Castle Biosciences Inc 8-K, filed Feb 28, 2022
Castle Biosciences Inc (CSTL)
8-K
2022-02-28
For: 2022-02-28
View Original
Added on
April 12, 2026
About this 8-K
Castle Biosciences Inc filed this 8-K on February 28, 2022.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 2022
(Exact name of registrant as specified in its charter)
| (state or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
Registrant’s telephone number, including area code: (866 ) 788-9007
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 28, 2022, Castle Biosciences, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2021. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information contained or incorporated in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
On February 28, 2022, the Company made available the slide presentation attached hereto as Exhibit 99.2. Information from this slide presentation may also be used by the management of the Company in future meetings regarding the Company.
The information contained or incorporated in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | ||||||||
| Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Inline XBRL for the cover page of this Current Report on Form 8-K. | |||||||
| SIGNATURES | ||
| Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | ||
| CASTLE BIOSCIENCES, INC. | |||||||||||
| By: | /s/ Frank Stokes | ||||||||||
| Frank Stokes | |||||||||||
| Chief Financial Officer | |||||||||||
Date: February 28, 2022 | |||||||||||
Exhibit 99.1
Castle Biosciences Reports Fourth Quarter and Full-Year 2021 Results
Full-year 2021 revenue was up 50% over 2020 to $94.1 million, beating expectations
Growth of 55% year over year in total GEP testing volume
Full-year 2022 revenue is expected to be between $115-120 million
Conference call and webcast today at 4:30 p.m. ET
FRIENDSWOOD, Texas- Feb. 28, 2022--Castle Biosciences, Inc. (Nasdaq: CSTL), a company improving health through innovative tests that guide patient care, today announced its financial results for the fourth quarter and twelve months ended Dec. 31, 2021.
“Driven by our patient-centric focus and our commitment to strong execution on our growth plans, we had an outstanding 2021,” said Derek Maetzold, president and chief executive officer of Castle Biosciences. “We exceeded the goals we set out to accomplish in 2021 and beat our revenue expectations. We successfully doubled our dermatology facing commercial team and accelerated our investments in R&D, which allowed us to continue generating data to further demonstrate the value of our tests. Further, in alignment with our M&A strategy, we identified two areas of growth that we believe complement and diversify our existing business, the acquisitions of Myriad’s myPath® Melanoma laboratory and the myPath Melanoma test and Cernostics and the TissueCypher® spatialomics platform. The commercially available TissueCypher® Barrett’s esophagus test, which is designed to predict future development of high-grade dysplasia and/or esophageal cancer in patients with Barrett’s esophagus, adds approximately $1 billion to our estimated total U.S. addressable market.
“One of our most exciting accomplishments in 2021 was the initiation of our collaboration with the National Cancer Institute (NCI) to link SEER registries’ cutaneous melanoma cases with DecisionDx®-Melanoma testing data. Data from the initial analysis of patients 65 years and older demonstrated that patients tested with DecisionDx-Melanoma had improved survival rates compared to untested patients, highlighting the test’s value in guiding risk-aligned treatment plans that improve health outcomes.
“We closed 2021 with the execution excellence that we strive for and are entering 2022 with great momentum. We expect our strong performance to enable continued value creation and allow us to improve health through innovative tests that guide patient care. Our success is not possible without the continued dedication and efforts of our Castle team, and I would like to express my sincere appreciation for their contributions.”
Twelve Months Ended Dec. 31, 2021, Financial and Operational Highlights
•Revenues were $94.1 million, a 50% increase compared to $62.6 million during the same period in 2020. Included in revenue for the period were revenue adjustments related to tests delivered in prior periods. These prior period revenue adjustments for the twelve months ended Dec. 31, 2021, were $3.3 million, compared to $0.2 million for the same period in 2020.
•Adjusted revenues, which exclude the effects of revenue adjustments related to tests delivered in prior periods, were $90.8 million, a 45% increase, compared to $62.5 million for the same period in 2020.
•Total gene expression profile test reports delivered in 2021 were 28,118, a 55% increase compared to 18,185 in the same period of 2020:
◦DecisionDx-Melanoma test reports delivered in 2021 were 20,328, compared to 16,232 in the same period of 2020, an increase of 25%. Data suggests that diagnoses of melanoma were down 11% in 2021 compared to historical pre-COVID 2019 levels.
◦DecisionDx®-SCC test reports delivered in 2021 were 3,510 compared to 485 in 2020 (Aug. 31-Dec. 31, 2020).
◦myPath® Melanoma and DecisionDx® DiffDx™-Melanoma aggregate test reports delivered in 2021 were 2,662, compared to 73 in 2020 (Nov. 2–Dec. 31, 2020).
◦DecisionDx®-UM test reports delivered in 2021 were 1,618, compared to 1,395 in the same period of 2020, an increase of 16%.
•Gross margin for 2021 was 81.1%, and adjusted gross margin for 2021 was 82.6%.
•Operating cash flow, including repayment of the 2020 Medicare advance payment, was $(19.0) million, compared to $9.9 million for the same period in 2020, and adjusted operating cash flow was $(12.5) million, compared to $1.5 million from the same period in 2020.
•Net loss for 2021, inclusive of non-cash stock-based compensation expense of $21.7 million, was $(31.3) million, compared to $(10.3) million for the same period in 2020.
•Adjusted EBITDA for 2021 was $(14.9) million, compared to $2.6 million for the same period in 2020.
Cash and Cash Equivalents
As of Dec. 31, 2021, the Company’s cash and cash equivalents totaled $330 million.
Fourth Quarter Ended Dec. 31, 2021, Financial and Operational Highlights
•Revenues were $25.0 million, a 45% increase compared to $17.3 million during the same period in 2020. Included in revenue for the period were revenue adjustments related to tests delivered in prior periods. These prior period revenue adjustments for the quarter ended Dec. 31, 2021, were ($0.8) million, compared to $3.5 million for the same period in 2020.
•Adjusted revenues, which exclude the effects of revenue adjustments related to tests delivered in prior periods, were $25.8 million, an 87% increase, compared to $13.8 million for the same period in 2020.
•Delivered 8,242 total gene expression profile test reports in the fourth quarter of 2021, an increase of 60% compared to 5,157 in the same period of 2020:
◦DecisionDx-Melanoma test reports delivered in the quarter were 5,635, compared to 4,246 in the fourth quarter of 2020, an increase of 33%.
◦DecisionDx®-SCC test reports delivered in the quarter were 1,265, compared to 428 in the fourth quarter of 2020, an increase of 196%.
◦myPath® Melanoma and DecisionDx® DiffDx™-Melanoma (Castle’s comprehensive diagnostic offering) aggregate test reports delivered in the fourth quarter of 2021 were 904, compared to 73 in the fourth quarter of 2020 (Nov. 2–Dec. 31, 2020).
◦DecisionDx®-UM test reports delivered in the quarter were 438, compared to 410 in the fourth quarter of 2020, an increase of 7%.
•Gross margin for the quarter ended Dec. 31, 2021, was 77.6%, and adjusted gross margin was 82.2%.
•Operating cash flow was $(2.8) million, compared to $(0.4) million for the same period in 2020, and adjusted operating cash flow was $0.2 million, compared to $1.5 million for the same period in 2020.
•Net loss for the fourth quarter was $(6.4) million, compared to $(4.9) million for the same period in 2020.
•Adjusted EBITDA for the fourth quarter was $(6.9) million, compared to $0.1 million for the same period in 2020.
2022 Outlook
•The Company anticipates generating between $115-120 million in total revenue in 2022. This includes expected revenue from the TissueCypher Barrett’s esophagus test, acquired in December of 2021.
