Q1 2025 Castle Biosciences Inc Earnings Call
Paul Knight, Mark Massaro, Paul Knight Souda, Paul Knight Souda, Paul Knight Souda,
Speaker Change: Good afternoon and welcome to CASEL Biosciences first quarter 2025 conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question and answer session. I would like to turn the call over to Camilla Zuckero, Vice President of Investor Relations and Corporate Affairs.
Camilla Zuckero: Joining me today are castle's founder President and Chief Executive Officer, Derek Muscle Chief Financial Officer, Frank Stokes and senior Vice President Medical Dr. Matthew Goldberg.
Speaker Change: <unk> certified dermatologist and dramatic pathologists.
Speaker Change: Information recorded on this call speaks only as of today may five 2025. Therefore, if you are listening to the replay or reading. This 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.
Speaker Change: Three weeks following the conclusion of the call.
Speaker Change: Before we begin I would like to remind you that some of the statements made today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
Speaker Change: These forward looking statements include but are not limited to statements about our financial outlook Tam intended use population and similar items referenced in our earnings release issued today and statements containing projections regarding future events or our future financial or operational results and performance, including <unk>.
Speaker Change: Our anticipated 2025 total revenue our expectations regarding reimbursement for our products opportunities for growth impacts of seasonality and other trends the size and structure of our commercial teams the timing of targeted milestones and the impact of our investments in growth initiatives, including our ability to achieve.
Speaker Change: <unk> long term growth and drive stockholder value.
Speaker Change: Forward looking statements are based upon current expectations and involve inherent risks and uncertainties and there can be no assurances 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.
Speaker Change: Other risks and uncertainties are described in detail in the company's annual report on Form 10-K for the year ended December 31, 2024, and its quarterly report on Form 10-Q for the quarter ended March 31, 2025 under the heading risk factors and in the company's other documents and reports filed or to be.
Speaker Change: 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.
Speaker Change: In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue adjusted gross margin adjusted net loss per share basic and diluted and adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP.
Speaker Change: These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. We believe these metrics provide useful supplemental information and assessing our revenue and operating performance reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are.
Derek Muscle: And the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the Companys website I will now turn the call over to Derek.
Derek Muscle: Thank you, Tim Hello, and good afternoon, everyone. We are off to an exceptional start of the year building on our track record of consistent execution and strong business fundamentals.
Derek Muscle: Revenue grew by 21% to $88 million in total cash report volume for our core revenue drivers grew by 33% compared to the first quarter of 2024.
Derek Muscle: Additionally, we believe our strong balance sheet with $275 million in cash cash equivalents and mark.
Derek Muscle: Investment Securities gives us the flexibility to continue executing on our growth initiatives as we work to maintain financial discipline.
Derek Muscle: This includes strategic opportunities as evidenced by our announcement earlier today that we signed agreement to acquire providers, which we believe can further benefit patients and providers alike, while strengthening our position in the gastrointestinal space.
Derek Muscle: Today, I will walk you through business highlights from the quarter discuss our expected acquisition that providers and then Frank will provide additional financial highlights before we turn to your questions.
Speaker Change: Before diving into our business highlights I'd like to introduce Dr. Matthew Goldberg, Matt joined Castle in August 2020, and currently serves as our senior Vice President Medical he completed his dermatology residency at the University of California, San Francisco, followed by dramatic Pathology Fellowship at the University of Texas southwestern.
Speaker Change: Or certified in both dermatology and no matter of pathology. Dr. Goldberg is the ideal person to discuss our decision Dx melanoma test as we enter may skin cancer awareness month.
Speaker Change: <unk>.
Speaker Change: Thank you Derek.
Speaker Change: My skin cancer awareness month, our mission aligns with raising awareness about the importance of prevention early detection risk assessment and personalized treatment strategies designed to improve patient outcomes, including one of the most aggressive forms of skin cancer melanoma.
Speaker Change: Think about the patient journey, our decision Dx melanoma test is ordered by physicians after biopsies take place in the diagnosis of invasive melanoma is made and our test is designed to answer two important clinical questions to guide subsequent treatment plan decisions at this point in the patient journey.
Speaker Change: First what is the risk of Sentinel lymph node positivity in order to inform decisions on Sentinel lymph node biopsy procedure.
Speaker Change: Second what does the patients risk of recurrence and importantly decision Dx melanoma has been shown to be associated with improved patient survival as evidenced from real world prospective data.
Speaker Change: Therefore, I am, especially pleased decision Dx melanoma recently achieved a significant milestone surpassing 200000 test orders since we launched the test.
Speaker Change: This is a remarkable achievement and I'm extremely proud of my colleagues and their unwavering commitment to improving the lives of the patients we serve.
Speaker Change: With that I will turn it back to Dirk.
Dirk: Thanks, Matt now we will discuss our quarterly highlights for decision Dx melanoma, we delivered 8621 test reports in the quarter, an increase of 3% compared to the first quarter of 2024 and roughly flat from the fourth quarter of 2024 as expected.
Dirk: As a reminder, historically the second quarter sees grow sequentially over the first quarter.
