Castle Biosciences Inc Q4 FY2025 Earnings Call

Good afternoon, and welcome to Castle Biosciences Fourth Quarter and Full Year 2025 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 Zuckero, Vice President, Investor Relations and Corporate Affairs.

Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences Fourth Quarter and Full Year 2025 Results Conference Call. Joining me today are: Castle's Founder, President and Chief Executive Officer, Derek Maetzold; and Chief Financial Officer, Frank Stokes. Information recorded on this call speaks only as of today, February 26, 2026. 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 3 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, including statements about expected addressable markets, statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2026 total revenue and the impact of our investments and growth initiatives, including our ability to achieve long-term growth and drive stockholder value. 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. Please refer to the risk factors in our most recent SEC filings for more information. 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 U.S. GAAP. 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. We closed out a strong fourth quarter and delivered an outstanding year in 2025, driven by continued momentum across our core revenue drivers, disciplined execution and the dedication of our employees. I'm intentional in mentioning the dedication of our employees. It is through their efforts that we were able to deliver clinically actionable results with our current commercial tests today and tomorrow with the addition of future tests. With fourth quarter revenue of $87.0 million, we delivered revenue of $344.2 million for the full year of 2025. Excluding DecisionDx-SCC and IDgenetix revenue from both 2025 and 2024, our revenue growth for the year would have been approximately 34%. For the full year, we also delivered total test report volume of 105,053 test reports from our core revenue drivers, increasing 37% compared to 2024, highlighted by continued momentum in TissueCypher report volume, which achieved 86% growth over 2024. As I reflect on our many accomplishments across our growth initiatives, we have succeeded in evolving Castle considerably. Over the course of 2025, we completed the acquisition of Previse, entered into a collaboration and license agreement with SciBase, launched our first-in-class AdvanceAD-Tx test, further strengthened our commercial teams and continued to solidify an already strong balance sheet. At the same time, DecisionDx-Melanoma reached a significant milestone, surpassing 230,000 test orders since launch, and we continue to build a robust body of clinical evidence across our entire portfolio. And we continue with our unwavering commitment to improving patient care. Everything we do with Castle remains focused on innovative, clinically actionable tests that help clinicians make better informed decisions and improve outcomes for their patients. We can only accomplish this mission because of the people who call Castle home. I sincerely thank our entire team for their hard work, resilience and commitment throughout the year. None of this progress would be possible without them. As we review 2025 results, I will also outline how we are thinking about our growth story, starting with the drivers of our near-term performance in 2026, then turning to our midterm opportunities and finally discussing the longer-term pipeline that we believe positions Castle well for sustained growth and value creation. Frank will then provide additional 2025 financial highlights and insight for 2026 before we turn to your questions. Let's start with our core revenue drivers and what we see as the bulk of our 2026 top line growth story, DecisionDx-Melanoma and TissueCypher. In 2025, for DecisionDx-Melanoma, we delivered 39,083 test reports, representing 9% year-over-year growth, achieving our high single-digit volume growth commitment. Importantly, we continue to see new clinicians ordering DecisionDx-Melanoma for the first time. Specifically in 2025, we had 1,795 clinicians order DecisionDx-Melanoma for the very first time. This was consistent with our experience in both 2024 and 2023, reflecting continued strong interest and adoption. Additionally, total ordering clinicians over the lifetime of this test is nearing 17,000. Our compelling body of evidence for DecisionDx-Melanoma also continues to expand with now 58 peer-reviewed publications supporting the clinical use of the test, which is not only a key driver for test adoption, but also meaningfully differentiates our test from the competition. We saw an approximately 31% patient penetration exiting 2025, and we believe DecisionDx-Melanoma remains a durable growth driver in 2026. Turning to our gastroenterology franchise. TissueCypher delivered 39,014 test reports in 2025 compared to 20,956 test reports in 2024, representing 86% growth and surpassing 80,000 tests ordered to date. We believe this adoption reflects growing clinical recognition of TissueCypher's value in determining a patient's individual risk of progression from Barrett's esophagus to high-grade dysplasia or esophageal cancer. Barrett's esophagus is the only known risk factor for the development of esophageal adenocarcinoma, one of the fastest-growing cancers in the U.S. Unfortunately, esophageal adenocarcinoma is also one of the most aggressive and difficult cancers to