Castle Biosciences at Canaccord Genuity’s Growth Conference: Strategic Growth Insights

On Tuesday, 12 August 2025, Castle Biosciences (NASDAQ:CSTL) presented at Canaccord Genuity’s 45th Annual Growth Conference. The company outlined its robust second-quarter results and strategic initiatives while acknowledging challenges in reimbursement. The discussion highlighted Castle Biosciences’ focus on expanding its multi-omics platform and improving patient outcomes.

Key Takeaways

• Castle Biosciences reported a 33% increase in volume and a 23% rise in revenue year-over-year for the second quarter.
• The company is advancing its multi-omics platform and pursuing FDA approval for DecisionDx Melanoma.
• Challenges remain with Medicare reimbursement for DecisionDx-SCC, but efforts to resolve these are underway.
• TissueCypher for GI cancer showed nearly 100% growth, with plans to expand the sales force.
• A new atopic dermatitis test is set to launch in late 2024, targeting a market of 7.4 million patients.

Financial Results

• Volume growth of 33% and revenue growth of 23% year-over-year in Q2 2024.
• Cash reserves stood at $276 million at the end of the quarter.
• Nearly $21 million in operating cash flow was generated in the second quarter.
• The company has achieved a 52% five-year compound annual growth rate (CAGR) through 2024.

Operational Updates

• TissueCypher (GI Cancer Test):

- Experienced near 100% growth in volume year-over-year.

- Market penetration at approximately 10%.

- Continued investment in expanding the GI sales force.

• Atopic Dermatitis Test:

- On track to launch in late 2024.

- Aims to predict response to systemic therapies for a market of 7.4 million patients.

• DecisionDx Melanoma:

- High single-digit volume growth expected this year.

- Received Medicare breakthrough designation from the FDA.

- Ongoing studies show no recurrences in patients who avoided surgical procedures.

• DecisionDx SCC:

- Medicare reimbursement temporarily removed.

- Reconsideration requests submitted to Novitas and MolDx, with high expectations for acceptance.

Future Outlook

• Continued growth anticipated in GI cancer and dermatology segments.
• Expansion of the multi-omics platform integrating spatial omics, methylation markers, and sequencing markers.
• Development of capsule sponge technology for Barrett’s Esophagus diagnosis.
• Focus on enhancing the value of TissueCypher by identifying higher-risk patients.

Q&A Highlights

• Acquisition of Previse focuses on valuable assets for platform development.
• Investors may undervalue Castle Biosciences’ growth potential across its product portfolio.
• FDA-approved tests are expected to receive preferential coverage.
• Recent studies enhance the value of the SCC test in patient care.

In conclusion, Castle Biosciences remains confident in its ability to drive growth and improve patient care. For a deeper understanding, refer to the full transcript below.

Full transcript - Canaccord Genuity’s 45th Annual Growth Conference:

Kyle Mixon, Analyst, Canaccord Genuity: Hi. Welcome to the Canaccord Genuity Growth Conference. I’m Kyle Mixon. I cover life science tools and diagnostics for Canaccord. Pleased to welcome you to this fireside chat with Castle Biosciences.

Castle offers a broad range of dermatologic cancer tests as well as GI cancer tests. We’ll learn more about that today. With the company, we have Tarek Mutzold, CEO and Frank Stokes, CFO. Thanks guys for joining us today. Appreciate it.

Maybe guys could just walk through the second quarter results. You announced those last week, very strong. So just kind of go over how the broad based performance in that business.

Tarek Mutzold, CEO, Castle Biosciences: Sure. Thank you, Kyle, for the invitation to come and chat here at Canaccord’s conference. It’s nice to be boss of the day. I remind people to look at our website for forward looking statement commentary. Regarding second quarter, we experienced another excellent, I think, performance from a team standpoint.

Volume grew, what, 33% year over year and revenue 23%, which is excellent. Ended up with $276,000,000 in the bank at the end of the quarter and generated operating cash flow, which is over just under $21,000,000 So I think a very, very nice strong performance helping us finish up the first half of the year. Do want add any commentary? No, I think so. Perfect.