Dirk: Importantly, we anticipate high single digit volume growth our decision Dx melanoma for the full year 2025 compared to 2024.
Dirk: We believe our compelling body of evidence reinforces continued adoption, we were especially pleased with the recent publication of two papers discussing data from a prospective multi center study demonstrating a significant impact of our decision Dx melanoma test Sentinel lymph node biopsy or S. L M B decision, making.
Dirk: The first publication reported data from our decide study.
Dirk: Importantly, the performance of a low risk so Sidney <unk> melanoma test result to predict Sentinel lymph node positivity rates of less than 5% who have elected to have a natural Mb.
Dirk: In this prospective multi center study no patient with a decision Dx melanoma predicted risk of less than 5% at Heartland positivity.
Dirk: Decided to have an actual MB procedure anyways had a positive note.
Dirk: That is the actual <unk> positivity rate was zero percent.
Dirk: The second publication shared outcomes of patients with a low risk decision Dx melanoma test result.
Dirk: Approximately half the patients decided to forgo in SMB that approximately half proceeding with an S. OMB. Despite the low risk decision Dx melanoma test result.
Dirk: Ah clinical significance all patients with a low risk decision Dx melanoma test result will recurrence free specifically, we saw a 100% recurrence free survival rate with a median follow up of two years.
Additionally, during the quarter, we presented a new study data at the National comprehensive cancer network or MCC and 2025 annual conference showing decision Dx melanoma as a significant predictor of mortality in a real world cohort of nearly 7000 patients with early stage cutaneous melanoma.
Dirk: Specifically as part of the castles collaboration with the National Cancer Institute Seer program. This study further validated decision Dx melanoma risk stratification performance and patients within our early stage cutaneous melanoma tumors or stage one to two way.
Dirk: In a real world cohort of 6892 eight edition of the American Joint Committee on cancer or age ACC eight low risk patients to test identified individuals at higher risk of death.
Dirk: Importantly, multi variable analyses confirm decision Dx melanoma as a significant predictor of melanoma specific mortality and overall mortality independent of key age ACC eight factors. These findings highlight the test's ability to refine risk assessment beyond <unk> staging.
<unk> identified patients, who may benefit from enhanced surveillance and management to potentially improve outcomes.
Dirk: Moving onto our decision Dx SCC test, we delivered 4375 test reports in the first quarter of 2025.
Dirk: Building on our six studies published in 2024, we presented new data at the <unk> 2025 annual conference demonstrating <unk> ability to enhance risk stratification beyond traditional staging specifically.
Dirk: Specifically this study evaluated how integrating decision Dx SCC with the Brigham and women's hospital or BW eight staging under NCC and guidelines may improve prognostic accuracy.
Dirk: Multicenter cohort of 1412 high risk FCC patients decision Dx SCC significantly enhance metastatic risk stratification, and NCC and high risk.
Dirk: And very high risk patient populations and the data demonstrated that the test to improve <unk> staging risk prediction accuracy.
Dirk: When combined with PVH staging a decision Dx SCC class. One test result, which is considered a loan risk results a nearly two fold decrease in metastatic risk while a class two b test result, which is the highest risk reporting.
Dirk: More than a fivefold increase in risk among lower stage patients classified as <unk>, one or <unk> NCC in high risk patients.
Dirk: These findings demonstrate the decision Dx SCC may refine individual patient risk assessment supporting more accurate personalized treatment decisions based upon a patient's predictor metastatic risk now, let's churns decision Dx SCC reimbursement the <unk> local coverage determination policy.
Dirk: <unk> or LCD that included non coverage language for decision Dx SCC went into effect on April 24, 2025, we.
Dirk: We will be pursuing reconsideration request of both <unk> and <unk> LCD.
Dirk: Based upon timing neither visa Lcd's included a review of the six 2020 for publications noted above which included evidence showing that decision Dx SCC is able to predict response to adjuvant radiation therapy or <unk> in.
Dirk: In addition to predicting the risk of progression.
Dirk: Given the strength of evidence of a data surrounding this use we believe the reconsideration request could be accepted as valid.
Dirk: This evidence and additional studies to support that the test is reasonable and necessary, which is the CMS requirement to be a covered tests for patients with high risk FCC for now we will be continuing to offer the test because given the strength of evidence and decision Dx SCC is ability to predict both the risk of metastasis to impacts Juergen pathway does.
Dirk: <unk> and the ability to predict responsiveness to <unk>. We believe it is the right thing to do for patient care.
Dirk: Now, let's turn to our gas neurology franchise.
Dirk: We're getting into our tissue side for performance for the quarter and we expect to provide acquisition I want to highlight that April was esophageal cancer awareness month amount dedicated to raising awareness about esophageal cancer its risk factors and the importance of early detection.
Dirk: Supporting key educational programs and initiatives throughout the month of April Castle, probably collaborated with the esophageal cancer action network. The American forget Society and the Doctor podcast, you promote esophageal cancer prevention education and advocacy.