treat with a 5-year survival rate of less than 20%. In 2024, the American Gastroenterological Association, or AGA, released a clinical practice guideline for Barrett's esophagus, stating that it can be effectively treated with endoscopic procedures like ablation and noting that identifying high-risk patients is crucial. Importantly, TissueCypher was highlighted as the first prognostic test capable of identifying patients with Barrett's esophagus at risk of progression to high-grade dysplasia or esophageal cancer. We believe this recognition by the AGA reinforces TissueCypher's role in providing personalized and clinically validated risk stratification, which in turn assists clinicians and their patients in making better management decisions with the end goal of extending the lives of high-risk patients with interventions at the precancer state. For the year ended December 31, 2025, we had 2,082 new ordering clinicians for the TissueCypher test, up from 1,234 in 2024. We remain highly focused on education and building awareness to drive continued adoption. With roughly 11% patient penetration for TissueCypher exiting 2025, an expanded commercial team and the compelling clinical actionability with a high clinical need, we continue to believe TissueCypher is still in the early stages of a long runway for significant growth in 2026 and beyond. Let's move on to the midterm phase of planned potential growth, which we view as 2027 and 2028. In addition to the continued contribution of our core revenue drivers, let's discuss our recently launched AdvanceAD-Tx test. AdvanceAD-Tx is our first-in-class test designed to guide systemic treatment selection for patients 12 years and older with moderate to severe atopic dermatitis. We clinically launched the test on a limited access model in late November 2025. The launch of AdvanceAD-Tx significantly expanded our total addressable market and reinforced our commitment to the dermatology community. Early results have exceeded our high expectations. As we announced in early January, we limited access to approximately 150 dermatological accounts in the U.S. Through year-end, we were pleased to see that more than half of these initial accounts had ordered one or more tests in the first 5 weeks of clinical availability. As mentioned in our third quarter 2025 earnings call, our market research suggested a high level of clinical need and adoption. The results of the initial 5 weeks of clinical availability match those expectations. In fact, through mid-February, we received close to 500 orders, continuing to reinforce our expectations for adoption from our mid-2025 market research studies. We expect to expand clinician access in a phased manner based on a number of internal metrics. We expect revenue contribution from AdvanceAD to be immaterial in 2026 with material revenue contribution expected in 2027 or 2028. Based upon revenue cycle timelines, we would expect to be in a position to communicate more about reimbursement in the second half of 2026. Lastly, moving on to the next phase of our growth strategy, the longer term, which we view as 2028 and beyond, I'll touch on our pipeline initiatives and strategic investments. Let's start with our GI pipeline. We acquired a non-endoscopic cell collection device with our acquisition of Previse. We plan to use this collection device to gather samples for the development of a pipeline test for differential diagnostic and screening support for GI diseases. We expect to initiate and enroll our first patient for the development study in the second quarter of 2026. This test will be upstream from TissueCypher, and we expect preliminary data before the end of 2026. This collection device requires FDA clearance, and we currently expect to both file our submission and potentially receive clearance in 2026. Next is our collaboration with SciBase, where we will evaluate their Electrical Impedance Spectroscopy or EIS technology for short. We have U.S. and select country rights to a number of possible indications. The first indication we are studying is the ability of the handheld EIS device or PEN to predict flares in patients with atopic dermatitis. We believe there are at least 2 additional intended uses in the atopic dermatitis population alone should we see promising results from the initial flare prediction study. Importantly, this approach could offer a nice synergy with our AdvanceAD test by extending the ability to support patients across different points in their disease journey. We expect to initiate the EIS PEN study and enroll our first patient for AD flares in the second quarter of 2026 and have preliminary development data before the end of 2026. And to wrap up our near-, mid- and long-term growth strategy, we continue to expect mergers and acquisitions to play a role. With our strong balance sheet and history of successful execution in this area, we continue to evaluate candidates that fit within our strategic opportunities criteria. That is, number one, tests near or at market; number two, tests near or at reimbursement; number three, tests that can be promoted within sales teams in the size of our current teams or less, that is around 100 or less; and four, tests within or complementary to our current customer verticals as a priority. In summary, we believe our financial strength positions us well to invest across our growth initiatives for continued value creation. And with that, I will now turn the call over to Frank.

