated the performance of DecisionDx-SCC to classify risk for metastasis in SCC patients with one or more risk factors (p<0.0001), and multivariate models showed the metastatic risk prediction of AJCC8 and BWH staging systems were significantly improved when DecisionDx-SCC test results were included. See the Company’s news release from March 18, 2023, for more information.
Corporate
•In February, the Company announced that it received a 2023 Top Workplaces USA award from Energage. This is the second year in a row that Castle has received this national award, recognizing the Company for its exceptional workplace culture. Recipients of the Top Workplaces USA award are chosen solely on employee feedback gathered through an anonymous employee engagement survey, issued by Energage. See the Company’s news release from Feb. 1, 2023, for more information.
•In February, the Company announced that its chief financial officer, Frank Stokes, was named to Finance & Investing’s Top 25 CFOs of Houston list for 2023. This year’s awardees are financial executives at the forefront of the rapid technological development occurring throughout Houston across key global industries, including energy, life sciences, manufacturing, logistics and aerospace. See the Company’s news release from Feb. 24, 2023, for more information.
Conference Call and Webcast Details
Castle Biosciences will hold a conference call on Wednesday, May 3, 2023, at 4:30 p.m. Eastern time to discuss its first quarter 2023 results and provide a corporate update.

A live webcast of the conference call can be accessed here: https://events.q4inc.com/attendee/614563599 or via the webcast link on the Investor Relations page of the Company’s website, https://ir.castlebiosciences.com/overview/default.aspx. Please access the webcast at least 10 minutes before the conference call start time. An archive of the webcast will be available on the Company’s website until May 24, 2023.

To access the live conference call via phone, please dial 833 470 1428 from the United States, or +1 404 975 4839 internationally, at least 10 minutes prior to the start of the call, using the conference ID 083848.

There will be a brief Question & Answer session following management commentary.
Use of Non-GAAP Financial Measures (UNAUDITED)
In this release, we use the metrics of Adjusted Revenues, Adjusted Gross Margin and Adjusted EBITDA, which are non-GAAP financial measures and are not calculated in accordance with generally accepted accounting principles in the United States (GAAP). Adjusted Revenues and Adjusted Gross Margin reflect adjustments to GAAP net revenues to exclude net positive and/or net negative revenue adjustments recorded in the current period associated with changes in estimated variable consideration related to test reports delivered in previous periods. Adjusted Gross Margin further excludes acquisition-related intangible asset amortization. Adjusted EBITDA excludes from net loss interest income, interest expense, income tax expense (benefit), depreciation and amortization expense, stock-based compensation expense and change in fair value of contingent consideration.

We use Adjusted Revenues, Adjusted Gross Margin and Adjusted EBITDA internally because we believe these metrics provide useful supplemental information in assessing our revenue and operating performance reported in accordance with GAAP, respectively. We believe that Adjusted Revenues, when used in conjunction with our test report volume information, facilitates investors’ analysis of our current-period revenue performance and average selling price performance by excluding the effects of revenue adjustments related to test reports delivered in prior periods, since these adjustments may not be indicative of the current or future performance of our business. We believe that providing Adjusted Revenues may also help facilitate comparisons to our historical periods. Adjusted Gross Margin is calculated using Adjusted Revenues and therefore excludes the impact of revenue adjustments related to test reports delivered in prior periods, which we believe is useful to investors as described above. We further exclude acquisition-related intangible asset amortization in the calculation of Adjusted Gross Margin. We believe that excluding acquisition-related intangible asset amortization may facilitate gross margin comparisons to historical periods and may be useful in assessing current-period performance without regard to the historical accounting valuations of intangible assets, which are applicable only to tests we acquired rather than internally developed.



We believe Adjusted EBITDA may enhance an evaluation of our operating performance because it excludes the impact of prior decisions made about capital investment, financing, investing and certain expenses we believe are not indicative of our ongoing performance. However, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes.

These non-GAAP financial measures are not meant to be considered in isolation or used as substitutes for net revenues, gross margin, or net loss reported in accordance with GAAP; should be considered in conjunction with our financial information presented in accordance with GAAP; have no standardized meaning prescribed by GAAP; are unaudited; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future, there may be other items that we may exclude for purposes of these non-GAAP financial measures, and we may in the future cease to exclude items that we have historically excluded for purposes of these non-GAAP financial measures. Likewise, we may determine to modify the nature of adjustments to arrive at these non-GAAP financial measures. Because of the non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measure as used by us in this press release and the accompanying reconciliation tables have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Accordingly, investors should not place undue reliance on non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of this release.
About Castle Biosciences
Castle Biosciences (Nasdaq: CSTL) is a leading diagnostics company improving health through innovative tests that guide patient care. The Company aims to transform disease management by keeping people first: patients, clinicians, employees and investors.