Dirk: As you will recall, we acquired tissue cipher in December 2021, giving us our spatial omics test designed to determinate patients individual risk of progression from barrick's esophagus to high grade dysplasia or south of Joe cancer.
Dirk: <unk> esophagus with the only known risk factor for the development of esophageal adenocarcinoma cancer.
Dirk: One of the fastest growing cancers in the U S with a five year survival rate of less than 20%.
Dirk: Tissue cycle have been studied in 16 peer reviewed publications to date and studies have consistently found that tissue cyber is the strongest independent predictor of progression with the ability to help identify non dysplastic patients that progressed at a rate similar to confirmed low grade dysplasia.
Dirk: For this reason we are thrilled with the positive reception tissue cycle has received from the Gastroenterology community, particularly as a test can make a meaningful impact on patient care in an area with unmet clinical needs.
Dirk: In fact in the first quarter of 2025, we delivered 7432 tissue soft protects reports compared to 3429 in the same period of 2020 for.
Dirk: This represents 117% year over year growth compared to the first quarter of 2024 as a reminder, the growth drivers we expect for tissue side for in 2025 and beyond include one our recent commercial team expansion.
Dirk: To the unmet clinical need and clinical value of our tests being further accepted by clinicians and three a strong focus on education and awareness.
Dirk: We're excited about the growth prospects of the test, including our volume growth expected in 2025, and we are equally pleased by its clinical utility to determine a patient's individual risk of progression from there to the south I guess disease to cancer.
Dirk: Turning to our announcement from earlier today, we recently signed a definitive agreement to acquire provides a gastro intestinal health company with a primary focus on a soft gel disorders. We believe its proposed transaction underscores our commitment to the Gi community providers and patients alike.
Dirk: As part of our strategic growth initiatives, we continually assess opportunities for ones that would fit into most or all of our outlined criteria, which are complementary to our existing tests disease states, adding value for our current customers.
Dirk: Some level of existing reimbursement and the test that could be successful at utilizing castles commercial playbook with providers, we found an opportunity to expand our offerings within our Gi vertical.
Dirk: And our spatial omics tissue cyber bearish esophagus test furthering our position in this space.
Dirk: Provides us methylation technology as well as pipeline technology provides us with the potential to address existing unmet needs, including potential upstream opportunities.
Dirk: We expect the transaction to close in a matter of weeks and we will continue to work through technology transfer integration and future R&D plans.
Dirk: Turning to our mental health business as we told you on our last earnings call in February due to changes in the market and our focus on allocating our resources efficiently unprofitable growth in late 2024, we revise our commercial strategy for our <unk> test reallocating resources to inside sales and non personal promotion after.
Dirk: Careful further assessment, we made the decision to discontinue the tests effective may 2025, as it makes the best sense for our business to put its resources towards other disease states with unmet clinical needs and with that I'll now turn the call over to Frank.
Frank Stokes: Thank you Derek and good afternoon, everyone.
Frank Stokes: As Derek highlighted we delivered very good first quarter financial results revenue was $88 million for the first quarter 2025, an increase of 21% in the first quarter of 'twenty 'twenty four.
Frank Stokes: Increase was driven primarily by Tesla.
Frank Stokes: Dermatologic tense.
Frank Stokes: That is a 117% tissue side for grades compared to the first quarter of 2024.
Frank Stokes: Adjusted revenue, which excludes the effects of the revenue adjustments in the current period related to tests delivered in prior periods was $87 $2 million for the first quarter 2025, an increase of 22% this quarter.
Speaker Change: Quarter 2020 for them.
Speaker Change: The total level 2025 year, raising our revenue guidance to $2 $87 million to $297 million up in the previously provided range of 280 to 200 million.
Speaker Change: Our revenue guide reflects decision Dx SCC reimbursement by Medicare through April 24.
Speaker Change: The apples to apples comparison, which creates when he kind of revenue growth. If you exclude decision Dx SCC revenue baked our 'twenty 'twenty four is really it's really kind of tools.
Speaker Change: Our new England is revenue growth and sweet leaf or it would be high teens to low two lease percent.
Speaker Change: Our gross margin in the first quarter was 49, 2% compared to 77, 9%.
Speaker Change: First quarter two weeks.
Speaker Change: Our adjusted gross margin, which excludes the effects of intangible asset amortization related to acquisitions and exclude the effects of revenue adjustments in the current period associated with sensor produced delivered in prior periods was 81, 2% for the quarter compared to 85% from the same period in two weeks.
Speaker Change: Gross margin for the first quarter 'twenty was impacted in large part due to the onetime adjustment and an acceleration of amortization expense and approximately $21 million.
Speaker Change: <unk> squeeze we.
Speaker Change: Associated with the discontinuation of <unk> genetics.
Speaker Change: For each of the remaining quarters until each week, one we expect gross margin to be in the mid seventies reach.
Speaker Change: Turning to expenses, our total operating expenses, including cost of sales for the first quarter 2025.
Speaker Change: $113 9 million compared to $78 $3 million from first quarter of 2020 for Susan.