Thank you, Derek, and good afternoon, everyone. As Derek noted, we delivered strong fourth quarter and 2025 financial results, supported by disciplined execution across the business. In the fourth quarter of 2025, we delivered total revenue of $87 million, resulting in $344.2 million for the full year 2025, exceeding our guidance range. Full year 2025 outperformance was driven predominantly by our core revenue drivers, including significant year-over-year test volume growth for TissueCypher at 86%. For 2026, we anticipate generating total revenue of $340 million to $350 million. This is growth to mid- to high teens over 2025 if you exclude DecisionDx-SCC and IDgenetix revenue from our 2025 and 2026 totals, and we do not disclose revenue by test. Our revenue guide reflects continued growth in our core dermatologic and gastrointestinal franchises, driven primarily by continued TissueCypher momentum with immaterial revenue expected from our AdvanceAD-Tx test and no revenue included for DecisionDx-SCC. Our gross margin during the fourth quarter was 76.3% compared to 76.2% in the fourth quarter of 2024, and our gross margin for the full year 2025 was 69.2% compared to 78.5% in 2024. Affecting 2025 gross margin was the loss of revenue from DecisionDx-SCC and the one-time adjustment of an acceleration of amortization expense of approximately $20.1 million during the 3 months ended March 31, 2025. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 77.6% for the quarter and 79.8% for the year compared to 81.1% and 82% for the same periods in 2024. Turning to expenses. Our total operating expenses, including cost of sales for the quarter were $90.8 million compared to $82.3 million for the prior year and were $387 million for the full year 2025 compared to $323.4 million for 2024. As Derek outlined, our growth plan spans the near, medium and long term. In support of that plan, we expect operating expenses to increase moderately in 2026 as we continue to support and invest in our core franchises, advance our pipeline and support key reimbursement and commercial initiatives. Sales and marketing expenses were $138.1 million for the full year compared to $123.5 million for 2024. The increase is primarily driven by increased personnel costs due to both expanded headcount and compensation adjustments higher expenses associated with training events and speaker conferences and higher sales-related travel expenses. General and administrative expenses were $91.2 million for the full year compared to $76.6 million for 2024. The increase is primarily attributable to increased personnel costs from expanded headcount and compensation adjustments and higher information technology-related costs. Cost of sales expenses were $71 million for the full year compared to $60.2 million for 2024, primarily due to increased personnel costs from expanded headcount and compensation adjustments and higher expenses related to services, supplies and depreciation. Research and development expenses were $51.9 million for the full year compared to $52 million for 2024, primarily due to increased personnel costs from expanded headcount and compensation adjustments, offset by lower clinical studies costs. Total noncash stock-based compensation expense, which is allocated among cost of sales, R&D expense and SG&A expense was $45.9 million for the full year, down from $50.3 million for 2024. Interest income was $11.8 million for the full year 2025 compared to $12.9 million for 2024. Our net loss for the fourth quarter of 2025 was $2.3 million compared to net income of $9.6 million for the fourth quarter of 2024, and our net loss for the full year 2025 was $24.2 million compared to net income of $18.2 million for 2024. Diluted loss per share for the fourth quarter was $0.08 compared to diluted earnings per share of $0.32 in the fourth quarter of 2024. Diluted loss per share for the full year 2025 was $0.83 compared to diluted earnings per share of $0.62 for 2024. Adjusted EBITDA for the fourth quarter was $11.5 million compared to $21.3 million for the comparable period in 2024. For the full year 2025, adjusted EBITDA was $44 million compared to $75 million in 2024. Net cash provided by operating activities was $26.9 million for the fourth quarter of 2025 and $64.3 million for the full year. Looking ahead, historically, in the first quarter of the year, we've seen net operating cash use due in part to annual cash bonus payments and certain health care benefit payments that do not recur during the remaining 3 quarters of the year. Net cash used in investing activities was $60.4 million for the 12 months ended December 31, 2025, and consisted primarily of purchases of marketable investment securities of $188.7 million, purchases of property and equipment, our asset acquisition of pre-buys and purchases of debt securities classified as held to market, partially offset by the maturity of marketable investment securities. Capital expenditures totaled $36 million in 2025. In 2025, we generated free cash flow, defined as net cash provided by operating activities less capital expenditures of $28.3 million. We expect capital expenditures to decline in 2026. As of December 31, 2025, we had cash, cash equivalents and marketable securities of $299.5 million. In closing, I'm pleased with our strong 2025 financial results, which reflect our continued track record of disciplined execution and focus on driving long-term shareholder value. I'll now turn the call back over to Derek.

