Castle Biosciences, Inc.

Good afternoon, and welcome to Castle Biosciences' second quarter 2020 conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question and answer session. I would like to turn the call over to Frank Stokes, Chief Financial Officer. Please go ahead.

Thank you, Operator. Good afternoon, everyone. Welcome to Castle Biosciences' second quarter 2020 financial results conference call. Joining me today is Castle's founder, president, and chief executive officer, Derek Maetzold. Information recorded on this call speaks only as of today, August 10, 2020. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the investor relations page of the company's website for approximately three weeks. Before we begin, I would like to remind you that some of the information discussed today may contain projections or other forward-looking statements. regarding future events or the future financial performance of the company, including expectations and assumptions related to the impact of the COVID-19 pandemic and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties, and there can be no assurance that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's annual report on Form 10-K for the year ended December 31, 2019 and in the company's other documents and reports filed with the Securities and Exchange Commission. These forward-looking statements speak only as of today and we assume no obligation to update or revise these forward-looking statements as circumstances change. I'll now turn the call over to Derek.

Thank you, Frank. Good afternoon, everyone. We thank you for joining us today. This afternoon, I'll discuss COVID-19's impact on our results, the recent trends we have seen, and our performance for the quarter. Then Frank will provide more detail on the second quarter results and our financial position. While our second quarter results reflect impacts from COVID-19, thanks to the strong execution by our employees, we are successfully navigating these challenging times. We are pleased that we maintain strong gross margins, saw a year-over-year increase in revenue, and deliver positive operating cash flow. Additionally, we are making strong progress on our near and long-term strategic growth plans. And importantly, in order to serve patients who have been diagnosed with melanoma and the clinicians who treat them, we maintain uninterrupted access to our proprietary DecisionDx melanoma test and our DecisionDx UM test. with normal turnaround times for delivery of test reports. As you would expect, second quarter 2020 revenue and report volume were impacted by COVID-19. Specifically, in the second quarter of 2020, revenue was $12.7 million, an 18% increase from $10.7 million in the second quarter of 2019. DecisionDx melanoma test report volume declined 19% in the second quarter of 2020 compared to the second quarter of 2019. Let me provide some color here on this decline and the positive recovery trends we have seen. While test report volume remains a key test performance metric, I feel it's important to discuss test order trends as well, as it provides additional insight into current demand and our expectations for increased test report volume. We believe second quarter 2020 year-over-year decline in DecisionDx melanoma test volume is due to the closing of dermatology practices and delays and or cancellations in patient visits, resulting in reduced diagnostic biopsies and thus reduced diagnoses of cutaneous melanoma. Let me remind you, our DecisionDx melanoma test is ordered by physicians after biopsies take place and a diagnosis of melanoma is made. Third-party data suggests the largest declines in biopsies due to the pandemic occurred in April. We also saw our largest monthly decline in orders to date in April. Since April, throughout the second quarter, we have seen monthly sequential improvement in DecisionDx melanoma orders, leading to a year-over-year increase in June, which continued year-over-year gains in July. To further illustrate this improvement and demand trends, I will outline data points of orders by month for the second quarter. In April, DecisionDx melanoma orders decreased 45% year-over-year. In May, orders decreased 39% year-over-year. And then in June, orders increased 10% year-over-year. We also saw positive year-over-year orders in July. We believe the improvement in DecisionDx melanoma test orders since April is driven in part by the reopening of dermatology practices and rescheduled patient visits, which have generally coincided with the easing of state and local government restrictions. And according to data published by the Commonwealth Fund for the week of June 14th, visits to dermatology clinics had returned to their February 2020 baselines. Further, since April, we have seen the rate of decision DX melanoma orders outpace melanoma diagnoses. We believe this is partly attributable to our commercial team's successful pivot with its promotional efforts, which we anticipate will support further recovery. We expect the near-term positive trends we have seen in test orders to continue, and as such, we believe our third quarter DecisionDX melanoma test report volume will increase, closely approaching pre-COVID levels. These expectations are primarily driven by the pandemic's severity, and the impact on state and local government restrictions on the U.S. healthcare system. Turning to our DecisionDx UM test for patients diagnosed with uveal melanoma, we delivered 306 reports in the second quarter of 2020 compared to 376 