Recent Accomplishments and Highlights
Dermatology
•The Company initiated a collaboration with the National Cancer Institute (NCI) to link DecisionDx®-Melanoma testing data with data from the Surveillance, Epidemiology and End Results (SEER) Program’s registries on cutaneous melanoma (CM) cases. Data from the initial analysis focused on Medicare-eligible patients (65 years and older). The analysis showed that when controlling for thirteen clinicopathologic and socioeconomic variables, CM patients whose clinicians had DecisionDx-Melanoma test results in addition to the available clinicopathologic factors lived longer compared to untested patients whose clinicians relied solely upon the available clinicopathologic factors. A poster from the 2022 Winter Clinical Dermatology Conference, titled “31-gene expression profile testing survival benefit in a population-based analysis of cutaneous melanoma patients ≥65 years of age,” highlighted data from this first analysis. See the Company’s news release from Feb. 3, 2022, for more information.
•The Company presented data on its suite of dermatologic cancer GEP tests and presented a poster describing the study design for its inflammatory skin disease pipeline initiative at the 2021 Fall Clinical Dermatology Conference. See the Company’s news release from Oct. 22, 2021, for more information.
•The DecisionDx-Melanoma integrated test result (ITR) now includes i31-GEP for Risk of Recurrence (i31-ROR). Designed to improve the precision of treatment plans for better patient care, the i31-ROR predicts patient-specific five-year outcomes for melanoma-specific survival (MSS), distant metastasis-free survival (DMFS) and recurrence-free survival (RFS). See the Company’s news release from Oct. 28, 2021, for more information.
•The Company announced the publication of a novel algorithm designed to integrate clinicopathologic features with the DecisionDx®-Melanoma test score (i31-GEP SLNB) to determine sentinel lymph node biopsy (SLNB) positivity risk in patients with CM. The article, titled “Integrating 31-Gene Expression Profiling with Clinicopathologic Features to Optimize Cutaneous Melanoma Sentinel Lymph Node Metastasis Prediction,” highlights the development and validation of the i31-GEP SLNB algorithm and demonstrates improved prediction for sentinel lymph node (SLN) status compared to clinicopathologic features alone and a very high correlation comparing predicted versus observed SLN positivity rates of 0.999 (1.0 is complete correlation). The study was published in the peer-reviewed journal JCO® Precision Oncology. See the Company’s news release from Nov. 5, 2021, for more information.
•A study of patients with stage I-III cutaneous melanoma was published in Future Oncology, and consistent with previous validation and performance studies, demonstrated that DecisionDx-Melanoma added independent prognostic value to current staging guidelines for CM to identify patients with a high and low recurrence or metastasis risk to improve patient management. See the Company’s news release from Nov. 19, 2021, for more information.
Uveal Melanoma
•In January, the Company announced the publication of a study in Ocular Oncology and Pathology demonstrating that the combined application of DecisionDx®-UM, DecisionDx®-PRAME and DecisionDx®-UMSeq allows for highly accurate analysis of RNA and DNA from a single biopsy sample for patients with uveal melanoma (UM). DecisionDx-UMSeq is Castle’s 7-gene test that uses next-generation sequencing (NGS) to identify somatic mutations relevant to UM. The sequencing panel identifies hotspot mutations in the genes GNAQ, GNA11, CYSLTR2, PLCB4 and SF3B1, mutations in exons 1-2 of EIF1AX and mutations across all coding exons of the BAP1 gene. This information, together with results from the DecisionDx-UM gene expression profile (GEP) test, is designed to help build a comprehensive genomic profile of an individual UM tumor from a single biopsy, which can then be used to inform patient care. See the Company’s news release from Jan. 12, 2022, for more information.
Gastroenterology
•In December, the Company diversified and expanded its portfolio into the gastrointestinal market with the acquisition of Cernostics and the TissueCypher® platform. The TissueCypher platform focuses on measuring, in the case of the initial test for use in patients with Barrett’s esophagus, the important information regarding the location of the expression of proteins or lack thereof within the morphology of the disease. This ‘spatialomic’ information is then interpreted through artificial intelligence to predict the likelihood of progression to high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite or low-grade dysplasia Barrett’s esophagus. The acquisition expanded Castle’s estimated U.S. total addressable market by approximately $1 billion. See the Company’s news release from Dec. 6, 2021, for more information.
ESG
•In November, the Company announced the launch of its inaugural Environmental, Social and Governance (ESG) report, detailing the Company’s related policies and metrics. See the Company’s news release from Nov. 8, 2021, for more information.
Conference Call and Webcast Details
Castle Biosciences will hold a conference call on Monday, Feb. 28, 2022, at 4:30 p.m. Eastern time to discuss its fourth quarter and full-year 2021 results and provide a corporate update.
A live webcast of the conference call can be accessed here: or via the webcast link on the Investor Relations page of the Company’s website, https://ir.castlebiosciences.com/overview/default.aspx. Please access the webcast at least 10 minutes before the conference call start time. An archive of the webcast will be available on the Company’s website until March 21, 2022.
To access the live conference call via phone, please dial 844 200 6205 from the United States, or +1 929 526 1599 internationally, at least 10 minutes prior to the start of the call, using the conference ID 223262.
There will be a brief Question & Answer session following management commentary.
Use of Non-GAAP Financial Measures (UNAUDITED)
In this release, we use the metrics of Adjusted Revenue, Adjusted Gross Margin, Adjusted Operating Cash Flow and Adjusted EBITDA, which are non-GAAP financial measures and are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Adjusted Revenue and Adjusted Gross Margin reflect adjustments to net revenues to exclude changes in variable consideration related to test reports delivered in previous periods. Adjusted Gross Margin further excludes acquisition-related intangible asset amortization. Adjusted Operating Cash Flow excludes the effects of repayments to Medicare of COVID-19 government relief advancements to healthcare providers. Adjusted EBITDA excludes from net loss interest expense, depreciation and amortization expense, income tax (benefit) expense and stock compensation expense, and one-time nonrecurring losses on extinguishment of debt.
We use Adjusted Revenue, Adjusted Gross Margin, Adjusted Operating Cash Flow and Adjusted EBTIDA internally because we believe these metrics provide useful supplemental information in assessing our revenue and cash flow performance, respectively. We believe Adjusted Revenue and Adjusted Gross Margin are also useful to investors because they provide additional information on current-period performance by removing the effects of revenue adjustments related to tests delivered in previous periods and acquisition-related intangible asset amortization, which we believe may facilitate revenue and gross margin comparisons to historical periods. We believe Adjusted Operating Cash Flow is also useful to investors as a supplement to GAAP measures in the assessment of our cash flow performance by removing the effects of COVID-19 government relief payments, which we believe are not indicative of our ongoing operations. We believe Adjusted EBITDA may enhance an evaluation of our operating performance based on recent revenue generation and product/overhead cost control because it excludes the impact of prior decisions made about capital investment, financing and other expenses. However, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes. These non-GAAP financial measures are not meant to be substitutes for net revenues, gross margin, net cash (used in) provided by operating activities or net loss reported in accordance with GAAP and should be considered in conjunction with our financial information presented on GAAP basis. Accordingly, investors should not place undue reliance on non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of this release.
About Castle Biosciences
Castle Biosciences (Nasdaq: CSTL) is a leading diagnostics company improving health through innovative tests that guide patient care. The Company aims to transform disease management by keeping people first: patients, clinicans, employees and investors.
Castle’s current portfolio consists of tests for skin cancers, uveal melanoma and Barrett’s esophagus. Additionally, the Company has active research and development programs for tests in other diseases with high clinical need, including its test in development to predict systemic therapy response in patients with moderate-to-severe psoriasis, atopic dermatitis and related conditions. To learn more, please visit www.CastleBiosciences.com and connect with us on LinkedIn, Facebook, Twitter and Instagram.
