Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-38984

CASTLE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)


Delaware						77-0701774
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

505 S. Friendswood Drive, Suite 401, Friendswood, Texas						77546
(Address of principal executive offices)						(Zip Code)

(866) 788-9007

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	CSTL	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2023, there were 26,910,548 shares of common stock, $0.001 par value per share, issued and outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	1
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nin e Months Ended September 30, 2023 and 2022	2
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Notes to the Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
SIGNATURES		51

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)



	September 30, 2023		December 31, 2022
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	91,223	$	122,948
Marketable investment securities	138,530		135,677
Accounts receivable, net	37,003		23,476
Inventory	5,769		3,980
Prepaid expenses and other current assets	7,097		6,207
Total current assets	279,622		292,288
Long-term accounts receivable, net	1,338		1,087
Property and equipment, net	22,273		14,315
Operating lease assets	11,613		12,181
Goodwill and other intangible assets, net	119,607		126,348
Other assets – long-term	1,566		1,110
Total assets	$	436,019	$	447,329

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	6,929	$	4,731
Accrued compensation	22,405		24,358

Operating lease liabilities	1,091		1,777
Other accrued and current liabilities	5,899		5,262
Total current liabilities	36,324		36,128

Noncurrent operating lease liabilities	13,435		11,533
Deferred tax liability	441		428
Other liabilities	36		90
Total liabilities	50,236		48,179
Commitments and Contingencies (Note 11)
Stockholders’ Equity
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued and outstanding as of September 30, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value per share; 200,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 26,890,488 and 26,553,681 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	27		27
Additional paid-in capital	601,618		560,409
Accumulated deficit	(215,791)		(160,905)
Accumulated other comprehensive loss	(71)		(381)
Total stockholders’ equity	385,783		399,150
Total liabilities and stockholders’ equity	$	436,019	$	447,329

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NET REVENUES	$	61,493	$	37,011	$	153,668	$	98,701
OPERATING EXPENSES AND OTHER OPERATING INCOME
Cost of sales (exclusive of amortization of acquired intangible assets)	11,319		8,859		32,559		22,489
Research and development	12,923		10,907		40,624		33,594
Selling, general and administrative	44,619		36,626		136,062		104,577
Amortization of acquired intangible assets	2,272		2,306		6,742		6,051
Change in fair value of contingent consideration	—		(151)		—		(17,987)

Total operating expenses, net	71,133		58,547		215,987		148,724
Operating loss	(9,640)		(21,536)		(62,319)		(50,023)
Interest income	2,769		1,293		7,504		1,693
Interest expense	(2)		(6)		(9)		(13)


Loss before income taxes	(6,873)		(20,249)		(54,824)		(48,343)
Income tax expense (benefit)	32		—		62		(1,823)
Net loss	$	(6,905)	$	(20,249)	$	(54,886)	$	(46,520)





Loss per share, basic and diluted	$	(0.26)	$	(0.77)	$	(2.05)	$	(1.79)



Weighted-average shares outstanding, basic and diluted	26,834		26,316		26,725		25,938

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(6,905)	$	(20,249)	$	(54,886)	$	(46,520)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable investment securities	73		(189)		310		(189)
Comprehensive loss	$	(6,832)	$	(20,438)	$	(54,576)	$	(46,709)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)


	Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
BALANCE, JANUARY 1, 2022	—	$	—	25,378,520	$	25	$	505,482	$	(93,767)	$	—	$	411,740
Stock-based compensation expense	—	—		—	—		8,419		—		—		8,419
Exercise of common stock options	—	—		62,102	—		399		—		—		399
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		2,466	—		(56)		—		—		(56)
Issuance of common stock under the employee stock purchase plan	—	—		42,332	—		1,457		—		—		1,457

Net loss	—	—		—	—		—		(24,623)		—		(24,623)
BALANCE, MARCH 31, 2022	—	$	—	25,485,420	$	25	$	515,701	$	(118,390)	$	—	$	397,336
Stock-based compensation expense	—	—		—	—		8,783		—		—		8,783
Exercise of common stock options	—	—		36,634	—		110		—		—		110
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		6,358	—		(32)		—		—		(32)
Issuance of common stock in acquisition of business	—	—		763,887	1		17,110		—		—		17,111
Net loss	—	—		—	—		—		(1,648)		—		(1,648)
BALANCE, JUNE 30, 2022	—	$	—	26,292,299	$	26	$	541,672	$	(120,038)	$	—	$	421,660
Stock-based compensation expense	—	—		—	—		9,196		—		—		9,196
Exercise of common stock options	—	—		17,093	—		166		—		—		166
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		4,818	—		(46)		—		—		(46)
Issuance of common stock under the employee stock purchase plan	—	—		36,320	—		895		—		—		895
Net unrealized loss on marketable investment securities	—	—		—	—		—		—		(189)		(189)
Net loss	—	—		—	—		—		(20,249)		—		(20,249)
BALANCE, SEPTEMBER 30, 2022	—	$	—	26,350,530	$	26	$	551,883	$	(140,287)	$	(189)	$	411,433

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)


	Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
BALANCE, JANUARY 1, 2023	—	$	—	26,553,681	$	27	$	560,409	$	(160,905)	$	(381)	$	399,150
Stock-based compensation expense	—	—		—	—		13,525		—		—		13,525
Exercise of common stock options	—	—		30,495	—		95		—		—		95
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		24,835	—		(314)		—		—		(314)
Issuance of common stock under the employee stock purchase plan	—	—		77,190	—		1,652		—		—		1,652
Net unrealized gain on marketable investment securities	—	—		—	—		—		—		245		245
Net loss	—	—		—	—		—		(29,204)		—		(29,204)
BALANCE, MARCH 31, 2023	—	$	—	26,686,201	$	27	$	575,367	$	(190,109)	$	(136)	$	385,149
Stock-based compensation expense	—	—		—	—		12,849		—		—		12,849
Exercise of common stock options	—	—		15,606	—		89		—		—		89
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		82,201	—		(534)		—		—		(534)
Net unrealized loss on marketable investment securities	—	—		—	—		—		—		(8)		(8)
Net loss	—	—		—	—		—		(18,777)		—		(18,777)
BALANCE, JUNE 30, 2023	—	$	—	26,784,008	$	27	$	587,771	$	(208,886)	$	(144)	$	378,768
Stock-based compensation expense	—	—		—	—		13,043		—		—		13,043
Exercise of common stock options	—	—		3,656	—		13		—		—		13
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	—	—		40,142	—		(271)		—		—		(271)
Issuance of common stock under the employee stock purchase plan	—	—		62,682	—		1,062		—		—		1,062
Net unrealized gain on marketable investment securities	—	—		—	—		—		—		73		73
Net loss	—	—		—	—		—		(6,905)		—		(6,905)
BALANCE, SEPTEMBER 30, 2023	—	$	—	26,890,488	$	27	$	601,618	$	(215,791)	$	(71)	$	385,783

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2023		2022

OPERATING ACTIVITIES
Net loss	$	(54,886)	$	(46,520)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9,106		7,702
Stock-based compensation expense	39,417		26,398
Change in fair value of contingent consideration	—		(17,987)
Deferred income taxes	13		(1,839)
Accretion of discounts on marketable investment securities	(3,851)		(184)
Other	284		186
Change in operating assets and liabilities:
Accounts receivable	(13,779)		(5,678)
Prepaid expenses and other current assets	(892)		(1,870)
Inventory	(1,789)		(1,502)
Operating lease assets	(590)		694
Other assets	(455)		533
Accounts payable	2,693		2,155
Operating lease liabilities	1,093		(559)
Accrued compensation	(1,953)		3,669

Other accrued and current liabilities	1,376		(853)

Net cash used in operating activities	(24,213)		(35,655)

INVESTING ACTIVITIES
Purchases of property and equipment	(9,828)		(3,845)
Asset acquisition, adjustment to purchase price	—		547
Acquisition of business, net of cash and cash equivalents acquired	—		(26,966)
Proceeds from sale of property and equipment	10		9
Purchases of marketable investment securities	(136,693)		(131,808)
Proceeds from maturities of marketable investment securities	138,000		—


Net cash used in investing activities	(8,511)		(162,063)

FINANCING ACTIVITIES

Proceeds from exercise of common stock options	197		675
Payment of employees’ taxes on vested restricted stock units	(1,119)		(134)
Proceeds from contributions to the employee stock purchase plan	2,027		1,812
Repayment of principal portion of finance lease liabilities	(106)		(88)
Net cash provided by financing activities	999		2,265

NET CHANGE IN CASH AND CASH EQUIVALENTS	(31,725)		(195,453)
Beginning of period	122,948		329,633
End of period	$	91,223	$	134,180

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and equipment	$	902	$	1,131

Common stock issued in acquisition of business	$	—	$	17,111
Contingent consideration in acquisition of business	$	—	$	1,528
Operating lease assets obtained in exchange for lease obligations	$	499	$	5,912

Property and equipment acquired with tenant improvement allowance	$	1,281	$	51

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Description of Business

Castle Biosciences, Inc. (the ‘‘Company”, “we”, “us” or “our”) was incorporated in the state of Delaware on September 12, 2007. We are a commercial-stage diagnostics company focused on providing clinicians and their patients with personalized, clinically actionable information to inform treatment decisions and improve health outcomes. We are based in Friendswood, Texas (a suburb of Houston, Texas) and our laboratory operations are conducted at our facilities located in Phoenix, Arizona and Pittsburgh, Pennsylvania.

We have a history of recurring net losses and negative cash flows and as of September 30, 2023, we had an accumulated deficit of $215.8 million. We believe our $91.2 million of cash and cash equivalents and $138.5 million of marketable investment securities as of September 30, 2023, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our unaudited condensed consolidated financial statements include the accounts of Castle Biosciences, Inc. and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’). All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2023; the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of stockholders’ equity, each for the three and nine months ended September 30, 2023 and 2022; and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of September 30, 2023, the results of our consolidated operations for the three and nine months ended September 30, 2023 and 2022 and our consolidated cash flows for the nine months ended September 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2023 and 2022 are also unaudited. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023 (the "2022 Form 10-K").

