Castle Biosciences, Inc. Price & Performance (CSTL)

Including our anticipated 2025 total revenue our expectations regarding reimbursement for our products including with regard to our DecisionDx SEC test, opportunities for growth, [indiscernible] of seasonality and other trends the size and structure of our commercial team, the timing of targeted milestones and the impact of our investment in growth initiatives including our ability to achieve long term growth and drive stockholder value. 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 risks and uncertainties are described in detail in the company's annual report on Form 10 ks the year ended 12/31/2024 under the heading Risk Factors and in the company's other documents and reports filed or to be 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. In addition, some of the information discussed today includes non GAAP financial measures such as adjusted revenue, adjusted gross margin and adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in The United States or GAAP 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 in assessing our revenue and operating performance. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek.

Thank you, Camilla, and good afternoon, everyone. 2024 was another exceptional year for Castle and I'm extremely proud of the strong execution by our entire team. The fourth quarter revenue of $86,300,000 we grew revenue by 51% year over year to $332,100,000.0 for the full year 2024. Additionally, total test report volume grew by thirty six percent twenty twenty four compared to 2023. Further, as of 12/31/2024, company's Castle, cash equivalents, and marketable investment securities totaled $293,100,000 a $50,000,000 increase over 12/31/2023, which we believe will enable us to continue executing on our growth initiatives. Today, I will walk you through business highlights in the fourth quarter and full year 2024 and then Frank will provide additional financial highlights before we turn to your questions. Starting with our core dermatology business, we delivered growth of 17% for combined DECISION DEX melanoma, and DecisionDx SCC over 2023. Our dermatologic commercial team supports the promotion of both of these tests Therefore, we look at the growth of these tests combined as appropriate test for our dermatologic portfolios performance. [indiscernible] we delivered 36,008 test reports in 2024, an 8% increase over 2023 After correcting for under reporting, we believe the addressable market comprises approximately 130,000 patients meaning that we exited 2024 with roughly 28% market penetration.

We're pleased with our volume growth for 2024 and I would like to provide some additional context specifically for our fourth quarter volume for Precision DX melanoma. We saw typical seasonality with the fourth quarter historically having the fewest working days compared to the other March. Specifically in the fourth quarter twenty twenty four, we had two fewer working days than in the third quarter of twenty twenty four. Further, the overlap of Christmas and Hanukkah in December with traditional practice closures as compared to 2023.

As a reminder, our decision to the X Melanoma test provide clinicians and patients with actionable results aiming at answering two The first being, does this patient have a likelihood of a positive tetralift node that is below five percent? Five percent has been the traditional guideline threshold for avoiding versus offering a cellulose biopsy surgical procedure. We have in multiple prospective and retrospective studies and consistently shown that our Cision DX melanoma test is able to identify patients who have a less than five percent rate of a positive set of lymph node biopsy. We have also shown that patients who avoided H1 lymph biopsy sort of procedure have excellent long term outcomes. This data consistency sets our DecisionDx melanoma test apart. The second question our test results aim to answer is what is the five year likelihood of this patient having a recurrence? Again, we have shown in multiple prospective and retrospective studies that our decision to the X-ray melanoma test is an independent predictor of recurrence that clinicians use our test results to assist with their decision as to whether to escalate or de escalate treatment pathways and that clinically tested patients show improved survival compared to patients who did not receive or received the X-ray melanoma test.

As part of their clinical care. We continue to develop evidence to support decision to eXmelanoma test And currently, we have more than 3,000 patients enrolled in clinical studies. We believe that the fact that we have been able to consistently demonstrate that we are adding independent value the traditional staging factors sets our design and development test apart. These two uses of our test impact patients across all stages of localized melanoma. And we believe we have significant room for further penetration across clinical stages. Further, HR 2024 data for this test our orders generate line with the SEER data. [indiscernible] for patients diagnosed with melanoma. Despite having launched CisVX Melanoma several years back, we continue to see new clinicians ordering our test for the very first time. Specifically in 2024, we had eighteen oh six commissions or decision to exfiltrumab for the very first time This was similar to the number of first time order clinicians in 2023 So while some existing customers may have settled into where they see the sweet spot for our test, we continue to have strong interest in usage that we need to then turn into further adoption. We currently anticipate mid to high single digit volume growth for the full year 2025 or the 2024, with the first quarter twenty twenty five being flat or slightly down compared to fourth quarter twenty twenty four, in line with typical seasonality and our expectations.