Speaker Change: Sales and marketing expense for the quarter were $36 8 million compared to $30 5 million for the same period in 2024.
Speaker Change: Increase is mainly due to higher personnel costs higher organizational and business development activities cost and higher sales related travel and other expenses.
Speaker Change: General and administrative expenses were $21 $8 million for the quarter compared to $18 million for the same periods where between the two.
Speaker Change: The increase is primarily attributable to higher personnel costs higher information technology related costs and higher professional fees.
Speaker Change: Higher personnel costs reflects head count expansion and administrative support functions as well as merit and inflationary wage adjustments for existing employees.
Speaker Change: Cost of sales expenses were $16 $4 million in the first quarter to 80 to 85 compared to $13 9 million in the first quarter of 2024.
Speaker Change: Due to higher personnel costs higher depreciation expense for lab equipment, and leasehold improvements and higher lab services cost.
Speaker Change: Increases in personnel costs reflect the higher head count additions to support business, Great response, and Green Test report volume as well as merit and inflationary wage adjustments for existing employees.
Speaker Change: Higher expense for lab services also reflects higher Chesterfield modems.
Speaker Change: <unk> expenses were $12 $6 million for the quarter compared to $13 $8 million from the same period in 2024, primarily due to slightly lower personnel cost and expense for clinical studies.
Speaker Change: Total non cash stock based compensation expense, which is allocated among cost of sales R&D expense and SG&A expense was $11 $2 million for the first quarter 2025.
Speaker Change: Slightly from $12 7 million in the first quarter, which means we.
Speaker Change: Despite a 23% year over year increase in total headcount.
Speaker Change: Interest income was $3 $1 million for the first quarter of 2025 compared to $3 million in the first quarter of 2024, primarily result of higher average balances marketable investment securities as slightly higher interest rates.
Speaker Change: Our net loss for the first quarter 2025 was $28 million compared to $2 $5 million for the first quarter 2024.
Speaker Change: Net loss per share basic and diluted.
And adjusted net loss per share basic and diluted was <unk> <unk> compared to nine 9% respectively for the same periods in 2024.
Speaker Change: Adjusted EBITDA for the first quarter was $13 million compared to $10 5 million for the comparable period in 2024.
Speaker Change: Net cash used in operating activities was $6 million for the first quarter 2025, <unk> annual cash bonus payments and certainly hope to beat the payments that do not recur really the remaining three quarters of the year.
Speaker Change: We continue to expect to deliver positive net cash flow from operations for the full year 2025.
Speaker Change: Net cash used in investing activities was $22 4 million for the first quarter and consisted primarily of purchases of marketable investment securities of $48.
Purchases of debt securities classified as held to market $5 $6 million.
Speaker Change: This is a property and equipment $4 7 million, partially offset by the maturity of marketable investment securities of $36 $3 million as of March 31, 2020, finally cash cash equivalence and marketable securities of $275 $2 million in conclusion, I'm pleased with our strong execution and results in the first quarter and look forward to maintaining that momentum.
Derek Muscle: For the rest of 2020, I'll now turn the call back over to Derek.
Derek Muscle: Thank you Frank.
Derek Muscle: In summary, we had an excellent start to the year building on our strength and momentum from 2024 underpinned by robust business fundamentals, we look forward to continuing to work to achieve the goals. We set for 2025 as our focus remains on driving both near and long term stockholder value. Thank you for your continued interest in castle, we will now be happy to take your.
Derek Muscle: Questions operator.
Speaker Change: In order to allow everyone in the queue and opportunity to address the castle management team. Please limit your time on the call to one question and one follow up.
Derek Muscle: Additional questions.
Derek Muscle: Please return to the queue. Please standby, while we compile the Q&A roster.
Speaker Change: The first question is from the line of sung <unk> Nam with Scotiabank you May proceed.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: Frank just a clarification on the mid 70% gross margin guidance is that GAAP or non-GAAP and also does that include a decision Dx SCC.
Speaker Change: Contribution or impact.
Speaker Change: That's adjusted.
Speaker Change: <unk> gross margin <unk>. It does include the falloff of reimbursement for a SEC.
Speaker Change: Okay got it and then just on a pre buy.
Speaker Change: Sorry.
Speaker Change: Didn't have a chance to go through their website carefully but do they offer the methylation technology. They operate that mostly tissue based today offer liquid biopsy base.
Speaker Change: Technology as well and then do you anticipate.
Speaker Change: Immediate contribution in terms of sale from the.
Speaker Change: The acquisition or is it just.
Speaker Change: Largely complementary in terms of providing additional insight to your tissue paper product. Thank you.
Speaker Change: Okay.
Speaker Change: So they have a <unk> that have a.
Speaker Change: A product that is available commercially today.
Speaker Change: That is as tissue base. So it's similar to tissue cipher by the users methylation platform our technology platform.
Speaker Change: Also have.
Speaker Change: A.
Speaker Change: A non endoscopic sponge based technology and.
Speaker Change: And from our perspective, we look forward to seeing if we could potentially combine both methodologies going forward into both tissue based testing as well as non endoscopic, our non hedge biopsy tissue specimens.
