Castle Biosciences Raises Outlook as Melanoma, TissueCypher Tests Gain Traction

Castle Biosciences raised its full-year outlook after second-quarter performance exceeded expectations, driven primarily by DecisionDx-Melanoma and TissueCypher, along with physician adoption and modest pricing gains.

DecisionDx-Melanoma remains the company’s core growth engine, with expected mid- to high-single-digit volume growth and testing penetration of roughly one-third of eligible invasive melanoma cases.

TissueCypher has reached about 15% penetration, leaving substantial room for expansion as its sales force matures.

AdvanceAD-Tx is gaining early physician interest but is unlikely to generate significant revenue until 2027 as Castle works through reimbursement requirements.

The company expects to remain adjusted-EBITDA positive through the rest of 2026 and in 2027, excluding major strategic changes.

Castle Biosciences NASDAQ: CSTL reported continued momentum in its core diagnostic franchises during the second quarter, prompting the company to raise its outlook by more than the amount of its reported beat, according to CFO Frank Stokes.

Stokes said the company’s DecisionDx-Melanoma and TissueCypher tests were the principal drivers of performance. Both products recorded favorable results, supported by modest average selling price gains during the first half of the year, continued physician adoption and broader use among physicians’ eligible patient populations.

“We raised our guidance a little bit more than the beat,” Stokes said, adding that the update reflected optimism about second-half performance and the broader franchise.

Castle expects DecisionDx-Melanoma test volume to grow at a mid- to high-single-digit rate this year, Stokes said.

He described the product as being at a more mature stage of market penetration, estimating that the company is testing roughly one-third of an estimated 130,000 annual invasive melanoma cases.

The company uses an estimate above the approximately 100,000 cases reflected in SEER data, citing published research that suggests melanoma may be underreported by 30% to 70%, particularly when diagnoses occur in community dermatology offices.

Stokes said two-thirds or more of relevant healthcare providers have used the test within the past year, making the next stages of market expansion more difficult but still meaningful.

Castle continues to seek both new physician customers and wider adoption within existing accounts.

He said the company’s research supports testing patients with melanomas thicker than three-tenths of a millimeter, arguing that biological risk assessment can provide more useful guidance than traditional clinical thresholds alone.

Castle also has breakthrough designation for its melanoma test and intends to seek FDA clearance.

Stokes said FDA clearance could potentially strengthen reimbursement discussions, particularly as more states enact biomarker legislation.

He said payers have often not complied with such laws and that FDA clearance could make it more difficult for insurers to classify a test as experimental or investigational.

TissueCypher, Castle’s test for risk stratification in Barrett’s esophagus patients, remains in an earlier phase of commercial penetration.

Stokes said the company estimates it has reached about 15% patient penetration based on annualizing second-quarter volume and estimates for relevant upper gastrointestinal endoscopies.

That leaves substantial room for growth, he said, noting that reaching penetration levels comparable to DecisionDx-Melanoma would represent more than a doubling of the TissueCypher business.

The test is intend...