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--(BUSINESS WIRE)-- 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