DecisionDx-Melanoma, DecisionDx-CMSeq, DecisionDx-SCC, myPath Melanoma, DecisionDx DiffDx-Melanoma, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-UMSeq and TissueCypher are trademarks of Castle Biosciences, Inc.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning the ability of our tests to provide valuable, clinically actionable information to clinicians and patients; our revenue outlook for the full year of 2022 and the expected contribution of the TissueCypher® Barrett’s esophagus test to this revenue outlook; our estimated U.S. total addressable market; our sales team’s ability to achieve optimal productivity; our ability to integrate our recent acquisitions into our existing business and the ability of such acquisitions to complement our existing business; DecisionDx-Melanoma’s contribution to increased survival rates for patients with CM and its ability to aid in risk-aligned treatment plans for improved patient outcomes and survival rates; DecisionDx-Melanoma’s ability to improve the precision of treatment plans for better patient care and predict patient-specific five-year outcomes for MSS, DMFS and RFS; DecisionDx-Melanoma’s predictive capacities with respect to SLN status compared to clinicopathologic features alone; DecisionDx-Melanoma’s ability to add independent prognostic value to current staging guidelines for CM and improve patient management; and the combined application of DecisionDx®-UM, DecisionDx®-PRAME and DecisionDx®-UMSeq in helping build a comprehensive genomic profile of an individual UM tumor from a single biopsy, which can then be used to inform patient care. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the effects of the COVID-19 pandemic on our business and our efforts to address its impact on our business, subsequent study results and findings may contradict earlier study results and findings, including with respect to the diagnostic and prognostic tests discussed in this press release, actual application of our tests may not provide the aforementioned benefits to patients and the risks set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the twelve months ended December 31, 2021, and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.
The COVID-19 situation continues to evolve and brings along with it a high level of uncertainty surrounding potential future impacts. Therefore, trends in revenues and test report volumes are not necessarily indicative of the Company’s results of operations that can be expected for future interim periods or for the year ending December 31, 2022.
Investor and Media Contact:
Camilla Zuckero
+1 832-835-5158
czuckero@castlebiosciences.com
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||
| NET REVENUES | $ | 25,039 | $ | 17,299 | $ | 94,085 | $ | 62,649 | |||||||||||||||
| OPERATING EXPENSES AND OTHER OPERATING INCOME | |||||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | 4,597 | 2,673 | 15,822 | 9,685 | |||||||||||||||||||
| Research and development | 9,445 | 4,581 | 29,646 | 13,256 | |||||||||||||||||||
| Selling, general and administrative | 25,160 | 14,959 | 86,738 | 48,132 | |||||||||||||||||||
| Amortization of acquired intangible assets | 1,008 | — | 1,958 | — | |||||||||||||||||||
| Other operating income | — | (1,882) | — | (1,882) | |||||||||||||||||||
| Total operating expenses, net | 40,210 | 20,331 | 134,164 | 69,191 | |||||||||||||||||||
| Operating loss | (15,171) | (3,032) | (40,079) | (6,542) | |||||||||||||||||||
| Interest income | 17 | 19 | 68 | 373 | |||||||||||||||||||
| Interest expense | (1) | (395) | (1) | (2,634) | |||||||||||||||||||
| Loss on extinguishment of debt | — | (1,397) | — | (1,397) | |||||||||||||||||||
| Loss before income taxes | (15,155) | (4,805) | (40,012) | (10,200) | |||||||||||||||||||
| Income tax (benefit) expense | (8,725) | 84 | (8,720) | 84 | |||||||||||||||||||
| Net loss and comprehensive loss | $ | (6,430) | $ | (4,889) | $ | (31,292) | $ | (10,284) | |||||||||||||||
| Loss per share: | |||||||||||||||||||||||
| Basic | $ | (0.25) | $ | (0.23) | $ | (1.24) | $ | (0.54) | |||||||||||||||
| Diluted | $ | (0.25) | $ | (0.23) | $ | (1.24) | $ | (0.54) | |||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | 25,329 | 20,833 | 25,137 | 18,929 | |||||||||||||||||||
| Diluted | 25,329 | 20,833 | 25,137 | 18,929 | |||||||||||||||||||
Stock-Based Compensation Expense
Stock-based compensation expense is included in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||
| Cost of sales (exclusive of amortization of acquired intangible assets) | $ | 578 | $ | 375 | $ | 2,058 | $ | 1,049 | |||||||||||||||
| Research and development | 1,256 | 657 | 4,522 | 1,492 | |||||||||||||||||||
| Selling, general and administrative | 5,017 | 1,929 | 15,160 | 5,768 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 6,851 | $ | 2,961 | $ | 21,740 | $ | 8,309 | |||||||||||||||
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2021 | December 31, 2020 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 329,633 | $ | 409,852 | |||||||
| Accounts receivable, net | 17,282 | 12,759 | |||||||||
| Inventory | 2,021 | 2,217 | |||||||||
| Prepaid expenses and other current assets | 4,807 | 4,766 | |||||||||
| Total current assets | 353,743 | 429,594 | |||||||||
| Long-term accounts receivable, net | 1,308 | 1,096 | |||||||||
| Property and equipment, net | 9,501 | 7,102 | |||||||||
| Operating lease assets | 7,383 | — | |||||||||
| Intangible assets, net | 88,922 | — | |||||||||
| Other assets – long-term | 1,715 | 1,536 | |||||||||
| Total assets | $ | 462,572 | $ | 439,328 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 2,546 | $ | 2,098 | |||||||
| Accrued compensation | 15,483 | 9,108 | |||||||||
| Medicare advance payment | — | 6,615 | |||||||||
| Operating lease liabilities | 1,179 | — | |||||||||
| Other accrued and current liabilities | 5,678 | 3,055 | |||||||||
| Total current liabilities | 24,886 | 20,876 | |||||||||
| Contingent consideration | 18,287 | — | |||||||||
| Noncurrent operating lease liabilities | 6,900 | — | |||||||||
| Noncurrent portion of Medicare advance payment | — | 1,735 | |||||||||
| Deferred tax liability | 635 | — | |||||||||
| Other liabilities | 124 | 1,026 | |||||||||
| Total liabilities | 50,832 | 23,637 | |||||||||
| Stockholders’ Equity | |||||||||||
Common stock | 25 | 25 | |||||||||
| Additional paid-in capital | 505,482 | 478,162 | |||||||||
| Accumulated deficit | (93,767) | (62,496) | |||||||||
| Total stockholders’ equity | 411,740 | 415,691 | |||||||||
| Total liabilities and stockholders’ equity | $ | 462,572 | $ | 439,328 | |||||||
CASTLE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Years ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net loss | $ | (31,292) | $ | (10,284) | |||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||
| Depreciation and amortization | 3,407 | 472 | |||||||||
| Stock-based compensation expense | 21,740 | 8,309 | |||||||||
| Amortization of debt discounts and issuance costs | — | 839 | |||||||||
| Deferred income taxes | (8,736) | — | |||||||||
| Loss on extinguishment of debt | — | 1,397 | |||||||||
| Other | — | (16) | |||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | (4,631) | 1,663 | |||||||||
| Prepaid expenses and other current assets | 617 | (2,815) | |||||||||
| Inventory | 327 | (980) | |||||||||
| Operating lease assets | 931 | — | |||||||||
| Other assets | (180) | (1,401) | |||||||||
| Accounts payable | (182) | 169 | |||||||||
| Operating lease liabilities | (852) | — | |||||||||
| Accrued compensation | 6,208 | 3,329 | |||||||||
| Medicare advance payment | (8,350) | 8,350 | |||||||||
| Other accrued liabilities | 2,286 | 561 | |||||||||
| Other liabilities | (276) | 272 | |||||||||
| Net cash (used in) provided by operating activities | (18,983) | 9,865 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Purchases of property and equipment | (3,483) | (4,751) | |||||||||
| Asset acquisitions, net of cash and cash equivalents acquired | (63,184) | — | |||||||||
| Proceeds from sale of property and equipment | 10 | 3 | |||||||||
| Net cash used in investing activities | (66,657) | (4,748) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Proceeds from public offerings of common stock, net of underwriting discounts, commissions and offering costs | — | 330,041 | |||||||||
| Payment of common stock offering costs | (336) | — | |||||||||
| Repayments on term debt | — | (27,359) | |||||||||
| Proceeds from exercise of common stock options | 4,234 | 1,593 | |||||||||
| Payment of employees’ taxes on vested restricted stock units | (781) | — | |||||||||
| Proceeds from contributions to the employee stock purchase plan | 2,312 | 1,615 | |||||||||
| Repayment of principal portion of finance lease liabilities | (8) | — | |||||||||
| Net cash provided by financing activities | 5,421 | 305,890 | |||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (80,219) | 311,007 | |||||||||
| Beginning of year | 409,852 | 98,845 | |||||||||
| End of year | $ | 329,633 | $ | 409,852 | |||||||
CASTLE BIOSCIENCES, INC.