Thank you, Frank. Before concluding, I want to share my sincere gratitude to each and every member of the Castle team who continue to deliver meaningful impact for patients and clinicians every day. I am incredibly proud of our team and grateful for the culture they continue to build here at Castle. In summary, we are executing on the drivers of our next phase of growth, supported by disciplined capital allocation, operational excellence and relentless innovation, which we believe positions us well for long-term sustainable growth and value creation. Thank you for your continued interest in Castle. Now we will be happy to take your questions.

Our first question will be from the line of Kyle Mikson with Canaccord Genuity. This is Alex Vukasin in for Kyle Mikson.

Congratulations on a strong finish to 2025. When last we spoke in early '26, you noted you've recently submitted new data to NCCN. Recognizing that DecisionDx-Melanoma is unique, and that it's GEP test that has demonstrated improved patient survival and GEP score provides meaningful prognostic information beyond traditional staging alone. Can you just concisely elaborate any takeaways from the recent NCCN update? And what is the level of confidence that DecisionDx-Melanoma could ultimately be included in guidelines? And what does that rank in terms of level of importance?

A lot of questions there, I'll try and answer what I can here. I might miss something. So I think the most important element to think about is that the U.S. standard across all of the sort of organizations that put out guidelines or recommendations for considering to perform or to avoid a sentinel lymph node biopsy surgical procedure has been 5% for several decades. And that was not changed in this update either. So it remains that if a patient and a physician or a health care provider believes a chance of having a positive node is greater than 5%, then one should consider and discuss that or encourage a patient to undergo that procedure. As you know or may know, our data regarding DecisionDx-Melanoma has shown time and time again in both prospective studies and retrospective studies that a low-risk result from DecisionDx-Melanoma gets you comfortably below 5%, indicating that a patient can have a conversation and hopefully avoid what's an unnecessary surgical procedure. What the guidelines also showed with this update when they reviewed the MERLIN_001 study is that the MERLIN test fails to achieve this threshold of 5%, which we knew last year when it was published in September, October 2025. So the current guidelines would say there isn't a recommendation to consider DecisionDx-Melanoma, which we'll get to in just a minute. There isn't an acknowledgment or recommendation that the Skyline test actually gets below 5%. And in fact, they also state that it acts similarly to nomograms, which today can't get below 5% from a population basis set. So it's a little head scratching. Now to answer your question about the outcomes data such as our SEER publication that was not included in the updated guidelines, I think we did a quick count. We have 58 peer-reviewed publications that review our test for both predicting the likelihood of a sentinel lymph node biopsy outcome being below 5% or greater than 5% as well as survival benefits. So talking about recurrence-free survival, distant metastasis-free survival, melanoma-specific survival. We also have clinical use studies showing how doctors have safely used our test results to manage clinical care. And as you noted, we also have data from the National Cancer Institute, where we map people who received DecisionDx-Melanoma as part of their clinical care with patients in the SEER database who did not receive our test as part of their clinical care and found that when care is guided with the use of our test results, there is an association with improved survival, not just overall survival; but more importantly, melanoma-specific survival. It's a bit of a head scratcher. It turns out that of those 58 articles, that have been published and easily found by doing a literature search, only 11 are cited in the current guidelines, meaning 47%, including the one you mentioned earlier, the NCI SEER database were not reviewed by the NCCN committee. So that's a good head scratcher about why 47 studies were ignored when what they're looking for is apparently more published evidence to support the use of our test.

That was very helpful. And one last one for me. So one thing we haven't touched upon is the FDA submission for DecisionDx-Melanoma. What is your timeline on when we could see FDA approval for this test? And how will this help you in payer discussions, effectively drive higher adoption and potentially reaccelerate test volume growth for this test?

