On March 8, 2021 Castle Biosciences, Inc. (Nasdaq: CSTL), a skin cancer diagnostics company providing personalized genomic information to improve cancer treatment decisions, reported its financial results for the fourth quarter and twelve months ended Dec. 31, 2020 (Press release, Castle Biosciences, MAR 8, 2021, View Source [SID1234576209]).
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"Our execution in 2020 allowed us to successfully navigate through this unique year and further our position as the leader in genomic testing for dermatologic cancers," said Derek Maetzold, president and chief executive officer of Castle Biosciences. "We began the year with one skin cancer test and ended the year with a suite of three tests, more than tripling our estimated in-market U.S. total addressable market (TAM) to $2 billion.
"DecisionDx-Melanoma, DecisionDx DiffDx- Melanoma and DecisionDx-SCC, our tests for cutaneous melanoma, suspicious pigmented lesions and high-risk cutaneous squamous cell carcinoma, respectively, are each designed to provide actionable information for dermatology clinicians, which helps to guide cancer management decisions and improve patient outcomes.
"We are now entering the next chapter of our growth story. Earlier today, we announced clinical availability of an artificial intelligence-based integrated DecisionDx-Melanoma test result – integrating meaningful clinical and pathologic features with tumor biology identified by our DecisionDx-Melanoma test – designed to provide a more precise prediction of risk. Further, we are developing several pipeline tests that are focused on answering clinical questions with high unmet need along the patient care continuum. We estimate these pipeline tests could add an additional $3.6 billion to our U.S. TAM, bringing our aggregate U.S. TAM to slightly more than $5.5 billion."
Twelve Months Ended December 31, 2020, Financial Highlights
Revenues were $62.6 million, a 21% increase compared to $51.9 million during the same period in 2019. Included in revenue for the period were positive revenue adjustments related to tests delivered in prior periods. These positive prior period revenue adjustments for the twelve months ended Dec. 31, 2020, were $0.2 million, compared to $2.5 million for the same period in 2019.
Total gene expression profile test reports delivered in 2020 were 18,185, compared to 17,055 in 2019:
DecisionDx-Melanoma test reports delivered in 2020 were 16,232, compared to 15,529 in 2019. Third-party data for 2020 suggests that diagnoses of melanoma were down more than 20% over the prior year.
DecisionDx-SCC test reports delivered in 2020 (Aug. 31, 2020 – Dec. 31, 2020) were 485.
DecisionDx DiffDx-Melanoma test reports delivered in 2020 (Nov. 2, 2020 – Dec. 31, 2020) were 73.
DecisionDx-UM test reports delivered in 2020 were 1,395, compared to 1,526 in 2019.
Gross margin for the twelve months ended Dec. 31, 2020, was 85%.
Operating cash flow was $9.9 million, compared to $7.0 million for the same period in 2019.
Adjusted operating cash flow, excluding the effects of certain relief payments described below, was $1.5 million, compared to $7.0 million for the same period in 2019.
Cash and Cash Equivalents
As of Dec. 31, 2020, the Company’s cash and cash equivalents totaled $410 million.
Fourth Quarter Ended December 31, 2020, Financial Highlights
Revenues were $17.3 million in the fourth quarter of 2020, compared to $17.6 million in the fourth quarter of 2019. Included in revenue for the quarters were positive revenue adjustments related to tests delivered in prior periods. These positive prior period revenue adjustments for the three months ended Dec. 31, 2020, were $3.5 million, compared to $4.3 million for the same period in 2019.
Delivered 5,157 total gene expression profile test reports in the fourth quarter of 2020, compared to 4,914 in the same period in 2019:
DecisionDx-Melanoma test reports delivered in the quarter were 4,246, compared to 4,480 in the same period in 2019.
DecisionDx-SCC test reports delivered in the quarter were 428.
DecisionDx DiffDx-Melanoma test reports delivered from Nov. 2 through Dec. 31, 2020, were 73.
DecisionDx-UM test reports delivered in the quarter were 410, compared to 434 in the same period in 2019.
Gross margin in the fourth quarter of 2020 was 85%.
Operating cash flow was $(0.4) million in the fourth quarter of 2020, compared to $4.5 million in the fourth quarter of 2019.
Adjusted operating cash flow, excluding the effects of certain relief payments described below, was $1.5 million in the fourth quarter of 2020, compared to $4.5 million in the fourth quarter of 2019.
Recent Clinical Evidence Highlights
On March 8, 2021, the Company announced clinical availability of an artificial intelligence-based integrated DecisionDx-Melanoma test result. The Company validated the integration of clinicopathologic features with the tumor biology insights provided by the DecisionDx-Melanoma test. The integrated test result (ITR) is designed to provide a more precise risk prediction to further improve the clinical actionability by clinicians and their patients in helping to guide cancer management decisions. For more information, see the Company’s news release from earlier today.
