Great. Okay, thank you. I'm Puneet Souda. I cover life science tools and diagnostics here at Leerink Partners, and it's my pleasure to be hosting Frank Stokes, who's CFO of Castle Biosciences. Frank, I'm glad to have you here. Thanks for. Thank you. you. Thanks for having us in. Yeah, thank you. All right. As I was looking through some of the key topics for a discussion, I mean, I kind of wanted—I realized I want to go back to sort of, you know, in 2018, you had the IPO, and I've been covering the stock since then. You had, at that time, DecisionDx was an important growth driver. To some extent, it still is. Uveal was flat, and I think it still is. You added IDg enetix in mental health, Cernostics acquisition that added TissueCypher. You launched SCC as well. Again, the number of tests and the menu expanded. Since then, we have seen contraction in SCC, reimbursement challenges, IDg enetix. I believe you said you're going to be de-emphasizing that. We're back to focusing on sort of three products, maybe ex- MyPath products. When we look at the portfolio that you have, maybe a high-level question I'll start here with is, what's the growth assumption that investors ought to have ex- SCC and ex- IDg enetix for this portfolio? And great to see TissueCypher doing well, but could that accelerate, and could the entire portfolio accelerate in 2026 and 2027? Sure. I'll give you another metric there. The year you referenced, we did $32 million in revenue. I think last year we reported $322 million, 10X in six years. If we'd been pitching that on the road, it'd have been a little tougher story, a tough credibility. I think that X SCC, so taking out our squamous cell carcinoma of the skin test, for 2025, we see the base business. Our guide suggests the base business grows mid-teens to upper teens to 20% year over year, 2024 to 2025. We expect similar growth from 2025 to 2026. We would think we would see melanoma growing mid to high single digits on a volume basis. We'll see some modest ASP improvement. Nothing stepwise. It'll be iterative. We would like to hope slow and steady, but it'll be iterative and a grind more than a stepwise jump. TissueCypher is the bulk of that growth. It would be great to grow TissueCypher the same% we grew 2023 to 2024, but we've doubled the denominator. That makes it harder. We've also expanded the sales force. Just to help with the trajectory there, this time last year, we had 24 sales reps in our TissueCypher division. April 1 of 2024, we went to 40. What we've said is that by the end of this quarter, Q1 of 2025, we would expect that group to be around 65 people. What we've said since is that we certainly will or have hit it. We're in that zip code now. We have effectively, on a weighted basis, more than doubled the TissueCypher sales force from 2024 to 2025. The market is large. We are only about 5% penetrated. We have expanded the reach of the sales force. We should see the same type of growth volume, nominal volumes, which would suggest pretty significant growth there. That is an aggressive assumption. It makes you a little anxious to think about seeing that kind of growth. At the same time, the pieces are in place to do it. We are still pushing hard on the TC test. Got it. No, that's a perfect segue into my sort of question around, can you talk to us some of the drivers of the TissueCypher growth? Once you said, obviously, penetration is low. But when we think about guidelines, and then if you could touch on as well, beyond volume growth, ASP as well, what are some of those that can drive meaningful growth here? Sure. We think for last year, we tested about 5% of the population. When we were first looking at Cernostics and at the test, we thought there were 280,000 surveillance upper endoscopies done a year. That patient basis is patients who are in for a surveillance upper endoscopy for Barrett's. We now have good data that it is more than 400,000. I am glad we missed low and not high. I am glad we did not overestimate. The market is bigger. When we are doing an acquisition like that, we did a lot of work with physicians, a lot of interviews, a lot of surveys. We had to really describe a patient fact pattern and a solution because the test was unknown. We could not say, "Hey, why do you think of TissueCypher?" because nobody knew anything about it because it had not been effectively marketed. We had to create a fact pattern, create a patient scenario, create a solution. What do you think? Would this be helpful? The feedback we got was really enthusiastic. That is encouraging. On the other hand, as you get to market, you're anxious, was that accurate? Did we cherry pick? Did we adequately describe the scenario? What we found is the response from physicians has been as enthusiastic as we thought it would be and hoped it would be when we were doing our diligence work. We have a bigger market than we thought we had. We have the receptivity that we maybe had hoped we would have. We have a nice, clear runway ahead of us. I think that in terms of driving that market, what's fun to think about is if we could get TissueCypher to the penetration of melanoma, that's a $300 million product by itself. That's almost as big as the whole company right now. That's the opportunity with TissueCypher. That's why we've invested fairly aggressively in this sales expansion here. The reimbursement rates or the ASP for