Castle Biosciences' Earnings Call Contradictions: FDA Clearance Timelines, Sales Strategy Shifts Clash with Reimbursement Hopes

Date of Call: Feb 26, 2026

Financials Results

• Revenue: Q4: $87.0M; Full Year 2025: $344.2M, exceeding guidance
• EPS: Q4: Diluted loss per share of $0.08 vs. income of $0.32 prior year; Full Year 2025: Diluted loss per share of $0.83 vs. income of $0.62 prior year
• Gross Margin: Q4: 76.3% vs. 76.2% in Q4 2024; Full Year 2025: 69.2% vs. 78.5% in 2024
• Operating Margin: Net loss for Q4 2025 was $2.3M vs. income of $9.6M prior year; Net loss for full year 2025 was $24.2M vs. income of $18.2M prior year

Guidance:

• Total revenue for 2026 anticipated to be $340M to $350M, representing mid- to high-teens growth over 2025 excluding DecisionDx-SCC and IDgenetix revenue.
• Expect immaterial revenue contribution from AdvanceAD-Tx in 2026, with material revenue expected in 2027 or 2028.
• Expect operating expenses to increase moderately in 2026 to support core franchises, pipeline, and reimbursement initiatives.
• Expect capital expenditures to decline in 2026.
• For DecisionDx-Melanoma, expect mid- to high single-digit volume growth in 2026.
• For TissueCypher, expect continued strong volume growth, though at a lower percentage than 2025 due to higher penetration.

Business Commentary:

Revenue Growth and Core Drivers:

• Castle Biosciences reported revenue of $87.0 million for Q4 2025, contributing to a full-year revenue of $344.2 million.
• Excluding DecisionDx-SCC and IDgenetix, the revenue growth for the year was approximately 34%.
• The growth was driven by continued momentum across core revenue drivers, disciplined execution, and a strong increase in test report volumes, particularly for TissueCypher, which saw an 86% increase in test reports compared to 2024.

TissueCypher's Expanding Impact:

• TissueCypher delivered 39,014 test reports in 2025, a significant increase from 20,956 in 2024, representing 86% growth.
• This expansion reflects growing clinical recognition of TissueCypher's value in identifying patients at risk of progression from Barrett's esophagus to high-grade dysplasia or esophageal cancer.
• The test was highlighted in a clinical practice guideline by the American Gastroenterological Association, reinforcing its role in personalized risk stratification and management decisions.

DecisionDx-Melanoma's Continued Success:

• DecisionDx-Melanoma reported 39,083 test reports in 2025, with a 9% year-over-year growth, maintaining high single-digit volume growth.
• The test's adoption was supported by a substantial increase in new clinicians ordering it for the first time, with 1,795 new clinicians in 2025.
• The growth is attributed to the test's clinical utility, supported by 58 peer-reviewed publications and its ability to provide prognostic information that influences clinical decisions.

New Test Launch and Market Potential:

• The launch of the first-in-class AdvanceAD-Tx test has shown promising early results, with over half of the initial 150 dermatological accounts ordering tests within the first five weeks.
• By mid-February 2026, close to 500 orders were received, indicating strong initial uptake and alignment with market research expectations.
• This test expands Castle's addressable market in atopic dermatitis, with material revenue contributions expected in 2027 or 2028.

Strategic Investments and Pipeline Development:

• Castle Biosciences is advancing its pipeline with a non-endoscopic cell collection device acquired through Previse, planning to initiate a development study in Q2 2026.
• The company is also evaluating Electrical Impedance Spectroscopy technology with SciBase for atopic dermatitis, with preliminary data expected by end of 2026.
• These initiatives are part of a broader strategy to leverage new technologies and expand into new indications, supporting long-term growth and value creation.

Sentiment Analysis:

Overall Tone: Positive

• "We closed out a strong fourth quarter and delivered an outstanding year in 2025..." "We delivered strong fourth quarter and 2025 financial results, supported by disciplined execution across the business." "We are executing on the drivers of our next phase of growth... which we believe positions us well for a long-term sustainable growth and value creation."

