Good afternoon, and Welcome to Castle Biosciences First Quarter 2022 Conference Call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would now like to turn the call over to Camilla Zuckero, Vice President, Investor Relations and Corporate Affairs. Please go ahead. Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences First Quarter 2022 financial results conference call. Joining me today is Castle's Founder, President, and Chief Executive Officer, Derek Maetzold, and Chief Financial Officer, Frank Stokes. Information recorded on this call speaks only as of today, May 9, 2022. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the investor relations page of the company's website for approximately three weeks. Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our financial outlook, TAM, and similar items referenced in our earnings release issued today, and statements containing projections regarding future events or our future financial or operational performance, including our expectations and assumptions related to the impact of the COVID-19 pandemic. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainty, 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 quarterly report on Form 10-Q for the quarter ended March 31st, 2022, under the heading Risk Factors, and in the company's other documents and reports 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 cash flow 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. Thank you for joining us. Today, I will take you through execution and strategy highlights from the quarter, and then Frank will provide financial highlights for the period. We will take your questions. As always, I wanna thank all of our Castle employees for their hard work during the quarter and continued dedication to our mission of improving health through innovative tests that guide patient care. We had a strong quarter, which we believe will provide us with significant momentum for the rest of the year. We delivered almost 70% growth in total test volume over the first quarter of 2021 and $26.9 million in revenue, which we attribute to our continued focus on our strategy and strong operational performance. We saw strong year-over-year growth in our core dermatology business and our combined dermatology test volume, that is DecisionDx-Melanoma, DecisionDx-SCC, and our comprehensive diagnostic offering of MyPath Melanoma and DiffDx-Melanoma, which grew by 69% over the first quarter of 2021. We continue to make careful investments intended to further accelerate growth in our core dermatology business, as well as investments in the two other pillars of our growth strategy, our pipeline initiatives and strategic opportunities. I will highlight across each of these pillars, starting with our strong core dermatology business. First, I would like to emphasize that we entered 2020 with an estimated in-market U.S. total addressable market or TAM of approximately $540 million. Despite the COVID headwind, with the launches of both DecisionDx-SCC and DiffDx-Melanoma test in the second half of 2020, we entered 2021 with an estimated in-market U.S. TAM of just under $2 billion. As of April 2022, following our acquisition of AltheaDx, we now have an estimated in-market U.S. TAM of just under $8 billion, made possible by maintaining our focus on our three pillars of growth. Test reports for our flagship gene expression profile test, DecisionDx-Melanoma, grew by 48% in the first quarter compared to the first quarter of 2021, with 6,023 test reports delivered. As we have discussed, COVID-19 impacted diagnosis of cutaneous melanoma during 2020 and 2021, according to our analysis of third-party data. We continue to see the data trending in ways that are not back to pre-COVID levels. However, now two years later, we are considering these trends a new normal for now anyway. We have made decisions that we believe will strengthen our resiliency and position our business for growth despite potential headwinds related to reduced diagnoses. We believe our success in our dermatology franchise is driven by strong execution on these growth initiatives. For instance, we doubled our dermatology-facing representatives in 2021 to the mid-60s, where it stands now. As we communicated to you in the first half of 2021, we made the active decision to double our dermatology-facing representatives by July 2021 so that we would enter 2022 with a commercial team that could take advantage of the promotional responsiveness that we see in this market. We feel good about the strong momentum we have seen so far in 2022. As we discussed, we will continue to assess the size of our commercial team and number of outside sales territories. Our assessments will include evaluation of our mix of outside sales territories, inside sales support, marketing and medical affairs, and we'll adjust our investments based upon these evaluations. As I noted earlier, we believe that our market is promotionally responsive. We anticipate that our sales force expansion efforts, investments in R&D, our peer-to-peer programs, our interface with a leading dermatology electronic medical record system, Modernizing Medicine EMA system, and our federal supply schedule contract with the VA, which was recently expanded to include all of our skin cancer tests, should position us well for growth across our suite of dermatologic tests for the remainder of 2022. Another significant dermatology highlight was the presentation of our expanded National Cancer Institute collaboration with the SEER program. This expanded real-world data showed improved survival for patients who had the benefit of the DecisionDx-Melanoma test in addition to traditional clinical and pathologic data, compared to untested patients who only had access to traditional clinical and pathologic factors to determine their treatment and follow-up plan. Specifically, patients diagnosed with melanoma and who received the DecisionDx-Melanoma test had a 27% improvement in melanoma-specific survival compared to untested patients. Let me restate this number as it is important clinically. When controlling for clinical and pathologic factors as well as socioeconomic factors, patients who had the benefit of having DecisionDx-Melanoma test results in addition to clinical and pathologic factors had a 27% improvement in melanoma-specific survival. Switching now to DecisionDx-SCC. We have discussed potential timing of Medicare coverage for this test. At this time, we remain uncertain on timing. However, we continue to plan for Medicare coverage prior to mid-2023. You will recall that the technical dossier for this test was submitted to MolDX for review to