the year, we would expect to be pretty steady this year. We're still early in the development or the cycle with commercial payers. We have some wind at the back. Primarily, most commercial payers will pay for ablation for almost any patient whose physician wants to have it done. They'll happily pay for it. The patient reality there is that Barrett's can proceed to esophageal cancer, which has an 85% five-year mortality rate. If you get that diagnosis, you got an 85% chance of not being around in five years. It's a tough five years. They'll go in and they'll remove part of the esophagus, which means the patient can't recline for the rest of their life. They have to sleep at 45 degrees. There's all kinds of lifestyle issues. It's a tough five years. As I said, 85% of the time, it's a bad outcome. It is very, very preventable because ablation works really well. I can't say 100% of the time, but a huge percentage of the time, ablation works. The challenge that physicians have is, which of my patients do I ablate and which don't I ablate? Which can I not bring in every year or nine months or year and a half for surveillance endoscopies? What the test does is it helps them reclassify their patients, high risk versus low risk. The utility is really good because most GIs have in their practice, or they have a colleague who had a non-dysplastic Barrett's patient who by pathology should be low risk. Not a worry. Don't worry about it. Bring him back for regular surveillance. You'll be fine. That patient has progressed to esophageal cancer. Physicians, I think, understand well that the pathology of Barrett's does not well align with the prognostic risk, and you need a biological answer for that. It just aligns well with what they know about their practice and about their patient. Now, on the commercial side, if I'm a commercial payer, I should be willing to pay for that test because I don't want to ablate somebody I don't need to ablate. I do not want to not ablate somebody I should ablate because esophageal cancer is an expensive cancer. As a payer, I should be enthusiastic about this. The challenge is we have the usual payer challenges, which is say no until say no and say no. By the way, Castle, are you giving the test? Are you giving the report anyway? Am I getting the right people ablated if doctors use the report? As a sector, we have a bit of a cross purposes with how payers think about that. There should be good wind at the back to get the right patients ablated who need it. This year, I would not assume any ASP improvement. We are not accruing for commercial claims. We recognize revenue as cash comes in the door. That is still fairly episodic. We have got a full team working on that. That is part of a big initiative for this year to bring those commercial payers over to see the value of the test. Got it. Okay. That's helpful. Maybe just rounding out, since this is an important growth driver for you, I mean, you talked about, I think Derek mentioned it at one point as well, private equity GI roll-ups that are happening. I think you mentioned 50% of GIs are in a roll-up, and that could be an opportunity. How much of this growth contribution you could potentially see from this type of sort of independent practices getting rolled up in the space? The biggest difference there is in dermatology, the roll-up, the number of practices that are rolled up is pretty small. I think we've said we think maybe 15-20%. Most derms are practices of one or two or three practitioners. That means if you want to convert 30 doctors, you got to go see 10 practices maybe, or maybe 15 practices. The opportunity with GI may be a little bit more concentrated in that there is a larger percentage of private equity and other owned management companies. It gives us the opportunity to try to demonstrate the economic advantage to the practice of using the test to someone in management, if you will, maybe a CFO of a practice company or maybe a Chief Medical Officer, and have them become our advocate to help sell the test to the physicians that are part of the practice as they see the benefits to patients, but also to costs. GIs, by and large, do not want to do unnecessary upper GI endoscopies. If the, I do not want to say the correct, but the gold standard or the textbook way to do a Barrett's surveillance endoscopy is the Seattle protocol, which is several layers of pinches all the way around the esophagus, effectively getting samples from the whole esophagus. It takes 50 minutes. That is a significant part of a practice day. Physicians do not want to do endoscopies that are not appropriate. What that does is it drives, many times, the physician will sample rather than do a whole Seattle protocol. They will sample where they see Barrett's, and so they are missing some tissue, which sometimes means that there is disease or dysplasia that is not being picked up. That offers a couple of things for a bigger practice group. If you can reduce those numbers of endoscopies and convert those to colonoscopies, which is a much quicker, much less wear and tear on a practice procedure to a management company, that may have some appeal. We do not have anything in our guide yet. We do not have any expectation for that at this point. We do have some really key smart people internally who are focused on that this year to see if there is a way for us to work with those groups