Castle Biosciences (CSTL) went public in July 2019, pricing its IPO shares at $16.00.

The firm is commercializing cancer diagnostic and prognostic testing products and services.

CSTL has grown revenue and gross profit at an impressive trajectory and the firm expects to launch its next predictive skin cancer test by the end of 2020.

My bias on the stock is Bullish.


Friendswood, Texas-based Castle Bio was founded in 2007 to bring ‘actionable genomic information to the diagnosis and treatment of skin and uveal cancers.’

Management is headed by founder and CEO Derek Maetzold, who has held senior roles at Encysive Pharmaceuticals, Schering-Plough, Amylin Pharmaceuticals, and Sandoz Pharmaceuticals.

Below is a brief overview video of one of the firm’s tests:

Source: Castle Biosciences

The firm has developed or is developing genomic tests for skin and uveal (ocular) cancers.

Castle sells its testing services via a direct sales force and also has a ‘medical affairs group’ which it uses to educate physicians and enhance its marketing efforts.

Below is a company chart on the growth in number of genetic profiling reports in recent years:

Source: Castle Biosciences

Source: Castle Biosciences

Skin cancer is the most common form of cancer in the U.S. According to a 2017 market research report by Grand View Research, the melanoma therapeutics market was $4.2 billion in 2016.

The market was expected to grow at a CAGR of 11.21% from 2014 through 2025, as shown in the chart below:

Source: Grand View Research

Source: Grand View Research

Per the World Health Organization, 132,000 cases of skin cancer are diagnosed each year, with a forecasted increase of 4,500 cases worldwide as a function of the reduction of ozone levels in the years to come.

The Asia Pacific market will likely grow at a strong rate due to a rise in the incidence of skin cancer and increased demand for lower-cost solutions.

According to a Medgadget report, the melanoma skin cancer diagnostics market is expected to reach $409 million by 2022 and grow at a rate of 7% from 2018 to 2022.

CSTL’s topline revenue by quarter has growing markedly, with Q1 2020’s results exactly double that of the same period in 2019:


Gross profit by quarter has grown at a similar trajectory over the past five quarters:


Operating income by quarter has varied significantly but remained in positive territory since Q2 2019:


Earnings per share (Diluted) have have exceeded breakeven for the last three reporting periods:


Source for chart data: Company Financials

In the past 12 months, CSTL’s stock price has risen 132 percent vs. the U.S. Biotechs index’ rise of 20.9 percent and the overall U.S. market’s growth of 3.1 percent, as the chart below indicates:

Source: Simply Wall Street

Source: Simply Wall Street


In its last earnings call, covering Q1 2020’s results, management highlighted its 100% growth rate over the previous year’s same quarter while having to deal with the beginning of the Covid19 pandemic’s effects on operations.

The firm was able to keep its labs fully operational while maintaining its historical turnaround time for lab reports on specimens received.

However, the amount of business was attenuated due to reduced clinician orders for its melanoma test as a result of reduced patient appointments from Covid19 reasons.

Despite this, management still intends to launch its DecisionDx-SCC squamous cell carcinoma test in Q3 2020.

The firm has published results that show that DecisionDx-SCC ‘is not only an independent predictor of metastatic risk but was shown to be the strongest predictor of metastatic risk relative to current SCC staging systems.’

As to its financial results, gross margin grew during Q1 2020 although operating expenses increased substantially due to the expansion of sales & marketing and administrative support functions.

Management expects to spend more on R&D as part of its ongoing addressable market expansion efforts.

Notably, the firm is nearly at operating cash flow breakeven and had cash of $98.7 million at the end of the quarter, so has significant cash capacity to cross the chasm of the Covid19 pandemic’s effects on its business, at least in the short-term.

As for the stock, investors have pushed up CSTL throughout the Covid19 pandemic, so while management expects continued losses, the prospect of increased TAM with new tests and the firm’s revenue and gross margin growth trajectories are promising.

I’m Bullish on the firm’s outlook once past the crisis period of Covid19.


(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)