Castle Biosciences, Inc.

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 now like to turn the call over to Camilla Zuccaro, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to Castle Bioscience's first quarter 2022 financial results conference call. Joining me today is Castle'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, May 9th, 2022. 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 statements made today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our financial outlook, TAM, and similar items referenced in our earnings release issued today, and statements containing projections regarding future events or our future financial or operational performance, including our expectations and assumptions related to the impact of the COVID-19 pandemic. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainty, 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 March 31st, 2022 under the heading Risk Factors 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 non-GAAP financial measures, such as adjusted revenue, adjusted gross margin, and adjusted EBITDA, that have not been calculated in accordance with generally accepted accounting principles in the United States, or GAAP. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. 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 I will take you through execution and strategy highlights from the quarter, and then Frank will provide financial highlights for the period. And then we will take your questions. As always, I want to thank all of our CASEL employees for their hard work during the quarter and continued dedication to our mission of improving health through innovative tests that guide patient care. We had a strong quarter, which we believe will provide us with significant momentum for the rest of the year. We delivered almost 70% growth in total test volume over the first quarter of 2021 and $26.9 million in revenue, which we attribute to our continued focus on our strategy and strong operational performance. We saw strong year-over-year growth in our core dermatology business and our combined dermatology test volume, that is decision DX melanoma, decision DX SCC, and our comprehensive diagnostic offering of MyPath melanoma and DiftyX melanoma, which grew by 69% over the first quarter of 2021. We continue to make careful investments intended to further accelerate growth in our core dermatology business, as well as investments in the two other pillars of our growth strategy, our pipeline initiatives and strategic opportunities. I will highlight across each of these pillars, starting with our strong core dermatology business. But first, I would like to emphasize that we entered 2020 with an estimated in-market U.S. total addressable market, or TAM, of approximately $540 billion. Despite the COVID headwind, with the launches of both DecisionDX-FCC and DIPC-X melanoma tests in the second half of 2020, we entered 2021 with an estimated in-market U.S. TAM of just under $2 billion. And as of April 2022, following our acquisition of Althea DX, we now have an estimated in-market US TAM of just under $8 billion, made possible by maintaining our focus on our three pillars of growth. Test reports for our flagship gene expression profile test, Decision DX Melanoma, grew by 48% in the first quarter compared to the first quarter of 2021, with 6,023 test reports delivered. As we have discussed, COVID-19 impacted diagnosis of cutaneous melanoma during 2020 and 21, according to our analysis of third-party data. We continue to see the data trending in ways that are not back to pre-COVID levels. However, now, two years later, we are considering these trends a new normal, for now, anyway. We have made decisions that we believe will strengthen our resiliency and position our business for growth, despite potential headwinds related to reduced diagnoses. And we believe our success in our dermatology franchise is driven by strong execution on these growth initiatives. For instance, we doubled our dermatology-facing representatives in 2021 to the mid-60s, where it stands now. As we communicated to you in the first half of 2021, We made the active decision to double our dermatology-facing representatives by July 2021 so that we would enter 2022 with a commercial team that could take advantage of the promotional responsiveness that we see in this market. So we feel good about the strong momentum we have seen so far in 2022. As we discussed, we will continue to assess the size of our commercial team and number of outside sales territories. Our assessments will include evaluation of our mix of outside sales territories, inside sales support, marketing, and medical affairs, and we'll adjust our investments based upon these evaluations. As I noted earlier, we believe that our market is promotion responsive, so we anticipate that our Salesforce expansion efforts, investments in R&D, our peer-to-peer programs, our interface with the leading dermatology electronic medical record system, modernizing medicine's EMMA system, and our federal supply schedule contract with the VA, which was recently expanded to include all of our skin cancer tests, should position us well for growth across our suite of dermatologic tests for the remainder of 2022. Another significant dermatology highlight was the presentation of our expanded National Cancer Institute collaboration with the SEER program. This expanded real-world data showed improved survival for patients who had the benefit of the DecisionDx melanoma test in addition to traditional clinical and pathologic data compared to untested patients who only had access to traditional clinical and pathologic factors to determine their treatment and follow-up plan. Specifically, patients diagnosed with melanoma and who received the DecisionDx melanoma test had a 27% improvement in melanoma-specific survival compared to untested patients. Let me restate this number as it is important clinically. When controlling clinical and pathologic factors as well as socioeconomic factors, patients who had the benefit of having decision DX melanoma test results in addition to clinical and pathologic factors had a 27% improvement in melanoma-specific survival. Switching now to DecisionDxSCC, we have discussed potential timing of Medicare coverage for this test. At this time, we remain uncertain on timing. However, we continue to plan for Medicare coverage prior to mid-2023. You will recall that the technical dossier for this test was submitted to Moldex for review to Palmetto in the second quarter of 2020. We expect to continue to offer this test to patients as we believe it is the right thing to do. Our billing department continues to bill payers, and as per our process, we expect to continue to