Speaker Change: As you know we have indicated last several quarters, we've been looking for other opportunities both in dermatology and in gastro royalty to complement our current offerings and build the strength of both of those franchises.
Speaker Change: Revised happens to be one of the.
Speaker Change: Opportunities that we were able to pull a trigger on at this point in time, but there are other ones out there that we will hopefully be able to discuss in the future.
Speaker Change: Great. Thank you regarding sponsor contribution.
Speaker Change: And suddenly we wouldnt expect meaningful impact on revenue or EBITDA this year.
Speaker Change: But those impacts will be more downstream.
Speaker Change: Got it appreciate it thank you.
Speaker Change: The next question is from the line of Kyle <unk> with Canaccord Genuity you may have.
Speaker Change: Proceed.
Speaker Change: Hey, guys. Thanks for the questions and congrats on quarter on the acquisition so just on providers.
Speaker Change: Maybe just can walk through Derrick, where Easter predict fits into their workflow relative to tissues diapers I was wondering if that compete at all and then can you also talk about.
Speaker Change: The tests Medicare payment rate mix and the annual volume of fossil.
Speaker Change: So.
Speaker Change: They provide test as a predict because they methylation based.
Speaker Change: Assay.
Speaker Change: <unk> use is for predicting progression.
Speaker Change: South bear to soft so similar to castles test.
Speaker Change: Tissue cyber the tissue side for dataset is it's more robust.
Speaker Change: Our interest.
Speaker Change: This will see one how can this enhance our tissue size of our franchise can the combination reporting of both.
Speaker Change: Tissue side for from a spatial omics standpoint, and DNA methylation from a provider standpoint, and get us to a a.
Speaker Change: A stronger clinical.
Speaker Change: Clinical offering to our patients today and tomorrow and then of course can we also use the the non endoscopic sponge based technology to really push forward a little more upstream vessels offerings.
Speaker Change: Got it that's helpful. Thanks, Derik and then on the I guess what the.
Speaker Change: Insinuation about genetics.
Speaker Change: Can you talk about how you will reinvest the spending associated with the the personnel and the marketing for that product and maybe like how much that business was burning and if there's any like run rate savings net of severance that you can talk about.
Speaker Change: Yeah, not a lot not a lot of severance or changes we were as we said we had changed the marketing support for that test.
Speaker Change: We continue to believe it is a very good test and of course it is.
Speaker Change: Unfortunately, incredibly unmet medical need.
Speaker Change: But while payors and our business are rarely rationale they've been especially difficult in that one and so.
Speaker Change: That led us to sort of the changes we made over the last several last couple of quarters.
Speaker Change: I think that we will see some modest impact to revenue Kyle.
Speaker Change: But EBITDA will be benefited positively benefited from the change as well so.
Speaker Change: Not big numbers, there, but there will be some revenue.
Speaker Change: Lower revenue, but at the end of the day it will it will improve the EBITDA performance of the company.
Speaker Change: The next question is from the line of lead to Sudan with <unk>.
Speaker Change: Leerink partners you May proceed.
Speaker Change: Hi, guys. Thanks for taking my questions.
Derek Muscle: So first one Derek.
Speaker Change: I just wanted to understand I think you gave a high single digit volume growth toward decision Dx melanoma, I'm, just trying to understand where some of the offsets are.
Speaker Change: And what tissue site for growth ought to be in.
Speaker Change: And <unk> and for the full year.
Speaker Change: Just trying to reconcile the growth.
Speaker Change: Implied growth for tissue so for as a result of decision Dx melanoma.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: Frankly, I think that yes sure.
Speaker Change: Yes, what we said puneet as volume growth on melanoma of of mid to high single digits.
Speaker Change: For the year over year 25 over 24.
Speaker Change: And we reiterated or we provided an apples to apples number.
Speaker Change: So the rest of the rest of the growth is Tc.
Speaker Change: We also think we will see some continued benefit or improvement in ASP melanoma.
Speaker Change: <unk>.
Speaker Change: The team has done great work, there and we continue to see very slow and very.
Speaker Change: Deliberate, but some continued progress.
Speaker Change: On the ASP side, there was benefit numbers as well so.
Speaker Change: Good good solid growth for Tc.
Speaker Change: Yes.
Speaker Change: So if we keep the same kind of scale that we have.
Speaker Change: Good consistent linear growth from here through the year.
Speaker Change: Got it thanks for clarifying that strength.
Speaker Change: On the tissue side for.
Speaker Change: Correct me, if I'm wrong, but I think Europe to 65 sales reps.
Speaker Change: Can you remind us what's the expectation for hiring for the rest of the year.
Speaker Change: And.
Speaker Change: On the reimbursement side can you just remind us where you stand with <unk>.
Speaker Change: Commercial reimbursement for <unk> and.
Speaker Change: So the priority for commercial reimbursement and where do you stand today with soft tissue laser.
puneet: So I think we discussed that were around 65 sales territories I guess here in earnings Puneet.
Speaker Change: So we are.
