Castle Biosciences, Inc.

quarter 2023 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 Camilla Zuccaro, Vice President, Investor Relations and Corporate Affairs.

Please go ahead. Thank you, Operator. Good afternoon, everyone. Welcome to Castle Biosciences' third quarter 2023 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, November 2, 2023. 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 anticipated 2023 total revenue and our full year 2023 to 2025 outlook, our expectations regarding reimbursement for our products, and the impact of our investments and growth initiatives and expanded commercial team. Forward-looking 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 annual report on form 10 K for the year ended December 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 operating 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. As you saw from our announcement a few minutes ago, CASEL delivered yet another outstanding quarter, continuing our track record of strong execution. Revenue grew by 66% to $61.4 million and total test report volume grew by 52% compared to the third quarter of 2022. We achieved these strong results while generating $5 million in cash flow from operations and $6.6 million in adjusted EBITDA. Given our consistent performance throughout the year and our confidence in the business, we are again raising our full year 2023 revenue guidance and now anticipate achieving at least $200 million in revenue, an increase of at least 45% over 2022. I attribute our continued strong performance in no small part to the culture we built at Castle, and the foundation of this culture is the people who call Castle home. I cannot thank them enough for their decision to join Castle, lean in, and help drive our success. Now, let me take you through execution and strategy highlights from the quarter, and then Frank will provide additional financial highlights for the period before we turn to your questions. Let's start with our core dermatology business, which continues to perform extremely well. For DecisionDx melanoma and DecisionDx SCC combined, test volume was 11,379, growth of 27% year over year. For the trailing 12 months as of September 30th, 2023, The combined test volume growth was 33% when compared to the preceding four quarter period. We are very pleased with a third quarter and trailing 12 months volume performance. For the three months ended September 30th, we had approximately 500 new ordering clinicians, that is clinicians ordering our tests for the very first time, and approximately 5,000 total ordering clinicians across all three dermatologic tests. As a reminder, there is significant overlap between clinicians who order our DecisionDx melanoma test and those who are now adopting our DecisionDx SCC test. In fact, during the nine months ended September 30th, 2023, approximately 75% of all clinicians ordering DecisionDx SCC had also ordered our DecisionDx melanoma test during that same period. We believe this is a result of a high unmet clinical need that our tests are designed to address, coupled with the decision-making value that is acted upon by dermatological providers and the leveraging of our sales efforts across both products effectively. As it relates to the impact on decision-making, I remind you of the results of a multicenter study published in the second quarter of this year from Cleveland Clinic, Northwestern University, and Oregon Health and Sciences Center. that showed a direct benefit in outcomes, that is survival, in patients whose early stage melanoma treatment plans were guided by the DecisionDx melanoma test results compared to those patients managed at the exact same institutions whose treatment plans did not include the knowledge of our DecisionDx melanoma test results, that is untested patients. For DecisionDx melanoma, we delivered 8,559 test reports in the third quarter. a 16% year-over-year increase, and roughly flat compared against 2Q, reflecting normal third-quarter seasonality. We are pleased by this performance. From a patient standpoint, we estimate that we have reached about 25% marker penetration, and we believe substantial growth opportunities are still ahead of us. We believe the most significant drivers of growth are the documented clinical impact our test has on improving outcomes in patients diagnosed with early-stage melanoma coupled with our prior commercial expansion investments intended to educate our customer base. One of our evidence development goals is to continue to compare the value of our test to other tools or other tests for patients diagnosed with melanoma, primarily for reimbursement purposes, but also as proactive competitive purposes with our customers. In the past, this meant focusing on comparing the independence of our DecisionDx melanoma test to the American Joint Committee on Cancer, or AJCC, staging factors, or the National Comprehensive Cancer Network's risk criteria. In addition to these two risk assessment tools, there is also the existence of nomograms. During the third quarter, we announced a new study demonstrating decision DX melanoma outperformed a nomogram that was developed at the Memorial Sloan Kettering Cancer Center. in predicting the risk of centrolifto positivity in patients with cutaneous melanoma. This study provides further evidence that using DecisionDx melanoma to help guide decisions regarding centrolifto biopsy procedures improves patient selection, potentially reducing unnecessary surgical procedures and ultimately improving the care of patients with melanoma. Similar to DecisionDx melanoma, we continue to see strong report volume momentum for our DecisionDx SCC test in the third quarter of 2023, with volumes up 72% year over year. As with our growth in DecisionDx melanoma, we believe that our strong growth and volume for DecisionDx SCC test is due in large part to the combination of the high clinical need for SCC, coupled with