Good morning, everyone. Thanks for joining us on day two of Baird's Global Healthcare Conference. I'm Tom Peterson. I'm an associate on our life sciences and diagnostics team here at Baird. We're excited to have Castle Biosciences presenting today, and representing the company, we have CEO Derek Maetzold and CFO Frank Stokes. Thanks for joining us. Thank you. Thank you, Tom, and to the Baird team for inviting us here to this conference. I'm gonna start off with just maybe four or five slides, just to set the stage for Castle's performance in 2024, and then I think we go into a group chat from that point, right? Yeah. As a public company, I certainly encourage each one of us to read our forward-looking statements and disclosures on both these slides and our website. There are different ways of organizing how one thinks about the strategy of a molecular diagnostics business. This is how we happen to organize our life, which is to say, we first start out by trying to focus on developing or locating for acquisition, high clinical pain points, and if we find those that we believe can be solved or improved by an accurate, high-value advanced diagnostic test, then we look to go and develop or acquire that, so we can be either one first in class to meet a very, very high unmet need, or perhaps best in class if we're not first to go ahead and meet that same high unmet clinical need. Once we've done that, we focus on building a robust clinical evidence publication track record that helps support both clinical adoption by our customers as well as reimbursement success, and we believe those things lead to penetration, eventually adoption by payers and clinicians, and the circle goes on and on. Today, we have sort of three primary areas of growth, I would call it. We have several tests in what I would call our dermatological call point, led by our DecisionDx-Melanoma test, which is a risk stratification test focused on patients with invasive cutaneous or skin-based melanoma. We answer two questions there. One is, "Can this patient avoid safely a sentinel lymph node biopsy surgical procedure and just go with a wide local excision to remove that, that primary melanoma?" We have generated prospective and retrospective data sets showing that we can do that safely. And the second use is really after that, how do you manage this patient? Are they at a high enough risk for progression or metastasis, so they should be tracked separately than patients who are at a low risk of metastasis, who are probably safe seeing their dermatologist for routine skin checks? We followed on with our DecisionDx-SCC test, our MyPath test, which is for differential diagnosis of melanoma. We acquired a few years ago, as you may know, a test called TissueCypher, which works in the Barrett's esophagus space. This is a disease state which is the only known precursor to development of esophageal adenocarcinoma. This is a large population base as well. We think there's around 415,000 patients diagnosed each year with Barrett's esophagus who should be tested by our test. And finally, we acquired also a couple of years ago, a test in the pharmacogenomic space called IDgenetix, which we know was not first in class, but we do believe it was best in class because it combines both drug-gene interactions, drug-drug interactions, and some lifestyle factors as well. All told, of our currently commercially available tests, we are attacking, we believe, roughly an $8 billion US market opportunity. If we just give a couple highlight slides on our second quarter performance of 2024, what you can see on the left and right-hand slides here is revenue by quarter and test volume by quarter, starting in 2Q 2023, ending in 2Q 2024, and what you can see is nice, strong, consistent growth. We closed out the second quarter with $87 million in revenue, and that was led by 25,102 test reports being issued in that same time period. That growth in revenue and the way we run our business has translated into a fairly efficient model in the molecular diagnostics space. We were able to go ahead and receive operating cash flow of around $24 million in the second quarter. Adjusted EBITDA was $21.5 million in the second quarter. You can see in terms of adjusted operating cash flow, it's up quite a bit from first quarter 2024. First quarter 2024 is when we pay out annual corporate bonuses and some one-time healthcare costs. That is always a heavy sort of cash use quarter for us. What that has led us to, with that $24 million in operating cash flow, is a fairly healthy balance sheet of $260 million from a cash and cash equivalent perspective. So we think we're sitting in a pretty good spot as a molecular diagnostics company to sort of grow and focus on our strategic initiatives, both in the last half of this year, going into 2025 and 2026. And with that, let's see if we have a summary slide that's good enough there. Yeah. Thank you. Great. Thank you, Derek, for that helpful introduction. I want to start on the dermatology business, and maybe on DecisionDx-Melanoma specifically. You know, you're about 30% penetrated today. I know