Q2 2020 Castle Biosciences Inc Earnings Call

[music], ladies and gentlemen, thank you for standing by your conference call will begin momentarily once.

Again, ladies and gentlemen, thank you for your patience and please standby.

[music].

Good afternoon.

Welcome to the Castle Bio Sciences second quarter 2020 conference call.

A reminder, today's call is being recorded we will begin today's call opening remarks, an introduction followed by question and answer session.

I would like to turn the call over to Frank Stokes Chief Financial Officer. Please go ahead.

Thank you operator, good afternoon, everyone. Welcome the Castle Life Sciences second quarter 2020 financial results Conference call.

Joining me today is castles founder President and Chief Executive Officer, Derek lateral.

Nation recorded on this call speaks only as of today August 2020. Therefore, if you were 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 three weeks.

For the good I would like to remind you that sold the information discussed today.

May contain projections or other forward looking statements regarding future that's for the future financial performance of the company, including expectations and assumptions related to the impact of the Koby 19 pandemic and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Looking statements are based upon current expectations and involve inherent risks and uncertainties.

To be no assurance 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.

These factors and other risks and uncertainties are described in detail in the company's annual report on form 10-K for the year ended December 31st 2019, and the company's other documents and reports filed with the Securities and Exchange Commission.

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.

I'll now turn the call over to Derek Thanks.

Thank you Frank good afternoon, everyone.

And for joining us today.

Good afternoon, I'll discuss cobot nineteens impacting our results recent trends we have seen in our performance for the quarter that Frank will provide more detail on the second quarter results in our financial position.

Well, our second quarter results reflect impacts from cobot 19.

Thanks to strong execution by our employees. We are successfully navigating these challenging times. We're pleased that we maintained strong gross margins.

Our year over year increase in revenue and deliver positive operating cash flow.

Additionally, we are making strong progress on our near and long term strategic growth plans.

Potently in order to serve patients who have been diagnosed with melanoma and the clinicians who treat them, we maintain uninterrupted access to our proprietary decision Dx melanoma cast and our decision DXP U.M. test with normal turnaround times for delivery of tester ports.

As you would expect second quarter 2020 revenue at a report volumes were impacted by cope with my team.

Specifically in the second quarter Twentytwenty revenue was $12.7 million, an 18% increase from $10.7 million kind of second quarter 20 I came.

Decision Dx melanoma tests reported volume declined 19% kinda second quarter Twentytwenty compared to second quarter 2019.

Provide some color here on this decline and the Pos of recovery trends, we have seen.

KES reported volume remains a key test performance metrics I feel it's important to discuss test order trends as well as it provides additional insight in the current demand and our expectations for increase test report volume.

We believe second quarter Twentytwenty year over year decline decision Dx melanoma test volume is due to the closing up dermatology practices and delays and or cancellations and patient visits resulting in reduced diagnostic biopsies and thus reduce diagnoses cutaneous melanoma.

We remind you our decision to JAKKS melanoma testers ordered by positions after biopsies take place any diagnosis of melanoma is made.

Third party data suggests the largest declines and biopsies due to the pandemic occurred in April.

We also saw our largest monthly decline in orders to date in April.

Since April throughout the second quarter, we have seen monthly sequential improvement indecision Dx melanoma orders, leading to a year over year increase in June which continued year over year games in July.

To further illustrate this improvement and demand trends.

Well I'm data points of orders by month for the second quarter.

In April decision, he ex melanoma orders decreased 45% year over year.

In May orders decreased 39% year over year, and then in June orders increased 10% year over year.

We also saw positive year over year orders in July.

We believe the improvement in decision Dx melanoma test orders since April is driven impart by the reopening of dermatology practices and rescheduled patient visits which had generally coincided with the easing of state and local government restrictions.

According to data published.

By the Commonwealth Fund for the week of June 14th.

Business the dermatology clinics had returned to their February twentytwenty baseline.

Further since April we have seen the rate that decision Dx melanoma orders outpace melanoma diagnoses.

We believe is partly attributable to our commercial team successful pivot.

It's promotional efforts, which we anticipate will support further recovery.