Moving on for the 16,348 test reports delivered in 2024, an increase of 43% compared to 2023. Further, we saw fifteen ten new ordering clinicians for our DecisionDx S test in 2024.

We believe that the addressable market of patients diagnosed with cutaneous sutumab cell carcinoma and the presence of one or more clinical or pathologic risk factors is approximately two hundred thousand patients meaning we exited 2024 with roughly eight percent market penetration. As a reminder, our Decision EX SCC test provides two actual test results. The first is predicting the risk of metastasis and the second is predicting response to adjuvant radiation therapy. These uses are supported by 22 peer reviewed publications since Alonzo attesting. Including six studies published in 2024, two of which represented the largest and the second largest studies ever published that evaluate the effectiveness of adjuvant radiation therapy in patients with cutaneous squamous cell carcinoma. Now let's turn to reimbursement. In January 2025, Novotax, the Medic administered contract with jurisdiction over a laboratory in Pittsburgh, finalized the local coverage determination or LCD that includes a language signifying non coverage by Medicare [indiscernible] The LCD effective date originally in 02/23/2025 was subsequently extended to 04/24/2025. To the LCD become effective as is, we would not anticipate receiving Medicare reimbursement for XENEX test performed on or after 04/24/2025. We will be disappointed with the impact on patient care if we lose Medicare coverage given the strength of the evidence in DecisionDx SCC's ability to predict the risk of metastasis impacting treatment pathways and the ability to predict responsiveness to asthma radiation therapy.

I will remind you that a cost effectiveness article that was published in January 2024 show that using DecisionDx SCC to guide at radiation therapeutics could result in substantial savings for the Medicare program of up to $972,000,000 per year. Now let's turn to our tissue cycle a patient's individual risk of progression from Barrett's Esophagus to high grade dysplasia or esophageal cancer. We have published multiple performance studies showing that tissue cypher consistently outperforms traditional clinical and pathologic factors providing physicians with an actionable assessment of elective of a patient's five year risk of progression a high grade dysplasia or esophageal cancer. As such, we are thrilled with the positive reception tissue Cipher has received from the gastroenterology community. In fact, we delivered 20,956 Cisco Cyber test reports in 2024, compared to nine thousand one hundred in 2023, representing one hundred and thirty percent growth. And for the year ended December 2024, we had twelve thirty four new ordering clinicians for the tissue cypher test Importantly, TissueCyber achieved a significant milestone in 2024. We're passing 25,000 test reports delivered since we acquired the test at the end of twenty twenty one. Suggesting more clinicians may be recognizing its value.

I'd also remind you that in 2024, the American Gastroenterology Association or AGA released new clinical practice guidelines and endoscopic eradication therapy for Barrett's Esophagus stating that it can be effectively treated with endoscopic procedures like ablation but noting identifying high risk patients is crucial, Importantly, tissue cycle was highlighted as the first prognostic assay in enroll of identifying patients with Barrett's Esophagus at risk of progressing to high grade or esophageal cancer. This recognition by the AGA reinforces TissueCyprus role in providing personalized and clinically validated risk stratification helping clinicians better manage patients with Barrett's Esophagus. As we look at 2025 and beyond, the gross drivers we expect for TissueCyber include one, the commercial team roughly doubling in size during the first half of twenty twenty four with continued expansion throughout the second half of twenty twenty four and the first few months of twenty twenty five. Two, the unmet clinical need and value of our test being further accepted by FINISH and three, a strong focus on education and awareness. We believe that the addressable market of patients diagnosed with Barrett's Esophagus with non dysplastic indefinite or low grade dysplasia is approximately four hundred and fifteen thousand patients per year in The U. S. Meaning that we exited 2024 with roughly five percent market penetration.

We believe in our ability to maintain strong momentum for future growth and currently expect tissue sector volume to be significant for the full year 2025 compared to 2024 although not as high as one hundred and thirty percent we delivered in 2024 compared to 2023. Turning to our mental health business. Due to changes in the market and our focus to allocating resources efficiently on profitable growth, In late twenty twenty four, we revised our commercial strategy for iogenix test.