Castle’s current portfolio consists of tests for skin cancers, uveal melanoma, Barrett’s esophagus and mental health conditions. Additionally, the Company has active research and development programs for tests in other diseases with high clinical need, including its test in development to predict systemic therapy response in patients with moderate-to-severe psoriasis, atopic dermatitis and related conditions. To learn more, please visit www.CastleBiosciences.com and connect with us on LinkedIn, Facebook, Twitter and Instagram.

DecisionDx-Melanoma, DecisionDx-CMSeq, DecisionDx-SCC, MyPath Melanoma, DiffDx-Melanoma, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-UMSeq, TissueCypher and IDgenetix are trademarks of Castle Biosciences, Inc.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning: our expectations regarding: (i) our expected total revenue outlook for the year ending December 31, 2023; (ii) potential clinical value and utility of our tests, including with respect to findings in the studies highlighted in this press release; (iii), and (iv) the momentum we see in our newer gastroenterology and mental health franchises helping us achieve our long-term financial targets. The words “anticipate,” “believe,” “can,” “could,” “expect,” “may,” “potential,” “should,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation: the accuracy of our assumptions and expectations underlying our fiscal 2023 revenue guidance (including, without limitation, our assumptions or expectations regarding continued reimbursement for our DecisionDx-SCC test at the current rate and reimbursement for our other products and subsequent coverage decisions, our estimated total addressable markets for our products and product candidates and the related expenses, capital requirements



and potential needs for additional financing, the anticipated cost, timing and success of our product candidates, and our plans to research, develop and commercialize new tests and our ability to successfully integrate new businesses, assets, products or technologies acquired through acquisitions), the effects of macroeconomic events and conditions, including inflation, banking crises, supply chain disruptions, the COVID-19 pandemic and geopolitical events, among others, on our business and our efforts to address its impact on our business; subsequent study or trial results and findings may contradict earlier study or trial results and findings or may not support the results discussed in this press release, including with respect to the diagnostic and prognostic tests discussed in this press release; actual application of our tests may not provide the aforementioned benefits to patients; our newer gastroenterology and mental health franchises may not contribute to the achievement of our long-term financial targets as anticipated; and the risks set forth under the heading “Risk Factors” in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.
Investor Relations Contact:
Camilla Zuckero
czuckero@castlebiosciences.com
281-906-3868

Media Contact:
Allison Marshall
amarshall@castlebiosciences.com

###




CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended
March 31,
2023 2022
NET REVENUES $ 42,037  $ 26,852 
OPERATING EXPENSES
Cost of sales (exclusive of amortization of acquired intangible assets) 10,182  5,944 
Research and development 14,393  10,761 
Selling, general and administrative 46,762  30,453 
Amortization of acquired intangible assets 2,222  1,648 
Change in fair value of contingent consideration —  2,562 
Total operating expenses, net 73,559  51,368 
Operating loss (31,522) (24,516)
Interest income 2,336  30 
Interest expense (4) (3)
Loss before income taxes (29,190) (24,489)
Income tax expense
14  134 
Net loss $ (29,204) $ (24,623)
Loss per share, basic and diluted $ (1.10) $ (0.97)
Weighted-average shares outstanding, basic and diluted 26,607  25,424 


Stock-Based Compensation Expense
Stock-based compensation expense is included in the condensed consolidated statements of operations as follows (in thousands):
Three Months Ended
March 31,
2023 2022
Cost of sales (exclusive of amortization of acquired intangible assets) $ 1,272  $ 853 
Research and development 2,587  1,828 
Selling, general and administrative 9,666  5,738 
Total stock-based compensation expense $ 13,525  $ 8,419 



CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(in thousands)

Three Months Ended
March 31,
2023 2022
Net loss $ (29,204) $ (24,623)
Other comprehensive income:
Net unrealized gain on marketable investment securities 245  — 
Comprehensive loss $ (28,959) $ (24,623)



CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 2023 December 31, 2022
ASSETS (unaudited)
Current Assets
Cash and cash equivalents $ 114,821  $ 122,948 
Marketable investment securities 117,234  135,677 
Accounts receivable, net 27,728  23,476 
Inventory 4,520  3,980 
Prepaid expenses and other current assets 6,797  6,207 
Total current assets 271,100  292,288 
Long-term accounts receivable, net 1,218  1,087 
Property and equipment, net 18,254  14,315 
Operating lease assets 11,401  12,181 
Goodwill and other intangible assets, net 124,126  126,348 
Other assets – long-term 792  1,110 
Total assets $ 426,891  $ 447,329 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 9,961  $ 4,731 
Accrued compensation 12,796  24,358 
Operating lease liabilities 1,779  1,777 
Other accrued and current liabilities 5,607  5,262 
Total current liabilities 30,143  36,128 
Noncurrent operating lease liabilities 11,103  11,533 
Deferred tax liability 441  428 
Other liabilities 55  90 
Total liabilities 41,742  48,179 
Stockholders’ Equity
Common stock
27  27 
Additional paid-in capital 575,367  560,409 
Accumulated deficit (190,109) (160,905)
Accumulated other comprehensive loss (136) (381)
Total stockholders’ equity 385,149  399,150 
Total liabilities and stockholders’ equity $ 426,891  $ 447,329 






CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended
March 31,
2023 2022
OPERATING ACTIVITIES
Net loss $ (29,204) $ (24,623)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,892  2,151 
Stock-based compensation expense 13,525  8,419 
Change in fair value of contingent consideration —  2,562 
Deferred income taxes 13  123 
Accretion of discounts on marketable investment securities (1,229) — 
Other 211  12 
Change in operating assets and liabilities:
Accounts receivable (4,383) (2,725)
Prepaid expenses and other current assets (654) (357)
Inventory (540) (329)
Operating lease assets 331  222 
Other assets 319  42 
Accounts payable 3,896  187 
Operating lease liabilities (68) (226)
Accrued compensation (11,562) (6,917)
Other accrued and current liabilities 1,014  29 
Net cash used in operating activities (25,439) (21,430)
INVESTING ACTIVITIES
Purchases of property and equipment (3,338) (402)
Proceeds from sale of property and equipment — 
Purchases of marketable investment securities (30,083) — 
Proceeds from maturities of marketable investment securities 50,000  — 
Net cash provided by (used in) investing activities 16,584  (402)
FINANCING ACTIVITIES
Proceeds from exercise of common stock options 95  399 
Payment of employees’ taxes on vested restricted stock units (314) (56)
Proceeds from contributions to the employee stock purchase plan 982  897 
Repayment of principal portion of finance lease liabilities (35) (24)
Net cash provided by financing activities 728  1,216 
NET CHANGE IN CASH AND CASH EQUIVALENTS (8,127) (20,616)
Beginning of period 122,948  329,633 
End of period $ 114,821  $ 309,017 




CASTLE BIOSCIENCES, INC.
Reconciliation of Non-GAAP Financial Measures (UNAUDITED)
The table below presents the reconciliation of adjusted revenues and adjusted gross margin, which are non-GAAP financial measures. See "Use of Non-GAAP Financial Measures (UNAUDITED)" above for further information regarding the Company's use of non-GAAP financial measures.
Three Months Ended
March 31,
2023 2022
(in thousands)
Adjusted revenues
Net revenues (GAAP) $ 42,037  $ 26,852 
Revenue associated with test reports delivered in prior periods 1,336  (602)
Adjusted revenues (Non-GAAP) $ 43,373  $ 26,250 
Adjusted gross margin
Gross margin (GAAP)1
$ 29,633  $ 19,260 
Amortization of acquired intangible assets 2,222  1,648 
Revenue associated with test reports delivered in prior periods 1,336  (602)
Adjusted gross margin (Non-GAAP) $ 33,191  $ 20,306 
Gross margin percentage (GAAP)2
70.5  % 71.7  %
Adjusted gross margin percentage (Non-GAAP)3
76.5  % 77.4  %
1.Calculated as net revenues (GAAP) less the sum of cost of sales (exclusive of amortization of acquired intangible assets) and amortization of acquired intangible assets.
2.Calculated as gross margin (GAAP) divided by net revenues (GAAP).
3.Calculated as adjusted gross margin (Non-GAAP) divided by adjusted revenues (Non-GAAP).