Reconciliation of Non-GAAP Financial Measures (UNAUDITED)
The table below presents the reconciliation of adjusted revenue and adjusted gross margin, which are non-GAAP measures. See "Use of Non-GAAP Financial Measures (UNAUDITED)" above for further information regarding the Company's use of non-GAAP financial measures.
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted revenue | |||||||||||||||||||||||
| Net revenues (GAAP) | $ | 25,039 | $ | 17,299 | $ | 94,085 | $ | 62,649 | |||||||||||||||
| Revenue associated with test reports delivered in prior periods | 780 | (3,515) | (3,324) | (176) | |||||||||||||||||||
| Adjusted revenue (Non-GAAP) | $ | 25,819 | $ | 13,784 | $ | 90,761 | $ | 62,473 | |||||||||||||||
| Adjusted gross margin | |||||||||||||||||||||||
Gross margin (GAAP)1 | $ | 19,434 | $ | 14,626 | $ | 76,305 | $ | 52,964 | |||||||||||||||
| Amortization of acquired intangible assets | 1,008 | — | 1,958 | — | |||||||||||||||||||
| Revenue associated with test reports delivered in prior periods | 780 | (3,515) | (3,324) | (176) | |||||||||||||||||||
| Adjusted gross margin (Non-GAAP) | $ | 21,222 | $ | 11,111 | $ | 74,939 | $ | 52,788 | |||||||||||||||
Gross margin percentage (GAAP)2 | 77.6 | % | 84.5 | % | 81.1 | % | 84.5 | % | |||||||||||||||
Adjusted gross margin percentage (Non-GAAP)3 | 82.2 | % | 80.6 | % | 82.6 | % | 84.5 | % | |||||||||||||||
________________________
1.Calculated as net revenues (GAAP) less the sum of cost of sales (exclusive of amortization of acquired intangible assets) and amortization of acquired intangible assets.
2.Calculated as gross margin (GAAP) divided by net revenues (GAAP).
3.Calculated as adjusted gross margin (Non-GAAP) divided by adjusted revenue (Non-GAAP).
The table below presents the reconciliation of adjusted operating cash flow, which is a non-GAAP measure. See "Use of Non-GAAP Financial Measures (UNAUDITED)" above for further information regarding the Company's use of non-GAAP financial measures.
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted operating cash flow | |||||||||||||||||||||||
| Net cash (used in) provided by operating activities (GAAP) | $ | (2,781) | $ | (430) | $ | (18,983) | $ | 9,865 | |||||||||||||||
Medicare advance payment1 | 2,999 | — | 8,350 | (8,350) | |||||||||||||||||||
HHS provider relief funds2 | — | 1,882 | (1,882) | — | |||||||||||||||||||
| Adjusted operating cash flow (Non-GAAP) | $ | 218 | $ | 1,452 | $ | (12,515) | $ | 1,515 | |||||||||||||||
________________________
1.In April 2020, we received an advance payment of $8.3 million from the Centers for Medicare & Medicaid Service (CMS), for which recoupment has commenced in April 2021. We recorded the receipt of the payment as a liability on our balance sheet and, in accordance with GAAP, it is included in net cash provided by operating activities in the period received. We have excluded receipt of the advance payment from adjusted operating cash flow, but as claims were submitted for reimbursement and applied against this balance, we included the advance payment in adjusted operating cash flow to the extent that Medicare claims submitted for reimbursement were applied to the balance.
2.We received a one-time payment of $1.9 million in relief funds automatically allocated to Medicare providers under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) from the U.S. Department of Health and Human Services (HHS).
The table below presents the reconciliation of adjusted EBITDA, which is a non-GAAP measure. See "Use of Non-GAAP Financial Measures (UNAUDITED)" above for further information regarding the Company's use of non-GAAP financial measures.
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
| Net loss | $ | (6,430) | $ | (4,889) | $ | (31,292) | $ | (10,284) | |||||||||||||||
| Interest expense | 1 | 395 | 1 | 2,634 | |||||||||||||||||||
| Depreciation and amortization expense | 1,451 | 160 | 3,407 | 472 | |||||||||||||||||||
| Income tax (benefit) expense | (8,725) | 84 | (8,720) | 84 | |||||||||||||||||||
| Stock compensation expense | 6,851 | 2,961 | 21,740 | 8,309 | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | 1,397 | — | 1,397 | ||||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | (6,852) | $ | 108 | $ | (14,864) | $ | 2,612 | |||||||||||||||
F e b r u a r y 2 8 , 2 0 2 2 Tra n s fo r m i n g D i s e a s e M a n a ge m e nt
D i s c l a i m e rs F O R W A R D - L O O K I N G S T A T E M E N T S This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning the effects of the COVID-19 pandemic on our business and our efforts to address its impact on our business; any estimated sizes of the total addressable markets of our current or future commercial and pipeline products within our dermatologic and GI franchises; our revenue outlook for the 2022 fiscal year, including any additional financial or operational metrics or related expectations with respect to future performance; the impact, accuracy and effectiveness of our commercial and pipeline tests on physicians, patients and their treatment plans, and their individual or collective impact on our prospects and plans, including any objectives of management related thereto; the ability of our tests to provide valuable, clinically actionable information to clinicians and patients, improve health and guide patient care; expected launch dates for tests in our pipeline expansion and estimates regarding their total addressable markets or future success; expectations regarding LCD effective dates and reimbursement capabilities; our ability to utilize existing relationships and build a suite of complementary tests in a single call point; increases in headcount in furtherance of our pipeline tests, clinical research and development and other expected drivers of growth, as well as efficiencies and synergies from capital expenditures related to expansion of lab facilities contributing to our growth; our ability to develop clinical evidence and publish peer-reviewed reports and studies that increase adoption among providers and commercial payors; estimated healthcare cost savings provided by our tests; the ability of our risk stratification tests to classify risk of metastasis in ways that better support risk-appropriate treatment than reliance on traditional clinicopathologic risk factors alone; program milestones for our pipeline test designed to predict systemic therapy response and the potential of systemic therapy guidance tools to streamline therapeutic interventions for patients and avoid ineffective, expensive medication courses; our sales team’s ability to achieve optimal productivity; and our ability to integrate our recent acquisitions into our existing business and the ability of such acquisitions to complement our existing business. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the effects of the COVID-19 pandemic on our business and our efforts to address its impact on our business, subsequent study results and findings may contradict earlier study results and findings, including with respect to the diagnostic and prognostic tests discussed in this press release, actual application of our tests may not provide the aforementioned benefits to patients, and the risks set forth under the heading “Risk Factors” in our in our Annual Report on Form 10-K for the twelve months ended December 31, 2021, and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law. 2
3 MISSION: VISION: VALUES: Improving health through innovative tests that guide patient care To transform disease management by keeping people first: patients, clinicians, employees and investors Trust, Excellence, Collaboration, Integrity, Innovation and Excitement