Kyle Mixon, Analyst, Canaccord Genuity: Now so we’re really focused on, you know, two year tests. We call them the core test now. So DecisionDx Melanoma as well as CGI Cypher for GI cancer. Let’s start with Tissue Cypher. That one really did well.

I think it was almost 100% year over year growth in volume. Could you talk about the market penetration for that test currently? And then really just like what the where is their upside? How should investors get comfortable with this like outsized growth like kind of continuing going forward?

Tarek Mutzold, CEO, Castle Biosciences: Yes,

Frank Stokes, CFO, Castle Biosciences: sure. So I we urge people not to model 100% growth going forward, not for any fundamental reason other than it’s just an aggressive target. I think at the end of the quarter, on a run rate basis, we’re about 10% penetrated on the patients that are appropriate for tissue cipher testing, probably a bit more than that on the physician side. So we’ve got some room on the physician side to increase penetration within physicians’ practices and one of the group’s practices. I think the reason we’re seeing such strong momentum there is just the clear clinical utility.

We are able to help a physician understand So taking a step back, similar to our melanoma test, physicians understand that on a population basis, a nondysplastic or low dysplastic patient has a low risk of progressing to esophageal cancer on a population basis. But they also appreciate that most esophageal cancers come out of those groups and that’s because those groups are not treated. If a patient is highly dysplastic or even moderately dysplastic, most of the time the physician will have them ablated. Ablated ablation is probably not a 100, but high ninety nine percent effective in preventing progression to esophageal cancer. But they’re not ablating those lower risk patients, and so they’re just bringing them back for surveillance.

And so it’s a conundrum for a doctor. They understand that this patient on a population basis has a low chance of progressing, but they also understand that my progressors are gonna come from this group. It’s somebody in this group. And so you’ll hear physicians who are steeped in the space, you’ll hear them call it the Barrett’s conundrum. How manage do these patients knowing what I know?

So with TissueCipher, they’re able to accurately restratify which of the patients they should go ahead and ablate and get very frequent surveillance and increased surveillance. They can understand which of their patients they can reduce surveillance on, which is a positive for the patient, of course, if you’ve ever had an endoscopy. It’s not the best day of your life, but it’s also good for physicians. A full Seattle protocol, is standard of care for Barrett’s surveillance, takes an average about fifty minutes. That’s a pretty big burden on a practice, particularly when a colonoscopy takes ten, twelve minutes.

So it’s a it’s a it’s a bigger burden on the practice. So they not they not only give better care to their patient and focus on the patients who will benefit, but it’s also more efficient for the practice. So I think that clear clinical utility is is what’s driving the the uptake. And when we see we don’t really see resistance. There’s, I think, the biggest resistance we have for increased penetration right now is just awareness.

There’s still lots of physicians who aren’t aware of the test.

Kyle Mixon, Analyst, Canaccord Genuity: Perfect. And then maybe on that point, I think you kind of expanded the sales force for that GI business. I think it was like late last year, let’s say. They’re all full speed. Do have any plans to expand that team going forward to continue the growth?

Or do you think there’s still kind of like white space where the education there’s some more marketing and education that these reps could do?

Tarek Mutzold, CEO, Castle Biosciences: So I think we exited last year scaling up to kind of the low mid-60s, I guess, from a GI perspective. We think there’s maybe 10,000 actionable customers, gastroenterologists, who are doing upper endoscopy, seeing Barrett’s patients for follow-up. That could be off a bit here or there. That probably is still understaffed a bit, Kyle. So I anticipate that as we let this last group season in, we’ll look to saying what’s the right time to kind of expand and get closer to serving our customers better.

And that should help keep growth accelerating, at least growth growing as it has been in the past from a volume quarter over quarter standpoint.

Kyle Mixon, Analyst, Canaccord Genuity: Got it. And this GI cancer business is becoming more and more important to you. You did an acquisition a couple of months ago for Previse. They offer a test that’s complementary to Tissue Cipher. It’s called ESA Predict.

Maybe just talk about the vision with that test and how you’re going to eventually offer like a multi omics offering for GI, esophageal cancer.