you've talked about at least doubling that, you know, over the long term as sort of a long-term target for penetration. You know, should we think about this test as a double-digit grower in the future to kind of get to that penetration level, you know, going forward? I think that we go ahead and try and benchmark what should be a reasonable asymptote in terms of market penetration. We have one of our legacy tests called DecisionDx-UM, that's been on the marketplace since 2010 for a small, rare cancer. We believe we test 85%-90% of all patients diagnosed each year, which is similar to, I think, what you see in the mature breast cancer category. So that probably is the upper limit of what one could expect. We model 60%-70%, which is where we think other tests like ours that help remove a surgical procedure kind of look like they're going to kind of get to. So doubling, I think, is certainly efficient. I would think for the foreseeable future that we should be in the double- digits, lower double- digits, though, but as the law of big numbers grows, that could fall down slightly. But certainly, from our perspective, we see no market reasons why this shouldn't be going from a 30% penetration to a 60%, 65%, 70%. That seems to be lined up quite well going forward. Got it. And how should we think about the mix here between, you know, volumes from physicians who have ordered the test before and sort of a same-store sales metric, if you will, versus new docs coming into the ordering group? Yeah, it's, it's interesting to me that, having launched that last decade, there are still a reasonable number of potential customers that remain potential because of just low awareness. That, that's surprising to me, but of course, we live the test every day. So, in terms of looking, we've seen a quarter- over- quarter in the last couple of years, we do still have a solid number of first-time ordering clinicians. Now, part of that is residents coming out of dermatology residency programs, part of that is nurse practitioners and PAs coming in and surgical oncologists coming out of fellowship programs. So there are new customers growing who didn't have a chance to sort of order our test for their own patients 'cause they had no patients. So that's a reasonable volume there. But we still continue to go and drive education awareness because there are still a number of low-knowledgeable clinicians out there that have not adopted our test, we believe, mainly because they haven't had a chance to really thoughtfully think through how they're gonna change care to their patients. That being said, well over half of the target audience that we believe exists in the marketplace today have ordered our test on an occasional to routine basis. So we see both growth in terms of consistent current customers. Some of them are not using our tests in all appropriate patients, some, a small minority are, so there's growth in that penetration, and then there's still growth in bringing in first-time customers to have them adopt test and hopefully improve the outcomes of their patients with the results. Got it. Castle put out a press release this morning on an additional study demonstrating sentinel lymph node biopsy risk assessment for DecisionDx-Melanoma. You know, how should we think about the cadence of future studies, you know, in the future for DecisionDx-Melanoma? And are there any particular areas or studies that you would point to that would be particularly impactful for things like NCCN or commercial coverage? We have over 50 studies published now. I don't remember if this is 50 or 53, somewhere around that. We do, as we've had in our second pillar of our strategic program, continue to build evidence, so that's an ongoing effort across all of our tests. In terms of DecisionDx-Melanoma and consideration and guidelines or other aspects of or coverage criteria, too, I guess you would say, I believe that if we look back between kind of summer of 2023 till this morning and kind of going forward, there are two seminal articles that came out in the middle of 2023. One of them was an ongoing collaboration that we had with the National Cancer Institute, which essentially took patients who we had tested clinically, and we matched them through a trusted third party with NCI's SEER database, and then, using their methodology, matched patients with similar clinical, pathological, and socioeconomic factors that were not tested. And what that study demonstrated, which was Bailey et al. in 2023, is that when clinicians order our test clinically, and you match for every variable that NCI can track, those patients live longer. Now, we crosswalk that back and say: Well, why would that be? Well, why that would be is because we have demonstrated in numerous clinical use studies that doctors actually escalate care in high-risk patients, and when you escalate care in melanoma, you're typically imaging them on a routine basis, trying to pick up metastasis early, because if you do that, you can get them on the newer immunotherapies, and they'll respond better than if they pick a metastasis late with a higher tumor