Improving Health Through Innovative Tests That Guide Patient Care 4 A Diagnostic Leader Robust Data Supporting our TestsCastle Team 345 Total employees 76 Laboratory testing operations team members 65 35+ Peer-reviewed publications Strong financial position, driven by investments in our growth pillars and commercial excellence Diversified portfolio of tests that answer clinical questions and provide actionable information Data driven with a robust R&D and clinical research engine that address areas of unmet clinical need Culture of teamwork and innovation, built on a patient-centric mindset 9 12 8 21 Research & development team members Data as of 12/31/21; total employee count also includes 98 general & administrative team members 106 Sales & marketing team members
F i n a n c i a l Pe r fo r m a n c e S u m m a r y 2 0 2 1 2021 2020 Revenue $94.1M $62.6M Adj. Revenue1 $90.8M $62.5M Total GEP test reports2 28,118 18,185 Total Derm test reports2 26,500 16,790 Operating Cash Flow $(19.0)M $9.9M Adj. Operating Cash Flow1 $(12.5)M $1.5M Gross Margin 81.1% 84.5% Adj. Gross Margin1 82.6% 84.5% Cash & Cash Equivalents $330M as of 12/31/2021 $410M as of 12/31/2020 1See Non-GAAP reconciliations at the end of this presentation. 2DecisionDx-SCC was launched on 8/31/20; DecisionDx DiffDx-Melanoma was launched on 11/2/20 5
6 Cast le Remains Focused On Transforming Disease Management Strate g ic p r in c ip le s th at c re ate va lu e for cu stome rs , p at ie nts an d stockh o ld e rs Address areas with unmet clinical need Leverage advanced technologies for innovative tests Accelerate test adoption through commercial excellence Provide robust data to support the clinical value of our tests
D r i v i n g L o n g - Te r m G r o w t h T h r o u g h A S t r o n g D e r m F o u n d a t i o n , P i p e l i n e a n d S t r a t e g i c O p p o r t u n i t i e s 7 Near-to Mid-term Growth (Potential LCD effective in 2023) (Potential LCD effective in 2023) Mid-to Long-term Growth Pipeline Expansion (Expected launches ~2025) Strategic Opportunities 2022-2023 2024 and beyond Strategic Opportunities Dermatology Gastrointestinal Strategic Opps
4 88 Screening Diagnostic Support Risk Stratification Therapy Response MRD/Recurrence Monitoring A n s w e r i n g C l i n i c a l Q u e s t i o n s t o G u i d e C a re A l o n g T h e Pa t i e n t J o u r n e y Our focus i s on d iag nost ic , r i s k st rat i f i cat ion and the rapy re s pons e are as o f the pat ie nt care cont in u u m Inflammatory Pipeline Test Patient Care Journey
Pi l lars Of Our Growth Plan 9 Cons iste nt exe cut ion fur the rs our le ad ing pos i t ion in de rmato logy and in the Dx s pace Strong Core Derm Business Pipeline Initiatives Strategic Opportunities • Continuing provider education • Optimizing commercial team • Evolving our go-to-market strategy (EMA, VA) • NCI/SEER collaboration • Ability to answer clinical questions/impact patient care • Utilizing our areas of expertise (genomics, spatialomics, AI) to develop innovative tests • Focusing on complementary/ adjacent disease states • Areas where we can utilize our commercial success • Potential to create a suite of tests in a single call point • Ability to answer clinical questions/impact patient care • Early reimbursement wins + +
Doubled our dermatology-facing commercial team and added to our commercial dermatology offerings with the acquisition of myPath Melanoma Achieved strong, consistent year-over-year growth, both in our revenue (+50%) and test report volume (+55%), with net cash used in operating activities of $19 million and adjusted operating cash flow use of $13 million Expanded evidence supporting our portfolio of tests to drive clinical usage with 15 peer-reviewed publications and initiated our collaboration with NCI/SEER Began development of our GI franchise through the acquisition of Cernostics and their TissueCypher test for use in Barrett’s esophagus Published our inaugural ESG report, helping us progress our ESG initiatives and demonstrating our commitment to patients, employees, stockholders and our communities 10 2021 Key Accomplishments 1See Non-GAAP reconciliations at the end of this presentation.
10,614 13,445 17,055 18,185 28,118 2017 2018 2019 2020 2021 11 Consistent Execut ion On Growth In i t iat ives Supports Long -Term Growth 2017 2018 2019 2020 2021 $22.8m $51.9m $62.6m $94.1m $13.8m 2017-2021 Revenue CAGR 2017-2021 Total Test Report Volume CAGR 62% 28% 1 2 1Due to COVID-19, cutaneous melanoma diagnoses were down 20% for 2020; 2 cutaneous melanoma diagnoses were down 11% for 2021.
F u l l - Ye a r 2 0 2 2 G u i d a n c e 12 February 28, 2022 Key Drivers Revenue $115 - $120 million Cost of Sales (exclusive of amortization of acquired intangible assets) 65%-75% growth Scaling of Pittsburgh lab; preparation for volume ramp for TissueCypher, DecisionDx-SCC and DiffDx- Melanoma ahead of reimbursement R&D Expense 50%-60% growth Continued acceleration in R&D to support our derm, GI and pipeline tests, including increase in clinical research and additional headcount SG&A Expense 30%-35% growth Addition of gastroenterology team and continued build in dermatology Stock Based Comp $35-40 million Primarily due to increase in headcount to support growth, with pace of additional employees increasing in recent years and 2022 Percentage increases compared to the year ended 12/31/21; Cost of sales, R&D and SG&A expense growth includes stock-based comp.
Additional Derm Pipeline Tests To be announced ~$1.7B Barrett’s esophagus/ risk of progression to esophageal cancer Patients receiving upper GI endoscopies/year who meet the intended use criteria for TissueCypher3 ῀$1B 384K E s t i m a t e d ~ $ 6 . 6 B U. S . To t a l A d d re s s a b l e M a r ke t 1 I n m a r k e t a n d p i p e l i n e t e s t s , a c r o s s d e r m a t o l o g i c a n d g a s t r o i n t e s t i n a l f r a n c h i s e s 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors. 2 Annual U.S. incidence for Stage I, II or III melanoma estimated at 130,000; annual U.S. incidence for squamous cell carcinoma estimated at 1,000,000 with addressable market limited to carcinomas with one or more high risk features; annual U.S. incidence for suspicious pigmented lesion biopsies estimated at 2,000,000 with addressable market limited to the 15% with an indeterminant biopsy. 3384,000 upper GI endoscopies/year with confirmed dx of BE (ND, IND, LGD) x $2,513 = U.S. only TAM of ~$1 billion 13 Cutaneous melanoma/ risk of metastasis Cutaneous squamous cell carcinoma/ risk of metastasis Suspicious pigmented lesions/melanoma status Pipeline Test - Inflammatory ~130k ~200k ~300k ~450k ~$540M ~$820M ~$600M ~$1.9B Patients classified as Stage I, II or III2 Patients w/ high-risk features2 Patients w/ indeterminant biopsy2 Patients eligible for systemic therapies Dermatologic Franchise GI Franchise
Potential DecisionDx-SCC and DecisionDx DiffDx-Melanoma draft LCD 14 2022 Anticipated Catalysts Potential expansion of commercial teams to further accelerate test adoption and volume growth in GI and Derm Continued evidence development, data presentations and peer-reviewed publications to support the value of our test and increase adoption with providers and commercial payers Pipeline updates in Derm franchise