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include revenue recognition, the valuation of stock-based compensation, assessing future tax exposure and the realizability of deferred tax assets, the useful lives and recoverability of long-lived assets, the goodwill impairment test, the valuation of acquired intangible assets and the valuation of contingent consideration and other contingent liabilities. We base these estimates on historical and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.

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CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Cash and Cash Equivalents including Concentrations of Credit Risk

Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds, which are not insured by the Federal Deposit Insurance Corporation (“FDIC”), that are primarily invested in short-term U.S. government obligations. Cash deposits at financial institutions may exceed the amount of insurance provided by the FDIC. Management believes that we are not exposed to significant credit risk on our cash deposits due to the financial position of the financial institutions in which deposits are held.

Marketable Investment Securities

All debt securities are recognized in accordance with Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) Topic 320, Investments-Debt Securities (‘‘ASC 320’’). Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. All debt securities are classified as available-for-sale and are recorded at fair value in accordance with ASC 320. We recognize the unrealized gains and losses related to changes in fair value as a separate component of accumulated other comprehensive loss within total stockholders’ equity, net of any related deferred income tax effects, on our condensed consolidated balance sheets. Premiums or discounts from par value are amortized to interest income over the life of the underlying investment. Realized gains and losses on available-for-sale securities are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations. Impairments of available-for-sale debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations. See Notes 5 and 10 for further details.

Revenue Recognition

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we follow a five-step process to recognize revenues: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied. We have determined that we have a contract with the patient when the treating clinician orders the test. Our contracts generally contain a single performance obligation, which is the delivery of the test report, and we satisfy our performance obligation at a point in time upon the delivery of the test report to the treating clinician, at which point we can bill for the report. The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration. See Note 3 for further details.

Accounts Receivable and Allowance for Credit Losses

We classify accounts receivable balances that are expected to be paid more than one year from the consolidated balance sheet date as noncurrent assets. The estimated timing of payment utilized as a basis for classification as noncurrent is determined by analyses of historical payor-specific payment experience, adjusted for known factors that are expected to change the timing of future payments.

We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected. Management’s estimates are typically based on historical loss information adjusted for current conditions. We generally do not perform evaluations of customers’ financial condition and generally do not require collateral. Historically, our credit losses have not been significant. The allowance for credit losses was zero as of September 30, 2023 and December 31, 2022. Adjustments for implicit price concessions attributable to variable consideration, as discussed below, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that it may be impaired. We perform annual impairment reviews of our goodwill balance during the fourth quarter of each fiscal year. We may perform a qualitative assessment to determine if it is necessary to perform a quantitative impairment test. If we determine that a quantitative impairment test is necessary, we apply the guidance in Accounting Standards Update (“ASU”) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, by comparing the fair value of the reporting unit to its carrying value, including the goodwill. If the carrying value exceeds the fair value, we recognize an impairment

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CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

loss for the amount by which the carrying value exceeds fair value, up to the total amount of goodwill allocated to the reporting unit. We did not incur any goodwill impairment losses in any of the periods presented.

On June 2, 2023, a Medicare administrative contractor (“MAC”) finalized a local coverage determination (“LCD”) pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. On June 5, 2023, our stock price decreased significantly and did not recover before June 30, 2023. In response to this trigger, we tested goodwill for impairment at June 30, 2023. We elected to bypass the optional qualitative assessment and proceeded directly to the quantitative assessment. In conducting our interim test, we concluded that our business consists of a single reporting unit. To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Our impairment test indicated that the fair value of our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated. In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective.

During the third quarter of 2023, we continued to monitor our market capitalization against the carrying value of our reporting unit and did not observe any significant changes since our impairment test at June 30, 2023. We are currently performing our annual impairment test, as of October 1, 2023, and we have not identified any additional indicators of impairment to date.

Accrued Compensation

We accrue for liabilities under discretionary employee and executive bonus plans. Our estimated compensation liabilities are based on progress against corporate objectives approved by our board of directors, compensation levels of eligible individuals and target bonus percentage levels. Our board of directors reviews and evaluates the performance against these objectives and ultimately determines the actual achievement levels attained. We also accrue for liabilities under employee sales incentive bonus plans with accruals based on performance achieved to date compared to established targets. As of September 30, 2023 and December 31, 2022, we accrued approximately $15,535,000 and $18,209,000, respectively, for liabilities associated with these bonus plans. These amounts are classified as current or noncurrent accrued liabilities in the unaudited condensed consolidated balance sheets based on the expected timing of payment.

