Castle Biosciences, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• AdvanceAD-Tx Launch: Launched first-in-class test for guiding systemic treatment selection in moderate to severe atopic dermatitis. Identified a gene expression profile test evaluating 487 genes across 12 immune inflammatory and skin-related pathways. Clinically launching on a limited access model in November 2025, with phased expansion expected in 2026.
• Third Quarter Performance: Revenue reached $83 million, total test report volume 26,841. Core revenue drivers grew 36% year-over-year. DecisionDx-Melanoma surpassed 10,000 reports in a quarter for the first time. TissueCypher also exceeded 10,000 reports in a quarter.

Segment Performance

• DecisionDx-Melanoma: Delivered 10,459 reports in Q3 2025, a 12% year-over-year increase. Expected high single-digit volume growth for the full year 2025 compared to 2024.
• DecisionDx-SCC: Delivered 4,186 test reports in Q3 2025. Submitted LCD reconsideration requests to Novitas and Palmetto MolDx, which were accepted. New peer-reviewed evidence validated its utility, including predicting local recurrence in NCCN high-risk SCC patients.
• TissueCypher: Delivered 10,609 test reports in Q3 2025, a 75% year-over-year growth. New data at the American Foregut Society's Annual Meeting reinforced its role in Barrett's esophagus management.

Guidance

• Raised 2025 revenue guidance to $327 million to $335 million from the prior range of $310 million to $320 million.
• Gross margin in Q3 2025 was 74.7%, with adjusted gross margin at 76.8%.
• Net cash provided by operating activities was $22.6 million for the third quarter of 2025.

Risks

• Forward-looking statements involve inherent risks and uncertainties, with no assurance that contemplated results will be realized. Factors could cause actual results to differ materially from forward-looking statements. Reimbursement for AdvanceAD-Tx is uncertain and subject to various payer pathways and timelines.

Question and Answer

Q: Could you provide more color on who would be addressable from the 13.2 million patients with AdvanceAD and if it is all of them, how many of these patients are Medicare age?

A: The 13.2 million patients are the target marketplace in the U.S. with moderate to severe atopic dermatitis. Estimated Medicare exposure is around 10% to 15%.

Q: Could you tell us a little bit more about the multiple reimbursement pathways for AdvanceAD-Tx?

A: It involves understanding commercial payment sections and other payer opportunities, but specific details are pending as timing is uncertain.

Q: Congrats on the quarter. First one is going to be on SCC. Kind of a multipart question. The first is on the reconsideration. The requests were approved, I guess. Anything you can kind of share on timing and likelihood and next steps and things like that?

A: Medicare contractors accepted reconsideration requests but timing is unknown as the Medicare manual doesn't have specific start and stop dates. Regarding SCC volume, it's flat due to commercial focus shift between melanoma and squamous cell carcinoma tests.

Q: Congrats on a really solid quarter here. I wanted to ask a first question here on the DecisionDx-Melanoma volume outlook. 3Q volumes were up about 5% sequentially versus the guidance of kind of flattish in the back half versus 2Q levels. So I guess, what did you see in the quarter outside of typical seasonality?

A: Expected high single-digit volume growth year-over-year. Normal seasonality in Q4 is typical with holidays and shorter working days affecting volume.

Q: On DecisionDx-Melanoma, good acceleration there. Could you give us a bit more insight into how refocusing the derm team has had an impact? What are you seeing drive the majority of the growth, at least in Q3?

A: Growth comes from both new ordering clinicians ramping up and higher utilization among existing docs, with both same-store and new store sales growth.