Full Press Release Details
Castle Biosciences Reports Second Quarter 2019 Results
FRIENDSWOOD, Texas--(BUSINESS WIRE)--September 3, 2019--Castle Biosciences, Inc. (Nasdaq: CSTL) today announced its financial results for the second quarter and six months ended June 30, 2019.
"We are pleased with our strong second quarter performance, including our 27% year-over-year growth in DecisionDx-Melanoma test report volume, which we believe was largely driven by our successful first quarter 2019 commercial expansion," said Derek Maetzold, President and CEO of Castle Biosciences. "We are also encouraged by the success of our recently completed initial public offering and the strong level of interest from our investors. We believe the proceeds from our initial public offering, combined with our existing working capital, position us to execute upon our expansion plans and fund research and development activities."
Second Quarter Ended June 30, 2019 Financial Highlights
Six Months Ended June 30, 2019 Financial Highlights
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 six months ended June 30, 2018, but not recorded until the fourth quarter of 2018, were $2.2 million and $3.0 million, respectively. Also, included in revenues for the quarter ended June 30, 2019 and 2018 were positive (negative) revenue adjustments related to tests delivered in prior periods of $3.3
million and $(0.8) million, respectively. For the six months ended June 30, 2019 and 2018, these amounts totaled $2.8 million and $0.9 million, respectively.
Second Quarter Business and Clinical Evidence Updates
Financing, Liquidity and IPO
As of June 30, 2019, our cash balance was $17.5 million and the outstanding principal balance on our bank term loan was $26.7 million. Subsequently, on July 12, 2019, we issued a $10.0 million convertible promissory note and on July 29, 2019, we completed our IPO, which resulted in net proceeds of approximately $66.0 million, after deducting underwriting discounts and commissions and other offering expenses.
On August 22, 2019, Palmetto GBA, a Medicare Administrative Contractor, posted a draft LCD that, if finalized, would result in expanded Medicare coverage for our DecisionDx-Melanoma test. We expect that Palmetto GBA will finalize and implement the draft LCD after a public comment period that opens on October 7, 2019 and closes on November 21, 2019.
The nineteenth peer-reviewed publication supporting DecisionDx-Melanoma use was published in the journal Skin in early July. This study was an evidence-based analysis of the clinical performance and utility of DecisionDx-Melanoma using four different datasets ranging in size from 403 to 8,944 patients. The study focused on identifying a tumor thickness that would be appropriate for use of the test to guide follow-up decisions for cutaneous melanoma patients. Results demonstrate that a tumor thickness of 0.3 mm and thicker is an appropriate population in which to use DecisionDx-Melanoma to guide follow-up
decisions. Note that previously published validation, performance and utility studies support the two primary clinical uses of the DecisionDx-Melanoma test following the diagnosis of melanoma. The first use is to inform decisions on sentinel lymph node biopsy in most eligible patients with tumor thickness less than or equal to 2.0 mm with no minimum tumor thickness, and the second is to guide follow-up decisions.
Conference Call Details
Castle Biosciences will hold a conference call on September 3, 2019 at 4:30 p.m. Eastern time to discuss its second quarter 2019 results and provide a general business update.
The conference call will be webcast live from the company's website and will be available via the following link: https://edge.media-server.com/mmc/p/tk8ypudk. Please access the webcast at least 10 minutes before the conference call start time.
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 2368125.
A replay of the webcast will be available for two weeks following the conclusion of the live broadcast and will be accessible on the Investors section of the company's website at www.CastleBiosciences.com.
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 our positioning to execute our strategic plans and fund research and development activities, the outcome of the draft LCD issued by Palmetto GBA and its process for finalizing the draft LCD, 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 June 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.
Chief Financial Officer
CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| NET REVENUES | $ | 10,738,569 | $ | 3,979,381 | $ | 19,455,556 | $ | 7,637,946 | |||||||
| COST OF SALES | 1,992,784 | 1,326,839 | 3,590,742 | 2,579,822 | |||||||||||
| Gross margin | 8,745,785 | 2,652,542 | 15,864,814 | 5,058,124 | |||||||||||
| OPERATING EXPENSES | |||||||||||||||
| Research and development | 1,317,237 | 1,159,197 | 2,711,088 | 2,421,887 | |||||||||||
| Selling, general and administrative | 6,820,927 | 4,159,755 | 12,867,549 | 8,387,546 | |||||||||||
| Total operating expenses | 8,138,164 | 5,318,952 | 15,578,637 | 10,809,433 | |||||||||||
| Operating income (loss) | 607,621 | (2,666,410 | ) | 286,177 | (5,751,309 | ) | |||||||||
| Interest income | 5,529 | 2,240 | 26,318 | 7,623 | |||||||||||
| Interest expense | (1,692,582 | ) | (524,843 | ) | (2,716,982 | ) | (1,055,068 | ) | |||||||
| Other income (expense), net | (189,647 | ) | 34,038 | (222,575 | ) | 13,340 | |||||||||
| Loss before income taxes | (1,269,079 | ) | (3,154,975 | ) | (2,627,062 | ) | (6,785,414 | ) | |||||||
| Income tax expense | - | - | - | - | |||||||||||
| Net loss and comprehensive loss | (1,269,079 | ) | (3,154,975 | ) | (2,627,062 | ) | (6,785,414 | ) | |||||||
| Convertible preferred stock cumulative dividends | 938,892 | 869,008 | 1,867,467 | 1,678,330 | |||||||||||
| Accretion of redeemable convertible preferred stock to redemption value | 56,775 | 55,795 | 112,573 | 105,020 | |||||||||||
| Net loss and comprehensive loss attributable to common stockholders | $ | (2,264,746 | ) | $ | (4,079,778 | ) | $ | (4,607,102 | ) | $ | (8,568,764 | ) | |||
| Loss per share attributable to common stockholders, basic and diluted | $ | (1.05 | ) | $ | (2.15 | ) | $ | (2.26 | ) | $ | (4.52 | ) | |||
| Weighted-average shares outstanding, basic and diluted | 2,152,965 | 1,897,084 | 2,035,393 | 1,897,070 |
CASTLE BIOSCIENCES, INC.