reports in the second quarter of 2019. As it relates to the impact of COVID-19 on our UM test, monthly year-over-year comparisons are difficult to interpret Thank you very much. Thank you. On our first quarter earnings call, I provided some thoughts about how we are investing in the company in order to facilitate our strategic growth plans and remain in a position of strength as we move through the current COVID-19 situation, as well as lay a foundation for execution for the remainder of 2020 and 2021. I will discuss our recent progress on these plans now, which includes significant evidence development, advancement of our pipeline test, and expansion of our commercial team. In the second quarter, we saw great progress in the publication of evidence to support appropriate use of our tests and coverage by commercial payers. For example, two systematic reviews and meta-analyses were published, demonstrating that the DecisionDx melanoma test is an independent, significant predictor of recurrence and metastatic risk in patients with invasive cutaneous melanoma. Achieving the Highest Strength of Recommendation Taxonomy, or SORT level, for a prognostic biomarker. That is level one evidence. The SORT system is used by the American Academy of Dermatology and other organizations to evaluate the quality, quantity, and consistency of evidence supporting tests such as the CisionDx melanoma. This brings a total number of peer-reviewed publications that support one are both of the current clinically actionable uses of the CisionDx melanoma test 225. The first clinical use of our test is to inform decisions on sentinel lymph node biopsy in patients when the tumor thickness is less than or equal to 2.0 millimeters. And the second use is to guide subsequent treatment plan decisions. As previously stated, we believe our continued investment in evidence development is key to supporting both marker penetration and coverage by commercial payers. Turning to our pipeline, we are pleased with the continued progress of our pipeline tests, which importantly allow us to expand our services for patients who are diagnosed with early-stage skin cancers. We are on plan for our pipeline test, DecisionDx SCC, for use in patients with high-risk squamous cell carcinoma to become commercially available at the beginning of September. DecisionDx SCC is designed to identify a patient's risk of metastasis in order to enable more informed, risk-appropriate clinical decisions regarding adjuvant therapy and other management options. In the second quarter, we saw three peer-reviewed publications supporting our DecisionDx SCC test. This includes development and validation data, which are published in the Journal of the American Academy of Dermatology, or JAD. The results demonstrate that decision DX-SCC is not only an independent predictor of metastatic risk, but our test was also shown to be the strongest predictor of metastatic risk relative to current staging systems and can complement clinical pathologic risk factors to better stratify risk of metastasis and the subsequent treatment plan decisions in patients with high-risk SCC. We anticipate hosting a public webcast for investors in September to discuss our DecisionDX SCC test concurrently with its commercial availability. Additionally, our team completed the clinical validation work needed to launch our second pipeline test, this one for use in suspicious pigmental lesions. As we previously stated, we expect this test to become commercially available in the second half of 2020. This test is designed to assist dermatopathologists to make a more informed diagnosis for a suspicious pigmental lesion that cannot safely be ruled out as benign or ruled in as melanoma. We estimate that combined, our three skin cancer products, DecisionDx Melanoma, DecisionDx SCC, and our test for suspicious pigmental lesions will have a total addressable U.S. market of approximately $2 billion, a $1.4 billion increase over our current total addressable U.S. market. and lastly we are moving forward with our plan to expand our commercial team in the second half of 2020. We are moving forward with these plans primarily to support the continued growth of DecisionDx melanoma, our lead product, but also to support the launch of DecisionDx SCC. You may recall that in 2019 we more than doubled our commercial team and despite the pandemic We remain in position to continue to execute on our strategic plans for further commercial expansion in order to facilitate near-term and long-term growth. On June 29th, we successfully completed a public offering for 2 million shares of our common stock with net proceeds to us of approximately $69.5 million and additional net proceeds of approximately $10.4 million on July 2nd. as a result of the underwriters' full exercise of their option to purchase 10 additional 300,000 shares. We plan to use a portion of these proceeds to further support and accelerate our research and development activities, including two important studies that we've implemented to support our DecisionDx melanoma test. The first is the personalized study in which we evaluate DecisionDx melanoma for interaction with adjuvant therapies. The second is the connection study which will collect long-term outcomes for up to 10,000 patients who have been tested clinically with decision X melanoma. We will provide more information on these studies as we make progress. I will now turn the call back over to Frank who will provide additional detail relating to our financial results.