The table below presents the reconciliation of adjusted EBITDA, which is a non-GAAP financial measure. See "Use of Non-GAAP Financial Measures (UNAUDITED)" above for further information regarding the Company's use of non-GAAP financial measures.
Three Months Ended
March 31,
2023 2022
(in thousands)
Adjusted EBITDA
Net loss $ (29,204) $ (24,623)
Interest income1
(2,336) (30)
Interest expense
Income tax expense
14  134 
Depreciation and amortization expense 2,892  2,151 
Stock-based compensation expense 13,525  8,419 
Change in fair value of contingent consideration —  2,562 
Adjusted EBITDA (Non-GAAP) $ (15,105) $ (11,384)
1.    Beginning in the fourth quarter of 2022, we began excluding interest income from the calculation of Adjusted EBITDA. The prior-year period presented herein has been recast to conform to the current period presentation.

EX-99.2 3 exhibit992q123.htm EX-99.2 exhibit992q123
First Quarter 2023 May 3, 2023 Transforming Disease Management


 
2 This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning: our estimated U.S. total addressable market for our commercially available tests; our positioning for continued growth and expected 2023 catalysts; our ongoing studies generating data and their impact on driving adoption of our tests; and study observations and interpretations of study data, including conclusions about the benefits and impact of our tests on treatment decisions and patient outcomes. The words “anticipates,” “can,” “estimates,” “expects,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation: our estimates and assumptions underlying our estimated U.S. total addressable market for our commercially available tests; the effects of macroeconomic events and conditions, including inflation, banking crises, supply chain disruptions, the COVID-19 pandemic and geopolitical events, among others, on our business and our efforts to address their impact on our business; subsequent study or trial results and findings may contradict earlier study or trial results and findings or may not support the results discussed in this presentation, including with respect to the diagnostic and prognostic tests discussed in this presentation; actual application of our tests may not provide the aforementioned benefits to patients; and the risks set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law. Forward-Looking Statements


 
3 Financial Performance Summary Q1 2023 14,916 10,974 Total test reports Total Dermatology test reports Q1 2023 Q1 2022 1See Non-GAAP reconciliations at the end of this presentation. 2Year-over-year change in cash, cash equivalents and marketable securities includes the acquisition of AltheaDx in April 2022 and payout of annual bonuses in Q1 2023, among other uses. $42.0M $43.4M Revenues Adj. Revenues1 70.5% 76.5% Gross Margin Adj. Gross Margin1 8,627 8,115 $26.9M $26.3M 71.7% 77.4% $(25.4)MOperating Cash Flow $232M2 Cash, Cash Equivalents & Marketable Investment Securities as of end of period $(21.4)M $309M $(29.2)M $(15.1)M Net Loss Adj. EBITDA1 $(24.6)M $(11.4)M


 
4 Published prospective, multicenter study, called DECIDE,1 showing DecisionDx-Melanoma test results influenced 85% of clinicians’ decisions regarding the SLNB2 surgical procedure and led to a significant reduction in SLNBs performed National Society for Cutaneous Medicine endorses DecisionDx- Melanoma as offering more utility than other existing cutaneous melanoma GEP3 assays or nomograms in consensus panel report Key Q1 2023 Accomplishments Shared performance data from a novel, multi-center, independent cohort demonstrating that DecisionDx-SCC can significantly improve metastatic risk predictions by complementing current staging systems (AJCC84 and BWH5) Received a 2023 Top Workplace USA award for an exceptional workplace culture; this is Castle’s second year in a row to receive this national distinction With continued momentum from 2022, delivered a strong start to the year, with significant test report volume growth (a 73% increase over Q1 2022) and revenue growth (a 57% increase over Q1 2022) 1DECIDE=DecisionDx-Melanoma Impact on Sentinel Lymph Node Biopsy Decisions and Clinical Outcomes; 2SLNB=sentinel lymph node biopsy; 3GEP=gene expression profile; 4AJCC8=American Joint Committee on Cancer 8th edition staging system; 5BWH=Brigham and Women’s Hospital staging system


 
5 Answering Clinical Questions to Guide Care Along the Patient Journey Our focus is on diagnostic support, risk stratification and therapy response areas of the patient care continuum Dermatology Ophthalmology Gastroenterology Mental Health Screening Diagnostic Support Risk Stratification Therapy Response MRD/Recurrence MonitoringPATIENT CARE JOURNEY Inflammatory Skin Disease Pipeline Test


