Investing.com -- Shares of Castle Biosciences, Inc. (NASDAQ:CSTL) fell 14% today as investors reacted to the company's preliminary performance results and a recent decision by Novitas that has implications for one of the company's key products. Despite reporting that it expects to meet or exceed the top end of its full-year 2024 revenue guidance, concerns have arisen due to the finalized Local Coverage Determination (LCD) by Novitas, which removes DecisionDx-SCC as a covered test.
Castle Biosciences delivered 96,071 total test reports in 2024, marking a 36% increase compared to the previous year, slightly missing analyst expectations of 97,350. The company's fourth quarter showed a 19% increase in total test reports compared to the same period in 2023. Notably, TissueCypher® Barrett’s Esophagus test reports surged by 94% in the fourth quarter. However, the recent Novitas decision has cast a shadow over these results, as DecisionDx-SCC, which is said to have generated approximately $110 million in revenue in 2024, will no longer be covered.
Lake Street analyst Thomas Flaten commented on the company's situation, stating, " Total (EPA:TTEF) 2024 testing volume grew 36% year-over-year to 96,071, slightly below our estimate of 97,350." He further detailed the challenges faced by Castle Biosciences following the Novitas decision, emphasizing the importance of the TissueCypher acquisition and the need for strategic decisions regarding the future of DecisionDx-SCC and the company's dermatology commercial infrastructure.
Castle Biosciences ended the year with strong cash reserves, expecting approximately $120 million in cash and cash equivalents and an estimated $173 million in marketable investment securities. These financial highlights suggest a solid position for the company to navigate the challenges ahead.
The company's recent performance results and the impact of the DecisionDx-Melanoma test on clinical decision-making, as published in the World Journal of Surgical Oncology, underscore its commitment to advancing patient care through innovative tests. However, investors seem cautious as the company faces significant decisions in the near term, which will likely shape its path to profitability and growth amidst changing coverage landscapes.
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