Castle Biosciences(US:CSTL)2025-08-04 20:10PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for Q2 and H1 2025 show a $21.3 million net loss for the six months, driven by increased amortization of intangible assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $82,233 | $119,709 | | Marketable investment securities | $193,697 | $173,421 | | Accounts receivable, net | $52,311 | $51,218 | | Total current assets | $348,668 | $360,154 | | Total assets | $544,729 | $531,235 | | Liabilities & Equity | | | | Total current liabilities | $50,890 | $49,392 | | Long-term debt | $8,096 | $9,745 | | Total liabilities | $89,353 | $75,400 | | Total stockholders' equity | $455,376 | $455,835 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $86,188 | $87,002 | $174,176 | $159,976 | | Total operating expenses | $90,439 | $81,990 | $206,355 | $160,435 | | Operating (loss) income | $(4,251) | $5,012 | $(32,179) | $(459) | | Net income (loss) | $4,523 | $8,920 | $(21,325) | $6,386 | | Diluted EPS | $0.15 | $0.31 | $(0.74) | $0.22 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,785 | $17,163 | | Net cash used in investing activities | $(50,809) | $(41,118) | | Net cash (used in) provided by financing activities | $(1,452) | $10,686 | | Net change in cash and cash equivalents | $(37,476) | $(13,269) | - In Q1 2025, the company discontinued its IDgenetix test, leading to an accelerated amortization expense of approximately $20.1 million as the related intangible asset was fully amortized by March 31, 202577 - In May 2025, the company acquired Capsulomics, Inc. for $28.2 million, accounted for as an asset acquisition with a 12-year useful life for the developed technology3478 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 8.9% increase in H1 2025 net revenues to $174.2 million, offset by a $21.3 million net loss due to accelerated amortization and the discontinuation of IDgenetix, alongside capital uses for operations and a new headquarters Overview and Test Portfolio Castle Biosciences, a molecular diagnostics company, discontinued its IDgenetix test in May 2025, focusing on dermatologic cancers, Barrett's esophagus, and uveal melanoma, with DecisionDx-Melanoma and DecisionDx-SCC as primary revenue drivers - The company's portfolio includes five proprietary multi-analyte assays with algorithmic analysis (MAAA) tests across dermatology, gastroenterology, and ophthalmology121 - The IDgenetix pharmacogenomic test for mental health conditions was discontinued in May 2025 after careful assessment129152 - In July 2025, the FDA granted Breakthrough Device designation to the DecisionDx-Melanoma test, aiming to expedite its development and review149 Reimbursement and Test Reports Reimbursement is critical, with DecisionDx-SCC losing Medicare coverage in April 2025, yet overall test report volume grew 10.8% in H1 2025, driven by a 102.2% increase in TissueCypher volumes - Novitas finalized non-coverage for the DecisionDx-SCC test, effective April 24, 2025, following similar recommendations from Palmetto and Noridian in 2024122138 Test Reports Delivered | Test | 6 Months 2025 | 6 Months 2024 | % Change | | :--- | :--- | :--- | :--- | | DecisionDx-Melanoma | 18,602 | 17,969 | +3.5% | | DecisionDx-SCC | 9,137 | 7,854 | +16.3% | | TissueCypher | 16,602 | 8,211 | +102.2% | | IDgenetix (discontinued) | 3,605 | 8,981 | -59.9% | | Grand Total | 50,976 | 45,990 | +10.8% | Results of Operations Q2 2025 revenues decreased 0.9% to $86.2 million, with H1 revenues up 8.9% to $174.2 million, but a $21.3 million net loss resulted from a $25.8 million increase in amortization expense due to the IDgenetix write-off Revenue Disaggregation (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Dermatologic | $56,297 | $68,828 | $119,259 | $128,163 | | Non-Dermatologic | $29,891 | $18,174 | $54,917 | $31,813 | | Total net revenues | $86,188 | $87,002 | $174,176 | $159,976 | Gross Margin Comparison | Period | Gross Margin % 2025 | Gross Margin % 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | 77.3% | 80.7% | | Six Months Ended June 30 | 63.1% | 79.4% | - Amortization of acquired intangible assets increased by $25.8 million for the six months ended June 30, 2025, primarily due to the full amortization of IDgenetix's remaining carrying value by March 31, 2025206 Liquidity and Capital Resources As of June 30, 2025, the company maintained strong liquidity with $82.2 million in cash and $193.7 million in marketable securities, with a new $44.2 million corporate headquarters under construction and access to a $25.0 million line of credit - As of June 30, 2025, the company held $82.2 million in cash and cash equivalents and $193.7 million in marketable investment securities210 - A new corporate headquarters, estimated to cost $44.2 million, is under construction with $14.0 million spent in 2025, expected completion in early 2026213 - The company has an undrawn $25.0 million line of credit available until September 30, 2025210225 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its $10.0 million floating-rate term debt, inflationary pressures on costs, and equity price volatility from its $3.3 million equity securities portfolio - The company is exposed to interest rate risk through its $10.0 million term loan, which bears a floating interest rate tied to the WSJ Prime Rate240 - As of June 30, 2025, the company held equity securities with a fair value of $3.3 million, exposing it to equity price risk242 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during Q2 2025 - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level244 - No material changes in internal control over financial reporting occurred during Q2 2025245 PART II. OTHER INFORMATION Legal Proceedings The company is cooperating with a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, regarding federal healthcare program claims from 2015-2024, with the outcome and financial impact currently unknown - On February 1, 2024, the company received a subpoena from the Department of Health and Human Services, Office of Inspector General, concerning claims submitted for payment under federal healthcare programs98246 - The company is cooperating with the government's request but cannot predict the outcome or estimate any potential loss from this matter99246 Risk Factors Key risks include a history of net losses and an accumulated deficit of $221.5 million, heavy revenue dependence on DecisionDx-Melanoma and TissueCypher after losing Medicare coverage for DecisionDx-SCC, and ongoing regulatory uncertainty for Laboratory Developed Tests (LDTs) - The company has a history of net losses and an accumulated deficit of $221.5 million as of June 30, 2025, raising concerns about sustained profitability249 - Revenue is heavily dependent on DecisionDx-Melanoma and TissueCypher tests, as DecisionDx-SCC revenue is expected to decline significantly following the loss of Medicare coverage effective April 24, 2025251 - The regulatory landscape for Laboratory Developed Tests (LDTs) remains a risk, despite a federal court vacating the FDA's final rule to regulate LDTs as medical devices, as future changes could still impose extensive FDA requirements260266 Unregistered Sales of Equity Securities and Use of Proceeds There has been no material change in the planned use of net proceeds from the company's July 2019 IPO, with proceeds remaining invested in cash, cash equivalents, or highly liquid investment securities as of June 30, 2025 - As of June 30, 2025, the company has not used any net proceeds from its 2019 IPO, keeping them invested in cash equivalents or liquid securities290 Other Information On May 8, 2025, CEO Derek Maetzold adopted a Rule 10b5-1 trading plan for the sale of up to 48,204 common shares and 48,919 RSU-settled shares, active from August 2025 to February 2026 - On May 8, 2025, CEO Derek Maetzold adopted a Rule 10b5-1 trading arrangement for the sale of company stock, scheduled from approximately August 14, 2025, to February 13, 2026293