Stock-Based Compensation

Stock-based compensation expense for equity instruments issued to employees is measured based on the grant-date fair value of the awards. The fair value of employee stock options and offerings under the 2019 Employee Stock Purchase Plan (the “ESPP”) are estimated on the date of grant using the Black-Scholes option-pricing valuation model. For restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), the fair value is equal to the closing price of our common stock on the date of grant. For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For options and RSUs, the requisite service period is generally the award’s vesting period (typically four years). PSUs vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. In these cases, the requisite service period takes into consideration the employee’s retirement eligibility, and is reassessed at each reporting date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date. Forfeitures are accounted for as they occur.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss is made up of net loss plus net unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

3. Revenue

All of our revenues from contracts with customers are associated with the provision of testing services. Our revenues are primarily attributable to our DecisionDx®-Melanoma test for cutaneous melanoma. We also provide a test for patients with cutaneous squamous cell carcinoma (“SCC”), DecisionDx®-SCC, a test for use in patients with suspicious pigmented lesions, MyPath® Melanoma and DiffDx®-Melanoma, a test for uveal melanoma (“UM”), DecisionDx®-UM and a test for patients diagnosed with Barrett’s esophagus, the TissueCypher® Barrett’s Esophagus Test. We also began offering a pharmacogenomics testing service focused on mental health, IDgenetix®, following a business combination completed in April 2022. Information on the disaggregation of revenues is included below.

Once we satisfy our performance obligations and bill for the service, the timing of the collection of payments may vary based on the payment practices of the third-party payor and the existence of contractually established reimbursement rates. The payments for our services are primarily made by third-party payors, including Medicare and commercial health insurance carriers. Certain contracts contain a contractual commitment of a reimbursement rate that differs from our list prices. However, absent a positive coverage policy, with or without a contractually committed reimbursement rate, with a commercial carrier or governmental program, our diagnostic tests may or may not be paid by these entities. In addition, patients do not enter into direct agreements with us that commit them to pay any portion of the cost of the tests in the event that their insurance provider declines to reimburse us. We may pursue, on a case-by-case basis, reimbursement from such patients in the form of co-payments and co-insurance, in accordance with the contractual obligations that we have with the insurance carrier or health plan. These situations may result in a delay in the collection of payments.

The Medicare claims that are covered by Medicare are generally paid at a rate established on Medicare’s Clinical Laboratory Fee Schedule or by the respective Medicare contractor within 30 days from receipt. Medicare claims that were either submitted to Medicare prior to the LCD or other coverage commencement date or are not covered but meet the definition of being medically reasonable and necessary pursuant to the controlling Section 1862(a)(1)(A) of the Social Security Act are generally appealed and may ultimately be paid at the first (termed ‘‘redetermination’’), second (termed ‘‘reconsideration’’) or third level of appeal (de novo hearing with an Administrative Law Judge). A successful appeal at any of these levels may result in prompt payment.

In the absence of Medicare coverage, contractually established reimbursements rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration attributable to these price concessions is measured at the expected value using the ‘‘most likely amount’’ method under ASC 606. The amounts are estimated using historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties. Such variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. Variable consideration may be constrained and excluded from the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor. Accordingly, in such situations revenues are recognized on the basis of actual cash collections. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Included in revenues for the three months ended September 30, 2023 and 2022 were $883,000 of net positive revenue adjustments and $277,000 of net negative revenue adjustments, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods. Such amounts of variable consideration for the nine months ended September 30, 2023 and 2022 were $3,085,000 and $1,850,000 of net negative revenue adjustments, respectively. These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Because our contracts with customers have an expected duration of one year or less, we have elected the practical expedient in ASC 606 to not disclose information about our remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expenses as incurred due to the short duration of our contracts. Contract balances consisted solely of accounts receivable (both current and noncurrent) as of September 30, 2023 and December 31, 2022.

Disaggregation of Revenues

The table below provides the disaggregation of revenue by type (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Dermatologic(1)	$	51,151	$	33,924	$	130,097	$	90,160
Non-Dermatologic(2)	10,342		3,087		23,571		8,541
Total net revenues	$	61,493	$	37,011	$	153,668	$	98,701

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma).

(2)Consists of TissueCypher Barrett’s Esophagus Test, DecisionDx-UM and IDgenetix.

Payor Concentration

We rely upon reimbursements from third-party government payors (primarily Medicare) and private-payor insurance companies to collect accounts receivable related to sales of our tests.

Our significant third-party payors and their related revenues as a percentage of total revenues and accounts receivable balances are as follows:


	Percentage of Revenues
	Nine Months Ended September 30,				Percentage of Accounts Receivable (current) as of				Percentage of Accounts Receivable (noncurrent) as of
	2023		2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Medicare	49	%	52	%	23	%	28	%	*		*
Payor A	14	%	12	%	19	%	14	%	16	%	16	%
Payor B	*		*		10	%	*		11	%	*

* Less than 10%

There were no other third-party payors that individually accounted for more than 10% of our total revenue or accounts receivable for the periods shown in the table above.

4. Loss Per Share

Basic loss per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options, vesting of RSUs and PSUs or purchases under the ESPP. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Contingently issuable PSU awards are included in the computation of diluted loss per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period. However, potentially dilutive shares are excluded from the computation of diluted loss per share when their effect is antidilutive.