Palmetto GBA in the second quarter of 2020. We expect to continue to offer this test to patients as we believe it is the right thing to do. Our billing department continues to bill payers, and as per our process, we expect to continue to receive some payments in 2022. Now turning to our pipeline initiatives. We presented proof of concept data at the Revolutionizing Atopic Dermatitis 2022 conference last month, which concluded that our non-invasive skin scraping technique produces sufficient RNA to assess reproducible gene expression for inflammatory skin disease pipeline test that's currently in development to predict therapy response. Specifically, data in the proof of concept portion of our ongoing development and validation study identified preliminary genes of interest. Importantly, study demonstrated strong technical reliability and interoperator concordance for the skin scraping technique. We feel confident about our non-invasive skin sampling approach. As you may recall, in 2021, we initiated a 4,800-patient prospective multi-center clinical study to develop and validate this pipeline test. We believe we are on track to have initial validation and development data in 2023, and we expect to launch this pipeline test by the end of 2025, which would add approximately $1.9 billion to our estimated U.S. TAM. As we move to our last growth pillar, strategic opportunities, we are excited to discuss the ongoing progress of our TissueCypher integration, as well as our recent acquisition of AltheaDx and the IDgenetix pharmacogenomic test for mental health conditions. As I mentioned above, the acquisition of these two laboratories expanded our in-market estimated U.S. TAM by approximately $6 billion to now approximately $8 billion. As we mentioned on past calls, we believe strategic opportunities enable us to build franchises in two complementary markets with existing commercialized products that address a clear unmet clinical need and have already gained Medicare reimbursement as well as select commercial coverage. We have made these acquisitions in furtherance of our long-term growth and value creation objectives. For the near and mid-term, we will focus assessment of other strategic opportunities from the position of building our three franchise markets, dermatology, gastroenterology, and mental health conditions. As it relates to our TissueCypher Barrett's esophagus test, we have seen the positive reception from clinicians that we identified during our market research in the second half of 2021. In the first quarter, CMS granted ADLT or Advanced Diagnostic Laboratory Test status for the TissueCypher test. ADLT status requires that a clinical diagnostic laboratory test provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests, among other criteria. Of significant business importance is the fact that ADLT status exempts TissueCypher from what is called the fourteen-day rule, which simplifies the billing process for Medicare patients. We also announced in the first quarter an independent peer-reviewed article published in the Clinical Gastroenterology and Hepatology journal. The study, a pooled analysis of five previously published clinical validation studies of 552 Barrett's esophagus patients, was led by Dr. Prasad Iyer, a recognized expert from the Mayo Clinic in the diagnosis and management of Barrett's esophagus. The analysis reinforces the ability of TissueCypher to significantly improve predictions of progression to esophageal cancer or high-grade dysplasia in patients with Barrett's esophagus, compared to predictions based on clinical and pathology variables alone, allowing for more informed disease management decisions to occur. For instance, one analysis evaluated the impact on TissueCypher in combination with clinical and pathologic factors that are known predictors of progression in patients with non-dysplastic Barrett's esophagus disease. This patient group is particularly concerning as we believe they represent approximately 348,000 endoscopies per year or approximately 91% of the intended use market for TissueCypher. We continue to make progress on our Pittsburgh laboratory enhancements, and we have signed our new lease to facilitate further progress for TissueCypher, which includes optimizing test turnaround time. You may recall our commercial team consists of 14 outside sales territories. Similar to our dermatology commercial team, we will continue to assess market response and determine what the appropriate commercial expansion will look like. Based upon our initial market research as well as initial provider response, we'd expect to add approximately 10-15 additional outside sales territories sometime in the third quarter, ending the year with approximately 25-30 outside sales territories. Let's turn now to our recent closure on AltheaDx and the acquisition of the IDgenetix test in late April. I want to reiterate our strategic focus and how this acquisition aligns well within this focus. Castle aims to transform patient management by providing actionable information in disease states with high unmet clinical needs. We accomplish this through four main factors. Number one, we identify high-value clinical decision points that are poorly served by current subjective features. Number two, we focus on clinical decision points where the diagnosing clinician is the treating clinician. Number three, we limit our investment to proprietary products. Number four, we identify subsequent disease states or clinical decision points at the same diagnosing or treating clinician phases, thereby providing multiple high-value tests to the same customer and leveraging our commercial investment. We believe IDgenetix aligns with our strategic focus. Additionally, as you may recall from our April fourth announcement, IDgenetix previously only had Medicare coverage for use in patients diagnosed with major depression. As we enter into May, Medicare coverage for the IDgenetix multigene test now includes seven additional mental health conditions for a total of eight. As a reminder, a randomized controlled trial showed that patients diagnosed with depression who were assessed with the IDgenetix test showed a greater than 2.5 x improvement in remission compared to those patients who received the physician's choice without knowledge of their pharmacogenomic information. AltheaDx had a commercial team covering approximately 20 outside sales territories and all joined the Castle family. We are excited about the potential IDgenetix has to help patients diagnosed with mental health conditions. We recently announced a collaboration with Camille Schrier, Miss America 2020, for Mental