burden. So it tracks here very well. The second study from last summer was an article out of Cleveland Clinic, Northwestern, and the University of Chicago, and that was an article, lead author Dillon et al. And that was a study of patients who had all been seen at those three institutions. There were some clinicians there who were early adopters of our test, and some clinicians who haven't yet adopted our test in those same institutions. And they basically tried to match patients who received clinical results, who were sentinel lymph node negative, to patients who did not receive our test but were also sentinel lymph node negative. And what they found at the end of the study period was that they picked up metastasis earlier, got them on therapy, and patients lived longer. Again, a second study that was very nice. We've already seen some progress with some commercial payers saying: "I want you to show me that if I pay for your test, patients actually live longer." These are perfectly great examples. The other area is similar to the article which came out, this morning, at least the press release, is continuing to go and demonstrate that when you use our test to avoid or to direct, I guess you would say, should this patient really undergo a sentinel lymph node biopsy surgical procedure, or can I avoid that, is can that be done safely? And the question becomes, there is no doubt, based upon prospective and retrospective data sets, that our test is able to find people who are eligible for that procedure under guidelines, but clearly have a likelihood of having a positive node that's less than 5%, which is a threshold for basically not doing that procedure. So that part works. Now, the question we always ask ourselves is: Well, if we avoid that procedure, we're going to miss a few patients. Are we doing harm long term to those patients if they don't undergo that procedure? And, as we presented back at the Surgical Society of Oncology meeting back in the spring of this year, we have a prospective study, which we started several years ago, looking both at clinical use of our test for sentinel lymph node avoidance, but also tracking those same patients long term, and at least as of the point of the presentation, we had seen that patients who avoided a sentinel lymph node biopsy procedure had zero recurrences. Now, that's not good because nothing's perfect, but at least through the study period, as of April and March of 2024, i t was clear that at least in this multi-center US-based study, if you use our test to avoid that procedure, patients end up having a very low, in this case, zero risk of recurrence. So, I would say very low risk, which is perfect. You're avoiding unnecessary procedure and doing patients no harm. Got it. Let's flip to DecisionDx-SCC. Understanding there's no kind of current updates on Novitas or visibility into when we might see a final LCD there, you know, assuming, as your guide assumes, that SCC reimbursement comes out of the model after 3Q of 2024. You know, you've noted that the dermatology sales force incentive mix is about 50/50 today. Would you expect changes to that going forward, you know, if we see a Medicare reimbursement come out for squamous cell, and would you then expect a positive acceleration on the DecisionDx-Melanoma line? Good questions there, so I think one, we had our test reviewed by the Medicare contractor that covers our Pittsburgh, Pennsylvania, laboratory in the first quarter of 2022, and following their review, their correspondence to us was that, "Based upon the data we've reviewed, you meet Medicare's requirements for clinical necessity and reasonableness," so it's been a covered service since that point in time. If we see a withdrawal or a gap in coverage, that's gonna be very disappointing from a Medicare beneficiary standpoint. That's just it's, that's disappointing, given you now have over 20 publications demonstrating the value of this test in clinical management. That being said, if there is a gap in coverage, I think one, we have to wait and see what it looks like. What's that gap look like? How long is it? Certainly, today in dermatology, we have kind of 75, 70+ individual sales territories in the U.S. marketplace. We think that's sized about right for dermatology overall, whether or not we have two tests for marketing to the same clinician or just one test. If we saw that there was a longer-term gap in coverage than a shorter-term gap, if we had that decision facing us, we would certainly look to go ahead and shift from kind of a 50/50 promotional mix support to probably 90/10 or 80/20, just to provide more potential lift for melanoma, which I would assume we would see an increased responsiveness there. Now, what that looks like, I wouldn't model a very, very aggressive upside. I would just say we're gonna go from, if it was 75 people, 37.5 FTEs to 70 FTEs, you'd expect to see something about a change in a positive manner. Sure. You know, given the strong momentum that we've seen from a volume perspective for DecisionDx-SCC, I guess, what are your latest thoughts on continuing to commercially support the