Q&A:

• Question from Alexander Vukasin (Canaccord Genuity): Can you just concisely elaborate any takeaways from the recent NCCN update? And what is the level of confidence that DecisionDx-Melanoma could ultimately be included in guidelines?
  Response: The NCCN guidelines did not change the 5% threshold for sentinel lymph node biopsy and did not acknowledge DecisionDx-Melanoma's ability to get below 5%, despite 58 peer-reviewed publications. Only 11 of these were cited in the guidelines. The company is preparing a de novo 510(k) submission for FDA clearance, expected late 2026 or early 2027, primarily to leverage state biomarker laws for commercial reimbursement.

• Question from Thomas VonDerVellen (Guggenheim Securities): Can you just speak a bit to the strategy of your sales team approaching derms with the AD-Tx test and what's led to the rapid KOL awareness?
  Response: The limited access launch to ~150 dermatological accounts, including early adopters of gene expression tests, resulted in over half ordering within the first five weeks and more than 500 orders by mid-February. Sales remain 100% focused on DecisionDx-Melanoma currently, with plans to shift to 90%/10% split with AD-Tx in Q2 as access expands.

• Question from Unknown Analyst (Leerink Partners): Do you see yourself expanding the reps more this year for TissueCypher? And just generally how they're contributing to the growth of that account?
  Response: The TissueCypher sales team will continue to expand methodically throughout 2026, with the goal of keeping each sales force (dermatology and GI) under 100 reps. The growth is driven by both individual clinician adoption and a strategic push to engage larger group practices.

• Question from Unknown Analyst (Leerink Partners): Is penetrating into private equity roll-ups still an opportunity to drive step-up growth for TissueCypher?
  Response: Yes, it is a strategy being pursued. While 2025 growth was largely organic, the company is working to move larger group practices toward uniform treatment protocols for Barrett's esophagus, which is expected to contribute to volume expansion in 2026.

• Question from Matthew Parisi (KeyBanc Capital Markets): Would it be reasonable to assume continued high single-digit volume growth for the melanoma test in 2026?
  Response: Yes, management expects mid- to high single-digit volume growth for DecisionDx-Melanoma in 2026, supported by ~32% patient penetration and strong adoption among targetable clinicians.

• Question from Unknown Analyst (Baird): Could you share your expectations for TissueCypher volume growth in '26? Do we expect this to come more from further penetration within your existing ordering base or adding new clinicians?
  Response: Volume growth is expected to be strong but at a lower percentage than 2025 due to higher penetration. Growth will come from both existing and new clinicians, with about 25-30% penetration among targetable clinicians and 11% at the patient level.

• Question from Unknown Analyst (Baird): Should we expect quarter-over-quarter declines for DecisionDx-Melanoma volumes in Q1? And how should we think about the cadence of year-over-year volume growth throughout '26?
  Response: Yes, Q1 typically sees flattish sequential growth due to physician meetings reducing patient encounters. The volume pattern is predictable, with a step-up in Q2 that is durable, leading to consistent year-over-year growth.

• Question from Mason Carrico (Stephens): Could you give us your latest thoughts on the commercial strategy for the derm team if we were to see a positive draft LCD get published midyear for DecisionDx-SCC?
  Response: If reimbursement is regained, the company would consider folding SCC back into the sales force, but may need to expand the team to handle all three tests (Melanoma, AD-Tx, SCC) profitably. The timing of LCD finalization and AD-Tx growth will influence the strategy.

• Question from Mason Carrico (Stephens): Would you remind us when NCCN typically updates guidelines for SCC? And what new data were you able to submit ahead of that panel meeting?
  Response: NCCN guidelines for SCC are typically updated around May each year. The company submitted two papers on predicting adjuvant radiation therapy responsiveness, which were published in Q3 2024 and missed the 2024 cutoff, but were included in the 2025 submission.

Contradiction Point 1

FDA Clearance Timeline and Medicare Rate Upside

Contradiction on the timing and benefit of FDA clearance for DecisionDx-Melanoma regarding Medicare reimbursement.

Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity) - Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity)

20260227-2025 Q4: FDA clearance is primarily aimed at leveraging state biomarker laws to improve commercial insurance reimbursement, not necessarily to drive immediate volume changes. - Derek Maetzold(CEO)

How does the recent NCCN update impact confidence in DecisionDx-Melanoma's guideline inclusion and its strategic importance? - Vidyun Bais (BTIG, on for Mark Massaro)

20251104-2025 Q3: The long-term hope is that FDA clearance may help enforce state biomarker laws, leading to better commercial reimbursement potentially by the end of the decade. - Derek Maetzold(CEO)

Contradiction Point 2

Strategy for DecisionDx-SCC Sales Force and Reimbursement

Contradiction on the sales force commission structure and timing for SCC reimbursement following a potential LCD reconsideration.

Mason Carrico (Stephens) - Mason Carrico (Stephens)

20260227-2025 Q4: If the reconsideration request is successful, SCC would likely be reintroduced into the sales force commission structure. However, full reimbursement could take up to a year. - Derek Maetzold(CEO)

What is the dermatology team's commercial strategy in response to a positive draft LCD for DecisionDx-SCC being published mid-year? - Kyle Mikson (Canaccord)

20251104-2025 Q3: The requests were deemed valid by Novitas and Palmetto MolDx... Timing is unknown as it depends on the contractors’ review pace. - Derek Maetzold(CEO)

Contradiction Point 3

FDA Submission and Clearance Timeline for DecisionDx-Melanoma

Contradiction on the status and expected timing of FDA submission/clearance.

Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity) - Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity)

20260227-2025 Q4: The test's FDA submission is ongoing, expected as a de novo 510(k), with potential clearance by end of 2026 or early 2027. - Derek Maetzold(CEO)

What is the impact of the recent NCCN update on DecisionDx-Melanoma's guideline inclusion and its significance for the company? - Thomas Flaten (Lake Street Capital Markets)

2025Q2: The Breakthrough Device Designation (BDD) is a step towards an FDA submission; timing is not yet public, but obtaining BDD was the expected outcome to advance the authorization process. - Derek J. Maetzold(CEO)

Contradiction Point 4

Commercial Payer Reimbursement Strategy and Progress for DecisionDx-Melanoma

Contradiction on the progress and challenges faced in securing commercial payer coverage.

Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity) - Alexander Vukasin (Analyst for Kyle Mikson, Canaccord Genuity)

20260227-2025 Q4: The test's FDA submission... with potential clearance by end of 2026 or early 2027. FDA clearance is primarily aimed at leveraging state biomarker laws to improve commercial insurance reimbursement, not necessarily to drive immediate volume changes. - Derek Maetzold(CEO)

What is the status of the recent NCCN update for DecisionDx-Melanoma, the company's confidence in its inclusion in guidelines, and its potential impact? - Sung Ji Nam (Scotiabank Global Banking)

2025Q2: Commercial payer resistance persists due to self-interest, not data. Despite strong physician adoption (>50%), payer coverage is slow due to lab benefit manager and technical assessment group processes, which have long cycles. - Frank Stokes(CFO)

Contradiction Point 5

Sales Force Strategy and Focus

Shift in the strategic allocation of sales force time between tests.

Thomas VonDerVellen (Analyst for Subbu Nambi, Guggenheim Securities) - Thomas VonDerVellen (Analyst for Subbu Nambi, Guggenheim Securities)

20260227-2025 Q4: Current sales force is 100% focused on DecisionDx-Melanoma, with minimal AD focus. Access expansion will be phased, likely shifting to a 90%/10% split in Q2 2026... - Derek Maetzold(CEO)

What sales strategy is being used for the AdvanceAD-Tx test with high KOL awareness? - Tom Peterson (Baird, on for Catherine Schulte)

2025Q1: The plan remains to shift the field force focus to be very heavily weighted towards Melanoma in the second half of the year, moving from a roughly 50-50 split. - Derek Maetzold(CEO)