Reallocating resources to inside sales and non personal promotions. In December 2024, we observed month to month decreases to IGX test reports which persisted throughout year end 2024. We continue to offer our IGX test and monitor performance. However, in 2025, we expect test report volumes and net revenues will continue to decrease and the long term performance of this test remains uncertain. And with that, I will now turn the call over to Thank you, Derek, and good afternoon, everyone. As Derek highlighted, we delivered strong 2024 results. Continuing our track record of consistent execution and strong financial performance. In the fourth quarter of twenty twenty four, we delivered total revenue of $86,300,000 31% increase over the fourth quarter of twenty twenty three and delivered $332,100,000 for the full year 2024, a 51% increase over 2023 and exceeding our guidance range. The full year 2024 increase was driven predominantly by test volume growth for our dermatologic and non dermatologic tests as well as our tissue cypher test along with a higher ASP for our DecisionDx FCC test compared to 2023. Importantly, we've now grown total revenue at a 52% tax over the last five years. Adjusted revenue, which excludes the effects of revenue adjustments in the [indiscernible] related to test delivered in prior periods, was $85,800,000 for the quarter, and $333,800,000 for the full year 2024.

For 2025, we anticipate generating total revenue of $80,000,000 to $295,000,000 which reflects Decisions DXFCC longer being reimbursed by Medicare for services performed on and after April 24, 2025.

Our gross margin during the fourth quarter was 76.2% compared to 77.8% in the fourth quarter of twenty twenty three. And our gross margin for the full year was 78.5% compared to 75.4% in 2023. Our adjusted gross margin which excludes the effects of intangible asset amortization related to our acquisitions, and excludes the effects of revenue adjustments in the current period Associated with test reports delivered in prior periods, was 81.1% for the quarter and 82% for the year compared to 82.379.9% for the same periods in 2023. With the anticipated loss of DecisionDx FCC coverage in late April, we currently expect gross margins in the low to mid-seventy percent range and adjusted gross margin in the mid- to high-seventy percent range for all 2025. Turning to expenses, our total operating expenses including cost [indiscernible] were $82,300,000 compared to $71,800,000 for the prior year. And were $323,400,000 for the full year 2024 compared to $287,800,000 for 2023.

Sales and marketing expenses were $123,500,000 for the full year compared to $113,700,000 for 2023. The increase is mainly due to higher personnel costs higher sales related travel expense, and higher organizational and business development activities Increases in personnel Castle reflect a higher headcount as well as merit and annual inflationary wage adjustments for existing employees. General and administrative expenses were $76,600,000 for the [indiscernible] Compared to $66,500,000 for 2023. The increase is primarily attributable to higher personnel costs, professional fees, and IT related costs and expenses. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees. Cost of sales expenses were $60,200,000 for the full year compared to $45,000,000 for 2023. Primarily due to higher personnel costs and higher expenses for supplies and depreciation. Increases in personnel costs reflect higher headcount, support business growth in response to growing test report volumes, commencement of operations at our New Pittsburgh laboratory, in the second quarter of twenty twenty three as well as merit and annual inflationary wage adjustments for existing employees. R and D expenses were $52,000,000 for the full year compared to $53,600,000 for 2023.

Primarily due to lower clinical studies costs lower organizational development Castle, lower expense for laboratory supplies partially offset by higher personnel costs. Total non Castle stock based compensation expense which is allocated among cost of sales, R and D expense and SG and A expense was $50,300,000 for the full year down slightly from $51,200,000 for 2023 despite an increase of 25% in total headcount over 2023. Interest income was $12,900,000 for the full year 2024, compared to $10,600,000 in 2023 primarily a result of higher balances held in marketable investment securities. Income tax expense was $3,300,000 for the full year 2024 compared to $100,000 in 2023 as we realized profitability and positive operating cash flows for the full year 2024, primarily a result of state income taxes and the realization of pre tax income in 2024. Our net income for the fourth quarter of twenty twenty four was $9,600,000 compared to a net loss of $2,600,000 for the fourth quarter of twenty twenty three. And our net income for the full year 2024 was $18,200,000 compared to a net loss of $57,500,000 for 2023. Diluted earnings per share for the fourth quarter was $0.32 a share compared to a diluted loss per share of $0.1 in the fourth quarter of twenty twenty three.