and potentially convert, instead of taking 15 practices to convert 30 physicians, maybe you need one point of contact. We do not know yet. We are early, but it is something that we are working on that may be an opportunity in that business. Got it. Okay. Switching gears, SCC, correct me if I'm wrong, but I think you have coverage until April 24 here. Obviously, this has been an ongoing challenge. Numbers are out of the model at this point into the back half of the year and next year, at least in our models. Can you talk about the pathways at this point? I mean, you have the MolDX pathway. You have potentially reconsideration requests with Novitas. I don't know if there are any other pathways, but maybe just give us a status update on potential to get the coverage back again here. Sure. A little bit to unpack there. The current proposed LCD for Novitas is proposed to go in effect April 24th. Our guide for the year and our expectations for 2026 assume that April 25th, that goes away as revenue. As part of the Medicare Program Integrity Manual and part of the Medicare process, stakeholders have the ability to ask for a reconsideration of an LCD of a policy. We can do that with either or both of the contractors that we've worked with on this. We will decide at the right time when to ask for that if that's the path we take forward. There is some ambiguity about the timeline there. There is not a specified timeline for reconsideration. We've suggested that could be probably two years as a base place to think about. Having said that, we have significant evidence supporting our SCC test that isn't included in either of those policies. In the case of Palmetto, my understanding is that the publications I'm referring to came after the end of the comment period. The manual suggests that they don't have to look at things past the comment period. It seems they did not if you read the annotations and the policy. We have substantial evidence that wasn't part of that review that hasn't been included, including the two largest studies relating to squamous cell carcinoma of the skin and adjuvant radiation therapy that have been done. On top of that, we have our publication from last March that shows if Medicare used our test to correctly or accurately direct adjuvant radiation therapy to squamous cell carcinoma of the skin patients, after the cost of our testing, they would save $1 billion. It strikes me from what I've seen that this is a government interested in saving money. This is a policy that by changing and having coverage, there's $1 billion on the table that could be saved. From that perspective, we think it has a positive impact on the health economics picture. Also, we talk about it that way, and we talk a lot about that, but it really misses how difficult adjuvant radiation therapy is for patients, especially Medicare patients. Doctors will tell you it has a 100% complication rate. There's something, many are mild and some are moderate, but there's always something. The worst case, it can cause radiation-induced dementia. You've got a patient who is, let's say, 85 years old, other medical conditions. They've got a high-risk squamous cell carcinoma of the skin, which has a 20-25% chance of progressing based on pathological features. If you're a physician, you got four of those. Do you want to send them all to radiation and risk those side effects, or you want to send none and hope you catch the one that's going to progress? It's a real difficult decision to be made. Further, a lot of these squames are above the shoulders. If you do radiation, you've shot that bullet for that patient. If that patient comes back and has just a basal cell on their face or nose or ear or something, you can't use radiation. It's a difficult procedure. Oh, and we think it's $60,000 for a full course. It's a difficult procedure on patients, and you're taking away that bullet when there's a 70-75% chance you didn't need to use it. We talk a lot about the savings and the billion dollars to Medicare, but really, we really would appreciate the contractors also talking about if this was your dad or uncle or spouse and they've got a squame and it's only 20% chance of metastasizing, do you really want to send them to radiation therapy? We think we have the evidence to support coverage. We just need to go through the process to present it. Of course, we're also developing and hopefully publishing additional evidence as we run along as well. Got it. Let me touch on the DecisionDx-Melanoma. I mean, I think in the fourth quarter, you pointed out a few of the dynamics. I think there were two of the holidays overlapping sequentially. When I look at it, the volumes were down and up maybe only a point or so. Just wondering, is this just happened to be a unique situation this year? I mean, obviously, these holidays are coming, I mean, every year. How much of this is seasonality? Are there any factors that impacted that are continuing into the first quarter? Are there any challenges that you saw that are continuing into the first quarter? I just wanted to get a sense of volume there. Sure. Yeah. Every year, Q4 and Q1 are seasonal for us, and it's different drivers. We spent a lot of time with groups about this. You look at Q3 to Q4, three less working days in Q4 than Q3. It seems like no big deal. Three days, that's 5%, right? That's 5% fewer patient encounters likely