 
6 Estimated ~$8B U.S. Total Addressable Market1 for Commercially Available Tests Dermatology Gastroenterology Mental Health Cutaneous melanoma/ risk of metastasis, SLNB positivity risk Patients classified as Stage I, II or III2 ~$540M ~130K Cutaneous squamous cell carcinoma/risk of metastasis Patients w/high-risk features2 ~$820M ~200K Suspicious pigmented lesions/melanoma status Patients w/ diagnostically ambiguous lesions ~$600M ~300K Barrett’s esophagus/risk of progression to esophageal cancer Patients receiving upper GI endoscopies/year who meet the intended use criteria for TissueCypher3 ~$1B ~415K Mental health therapy response Based on indicated use of IDgenetix for patients diagnosed with depression, anxiety and other mental health conditions ~$5B Tests in pipeline add an additional estimated ~$5.7B to our U.S. TAM 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors.2Annual U.S. incidence for Stage I, II or III melanoma estimated at 130,000; annual U.S. incidence for squamous cell carcinoma estimated at 1,000,000 with addressable market limited to carcinomas with one or more high risk features; annual U.S. incidence for suspicious pigmented lesion biopsies estimated at 2,000,000 with addressable market limited to the 15% with an indeterminant biopsy.3415,000 upper GI endoscopies/year with confirmed dx of BE (ND, IND, LGD, EXCLUDING HGD) x $2,513 = U.S. only TAM of ~$1 billion


 
7 Significant Scientific Evidence Through Robust Clinical Research Program Across Our Testing Portfolio 7 323 Committed/contributing clinical research sites as of Q1 2023 ~18,000+ Patients enrolled in studies over lifetime of Castle1 ~11,800+ Patients enrolled in studies as of Q1 2023 Data as of March 31, 2023 1Number reflects studies that span Castle’s dermatology, ophthalmology and gastroenterology portfolios, as well as tests that are currently or were in our development pipeline; 2SEER cancer registries linked CM cases diagnosed from 2013-2018 to data for patients with stage I-III CM tested with the 31-GEP as of Dec. 31, 2022; includes patients in studies not yet published; 3SEER cancer registries linked UM cases diagnosed in 2018 for patients with primary uveal melanoma tested with the 15-GEP; includes patients in studies not yet published. 18 Ongoing clinical research studies Ongoing collaboration with NCI/SEER has allowed for analyses of 9,200+ patients clinically tested with DecisionDx-Melanoma2 and 2,900+ patients clinically tested with DecisionDx-UM3 to date


 
8 Well Positioned for Continued Growth with Expected 2023 Catalysts Expected publication of collaborative NCI study showing higher melanoma specific survival for patients tested with DecisionDx-Melanoma Expect new GI and MyPath commercial team expansion to reach optimal productivity in Q2 2023 Pittsburgh lab opening in Q2 2023, bringing Castle’s total laboratory operations space combined to 52,000 square feet Further refinement of sales territories in our Derm, GI and Mental Health franchises


 
9 Strong Growth in Our Foundational Dermatology Business Strong provider growth and continued adoption with ~540 new ordering clinicians1 and ~4,500 total ordering clinicians for our dermatologic tests for the quarter ending March 31, 2023 1New ordering clinician =clinician who ordered a Castle dermatologic test for the first time. 8,115 10,974 Total Dermatology Test Reports Q1 2022 Q1 2023


 
10 Direct Evidence Demonstrating Treatment Decisions Guided by DecisionDx-Melanoma Results Can Lead to Improved Patient Outcomes Key findings: • DecisionDx-Melanoma test directed routine surveillance imaging in SLN-, high-risk patients detected melanoma recurrence ~10 months earlier than those without routine imaging. • Tumor burden at detection was significantly lower in patients tested compared to those not tested (27.6mm vs. 73.1mm) • Patients tested had better overall survival than those not tested (76% vs. 50%, p-value= 0.027) “Untested” Control Group (n=327): Patients without testing “Tested” Experimental Group (n=307): “Patients who received routine imaging after high-risk GEP test scores had an earlier recurrence diagnosis with lower tumor burden, leading to better clinical outcomes.” Dhillon et al. Archives of Derm Research 2023. Independent, multi-center study of SLN negative patients (n=634) Imaging driven by clinical symptoms or physical exam findings Adhered to routine imaging every 6-12mo CLASS 2A/B