We expect the near term positive trends, we have seen in test orders to continue and as such we believe our third quarter decision. The ex melanoma tests reported volume will increase closely approaching three cope at levels.

These expectations are primarily driven by the pandemic severity and the impact on state and local government restrictions on the U.S. health care system.

Turning to our decision he actually you and test for patients diagnosed with you'll melanoma, we delivered 300 and fixed reports in the second quarter of Twentytwenty compared to 376 reports in the second quarter 2019.

As it relates to the impact of covert 19 on our UN cast monthly year over year comparisons are different call to interpret due to the low incidence of Uveal melanoma.

This being said, we believe the year over year decreases due to the pandemic.

We believe that the majority of your melanoma diagnoses are made incidental to a routine eye exam, and we expect recovery and they get since have you been melanoma and that's our order volume to be time shifted relative to the recovery that we observed for decision Dx melanoma tests.

Our first quarter earnings call I provided some thoughts about how we are investing in a company in order to facilitate our strategic growth plans and remain a position of strength as you move through the current cobot 19 situation.

As well lay a foundation for execution for the remainder of Twentytwenty and Twentytwenty one.

I will discuss our recent progress on these plans now which includes significant evidence development advancing our pipeline test and expansion of our commercial team.

In the second quarter, we saw great progress to the publication that evidence to support appropriate use of our task and coverage by commercial payers. For example to systematic reviews and made analyses were published demonstrating that the decision Dx melanoma test is an independent significant predictor a recurrence.

Metastatic risk in patients with invasive cutaneous melanoma, achieving the highest strength of recommendation taxonomy for sort level.

He prognostic biomarker.

That is level one evidence.

The sort system is used by the American Academy of dermatology.

Their organizations to evaluate the quality quantity and consistency of evidence supporting tasks such as a decision Dx melanoma.

This brings the total number peer reviewed publications that support one or both of the current clinically actionable uses a decision Dx melanoma test to 25.

The first clinical use of our testers to informed decisions on Sentinel lift a biopsy in patients when the tumor thickness is less than or equal to 2.0 millimeters.

And the second uses to guide subsequent treatment planning decisions.

As previously stated we believe our continued investment Evans development is key to supporting both market penetration and covered by commercial payers.

Turning to our pipeline. We are pleased with continued progress of our pipeline test, which importantly allow us to expand our services for patients who were diagnosed with the early stage skin cancers.

We're on plan for pipeline test decision DXP F C C.

For use in patients with high risk squamous cell carcinoma to become commercially available at the beginning of September.

Decision Dx FCC is designed to identify patients risk of metastasis in order to handle more informed risk appropriate clinical decisions regarding adjunct therapy and other management awesome.

In the second quarter, we Sapthree peer reviewed publications supporting our decision Dx FCC test.

This includes development and validation data, what's your publishing a journal of the American Academy of Dermatology or Chad.

The results demonstrate that decision Dx FCC is not only an independent predictor metastatic risk, but our test was also shown to be the strongest predictor of anesthetic risk relative to current staging systems and can complement clinical pathlogic risk factors to better stratify risk of metastasis and the subsequent treatment plant decision.

<unk> in patients with high risk FCC.

We anticipate hosting a public webcast for investors in September to discuss our decision Dx FCC test concurrently with its commercial availability.

Additionally, our team completed the clinical validation work needed to watch our second pipeline test. This one for use in suspicious pigmented lesions.

As we previously stated we expect this test to become commercially available in the second half Twentytwenty.

This test is designed to assist dramatic pathologists to make it more informed diagnosis for suspicious pigmented lesion that cannot safely be rolled out as benign rolled in us melanoma.

We estimate that combined our three skin cancer products decision the ex melanoma decision Dx FCC and our test for suspicious pigmented lesions, we'll have a total addressable U.S. market of approximately $2 billion, a 1.4 billion dollar increase over our current total addressable U.S. market.

And lastly, we are moving forward with our plan to expand our commercial team in a second half Twentytwenty. We're moving forward. These plans primarily to support the continued growth of decision Dx melanoma, our lead product, but also to support the loss of decision Dx FCC you may recall that in 2019, we more.

Doubled our commercial team and despite the pandemic we remain in position to continue to execute on our strategic plan for further commercial expansion in order to facilitate near term.