In January 2021, the Company presented data on DecisionDx-Melanoma and DecisionDx DiffDx-Melanoma at the 18th Annual Winter Clinical Dermatology Conference:
The virtual poster for DecisionDx-Melanoma was entitled, "Identifying predictors of sentinel lymph node metastasis in cutaneous melanoma patients using molecular and clinicopathologic high-risk features." For 3,093 patients with T1-T4 cutaneous melanoma, authors used decision tree analysis to determine which molecular and clinicopathologic features best stratify sentinel lymph node (SLN) positivity risk and demonstrated that DecisionDx-Melanoma was the most important feature in distinguishing between high and low SLN-positivity rates (p<0.001).
The virtual poster for DecisionDx DiffDx-Melanoma was entitled, "Performance of a 35-gene expression profile test in suspicious pigmented lesions of the head and neck." The study evaluated DecisionDx DiffDx-Melanoma’s accuracy in classifying pigmented lesions on the head and neck. The data demonstrated that DecisionDx DiffDx-Melanoma has the ability to be an effective tool for refining melanoma diagnoses on the head and neck and therefore improving downstream management decisions, as indicated by its high sensitivity and specificity in the study.
Also in January 2021, the Company presented data at the Maui Derm for Dermatologists 2021 conference:
The virtual poster for DecisionDx-SCC was entitled, "Clinical utility of the 40-gene expression profile (40-GEP) for improved patient management decisions and disease related outcomes when combined with current clinicopathological risk factors for cutaneous squamous cell carcinoma (cSCC): Case Series." Two SCC cases were presented that highlight DecisionDx-SCC’s utility in stratifying risk in SCC. The cases had very similar risk of metastasis at diagnosis as both presented with a history of immunosuppression and had identical staging (T2a per Brigham and Women’s Hospital staging; T1 per American Joint Committee on Cancer staging), but had divergent outcomes:
Case 1 did not recur, despite incomplete resection. This case had a low-risk (Class 1) DecisionDx-SCC result, consistent with the clinical outcome of no clinical progression.
Case 2 developed local recurrence and regional metastasis, and eventually died from SCC, despite clear surgical margins. This case had a highest-risk (Class 2B) DecisionDx-SCC result, consistent with clinical progression. The study authors concluded that incorporating DecisionDx-SCC as a prognostic factor with traditional clinicopathologic risk factors can improve stratification of high-risk SCC patients with at least one risk factor, thereby informing risk-appropriate management strategies.
In February 2021, the Company presented data on DecisionDx-Melanoma at the 19th Annual South Beach Symposium:
The first poster was entitled, "31-Gene expression profiling improves risk stratification in patients with T1 cutaneous melanoma." Univariate analysis of the study data showed DecisionDx-Melanoma to be a stronger predictor of recurrence-free survival (RFS) than SLN status. Additionally, multivariable analysis showed DecisionDx-Melanoma to be a strong, independent predictor of RFS. With Class 2B RFS status similar to SLN positive status, Class 2B patients warrant follow-up strategies similar to SLN positive patients.
The second DecisionDx-Melanoma poster was entitled, "The clinical and financial impact of the 31-gene expression profile testing on sentinel lymph node biopsy patients selection in patients with T1b cutaneous melanoma." The authors analyzed all clinical DecisionDx-Melanoma tests that were reported from Jan. 3, 2019 through Sept. 4, 2020. The data showed that 75% of eligible patients with T1b tumors had a Class 1A result and could potentially forego sentinel lymph node biopsy (SLNB). The authors estimate that foregoing SLNB in these patients could reduce healthcare expenditures by up to $120 million in SLNB-related costs.
For a summary of Castle’s 2020 business and clinical evidence highlights, please see the Company’s news release from Jan. 13, 2021. Find the release here: Castle Biosciences Announces Preliminary Fourth Quarter and Full Year 2020 Results.
Conference Call and Webcast Details
Castle Biosciences will hold a conference call on Monday, March 8, 2021, at 4:30 p.m. Eastern time to discuss its fourth quarter and full-year 2020 results and provide a corporate update.
A live webcast of the conference call can be accessed here: View Source or via the webcast link on the Investor Relations page of the Company’s website (www.castlebiosciences.com). Please access the webcast at least 10 minutes before the conference call start time. An archive of the webcast will be available on the Company’s website until March 29, 2021.
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 3834669.
There will be a brief Question & Answer session following management commentary.
Use of Non-GAAP Financial Measures (UNAUDITED)
In this release, we use the metric of Adjusted Operating Cash Flow, which is a non-GAAP financial measure and is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). This non-GAAP financial measure reflects adjustments to net cash provided by operating activities to remove the effects of two payments we received associated with government aid to healthcare providers due to COVID-19, which we believe are not indicative of our ongoing operations.
We use Adjusted Operating Cash Flow internally because we believe this metric provides useful supplemental information in assessing our cash flow performance from our core ongoing business activities by removing the effects of these items on our operating cash flows. We believe this metric is also useful to investors as a supplement to GAAP measures in analyzing the performance of our business. However, this non-GAAP financial measure may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes. This non-GAAP financial measure is not meant to be a substitute for net cash provided by (used in) operating activities reported in accordance with GAAP and should be considered in conjunction with our financial information presented on GAAP basis. Accordingly, investors should not place undue reliance on non-GAAP financial measures. Reconciliations of this non-GAAP financial measure to the most directly comparable GAAP financial measure are presented in the table at the end of this press release.