Health Awareness Month to promote the potential of genetic testing and the IDgenetix test to help improve treatment for mental health conditions. We look forward to updating you in the near term on our progress with IDgenetix. I will now turn the call over to Frank, who will provide details relating to our financial results and updated 2022 revenue guidance. Thank you, Derek, and good afternoon. First quarter revenue was $26.9 million, an increase of 18% over the first quarter of 2021. Overall, the increased revenues primarily reflect both higher report volumes for our DecisionDx-Melanoma and DecisionDx-UM tests, partially offset by lower revenue adjustments related to tests delivered in prior periods. We believe the higher volumes are attributable to a combination of increased patient flows from the easing of COVID-19 restrictions and the effects of our dermatologic sales force expansion last year. Excluding the effects of revenue adjustments related to tests delivered in prior periods, adjusted revenue was $26.3 million, an increase of 50% over the first quarter of 2021. For the three months ended March 31, 2022 and 2021, we recorded net positive revenue adjustments of $0.6 million and $5.3 million, respectively, related to tests delivered in previous periods associated with changes in estimated variable consideration. We are raising our full-year 2022 revenue guidance and now anticipate generating revenue between $118 million and $123 million, which we believe will be driven by further consistent execution on our growth plans, and in particular, the AltheaDx acquisition. Our gross margin during the first quarter was 71.7% compared to 86.7% in the first quarter of 2021. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and revenue associated with test reports delivered in prior periods, was 77.4% for the quarter, compared to 82.7% for the same period in 2021. As you saw in the first quarter, we continue to expect our gross margin percentage to be negatively impacted in the near and midterm by increased spending on investments to facilitate and support anticipated growth in report volumes in advance of obtaining reimbursement coverage for several of our tests. These investments may include additional laboratory personnel and related resources. Additionally, as we have discussed, our GAAP gross margin may also continue to be negatively impacted by amortization of intangible assets associated with recent acquisitions for the remainder of 2022. Our total operating expenses, including cost of sales for the quarter ended March 31, 2022, were $51.4 million compared to $27.1 million for the first quarter of 2021. The largest driver of the increase was higher SG&A, which increased by $12.3 million compared to 2021, attributable in large part to higher personnel associated with our increased headcount, which include expenses related to salaries, bonuses, benefits, and stock-based compensation. These higher personnel costs were primarily attributable to the expansion of our sales and marketing teams as well as administrative support functions. Further, in connection with our acquisition of Cernostics, we hired an initial commercial team of 14 outside sales territories, along with internal sales associates and medical science liaisons to support our launch of the TissueCypher Barrett's Esophagus Test. The remainder of the increase in SG&A was primarily associated with training events, meetings, travel, and other general increases. R&D expense increased by $4.9 million in the first quarter compared to the first quarter of 2021, and was primarily associated with increases in personnel costs, including increases in stock-based comp attributable to additional headcount to manage and run our clinical studies and increases in other expenses associated with increased clinical study activity. Total stock-based compensation expense, which is allocated among cost of sales, R&D, and SG&A, totaled $8.4 million for the first quarter compared to $4.9 million for the first quarter of 2021. Operating expenses this quarter also included a change in fair value of contingent consideration of $2.6 million or $0.10 per diluted share, and is related to the remeasurement of the liability for earn-out payments in connection with our acquisition of Cernostics. This expense could vary from quarter to quarter, depending on any changes in assumptions and valuation results. Further, we had amortization of acquired intangible assets for the three months ending March 31, 2022 of $1.6 million, which is related to the developed technology we acquired in May 2021 and December of 2021, attributable to the MyPath Melanoma and TissueCypher tests, respectively. Our net loss for the first quarter of 2022 was $24.6 million compared to net loss of $4.3 million for the first quarter of 2021. Basic and diluted loss per share for the first quarter was $0.97 compared to basic and diluted loss per share of $0.17 in the first quarter of 2021. Adjusted EBITDA for the first quarter was negative $11.4 million compared to a positive $0.9 million for the comparable period in 2021. Net cash used in operating activities was $21.4 million for the three months ended March 31st, 2022, and was primarily attributable to the net loss of $24.6 million, accrued compensation of $6.9 million, and increases in accounts receivables of $2.7 million, partially offset by stock-based compensation expense of $8.4 million and a change in fair value of contingent consideration of $2.6 million, as well as depreciation and amortization of $2.2 million. Finally, we had cash and cash equivalents at March 31st, 2022 of $309 million and no debt. I want to reiterate that we believe our strong balance sheet positions us well for continued growth and value creation. I'll now turn the call back over to Derek. Thank you, Frank. In summary, we're off to a great start in 2022, delivering strong year-over-year growth in our current dermatology business and a laser-like focus on strategy execution. We continue to make thoughtful investments to accelerate growth, and we are seeing results of those investments. I would like to conclude today by thanking our Castle team. I thank you for your continued interest in Castle. Now we are happy to take your questions. Operator? Thank you. If you would like to ask a question, please do so now by pressing star followed by one on your telephone keypad. If you change your mind and would like to withdraw your question from the queue, please press star followed by two. We ask that when preparing to answer your question, please ensure that your device and your microphone are unmuted locally. Our first question today comes