Long term growth.

On June 29th we successfully completed a public offering for 2 million shares of our common stock with net proceeds to lots of approximately six $9.5 million.

And additional net proceeds of approximately $10.4 million on July 2nd.

As a result will be underwriters full exercise their option to purchase an additional 300000 shares.

Plan to use a portion of these proceeds to further support and accelerate our research and development activities, including two important studies that we've implemented to support our decision Dx melanoma test.

The first is the personalized study in which we evaluate decision Dx melanoma for interactions with the agile and therapies.

Second is the connection to study, which will collect long term outcomes for up to 10000 patients who've been tested clinically with decision to GEX melanoma, we will provide more information on these studies as we make progress I.

I'll now turn the call back over to frighten, who will provide additional detail relating to our financial results.

Thank you Derek we're pleased with our execution and the progress we made on our strategic growth plans in the second quarter and the main that's if you want you to take away from today's call is at the long term fundamentals of castles business remains strong and our expectations of where the business is having have not changed.

The second quarter 2020, we reported revenue of $12.7 million.

18% increase from $10.7 million in the second quarter 2019.

Primarily due to higher per unit revenues, and partially offset by reduced test volume and reduced revenue adjustments related to prior periods.

In addition to in period test revenue, our second quarter revenue includes positive adjustments related to test delivered in prior periods of 2.3 million.

Appear to 3.3 million in the second quarter of 2019.

Looking forward, we anticipate significant declines in these prior period revenue adjustments, particularly in the third quarter of 2020.

Due to lagging impacts of the pandemic.

We're also pleased with our ability to maintain strong gross margins and during the second quarter of 2020, our gross margin was 83% compared to 81% for the second quarter of 2019 with the improvement primarily resulted increased operating leverage on the higher revenues.

Our net operating expenses for the quarter ended June 32020 were $11.2 million compared to 8.1 billion for the same period last year. The increase was driven by higher SGN eight a $3.6 million and increased R&D expense of $1.4 million, what was partially offset by the benefit of $1.9 billion.

In pandemic relief funds automatically distributed health care providers that we received from the US Department of health and human services pursuant to the cares Act.

These increases in SGN and R&D were primarily the result of higher personnel costs, particularly due to the expansion of our sales and marketing organization, but also due to the expansion of administrative support functions and R&D as well as increases and administrative expenses associated with our growth. Although these increases were partially offset by lower spending on travel and conferences.

During the quarter due to pandemic related cancellations in Richardson.

With regard to our R&D expense, we expect further increases as we fill critical roles further clinical studies dared discussed earlier I continue to invest in activities to support our products and position us well for continued growth.

As a percentage of revenue our SGN expense was 82% for the second quarter of 2020 compared to 64% for the second quarter of 2019, reflecting impacts on revenue growth due to koby 19.

Interest expense decreased point $9 billion for the second quarter Twentytwenty compared to second quarter 2019, primarily due to interest on the convertible promissory notes that were outstanding last year. As reminder, these notes converted into common stock in connection with the IPO in July 2019.

Our net loss for the three months ended June 30, 2020 was $1.4 million compared to $1.3 million for the three months ended June 30 29 team.

Diluted loss per share attributable to common stockholders for the three months ended June 32020 was eight cents compared to a dollar and five cents for the three months ended June 32019.

We generated positive operating cash flow for the second quarter 2020.

And castles net cash provided by operating activities was $13.5 million.

Compared to net cash provided by operating activities of point $5 million in the prior period year.

In the first half of 2020, we generated 13.3 million of operating cash flow compared to $1.8 million last year.

Our operating cash flow for the second quarter benefited from it advance payment of $8.3 million from CMS, which will be applied against future Medicare claims that we submit for reimbursement later in 2020 as well as a previously mentioned onetime payment of $1.9 million and really funds automatically allocated to Medicare providers under the cares that.

Excluding these payments our adjusted operating cash flow a non-GAAP measure was $3.3 million for the second quarter 2020 compare $2.5 million for the second quarter of 2019.

Finally, we had cash and equivalents at June 30, 2020 of approximately $179.8 million, which includes net proceeds of approximately $69.5 million from our June 2020, public offering of 2 million shares of common stock.