 
11 DecisionDx-Melanoma Disease Specific Survival Outcomes Are Favorable Relative to Other Tests MSS mortality difference of 1.1% at 3 years when comparing tested and untested populations Sentinel lymph node biopsy (SLNB) • SLNB is a risk-stratification surgical procedure “test” in melanoma • MSLT-1 found that SLNB had no impact on 10-year melanoma-specific survival1 Tumor size P-value 10-yr MSS Thin (<1.2mm) Not reported Not impacted Intermediate (1.2-3.5mm) not significant (p=.18) Not impacted Thick (>3.5) not significant (p=.56) Not impacted BCSS mortality difference of 0.50% at 3 years when comparing tested and untested populations Breast Cancer Test2 3-yr BCSS* Breast Cancer Test 99.6% Matched Untested 99.1% Absolute Mortality Difference 0.50% (p<0.05) . 3-yr MSS3 DecisionDx-Melanoma 97.4% Matched Untested 96.1% Absolute Mortality Difference 1.3% (p<0.05) Breast Cancer Test 1Morton et al. N Engl J Med 2014; 2Zhang et al. Breast Cancer Res Treat. 2020; 3 Manuscript accepted for publication at JCO PO. *https://apps.automeris.io/wpd/


 
12 TissueCypher is a Risk Stratification Tool for Patients with Barrett's Esophagus Low RiskHigh Risk • Indicated for NDBE, IND and LGD • High Risk score enables increased surveillance or early intervention to prevent cancer • Low Risk score minimizes over treatment and supports extension of surveillance intervals to guideline recommendations Individualize 5-year risk of progression to HGD or EAC


 
13 IDgenetix: Precision Medicine Designed to Streamline Medication Selection for Mental Health • Eliminate trial and error prescribing • 3 in 1 test: • Drug-gene interactions • Drug-drug interactions • Lifestyle factors Next Generation PGx • 2x improved chance of medication response vs. control • >2.5x improved chance of remission of depression symptoms vs. control Unrivaled Efficacy • 10 mental health and pain conditions in one report • <1 minute to collect DNA sample • 3-5 days to receive test report • Specialized sales and medical science liaison support Easy to Use Bradley et al. J Psychiatr Res 2018.


 
Thank you


 
15 Use Of Non-GAAP Financial Measures (Unaudited) In this presentation, we use the metrics of Adjusted Revenues, Adjusted Gross Margin and Adjusted EBITDA, which are non-GAAP financial measures and are not calculated in accordance with generally accepted accounting principles in the United States (GAAP). Adjusted Revenues and Adjusted Gross Margin reflect adjustments to net revenues to exclude changes in variable consideration related to test reports delivered in previous periods. Adjusted Gross Margin further excludes acquisition-related intangible asset amortization. Adjusted EBITDA excludes from net loss interest income, interest expense, income tax expense (benefit), depreciation and amortization expense, stock-based compensation expense, change in fair value of contingent consideration, and acquisition- related transaction costs. We use Adjusted Revenues, Adjusted Gross Margin and Adjusted EBITDA internally because we believe these metrics provide useful supplemental information in assessing our revenue and operating performance reported in accordance with GAAP, respectively. We believe that Adjusted Revenues, when used in conjunction with our test report volume information, facilitates investors’ analysis of our current-period revenue performance and average selling price performance by excluding the effects of revenue adjustments related to test reports delivered in prior periods, since these adjustments may not be indicative of the current or future performance of our business. We believe that providing Adjusted Revenues may also help facilitate comparisons to our historical periods. Adjusted Gross Margin is calculated using Adjusted Revenues and therefore excludes the impact of revenue adjustments related to test reports delivered in prior periods, which we believe is useful to investors as described above. We further exclude acquisition-related intangible asset amortization in the calculation of Adjusted Gross Margin. We believe that excluding acquisition-related intangible asset amortization may facilitate gross margin comparisons to historical periods and may be useful in assessing current-period performance without regard to the historical accounting valuations of intangible assets, which are applicable only to tests we acquired rather than internally developed. We believe Adjusted EBITDA may enhance an evaluation of our operating performance because it excludes the impact of prior decisions made about capital investment, financing, investing and certain expenses we believe are not indicative of our ongoing performance, such as acquisition-related transaction costs. However, these non-GAAP financial measures may be different from non- GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes.


 
16 Reconciliation of Non-GAAP Financial Measures (Unaudited) The table below presents the reconciliation of adjusted revenues and adjusted gross margin, which are non-GAAP financial measures. See previous slide for further information regarding the Company’s use of non-GAAP financial measures.


 
17 Reconciliation of Non-GAAP Financial Measures (Unaudited) The table below presents the reconciliation of adjusted EBITDA, which is a non-GAAP financial measure. See slide 15 for further information regarding the Company’s use of non-GAAP financial measures.


 
Appendix


 
19 Leadership Team Overview