Yes. That's a good question there. So we are preparing our submission as we speak now. We believe that it will be accepted as a de novo 510(k) submission as opposed to PMA submission. And those timelines from the time of submission to the time of clearance are pretty well prescriptive by the FDA. So that may be something which we would see towards the end of the year or maybe early next year. That's hard to say. In terms of sort of impact on clinician uptake since that was the last part of your question, I don't know if there's any evidence that we have seen where you take a lab-developed test and move it over to an IVD cleared device where you would see or expect a sort of substantial change in sort of volume uptake. There are certainly going to be clinicians out there, I think, who may be waiting for sort of an FDA flag of approval. So maybe I'm being a little too conservative there. I think the bigger impact and the reason why we are going forward on this is looking at the newer state biomarker laws, which, among other things, would indicate that across most of the states who have enacted biomarker laws, if you have an FDA cleared or approved device, then that qualifies for reimbursement or payment from commercial insurance carriers with a few other caveats there. And so our primary drive, to be honest, about looking to achieve 510(k) clearance was to focus on leveraging state biomarker laws to reduce non-payments from commercial insurance carriers. So that's the value that we would see. I think the quicker we can get that into the FDA and out of the FDA will then have a subsequent impact, I think, on our overall commercial ASP.

The next question will be from the line of Subbu Nambi with Guggenheim Securities.

This is Thomas on for Subbu. Maybe one on AD-Tx. Our checks indicated a high level of awareness of the test already in the field and looks like from your prepared comments, that's pretty consistent. Can you just speak a bit to the strategy of your sales team approaching derms with that test and what's led to the rapid KOL awareness?

I'll try to address that question. It's interesting to note that I wouldn't have anticipated we had created that much awareness based on the panel you reviewed. That's quite positive, actually, so thank you for that. We released the test back in January with a limited access launch, and it was available for about five weeks to roughly 150 dermatology accounts, primarily early adopters of gene expression profile testing. These accounts tend to embrace new technologies for patient care. We included a few clinical sites that are not early adopters of these tests and a small number of key opinion leaders not involved in our studies or treating skin cancer. We mentioned in January that over half of them had ordered at least one test during the initial five weeks, which we thought was a strong uptake considering the holiday interruptions. By mid-February, we had received over 500 orders from these accounts. The interest is aligning with the high expectations we had based on market research conducted last summer, and that trend appears to be continuing. As we look ahead to the remainder of 2026, our current sales strategy involves focusing entirely on the DecisionDx-Melanoma test results, which have consistent payment. We also offer some additional bonuses related to atopic dermatitis volume growth. However, for now, we are maintaining a focus of 100% on melanoma with a minor inclusion of atopic dermatitis. In the second quarter, we may adjust that to a 90%/10% focus. Our goal is to maintain strong momentum for DecisionDx-Melanoma while ensuring that the clinical laboratory and logistics process remains smooth. We want to avoid any buildup of frustration among our dermatology customer base regarding access to kits. We will also keep an eye on the average selling price growth, and as it meets our projections, we plan to expand access to more customers. I agree with your observation that there is a significant level of awareness and enthusiasm among the physicians, which reflects what we are seeing as well.

And our next question today will be from the line of Puneet Souda with Leerink Partners.

This is Carlos on for Puneet. I've got 2 about TissueCypher. The first one is if you could just give us an update on the sales reps and their activity. I think last we checked, there were 65 reps and then you got a couple more from Previse. Do you see yourself expanding the reps more this year? And just generally how they're contributing to the growth of that account?

We are continuing to expand the TissueCypher sales team and will keep adding more throughout the year as we see certain territories reaching volumes that may be challenging to balance between maintaining and growing existing accounts while also seeking new customers. We believe that both dermatology and GI specialties need no more than 100 sales representatives. As we observe an increase in volume, we will be working systematically to keep that number below what it has been in the past. That's the current status and our plan moving forward into 2026.