Additionally on July 2nd Twentytwenty.

The underwriters of the public offering exercise and folder option to purchase an additional 300000 shares of common stock.

The additional net proceeds were approximately $10.4 million.

As a reminder, we withdrew our full year Twentytwenty revenue guidance on day to 2020 in light of the Kobin 19 pandemic.

While we are expecting.

Continued commercial recovery in the second half of the year, we recognize that uncertainty remains and will not reissue guidance at this time.

We believe our current cash position along with cash generated from sales of our products will be sufficient to fund our operating expenses for the foreseeable future.

We remain confident our ability to invest in the business and execute on our growth plans as we build the company from near and long term growth I'll now turn the call back over to Derek.

You Frank.

Sort of on the Q1 day I want express my gratitude to our employees.

As you recently marked a one year anniversary as a public company.

Capital strong foundation begins with their dedication to improving the lives of people with skin cancer.

During the second quarter. Despite the cobot 19 impact we continue to execute on our strategic growth plans and remain focused on current and future success.

Thank you for your continued support and interest in Castle. This concludes our remarks.

Operator, we're now ready for Q1 day.

Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered I wish to move yourself from the Q. Please press the pound key to prevent any background noise. We ask that you. Please. Please your line on mute once your question has been stated.

Our first question comes from the line of neat Saudi was.

STB Leerink. Your line is open. Please go ahead.

Yeah, Hi, Derrick Frank Thanks for taking the questions.

First one is it's great to see first of all the improvement that you're seeing here across the quarter and that you're expecting to reach pre cobot levels in third quarter and I totally get that you are not providing guidance just yet but.

Given the improvement should we assume that potentially could be in line with the first quarter pre Tobin levels. Obviously, there was a two week impacted there and in March so is that a reasonable.

Point to work off would or it's anything anything else you can provide there in terms of.

Improvement and recognized totally recognizing that we're not out of coated yet.

Yes, thanks to the thanks for calling on I like I said, we're not ready.

I don't have enough visibility to reissue guidance, yet, but I just as it relates to Q1, just just do keep in mind. There that there is a lag between orders and and report and the test report is what actually triggers revenue. So.

You're correct there was some certainly some impact in Q1.

Because workover the early days a co bid, but we still believe that that natural cycle between order and report means that most of that revenue impact was pushed over into Q2.

Okay. That's helpful and in terms of the FCC launch can you maybe just provide us I mean, given the timing right around the corner.

Tell us in terms of the sales reps capability you have there.

Let's assume at this point, they're trained and ready to go on that product and also how should we think about the potential volumes there.

Again, given the timing it appears that most of that is going to lend into fourth quarter.

Yes, hi, funny their care.

So from a sort of launched standpoint, we expect to make them available clinically as we talked about on the call in the September time period.

We did add eight out of that awareness of caution I guess, Oh go ahead and switch our national sales are national training meetings that launched a virtual format here, but we expect based upon the adjustments. Our team has made in the commercial or that will be highly effective in training up are both our sales represented.

And our medical science liaison as in the rest of the customer focus focused team to be ready to launch.

That's a thus this this first pipeline test effectively in September I would concur I think on volumes I almost I'd, rather not comment here I think new new product forecasting is top anyways, and but you're right I would expect nothing material in the sort of third quarter 2020, because if we.

Yes, it out.

In early September you know by time, we would get tissue from orders coming in the quarters almost maybe over so I think the first indication of anything probably you're right is at the end of the fourth quarter, but I would probably say Mike are forecasting expectation is that we will be well staffed to handle a and.

Launch and effective launch and what kind of look at a look our forecast rechallenge, you're probably in the first quarter next year. After a couple of quarters of uptake.

Okay, that's great and if I could ask on.

In the current quarter as Youre seeing pick up across as you pointed out that in July you were continuing to see improvements across the business can you elaborate to us whether some of that demand was due to extended work hours at the dermatology practice.

Or was that essentially in line with normal work hours and do you expect that or where would you expect that to normalize in sort of August and September largely asking that because we were hearing from some of the derm practices that they were trying to accommodate a bolus of patients.

