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Castle Biosciences Growing Data for Skin Cancer Tests as Adoption Drives Q1 Revenue Growth


NEW YORK – Castle Biosciences has continued to generate new data across its dermatology test portfolio in recent months, including an independent, retrospective multicenter study published in the Archives of Dermatological Research this March, providing additional evidence that the use of the DecisionDx-Melanoma test to guide radiological surveillance can lead to improved patient outcomes.

On a call Wednesday to discuss the firm's first quarter financial results, Castle CEO and President Derek Maetzold provided further details about the study as well as other research. The Friendswood, Texas-based molecular diagnostics firm reported that its Q1 revenues increased 57 percent year over year.

"We have for years generated data with our DecisionDx-Melanoma test that has shown clinicians who use our tests clinically do in fact make changes in the selection of their patients' treatment pathways, and we have always had an indirect chain of evidence that these changes would therefore result in either less intervention … or more intervention, like initiation of regular imaging based upon a high-risk test result," Maetzold said. "That should then enable early detection of a metastasis and then earlier initiation of immune or targeted therapy."

But he argued that it's difficult, and therefore rare, for a risk stratification test to prospectively demonstrate definitively that these changes improve patient outcomes.

Maetzold said the recently published multicenter clinical study, while not randomized, provides a real-world "direct chain of evidence" that using Castle's test results to guide radiologic surveillance can lead to improved patient outcomes. Conducted at three National Cancer Institute-designated cancer centers — the Cleveland Clinic, Northwestern University in Chicago and Oregon Health and Sciences Center — the study compared outcomes of patients whose physicians had adopted DecisionDx-Melanoma for clinical use to patients whose physicians had not.

"These differences in adoption within each of the three institutions enabled the study authors to evaluate directly the impact of treatment pathways that were directed by test results to those patients who did not have that," Maetzold said. The study authors also aimed to control for any impact of differences in sentinel biopsy surgical procedures, limiting the study to those who underwent a biopsy and were lymph node negative.

"All patients were stage I or II, which is the prime target for the clinical use of our test, given that greater than 90 percent of early-stage melanoma patients are stage I or II at the time of diagnosis," said Maetzold.

Each institution participating had an established escalation pathway for patients with a high-risk test result that included scheduled routine advanced imaging for the purpose of detecting metastasis. In comparison, the control group was managed "appropriately according to guidelines, without a scheduled routine advanced imaging protocol."

Maetzold called the detection results — with recurrences identified approximately 10 months earlier in tested patients than in the control group, with the average tumor burden significantly lower at an average of 27.6 millimeters versus 73.1 millimeters — particularly important considering recent immunotherapy studies. These trials have shown that treatment for metastatic melanoma is more effective when started while the tumor burden is lower versus higher.

Meanwhile, 76 percent of patients in the study with a melanoma recurrence who received a change in care linked to a DecisionDx-Melanoma test result were alive following an average follow-up time of 45.6 months. In comparison, among patients who were followed without testing, only 50 percent were alive following an average follow-up time of 63.3 months.

Escalation of treatment is one aspect of Castle's anticipated impact for DecisionDx-Melanoma. The company is also pursuing evidence that testing can de-escalate treatment. In this vein, in another publication in February, investigators shared data from a prospective, multicenter study called DECIDE, which found that DecisionDx-Melanoma test results influenced 85 percent of clinicians’ decisions whether to perform a sentinel lymph node biopsy, leading to a significant reduction in SLNB procedures performed.

Additionally, a March presentation at the 2023 American Academy of Dermatology (AAD) annual meeting featured performance data from a novel, multicenter, independent cohort demonstrating DecisionDx-SCC can significantly improve metastatic risk predictions by complementing two current staging systems, the American Joint Committee on Cancer 8th edition staging system (AJCC8) and Brigham and Women’s Hospital staging system (BWH).

Consistent with previous studies, DecisionDx-SCC independently and significantly stratified this new 524-patient cohort according to patients’ biologic metastatic risk (p<0.0001). Multivariate models showed the metastatic risk prediction of AJCC8 and BWH staging systems were significantly improved when DecisionDx-SCC test results were included.

Meanwhile, the company reported that for the three months ended March 31, revenues grew to $42.0 million from $26.9 million in Q1 2022 and beat the average Wall Street estimate of $37.4 million.

Castle said its Q1 2023 total test reports increased 73 percent over Q1 2022 to 14,916 from 8,627. During the quarter, the firm delivered 7,583 DecisionDx-Melanoma test reports, a 26 percent jump from the 6,023 reports delivered in the first quarter of 2022. Its DecisionDx-UM test volume shrank about 10 percent during the quarter to 409 reports from 456 reports in the prior-year quarter. DecisionDx-SCC tests more than doubled at 2,411, compared to 1,142 tests in Q1 2022.

In aggregate, the company also delivered 980 MyPath Melanoma and DiffDx-Melanoma aggregate test reports in Q1, compared to 950 in the same period last year. The firm ran 1,383 TissueCypher Barrett’s Esophagus test reports compared to just 56 in Q1 2022 when the assay was launched, and it recorded 2,150 test reports for it most recent addition, IDgenetix, launched in April 2022.

Maetzold attributed the firm's volume and revenue growth to continued execution on short- and long-term strategies.

"Investments in our growth initiatives across our entire test portfolio, coupled with the team’s performance, continue to support the adoption of our proprietary tests. In particular, the evolution of our dermatology-facing commercial team in the third quarter of 2022 helped drive first quarter test report volume for DecisionDx-Melanoma and DecisionDx-SCC combined, which grew nearly 40 percent year over year," he said.

The company has also been pleased to see "continued momentum" in test volume for newer tests acquired over the last 18 months in mental health and gastroenterology, but its dermatologic arm continues to be a central focus.

According to a company presentation, Castle currently has 18 ongoing research studies, with 323 committed or contributing sites. This includes an ongoing collaboration with the National Cancer Institute that has allowed for analyses of more than 9,200 patients clinically tested with DecisionDx-Melanoma and at least 2,900 patients clinically tested with DecisionDx-UM to date, which Maetzold said is a great adjunct to the recent multicenter case-control trial.

As the year progresses, the firm expects to publish results from this other effort showing higher melanoma-specific survival for patients tested with DecisionDx-Melanoma than the larger population. Maetzold said the manuscript has been accepted for publication — in JCO Clinical Oncology, according to the firm's slide deck — and is expected to be available online by the end of the second quarter.

"We believe that clinicians who diagnose and manage early-stage melanoma, as well as commercial payors, should find these direct and indirect chains of evidence compelling," he said.

Castle's net loss for Q1 was $29.2 million, or $1.10 per share, compared to $24.6 million, or $.97 per share, a year earlier. Wall Street analysts, on average, had estimated a loss per share of $.89 for Q1.

The firm's Q1 R&D expenses rose 33 percent to $14.4 million from $10.8 million in Q1 2022, and its SG&A costs for the quarter were up 53 percent at $46.8 million compared to $30.5 million.

At the end of March, the company had cash and cash equivalents of $114.8 million and marketable investment securities totaling $117.2 million.

In early morning trading on the Nasdaq on Thursday, Castle's shares were down about 7 percent at $21.35.