Diluted earnings per share for the full year 2024 was $0.62 per share compared to diluted loss per share of $2.14 for 2023. Adjusted EBITDA for the fourth quarter was $21,300,000 compared to $9,400,000 for the comparable period in 2023. For the full year 2024, adjusted EBITDA was $75,000,000 compared to a negative $4,400,000 in 2023. Net cash provided by operating activities was $24,400,000 for the fourth quarter of twenty twenty four, and $64,900,000 for the year ended 12/31/2024. Historically, in the first quarter of the year, have seen net operating cash used due in part to annual cash bonus payments and certain healthcare benefit payments that do not recur during the remaining three quarters of the year.

We expect twenty twenty five to follow this historical trend. Importantly, continue to expect to deliver positive net cash flow from operations for the full year of 2025. Net cash used in investing activities was $50,100,000 for the twelve months ended 12/31/2024, and consisted primarily of purchases of marketable investment securities of $205,700,000 and purchases of property and equipment $28,300,000 partially offset by the maturity of marketable investment securities of 183.9 We ended the year with cash, cash equivalents and marketable securities of $293,100,000 which we believe will allow us to invest in the business for long term growth, and to continue our efforts to drive stockholder value. In conclusion, we delivered strong financial results in 2024. In an effort to ensure the company is positioned for success in 2025, expect to remain focused on strong execution, coupled with our sound capital allocation strategy including strategic opportunities. I'll now turn the call back to Derek. Thank you, Frank.

In summary, we believe we have entered 2025 and it boosts our financial and operational strength. As a result of our long sentiment to a science driven approach to improve the lives of patients we serve. Our continued investment in innovation, along with excellent execution to enable us to deliver value to patients missions and stockholders. Thank you for your continued interest in Capsule Castle. Now we will be happy to take your questions. [indiscernible] Thank you. Your first question comes from Subbu Nandi with Guggenheim. Please go ahead.

Guys, thank you for taking my question. In our checks, we have noticed that private terms usually peppered disease and DX melanoma but derm's and academic center are still hesitant to order more broadly before guideline inclusion. One, do you agree [indiscernible] In the absence of guideline update, how should we think about the opportunity?

So if I understood the Thomas, back from your interviews. I guess that flies a little contrary to what the 108 and the OneTouch 800 new first time ordering clinicians in 2024 that order the melanoma test. So while it could be that there are clinicians who have been common users and they have kind of holding to what they've used sweet spot. So maybe there's not much expansion for some of those current customers We did see substantial growth in new first time ordering clinicians last year as well as in 2023. From our perspective, outside of a few of the sort of NCCN centers, we don't hear much feedback at all regarding NCCM guideline inclusion or lack thereof is driving any sort of a personal decision around treating individual patients except for again a couple of the NCCN institutions who I guess feel obligated to follow guidelines as opposed to treating patients individually. Got it. Thank you for clarifying, Derek. I want to bring back to atopic dermatitis gene expression profile test.

That I think is planned to launch by end of twenty twenty five if the validation study results when should we expect reimbursement update for this product?

Reimbursement or launch updates. Yes. So we don't at this point in time we believe, assuming as you said that the rest of the validation study finishes out successfully that we would be on target at this point in time to still launch in late twenty twenty five. And I think we discussed this earlier in January, maybe with third quarter earnings. Once we see what our final profile looks like, and the relative value to both clinicians and payers, that the teams work in the next four, five or six, seven months to really work through that exact same question. So if we wish to say, how do we want to make this test available clinically so that it's doing good for patient outcomes and Castle getting fairly reimbursed and there might be some non traditional approaches. So I think one of the next several quarters in 2025 expect to have us provide some good clarity on that I think. But as I say, I think I want to see what the profile looks like, so we can really focus in on what that reimbursement strategy will actually be post launch assuming we're successful, of course, in the R and D part of the business.

Either way, though, I would say, starting from volume of zero, to some volume that's higher than that, But I would not expect much material revenue is the way to say it. Probably until what 2829 probably is the right time for you to think about that [indiscernible] Thank you. Your next question comes from Sung Ji Nam [indiscernible] Scotiabank. Please go ahead.

Hi, Vic.

Thank you for taking the questions. On TissueCypher and getting the New York State Department of Health approval there, what percentage of the addressable market does does New York State represent?

That sounds like an AI Google question. I don't know off the top of my cuff here. I'm assuming it's going to be demographically, there will be nothing different to say it would not be similar to the population New York has percentage of the overall U. S. Population. I don't think there's any no age difference or no health difference that I would think would make them a heavier or lighter player than just the average percentage of The U. S. Population lives in New York.