Speaker Change: Having training being completed getting people's feet wet.
Speaker Change: Take certainly a breath and make sure that we can understand if there are gaps in the marketplace right now and the need or benefit to expand more in 2025 versus a little bit later.
Speaker Change: I don't think we would discuss on a public plants about near term expansion I think we need to kind of get through the second quarter here and C. C.
Speaker Change: See how the expanded efforts are educating the marketplace are producing results and then kind of go from there.
Speaker Change: At the end of the day, if we are accurate in our assumption that we believe there is around 10000.
Speaker Change: Targeted bolt commissions are gastroenterologists and their associated support than 60.
Speaker Change: 65, still seems a little low, but we arent quite sure to be honest, if the larger group practice models that gastrologist practice and makes that number adequate over it. So as you go up a couple of regions.
Speaker Change: The second question.
Speaker Change: Yes.
Speaker Change: The next question is from the line of Catherine Schulte with Baird. You May proceed.
Speaker Change: Everyone. This is Tom Peterson on for Catherine I. Appreciate you guys, taking the question questions. Congrats on solid quarter first question that's.
Speaker Change: I kind of wanted to get the latest on sales and marketing efforts for the SEC decision Dx melanoma.
Speaker Change: You had talked about shifting the sales force incentives more towards melanoma one.
Speaker Change: ICC coverage came out of the model. So I guess can you just confirm that that is.
Speaker Change: The strategy going forward.
Speaker Change: Your thoughts on sort of the volume outlook for 'twenty five.
Speaker Change: Yeah.
Speaker Change: Yes that is still the intention Tom.
Speaker Change: This is to have the.
Speaker Change: <unk>.
Speaker Change: Field forces go from roughly kind of 50, 50, I guess I would call it.
Speaker Change: Splitting time between melanoma and squamous cell carcinoma to being very.
Speaker Change: Very heavily weighted going forward in the second half of the year to melanoma.
Speaker Change: We haven't had a.
Speaker Change: Single test focus in this marketplace I think progress is totally right.
Speaker Change: While the Covid source and we were much smaller there as the company. So it's hard to say what kind of I guess lift or acceleration one could see when we go back to a solely focused are predominantly solely focused field team in dermatology, but our expectations is that we should see some lift as appropriate.
Speaker Change: Okay. Thanks, that's really helpful. And then you mentioned the reconsideration request for both <unk> and <unk> I guess, what's your latest thoughts on timing here should we expect.
Speaker Change: An outcome here in 2025, and just your latest thoughts there.
Speaker Change: Sure So I think.
Speaker Change: First of all.
Speaker Change: Our recommendation our guidance I guess in the last year and a half of having people.
Speaker Change: Remove squamous cell carcinoma from revenue models was obviously.
Speaker Change: Good straightforward approach and certainly for the remainder of 2025 I would not have anybody reinsert circ revenue assumptions I think on timing.
Speaker Change: It's difficult to project at this point in time, and I think as we see the year progress. So the quarter progressed through the quarters progress will go and update.
Speaker Change: The group as we have material knowledge. There is no real good benchmark to kind of give you a.
Speaker Change: Evidenced based.
Speaker Change: Target there.
Speaker Change: The next question is from the line of Pone <unk> with Keybanc you May proceed.
Speaker Change: Thanks for the question.
Speaker Change: On the could you talk about the distribution of your sales force.
Speaker Change: Bye.
Speaker Change: Hi.
Speaker Change: So we have an idea where youre doing most as this year.
Speaker Change: Yes, Paul So as we said the GI sales force it is rough and tough middle <unk>.
Speaker Change: And the Derm sales forces is high <unk>, maybe around 70.
Speaker Change: Should we expect that build and ramp to continue this year.
Speaker Change: The <unk> salesforce, they're making some growth here and there as we see territories get get full.
Youll see territories become kind of Fuller business, and we need we need more effort in the territory, where you take a territory make it two or something like that that will be more episodic I think and as Derek said earlier I think on the TC side, we want to settle into where we are and watch how the territories progress to see if we need to add another another handful of.
Speaker Change: Ups there.
Speaker Change: The next question is from the line of <unk> <unk> with Guggenheim You May proceed.
Speaker Change: Thank you for taking my question.
Speaker Change: And then regarding the acquisition of device and your positioning of this as a complementary asset Patricia cipher conceptually makes sense Doug.
Speaker Change: It does seem at least on the surface.
Speaker Change: They want to they've been Lightpath acquisition, a few years ago, which as you know came up light of targets and I ask not to be heavy handed but I want to hear what is different here than what lessons were learned that increase the probability of success because on paper, but it definitely looks interesting.
Speaker Change: Mr Last forever, but we're very much if I recall I think so.
Speaker Change: So we so but we do quite like the bypass acquisition, we were able to pull up reimbursement for the differential diagnostic test, which was very important we were able to add another offering to two <unk> and derm paths, which increased our value to them.
Speaker Change: We don't expect my path to get to the scale of <unk>, our FCC given the nature of that market, but we also like having up an ability to point to prognostic test in melanoma, when my path results and a positive diagnosis.