Because we reported a net loss for all periods presented, all potentially dilutive securities are antidilutive and are excluded from the computation of diluted loss per share for such periods.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The table below provides the weighted-average number of potential common shares associated with outstanding securities not included in our calculation of diluted loss per share for the three and nine months ended September 30, 2023 and 2022 because to do so would be antidilutive or, in the case of PSUs, the applicable performance conditions have not yet been met (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	3,302	3,542	3,339	3,538
RSUs and PSUs	3,422	1,743	3,403	1,444
ESPP	371	168	320	124
Total	7,095	5,453	7,062	5,106

In addition, in connection with our acquisition of AltheaDx, Inc. (“AltheaDx”) in April 2022, we may be required to issue shares of our common stock to satisfy the contingent consideration obligations, pending the outcome of certain commercial and regulatory milestones, as required by the definitive agreement to acquire AltheaDx. For purposes of calculating diluted loss per share, no such shares were assumed to have been issued because none of the applicable conditions have been met to date. See Note 10 for additional information.

5. Marketable Investment Securities

The following tables present our available-for-sale debt securities (in thousands):


	September 30, 2023
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	138,601	$	—	$	(71)	$	138,530
Total	$	138,601	$	—	$	(71)	$	138,530


	December 31, 2022
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	136,058	$	—	$	(381)	$	135,677
Total	$	136,058	$	—	$	(381)	$	135,677

Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. We classify all investments as current assets, as these are readily available for use in current operations. The cost of securities sold is determined based on the specific identification method for purposes of recording gains and losses.

There were no realized gains or losses on sales of investments for the three and nine months ended September 30, 2023 and 2022.

We evaluated our investment portfolio under the available-for-sale debt securities impairment model guidance and determined our investment portfolio is comprised of low-risk, investment grade securities. As of September 30, 2023, unrealized losses on our available-for-sale investments are not attributed to credit risk. We believe that an allowance for credit losses is unnecessary because the unrealized losses on certain of our marketable investment securities are due to market factors. No credit-related or noncredit-related impairment losses were recorded for the three and nine months ended September 30, 2023 and 2022. The allowance for credit losses was zero as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, all of our available-for-sale debt securities had contractual maturities of one year or less. Accrued interest receivable is included in prepaid expenses and other current assets in our unaudited condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022 the accrued interest receivable balance was immaterial.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Additional information relating to the fair value of marketable investment securities can be found in Note 10.

6. Acquisition

On April 26, 2022, we completed the acquisition of 100% of the equity interests in AltheaDx which offers the IDgenetix test that focuses on mental health. We acquired AltheaDx for $30.5 million in cash and $17.1 million in common stock issued, for total consideration of $47.6 million. The fair value of assets acquired and liabilities assumed primarily consisted of finite-lived intangible assets of $35.0 million, goodwill of $10.7 million, cash and cash equivalents of $3.5 million and deferred tax liabilities of $1.7 million. We have concluded that the transaction represents a business combination under ASC Topic 805, Business Combinations. The financial results of AltheaDx have been included in our unaudited condensed consolidated financial statements since the date of the acquisition. For further details refer to our consolidated financial statements included in our 2022 Form 10-K. The amount of revenue attributable to AltheaDx included in the unaudited consolidated statements of operations from the acquisition date was not material for the three and nine months ended September 30, 2022. The loss attributable to AltheaDx included in the unaudited consolidated statements of operations from the acquisition date was approximately $8,199,000 for the nine months ended September 30, 2022. This amount does not reflect transaction costs from the acquisition or the effects of the valuation allowance reduction discussed in Note 13. Transaction costs associated with the acquisition were $1,711,000 for the nine months ended September 30, 2022 and were recognized as expenses in the unaudited condensed consolidated statements of operations. During the three months ended September 30, 2022, we recognized an immaterial measurement period adjustment to cash consideration transferred, with a corresponding adjustment to goodwill.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information for the three and nine months ended September 30, 2022 combines our historical financial results and the results of AltheaDx, assuming that the companies were combined as of January 1, 2021, and includes adjustments for amortization expense from the acquired intangible assets and additional stock-based compensation expense. Non-recurring pro forma adjustments consist of acquisition-related transaction costs of $1,711,000 and an income tax benefit of $1,769,000, both assumed to have been recognized during the year ended December 31, 2021 and therefore removed from the nine months ended September 30, 2022. The following unaudited pro forma financial information (in thousands) is for informational purposes only and is not necessarily indicative of (i) the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2021 or (ii) the results of operations that are expected in future periods:


	Pro Forma Data
	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Net revenues	$	37,011	$	99,253
Net loss	$	(20,302)	$	(52,247)

Related Parties

Derek J. Maetzold, our President and Chief Executive Officer, and a member of our board of directors, and Daniel M. Bradbury, the Chairperson of our board of directors, each served on the board of directors of AltheaDx until the acquisition of AltheaDx was completed, were direct or indirect beneficial owners of AltheaDx securities and received consideration in connection with our acquisition of AltheaDx. Further, Frank Stokes, our Chief Financial Officer; Tobin W. Juvenal, our Chief Commercial Officer; Kristen Oelschlager, our Chief Operating Officer and certain immediate family members of Mr. Maetzold and Ms. Oelschlager were direct or indirect beneficial owners of AltheaDx securities and received consideration in the transaction. These individuals may receive additional contingent consideration based on the achievement of certain commercial milestones relating to the 2022, 2023 and 2024 commercial milestones (“AltheaDx Earnout Payments”) if the relevant commercial and regulatory milestone events occur. As of September 30, 2023 and December 31, 2022, our contingent consideration liability for the AltheaDx Earnout Payments was zero. See Note 10 for additional information. Our entry into the definitive agreement to acquire AltheaDx was approved by our board of directors based upon the unanimous recommendation of a special transaction committee comprised entirely of independent members of our board of directors without any financial interest in AltheaDx or any conflict of interest with respect to the acquisition of AltheaDx.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

7. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Lab equipment(1)	$	12,576	$	9,721
Leasehold improvements	9,673		5,171
Computer equipment	3,942		4,336
Furniture and fixtures	2,352		1,660
Construction-in-progress	909		1,275
Total	29,452		22,163
Less accumulated depreciation(1)	(7,179)		(7,848)
Property and equipment, net	$	22,273	$	14,315

(1) As of September 30, 2023 and December 31, 2022, includes lab equipment under finance lease of $369 thousand and $369 thousand, respectively, and accumulated depreciation of $243 thousand and $137 thousand, respectively.

Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	505	$	267	$	1,205	$	621
Research and development	84		85		246		255
Selling, general and administrative	313		265		913		775
Total	$	902	$	617	$	2,364	$	1,651

8. Goodwill and Other Intangible Assets, Net

Goodwill

The balance of our goodwill was $10.7 million as of September 30, 2023 and December 31, 2022. There were no accumulated impairments of goodwill as of September 30, 2023 or December 31, 2022.

Other Intangible Assets, Net

Our other intangible assets, net consist of the following (in thousands):


	September 30, 2023
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(16,759)	$	108,558	12.3
Assembled workforce	563		(206)		357		3.4
Total other intangible assets, net	$	125,880	$	(16,965)	$	108,915

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	December 31, 2022
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(10,102)	$	115,215	12.9
Assembled workforce	563		(122)		441		4.0
Total other intangible assets, net	$	125,880	$	(10,224)	$	115,656

Amortization expense of intangible assets was $2.3 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, and $2.3 million and $6.1 million for the three and nine months ended September 30, 2022, respectively.

9. Other Accrued and Current Liabilities

Other accrued and current liabilities consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Clinical studies	$	3,020	$	1,822
Accrued service fees	2,208		2,125
ESPP contributions	213		900

Other	458		415
Total	$	5,899	$	5,262

10. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used in measuring fair value. There are three levels to the fair value hierarchy based on the reliability of inputs, as follows:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or amounts recorded may not be indicative of the amount that we or holders of the instruments could realize in a current market exchange.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The table below provides information, by level within the fair value hierarchy, of our financial assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands):


	As of September 30, 2023
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	88,123	$	—	$	—	$	88,123
U.S. government securities(2)	$	138,530	$	—	$	—	$	138,530
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—


	As of December 31, 2022
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	108,673	$	—	$	—	$	108,673
U.S. government securities(2)	$	135,677	$	—	$	—	$	135,677
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—

(1)Classified as “Cash and cash equivalents” in the unaudited condensed consolidated balance sheets.

(2)Classified as “Marketable investment securities” in the unaudited condensed consolidated balance sheets.

(3)Current portion, if any, classified as “Other accrued and current liabilities” in the unaudited condensed consolidated balance sheets.

Contingent Consideration

In connection with our acquisition of Cernostics, Inc. (“Cernostics”) in December 2021, we recorded a liability for contingent consideration of up to $50.0 million that could have been payable based on the achievement of certain commercial milestones relating to the year ending December 31, 2022 (“Cernostics Earnout Payments”). At our sole discretion, we could have settled Cernostics Earnout Payments in cash or shares of our common stock, subject to certain limitations. There were no Cernostics Earnout Payments that became payable because the commercial milestones were not achieved during the earnout period and the final valuation of the contingent consideration was assessed to be zero as of December 31, 2022. The fair value of the contingent consideration associated with our acquisition of Cernostics did not change for the three months ended September 30, 2022 and decreased by $18.3 million for the nine months ended September 30, 2022 with no similar activity for the same periods in 2023.

In connection with our acquisition of AltheaDx, we agreed to pay contingent consideration of up to $75.0 million relating to the AltheaDx Earnout Payments. The portion of the AltheaDx Earnout Payments associated with the commercial milestones for the year ended December 31, 2022 was not paid since the applicable commercial milestones were not met. This portion represented $35.0 million of the $75.0 million total potential payment obligation, exclusive of the catch-up payment in 2023 of $17.5 million, which will become payable if all 2023 commercial milestones are fully met. Therefore, as of September 30, 2023, we have a potential payment obligation of up to $57.5 million with respect to the remaining commercial milestones for 2023 and 2024. If the settlement of the remaining portion of the AltheaDx Earnout Payments would have occurred on September 30, 2023, no amounts would have been due because no commercial milestones had been achieved as of such date.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The contingent consideration was classified as a Level 3 fair value measurement due to the use of significant unobservable inputs and a Monte Carlo simulation to determine its fair value. The Monte Carlo simulation uses projections of the commercial milestones for the applicable period as well as the corresponding targets and approximate timing of payment based on the terms of the arrangement. We recognized a gain of $0.2 million and a loss of $0.3 million during the three and nine months ended September 30, 2022, respectively, associated with the change in fair value of the preliminary AltheaDx contingent consideration. The valuation of the AltheaDx contingent consideration was zero as of September 30, 2023 and December 31, 2022, and no gains or losses were recorded associated with changes in fair value during the three and nine months ended September 30, 2023.