the value that our test provides. We continue to expand the body of evidence surrounding the test, This quarter, for example, we shared new data demonstrating the ability of our decision DXSCC test to identify patients with localized but high-risk cutaneous squamous cell carcinoma who may benefit as well as those who may not benefit from adjuvant radiation therapy. Now, let's shift our focus to our gastroenterology franchise and our tissue cipher test that was designed to predict the development of high-grade dysplasia or esophageal cancer in patients diagnosed with non-dysplastic, indefinite, or low-grade dysplasia, Barrett's esophagus disease. During the third quarter, we delivered 2,829 tissue cycle reports compared to 690 in the third quarter of 2022. As with our DecisionDx melanoma and DecisionDx SCC test, I'm pleased to share that during the third quarter, we had multiple data announcements demonstrating a significant clinical utility of Tissue Cipher in guiding risk-aligned care for patients. Turning to our mental health franchise, we delivered 2,791 ID genetics test reports during the third quarter of 2023, up from 1,208 in the third quarter of 2022. We are extremely pleased with the momentum thus far, including two consecutive quarters of triple-digit year-over-year volume growth. We believe our success is due to a differentiated test including identifying drug-drug and drug-gene interactions with lifestyle factors to help improve medication response and remission rates in a mental health market which we believe offers significant opportunity for growth. In fact, recent data from a study showed the addition of drug-drug interactions and lifestyle factors to drug-gene interactions provided by our iGenX test significantly impacted the number of drug recommendations and contribute to improved remission rates for patients with moderate to severe depression. Specifically, patients whose medication management was guided by our iGenX test were 2.65 times more likely to achieve remission of depressive symptoms compared to patients whose medication was guided by standard of care trial and error approach. That is a clinically meaningful improvement to patients suffering from moderate to severe depression. Moving to our longer-term growth initiatives, I'm excited to share some early discovery data on our inflammatory skin disease pipeline program. As you may recall, we launched the program with the goal of developing a genomic test aimed at guiding systemic therapy selection for patients with moderate to severe atopic dermatitis, psoriasis, and related conditions. We are pleased with the early discovery data, which we presented in October at the Fall Clinical Dermatology Conference. The data demonstrated that in patients with moderate to severe atopic dermatitis, we're able to show that using our noninvasive method of tissue sampling, coupled with gene expression profiling, can separate out responders from nonresponders. Furthermore, our inflammatory skin disease pipeline test could help distinguish atopic dermatitis, psoriasis, and mycoses fungoides skin lesions to ensure proper selection based upon an individual patient's molecular profile. This test has the potential to represent a significant advancement in the care of patients grappling with these debilitating skin conditions. Importantly, it could empower clinicians to tailor therapy choices by considering their molecular profiles, potentially sparing patients from undergoing numerous ineffective and costly medication trials before discovering an effective treatment to manage their specific symptoms. We are encouraged by the data we have generated to date and look forward to providing with additional development updates in 2024 with a test launch targeted for the end of 2025. Now, shifting our focus to a development related to UV melanoma, discovery data on a potential complementary test is being presented this weekend at the American Academy of Ophthalmology. As you know, UV melanoma is a rare disease with approximately 2,000 patients diagnosed annually in the U.S. Our DecisionDx UM test is standard of care for newly diagnosed patients, and we believe we test about 85% of such patients. In our ongoing dedication to this patient population, we're currently conducting a study to explore the potential for developing a test that will be tailored for individuals presenting with very small suspicious lesions with uncertain malignant potential. The current approach in deciding whether to intervene and treat these suspicious lesions is based on a watch and wait approach. where some change in the clinical characteristics of the lesion prompts the decision to definitively treat it and perform a prognostic biopsy. However, the decision to intervene is highly subjective and can lead to both undertreatment or delayed treatment of aggressive lesions and overtreatment of lesions that would probably have been fine to follow without any intervention. We are looking for a simple, minimally invasive, and objective signal that can identify aggressive biology earlier than the current clinical standards in order to allow for potentially earlier interventions. We see this potential test as a complementary test to our prognostic DecisionDx UM test. Our data is still in the early stages of discovery, but we expect additional data in 2024 indicating whether development of this type of complementary test may be possible. Lastly, I'm honored to share that Council Biosciences has recently been awarded a Top Workplaces National Industry Award, securing a third position among 84 top workplaces in the healthcare sector. People come first at CASEL, and our unique culture reflects that mindset. Our success is not possible without the entire CASEL team, and I would like to express my sincere appreciation for their contributions. I will now turn the call over to Frank, who will provide details relating to our financial results and outlook.