Castle Biosciences, Inc.

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 Bioscience's first quarter 2024 financial results conference call. Joining me today is Castle's founder, president, and chief executive officer, Derek Masold, and Chief Financial Officer Frank Stokes. Information recorded on this call speaks only as of today, May 2, 2024. 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 following the conclusion of the call. 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, PAM, 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 2024 total revenue and our 2025 outlook, our expectations regarding reimbursement for our products, and the impact of our investments in growth initiatives and expanded commercial teams. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties, and there could 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 31, 2024 under the heading Risk Factors and in the company's other documents and reports filed or to be 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. Building on our strength and momentum from 2023, I'm pleased to share that CASEL delivered a strong start to the year, growing first quarter revenue by 74% and total test volume by 40% compared to the first quarter of 2023. With our team's consistent execution and successful track record of building a differentiated portfolio of tests across our therapeutic areas, we remain confident in our business and are raising our full year 2024 revenue guidance to $255 to $265 million from the previously reported guidance of $235 to $240 million. Now, let me take you through execution strategy highlights in the first quarter, and then Frank will provide additional financing highlights before we turn to your questions. Starting with our core dermatology business, for DecisionDx melanoma and DecisionDx SCC combined, test report volume was 11,961 for the first quarter of 2024, a 20% increase over the same period in 2023. We believe our core dermatology offerings continue to present a long-term growth opportunity for us. Studies have shown that these two tests can positively impact patient outcomes and help reduce healthcare costs. For decision DX melanoma, we delivered 8,384 test reports in the first quarter, an 11% year-over-year increase. As we've discussed, driving test adoption through robust clinical evidence remains a priority for us. This quarter was no exception. As you know, our DecisionDx melanoma test has two clinical uses, ruling out a sentinel-lifto-biopsy surgical procedure and predicting risk of recurrence so that patients can have their treatment pathways adjusted to be more aligned with their biological risk of progression. While one could view these two uses as separate and parallel, The use of our tests to rule out a sentinel to biopsy surgical procedure must be accompanied with evidence that avoiding this procedure will not put them in harm's way. That is that they have an excellent prognosis should they choose to avoid the sentinel to biopsy surgical procedure. To this end, I am pleased to review data from an oral presentation that took place at the March 2024 meeting of the Society of Surgical Oncology. At this meeting, data was presented from one of our multi-center prospective U.S.-based studies. The data examining the performance of decision DX melanoma in safely ruling out a similar to biopsy surgical procedure showed that patients with a T1 or T2 melanoma and predicted to have less than a 5% likelihood of a positive set and lift node by our test, no patients as of the date of the data poll for this presentation predicted to have a less than 5% likelihood of a positive node actually had a positive node. That's a negative predictive value of 100% for this use of our test. But as I noted earlier, and it's clinically important, the study also examined the recurrence of patients who are predicted to have a less than 5% likelihood of a positive node and chose to forego that surgical procedure, as well as patients who were also predicted to have less than 5% likelihood of a positive node, but who, for personal preference, chose to undergo that surgical procedure anyway. I'm pleased to say that both of these groups were recurrence-free during the follow-up period, which had a median follow-up of two years. That is, in these two patient populations, our tests had a negative predicted value of 100% for risk of recurrence. This is powerful data that shows the exceptional clinical value that decision DX melanoma brings to improving patient care decisions and outcomes. Separately, in February, we announced a peer-reviewed publication of study data showing that decision DX melanoma provided significantly better risk stratification than the current American Joint Committee on Cancer Staging System in patients with stage 1 melanoma. This is an important patient group as it represents the largest group of melanoma patients. This publication reports the results of two large Stage 1 cohort studies, including 5,561 patients from the National Cancer Institute's SEER program. This study supports the use of a decision DX melanoma test in Stage 1 melanoma to obtain more precise information about a patient's risk of disease progression to, again, inform more personalized risk-aligned treatment and surveillance management plans. Looking ahead, we will certainly be focusing our educational effort on these highly compelling data, along with the findings from our two publications in 2023 that highlighted the fact that the clinical use of our decision DX melanoma test correlated to improve patient outcomes. That is, patients lived longer compared to those patients who did not have decision DX melanoma included as part of their clinical care. That is, they were untested. Moving on to our DecisionDx SCC test, we continue to see strong report volume momentum with 3,577 test reports delivered in the first quarter, an increase of 48% compared to the same period in 2023. DecisionDx SCC continues to be supported by a robust and growing body of evidence. We are particularly excited about a study that was published in March of this year that showed, in addition to providing risk stratification information, Our decision DXSCC test identified patients most likely to benefit from adjuvant radiation therapy, or ART for short, and those who can consider deferring treatment given a lower likelihood of benefit. This ART response data is of high clinical importance for a couple of reasons. First, ART has been shown to be an effective adjuvant intervention in patients with high-risk SCC. However, some high-risk STC patients are either not responsive to ART or the likelihood of metastasis is lower than predicted by the clinical pathological risk factors. In either case, these patients can be subject to ART, which carries both significant complications as well as cost. So, the ability of our decision in the SCC test to assist identifying those who are likely not to benefit from ART from those who are likely to benefit from ART has high clinical actionability. Furthermore, based off of our three-year real-world data, more than 98% of the patients that we test clinically are eligible for ART consideration under one or more of the existing guidelines. Importantly, this was the third peer-reviewed study published since the start of 2024, demonstrating DecisionDxSCC's clinical and or economic value in guiding ART decisions in the high-risk cutaneous squamous cell carcinoma patient population. Now, let's turn to our gastroenterology franchise. During the first quarter of 2024, we delivered 3,429 tissue cipher test reports compared to 1,383 in the first quarter of 2023, which is 148% growth. As a reminder, we believe the total market opportunity encompasses approximately 415,000 patients annually who meet the intended use criteria for this test, representing an estimated U.S. addressable marketplace of approximately $1 billion. As such, we believe our tissue cipher test represents significant long-term growth opportunity as we're in the very early stages of market penetration. We're excited about the growth prospects of the test, and we are equally pleased by its clinical utility to determine a patient's individual risk of progression from Barrett's esophagus to cancer. Turning to our mental health business, we delivered 4,078 ID genetics test reports in the quarter compared to 2,150 in the first quarter of 2023, which is 90% growth year over year. We believe the ongoing momentum we're experiencing is in part driven by our unique value proposition. In fact, data shows that using our test, which considers a combination of drug gene, drug drug, and lifestyle factors, contribute to greater remission and greater relapse control in patients with major depressive disorder and anxiety than the trial and error method of therapy selection. Further, we recently announced new data showing that while two-thirds of IGNX recommendations for patients ages 65 and older were due to drug gene interactions, one-third were due to drug-drug or lifestyle factor interactions, highlighting the value of the IGNX 3-in-1 approach to providing tailored guidance for neuropsychiatric medication selection. Moving on to our pipeline, we're making good progress our inflammatory skin disease pipeline initiative and expect to provide you with additional updates in the second half of this year. This pipeline genomic test for patients with moderate to severe atopic dermatitis, psoriasis, and related conditions is targeted for launch by the end of 2025, assuming a positive outcome of our discovery, development, and validation efforts. lastly i'm honored to share that for the third year in a row castle has earned a top workplace usa award underscoring our position as a leader in creating an exemplary workforce culture i want to thank each and every member of the castle team for their continued hard work i will now turn the call over to frank who will provide details relating to our financial results thank you derek and good afternoon everyone as derek highlighted we delivered excellent financial results to start the year