New GI commercial team of ~ 14 outside territories hired, trained and in the field in January 2022, GI focused medical science liaisons and internal sales associates hired 15 Year-to-date 2022, two abstracts for GI conferences (podium presentations at ESGE Days 2022 and DDW 2022) and one peer-reviewed publication accepted Lab floorplan and workflow reconfigurations have increased efficiencies with more progress expected throughout 2022 Leveraging spatialomics expertise to identify pipeline opportunities in GI and dermatology GI/Cernostics Integration Update Fu e l in g mid - an d lon g - te rm g rowth wi th T i s s u e Cyp h er® p lat form an d G I f ran ch is e Planned capex investments (lab expansion and additional headcount) expected to allow for further enhancements to automation, a significant increase to throughput and provide support for potential future GI tests off the TissueCypher spatialomics platform
S i g n i f i c a n t S c i e n t i f i c Ev i d e n c e T h ro u g h Ro b u s t C l i n i c a l Re s e a rc h P ro g ra m A c ro s s O u r Te s t i n g Po r t fo l i o 16 16 Ongoing clinical research studies 341 Committed/ contributing clinical research sites at year-end 2021 ~12,000 Patients enrolled in studies over lifetime of Castle 7,800+ Patients enrolled in studies at year-end 2021 20,000+ Additional patient’s data we anticipate analyzing in CM studies in 2022 CM = cutaneous melanoma
17 Accelerat ing Investments In C l inical Development G e n e rat in g d ata th at s u p p orts th e c l in ica l va lu e o f ou r te sts an d s u p p orts p rov id e r an d p aye r ad opt ion 102 Committed sites ~1,400 Patients enrolled 4 Ongoing studies 144 ~3,100 3 Committed sites Patients enrolled Ongoing studies 25 ~3,250 3 Committed sites Patients enrolled Ongoing studies 11 ~630 3 Committed sites Subjects1 enrolled Ongoing studies Upcoming Q1-Q2 Data Presentations • SSO 2022 • AAD 2022 • AAD 2022 • ACMS 2022 • ESGE Days 2022 • DDW 2022 1Subjects includes patients and physicians
18 First To Market Dermatologic Franchise, Addit ional Growth Opportunit ies Diagnostic Support Risk-Stratification Therapy Response1 1Target launch anticipated by the end of 2025 . Inflammatory Pipeline
19 Decis ionDx-Melanoma : Prec is ion R isk Strat i f icat ion Based on Tumor Biology Informs Treatment P lans Market Snapshot Clinical Questions (post-melanoma diagnosis) Clinical Utility Transforming Disease Management ~$540M revenue opportunity1 ~130k patients classified as Stage I, II or III2 Is the risk of SLN-positivity high enough to warrant referral for the SLNB surgery? Accurately identifies those at low and high risk for a positive SLN3 DecisionDx-Melanoma could result in 74% fewer SLNB surgeries7, potentially saving the U.S. healthcare system $250M4,5 Why? More precise risk prediction – DecisionDx-Melanoma identified 27.7% of patients as low risk (<5%) of SLN positivity, compared to only 8.5% using T-Stage3 What is the individual risk of recurrence? Provides personalized risk of recurrence to give guidance for patient follow-up and treatment intensity decisions 4 consecutive clinical impact studies show a 47-53% change in management decisions (i.e., imaging and labs, SLNB guidance, clinical visit frequency, referrals) based on DecisionDx-Melanoma results6 SLN = sentinel lymph node; SLNB = sentinel lymph node biopsy. Source: NCCN Guidelines for Cutaneous Melanoma v3.2020 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors. 2 Annual U.S. incidence for Stage I, II or III melanoma estimated at 130,000. 3Whitman et al. JCO Precision Oncology 2021 4Vetto et al. Future Oncol 2019. 5Clearview health economic model, data on file 6Four consecutive clinical impact studies showed 47-53% change in risk-of-recurrence-based management based on results of testing with DecisionDx-Melanoma: Berger, et al. 2016 Curr Med Res Opin; Dillon et al. 2018 Skin; Farberg et al. 2017 Jrnl Drugs Derm; Schuitevoerder, et al. 2018 Jrnl Drugs Derm. 7 For patients with melanomas of less than or equal to 2.0 mm thick
20 Current Melanoma Staging Misses Patients With Aggressive Tumor Biology 80% 12% 8% Stage at Diagnosis Stage II Stage III Stage I Excludes Stage IV 26% 34% 40% Melanoma Deaths by Stage at Diagnosis Stage II Stage III Stage I Excludes Stage IV 92% Stage I or II 60% Stage I or II The majority of melanoma deaths occur in patients who were diagnosed at Stage I or II 1AJCC v7 J Clin Oncol 2009; 2SEER data release 2017; 3Morton et al. N Engl J Med 2014; 4Whiteman et al. J Invest Dermatol 2015; 5Shaikh et al. J Natl Cancer Inst 2016; 6Poklepovic and Carvajal. ONCOLOGY 2018; 7Ibrahim et al. Ann Surg Oncol 2020
D e c i s i o n D x - M e l a n o m a I s S u p p o r t e d B y S i g n i f i c a n t S c i e n t i f i c E v i d e n c e 21 6,000+ Patients included in studies including independent validation 90,000+ Patients with a DecisionDx-Melanoma order from more than 9,300 clinicians 35+ Peer-reviewed, published studies including 2 meta-analyses 1A Level 1A evidence* Medicare+ Covered by Medicare and multiple private insurers with an industry- leading patient assistance program 50% Demonstrated change in management for 1 of 2 patients tested *According to sort system, used by American Academy of Dermatology Following a diagnosis of cutaneous melanoma, providers make two important treatment decisions – whether to recommend SLNB and what type/frequency of follow up should be used.
DecisionDx-Melanoma Adoption Since Launch 22 Con s iste nt g rowth in vo lu me an d market p e n etrat ion d r ive n by c l in ica l va lu e an d comme rc ia l exce l le n ce Estimated penetration percentage calculated based on 130,000 melanoma diagnoses annually for 2015-2019; due to COVID-19, diagnoses were down 20% for 2020 and down 11% for 2021 110 of the outside sales territories in 2020 were dedicated to our Comprehensive Diagnostic Offering before being merged into the Dermatology-facing commercial team in 2021 2,858 6,295 9,300 12,032 15,529 16,232 20,328 2015 2016 2017 2018 2019 2020 2021 2% 5% 7% 9% 12% 16% 18% DecisionDx-Melanoma test report volume Estimated market penetration (15) Number of outside sales territories (by EOY) (16) (15) (14) (32) (40)1 (64)
23 NCI/SEER Data L inked with Decis ionDx -Melanoma Test Results 1Initial data analysis following data linkage included an unselected, prospectively tested population of Medicare-eligible patients 65 years and older, consistent with prior study cohorts ‡Hazard ratio (HR) was computed using the untested patients as reference for 31-GEP testing. An HR less than 1.0 demonstrates improved survival in 31-GEP tested patients. Diagnosis date 2016 and onward. †MSLT- 116: Multicenter Selective Lymphadenectomy Trial-1. SLNB: sentinel lymph node biopsy. WLE: wide local excision. SE: standard error. †Intermediate thickness tumors (1.2-3.5 mm). 1Bailey C. et al. ”31-gene expression profile testing survival benefit in a population-based analysis of cutaneous melanoma patients ≥65 years of age”Poster at 2022 Winter Clinical Dermatology Conference 0.66 Data an a lys i s o f th e f i rst coh ort o f p at ie nts 65 ye ars or o ld e r 1 Data provides real world evidence that patients tested with DecisionDx-Melanoma had improved overall survival rates vs. untested patients increase in death rate for patients with a high-risk result10x (12.3% death rate for a Class 2B (high-risk) result compared to 1.5% for a Class 1A (low risk) result) hazard ratio 0.002 p-value Data further strengthens independent, risk- stratification value of testing with DecisionDx-Melanoma (a hazard ratio less than 1.0 demonstrates improved survival in patients tested with DecisionDx-Melanoma)