Got you.

And then just on the Precision DX SCC, kind of what's the commercial strategy while you're continuing to [indiscernible] reimbursement issues Just kind of curious if you will continue to offer the test to patients or clinicians that order the tests and how we should think about that? For [indiscernible] It's a great question. So should we lose coverage towards the April, which is the current expectation, one from just a non cash perspective, but more of a patient care perspective, it will be hugely disappointing to have Medicare beneficiaries be referred to and undergo adjuvant radiation therapy. We know based upon our two large multicenter studies that are published last year that roughly sixty percent of them will not respond to that intervention The other patients will, which is fantastic, but you're really overradiating people and that's that will be disappointing if that continues to go on. Despite the fact that use of our tests in directing radiation therapy we believe, extracts over $900,000,000 a year in excess of spend because you're removing ART from the patient. Now that being said, as background, I think, how we would approach this today is a say, if we believe there's a reasonably short term approach to regaining [indiscernible] we would leave the test on as is, I think, so that patients can benefit in the interim period.

If we think it's a longer term challenge to regaining coverage through Medicare, then I think we have to balance out somewhat of the needs of the shareholders in terms of an impact on gross margins as well as the impact on Medicare pressure to go ahead and have that test covered. So right now, I don't anticipate that we would make the choice of taking it off the marketplace completely. That seems quite harsh. And not in the orientation of a patient focused company.

Great. Thank you for taking the questions.

Thank you. We now have Thomas Flaten with Lake Street on the line.

Good afternoon. Thanks for taking the questions. In the press release, you mentioned the potential for strategic opportunities with respect to capital allocation. Should we be thinking about existing verticals, new verticals, maybe both So I think we are always looking at taking our capital and saying what can we do to invest in our current commercial efforts to drive appropriate volume and revenue on top line looking at what we can fund for internal pipeline and all also external opportunities as you noted there, Thomas, From just a peer profitability driver for Castle, it's easier to model out and think about locating additional test services that fit in our current verticals because we already have an infrastructure just diversify Castle across. That being said, we were not in gastroenterology three years ago when we bought Cernopstix to acquire TissueCyfer. So I think we are focused both on seeing what assets are there that can fit within our current portfolios but are not diverse to looking at another area if it may good sense and we see good strong upside.

Got it. And then Frank, one for you. With with SEC most likely disappearing from the top line. And keeping in mind you had a really strong adjusted EBITDA number in 2024.

Help you can give us on how to think about adjusted EBITDA for 2020 Yes, Thomas, we just continue to reiterate, we expect to be adjusted EBITDA for the year. We haven't given any scope or scale to that. Got it. Appreciate it. Thanks guys.

Thank you. We have Paul Knight with KeyBanc on the line. Hi, Derek. Frank, question on SEC, obviously, you're assuming that That ends fairly quickly. But is there any residual from non Medicare payers and private pay on FCC?

Not significant private not significant commercial payment there on SEC Still very early.

And then strategically, what's the M and A mark in the world of diagnostics right now? Is it Have you seen the pipeline mature and it's possibly a great market because deal flow has kind of been light, but research maybe is not slowed down. What's your feeling about? Are you buying things that are, let's call it, more mature in this world. [indiscernible] There's certainly lots of assets in the diagnostic space. Paul, but our filter is pretty thin. And so we certainly haven't changed that view or haven't had a sense that we'd loosen that filter. So I think the same sort of discipline and approach is how we're comfortable thinking about things. And then as we think about 2025, how should we model SG G and A is the sales force expenditure and overhead increasing in 2025?

We have made some expansions to the tissue cypher sales force and that's Good bit of that was reflected in the Q4 number. I think we'll continue to get leverage in the P and L, but we don't see any very, sweeping large changes to the sales force, but we will continue to add and invest in that asset as we see continued penetration on our test menu.

Okay. Thank you.

Thank you.

We have Mason Caricott with Stephens.

Hey, guys. For taking the questions.

This is Ben on for Mason here.

I wanted to start with the Q4 impacts from the hurricanes and the holidays. Do you have a sense for these patients being able to be rescheduled in Q1 or I guess, late in Q4 And then how do these patients factor into your melanoma framework for the start of the year here in 2025? Frank?

Yes.