Tarek Mutzold, CEO, Castle Biosciences: Sure. So I was going to step back and say it’s more about the assets they had versus the tests they had in the marketplace. So in our evaluating other opportunities in both dermatology and gastroenterology, part of the question becomes where else can we leverage what we believe is a good reputation, a good customer call point in gastroenterology. And one of the areas we’re looking into was to say tissue cipher, we believe, is the most validated, most accurate biomarker out there that’s been developed for predicting progression or prognosis to esophageal adenocarcinoma. And that’s based predominantly on the underlying spatial omics technology that Cernostics really built and developed prior to that acquisition.

That being said, I think that we continue to say how do we serve our customer better. And I would jump to the middle test potential first, which is to say, we believe that while there undoubtedly is some biological overlap between spatial omics and what it detects biologically versus methylation versus maybe even sequencing data, we also believe there’s not 100% overlap. And so our hope would be going forward, can we rapidly develop a multi omics platform, to use that word, integrates both spatial omics, perhaps methylation markers, perhaps sequencing markers to go and get to a more accurate test and serve our customers and our patients better. So that was really the primary near term acceleration opportunity. The second part of that acquisition also included acquiring the development work they’ve done on a capsule sponge technology per se.

And there is data that will be coming out over the course of the next little while about what they’ve developed in the last couple of years with their Johns Hopkins relationships. But essentially, we believe there’s an opportunity to both participate in potentially upstream diagnosis of Barrett’s Esophagus disease, as well as look to go ahead and see if these sponge based technologies where you go ahead and capsule a string, swallow a capsule on a string which has a sponge inside the capsule, it dissolves, expands out, you pull that back up and see what you can see. So our hope at the end of the day, more mid term, is to say, can we go ahead and take tissue cipher, enhance the value to customers by making it better I guess I would say better value, finding more of the higher risk patients and put them into a higher risk category. And two, as you go ahead and move forward with a sponge based technology, see about participating in the Barrett’s Esophagus diagnosis arena as well.

Kyle Mixon, Analyst, Canaccord Genuity: Okay. Just thinking about this, I mean, do you see that ultimately this company could be like fiftyfifty GI cancer and derm cancer, which is obviously like a step away from what people think of Castle as, but it just sounds like you’re really focused on GI, really what the potential holds.

Tarek Mutzold, CEO, Castle Biosciences: From a balancing revenue standpoint?

Kyle Mixon, Analyst, Canaccord Genuity: Yeah, from revenue.

Frank Stokes, CFO, Castle Biosciences: Yeah, I think that we view them both as very attractive. Think we’ll be volumes are getting pretty close on the two tests. And so they’re both nice franchises. We value both of them. We have a pipeline in dermatology as well.

So I think we’re going to continue to expand the offering there. And we’re happy to see the growth in both businesses. Both are good for patients and both have a high level of clinical utility and value.

Kyle Mixon, Analyst, Canaccord Genuity: Perfect. And then actually, I guess on that note, on the pipeline. So you have an atopic dermatitis effort ongoing. So you have an internal test. We’ll talk about that first.

I think it was kind of more or less validated recently. So just remind me the plans for that one going forward. I think you want to launch that test in 2025. What would you do about sales force and Medicare, like reimbursement for that asset?

Tarek Mutzold, CEO, Castle Biosciences: So yes, we’ve been working for several years on a test in the eczema space, I guess, to predict response to systemic therapies. And our focus in the last maybe year and a half, two years has focused predominantly in the atopic dermatitis part of the eczema marketplace, the other side being psoriasis. And our belief is if you look at the atopic dermatitis marketplace, there’s around twenty four million people we estimate diagnosed with atopic dermatitis in The US today. That’s kind of a three years and older age group. Think it’s twenty seven total.

And of that group you have patients falling into kind of the mild category where maybe their disease is currently being managed with topicals only today. And then you have sort of this moderate to severe category where it’s people who have moderate to severe atopic dermatitis. Some of them may be on systemic therapy. Some of them are seeking perhaps systemic therapy. We estimate the moderate to severe category around seven point four million patients, give or take a couple 100 thousand.

So clearly a step up in terms of opportunity for Castle. What these patients face in this moderate to severe category is they clearly aren’t being managed, or at least they have a high, a heavy symptomatic burden on topicals only. And when they step over the threshold and say, I’ll go ahead and accept going on a systemic therapy, be it an oral tablet, which more recently has been JAK inhibitors, or be it Regeneron or Dupixent therapy, which is an injectable biologic. And those agents work better, are more effective than topicals only. But they carry risks and benefits.

