Castle Biosciences, Inc.

Good afternoon and welcome to CASEL BioSciences' second quarter 2021 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 Camila Zuccaro, Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to CASEL Biosciences' second quarter 2021 financial results conference call. Joining me today is CASEL's founder, president, and chief executive officer, Derek Matzold, and chief financial officer, Frank Stokes. Information recorded on this call speaks only as of today, August 9th, 2021. 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 safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Overlooking statements are based upon current expectations and involve inherent risks and uncertainties, and there can be no assurances 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 quarterly report on Form 10-Q for the quarter ended June 30, 2021, 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. In addition, some of the information discussed today includes financial metrics such as adjusted revenue and adjusted gross margin, which are non-GAAP financial measures. We believe these metrics provide useful supplemental information in assessing our revenue and cash flow performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today which has been posted on the investor relations page of the company's website. I will now turn the call over to Derek.

Thank you, Camilla, and good afternoon, everyone. Thank you for joining us today for CASEL's second quarter 2021 earnings call. This afternoon, I will discuss highlights from the quarter and recent progress against our growth initiatives. Frank will then provide additional detail on our financial results and performance. I'd like to start today's call by thanking the CASEL team. On the sales side, we're able to conduct sales training updates in person in the first quarter, and we enter the second quarter fully engaged as our clinician customers continue to open up their practices. It is our team's hard work that contributed to an exceptional quarter, and by exceptional, I mean that we had record test report volume in a single quarter for each of our proprietary GeneXus profile tests. Stated differently, we continue to execute on our long-term growth initiatives, furthering our position as a leader in dermatologic diagnostics. In the second quarter of 2021, we delivered total revenue of $22.8 million, a 79% increase over the second quarter of 2020. Additionally, our adjusted revenue, excluding the effects of revenue adjustments related to tests delivered in prior periods, was $22.9 million. 120% increase over the second quarter of 2020. As you may recall, we provided revenue guidance in May for the full year 2021. Due to our strong performance and expected continued momentum, we are raising our 2021 revenue guidance for the full year to $893 million compared to our previously provided guidance of $80 to $83 million. We delivered 7,007 total gene expression profile reports in the second quarter of 2021, compared to 3,314 in the same period of 2020. This includes 5,128 decision DX melanoma test reports delivered, despite cutaneous melanoma diagnoses remaining below historical 2019 levels by approximately 12%. based upon our analysis of third-party data. The year-over-year growth in DecisionDx melanoma test reports of 70% reflects gains in both diagnoses compared to 2020, as well as significant gains in market penetration. We understand that comparing test report growth to 2020 may be less informative given that we believe the pandemic impacted us the hardest during the second quarter of last year. So to provide a different perspective, Our second quarter 2021 test report volume for Decision DX melanoma is a 39% increase over the second quarter of 2019. And this is in the face of the decreased cutaneous melanoma diagnoses I just mentioned. Although we cannot be certain of any potential future impacts of COVID-19, including the emergence and spread of variants, we believe the positive momentum we have seen will continue. Additionally, the expansion of our sales team is complete, and beginning on July 1, our dermatology clinician-focused outside sales force approximately doubled in size to the mid-60s, and each of our sales representatives is selling all three of our skin cancer diagnostic product lines. Utilizing our existing sales channels and calling on dermatologists as a primary call point, followed by most surgeons, surgeons who work in skin cancer, including surgical oncologists and head and neck surgeons, and dermatopathologists. We have seen that our market is promotionally responsive, and we believe that our continued increase in market penetration is being positively impacted by three promotional variables. Number one, nearly 90% of our calls in the second quarter were in person, up from just over 75% in the first quarter of 2021. Number two, The number of average calls per day per sales reps continues to improve and specifically more than doubled in the second quarter of 2021 compared to the second quarter of 2020. Although it is still below the pre-COVID first quarter levels of 2020 by approximately 20%. And number three, we are seeing a continued return to in-person peer to peer programs to the extent that for the first half of 2021, We've already exceeded our totals for all of 2020. Thus, we believe that we are well-positioned for continued growth for the remainder of 21 due to these three variables, combined with a doubling of our dermatology-focused sales team. Turning to our DecisionDx SCC test for patients diagnosed with high-risk cutaneous squamous cell carcinoma and one or more risk factors, we delivered 784 test reports in the second quarter of 2021. We remain extremely pleased with the rate of adoption for this test. We believe one clear differentiator for CASEL is our position as the leader in dermatologic GEP tests. We have seen and expect to continue to see value through leveraging our established dermatologic commercial channels for SCC, as well as for our comprehensive diagnostic test offering. Third-party data shows that over 90% of dermatologists and Mohs surgeons diagnose both melatonin and SCC providing us with leverage that we are seeing in the field. And more specifically, for the first six months ended June 30, 2021, approximately 70% of clinicians who ordered DecisionDx SCC also ordered DecisionDx melanoma. We are a data-driven, evidence-based company, and we invest heavily in evidence development. At this year's American Head and Neck Society 10th International Conference on Head and Neck Cancer, we presented new data demonstrating that DecisionDx SCC complements current risk