Castle Biosciences ((CSTL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Castle Biosciences’ recent earnings call revealed a mixed sentiment, with strong growth in test volumes and revenue, particularly in their TissueCypher and DecisionDx-Melanoma tests. However, challenges such as reimbursement issues with the DecisionDx-SCC test and increased operating expenses have impacted the company’s financial results. Despite these hurdles, Castle Biosciences has raised its revenue guidance, indicating confidence in its financial position.
Strong Revenue and Test Volume Growth
Castle Biosciences reported impressive revenue figures for Q2 2025, reaching $86.2 million. This represents a 33% year-over-year increase in core revenue driver test volumes. The company ended the quarter with a robust $275.9 million in cash, cash equivalents, and marketable securities, underscoring its strong financial health.
TissueCypher Test Performance
The TissueCypher test demonstrated remarkable growth, with a 92% year-over-year increase, totaling 9,170 reports in Q2 2025, up from 4,782 in the same quarter the previous year. This growth highlights the strong momentum within the company’s gastroenterology franchise.
DecisionDx-Melanoma Test Success
Castle Biosciences saw significant success with its DecisionDx-Melanoma test, delivering 9,981 reports in Q2 2025. This marks a 16% sequential increase from Q1 2025 and a 4% year-over-year rise, representing the largest sequential increase since the company’s IPO in 2019.
Collaborations and Pipeline Developments
The company is actively expanding its pipeline, entering a collaboration with SciBase to develop a diagnostic test for atopic dermatitis, with plans to launch by the end of 2025. Additionally, Castle Biosciences has identified a new genomic signature for predicting treatment response in atopic dermatitis.
Financial Performance and Guidance
Castle Biosciences has raised its 2025 revenue guidance to a range of $310 million to $320 million, up from the previous range of $287 million to $297 million. This adjustment reflects the company’s strong performance and growth expectations.
DecisionDx-SCC Reimbursement Challenges
The DecisionDx-SCC test faced reimbursement challenges due to a Novitas noncoverage decision effective April 24, 2025, impacting revenue growth. Castle Biosciences has submitted a reconsideration request to address this issue.
Decreased Gross Margin
The company’s gross margin decreased to 77.3% in Q2 2025 from 80.7% in Q2 2024, with an adjusted gross margin of 79.5%, down from 83.2% in the previous year.
Increased Operating Expenses
Total operating expenses rose to $90.4 million in Q2 2025, up from $82 million in Q2 2024. This increase was driven by higher sales and marketing, general administrative, and cost of sales expenses.
Net Income Decline
Net income for Q2 2025 was reported at $4.5 million, a decline from $8.9 million in Q2 2024. The diluted EPS dropped from $0.31 to $0.15, reflecting the financial challenges faced by the company.
Forward-Looking Guidance
Castle Biosciences provided forward-looking guidance during the earnings call, highlighting several key financial metrics and strategic priorities. The company expects high single-digit volume growth for DecisionDx-Melanoma for the full year 2025. Total revenue guidance for 2025 has been raised to $310 million to $320 million, reflecting a positive outlook despite reimbursement challenges. The company is focusing on strategic M&A opportunities and pipeline developments, including advancements in dermatologic and gastrointestinal testing.
In summary, Castle Biosciences’ earnings call presented a mixed picture, with strong growth in test volumes and revenue tempered by reimbursement challenges and increased expenses. The company’s raised revenue guidance and strategic focus on pipeline developments indicate a positive outlook, despite the hurdles faced in Q2 2025.