Yeah. So one I wish I had quantitative data share with you and I don't have that so I apologize for that.

As you may recall, either at the year enemy that maybe the one Q call. We had done a proprietary survey of our own customers and they suggested that whenever they could reopen their practices whenever that men on localize basis. They were planning on going from working on average our four days a week to five days a week to catch up.

And they were hoping to go ahead and sit in the deferred or delayed or canceled deployments, obviously and they also indicated they would try and and position biopsies early year ahead of other kinds of normal clinical follow up visits I, presumably because that will be that's probably the more medically concerning aspect can also procedures.

Driving a higher income for practices as well.

I don't have a sense to be honest to see if the sort of.

Pickup that we saw between April and May in May and June in June being over last year in July being over last year's volume as well if thats a indication of more volume I mean, it's at the extra day coming through or not I think at all points to hopefully patients getting treated properly underwrite cycle and that would lead to.

Subsequent orders reports by buying off so we feel good about that but I can't point to is that up.

Going from four to five days of work or is that actually see more patients in the same period of time I don't I don't have any quantitative data on that one to help guide you.

Okay, that's fair.

Just last one if I could squeeze and on the personalized study.

For adjuvant therapy does that increase your Tam maybe could you provide some.

Some details around that and for the other 10000 patient melanoma study what does the duration of that study and that a prospective study would you expect that study to be sort of the practice changing outcomes to study.

You can elaborate on that thank you so much thanks for taking the questions.

Sure. So we'll go into more detail that a little later in the quarter I think separately, but the personalized study is really focused on on assessing the value of our test and helping to director guide decisions around agile and therapy. As you heard I think those patients are largely baked into our overall tam to be honest. However.

The majority of our test orders come from Sentinel lymph node negative patients and thinner patients where they are really concerned as a clinician impatient about undergoing assembled to biopsy procedure and or how do I call. The patient afterwards in terms of imaging et cetera, So we might be able to see a more rapid penetration of.

Our Tam, but I would not added on top of the current 10 calculation, we have that already in there and stage 123 market basket for us.

I'm a connection study.

That protocols being being run on clinically tested patients I think we're hoping to have around.

Half of patients.

True prospective and half the patients recent rent retrospective only tested patients. So we can get some data out earlier rather than later.

That's going to be a nice very very large dataset for us to really established clinical use and also realize outcomes at a level that hasn't been seen certainly in the skin cancer diagnostic business ahead of us.

Great. Thanks.

Thank you and our next question comes from the line ups.

BT <unk>. Your line is open. Please go ahead.

Hi, Thanks for taking the questions and congratulations on all the progress that you're making a maybe a follow up on be did a decision FCC Dx FCC launch could you remind us again kind of the go to market strategy. There is that initially to target your existing customer base and also elaborate.

King your current sales for a defined I would love to hear.

Some initial plans there.

Excellent questions on here so.

One is that our existing Salesforce, which as a reminder is 32 outside sales territories.

And they're paired with a inside sales associate group I think seven or eight individuals.

And then our medical science liaisons staff will be the ones launching this test clinically to clinicians.

The the targeted audience for this test based upon our market research and our advisory interactions with with our current community of clinicians suggest that it will be a.

Essentially a customer base that largely lines up with our current cutaneous melanoma customer base. So dermatologists to have a higher practice level and medical dermatology versus say cosmetic and maybe within the medical dermatologist. Those that are more interested in skin cancer management versus not.

And then the most surgeons, which is a subset of dermatologists. These are individuals that are fellowship trained are trained in most surgery are sort of the sort of skin cancer pinnacle have they given practice and so we expect most surgeons and the medically warrants a dermatologists who are current customers to be our initial uptake or.

Orders of this test fits their their their exact focus a need directly. So our expectation is too is to walk in there with a dialogue around our cutaneous melanoma assay to reinforced the value.

Once they get out of that task to try and show our clinicians where they can perhaps get more use and then the quickly turn to page and say by the way. We know you have a similar question to answer and people, who already have one or more risk factors with cutaneous squamous cell carcinoma. Our R&D team you know listen to some of your peers we were so.