And what we saw in the marketplace here is to say, well, the sort of grandfather of this newer therapy section is Dupixent from Regeneron Sanofi. And it works well in some patients. But in some patients, about forty percent of the patients, if you go through literature, they aren’t getting the relief on that initial therapy that they could potentially be. So they still have a heavy symptomatic burden. Before time goes too far, three months or six months, we see those patients going on to either switching to other systemic therapies or adding other therapies back on to try and again get control of their symptoms.

So our goal was to say, can we develop a immune signature or a class therapy signature, or maybe it’s a cytokine signature, depending on the words you want to use, that would say, hey, let us take part of that individual patient’s atopic dermatitis lesion, scraping it, putting it into our buffer, analyzing that, and see if we can identify a test or a series of tests that could say, you made the decision to have greater symptom control occur by stepping into the threshold of systemic therapy rather than have you go through sort of a trial and error standard of care approach. Can we use the immune signature of your own atopic dermatitis see if selecting a therapy based upon your disease symptoms gets you better result quicker. And what we discussed in our second quarter earnings call last week and also put a new slide into our corporate presentation slide deck with some of our top line data. And our belief in terms of thinking about the value of a biomarker based test in identifying therapeutic response in atopic dermatitis was to say, there were sort of three or four major symptoms that we see. The sort of FDA registration trials use a score called EASI.

FDA sets or at least the classical expectation has been to see if you can achieve an easy 75% score, which roughly means a 75% reduction in your lesion loading. The burden of the disease stayed on your skin as a sort of a threshold and then compare that to placebo. And when we were looking at the marketplace, our perspective was we will have newer classes of agents coming out potentially in the next year or two or three. And we don’t need a test to go in and say, you’ll just do average. And so we set our bar at saying, we’d like to go ahead and find people who can achieve an easy 90 score, which means 90% clearance roughly speaking.

We also know that itch is a heavy burden for these patients. And although it’s captured somewhat in the easy scale, it’s also a separate validated score. So we said, can we improve itch prediction as well based upon therapeutic response? And finally, there’s an area of flares. And so flares are kind of breakthrough of symptomatology, you might say, difficult to get under control.

Another indication of really uncontrolled disease. And so what we were able to develop and validate to date is a couple of signatures. The most exciting part of that would be to go ahead and take patients who have a signature which I will say today appears to be a JAK inhibitor response class test. Which would be to say, if you want to use our assay when people are starting systemic, they’re starting DUPIXENT maybe and are not getting the response they want, and you want to know do I add this new class of oral therapies or do I not, Then what we’ve been able to go and demonstrate is a gene expression profile test which says if you’re a JAK responder, we can find a population, a pretty good sized population which will achieve a 90% or greater easy score improvement within the first three months of therapy, dramatic reduction in flares compared to the group that we would say does not respond to JAK inhibitors, which has a very, very small chance of any benefit.

Kyle Mixon, Analyst, Canaccord Genuity: All right. Perfect. That was great. Again, more of a like beyond 2026?

Tarek Mutzold, CEO, Castle Biosciences: So we’re on track to having this test available clinically later this year. I would not bake in revenue assumptions for 2026. I think we’re still early on in a target limited launch perspective. But we should be able to go ahead and track our progress in volume and ASP growth over the course of ’twenty six and go ahead and identify what the value could be in ’twenty seven, ’twenty eight, nine. So very, very exciting times in terms of launching another novel test in a high unmet need in clinical dermatology.

Kyle Mixon, Analyst, Canaccord Genuity: Yeah, exciting. And then on the kind of core business, the longest standing primary test at this point that generates a lot of revenue is DecisionDx Melanoma. So I think the guidance for volume this year is growth of high single digits still. As you think about like basically third quarter and beyond, no reimbursement for DecisionDx SCC for Medicare, How are the incentives on the sales team kind of shifting more focus towards melanoma? Is that actually generating volume growth?

Or is that maybe like a future dynamic we’ll see?

