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Castle Biosciences Reports Third Quarter 2019 Results

November 11, 2019

FRIENDSWOOD, Texas--(BUSINESS WIRE)--Nov 11, 2019--

Castle Biosciences, Inc. (Nasdaq: CSTL), a skin cancer diagnostics company providing personalized genomic information to improve cancer treatment decisions, today announced its financial results for the third quarter and nine months ended September 30, 2019.

“We are pleased with our strong third quarter performance, driven by solid growth in our DecisionDx®-Melanoma test report volume, which is a result of our investment in evidence development and scaling our commercial team in the first quarter of 2019,” said Derek Maetzold, president and chief executive officer of Castle Biosciences. “Based upon our results, we have decided to execute our commercial expansion plans in December 2019.

“We recently presented the clinical validation study data for our DecisionDx-SCC test for use in patients diagnosed with high risk cutaneous squamous cell carcinoma, which we expect to launch in the second half of 2020. Additionally, we continue to progress our third skin cancer product for use in patients with a suspicious pigmented lesion, which is also on track for anticipated commercial availability in the second half of 2020. We believe these two late stage pipeline products will increase our estimated total addressable U.S. market by more than $1.4 billion, for an estimated total addressable U.S. market of $2.0 billion for current and pipeline products.”

Third Quarter Ended September 30, 2019, Financial Highlights

Nine Months Ended September 30, 2019, Financial Highlights

Cash and Cash Equivalents

As of September 30, 2019, the Company’s cash and cash equivalents was $94.5 million, and the outstanding principal balance on our bank term loan was $26.7 million.

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 nine months ended September 30, 2018, but not recorded until the fourth quarter of 2018, were $2.2 million and $5.2 million, respectively. Also, included in revenues for the quarter ended September 30, 2019, and 2018, were positive (negative) revenue adjustments related to tests delivered in prior periods of $3.2 million and $(1.2) million, respectively. For the nine months ended September 30, 2019, and 2018, these amounts totaled $2.4 million and $0.6 million, respectively.

Third Quarter Business and Clinical Evidence Updates

Recent Developments

Conference Call and Webcast Details

Castle Biosciences will hold a conference call on Monday, November 11, 2019, at 4:30 p.m. Eastern time to discuss its third quarter 2019 results and provide a corporate update.

A live webcast of the conference call can be accessed here: https://edge.media-server.com/mmc/p/pivux23i 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 December 2, 2019.

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 4476877.

There will be a brief Question & Answer session following management commentary.

About Castle Biosciences, Inc.

Castle Biosciences (Nasdaq: CSTL) is a commercial-stage dermatologic cancer company focused on providing physicians and their patients with personalized, clinically actionable genomic information to make more accurate treatment decisions. The Company currently offers tests for patients with cutaneous melanoma (DecisionDx®-Melanoma, DecisionDx®-CMSeq; www.SkinMelanoma.com ) and uveal melanoma (DecisionDx®-UM, DecisionDx®-PRAME and DecisionDx®- UMSeq; www.MyUvealMelanoma.com ), with products in development for other underserved cancers, the two most advanced of which are focused on patients with cutaneous squamous cell carcinoma, and patients who have a difficult-to-diagnose pigmented lesion. Castle Biosciences is based in Friendswood, Texas (Houston), and has laboratory operations in Phoenix, Arizona. For more information, visit www.CastleBiosciences.com.

Forward-Looking Statements

The information in this press release contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning the expected commercial availability of our pipeline products, estimated total addressable market attributable to these pipeline products, our plans for commercial expansion, including anticipated number of sales territories and related increased hiring activity, the impact of our tests, including DecisionDx-Melanoma, on patient treatment plans, our prospects and plans and the objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our final prospectus filed with the SEC on July 26, 2019 relating to our Registration Statements on Form S-1 (File Nos. 333-232369 and 333-232796) and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.

 

CASTLE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

 

2019

 

2018

 

2019

 

2018

NET REVENUES

$

14,774,891

 

$

3,711,759

 

$

34,230,447

 

$

11,349,705

COST OF SALES

1,708,722

 

1,350,799

 

5,299,464

 

3,930,621

Gross margin

13,066,169

 

2,360,960

 

28,930,983

 

7,419,084

OPERATING EXPENSES

 

 

 

 

 

 

 

Research and development

1,514,966

 

1,294,301

 

4,226,054

 

3,716,188

Selling, general and administrative

7,121,982

 

3,918,387

 

19,989,531

 

12,305,933

Total operating expenses

8,636,948

 

5,212,688

 

24,215,585

 

16,022,121

Operating income (loss)

4,429,221

 

(2,851,728)

 

4,715,398

 

(8,603,037)

Interest income

5,190

 

13,266

 

31,508

 

20,889

Interest expense

(1,088,130)

 

(568,774)

 

(3,805,112)

 

(1,623,842)

Gain on extinguishment of debt

5,213,431

 

 

5,213,431

 

Other expense, net

(2,710,417)

 

(42,796)

 

(2,932,992)

 

(29,456)

Income (loss) before income taxes

5,849,295

 

(3,450,032)

 

3,222,233

 

(10,235,446)

Income tax expense

 

 

 

Net income (loss) and comprehensive income (loss)

5,849,295

 

(3,450,032)

 

3,222,233

 

(10,235,446)

Convertible preferred stock cumulative dividends

288,891

 

949,202

 

2,156,358

 

2,627,532

Accretion of redeemable convertible preferred stock to redemption value

17,578

 

56,843

 

130,151

 

161,863

Net income (loss) and comprehensive income (loss) attributable to common stockholders

$

5,542,826

 

$

(4,456,077)

 

$

935,724

 

$

(13,024,841)

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

Basic

$

0.43

 

$

(2.33)

 

$

0.17

 

$

(6.85)

Diluted

$

0.05

 

$

(2.33)

 

$

(0.67)

 

$

(6.85)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

12,757,658

 

1,912,429

 

5,648,757

 

1,902,314

Diluted

14,301,663

1,912,429

5,746,610

1,902,314

 

CASTLE BIOSCIENCES, INC.