24 Decis ionDx-SCC : Predicts Metastat ic R isk for SCC Pat ients With One Or More Risk Factors Market Snapshot Clinical Question (post-SCC diagnosis) Clinical Utility Transforming Disease Management ~$820M revenue opportunity1 ~200k patients with high-risk features2 Who is really at low risk or high risk for metastasis? Predicts metastatic risk for individual SCC patients with one or more risk factors Improved accuracy of metastasis risk predictions compared to BWH and AJCC8 staging Significantly greater specificity (Class 2B=96.9%) and sensitivity (Class 2-77.8%) compared to metrics for high-stage BWH and AJCC8 Incorporation of DecisionDx- SCC can improve management decisions within established guidelines Enhances revised NCCN risk stratification Class 2A results showed hazard ratios of >1.25x NCCN very high risk while class 2B results showed hazard ratios of >4.5x NCCN very high risk Proven significant and independent prognostic value for stratifying risk of metastasis in high-risk SCC patients DecisionDx-SCC Class 2B results have a higher positive predictive value (60%) than BWH (35.1%) and AJCC8 (32.8%) Current SCC staging fails to identify >35% of cases that will go on to metastasize and over-stages >75% that will not SCC = squamous cell carcinoma; NCCN = National Comprehensive Cancer Network (NCCN); BWH = Brigham and Women's Hospital; AJCC8 = American Joint Committee on Cancer Eighth Edition 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors. 2Annual U.S. incidence for squamous cell carcinoma estimated at 1,000,000 with addressable market limited to carcinomas with one or more high risk features. Wysong et al. JAAD 2020; Ibrahim et al. Future Oncology 2021; Data on file, Castle Biosciences NCCN Guidelines for Squamous Cell Skin Cancer v1 2022, Likhacheva et al. Pract Radiat Oncol 2020, Farberg et al. CMRO 2020, Litchman et al. CMRO 2020, Teplitz et al. JDD 2019, Alam et al. JAAD 2018
~20% of SCC patients (200,000 annually) have one or more clinical or pathological risk factors, and a subset will develop metastasis They suffer the majority of SCC mortality These factors alone are often not specific enough to determine risk-appropriate treatment and further management Decis ionDx-SCC Addresses the Unmet Need In High -Risk SCC Pat ients Wh o i s re a l ly at low r i s k or h ig h r i s k for metastas i s? NCCN=National Comprehensive Cancer Network; BWH = Brigham and Women’s Hospital; AJCC = American Joint Committee on Cancer SCC treatment plans are guided by risk of metastasis Risk-appropriate SCC management is limited by classification systems (NCCN, BWH, AJCC) with low positive predictive value (PPV) Deaths from SCC are now estimated to exceed those from melanoma 25
D e c i s i o n D x - S C C I n f o r m s R i s k - A p p r o p r i a t e M a n a g e m e n t To G u i d e P a t i e n t C a r e 26 For high-risk SCC patients with one or more risk factors Validated in 420-patient cohort of high-risk SCC from 33 U.S. centers 9 peer-reviewed publications to date ~3,100 patients have been enrolled in studies to date from 144 centers Utilizing existing sales channels: dermatologists (including Mohs surgeons) Incorporation of DecisionDx- SCC with traditional risk factors can improve patient classification compared to traditional risk factors alone
27 Comprehensive Diagnost ic Offer ing Improves C l in ica l ly Act ionable Report ing for ~99% of Concerning Les ions Market Snapshot Clinical Question Clinical Utility Transforming Disease Management ~$600M revenue opportunity1 ~300k patients with an indeterminate biopsy2 After melanoma diagnosis, clinicians can order DecisionDx- Melanoma using the same tissue sample Is the melanocytic lesion malignant or benign? Leverages the strengths of myPath Melanoma and DecisionDx DiffDx- Melanoma for the benefit of patient care Annually, ~300,000 difficult-to-diagnose lesions cannot be confidently diagnosed with a routine histopathology, leading to an ambiguous diagnosis or uncertain treatment plans3,4 Designed to be used as an adjunct to histopathology when the distinction between a benign nevus and a malignant melanoma cannot be made confidently by histopathology alone Proven utility in reducing ambiguous diagnoses by dermatopathologists and reducing surgical re-excisions by dermatologists in patients with benign GEP results5,6,7 Adds diagnostic clarity and confidence for more informed patient care Improves clinically actionable reporting for ῀99% of concerning lesions7 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors. 2Annual U.S. incidence for suspicious pigmented lesion biopsies estimated at 2,000,000 with addressable market limited to the 15% with an indeterminant biopsy 3Shoo et al. J Am Acod Dermatol 2010; 4Lott et al. JAMA Derm 2018; 5Cokerell et al. Per Med 2017; 6Cockerell et al. Medicine 2016; 7Farberg et al. SKIN J Cutaneous Med 2020; 8Goldberg et al. SKIN 2021: s79;
D i a g n o s i n g M e l a n o m a , t h e C l i n i c a l I s s u e : U n c e r t a i n t y C r e a t e s A n O v e r - O r U n d e r - Tr e a t m e n t D i l e m m a Definitive melanoma diagnoses (invasive or in situ) Definitive benign diagnoses SLNB Imaging Increased Follow-up No additional treatment Routine follow-up Clinically evaluated suspicious pigmented lesions Wide Local Excision ~2 million melanocytic skin biopsies Uncertain malignant potential Primary treatment Staging, surveillance, and follow-up options Histopathologic evaluation 28
Inf lammatory Pipel ine Test 29
Targeting the Unmet Need In Moderate To Severe Psorias is And Atopic Dermatit is Common s k in d i s e as es wi th s ig n i f i cant pat ie nt impacts and costs to he a l th care syste m Treatments are significantly different for PSO and AD and can be costly (e.g., Humira for PSO ~$68k/year; Dupixent for AD is ~$38k/year) Systemic therapy guidance tools have the potential to streamline therapeutic interventions for patients and avoid ineffective, expensive medication courses Psoriasis (PSO) and Atopic Dermatitis (AD) are among the most frequently seen skin rashes 30 Cutaneous T Cell Lymphoma (CTCL) can mimic clinical presentation of AD and PSO ~20-30% of patients with PSO will go on to develop psoriatic arthritis, which can produce irreversible joint damage and significant patient morbidity Inflammatory Pipeline Test
31 Cast le’s Inf lammatory Sk in Disease Pipel ine Test I s Being Developed To Predict Systemic Therapy Response 50 Committed Sites Program Milestones Q32021 Steering committee formed with top KOLs 2025 Target launch 50 Total Target Sites Target Enrolled Patients As of 2/17/22 First patient enrolled Proof of RNA extraction method concept Q22022Q2-Q32021 5 Enrolled Patients Inflammatory Pipeline Test Target Patient Enrollm nt 4,800
G a st ro i nte st i n a l
33 TissueCypher : Designed to Predict Future Development Of Esophageal Cancer In Pat ients With Barrett ’s Esophagus Market Snapshot Clinical Decision Point Clinical Utility Transforming Disease Management ῀$1B revenue opportunity1 ~384k patients receiving upper GI endoscopies/year w/ confirmed Dx of BE2 Which BE patients will progress to HGD or esophageal cancer? Provides a 5-year individual risk of progression to high-grade dysplasia or esophageal adenocarcinoma for patients with confirmed BE TissueCypher high risk score independently predicted an almost 8-fold increased risk of progression to esophageal cancer3 Identifies patients: 1) At risk for future progression and patients harboring prevalent HGD/cancer 2) At low risk of progression who may be able to avoid unnecessary treatment or surveillance Strongest predictor of progression to esophageal cancer (risk-stratification) TissueCypher hazard ratio of 7.7 compared to GI expert pathologist diagnosis of 3.9 (p<0.0001); pooled analysis4-8 Clinical use study demonstrates 55% change in patient management9 HGD = high-grade dysplasia; EAC = esophageal adenocarcinoma; BE = Barrett’s esophagus 1U.S. TAM = Total addressable market based on estimated patient population assuming average reimbursement rate among all payors. 2384,000 upper GI endoscopies/year with confirmed dx of BE (ND, IND, LGD) x $2,513 = U.S. only TAM of ~$1 billion 3Iyer, P, et. al. Prediction of Progression in Barrett’s Esophagus Using a Tissue Systems Pathology Test: A Pooled Analysis of International Multicenter Studies. DDW 2021 Presentation (Manuscript Submitted) 4Critchley-Thorne, et. al. Cancer Epidemiol Biomarkers Prev. Jan 2016; 5Critchley-Thorne, et. al. Cancer Epidemiol Biomarkers Prev. Feb 2017 6Davison, et. al. Am J Gastroenterol. Feb 2020 7Frei, et. al. Clin Transl Gastroenterol. Oct 2020; 8Frei, et. al. Am J Gastroenterol. Apr 2021; 9Diehl, et.al. Endoscopy International Open, 2021, Mar; 9(3): E348-E355