It's hard to say when patients get caught up. Durns are pretty full. And we've spoken before and the best analogy is when an airline cancels a plane, aren't 180 empty seats on the next plane to put them on. So they got to find ways to move them around and docs have to do the same. So we don't really have a good sense of when those patients flow through and how many of them are lost. We think Q1 is probably going to set up like normal for Q1 and you've got two very large physician meetings in the quarter. You've got patient reset patient deductibles resetting. So as we said in the In the release, we expect typical seasonality for Q1 that we've in past years. Okay.

Great. Thank you for that.

And then appreciate the gross margin color that you guys gave. Was just hoping that you'd be able to provide some additional detail as SEC rolls off starting in April, just how we should think about the cadence there as we move throughout the year?

Yes, sure. So yes, the adjustments we referenced and the expected adjustments are impact on gross margin would be at at the time reimbursement is pulled back. So it wouldn't be phased in. It would be It would be right at the end of that coverage.

Thank you. We have a question from Catherine Schulte with Baird.

Hi, Hey, everyone. This is Todd Peterson on for Catherine. Thanks for taking our questions.

I wonder if you could kind of walk through your latest thoughts on SEC promotional efforts following assumed non coverage in late April.

Guess specifically, how are you thinking about potential changes to the dermatology sales force incentive structure? Is there any contemplation around shifting those more towards [indiscernible] Yes, is the answer. So depending on the what we see between now and the April, we will be shifting, if not 100% very, very close to that towards the melanoma test only beginning probably May 1 And obviously, we'll watch and see what plays out in the next couple of months here if that's the right call or not. The only element that might change a a switch back to some kind of a shared compensation, not fiftyfifty at all, but something else that's ninetyten, eightytwenty. Would be if we see a line of sight to having near term reimbursement regained or remained maintained. Otherwise, the expectation here is that we move back to being close to 100% for Melodoma.

Got it. Thanks. And then I know you've got some questions and comments on the tissue diaper sales force expansion to end 2024. It sounds like maybe a couple of incremental adds here to start 2025. I guess, can you just give us some more color on where that fits today, what the expectation is for 2025 and if you could remind us how you think how you think about that sales force size long term?

So we think there's roughly 10,000 targetable gastroenterologists who perform upper endoscopies. In that group, there's a small number who are really focused on upper endoscopies and ablation procedures, etcetera. Whoever in that group there We don't quite know today or maybe I'm not as confident as I should be about how important or how unimportant to be advanced practice participants are, nurse practitioners physicians assistants in sort of maintaining clinical interaction with patients diagnosed with their Esophagus. So if you just go ahead and assume that they aren't managing those patients per se and it's really just the gastroenterologist with the MD or DO degree behind their name. Then sitting in kind of the low 60s is probably insufficient by maybe 15 to 25 sales representatives. So part of our expectation here is to kind of watch and see how this most recent increase in territory size matures during the second quarter and then probably make additional expansion opportunities third and fourth quarter as we sort of see the relationships building among our expanded territories the current customers and new customers, so we don't expand too Castle. To go ahead and cause more disruption, but expand at the right rate And at the end of the day, I guess should come back here is the we are quite sure if in the 60 range is where we should be sitting and part of that's looking at promotional responsiveness and territory sizes and and travel time, but probably somewhere between 60s to 80s feels about right at full maturity.

Thank you. We have Mark Marasso with BTIG. This is Vivien on for Mark.

Thanks for taking the questions. I'll just keep it to one. So just on the Novitas non coverage of SEC, could you just remind us of the other pathways that are available to you in contesting that? And either continuing discussions of Novitas or potentially flexing to a different lab such that you might be covered by a different Medicare contractor. Thanks.

Yes. So there are in the part of Integrity Manual, they're outlined different processes and approaches one can take to to interacting when there is an LCD in place One of those would be a reconsideration request, which we would expect to enter into with Novitas if this policy finalizes as is. We are aware of a another laboratory that has filed a lawsuit against Novotov was LCD, Pacific Edge that went up, I guess, a week or two ago. That may have an impact on this on the policy timing of this LCD being effective or it may not have an impact. But at least there seems to be other laboratories who are aware of a similar kinds of issues. There is also a administrative law judge challenge, which would usually take a patient to work with you to do that. And then that sort of are the main pathways within with Innovitas directly, as you may recall, we do have a LCD opportunity with the MouldDx Group. And as we talked about last fall and they finalized that policy, they did not due to the timing of our publications review the adjuvant radiation therapy in the LCD being aware that they were aware of some promising early data.