that physicians are having. In Q1, you always have dermatologists really enjoy good travel. There are two meetings. There's one in Maui and one in the Caribbean in the first quarter. AAD is right now going on. There are a lot of events going on that draw physicians' time and capacity away. You're right. It's every year. These things happen every year. The challenge we have is for us, as we manage the derm team, we're managing to CM and SCC together. That is because that is what drives test reports, and that drives revenue while we are reimbursed. The difficulty, I think, that is part of what your question looks to is you are looking at it from, I hear that now, Frank, but when SCC goes away, then we are focused on melanoma. That is really, and that will be a shift. We have said before, if the policy goes effective and we are no longer covered, we will change the way we market and drive our salesforce and market our two tests. We have also said we will continue to leave it to be available. There are a number of reasons for that. One is ethical. We know that the test matters to patients and their physicians. One of the things that we think about every day at Castle is every test report has a patient and a family on the other side of it. It would be an ethical challenge to pull that test. Secondarily, and perhaps more practically, 75% of the SCC tests are written by a physician that's using melanoma. We want to ensure if we make changes there that we don't disrupt the melanoma business or impact our melanoma usage as we transition through this period on SCC. I think that we will be effective with changing that focus. We have not had a salesforce that is only selling melanoma. I think the last time we had that, we had 23 reps, if I think that's the right number. Now we will have 65-70 reps selling just melanoma. We should see wind at the back. We would expect to see wind at the back from that. We do not have a comparable period to go back and say, "All right, the last time we just had melanoma, here's what productivity looked like," because we had much larger territories. We had fewer territories. We will get a sense of that as we make that transition. We also, another practical reason is we do think there is evidence to at some point recover reimbursement. We would rather have the SCC business be at some run rate than having had to just shut it down and have to start all over from ground zero. We will offer the tests. The marginal cost of goods are manageable. We will de-emphasize it or promote it less aggressively. There is not a lot of spend that we do that is just SCC. Really, most of what we do is both derm tests because there is such great overlap between the physicians for the two tests. It's really, for a non-medical guy, it's the same clinical question just being answered for two different groups of patients. The synergies and the pin action in that marketing effort is so good. There's not a lot of spend purely around SCC. We'll pivot that. We'll transition that to melanoma. I would expect some wind at the back, but we'll wait and see it when we get there. Okay. A lot of other questions to get to, but just very briefly, do you think the penetration in cutaneous melanoma today makes it somewhat challenging to drive that level of growth even with 60-plus reps? It's definitely more mature now. Just intuitively, the first users are the easiest ones, right? The ones that use it first are the ones that became convinced the quickest. Your later users are less quickly converted. Last year, we had 1,800 new ordering physicians even last year. That's a great metric this deep in, this far into the marketing of melanoma to still be able to convert 1,800 new physicians. Now I don't know what we can do this year because that number should be getting smaller as it gets tougher as well. That also brings up same-store growth if you think about it that way. Many times, a new ordering physician will make their own cut points or make their own categorization of their patients. We have evidence and data all the way from ultra-low risk to high risk showing where we have utility and where we're effective. If we do have a new physician that's made that cut point or decided, "This is high risk for me. This isn't," then we've got great material for the reps to get in there and say, "Hey, you figured it out. You're testing this group of patients, but you really have benefit for here as well." It is a more mature test. We think we're over 50-60% of applicable or eligible clinicians are using the test. The ones that aren't, a lot of them are still maybe no-see practices or just we haven't had the opportunity to get around to them and to educate them on the test yet. I would expect us to still grow, but yeah, coming off a bigger base, it'll be more of a mature cycle, mature profile. Got it. Just quickly on IDg enetix, you are de-emphasizing that test. Just wondering how to think about for modeling for the rest of the year. Maybe was there any write-down associated with that? You'll see the depreciation of the intangible value will hit the P&L over time. We've shifted to an internal salesforce there. A number of factors have driven that. The market has changed a good bit. There's a genericization to it with physicians and some groups relying on single SNPs or double SNPs. The reimbursement has stayed very difficult. I can only suppose what