Okay. And one more on TissueCypher. So you talked a bit last year about an opportunity to penetrate into private equity roll-ups. And it would be helpful to get an update on whether that's something you're executing on that's been driving the, frankly, really incredible growth you've been seeing. Is that still an opportunity that can drive a step-up of growth in the future? Or is it something that after some research, you decided to focus your efforts in other areas?

Great question there. So one, as you look at volume in 2026, including fourth quarter volume, I don't think you or we would be able to discern back the impact on sort of group practices or even PE groups adopting a sort of more formulamatic approach to saying, 'Hey, we want to go ahead and treat Barrett's esophagus patients regardless of which GI is treating that patient in a parallel manner.' So we have seen some success in some smaller groups that would suggest as we go through 2026 that we would be able to go ahead and tackle and improve efficiency among larger groups. And so that may contribute to some volume expansion in 2026. But I think the volume expansion, both year-over-year and quarter-over-quarter growth in TissueCypher in 2025 was largely based on just the organic need of individual clinicians seeing the value of this test clinically and deciding to go ahead and try it and then adopt it for their patient care.

Got it. That makes sense. If I could just sneak this in. So this isn't something that you have formally adopted as a strategy? Or is it a strategy that you've chosen not to formally adopt, focusing instead on the other aspects?

No, I'm sorry if I inadvertently ignored your question directly. There is interest in large group models, whether you want to call it PE groups only or just larger practices of gastroenterologists, to promote uniform treatment for Barrett's esophagus disease based on quality standards and good patient care instead of treating it as isolated cases. This is an important strategy that we have throughout our gastroenterology sales team and strategic accounts team, aimed at transitioning practices from individual clinicians responsible for specific patients to a unified approach. We have a test that effectively identifies individuals at high risk for disease progression. We know that by using interventional tools, whether it's ablation or surgical techniques, we can effectively eliminate Barrett's esophagus disease, preventing its progression to esophageal cancer. Understanding who to intervene on allows us to cure or prevent patients from moving towards cancer. This raises the question of why a patient's survival should differ based on which doctor they see. I believe we will start to see the success that we anticipate materializing by 2026, and it's a strategy we are committed to continuing to develop.

Next question today will be from the line of Matthew Parisi with KeyBanc Capital Markets.

This is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. First off, congrats on the great quarter. So just a quick question to begin would be around volumes for melanoma. I know you guys did not provide volume guidance, but following 2 consecutive years of high single-digit volume growth for the melanoma test, would it be reasonable to assume continued high single-digit volume growth for '26?

Frank, do you want to handle that?

Yes, yes. Thanks for the question. I think we're going to see mid- to high single digits volume growth in melanoma this year as well. We're in a very nice penetration level there with 32% maybe of the patients being tested now. And we think something over half the physicians, maybe even 60% of the targetable physicians or clinicians are using the test regularly. So we'll continue to see that same level of growth we would expect this year.

I would like to clarify if I missed it earlier, but can you provide some insight into the sales force team breakdown between dermatology and gastroenterology? What would the percentage be?

Yes. We do not disclose the number of representatives in each sales force. What we've mentioned is that we believe each sales force can be effectively managed with fewer than 100 representatives. Back in April of '25, we noted that the TissueCypher sales force had expanded to 64. Last year, we also indicated that the dermatology sales force was in the 70s. We are still around those numbers. We will make expansions, as Derek highlighted earlier this year to support our continued growth, but we believe we can operate both sales forces with fewer than 100 for the foreseeable future.

Your next question will be from the line of Catherine Schulte with Baird.

This is Josh on for Catherine. And maybe first, could you share your expectations for TissueCypher volume growth in '26? Do we expect this to come more from further penetration within your existing ordering base or adding new clinicians? And then where are you from a clinician penetration perspective?

Yes. I think last year, we said for '24. Go ahead, Derek.

No, no. You go, you go.

Yes. For 2024, we mentioned that we expect to have over 1,000 new ordering physicians, and for 2025, we anticipate more than 2,000. Together, these figures imply that we could reach 3,000 clinicians, which we believe aligns with dermatology, a key reason we are drawn to this therapeutic area. There appears to be 12,000 to 14,000 targetable clinicians in the gastrointestinal space, indicating that our penetration among clinicians or healthcare professionals is around 25% to 30%. Based on current patient data, our penetration stands at about 11%. We expect to see continued volume growth this year, likely similar in nominal terms to the growth we observed in 2025 as we move into 2026. As we approach larger volumes, the percentage growth may become more challenging, especially as we engage with later adopter physicians. Nonetheless, we anticipate ongoing volume growth for TissueCypher this year, although it may not match the high percentages we saw in 2024 and 2025 due to our current penetration levels.