The contingent consideration liability is remeasured at fair value at each reporting period taking into account any updated assumptions or changes in circumstances. Any changes in the fair value are recorded as gains or losses in our unaudited condensed consolidated statement of operations.

11. Commitments and Contingencies

From time to time, we may be involved in legal proceedings arising in the ordinary course of business. We believe there is no threatened litigation or litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

12. Stock Incentive Plans and Stock-Based Compensation

Stock Incentive Plans

Effective January 1, 2023, an additional 1,327,684 shares became available under our 2019 Equity Incentive Plan (the “2019 Plan”) pursuant to an automatic annual increase. The 2019 Plan provides for automatic annual increases to the number of shares authorized for issuance, equal to 5% of our common shares outstanding as of the immediately preceding year end, through January 1, 2029. As of September 30, 2023, 124,383 shares remained available for grant under the 2019 Plan.

On December 22, 2022, our board of directors approved the 2022 Inducement Plan (the “Inducement Plan”). Our Inducement Plan provides for the grant of RSU awards and other stock awards made as an inducement material to the grantee’s entering into employment with us to the extent such grantee was not previously an employee of ours or is entering into employment following a bona fide period of non-employment with us. As of September 30, 2023, there were 164,306 shares available for grant under the Inducement Plan.

Stock Options

Stock option activity under our stock plans for the nine months ended September 30, 2023 is set forth below:


		Weighted-Average
	Stock Options Outstanding	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2022	3,419,840	$	35.11

Granted	170	$	25.06
Exercised	(49,757)	$	3.96
Forfeited/Cancelled	(93,819)	$	45.24
Balance as of September 30, 2023	3,276,434	$	35.29	6.8	$	7,087
Exercisable at September 30, 2023	2,537,555	$	32.21	6.5	$	7,087

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Restricted Stock Units

RSUs represent the right to receive shares of our common stock at a specified future date, subject to vesting. Our RSUs generally vest annually from the grant date in four equal installments subject to the holder’s continued service with us. We issue new shares of common stock upon the vesting of RSUs.

The following table summarizes our RSU activity for the nine months ended September 30, 2023:


	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	3,477,922	$	27.56
Granted	315,950	$	17.65
Vested(1)	(200,824)	$	28.19
Forfeited/Cancelled	(253,548)	$	26.45
Balance as of September 30, 2023	3,339,500	$	26.67

(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 53,646 for the nine months ended September 30, 2023.

Performance-Based Restricted Stock Units

PSUs represent the right to receive shares of our common stock contingent upon the achievement of certain financial performance measures. We issue new shares of common stock upon the vesting of PSUs.

The following table summarizes our PSU activity for the nine months ended September 30, 2023:


	Performance-Based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	196,033	$	23.23
Granted	—	$	—
Vested	—	$	—
Forfeited/Cancelled	—	$	—
Balance as of September 30, 2023	196,033	$	23.23

Retirement Policy

In January 2023, our board of directors approved a retirement policy (the “Retirement Policy”) that provides for acceleration of a portion of unvested awards that were granted to certain eligible employees upon meeting age, service and notice requirements. We considered the adoption of the Retirement Policy to be a modification of existing awards under ASC Topic 718, Compensation – Stock Compensation. The modification did not result in any incremental compensation cost. However, the adoption of the of the policy resulted in a new estimate of the requisite service period for certain awards, which we reassess at each balance sheet date. In connection with the Retirement Policy, we accelerated the recognition of compensation expense of $0.5 million and $1.6 million during the three and nine months ended September 30, 2023, respectively.

Employee Stock Purchase Plan

The ESPP provides for certain automatic increases in the number of shares of common stock reserved for issuance, which resulted in an additional 265,536 shares becoming available under the ESPP effective January 1, 2023. During the nine months ended September 30, 2023, we issued 139,872 shares of common stock pursuant to scheduled purchases under the ESPP. As of September 30, 2023, 940,263 shares remained available for issuance under the ESPP.

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CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Determining Fair Value - Summary of Assumptions

We use the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or any other measurement date. The following table sets forth the assumptions used to determine the fair value of stock options:


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	5.0	5.9
Expected stock price volatility	75.57% - 76.01%	68.34% - 73.33%
Risk-free interest rate	3.57% - 3.57%	1.54% - 3.03%
Dividend yield	—%	—%

The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP:


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	1.3	1.2
Expected stock price volatility	93.17% - 130.95%	62.98% - 91.78%
Risk-free interest rate	4.74% - 5.33%	0.60% - 3.45%
Dividend yield	—%	—%

We use the closing price of our common stock on the date of grant to determine the fair value of RSUs and PSUs.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	1,245	$	975	$	3,719	$	2,725
Research and development	2,682		1,948		7,755		5,607
Selling, general and administrative	9,116		6,273		27,943		18,066
Total stock-based compensation expense	$	13,043	$	9,196	$	39,417	$	26,398

For the nine months ended September 30, 2023 and 2022, the weighted-average grant date fair value of stock options was $15.99 and $14.34 per option, respectively, and the weighted-average grant date fair value of the purchase rights granted under the ESPP was $11.51 and $16.79 per share, respectively. As of September 30, 2023, the total unrecognized stock-based compensation cost related to outstanding awards was $96,424,000, which is expected to be recognized over a weighted-average period of 2.4 years. The total unrecognized compensation cost will be adjusted for forfeitures in future periods as they occur.