Tarek Mutzold, CEO, Castle Biosciences: So we did reiterate last week our expectations for kind of coming in at high single digits from a volume growth year over year perspective. In the second quarter, we were up 4% year over year or 60% 2Q to 1Q. So we’re on that track. With the what I would call a temporary adjustment to our Medicare coverage for the FCC test, we did go ahead and switch the bonus plan as you would expect to be fully focused on cutaneous melanoma. That’s part of the rationale is having us go from roughly a fifty-fifty split to 100% to zero split on melanoma versus SCC to help drive that single digit expectation for year end performance.

Kyle Mixon, Analyst, Canaccord Genuity: Got it. Okay. Anything else on the melanoma side that should give us confidence that that can be a pretty healthy high single digit grower for the next couple of years?

Tarek Mutzold, CEO, Castle Biosciences: I think second quarter results were very, very strong for us. We also continue to see seminal publications coming out that make a difference. For instance, one of the publications that came out earlier this year was an ongoing prospective study looking at actual clinical use of our test to rule out a sentinel lymph node biopsy procedure, which is one of the covered uses under Medicare is LCD. And that’s important to us because if physicians are going to use our test to take a procedure off the table, then they undoubtedly might miss some patients who might have melanoma cells in their sentinel lymph nodes because they aren’t doing that procedure. And the question we said was, well, if they’re going to use our test clinically, how do those patients do over time in terms of recurrence or lack thereof?

And then the data that came out earlier this year, I think with median two year follow-up in terms of recurrences of people who avoided that surgical procedure, we had no recurrences to date. Now that’s going to change, because one hundred percent lack of recurrence doesn’t really happen in cancer progression. But it does show you that when physicians use our test clinically to help rule out what ends up being an unnecessary surgical procedure, they have a very, very high strong outcome that’s at least recurrence free in our current study to date.

Kyle Mixon, Analyst, Canaccord Genuity: All right, great. And then DecisionDx Melanoma received a breakthrough device designation from the FDA recently. The plan is like to submit that to the FDA at some point. Could you do that as early as second half of the year, this year?

Tarek Mutzold, CEO, Castle Biosciences: Yes, we could.

Kyle Mixon, Analyst, Canaccord Genuity: And that Okay. And that you think that would be material lift to volume, let’s say, going forward if that gets

Tarek Mutzold, CEO, Castle Biosciences: approved? Think in terms of achieving FDA authorization as a class two device, I would think that we would we see a couple of potential business improvements. One of them is to say, we now see this rolling through of state biomarker laws. And although they have been very disappointing to the industry in terms of the lack of teeth in enforcing reimbursement from commercial payers in those states. We do see movement going forward that within a couple of years, one of the hopes would be that you would begin to see state biomarker laws being complied with by commercial payers versus not complied with.

One of the core underlying areas there would be to say FDA approved tests get a little more likely to preferential coverage. And so a benefit to us, we would see mid term would be to say, gain FDA authorization as a class two device and see if we can float behind improvements in commercial ASP in sort of the latter part of this decade. Second element, which we don’t have any experience on right now, there’s not much to point to, would be to say, do we see guidelines changing? NCCN, AAD, other guidelines where you could say, well, you questioned it, but whether or this test was actually doing what we say it does. You now have the highest regulatory body in the nation actually confirming what we’ve said all along.

So that change in impact there. If it does, we would see improvements also in ASP from those plans that follow guideline inclusion as well as perhaps volume lift over time.

Kyle Mixon, Analyst, Canaccord Genuity: Yeah. Okay. Perfect. And then now on to SooDx SCC. So that was doing, you know, over $30,000,000 or so a quarter.

Medicare reimbursement has been essentially removed temporarily, like you said, to Eric, by the MAC Novitas. MolDX is also sort of isn’t covering it, obviously. You submitted a reconsideration request to both of these MACs, both programs. I think Novitas has accepted that. You’re waiting until, I think it sounds like early September for Moldex to accept it.

So what’s the next steps with SEC and how likely is it that Moldex accepts or doesn’t accept?