from the line of Puneet Souda from SVB Leerink. Puneet, please go ahead. Hi, Derek, Frank, thanks for taking my questions. First one is on guide. I just wanted to understand, you delivered about $1 million ahead of us and the consensus, I believe as well. You're expecting $2 million for AltheaDx. Given that seems to account for the increase in the guide at the midpoint, combining those two elements. I just wanted to understand, given the momentum you're seeing in the market, is there anything that's giving you a pause a little bit? Is it still COVID sluggishness? Is there, you know, rep access? Anything else that you would point to, that is giving you know, a slight, you know, more confidence that it appeared to me that you would have more confidence at this point in time, given where the current markets are and, we're somewhat out of COVID at this point in time, hopefully. That's a great question, Puneet. Derek, I'll maybe give some flavor, and Frank can correct me. I think that, one, this is only the first quarter, and so you're right. We exited last year with really strong momentum, certainly in our dermatology business. We're early on in the launch of both TissueCypher and, of course, only closed this quarter on AltheaDx. There certainly is some conservative, as I think in terms of thinking through the opportunities for the other new products, I guess you would say, from a launch standpoint. Nothing we've seen reflects any kind of a pullback, rep access, et cetera. I would just remind you that the range of the Althea revenue guidance was $1 million-$3 million rather than a single midpoint. I think that the revised guidance reflects our enthusiasm and excitement about the tremendous execution in our core derm business that we continue to see. Okay. That's helpful. You know, Derek, maybe taking a step back, when you look at the AJCC guidelines overall, where DecisionDx-Melanoma is today, the momentum that you've had and the data generation that you've had over the last few years, the fact that DecisionDx-Melanoma, and correct me if I'm wrong, it's mid-teens to high-teens penetration in the market. At what point do you think you can approach the AJCC guidelines and potentially we can see potential for inclusion of this test longer term into the guidelines? Thank you. Yeah, excellent question. Again, I would maybe separate out slightly. AJCC really is about diagnostic workup only, and I think it wasn't until the last version, which was probably December 2017 or January 2018 when you saw them include even Oncotype for breast in terms of the diagnostic workup guidelines. I think impacting AJCC diagnostic criteria is a ways off, but that's mainly because they try to harmonize with the WHO equivalent. As it relates to NCCN guidelines, maybe where your question was going. We certainly believe that this recent National Cancer Institute/SEER collaborative study that we have ongoing with NCI is a very significant real-world, large prospective dataset that shows that when clinicians have an opportunity to incorporate the results of our test with the other standard of care information they get with them, you know, clinical and pathologic features that they're able to make, you know, I'm interpolating here slightly, better decisions that results in living longer, and that's pretty significant. Given that it's not a Castle study, but a third-party large NCI study, I think should bear weight. I certainly think we should expect the NCCN committee members to evaluate that data, and they should be doing what, you know, over 5,000 U.S. clinicians do, which is to incorporate it in use of their practice. Now, that being said, I think the diagnostic numbers, as you know, around melanoma are kind of squishy, part due, we think, to kind of the COVID squishiness. I think we expected when we exited last year at around 18%-20%, more like 20%. Is that right, Frank? On a reduced number of diagnoses, correct. On a reduced number of diagnoses. We're already sort of testing last year, one in five patients. In doing some assessment work, it looked to us like things like Oncotype DX for breast cancer, for example, didn't get incorporated into NCCN guidelines for breast cancer. It hit around 30%, so we're kinda just a year or two away from there. I think it'll be around the corner is my expectation because clinicians are using our tests in record numbers to help treat their patients. Although we do recognize NCCN as being a laggard indicator of adoption, that laggardness is coming pretty close from our perspective. Our next question comes from the line of Catherine Schulte with Baird. Kathryn, please go ahead. Hey, guys. Thanks for the questions. I guess first, you mentioned melanoma diagnoses aren't yet back to pre-COVID levels. You know, where were they for the quarter? Then you mentioned you're considering this the new normal. You know, why don't you think that will rebound to pre-COVID levels? Does that change how you think about the ideal ultimate size of your sales force if diagnoses or and/or rep access is gonna be different going forward versus pre-COVID? A lot of yes, no questions there, Cathryn Schulte. Let's see. First of all, we don't believe we have accurate first quarter diagnosis numbers based upon the vendor that we've been using. We believe that there wasn't any pullback. There's nothing to indicate from kind of a sales force access perspective or knowledge to marketplace in January, February that Omicron had any material difference. I think the question is that, you know, we're in this about, what, seven quarters or so, and we keep wondering when we get back to diagnosing around 130,000 patients a year versus call it 110 or 115. I guess in the short term, I can't tell when they come back if that's due to kind of a reduction in telehealth over time or if we should. We just wanted to be as transparent as possible, obviously, and just indicate that, you know, as of now, we should probably view the normal patient flow as being what it's gonna be. I think unfortunately, those patients who had delayed diagnoses, which I think is largely due to the implementation of telehealth medicine, which I think for older patients certainly makes it much more difficult to get your phone around the back of your head or your back and say, "Hey, is that a melanoma doctor?" That's kind of concerning from a patient care standpoint. I think until we sort of see that kind of primary care in-person activity returning, we would expect a slow dribble of these patients coming back in as they self-diagnose a melanoma that's bigger today than it would've been in a normal PCP interaction a year or two ago. I think