receive some payments in 2022. Now, turning to our pipeline initiatives, we presented proof-of-concept data at the Revolutionizing Atopic Dermatitis 2022 conference last month. which concluded that our non-invasive skin scraping technique produces sufficient RNA to assess reproducible gene expression for inflammatory skin disease pipeline tests that's currently in development to predict therapy response. Specifically, data in the proof-of-concept portion of our ongoing development and validation study identified preliminary genes of interest. Importantly, the study demonstrated strong technical reliability and interoperative accordance for the skin scraping technique. So we feel confident about our non-invasive skin sampling approach. As you may recall, in 2021, we initiated a 4,800-patient prospective multicenter clinical study to develop and validate this pipeline test. We believe we are on track to have initial validation and development data in 2023, and we expect to launch this pipeline test by the end of 2025, which would add approximately $1.9 billion to our estimated U.S. TAMP. As we move to our last growth pillar, strategic opportunities, we are excited to discuss the ongoing progress of our tissue cycle integration, as well as our recent acquisition of the ADX and the IDGenX pharmacogenomic test for mental health conditions. As I mentioned above, the acquisition of these two laboratories expanded our in-market estimated US PAM by approximately $6 billion to now approximately $8 billion. As we've mentioned on past calls, we believe strategic opportunities enable us to build franchises in two complementary markets with existing commercialized products that addressed a clear unmet clinical need and have already gained Medicare reimbursement as well as select commercial coverage. And we have made these acquisitions in furtherance of our long-term growth and value creation objectives. For the near and mid-term, we will focus assessment of other strategic opportunities from the position of building our three franchise markets, Dermatology, Gastroenterology, and Mental Health Conditions. As it relates to our Tissue-Cyber Aerotisophagus test, we have seen the positive reception from clinicians that we identified during our market research in the second half of 2021. In the first quarter, CMS granted ADLT, or Advanced Diagnostic Laboratory, test status for the Tissue-Cyber test. ADLT status requires that a clinical diagnostic laboratory test provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests, among other criteria. Of significant business importance is the fact that ADLT status exempts tissue site from what is called the 14-day rule, which simplifies the billing process for Medicare patients. We also announced in the first quarter an independent peer-reviewed article published in the Clinical Gastroenterology and Hepatology Journal. The study, a pooled analysis of five previously published clinical validation studies of 552 Barrett's esophagus patients, was led by Dr. Prasad Iyer, a recognized expert from the Mayo Clinic in the diagnosis and management of Barrett's esophagus. The analysis reinforces the ability of tissue cipher to significantly improve predictions of progression to esophageal cancer or high-grade dysplasia in patients with Barrett's esophagus compared to predictions based on clinical pathology variables alone, allowing for more informed disease management decisions to occur. For instance, one analysis evaluated the impact on tissue cipher in combination with clinical and pathologic factors that are known predictors of progression in patients with nondisplastic barotrophic disease. This patient group is particularly concerning, as we believe they represent approximately 348,000 endoscopies per year, or approximately 91% of the intended use market for tissue cipher. We continue to make progress on our Pittsburgh laboratory enhancements and we have signed our new lease to facilitate further progress for TissueCypher, which includes optimizing test turnaround time. You may recall our commercial team consists of 14 outside sales territories. Similar to our dermatology commercial team, we will continue to assess market response and determine what the appropriate commercial expansion will look like But based upon our initial market research, as well as initial provider response, we'd expect to add approximately 10 to 15 additional outside sales territories sometime in the third quarter, ending the year with approximately 25 to 30 outside sales territories. Let's turn now to our recent closure on AlfeaDx and the acquisition of the IgGenX test in late April. I want to reiterate our strategic focus and how this acquisition aligns well within this focus. CASEL aims to transform patient management by providing actual information in disease states with high unmet clinical needs. We accomplish this through four main factors. Number one, we identify high value clinical decision points that are poorly served by current subjective features. Number two, we focus on clinical decision points where the diagnosing clinician is the treating clinician. Number three, we limit our investment to proprietary products And number four, we identify subsequent disease states or clinical decision points at the same diagnosing or treating clinician basis, thereby providing multiple high-value tests to the same customer and leveraging our commercial investment. We believe IDGenX aligns with our strategic focus. Additionally, as you may recall from our April 4th announcement, IDGenX previously only had Medicare coverage for use in patients diagnosed with major depression. As we enter into May, Medicare coverage for the IgDX multi-gene test now includes seven additional mental health conditions for a total of eight. And as a reminder, a randomized controlled trial showed that patients diagnosed with depression who were assessed with the IgDX test showed a greater than 2.5 times improvement in remission compared to those patients who received the physician's choice without knowledge of their pharmacogenomic information. AltheaDx had a commercial team covering approximately 20 outside sales territories, and all joined the Castle family. We are excited about the potential IGX has to help patients diagnosed with mental health conditions. And we recently announced a collaboration with Camille Schreier, Miss America in 2020, for Mental Health Awareness Month to promote the potential of genetic testing and the IGX test to help improve treatment for mental health conditions. We look forward to updating you in the near term on our progress to HygieneX. I will now turn the call over to Frank, who will provide details relating to our financial results and updated 2022 revenue guidance.