drives that. I think my own sense is a lot of it is that a depressed patient who isn't responding to their meds doesn't have incremental costs typically to an insurance company. The cost is usually borne by the family or the employer. Maybe that drives it just pure MLR. We saw the change United made back in the fall. That certainly suggests incremental headwinds on reimbursement. Even with the lower volumes through this year and the attendant lower revenue, it'll be net positive to EBITDA as we shift how we support that. We still think it's a great test, and it's medically important. The environment is tough on that one. Got it. A couple of CFO questions, if I may. I mean, gross margin side, let's start there. You have guided to mid to high 70s for gross margin. This compares to, I think, about 80%, I mean, gross margin in 80s in 2024. With SCC and IDg enetix impact here, so how should we think about overall gross margins? I mean, how should we think about gross margins into 2026 when both of those tests maybe are not contributing? A couple of puts and takes there. As you can appreciate, when you don't get paid for your service, it has a negative impact on margin, right? We would expect with SCC coverage going away, our adjusted gross margin would be in the low to mid 70s as a starting point. Where that evolves from there will depend on how much volume we continue to run on SCC, but also how much TissueCypher traction we continue to develop. TissueCypher is a lower gross margin test than GEP. The solid tumor GEP tests, we run them on QuantStudio, PCR platform, very efficient, very cost-effective. TissueCypher has a bit more manual process to it. Now, having said that, at those ranges, we're still fairly well positioned when you look across the comparable set in terms of gross margin. We still have plenty of margin to push down the P&L to support the other expense functions. I would think if SCC coverage stays gone, that low to mid 70% adjusted gross margin is where we'll stay. Even as TissueCypher grows more and more, I'm confident that we can still make yet some changes that can make it a bit more efficient, help out with COGS a bit. It's a radically different cost structure now than when we got it. It was 100% manual when we got the test and we bought the company. Now we have even the staining at the front end was manual. Now we have this beautiful row of very expensive but very efficient auto stainers that take that out of it. A lot of the annotation now is done by the tech, by the computers. We're pushing on that, trying to get it more efficient. Another attendant question there is capacity. We continue to stay ahead of demand on capacity. If you recall, in 2023, we had capacity challenges for a quarter. We've stayed ahead of that partially with some of that automation and improvement. Also, we increased the size of the Pittsburgh lab, and that's given us more space, more people. Got it. Just going below the line, what are some of the levers you have in terms of salesforce? There's some deprioritization. There's some other assays where you are increasing more efforts. Maybe just talk to us about how should we think about overall margins below the gross margin line? How should we think about the cash flow? I believe you said cash flow positive in fiscal year 2025. How much of that was driven by SCC and now that SCC is not there? Yeah. We've said even without SCC, we'll be operating cash flow or adjusted EBITDA positive for 2025. We're still confident in that. At some point in a sort of a common-sized P&L, and it will not be this year, of course, but we should look more like a 20%-25% EBITDA P&L with as much as 20% maybe in R&D and more spend in the S of SG&A and not as much in the G&A. That is where we would target getting the business to in the near term. I mean, I would not think this year. We were close last year. I mean, as you look at last year's performance, and if we had reimbursement coverage on SCC with the growth there, we would see getting there pretty quick. We were a net income company last year, and then this year it'll shift a bit as that reimbursement change goes through. Ultimately, we should look like that from more of a mature business perspective. Got it. Just we're almost at the time. Just briefly on, given the changes that have happened on the test, can you just briefly talk about how are you thinking about potential capital deployment and M&A, if there are tests that you can bring in to fill the ones that are sort of getting de-emphasized? I guess with the caveat that we don't feel compelled to go try to buy something. We do feel like we've got a good playbook for running diagnostic testing services. We'd love to find another product for our GI group to have to sell. We saw such good leverage with melanoma and SCC. We would expect to see similar leverage in the GI space. That would be a priority. If we could find a good, high-value, high-clinical need test, that would be attractive. We would selectively look outside of our areas, but again, we don't feel our therapeutic areas, but we don't feel compelled. It's funny. We like having a strong balance sheet, and we'll make sure that we continue to have that. If we see interesting opportunities that fit the criteria, we do the work and see if it makes sense. Great. Okay. All right. That's all the time we have. Thanks, Frank. Thanks. Okay. Thank you.