Great. And then I was also wondering if we should expect quarter-over-quarter declines for DecisionDx-Melanoma volumes in 1Q? And then how should we think about the cadence of year-over-year volume growth throughout '26, just given some of the tougher year-over-year comps in the back half?

Melanoma has a predictable seasonality, and we observe flat sequential growth each quarter, except from the first to the second quarter. This trend is mainly influenced by physician-patient encounters, which differ from just counting business days. In the first quarter, multiple large dermatology meetings occur that take physicians away from their practices, leading to fewer patient encounters. As we've mentioned, a variation of around 100 tests is still considered flat compared to over 10,000 tests. Since 2021, following the pandemic, this pattern has remained consistent. We typically see flat sequential growth until the transition from the first to the second quarter, where there is often a significant increase, and this new level tends to persist over the following quarters. We anticipate the same flat performance moving forward. By reviewing the disclosed volumes from each year since 2021, we can predictably assess the changes from the fourth quarter to the first quarter.

The next question will be from the line of Mason Carrico with Stephens.

Derek, could you give us your latest thoughts on the commercial strategy for the derm team if we were to see a positive draft LCD get published midyear for DecisionDx-SCC. I guess how are you thinking about splitting reps time between Melanoma, SCC and your AD test now if that were to play out?

Yes. That will be a very, very nice problem to have, Mason won't it? So I think, there are a couple of variable triggers there, right? So having the reconsideration request resulting in LCD, which kind of covers it the way it was covered before by Novitas, let's just assume that's the base case. I would say that we would begin to go ahead and fold SCC back into the sales bag from a commission standpoint, although we have to watch for timing. It may be up to a year before you would see SCC gain reimbursement. I think, we talked about in previous years that if we see limelight to regaining coverage, then the question will be, do you want the run rate for that test to be $25 million a year? Do you want it to be $100 million a year? So there are some interesting trade-offs to go ahead and think through there. We think that it's probably difficult to have 3 tests being sold extremely well by the same person, the same customer base. And so if we're faced with that wonderful opportunity or problem, I guess, depending on what you'd say, if we are seeing what we like in terms of the reimbursement growth for the AdvanceAD test, then we could come around and say we can profitably maybe expand our sales forces to go ahead and make sure we can handle all 3 opportunities, DecisionDx-Melanoma, AdvanceAD and the regaining of coverage for DecisionDx-SCC. So I think we'll have to see kind of how those latter 2 things come out, the SCC draft timing, how confident we are about will that be finalized in 3 months or will it take a year? And then also our sort of climb in AdvanceAD for atopic dermatitis and come to some decisions there. But otherwise, that's been part of our planning about how we approach that, and there's a few different variables there, but it will represent a very, very nice opportunity for patient care and for the company overall.

Got it. That's helpful. And then would you remind us when NCCN typically updates guidelines for SCC? And what new data, I guess, were you able to submit ahead of that panel meeting that maybe previously wasn't submitted or previously wasn't reviewed in last year's update?

Yes, that's a good question. I might be off on the facts, so I’ll just mention that. I believe the submission from last spring included our two papers demonstrating the benefit of predicting adjuvant radiation therapy responsiveness. Those papers are expected to be published in mid-2024, around the third quarter. Therefore, they missed the 2024 cutoffs and were submitted last year. Their annual in-person meeting usually coincides with the Mohs Surgical Meeting in May. If they’re following a one-year cadence for updating guidelines, I would expect the updates to be released sometime between now and late April or May.

Thank you. This will conclude the Q&A for today. And I would now like to hand the call back to Derek Maetzold for any closing remarks.

So this does conclude our fourth quarter and full year 2025 earnings call. We do thank you again for joining us today and for your continued interest in Castle Biosciences.

Thank you. This concludes today's conference call, and you may now disconnect your lines.