On September 3, 2019 Castle Biosciences, Inc. (Nasdaq: CSTL) reported its financial results for the second quarter and six months ended June 30, 2019 (Press release, Castle Biosciences, SEP 3, 2019, View Source [SID1234539242]).
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"We are pleased with our strong second quarter performance, including our 27% year-over-year growth in DecisionDx-Melanoma test report volume, which we believe was largely driven by our successful first quarter 2019 commercial expansion," said Derek Maetzold, President and CEO of Castle Biosciences. "We are also encouraged by the success of our recently completed initial public offering and the strong level of interest from our investors. We believe the proceeds from our initial public offering, combined with our existing working capital, position us to execute upon our expansion plans and fund research and development activities."
Second Quarter Ended June 30, 2019 Financial Highlights
Revenues of $10.7 million, an increase of $6.8 million from Q2 2018.
Delivered 4,067 DecisionDx-Melanoma and DecisionDx-UM proprietary test reports, an increase of 24% over Q2 2018, with DecisionDx-Melanoma having an increase of 27%.
Gross margin of $8.7 million, or 81%, compared to $2.7 million, or 67% for Q2 2018.
Six Months Ended June 30, 2019 Financial Highlights
Revenues of $19.5 million, an increase of $11.8 million from the first half of 2018.
Delivered 7,659 DecisionDx-Melanoma and DecisionDx-UM proprietary test reports, an increase of 21% over the same period in 2018, with DecisionDx-Melanoma having an increase of 23%.
Gross margin of $15.9 million, or 82%, compared to $5.1 million, or 66% for the first half of 2018.
Supplemental Revenue Information
Affecting the year-over-year comparability of our revenues were (a) the issuance of the Medicare Local Coverage Determination (LCD) for our DecisionDx-Melanoma test, effective December 3, 2018 and (b) confirmation of the Medicare Contractor rate for DecisionDx-Melanoma. As a result of timing of these two elements, all 2018 Medicare claims covered under the LCD were recognized as revenue in the fourth quarter of 2018. Medicare revenues for DecisionDx-Melanoma associated with test reports delivered in the three and six months ended June 30, 2018, but not recorded until the fourth quarter of 2018, were $2.2 million and $3.0 million, respectively. Also, included in revenues for the quarter ended June 30, 2019 and 2018 were positive (negative) revenue adjustments related to tests delivered in prior periods of $3.3 million and $(0.8) million, respectively. For the six months ended June 30, 2019 and 2018, these amounts totaled $2.8 million and $0.9 million, respectively.
Second Quarter Business and Clinical Evidence Updates
An independent, prospective study from investigators at the Saint Louis University Hospital was published during the second quarter in the journal Cancer Medicine. The study demonstrated that DecisionDx-Melanoma accurately identified risk of melanoma recurrence independent of other prognostic factors such as Breslow thickness and sentinel lymph node biopsy. The results are consistent with previously published prospective and retrospective studies demonstrating the high performance of DecisionDx-Melanoma to predict outcomes, supporting its clinical value to inform patient management decisions.
American Skin Association (ASA) honored Castle Biosciences with the 2019 Technology Innovation in Melanoma Award for advancing innovative technology in the field of dermatology.
Poster at the 2019 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting presented updated results from a prospective, multicenter study demonstrating the accuracy and performance of DecisionDx-Melanoma with median follow-up of over 3 years. Three-year overall survival for patients with T1-T2 melanoma and a DecisionDx-Melanoma Class 1A test result was greater than 99%, providing support for the use of a DecisionDx-Melanoma Class 1A test result to identify patients at low risk for a positive sentinel lymph node biopsy result, allowing patients to avoid the invasive surgical procedure.
Poster at the 2019 Fall Clinical Dermatology Conference for PAs & NPs highlighted accuracy of DecisionDx-Melanoma risk prediction in newly expanded cumulative patient cohort of 901 patients.
Presentation at the 2019 American College of Mohs Surgery (ACMS) Annual Meeting highlighted progress in the development of Castle Biosciences’ gene expression profile (GEP) test candidate for use in cutaneous squamous cell carcinoma (cSCC).
Financing, Liquidity and IPO
As of June 30, 2019, our cash balance was $17.5 million and the outstanding principal balance on our bank term loan was $26.7 million. Subsequently, on July 12, 2019, we issued a $10.0 million convertible promissory note and on July 29, 2019, we completed our IPO, which resulted in net proceeds of approximately $66.0 million, after deducting underwriting discounts and commissions and other offering expenses.
Recent Developments
On August 22, 2019, Palmetto GBA, a Medicare Administrative Contractor, posted a draft LCD that, if finalized, would result in expanded Medicare coverage for our DecisionDx-Melanoma test. We expect that Palmetto GBA will finalize and implement the draft LCD after a public comment period that opens on October 7, 2019 and closes on November 21, 2019.
The nineteenth peer-reviewed publication supporting DecisionDx-Melanoma use was published in the journal Skin in early July. This study was an evidence-based analysis of the clinical performance and utility of DecisionDx-Melanoma using four different datasets ranging in size from 403 to 8,944 patients. The study focused on identifying a tumor thickness that would be appropriate for use of the test to guide follow-up decisions for cutaneous melanoma patients. Results demonstrate that a tumor thickness of 0.3 mm and thicker is an appropriate population in which to use DecisionDx-Melanoma to guide follow-up decisions. Note that previously published validation, performance and utility studies support the two primary clinical uses of the DecisionDx-Melanoma test following the diagnosis of melanoma. The first use is to inform decisions on sentinel lymph node biopsy in most eligible patients with tumor thickness less than or equal to 2.0 mm with no minimum tumor thickness, and the second is to guide follow-up decisions.
Conference Call Details
Castle Biosciences will hold a conference call on September 3, 2019 at 4:30 p.m. Eastern time to discuss its second quarter 2019 results and provide a general business update.
The conference call will be webcast live from the company’s website and will be available via the following link: View Source Please access the webcast at least 10 minutes before the conference call start time.
To access the live conference call via phone, please dial 877-282-2581 from the United States and Canada, or +1 470-495-9479 internationally, at least 10 minutes prior to the start of the call, using the conference ID 2368125.
A replay of the webcast will be available for two weeks following the conclusion of the live broadcast and will be accessible on the Investors section of the company’s website at www.CastleBiosciences.com.