Accessible in developing an assay, let's walk through that data and see if that you patients get benefit. So that's kind of thinking right now as we were target predominantly our current decision Dx melanoma customer base, which will be.

Dermatology as a focus and as some focus will be the most surge in that group you, adding frank or is that okay.

Great. Thank you for that and then just on the on the commercial payers side. Obviously, you guys are continuing to generate more evidence around your potash.

Especially consistent yet melanoma and also I'm seeing in <unk> I'm not sure if I'm reading too much into it but from your higher per unit revenue. This quarter I'm, there's a modest increase sequentially as well obviously year over year with curious if you're gaining more traction on the commercial parasites.

Or just you know in this kind of pandemic in Boston and it's the conversations.

With the private Perry site, just kind of curious how that's progressing if there might be the more thinking outside of the box just given what's going on in the wild.

Yes, so I'm not maybe a couple of comments and Frank and adjust I guess correct such a harsh words.

We we with exception of one or two plan interactions.

Early in sort of the late March April time here, where we had a couple of medical records say, hey, I'm on overwhelmed right now trying to get our cobot 19 testing policy organized properly. We I haven't proceed from our managed care group that we've seen a significant sort of stiff arm.

By most accounts in terms of the review cycles, they would do for our decision Dx melanoma tasks.

As you may recall from the IPO last year, we have a number of plans that we expect to complete their review cycles and sort of the third quarter of this year. Most of them I think are set up in the first quarter every year.

I'm aware of some positive interactions ongoing right now about should lead to some changes from negative or positive coverage I don't think thats related to cope with Doe well I don't think it is I think it's more related to the maturation of our data.

I think the the publication certainly of the initial and the subsequent systematic review made analyses and that level of evidence is hard to ignore I think because that represents the highest potential level evidence for test like ours. So I.

I'm thinking as we caught a move or moving in the third quarter here, we'll have an opportunity to two leased unveil or discuss publicly some of the coverage policy decisions kind of what led to a change from a negative or no coverage that coverage.

So as we go through the quarter at the closing a third quarter.

Great and then just lastly from me on new deal melanoma, obviously small part of your business now I'm just kind of curious given the volume declines in a pretty comparable to the decline you saw for melanoma, obviously that makes sense given if you know because it's an opposite to shut down or how filter part I think.

I think there's.

Delayed diagnosis et cetera was curious from a recovery standpoint, do you expect that business to recover at up at a faster rate potentially just given the urgency associated with that particular.

Yes, I information provided yeah, I was hoping for that actually I think we're going to see it just a reverse happen sungy I.

As you may recall from the.

Urban Coven commentary, we did a review looking yet.

Ill how're patients with melanoma first detected potentially having melanoma and at least the U.S. based literature. If you can trusted because it was all done by dermatologists would suggest that 80% of people who end up getting diagnosed with melanoma, usually sell protect that mobile first why do they do have their spouse or friends says hey.

Hey.

Thats buying back your neck is getting worse now get it checked out. So we were our internal models suggest that we would think that the that the sort of post cove. It in terms of patients being anxious about not going to a doctor would would would would go away a bit quicker in melanoma scan because.

As it's a visible lesion.

In comparison that information, we've we've been able to glean from our.

That are oncology customers, which are those retina specialists that really treat high tumors is that the majority of their patients that they end up managing or diagnosing with youview melanoma are usually found incidental to a optometry or routine ophthalmology visit so I think given up.

Tom would you practices were largely closed after the second quarter.

Well, we don't have a good handle on just to be Frank is.

You had a patient who is going in for their annual eye exam for a prescription lens change in April and that appointment was cancelled they get a rush back in September our August because they.

Because of what I guess, if they are felt their prescription was off maybe so so I think we'll see a slightly slower recovery of that so.

All that being said, it's also difficult to believe that somebody with they are using melanoma. That's that's that's accelerating from a gross standpoint is not going to have a visual disturbance sooner rather than later, so I think at the end of the time, we will see kind of delayed issue behind the decision yet melanoma test, but given that the.

Volume is so low that rare cancer I'm not sure we can discern the actual facts behind that you want to.

And next line, yes, I just I think the key there's just a small patient numbers here make make that a little bit more difficult to try to trend now.

Okay, great. Thank you so much.