if people are modeling in kind of a rush to a catch-up of all these missing patients, I think that's hard to predict from our standpoint, which we've always said we just try to be a bit more open or transparent this time. I get them all? Okay. Got it. You did. Oh, I know, I know. In terms of size of sales force question was buried there. I don't think it impacts that. We have such a large untapped medical need here in melanoma. As you know, we're just now scratching the surface for squamous cell carcinoma, and we also have our MyPath and DiffDx tests. Those are all largely at the same customer. You know, a few thousand less melanoma patients doesn't necessarily change the opportunity we have to really impact patient care, who have skin cancer, one of a variety of skin cancers in a dermatologist practice. I think that doesn't impact our planning or our decision-making process. Okay. Got it. For squamous cell, you know, you had those volumes drop sequentially. Just curious if you could talk through what you're seeing with that test. You know, is there seasonality there? Just a little surprised to see that given it's so early in the launch and given the sales force expansion. Any color on what you're hearing in terms of doc feedback would be great. Yeah. Catherine, it's Frank. The position feedback is tremendous and it is the clinical utility of our squamous cell test may wind up being even more compelling than the clinical utility of our melanoma test, which is of course well published and well validated. Important to remember, the reps, our area managers are still directed to focus most of their time on the melanoma test. Given where we are in the reimbursement journey, we certainly don't wanna have a squamous report at the expense of a melanoma. Now, if a physician, and many of them do, if they wanna talk about squamous, the area managers are well equipped, well trained, and they'll do it. We are guiding them fairly heavily to focus the majority of their interactions on melanoma. We're quite happy with where the squamous volume was this quarter. It may bounce around a little bit. I think that the real measure is gonna be once we get the reimbursement puzzle fixed there. I think you'll see that start tracking angles and trends like melanoma. Yeah. I wouldn't focus any effort or concern around quarter-over-quarter, especially this quarter. You know, we haven't been in market having launched the squamous cell test only in sort of late August 2020. We really don't have any non-COVID normal patient flow experience. Assuming squamous cell tracks like melanoma does in terms of patient flow, then we've seen pre-COVID the number of patients diagnosed and reported growth in first quarter over the fourth quarter being nothing to write home about. It's usually flattish or something like that. I think this is not atypical from that standpoint. Certainly we've heard well, I would say only positive impact in terms of the decisions we're having our tests make in terms of patient care. Assuming squamous cell tracks seasonality close to melanoma, which I don't think there's a reason why it shouldn't, I don't think we would expect melanoma to have an increase in the rate of diagnosis, and we'd expect our revenue growth to occur in the second quarter versus first quarter. We would see a little bit more in the third quarter versus second, and then you'd have third to fourth and fourth to first being kind of flatter. That's not atypical. And I think reimbursement, we're giving around 10% effort to kind of a launch product, but that's just due to kinda where we are in reimbursement is a perfectly adequate place we wanna be at today. All right. Got it. Thank you. Our next question comes from Mason Carrico with Stephens. Mason, please go ahead. Hey, guys. Thanks for taking the questions. First, could you walk through some of the growth dynamics in the quarter for your dermatology portfolio specifically? Any color you can provide on growth you're seeing from a growth in new clinicians adopting use of the test versus increases in utilization? Let me just close so I can focus. Yes. Yeah. Sorry. Sorry, Mason. We had a tremendous quarter in terms of new ordering physicians. That's a metric that we not only track, but we drive. Area manager results are impacted heavily by that. The reason is because if we can convert a physician and have them begin using the test on a handful of their patients, we typically see as they review the data and see the benefit of the test, they'll expand it to a larger group. A great quarter in terms of new ordering physicians, and then continued volume and uptake from the docs we have. As Derek said, at this point, I know you've heard us say we have a little bit of a tough time getting a real precise number on the total number of clinicians who are targetable in the country just given the subspecializations that you see in dermatology. Somewhere around half the docs that are targetable here use the test in the last year. That's, you know, one out of two is pretty close to getting pretty close to standard of care. I think that as we continue to see the penetration levels grow, you know, physicians will see their colleagues, and they'll see that their colleagues are using the test and benefiting from the test. Also this quarter, we had one of the, you know, most powerful data study, data points we've had yet, which was the collaboration with NCI and the SEER data. Working hard to get that published. That's a key goal of ours, and then we'll amplify the dialogue around that even more. Got it. Thanks. That's helpful. On your IDgenetix test, in the sense that it incorporates drug-to-drug interaction, I was wondering, one, is that unique to IDgenetix versus some competitor tests out there? Also, is there a general percentage of patients with major depressive disorder who are on one or more medications? I'll answer the first one, and we'll come back to the second one for a little bit of clarity, Mason. On the first one, there have been four clinical studies done with four different pharmacogenomic tests in patients with depression. Two were negative. I'm sorry, there's been five, I guess. Two were negative. Both of those only do drug-gene interaction reporting. Myriad's GeneSight test had a positive outcome study showing an improvement in terms of remission and response rates, if I recall correctly, compared to physician's choice. They only report drug-gene interactions. AltheaDx's, you know, early scientists made the proactive choice that actually both components are important and the doctor should see the summary of not only what the patient's on today, but also the