So we take that as a indication that that is a very interesting or interested clinical use perspective.

So we would we are and would that approach as well for a positive LC through the MultiX program. Those are the main avenues.

Great. Thanks for taking the question. Thank you. We now have Kyle Mickelson with Canaccord.

Yes.

Hey, guys. Thanks for the questions. Just based on consensus, even though most estimates did not include SEC, you assume like quarter and a third of SEC, the guidance probably should have like touched or bracket $300,000,000 Could you just [indiscernible] Can you talk about the quarterly assumptions for SAC in 1Q and 2Q? Is that kind of like flat relative to like end of 'twenty four levels? And then the acceleration of decision to extend the Loma throughout year, maybe that benefits from the roll off of SAC as the commercial team kind of reallocate its efforts? [indiscernible] I think you're on mute if you're still on. I am. Thank you. I said I'll cover the guidance and let Derek answer the second part.

The guidance assumes FCC coverage through through the LCD effective date of April 24.

In terms of acceleration of melanoma volume as the back half of your question there, we We went from being solely focused with the sales force more than less than half the current size we're at, Kyle. I guess it was summer of twenty twenty two.

When we went to splitting sales force focus between melanoma and SCC and we expanded quite a bit since that point in time. So we would expect some accelerated growth once we return to a fully focused melanoma sales team. But to be quite honest, don't have any sort of recent history with this number of people in the field about what that might look like for momentum. So I'd rather not over under set expectations to be honest at this point in time until we kind of see how how our customers respond in the second quarter.

Okay, that's great. And then just second one, can you kind of talk about the white space or greenfield upper opportunities for the melanoma test, whether that's in the clinical opportunity market or economic or regional kind of differences, I guess. Is the penetration in the current practices material growth driver or do you have to kind of look outside that maybe two adjacent areas?

Okay. Okay. Let me see if I can write it down briefly.

So we had was it 800? 1,800 new ordering clinicians first time ever last year. And that was close to what we saw in 2023 as well.

So It's surprising, interesting, what you want to call that, But after being on the marketplace for several years, there were still that many numbers of kind of dermatologic or surgical customers who are adopting our test for the very first time ever. So there is still, I think, good growth in 2025 and beyond of attracting clinicians who maybe they were tough to see, maybe they were residents coming into practice, they weren't here three or four or five years ago. Maybe they were nurse practitioners or PAs that are fresh out of school and just learning about new technologies like ours. So I think that is one area of growth going forward that necessary slowing down a whole lot because of just the the new clinicians going into dermatology and also just getting around to those who are either related doctors by style or maybe they are hard to go ahead and get a hold of and communicate to. In terms of current ordering customers, when we analyze our data, one of the things that we do look at is is is Breslow's thickness on the patients who our test is ordered in. And if we kind of look at the the NCICER data, we can look at at least the reported melanoma cases in half the country relative to their Breso and what's called their T stage or their tumor stage And we can then marry against what kind of orders we're seeing coming in from an individual if we find out that the only orders that clinician is giving us are first aid patients that are between say 0.8 millimeters thick and maybe call it 1.5 millimeters thick, and we're getting almost nothing else from that physician or that nurse practitioner PA we would say that clinician has sort of found what they believe is a sweet spot of our test in our practice because nobody only has those patients.

And so we have articles and performance studies and clinical use studies that the sales force knows how to use that would go back into that same clinician who is sort of limited use of our test for certain patient population. Hey, this is what I'm seeing and what you're ordering. Can we kind of go through data over here in thinner patient and see the value that some of your peers are getting would you agree to that? And in some cases, we aren't Castle. But in other cases, we are successful in seeing that [indiscernible] review the data, think about how they would apply clinically, and expand use in these other customer ranges. So that is an opportunity as well. And then we do see other customers who are current customers who Looks like you're ordering our test across the spectrum of patients that they're diagnosed. That probably is close to 80%, 90%, 100% penetration for that individual clinician's practice and obviously that's really more about maintaining and reinforcing that they are making good clinical decisions based upon the use of our test.

Thank you. Thank you.

I would now like to hand it back to Derek Forrester for final closing comments. Thank you, operator.

This concludes our fourth quarter and full year 2024 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences.

Thank you all for joining. I can confirm that does conclude today's call. Please enjoy the rest of your day and you may now disconnect. Thank you for your participation.