The Standard of Care for Evaluating Metastatic Risk in Uveal Melanoma
Decis ionDx-UM: The Standard Of Care In The Management Of Newly Diagnosed Uveal Melanoma ~2,000 patients diagnosed in the U.S. annually ~97% of patients – no evidence of metastatic disease at the time of diagnosis ~30% will develop metastases within 5 years Low-risk: ~67% Low Intensity Management High-risk: ~33% High Intensity Management Strong Evidence Base • 21 peer-reviewed publications, 3,000+ patients Widespread adoption • More than 90% of U.S. ocular oncology institutions order • 1,618 reports issued in 2021 Broad Reimbursement • In 2021, received payment on ~93% of claims • Medicare LCD covers patients with a confirmed diagnosis and no evidence of metastatic disease • 2022 Medicare rate of $7,776 AJCC and NCCN Guideline Inclusion Uveal Melanoma – A Rare Eye Cancer 15-Gene Expression Profile (GEP) Test 35 Facts About Uveal Melanoma
35.7% 64.3% FEMALE MALE Commitment To Diversity 36 A ll Em p lo ye es Ex ec u ti ve s E T H N I C I T Y/ R A C E G E N D E R Data as of 12/31/21, Executive= Executive Director or Regional Business Director level and above 64.6% 35.4% FEMALE MALE TOTAL EMPLOYEES = 345 75% 21.4% 3.6% CAUCASIAN OTHER (NOT HISPANIC OR LATINO) HISPANIC OR LATINO 64.3% 7.2% 4.6% 3.5% 20.4% CAUCASIAN HISPANIC OR LATINO ASIAN BLACK OR AFRICAN- AMERICAN TWO OR MORE RACES (NOT HISPANIC OR LATINO)
Committed to cu lt ivat ing a cu lture of innovat ion, cont inuous growth and advancement Award-Winning Company 37 2019 Technology Innovation in Melanoma Award Winner
CUTANEOUS MELANOMA1,2 SQUAMOUS CELL CARCINOMA UVEAL MELANOMA3 BARRETT’S ESOPHAGUS4 PROGNOSTIC DIAGNOSTIC PROGNOSTIC PROGNOSTIC PROGNOSTIC Predicting Individual Risk of Recurrence or Metastasis in Stage I, II, and III Melanoma Highly Accurate and Objective Tests Characterizing Difficult–to-Diagnose Melanocytic Lesions Better Identifies Risk of Metastasis in Patients with One or More Risk Factors The Standard of Care for Evaluating Metastatic Risk in Uveal Melanoma Predicting Individual Risk of Progression to Esophageal Cancer in Barrett’s Esophagus Cast le B iosciences I s Improving Health Through Innovative Tests That Guide Pat ient Care 4 38 38 12022 CMS rate: DecisionDx-Melanoma, $7,193; 22022 CMS rate: myPath-Melanoma, $1,950 32022 CMS rate: DecisionDx-UM, $7,776; 42022 CMS rate: TissueCypher BE, $2,513 https://www.cms.gov/medicaremedicare-fee-service-paymentclinicallabfeeschedclinical-laboratory-fee-schedule-files/22clabq1
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U s e O f N o n - G A A P F i n a n c i a l M e a s u re s ( U n a u d i t e d ) 40 In this presentation, we use the metrics of Adjusted Revenue, Adjusted Gross Margin and Adjusted Operating Cash Flow, which are non-GAAP financial measures and are not calculated in accordance with generally accepted accounting principles in the United States (GAAP). Adjusted Revenue and Adjusted Gross Margin reflect adjustments to net revenues to exclude changes in variable consideration related to test reports delivered in previous periods. Adjusted Gross Margin further excludes acquisition-related intangible asset amortization. Adjusted Operating Cash Flow excludes the effects of repayments to Medicare of COVID-19 government relief advancements to healthcare providers. We use Adjusted Revenue, Adjusted Gross Margin and Adjusted Operating Cash Flow internally because we believe these metrics provide useful supplemental information in assessing our revenue and cash flow performance, respectively. We believe Adjusted Revenue and Adjusted Gross Margin are also useful to investors because they provide additional information on current-period performance by removing the effects of revenue adjustments related to tests delivered in previous periods and acquisition-related intangible asset amortization, which we believe may facilitate revenue and gross margin comparisons to historical periods. We believe Adjusted Operating Cash Flow is also useful to investors as a supplement to GAAP measures in the assessment of our cash flow performance by removing the effects of COVID-19 government relief payments, which we believe are not indicative of our ongoing operations. However, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes. These non-GAAP financial measures are not meant to be substitutes for net revenues, gross margin or net cash (used in) provided by operating activities reported in accordance with GAAP and should be considered in conjunction with our financial information presented on GAAP basis. Accordingly, investors should not place undue reliance on non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the slides that follow.
Re c o n c i l i a t i o n O f N o n - G A A P F i n a n c i a l M e a s u r e s ( U n a u d i t e d ) The table below presents the reconciliation of adjusted revenue and adjusted gross margin, which are non-GAAP measures. See "Use of Non-GAAP Financial Measures (UNAUDITED)" on the previous slide for further information regarding the Company's use of non-GAAP financial measures. 41
Re c o n c i l i a t i o n O f N o n - G A A P F i n a n c i a l M e a s u r e s ( U n a u d i t e d ) The table below presents the reconciliation of adjusted operating cash flow, which is a non-GAAP measure. See "Use of Non-GAAP Financial Measures (UNAUDITED)" on the previous slide for further information regarding the Company's use of non-GAAP financial measures. 42
APPENDIX
Stuart Pharmaceuticals Robert Cook, PhD Senior Vice President, Research & Development L e a d e r s h i p Te a m O v e r v i e w M A N A G E M E N T T E A M Derek Maetzold Founder, Director, President and CEO Frank Stokes Chief Financial Officer Toby Juvenal Chief Commercial Officer Kristen Oelschlager, RN, CHC Chief Operating Officer Dan Bradbury Derek Maetzold Mara Aspinall Brad Cole Miles D. Harrison 44 Matthew Goldberg, MD Medical Director Tiffany Olson Kimberlee Caple Ellen Goldberg B O A R D O F D I R E C T O R S
Recent Achievements And Expected Future Milestones Oct. 2020: LCD expansion finalized for DecisionDx-Melanoma, effective date 12/6/20 2Q2022: Potential draft LCD for DecisionDx-SCC and DecisionDx DiffDx-Melanoma 2020 2021 2019 2022 2H2020: Initiation of work on additional dermatology pipeline products 4Q2020: Launch of DiffDx-Melanoma 2023: Potential effective LCD for DecisionDx-SCC and DecisionDx DiffDx- Melanoma 3Q2020: Dermatologic commercial team expansion 3Q2020: Launch of DecisionDx-SCC July 2019: IPO Dec 2019: Expanded outside sales territories to 32 = Achieved Feb. 2019: Expanded outside sales territories to 23 Aug. 2019: Expanded draft LCD for DecisionDx- Melanoma posted 45 1H2021: Dermatologic commercial team expansion to mid-60s 2018 Dec. 2018: Initial LCD effective for DecisionDx-Melanoma 2021+: Continued evidence development for all commercialized products 2021+: Continued development of dermatologic pipeline products; potential launches in 2025 2021: Acquired myPath® Melanoma Dec. 2021: Acquired Cernostics 2023 Jan. 2022: GI commercial team trained and in the field