Castle Biosciences(CSTL) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported full-year revenue of $137 million for 2022, a 46% increase over 2021, with fourth-quarter revenue of $38.3 million, a 53% increase year-over-year [21][56] - Adjusted revenue for the fourth quarter was $37.5 million and $139 million for the full year 2022 [30] - Gross margin for the fourth quarter was 69.4%, down from 77.6% in Q4 2021, and for the full year, it was 70.6%, down from 81.1% in 2021 [31] - The net loss for the fourth quarter was $20.6 million, compared to a net loss of $6.4 million in Q4 2021, and for the full year, the net loss was $67.1 million, compared to $31.3 million in 2021 [60] Business Line Data and Key Metrics Changes - The dermatology franchise delivered 37,331 test reports in 2022, a 41% increase over 2021, with a total of 44,419 test reports delivered for the year, reflecting a 58% growth [10][21] - The Gastroenterology business delivered 2,128 tissue cypher test reports in 2022, with significant progress expected from the new Pittsburgh laboratory opening in Q2 2023 [25] - The IDgenetix test is currently reimbursed by Medicare at approximately $1,500 per test, with expectations for continued growth in this area [27] Market Data and Key Metrics Changes - Approximately 79% of clinicians ordering DecisionDx-SCC also ordered DecisionDx-Melanoma, indicating strong cross-utilization of tests [22] - The company expects to generate between $170 million and $180 million in total revenue for 2023, driven primarily by growth in the dermatology franchise [57] Company Strategy and Development Direction - The company plans to continuously assess the impact of its commercial teams and make moderate adjustments as necessary, with a focus on expanding outside sales territories [23] - The long-term strategy includes significant investments in R&D and commercial initiatives to drive growth, with expectations of achieving total revenue between $255 million and $330 million by 2025 [61][62] - The company is also focused on rationalizing its laboratory operations to improve efficiency and reduce costs [98] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum heading into 2023, citing strong execution and a people-first culture [37] - The management noted that the operating environment remains challenging, particularly with commercial payers, but expects steady progress in reimbursement and coverage [101] Other Important Information - The company had cash, cash equivalents, and marketable securities of $259 million as of December 31, 2022, which is expected to support operations through 2025 [35] - The company anticipates stock-based compensation expenses to increase by approximately 30% to 35% in 2023 compared to 2022 [33] Q&A Session Summary Question: What is the quarterly pacing for 2023 guidance? - Management indicated a return to a pre-COVID pattern of seasonality for melanoma diagnoses, expecting increased activity in Q2 [64] Question: What are the cost savings from closing the Althea San Diego Lab facility? - The company expects to see full benefits from the closure in Q2, with significant cost savings anticipated [67] Question: How much of the guidance is driven by growth in core melanoma versus other tests? - Management stated that a significant portion of growth will be driven by the dermatology franchise, including both melanoma and squamous cell carcinoma tests [75] Question: What is the status of the ADLT status for the SCC test? - The company believes DecisionDx-SCC qualifies for ADLT status but did not provide a timeline for the process [89] Question: What are the expectations for NCCN guideline inclusion for 2023? - Management does not expect material updates until the year-end publication date following the NCCN's mid-summer meeting [80]