genomic impact of their own body on processing these kinds of therapies so that we saw obviously in the AltheaDx study a positive improvement in terms of both remission and response rates. Now, I don't want to raise up or cut down the validity of inter-study comparisons, but if you look at the GeneSight study, the robustness of responses was more muted than it was in the AltheaDx study. That could be a protocol design issue, it could be site selection, it could be timing when the study's done, or it could be actually because you have one report that includes both drug-gene and drug-drug and one that does not. Our perspective is that when we share in an honest manner the protocol design and the ease at which a clinician can order our IDgenetix test, and the fact that we give them one lab report back, which includes what they want, as opposed to saying, "Hey, if you're interested in the other part of therapeutic response, go over online and figure it out, doctor, we can't help you." I think that's an important advantage to us. Now that being said, the main opportunity, I think, is not so much grabbing share. It really is helping these people, the vast majority who have not had access to pharmacogenomic testing, to actually have better choices made the first time around. I think that's the real opportunity, but we do think we have a very nice, strong competitive advantage, which is easy to communicate. On the multiple medication issue, my understanding is that, yes, these patients and the patients for the other indications that we have approval for, anxiety, the expanded approval with Medicare coverage, a week or two ago, which included seven other indications, that many of those patients are going to be on multiple drugs, unfortunately, which just increases the value of our test to clinicians and their patients. Perfect. Thanks, guys. Absolutely. Our next question comes from Thomas Flaten with Lake Street Capital Markets. Your line is open. Thank you, guys. Appreciate you taking the questions. Sticking with IDgenetix, from a rep productivity perspective, obviously the guide is pretty marginal at this point, you know, 20 ft on the street, what kind of productivity could you get out of that team without a significant expansion in the, let's say, you know, near- to intermediate-term? Yeah. Hey, Thomas Flaten, it's Frank Stokes. We would expect that we at some point will expand that group. We'll do it as we grow volumes. Having Medicare coverage in hand allows us to sort of scale that as appropriate as the volumes come forward. I don't know. I can't guide you when we might expand. It's certainly. I think it's clear that there are lots of uncovered areas that we could still tap. We'll use our typical Castle structure of a group of outside area managers, coupled with medical science liaisons and inside sales associates, to penetrate that space. It's too early for us to really see at what point a rep is doing so much business that we need to scale that territory down a little bit. But I would suspect that in our behavioral health effort, we will probably take the same approach we do in our others, which is we would like our area managers to be able to spend about half their time converting new physicians and about half their time providing information and service to physicians who are using the test. We'll give you more insight as we develop it here. Out of curiosity, are those territories built around high prescribers of certain basket of meds or anything you can share about how those territories are built or designed? With the millions of potential patients, and only 20 or so, 19 sales territories out there. They were originally designed based on just massive geography. There were some expansions done earlier last or late last year, earlier this year that we're targeting much more so the areas of responsiveness. I think the opportunity here is to really, I mean, let us get past the next couple of months into the integration of the group, and as Frank said, organizing or integrating the commercial team and the medical teams into Castle's approach, and we'll be able to go and march forward very, very strongly towards the end of this year, which is also part of why we wanna make sure we were setting up modest expectations so that we aren't having to make rapid choices for the wrong reasons, but let's make rapid choices for the right reasons. Got it. Appreciate it, guys. Thank you. Thanks, Thom. Our next question comes from Kyle Mikson with Canaccord. Kyle, your line is open. Thanks. Hey, guys. Thanks for taking the questions. Just sticking with the acquisitions, the current TAM of your, of your legacy Derm business, it's grown quite a bit through these acquisitions and the launch of all these products. But, you know, it's still the legacy business is still below $2 billion in TAM, and I know the pipeline offers upside to like $5 billion-$6 billion, but you've added $1 billion from Cernostics and $5 billion from AltheaDx. I'm sure those are big reasons for the acquisitions. I'm just kind of wondering, though, like, what gives you confidence you'll be able to successfully penetrate those incremental TAMs that you've added over the past year? I guess it'd be helpful to kind of talk about that in the context of your objective to kind of achieve cash flow break even by 2025 before we even launch some of these pipeline tests on the Derm side as well. Thanks. Clarify what you're thinking about with the word incremental. The incremental as in Cernostics is incremental to dermatology or incremental within dermatology even? I just wanna make sure we're answering the question correctly. Sure, Derek. The $1 billion from Cernostics, the $5 billion from AltheaDx, I mean, those are all kind of, you know, relatively white space opportunities for Castle, right? Like, what gives you confidence that you can kind of penetrate those successfully, just given, you know, they're kind of relatively Okay. Okay. Niche businesses, I guess. Thanks. Excellent question. Our belief as we kind of went through the COVID period of understanding where we were gonna ensure strong growth in the kind of mid to long term was, do we only wanna stay or should we only stay within dermatology? Or when we think we've gotten sized properly in terms of infrastructure support, back office support, do we think it makes sense as well to maybe go outside of dermatology if we can find areas that offer the same kind of checkbox that we get with dermatology, which is to us, you know, are there more than one areas of high unmet clinical need that could be solved potentially with advanced molecular diagnostics, yes or no? I.e., can