test, you know, for ordering physicians should Medicare coverage come out of the model? You know, would you continue to make the test commercially available, given that we've seen, you know, pretty strong physician uptake here in the early days of launch? Frank? Yeah, I think there's some questions to answer there. One is certainly an ethical question. We know that patients do better for having the test, and so we've got that consideration. In terms of keeping it available, the marginal COGS on the test are pretty low. As Derek said, I don't think we would spend a lot of money trying to drive volume for something we're not being paid for. But on the other hand, we recognize that circa 75% of the doctors who are ordering SCC are also ordering melanoma. And so, we have to recognize that it's a valuable part of their practice, and it's part of... They depend on it, and it's become a standard for how they treat their patients. So, we have to weigh all that in terms of figuring out what we do going forward. Haven't made any decisions yet, but those are the things we have to consider. Got it. Can you just give us a quick reminder on where the volume mix is on Medicare versus commercial for SCC today? Yeah. SCC has been running about 70%-72% Medicare. It looks like the patient base is maybe not quite that high, but we think that physicians are more worried about older patients, of course, but also, given that the standard treatment here is adjuvant radiation therapy, I think with older patients, physicians wanna make sure they really need to go to ART before they do it, and the test is the only way to do that. So, we may be a little bit enriched just because of the risk profile of older patients, but that's about where we're running right now. Got it. Let's flip over to TissueCypher and the GI business. You know, volumes here have been particularly strong in the first half, nearly 40% sequential growth in 2Q. Can you just give us a high-level sense for where you think TissueCypher is resonating most with the GI community? Sure. So, the patient journey or the clinical pain point in the management of Barrett's esophagus is that, for patients who are diagnosed off of their biopsy with what's called high-grade dysplasia or low-grade dysplasia in the US marketplace, those patients are generally recommended to undergo an endoscopic eradication therapy approach. What's that mean? Typically, in the US today, it means using one of the ablation tools, most frequently, I think, Medtronic's Barrx radiofrequency ablation tool, I guess I would call that, to basically try and cure that lesion, so it can't progress to cancer. 'Cause those are the patients who have a higher likelihood of progressing to esophageal cancer if they're untreated, than other patients. At the other end of the equation are these patients with non-dysplastic Barrett's disease. So they have a diagnosis of Barrett's esophagus, but there's no dysplasia evident on that pinch biopsy by the pathologist. As a population, those patients do have a lower likelihood of progressing to cancer. Current guidelines would generally say you should surveil, follow them up with repeat endoscopy, depending upon symptomatology, every three to five years. In reality, they're seen more frequently than that, but because they represent, you know, 90%-95% of the patients with Barrett's esophagus, it turns out that most patients who progress to esophageal cancer from Barrett's disease are those patients. And so, what our test is able to do is to really focus, I think, in that sweet spot of patients and say, "Hey, overall, no dysplasia that we can see in this pinch biopsy that was taken." Now, it could have been missed, the dysplasia, but based upon the biology of the tumor, as determined by the TissueCypher test, this patient has a higher likelihood of progressing to cancer than even the patients that you are currently sending to ablation. And so the question becomes: just because you measure progression risk biologically versus pathologically, why do not they get treated the same? So it is a very easy conversation to have with most gastroenterologists of saying, "We are not asking you to invent a new pathway. We're just saying use new technology tools," in this case, our test, "to really get to finding those patients who will benefit from the risk benefit of that intervention," which by the way, is FDA cleared and approved anyway. So you're not doing anything outside the scope of practice. You're just changing, and improving, by the way, who you can stop to progress to cancer. Yeah. You made a relatively large addition to the GI sales force earlier this year. I think you're roughly 40 territories or so right now. You know, if you could remind us when you expect to see the full benefit of that expansion, and then how should we think about, you know, how you might add to that sales force, just given where we are in the commercial ramp for TissueCypher? Sure. So, April 1st, we went from about 24 territories to about 40. I think that those new area managers were finished with their training in early June. So, they do three or four