Castle Biosciences(CSTL) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of $86.2 million for Q2 2025, a decrease of $800,000 or 1% compared to Q2 2024, primarily due to a $12.5 million decrease in revenue from dermatological tests, offset by an $11.7 million increase from non-dermatological tests [18][19] - Adjusted revenue for Q2 2025 was $86.2 million, also a decrease of 1% compared to the previous year [19] - The gross margin for Q2 2025 was 77.3%, down from 80.7% in Q2 2024, while adjusted gross margin was 79.5%, compared to 83.2% in the same period last year [20][22] - Net income for Q2 2025 was $4.5 million, compared to $8.9 million in Q2 2024, with diluted earnings per share of $0.15 versus $0.31 in the prior year [22] Business Line Data and Key Metrics Changes - For DecisionDx Melanoma, the company delivered 9,981 test reports in Q2 2025, a sequential increase of approximately 16% compared to Q1 2025 and a year-over-year increase of about 4% compared to Q2 2024 [8][9] - DecisionDx SCC test reports totaled 4,762 in Q2 2025, with reimbursement challenges noted due to a local coverage determination policy that went into effect on April 24, 2025 [11][12] - Tissue Cypher test reports reached 9,170 in Q2 2025, representing a 92% year-over-year growth compared to Q2 2024 [13] Market Data and Key Metrics Changes - The company expects continued solid growth in the second half of 2025, reiterating expectations for high single-digit volume growth for DecisionDx Melanoma for the full year [9] - The collaboration with the National Cancer Institute's SEER program is ongoing, enhancing the clinical evidence for DecisionDx Melanoma [10] Company Strategy and Development Direction - The company is focused on investing in near-term growth initiatives, including expanding clinical evidence and optimizing the commercial team [7] - The strategy includes pursuing M&A opportunities that complement the existing portfolio and drive mid- to long-term value creation [24] - The company is also developing a diagnostic test for atopic dermatitis in collaboration with Sybase, targeting a significant unmet clinical need [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the clinical value of their tests and the strength of their balance sheet, which positions the company well for future investments [7][8] - The management acknowledged the challenges posed by the reimbursement environment but remains optimistic about the growth potential of their tests [24] Other Important Information - The company raised its total revenue guidance for 2025 to $310 million to $320 million, up from a previous range of $287 million to $297 million [19] - The company has a strong cash position, ending Q2 2025 with $275.9 million in cash, cash equivalents, and marketable securities [23] Q&A Session Summary Question: Plans for FDA approval after breakthrough designation for DecisionDx Melanoma - Management confirmed they are moving forward with plans for FDA submission but did not disclose specific timing [28][29] Question: Payment status for DecisionDx SCC volume - Management indicated they receive episodic payments on commercial claims but noted it is not a significant percentage [30][31] Question: Insights on GI sales rep productivity - Management stated that the sales team is expected to reach full productivity in the third and fourth quarters of the year [34] Question: Reimbursement outlook for atopic dermatitis products - Management is pursuing multiple reimbursement avenues and expects to launch the test by the end of 2025, with significant revenue impact anticipated in 2027 and beyond [40][41] Question: Continuation of DecisionDx SCC offering - Management confirmed they will continue to offer the SCC test while awaiting reconsideration outcomes, emphasizing patient care [44] Question: Drivers for revenue guidance increase - Management noted strong drivers across the business and historical seasonal trends affecting revenue [46] Question: Tissue Cypher growth expectations - Management expects continued growth in Tissue Cypher volumes, with no specific guidance for 2026 yet [52][54]