Frank Stokes, CFO, Castle Biosciences: I’d be surprised if they don’t accept it. We had we

Kyle Mixon, Analyst, Canaccord Genuity: had a

Frank Stokes, CFO, Castle Biosciences: a good dialogue with MolDx to understand, appreciate what it was they were looking for to have a a valid complete reconsideration request. I I think we’ve gotten it, and it would be it would be surprising if if if they have a different view. I do think they’ll wait for the full sixty days to notify us, but that’s frankly what we would expect.

Kyle Mixon, Analyst, Canaccord Genuity: And on the Novitas side, I think now you’re able to really provide more publications and data that maybe they were looking for in the original LCD in the draft and all that. I mean, how

Frank Stokes, CFO, Castle Biosciences: much

Kyle Mixon, Analyst, Canaccord Genuity: more confidence do you have now than you had a year ago or two years at Cleveland?

Tarek Mutzold, CEO, Castle Biosciences: Confidence on?

Kyle Mixon, Analyst, Canaccord Genuity: That, I mean, you’ll secure that you’ll obtain coverage.

Tarek Mutzold, CEO, Castle Biosciences: I think based upon the acceptance of our reconsideration request as valid, that doesn’t guarantee coverage by any means. It just says that there’s enough evidence here that would force a reopening of the draft LCD. I would have a hard time thinking why one puts effort into that if you weren’t going to go ahead and consider some sort of coverage criteria for this test. But that remains to be seen. So from our perspective and the interactions that we’ve had with both contractors, there seems to be an acknowledgment that there is a substantial amount of new evidence that was not considered in the original request.

That’s it’s a valid reconsideration request. Keep in mind that both drafts both LCD drafts came around the 2023. An important step up in the value of our test to patient care was the mid-twenty twenty four publication of two multicenter studies which can, which the first identified the fact that our decision SCC test not only risk stratifies patients but also predicts who will be likely to respond or not respond to adjuvant radiation therapy, which is one of the few interventions one can take in localized squamous cell carcinoma today to make a difference in outcomes. And the second study replicated the first study results. Those represent the largest study and the second largest study ever performed in SCC in adjuvant radiation therapy responsiveness.

Neither one of the MACs had that data available to consider that. So that use alone to me is significant improvement in utility value to the Medicare patient population.

Kyle Mixon, Analyst, Canaccord Genuity: Okay. So just forgetting about MolDX for a second, on Novitas, if that route was successful for you and they reopened the LCD, are you going to get paid on SEC claims in that kind of lame duck period?

Tarek Mutzold, CEO, Castle Biosciences: I think that remains to be seen. Historically, when we’ve had LCDs in draft form and then finalized out, and those are some of our peers that we’ve talked to. The Medicare contractors, in our experience that have acknowledged that, Okay, there’s a draft LCD. All the evidence was reviewed to go and support coverage. It took us a while to finalize coverage.

Therefore, the tests that were producing those interims should be valid tests to go ahead and pay for. That’s been our experience so far. There’s no guarantee of that. But that could be an expectation in the future.

Kyle Mixon, Analyst, Canaccord Genuity: All right, great. Now finally, so we just talked about SEC. That seems like you got that under control. You’re handling it. There could be we’re optimistic.

Melanoma, you’re accelerating now. It’s rebounding. That’s what we all want to see. With Tissue Cipher, that’s another big growth driver as well. And that looks like that’s pretty sustainable.

Guess, maybe not triple digits, but it’s going be pretty strong. What are investors missing or underappreciating for Castle right now?

Tarek Mutzold, CEO, Castle Biosciences: I think the squamous cell carcinoma LCD has certainly been an unfortunate saga for the last three years. I think what investors had missed over time is we went public in July 2019, just ahead of that COVID thing. And if you look at our five year CAGR through the 2024, it’s 50 2%. That’s not that’s a nice performing diagnostic company. We went from burning a little bit of cash pre IPO to being judicious about our cash used to, I think, generating in the second quarter of this year nearly $21,000,000 in operating cash flow.

We’re in a very healthy position to go and drive value forward in the near term and also mid term. If you look at our tissue cipher test or melanoma test, this atopic dermatitis test which will be early in launch that we’ve set ourselves up to be a very, very strong company from a near term growth standpoint and also mid term growth standpoint.

Kyle Mixon, Analyst, Canaccord Genuity: Okay. Let’s leave it there. Thanks guys for joining. This was great. Appreciate it.

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