Thanks Angie.

Thank you and your next question comes from the line of Cats with Baird. Your line is open. Please go ahead.

Hey, guys. This is actually timeline for Catherine I appreciate the color on the quarter in terms of how orders trended.

Just curious I know you guys had said you still saw year over year increase in July I was curious even just directionally versus June how that trended specifically just trying to dig into.

Whether you guys have kind of seen some pull back given the cobot as sort of flared up.

The July I think we've seen that consistently from Theres. Just curious if you are seeing same thing.

Yes. Thanks. Thanks for the question, we do want to be careful avoid trying to try to make monthly disclosures here on some of these topics just to.

Just because it is more effective I think to look at things on a quarter by quarter basis, but.

I don't think we've seen.

The tightening up in some areas I guess or the re tightening in some areas, we've not seen that affect physician encounters for dermatologist and their patients and I think that.

In contrast, with early days in the coded crisis when.

Physicians and healthcare providers, you know didnt they were cautioning people not to visit don't don't come in for a variety of reasons now I think what you hear in most parts of the country or providers are saying, Hey don't put off your health care don't put off your care needs, we'll find a way to treat you safely we'll make sure you're comfortable will make a.

We will but if you have health care needs you need to be treated for those and that's one of the the lagging impacts of this is I think a lot of people will find had had things that may or may be more acute and they could have been if they've gotten treatment in a normal normal post post coated cadence so.

We're cautious deal we we don't know what's going to happen. So so thats why we can't yet really.

Hey, good solid predictions, but at least so far it looks like the health care provider community is continuing to continue to practice, it's care in a normal fashion.

Okay. Thanks are they sort of color on that maybe just one more if I could dig in a little bit more to kind of your thoughts or strategy behind the pipeline launches in the back half specifically just around physician access and the ability to sort of get in front of reps. So just curious I know you guys had mentioned year Jensen training virtually but just any thoughts.

It's on how that launch sort of looks like and it cobot environments sort of compared to what we would typically think as a new product launch.

Yes so.

I guess I would say in a typical new product launch our commercial team I think would have a mixture of relying upon confidently trained sales representatives and medical science liaison.

Speaking to clinicians one I want to earn small groups we would.

Normally wouldn't trained up.

A group of speakers most of them being investigators to develop set as squamous cell carcinoma test to maybe some other individuals who couldn't participate as investigators but are excellent speakers from a peer to peer standpoint, it'd be it's ideal that to train those people in small group in persons that.

Things of that not only can they understand the information, but as there was questions and discussions around the use of our task maybe some data strong points weak points you can learn from a group dynamic.

Those in person meetings have had to be largely canceled because of concerns about what that means going back to my practice for example, when I could have been exposed the airport for a training opportunities. So I think compared to normal product launch, we're going to see a little more reliance in the first couple of months on in person.

And some virtual sales calls and calls by medical Science liaison say individuals I think we will see.

Peer to peer opportunities kind of grow up a little slower in the covert environment that you might expect in the non co environment.

As we've talked with Puneet earlier I think at the end of the day, where if we look back sort of at the end of the second first quarter into the second quarter next year I think we won't be able to see that has a negative or positive, but otherwise we feel pretty good about the level of engagement, they're getting from our customers today on our cutaneous melanoma test nothing adding the squamous I'll pass.

To that dialogue given it has a very similar use you might say is going to be.

[music].

Easily worked into the normal sales call cycle, but bottom, but I think the one thing if you're asking me what might be different is probably a little less reliance on having certainly peer to peer opportunities as you would expect if we.

The major meetings in the fall at the American Society of Dermatological Surgeons was maintained in person meeting we wouldn't add.

A lot of local programs, there because that really wouldnt be that target audience, our customer base and with that being.

Virtual slash cancel those sort of big opportunities are sort of taken away in the early fall this year.

All right that's it for me appreciate the color guys.

Thank you Tom.

Thank you and your next question comes from the line.

Gee with Canaccord Genuity. Your line is open. Please go ahead.

Hi, Thanks for taking the questions.

To start can you offer any additional detail just around the recovery of new Doc adds specifically.

Over the over recent.