we leverage a franchise investment through multiple products? Two was, if we do it ourselves, that's a pipeline development timeline. Then as we know, it's a you know, uncertain elongated timeline to getting at least your first steps in reimbursement taken care of. Do we see areas where we could find things that would meet that we view as complementary to Castle's strengths? I think going back to gastroenterology and our TissueCypher test for patients with Barrett's esophagus, there's a clear unmet clinical need as we talk to gastroenterologists who are concerned about the poor predictive value of pathology in terms of predicting which patients with Barrett's esophagus actually will go on to progress and which will not. That results in both the undertreatment of people who maybe could be saved from advancing to adenocarcinoma of the esophagus, as well as overmanagement, which is really, you know, repeat endoscopies every year, every two years for the rest of one's life. When your chance of progressing is so low, is that really the right thing to do? We felt that the opportunity in Barrett's esophagus, the clinical data that Cernostics had generated and published prior to the acquisition, and the sort of, as you put it, you know, wide open green space to really be able to walk in there and frame the opportunity for gastroenterologists kind of checked all of our boxes. By the way, they also had Medicare reimbursement as well as reimbursement from some small commercial payers underfoot. We felt, wow, we could walk in now. We'll have to integrate obviously the current employee base and hire new, but the opportunity to really kind of move this through a growth system in 2023, 2024, 2025, 2026 and beyond looked like it had an awful lot of risk taken out due to Medicare coverage due to the strong clinical publication track record. We believe there are other disease states within the gastroenterologist marketplace that we will be looking to build up so that by the time we get to what, call it 2025, and you turn around and say, just like dermatology was in 2022, we have two or three or four tests now targeted to the same customer offering good value that should let us leverage our investments. That was kind of the gastroenterology analysis. When looking at the AltheaDx opportunity, it was quite similar, which was to say, do we think we have a large unmet need here? Do we think that the product profile is competitive, if not highly competitive? Our answer was yes in both cases. Do we believe that this product could be a substantial growth driver in the next, you know, three/four/five years? Not really doing much in 2022 like TissueCypher isn't expected to, but really helping us move things forward in the middle of this decade and beyond. Our answer was yes. Having kind of designed in or in designed drug-drug and drug-gene interactions to us was a very interesting smart choice that we think based upon our due diligence makes a difference in the case of prescribing doctors. To make that easier and make it, I hate to say mindless, but make it a much more easier choice to have everything in one report, clearly is attractive to our customer base. It really is about execution for both, the mental health business as well as for the GI business. We believe that we've demonstrated that we not only could do well launching the melanoma test, in 2015, I guess, 2013, 2014, 2015, with a small sales force, but also launching our squamous cell carcinoma test and our DiffDx during COVID and being successful hopefully reduces outside concerns about execution risk. It's really just a matter of blocking and tackling. What's exciting is that we've had an opportunity here to really take some of the digital marketing advances that AltheaDx has been moving towards and really cross-filter those across our other business lines so that at the end of the day, we're gonna hopefully not only have the sort of excellent block and tackling that we do from a sales and marketing standpoint permeate both GI and mental health, but we'll also go ahead and take some of the learnings and in terms of where we can actually make good, strong digital marketing investments to help drive further growth in our other business lines. I think it's a win-win for both those acquisitions. We would have liked to have these spaced out a bit more timing-wise, but you don't always look a gift horse in the mouth all the time. I think we are quite excited about the integration, investment we're making the next three or four months. That's for certain. Looking forward to seeing the contribution of both these acquisitions in 2023 to 2027 to 2028. Wow. Okay. That was great, Derek. Thanks so much. Awesome. Really thorough answer. Just thinking without the, maybe the new indications for IDgenetix under the coverage expansion, I assume that's gonna be the kind of, like, $1,500 rate as for depression. Can you kind of talk about any off-label use of the test in these newly reimbursed areas to date? You know, ultimately, is there any material upside to the 2022 revenue or maybe gross margin expectations being provided here today? I don't think they're baked in. If you could quantify the milestone payment was paid yet, like what was that in connection with this, you know, recent catalyst? That'd be helpful too. Thanks. I'll answer a couple of those questions. I want to try and cover a couple. In terms of the expanded indications, those are disease states that I believe AltheaDx was reporting on prior to the expanded Medicare coverage. What really was expanded wasn't so much the MolDX program saying, "Gee, we think that you can now add value to these patients." It was really about reviewing data in patients with those indications. The kind of overriding driver of IDgenetix is really looking at what CPIC does, C-P-I-C, which is a quasi-governmental body or NGO rather, composed of academics and pharmaceutical companies as well as I think current or ex-FDAers who really looks around and says, "Gee, of FDA-approved drugs, what do we know about drug-drug or drug-gene interaction? Let's create a list that's evidence-based so that as clinicians, physicians treating patients can go to the CPIC website and be able to see the various interactions that may be occurring on a drug-drug or drug-gene perspective for different disease states." CPIC really is sort of the clearing house, I would say, for potential use of a test like IDgenetix. Now that being said, what I just described to you is not what doctors get paid to do. They get paid to see patients. The actual value of CPIC is not seen very well. The opportunity to go ahead and look at saying, "Hey, what