weeks of at-home study, then we bring them in, and they do several weeks of on-site. So, they really had live ammo for part of Q2 only. We think it takes six months to get average productivity in terms of physician interaction, not revenue, but physician reach. So we're still seeing, we would expect, the upslope there. So we'll see some benefit in third quarter, and then should see more benefit in fourth quarter. But I really don't think they'll be at full speed until the start of the year. Got it, and you think that 40-ish territories- Sorry, that was the other- - is the right way to think about that for the next, you know, year plus? Yeah, I think we think the right size for that team is probably 60-ish people. Mm-hmm. And so we wanna be careful before we make another expansion, just in terms of physician handoff and not fumbling that. The reps are. They cover themselves pretty quickly from a volume perspective, from a cash perspective, but we wanna be careful about the physician handoff and not have somebody get passed around too many times. Yeah. You've also mentioned that there's some larger GI groups, group practices that are managing treatment from more of a top-down approach. How are you specifically targeting this group of GIs and these practices? Yeah, so let me... I'll take a step back first, and maybe we can come down to this. So, in general, the majority of patients with Barrett's esophagus symptoms and Barrett's esophagus disease are diagnosed in non-academic, community-based gastroenterology practices, similar to dermatology actually. It's not a tertiary care center disease, it's a community disease, and the majority of practices will have these sort of ablation specialists within them. So it's not like this is a patient who needs to have endoscopic esophageal eradication therapy, and they're sent to an academic center. They actually are contained, most of the time, within that system. Gastroenterologists - I don't know how it compares to cardiology or other groups - has a more significant private equity penetration, and they're larger practice settings than dermatology. And so what we have seen in some areas of the country is that some of these larger groups are saying, "For consistency of quality of care standards, we do standardize certain things." Top-down is a little aggressive, but basically, I would say a medically led policy which says: Here's how we want to. Here's our protocol for this kind of patient population. So we are seeing some of the groups right now evaluating: Do we want to use, based upon our experience so far, TissueCypher as a standard protocol for a certain patient population? And I think as we see those individual practices raise their hand up, we will move that forward here in saying, "Well, what information do you want to see or hear on this topic? Got it. That, that's helpful. You mentioned that ASPs on TissueCypher have been relatively stable this year. You know, given the ADLT pricing structure, I guess, what are your expectations for pricing in 2025? Yeah, we would expect stable pricing at this point, at least through 2026. Okay, got it. Let's shift over to the pipeline on the inflammatory skin disease asset. I think the timing here in terms of a late 2025 launch is, you know, been reiterated and in line with expectation. I guess, what's your latest thoughts on the commercial opportunity here, and are you fielding, you know, interest from potential partners, whether that's commercial or pharma? And can you just remind us what the typical physician call point would look like for this test? Sure. So, I'll start last first and middle. So, the physician call point, we believe, is largely our same current customers that are using either our melanoma test or squamous cell carcinoma test. There are some dermatologists in practices who maybe are more skin cancer focused, but in general, medical dermatology, I think, is medical dermatology, and those are customers who we've called on for one year, three years, 10 years. And so, we think that's, by and large, the same customer base as we currently call customers. In terms of sort of product profile, we, we've stated that we expect by year-end to provide public information on where this is going. I think there are three opportunities. I'll just talk about two of them, that I think are at least what gets us excited internally. One of them is to say, you have patients who can be diagnosed with psoriasis or across the sort of eczema spectrum to atopic dermatitis. I'll leave the psoriasis out for a second here, focus over here. That's a patient population which is, which has a large number of patients who have enough symptomatology where they're gonna go from topicals to systemic therapy. The first-line choice of that is Regeneron's Dupixent, which is an excellent drug for people who it works in. But there are a reasonable number of patients where they aren't getting satisfied efficacy. So maybe there is a clearance opportunity going on, but they still suffer from heavy itch, and a large number of those patients go on to either switch to one of the newer therapies, add