Speaker Change: From a previously in determinant lesion.
Speaker Change: Pre buys is a bit different however, and we are excited about the technology that comes along with it.
Speaker Change: As Derek said theres going to be some some work done in some interesting.
Speaker Change: Efforts to see if we can improve the prognostic offering potentially with a multi omics approach at some point.
Speaker Change: But also pre buys has a very interesting pipeline in Gi and as we've said before.
Our intent and goal to have multiple offerings to the Gi community.
Speaker Change: <unk>.
Speaker Change: Particularly around the kind of the upper upper Gi.
Speaker Change: In the <unk> area and this brings us.
Speaker Change: Located that's there so.
Speaker Change: Motivations for the two but.
Speaker Change: A nice a nice expansion of our pipeline as well.
Speaker Change: Oh look at that shrank and it maybe I missed this but how much is it getting reimbursed and how how does this compare to tissue cycle in terms of the Medicare rate and then that payable in decision making for doctors.
Speaker Change: Not not I don't think it plays a role in decision, making their Medicare rate is lower than ours, because ours is the <unk>. So.
Speaker Change: That's a that's a differential there.
Speaker Change: But not I.
Speaker Change: I don't think clinicians are or are making that making decisions that way I think Tc we've been able to grow so quickly because of the robust body of evidence supporting the clinical utility and the high action ability of the test.
Speaker Change: The next question comes from the line of Nathan <unk> with Stephens, Inc. You May proceed.
Nathan: Hey, guys. Thanks for the questions.
Speaker Change: Frank on the margin guide could you give us a bit more color on that assumption specifically what are your expectations for FCC volumes in the back half of this year, you're expecting them to trend higher flatten out go down.
Nathan: So.
Nathan: We would expect that as we shift promotion.
Nathan: More and more fully to.
Nathan: To melanoma that we would see some some certainly slowing of growth at some point I think that plateaus and we began to see the demand.
Nathan: A bit.
Nathan: But on the other hand Mason, it's a test that physicians are as you can see for volumes physicians have really embraced that it helps their practice it helps their patients.
Nathan: It helps their patient management.
Nathan: And.
Nathan: It saves Medicare almost $1 billion, a year by appropriately directing patients to agile radiation therapy, who will benefit from it and directing patients who would benefit away. So.
Nathan: We fully as saying that without promotion most diet high value diagnostic tests.
Nathan: Not grow.
Nathan: But this is also a test that has great value to the users and to the health care system.
Nathan: No that makes sense.
Speaker Change: And then as a follow up how are you thinking about the growth algorithm of decision Dx melanoma going forward and I guess in terms of same store sales versus increasing the number of ordering clinicians I mean, obviously you probably benefit from both both are important but.
Speaker Change: How do you have the reps I guess splitting their time between driving utilization or out hunting for new clinicians.
Speaker Change: So in.
Speaker Change: Historically, I guess I would say.
Speaker Change: That we.
Speaker Change: Looked at a combination of forward looking revenue per territory.
Speaker Change: As well as number of actively ordering customers I guess you would say.
Speaker Change: And what we had found which I think is I don't know if theres a real industry standard here makes or not but when we have a territory to get up around what Frank 225, 3 million forward looking revenue then that becomes a territory that.
Speaker Change: That usually if you could go back and look at sort of where the representatives spending time, it's more on maintaining existing customers and less time hunting for new new clinicians and that's kind of by the time, we choose to go ahead and divide and usually success begets success. So you probably have two successful territories adjacent to each other so.
Speaker Change: It might take two and make them into three for example.
Speaker Change: I think that rule of thumb still holds pretty well so what that ends up doing is letting us spend probably roughly half our time.
Speaker Change: Turning to educating current clinicians about where they could appropriately expand the use of our test in our patient population and then roughly half their time.
Speaker Change: Moving people from and awareness or no awareness to awareness and hopefully usage and adoption.
Thomas Flaten: The next question is from the line of Thomas Flaten with Lake Street, You May proceed.
Speaker Change: Yeah.
Thomas Flaten: Hey, good afternoon. Good afternoon I appreciate you taking the questions probably a difficult question to answer but you said in your prepared remarks that you would continue offering FCC for now do you have a sense of how Ford now how long for now will last given that theres a bit of a black box around the reconsideration request in the timelines that.
Speaker Change: Now I don't want to have more information.
Thomas Flaten: Our our inside to go ahead and guide Unfortunately.
Thomas Flaten: I think for now is that is that.
Thomas Flaten: We need to understand how.
Thomas Flaten: Our interactions play out with Medicare and that will help make a determining factor of how we want to approach that I think from a purely.
Thomas Flaten: At the coal perspective today, I guess, you would say we have a test here, which when used properly.
Thomas Flaten: To help a patient and their clinicians care team from their dermatological, our motive surgeon to their radiation oncologists identify people, who may be considering adjuvant radiation therapy, and probably take about 60% plus of them out of that therapy course, because they will receive based upon our data.