assessment methods in patients with cutaneous squamous cell carcinoma of the head and neck. Archival primary tumor specimens and associated data from a cohort of 278 patients from 33 different clinical sites were included in the study. The patients had high-risk SCC located on the head or neck, and 54 patients, or 19% overall, develop regional and or distant metastasis. Patients received either a CASEL Class I low-risk biological test result, a Class II moderate biological risk test result, or a Class IIb high biological risk test result, had significantly different three-year metastatic pre-survival rates of 92.1%, 76.1%, or 44.4% respectively, with a p-value of less than 0.001. Furthermore, as expected, using multivariate Cox regression analysis, the DecisionDx SCC test was found to be an independent predictor of metastasis when compared to AJCC staging. Additionally, and I would say more importantly, DecisionDx SCC had a substantially higher hazard ratio, 9.07, compared to 2.51 with AJCC staging, demonstrating the increase in risk stratification compared to AJCC staging alone. We plan to continue investing in evidence development for all of our gene expression profile tests, as it remains a key component of our growth strategy, supporting both adoption of our tests by clinicians and reimbursement by commercial payers. As we previously discussed, the technical assessment dossier for our Decision to the FCC test was submitted to Palmetto and Naridian in the second quarter of 2020. We received confirmation of acceptance of the submission as being complete in the third quarter of 2020. And although there can be no assurances, we continue to plan for a draft local coverage determination, or LCD, to be posted in 2021. But I remind you that there is no specific timeframe under which palmetto and iridium must operate. Now, let's discuss our comprehensive diagnostic test offering for difficult-to-diagnose melanocytic lesions, also called unequivocal, uncertain, or suspicious. As you may recall, in April, we announced our plans to acquire MyPath melanoma, and the deal closed in late May. MyPath melanoma and DecisionDx DysDx melanoma Our gene expression profile test is designed to provide an objective and comprehensive diagnostic test offering to aid dermatopathologists and dermatologists in characterizing these difficult to diagnose monocytic lesions as likely to be benign, malignant, or in rare cases, intermediate risk for malignancy. Let me remind you to estimate that there are over 2 million biopsies of suspected melanoma annually in the U.S., Thankfully, approximately 85% of these biopsies receive a definitive diagnosis of either benign or malignant, as determined by a dermatopathologist using traditional microscopic analyses. Thus, up to 300 lesions, or 15%, are not constantly diagnosed with traditional histopathology. These difficult-to-diagnose monocytic lesions do require additional or ancillary testing before definitive diagnosis can be reached. it is important to reduce this diagnostic uncertainty so the patient's treatment plan can be determined and implemented. In the case of a benign lesion, the treatment plan is generally do nothing on that lesion, whereas in the case of a malignant lesion, the clinician would, at a minimum, afford a wide local excision and, depending on the depth and other characteristics, pursue a similar biopsy procedure as well. So let's talk about our acquisition of the Myriad MyPath laboratory and the Myriad MyPath melanoma test. As you may recall, a few years ago we began development on our own Difty X melanoma test to address this unmet medical need to provide improved clarity around difficult to diagnose lesions. In addition to developing a test with high sensitivity and specificity, Our target product profile included the criteria of having both a low technical failure rate, that is being able to report a test result out on more than 95% of orders, as well as a small intermediate test result. Our assessment of the published literature and market research was that while clinicians and dermatopathologists valued the MICAP melanoma test, they perceived the technical failure rate and intermediate rate of the test as being high. As you know, we succeeded in achieving our target product profile. However, we also knew that we would be investing additional performance studies, including additional work in pediatrics, to serve our customers and build market share and penetration, while competing with Myriad for the same patient population. Not to mention that we would also have an estimated 18- and 24-month wait for Medicare coverage. Myriad announced its intention to divest MyPath Melanoma in the fourth quarter of 2020, just as we were making our 50X Melanoma test available for clinical use. We determined that housing both gene expression profile tests for use in difficult to diagnose lesions and providing structured ordering could enable us to serve more patients more quickly, significantly advance the combined evidence development, and move forward reimbursement in a significant manner. I am pleased to announce that even though we only had one full month of offering the combined diagnostic test offering, that is June, we're able to deliver 627 test reports for MyPath melanoma and DiffDx melanoma combined for the second quarter, a record number of test reports delivered for our suspicious pigmental lesion offering for a quarterly period. Furthermore, we are also successful meeting our objective of upgrading the MyPath melanoma test ability to provide clinically actionable results. From less than 80% when offered as a standalone test, to more than 95% when offered in combination with . This is a fantastic achievement and results in more patients getting an actionable test result more of the time. In addition to this performance, it's pointing out that the National Comprehensive Cancer Network, or NCCN, guidelines support the use of ancillary testing, including gene expression profile tests for indeterminate melanocytic neoplasms following histopathology, meaning Both tests are supported by the NCC and guidelines. As you should expect, our reimbursement team is already focusing on driving appropriate payment from commercial payers through the use of both a more extensive base of evidence and NCC and guideline support. In summary, we delivered an excellent quarter of financial performance with a strong execution on our growth initiatives, delivering on our commitment to our stakeholders and continuing to create value for patients and stockholders. I will now turn the call over to Frank, who will provide additional detail relating to our financial results.