on another biological therapy, perhaps add on a JAK inhibitor, for example, or they actually add on more topicals again. So they aren't satisfied with this first-line choice only. One of our expectations, should we be successful in validation, is to say, "Let's take those patients, and would it be valuable to you as a clinician if we can find a Dupixent responder?" I don't think so, because they're gonna try it anyways, right? It's already first line. So, we ask the other question: Would it be valuable to you if we could find people who be unsatisfied? They'll view themselves as a non-satisfied responder to Dupixent and know that upfront. Now, why is that important? One, if you know the information, would you adjust your first-line approach? Would you keep them on topicals to begin with? Would you look at maybe even switching to JAK inhibitor first line if you could get that approved from insurance company standpoint? Would you also be more interested in saying, "Okay, I'm spending a reasonable amount of my dollars as a dermatologist with my reimbursement coordinator, getting this drug paid for"? If I told you this is a patient who's gonna be unsatisfied, that means in three or six months, you're taking that exact same resource out of your private practice and doing it again because this was an unsatisfied patient response benefit. There's all sorts of benefits to getting patients to the right drugs, drug or drugs, earlier for their disease state benefit, and there's economic benefits of not having to go through all the prior authorization and restart processes. If you knew upfront, maybe I'll make a slightly different choice, so that's exciting to me from that standpoint because there's many patients out there who could benefit from knowing upfront, "This is not gonna be enough for me." The other area that we're investigating is a differential diagnosis between something called mycosis fungoides and either psoriasis or atopic dermatitis. That's a rare disease state, but it can be a precursor to CTCL, and the issue here is that those patients who have either AD or psoriasis or mycosis fungoides are hard to differentiate apart. Would it be useful to a clinician and to a patient to get to a more accurate diagnosis? So more of a differential diagnosis support tool. So that, I think, will be the other area of interest in the psoriasis marketplace, that's a whole 'nother story there. So that's kind of where I think we will come out towards the end of the year from a data standpoint. In terms of kind of collaborations and potential partnerships, I think we shouldn't discuss that here at this point in time. Sure. Let's get a couple in on profitability and the balance sheet. Frank, you know, you have reaffirmed the 2025 target of reaching positive net cash flow from operations, you know, even assuming DecisionDx-SCC comes out after this quarter. I guess, what gives you confidence in that target, and how much of achieving these goals kind of rests from assumed contributions outside of the derm franchise? So, we gave that guidance in September 2022. Every bit of our business is ahead of where we expected it to be when we gave that guidance. So, we're confident in it from that perspective. Also, if you kind of back into loosely what SCC revenue would've been in Q2, and you look at our operating cash flow, we're awfully close, right? We're not quite there, of course, but we're certainly within sight, and a good line of sight to get there. So, we've been careful about how we manage the business. We've been prudent about investment. We've overachieved what we'd hoped to across the board. And you'll see our non-derm revenue will continue to grow here as a percent, I think, of our overall revenue. And that's on top of the derm franchise. So, we still expect to hit that. We define it as EBITDA and adding back non-cash stock-based compensation, just as a measure of, you know, financial viability and cash generation. So, we're very pleased with how the non-derm franchise is performing. Good. With just under a minute left, I wanted to touch on the balance sheet and the capital allocation priorities. You know, about $260 million of cash here at the end of the quarter. We've just talked about the outlook going forward. You know, how would you characterize the balance sheet positioning here, and you know, what are the investment priorities you have over the next year? Sure. They've really stayed the same. Our first priority is sales and marketing, supporting our existing products. Next is, excuse me, R&D to support our existing products, as Derek referenced, and you did early. We continue to publish on our products, even our uveal melanoma test, which is probably 85% penetrated. We continue to publish on that. So, we'll continue R&D support for existing tests as well as pipeline tests. Then third down the list, we do look at opportunities outside of Castle, non-organic things, and we don't feel like we have to do anything outside right now. But we also think we've got a good playbook for running a high-value diagnostics company. So we look at things when we see them that are-