Weeks or months, and what sort of virtual customer targeting initiatives from your salesforce are resonating with with dermatologists in the current environment.

Yes to actually questions back I think.

One is that.

We did see concomitant with our sales expansion that occurred December onest of 2019.

Nice acceleration I guess, you would say of new ordering Doc growth in one Q2 thousand 20 over one Q 19 as you saw in the release of the script that got.

That was reduced compared or access to our growth. We saw last year I think thats, a direct result of having less face to face visits and of course, having a lot of dermatologist thing nobody.

In late March to maybe mid May for example across the country, we did see.

Commensurate with the increase in order flow going from you know minus 43 to minus 39 to plus 10% a similar kind of re growth in terms of new ordering docs, whether that feels pretty good that we're able to.

In the time period, where we had just a virtual interactions with connections we have a number of.

Clinicians, who who began ordering off of a virtual interaction, which I think is positive about that that kind of a zoom color that kind of a go to meeting small group called being effective in terms of having physicians think about the data that's being share to think about the potential value and actually acting upon that.

I don't think Thats as effective as in person just because you don't have a really good chance of reading body language and being able to go deep on questions, but thats as part of what we were asked so I think the recovery of that.

Of new ordering dock growth feels like it was coming in parallel to the recovery overall order gross that feels good I think for the third and fourth quarter and in terms of where we expect the business to be Frank do you want to.

I concur.

I would add to that.

Great well and send out your your balance sheet is fortified.

You are investing in your two newly announced.

Trials and studies are there any other internal investment that you plan to accelerate following the financing and any change to your view on potential M&A or or complementary tuck ins.

So I don't want to talk about M&A, Frank and do that so I certainly fortifying the balance sheet with them with the follow on raise their in late June and I guess issue. In early July was was was quite positive for us and.

As we talk about going into that the most important thing Frank and I sat down with the management team in early January 2020 was.

When we get 12 months down from this point in time.

We think we're going to be investing again in our cutaneous melanoma test to both drive utility and bought and drive offensive data generation.

We we expected by the end of the year to have two successful product launches with the squamous cell carcinoma launched metastasis is pigmented lesions and we also plan on being able to initiate one two or maybe three additional pipeline programs.

Before December 30, Onest 2020 turns the corner and the most important commentary we had was we didn't want to.

Reached the end of 2020, and this was pre cobot mind you.

And being a position the say we have to make a choice because we didnt go back and take care of our job properly and so we felt it was exactly wrong, they haven't say rather than rather than starting to pipeline programs are going to start one because I don't have enough capital in the bank and so part of our goal of that raise was to make sure we can invest aggressive.

Really in proactively for the business and 20 to 23, 24, and co which just happens to be kind of a negative factor. There of course withdraw them a reason to push towards the gas quite positive. So specific initiatives, we talk briefly about the.

The decision the ex melanoma.

Large protocols that we initiated earlier this spring so part of the proceeds will undoubtedly be used for R&D in cutaneous melanoma I think as we've seen the data progressed published for squamous cell carcinoma. The skin we are.

I wouldn't say, we weren't excited before but I mean, the impact of that test can have on a population is probably what nearly twice the size of our melanoma population is just so fantastic and so you can that there will be increasing both commercial investments as well as R&D investments. So that we can have patients and clinicians.

To the full value of that test as soon as possible and of course and subsequent pipeline programs you want to add clarity there.

Yes, sure and Max we certainly are open minded M&A opportunities and and happy to take a look having said that I would note that we're still maybe 15% penetrated in our melanoma product, which is a half a billion dollar Tam and we're just about to launch two new products. The another billion.

And a half and so.

We've got so much runway ahead of us in the area, we're in and so much opportunity for growth.

We don't spend too much time looked looking outside of that we will of course look at ideas and if it makes sense for shareholders. We certainly are positioned to do something but.

We're just excited about the the space we've got in the end the the path ahead for the for the existing portfolio.

Great that's it for me thanks.

Thank you and I'm showing no further questions at this time.

Back over to <unk>.

For any further remarks.

All right. Thank you operator.

This concludes our second quarter 2020 earnings call.

Frank and I personally want to thank you again for joining us today and for your continued interest in castle allow sciences.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a great.

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