CONDENSED BALANCE SHEET
| June 30, 2019 | December 31, 2018 | ||||||
| (unaudited) | |||||||
| ASSETS | |||||||
| Current Assets | |||||||
| Cash and cash equivalents | $ | 17,468,466 | $ | 4,478,512 | |||
| Accounts receivable, net | 9,730,319 | 12,089,719 | |||||
| Inventory | 550,894 | 882,233 | |||||
| Prepaid expenses and other current assets | 774,885 | 675,562 | |||||
| Total current assets | 28,524,564 | 18,126,026 | |||||
| Long-term accounts receivable, net | 1,266,098 | 2,532,011 | |||||
| Property and equipment, net | 1,743,170 | 1,528,996 | |||||
| Intangible assets, net | - | 4,167 | |||||
| Other assets - long-term | 1,813,311 | 213,735 | |||||
| Total assets | $ | 33,347,143 | $ | 22,404,935 | |||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT | |||||||
| Current Liabilities | |||||||
| Accounts payable | $ | 2,084,910 | $ | 1,450,766 | |||
| Accrued compensation | 2,784,746 | 4,571,011 | |||||
| Other accrued liabilities | 1,616,866 | 715,244 | |||||
| Current portion of long-term debt | 833,333 | - | |||||
| Convertible promissory notes | 4,425,819 | - | |||||
| Total current liabilities | 11,745,674 | 6,737,021 | |||||
| Long-term debt | 23,858,781 | 24,499,752 | |||||
| Preferred stock warrant liability | 1,279,840 | 1,193,726 | |||||
| Deferred rent liability | 56,690 | 43,587 | |||||
| Total liabilities | 36,940,985 | 32,474,086 | |||||
| Convertible Preferred Stock | |||||||
| Convertible preferred stock Series C | 1,500,994 | 1,500,994 | |||||
| Redeemable convertible preferred stock Series A, B, D, E-1, E-2, E-2A, E-3 and F | 45,107,730 | 44,995,157 | |||||
| Stockholders' Deficit | |||||||
| Common stock | 2,192 | 1,916 | |||||
| Additional paid-in capital | 9,910,882 | 921,360 | |||||
| Accumulated deficit | (60,115,640 | ) | (57,488,578 | ) | |||
| Total stockholders' deficit | (50,202,566 | ) | (56,565,302 | ) | |||
| Total liabilities, convertible preferred stock and stockholders' deficit | $ | 33,347,143 | $ | 22,404,935 |
CASTLE BIOSCIENCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, | |||||||
| 2019 | 2018 | ||||||
| OPERATING ACTIVITIES | |||||||
| Net loss | $ | (2,627,062 | ) | $ | (6,785,414 | ) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
| Depreciation | 163,285 | 141,495 | |||||
| Stock compensation expense | 307,229 | 146,340 | |||||
| Amortization of intangibles | 4,167 | 18,673 | |||||
| Amortization of debt discounts and issuance costs | 1,249,964 | 286,798 | |||||
| Change in fair value of preferred stock warrant liability | 86,114 | (13,341 | ) | ||||
| Change in fair value of embedded derivative | 136,461 | - | |||||
| Other | 337 | - | |||||
| Change in operating assets and liabilities: | |||||||
| Accounts receivable | 3,625,313 | (621,175 | ) | ||||
| Prepaid expenses and other current assets | (99,323 | ) | 38,209 | ||||
| Inventory | 331,339 | (101,676 | ) | ||||
| Other assets | (12,057 | ) | (100,968 | ) | |||
| Accounts payable | (524,029 | ) | (607,683 | ) | |||
| Accrued compensation | (1,786,265 | ) | 331,465 | ||||
| Other accrued liabilities | 901,622 | 33,305 | |||||
| Deferred rent liability | 13,103 | 28,249 | |||||
| Net cash provided by (used in) operating activities | 1,770,198 | (7,205,723 | ) | ||||
| INVESTING ACTIVITES | |||||||
| Purchases of property and equipment | (424,473 | ) | (184,610 | ) | |||
| Net cash used in investing activities | (424,473 | ) | (184,610 | ) | |||
| FINANCING ACTIVITIES | |||||||
| Proceeds from issuance of preferred stock and preferred stock warrants (including exercised warrants) | - | 10,382,507 | |||||
| Proceeds from issuance from convertible promissory notes, net of issuance costs | 11,695,495 | - | |||||
| 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 | ) | - | ||||
| Payment of deferred offering costs | (453,816 | ) | - | ||||
| Proceeds from exercise of common stock options | 417,550 | 1,065 | |||||
| Net cash provided by financing activities | 11,644,229 | 11,383,572 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 12,989,954 | 3,993,239 | |||||
| Beginning of period | 4,478,512 | 1,212,063 | |||||
| End of period | $ | 17,468,466 | $ | 5,205,302 |