are some areas of recognized drug-gene or drug-drug interactions that could be added to future reports?" The CPIC group happens to be one of the consortia that one can look at and say, "Does this make sense? Does it align with our current kind of customer call base? Should we look at developing data that could demonstrate that we can actually measure drug-drug or drug-gene interactions in these same patients with those disease states or those diagnostic states?" We kind of move forward from there. I don't think I would characterize any use of the IDgenetix test as off-label. We really only report interactions that are relevant for patients who have certain stated diseases or diagnoses today. We can expand that over time, of course, with additional data development. Did I answer that part of the questions you were trying? Yeah. Kyle, the milestone or contingent consideration potential payments are based on revenue growth and reimbursement performance. Our next question comes from Mark Massaro from BTIG. Mark, your line is open. Hey, Derek and Frank. Good to hear from you, and thanks for taking the questions. I wanted to ask about gross margins. You know, Frank, you talked about investments you'll make in lab personnel and amortization of intangible assets from acquisitions. You know, legacy Castle, you know, you guys were quite unique with 80% gross margins. Can you just maybe help us at a high level think about your mid- to long-term gross margin trajectory and when you think you might be able to get back to those potential 80% gross margins? Or is this mid- to high-70s, you think maybe the new normal? Yeah, I'll divide that, Mark, from a GAAP gross margin, which includes the amortization of intangible assets that were part of the acquisitions. That's gonna change based on that amortization, right? There's not anything that's gonna change there. But the adjusted gross margin, if you take that out, you know, it's. When you're not appropriately paid for your service, it has a negative effect on gross margin. So, when we do have the reimbursement path repaired or fixed or correct, I guess, is the way to think about it, then we would expect to get back close to the gross margin that we had before. IDgenetix is also run on QuantStudio, so, similar throughput, similar workflow there. I think that it's a matter of getting reimbursement to catch up with volume, which is something we work very hard on. For example, one exercise. Sorry, continue, Derek. I was gonna say, for example, one exercise that we don't do in our filings is just take the volume for the tests that you believe have reasonable reimbursement, such as the DecisionDx-UM test, our DecisionDx-Melanoma test, and our MyPath Melanoma test, and just use those as your test report denominators, and divide back into the cost of goods, and you'll see it's sitting up where you expect it to go and be. I think it's a matter of progress on a reimbursement that lets that volume that we're producing reports on today that aren't being reimbursed appropriately, that's that'll move the needle right back up, as Frank said. Okay, that's helpful. I think your R&D outlook for the year contemplates $65 million-$80 million in investment in 2022. Can you give us a sense for the breakdown between Derm, GI, and mental health? You know, you guys talked about how GI could sort of you know be a maybe sort of a new area where you could add additional indications over time. You know, how are you guys thinking about potentially adding those organically versus inorganically? Can you give us a sense for what that pipeline is that you acquired? Yeah, I think your R&D number might be a little high, Mark. We'll make sure we get that cleared up for you. We haven't broken out how much is in which category. I would tell you that we will continue to support our in-market derm tests very aggressively. We'll continue to support TissueCypher and IDgenetix very aggressively as well. We have been incredibly successful as a company in developing signatures internally. Our UM test was licensed, as you know, but our three derm tests, taking out the MyPath portion of our comprehensive diagnostic offering, those were all developed in-house. We've got a tremendous amount of confidence in our R&D team and their ability to develop signatures. The tricky part is just making sure that you're identifying a clinical question that physicians have and need an answer for. If we can do that, we're confident that we can. By the way, we have identified questions in GI. If we identify a question this group of physicians has, we're very confident we can develop a signature for it. We would like to add additional products to our GI offering. We're working on several in derm as well. We'll keep doing that. The opportunity with these groups of physicians is quite significant. As we saw with our squamous cell quick update, when you educate a group of physicians on the value of gene expression profile diagnostic testing, when you have new patients that you can help them, it's a much easier putt to get them to understand that value in the next group of physicians. Okay, that's great. One last one from me. You know, you guys have a strong balance sheet with over $300 million of cash. You have been acquisitive recently. You know, you've got new channels where you could plug additional assets into. Valuations have declined significantly in the last three months. How do you look at the environment for potential tuck-ins at this current time? I think one is, of course, you can never say never anyways, but I think we have an opportunity here to really integrate, driving into three areas in terms of our current commercial opportunities in GI, in mental health, and in dermatology. We have laid out the fact that we believe dermatology is our significant near midterm core revenue driver, certainly, and that one of our growth pillars is looking at external opportunities like TissueCypher and like IDgenetix. That being said, I think that one of the leverage points that we like about dermatology is how do we leverage gastroenterology and our sort of mental health call point. I think from a acquisition perspective, there are certainly items that are looked at all the time. I think it's much more likely that if we make additional moves, they'll largely be focused in growing out our current call points. We can get greater leverage value off those commercial investments. Do you wanna add anything? This concludes our first quarter 2022 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences. Thank you everyone for joining us today. This concludes our call. You may now disconnect your lines.