Thomas Flaten: No clinical benefit, but substantial side effects and at a great cost of Medicare So.
Thomas Flaten: For the time being we felt obligated to make sure that those patients are benefiting now Medicare benefits to the tune of around $2 4 million per day, and avoiding unnecessary or radiation therapies and that's net of the cost of our tests. So we're going to have to kind of wait and see how we work through the reconsideration process and make a call.
Thomas Flaten: As those as that.
Thomas Flaten: That was clear.
Thomas Flaten: And then.
Thomas Flaten: Any update on atopic dermatitis.
Thomas Flaten: Not since the.
Thomas Flaten: And a year in earnings we are still moving through market research to appreciate both the interest and our clinicians regarding their product profile as well as the reimbursement strategy and we believe we are still on track to achieve.
Thomas Flaten: Achieving our milestone we said a couple of years ago, which was which was commercial availability by year end.
Speaker Change: The next question is from the line of Mark Massaro with BTG you May proceed.
Mark Massaro: Hey, guys. Thank you for taking the questions on the acquisition that you just announced.
Mark Massaro: Was there any stock included in the deal or was it cash and if youre not willing to share. The terms of the deal is it safe to say that the any level of cash would be immaterial to your cash balance.
Mark Massaro: There was no stock market, we've not disclosed the value of the transaction.
Mark Massaro: Okay.
Mark Massaro: For investors on the line that that might be thinking this question.
Mark Massaro: The timing of the acquisition sort of coincides with.
Mark Massaro: Your decision to.
Mark Massaro: Shutdown, the IV genetics business, which which admittedly did telegraph.
Speaker Change: I believe you did and then it also coincides with the lapping of the FCC payments.
Mark Massaro: From your Medicare contractor for the time being.
Speaker Change: To what extent does the timing of this deal.
Speaker Change: Influence your probability of winning.
Speaker Change: FCC reimbursement back because.
Speaker Change: Optically this almost.
Speaker Change: Could look like like your.
Speaker Change: Your ability to win.
Speaker Change: <unk>.
Speaker Change: Medicare reconsideration request might be.
Speaker Change: More than it might have been a quarter ago or could you just speak to that because obviously the.
Speaker Change: You announced a new deal the timing of these other two going away.
Speaker Change: Completely unrelated.
Speaker Change: Okay.
Speaker Change: And then last quick question I know you were asked about.
Speaker Change: What you acquired.
Speaker Change: What I don't understand is.
Speaker Change: How much revenue this asset was producing in 2024, and then for the sponge technology.
Speaker Change: This does look similar to another test on.
Speaker Change: On the market called <unk>.
Speaker Change: Is it safe to say that.
Speaker Change: That the sponge technology or the non endoscopic technology and the Isa Guard tests have have some similarities in the marketplace and then if you could where does that stand in terms of.
Speaker Change: Data and Medicare coverage.
So revenue is not material to castle for the year. This is a technology opportunity for us and a pipeline opportunity first and foremost as well as.
Speaker Change: A nice way to potentially improve our prognostic offering for Barrett.
Speaker Change: And.
Speaker Change: The Medicare process for non endoscopic.
Speaker Change: Our diagnosis there is there are policies around policies out there I believe.
Speaker Change: This technology is not at the point of seeking Medicare coverage.
Although.
Speaker Change: Just to note Mark there are of course more than just one other there are a couple of known and discovered.
Speaker Change: Methods for quarter diagnosis, not only for Barrett other under conditions as well so.
Speaker Change: In that respect there is some similarity to those other technologies.
Speaker Change: Next question is from the line of Kyle mixing with Canaccord Genuity you May proceed.
Speaker Change: Thanks for the follow up just want to ask about the acquisition pipeline to keep talking about it.
Speaker Change: Can you talk about the timing of the pipeline launches and how large those opportunities are.
Speaker Change: And then just secondly, since you're getting access to the Johns Hopkins PCR based methylation technology have you ruled out using that tech.
Speaker Change: I'll pick an early the texture on carrier screening tests for Dr cancers.
Speaker Change: I Havent ruled it out Kyle.
Speaker Change: To be clear.
Speaker Change: But not not.
Speaker Change: Certainly wouldn't wouldn't stop any any opportunities there.
Speaker Change: I think that the opportunity we have is to accelerate the development of the pipeline that the company had.
Speaker Change: With additional resources, but also our broader expertise in Gi.
Speaker Change: And our somewhat deeper history of.
Speaker Change: Of R&D so.
Speaker Change: We were way down on the pipeline technologies that I don't know that were ready to.
Speaker Change: To put our put a pin in the ground on where what the timelines would be but we certainly think we can accelerate them from what they might otherwise have been.
Speaker Change: Okay. Thanks for that.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: There are no additional questions waiting at this time, so I would like to pass the call back over to Derek for any closing remarks.
Speaker Change: Thank you operator. This concludes our first quarter 2000 of all five of our earnings call.
Speaker Change: Thank you again for joining us today and for your continued interest in castle Biosciences.
Speaker Change: That concludes today's call. Thank you for your participation and enjoy the rest of your day.