CONDENSED BALANCE SHEETS

 

September 30,

 

December 31,

2019

 

2018

 

 

 

 

(unaudited)

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

94,474,818

 

$

4,478,512

Accounts receivable, net

12,369,260

 

12,089,719

Inventory

821,658

 

882,233

Prepaid expenses and other current assets

2,197,235

 

675,562

Total current assets

109,862,971

 

18,126,026

Long-term accounts receivable, net

1,451,872

 

2,532,011

Property and equipment, net

1,798,236

 

1,528,996

Intangible assets, net

 

4,167

Other assets – long-term

87,168

 

213,735

Total assets

$

113,200,247

 

$

22,404,935

 

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK ANDSTOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

1,251,267

 

$

1,450,766

Accrued compensation

3,676,164

 

4,571,011

Other accrued liabilities

976,977

 

715,244

Current portion of long-term debt

3,333,333

 

Total current liabilities

9,237,741

 

6,737,021

Long-term debt

21,570,372

 

24,499,752

Preferred stock warrant liability

 

1,193,726

Deferred rent liability

56,006

 

43,587

Total liabilities

30,864,119

 

32,474,086

Convertible Preferred Stock

 

 

 

Convertible preferred stock Series C

 

1,500,994

Redeemable convertible preferred stock Series A, B, D, E-1, E-2, E-2A, E-3 and F

 

44,995,157

Stockholders’ Equity (Deficit)

 

 

 

Common stock

17,074

 

1,916

Additional paid-in capital

136,585,399

 

921,360

Accumulated deficit

(54,266,345)

 

(57,488,578)

Total stockholders’ equity (deficit)

82,336,128

 

(56,565,302)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

$

113,200,247

 

$

22,404,935

 

CASTLE BIOSCIENCES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

Nine Months Ended

September 30,

 

2019

 

2018

OPERATING ACTIVITIES

 

 

 

Net income (loss)

$

3,222,233

 

$

(10,235,446)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

Depreciation

254,312

 

216,014

Stock compensation expense

536,713

 

220,732

Amortization of intangibles

4,167

 

27,452

Amortization of debt discounts and issuance costs

1,690,621

 

426,071

Other non-cash interest

442,176

 

Gain on extinguishment of debt

(5,213,431)

 

Change in fair value of preferred stock warrant liability

619,024

 

29,456

Change in fair value of embedded derivative

237,199

 

Change in fair value of convertible promissory note accounted for under the fair value option

2,076,768

 

Other

337

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

800,598

 

(655,247)

Prepaid expenses and other current assets

(1,521,673)

 

(15,408)

Inventory

60,575

 

(5,671)

Other assets

(20,256)

 

(49,282)

Accounts payable

(46,932)

 

(170,890)

Accrued compensation

(894,847)

 

1,016,014

Other accrued liabilities

261,737

 

83,803

Deferred rent liability

12,419

 

28,022

Net cash provided by (used in) operating activities

2,521,740

 

(9,084,380)

INVESTING ACTIVITIES

 

 

 

Purchases of property and equipment

(589,664)

 

(271,620)

Net cash used in investing activities

(589,664)

 

(271,620)

FINANCING ACTIVITIES

 

 

 

Proceeds from initial public offering of common stock, net of underwriting discounts, commissions and issuance costs

65,935,428

 

Proceeds from issuance of preferred stock and preferred stock warrants (including exercised warrants)

49,017

 

10,382,514

Proceeds from issuance of convertible promissory notes, net of issuance costs

11,695,495

 

Proceeds from issuance of convertible promissory note and common stock warrant, net of issuance costs

9,235,744

 

Proceeds from issuance of term debt, net of issuance costs

1,776,145

 

Proceeds from line of credit

 

1,000,000

Repayments on line of credit

(1,791,145)

 

Proceeds from exercise of common stock options

1,163,546

 

37,696

Net cash provided by financing activities

88,064,230

 

11,420,210

NET CHANGE IN CASH AND CASH EQUIVALENTS

89,996,306

 

2,064,210

Beginning of period

4,478,512

 

1,212,063

End of period

$

94,474,818

 

$

3,276,273

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191111005584/en/

CONTACT: Investor Contact:

Frank Stokes

Chief Financial Officer

866-788-9007

ir@castlebiosciences.com

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: BIOTECHNOLOGY HEALTH GENETICS PHARMACEUTICAL ONCOLOGY

SOURCE: Castle Biosciences, Inc.

Copyright Business Wire 2019.

PUB: 11/11/2019 04:05 PM/DISC: 11/11/2019 04:05 PM

http://www.businesswire.com/news/home/20191111005584/en