13. Income Taxes

In connection with our acquisition of AltheaDx in 2022, we recorded deferred tax liabilities based on our allocation of the fair values of assets acquired and liabilities assumed. As a result of these additional deferred tax liabilities, we recorded a $1,769,000 reduction to our existing valuation allowance on deferred tax assets, which was reflected in our income tax benefit on the condensed consolidated statements of operations for the nine months ended September 30, 2022 as a discrete item.

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CASTLE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

14. Subsequent Event

On July 10, 2023, following approval by our board of directors, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments. Under the agreement, we had the option to terminate the contract within 90 days, for any reason. On October 4, 2023, we amended the definitive agreement to extend the option period by an additional 30 days. The option period is being used to complete initial suitability diligence. Closing, if it should occur, is expected in late 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q with our audited financial statements and notes thereto as of and for the years ended December 31, 2022 and 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, including the section entitled “Critical Accounting Estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Castle,” “we,” “us” and “our” refer to Castle Biosciences, Inc.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipate,” “believe,” “estimate,” “expect,” “may,” “plan,” “potential,” “will,” “would” or the negative or plural of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions or expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.

Overview

Castle Biosciences is applying innovative diagnostics to inform disease management and improve patient outcomes. For the diseases that our portfolio of tests cover, we believe the traditional approach to developing a treatment plan for cancers and other diseases using clinical and pathology factors alone is inadequate and can be improved by incorporating the personalized information our tests provide.

Our Test Portfolio

We currently offer five proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the dermatologic, ocular and gastroenterology fields. We also offer a proprietary pharmacogenomics (“PGx”) test to guide medication selection and management for patients with depression, anxiety and other mental health conditions following our acquisition of AltheaDx, Inc. (“AltheaDx”) in April 2022, as discussed below.

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification gene expression profile (“GEP”) test for cutaneous melanoma, which is supplemented by revenue generated from our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), our TissueCypher risk stratification test for Barrett’s esophagus (“BE”) and our DecisionDx-UM risk stratification test for uveal melanoma (“UM”).

All five of our MAAA tests have been granted Advanced Diagnostic Laboratory (“ADLT”) test status by the Centers for Medicare & Medicaid Services (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies; and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests. We believe this designation not only demonstrates our focus on developing and validating innovative tests but also enables our Medicare reimbursement rate to be set, over the long term, by the median private payor rate, which we believe provides a fair exchange of value. Further information about Medicare coverage and ADLT status with respect to each of our tests is set forth below.

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Test Overview

Our Dermatologic Tests

Our lead product is DecisionDx-Melanoma, a proprietary risk stratification GEP test that predicts the risk of metastasis or recurrence for patients diagnosed with invasive cutaneous melanoma. In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive cutaneous melanoma in the United States, representing an estimated U.S. total addressable market (“TAM”) of approximately $540 million. We launched DecisionDx-Melanoma in May 2013.

DecisionDx‑SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC). We estimate 200,000 SCC patients are annually diagnosed and classified at high risk in the United States, representing an estimated U.S. TAM of approximately $820 million. We launched DecisionDx-SCC in August 2020.

MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion. We estimate approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S. TAM of approximately $600 million. Initially, we offered both our MyPath Melanoma test and our DiffDx-Melanoma test under an offering that we referred to as our Diagnostic GEP offering. However, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023 and now the focus of this offering is MyPath Melanoma.

Our Gastroenterology Test

The TissueCypher Barrett’s Esophagus Test (sometimes referred to as “TissueCypher”) is the world’s first precision medicine test designed to predict future development of high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite dysplasia or low-grade dysplasia BE. We estimate a U.S. TAM of approximately $1 billion. We began offering the TissueCypher Barrett’s Esophagus Test following our acquisition of Cernostics, Inc. (“Cernostics”) in December 2021.

In the second quarter of 2023, we opened a new laboratory in Pittsburgh, Pennsylvania, where we process our TissueCypher Barrett's Esophagus Test. Due to high demand for the test from the gastrointestinal community, orders subsequently outpaced our forecasts despite our process improvements and automation efforts. In July 2023, we elected to temporarily pause accepting additional TissueCypher orders to focus on scaling efforts and to work through a significant backlog of orders. In September 2023, we resumed accepting new orders for testing in a phased approach consistent with continued scaling activity aimed at accommodating current demand and future growth. As of mid-October 2023, we have completed the pre-existing backlog orders.

Our Uveal Melanoma Test

DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM. We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States. We estimate a U.S. TAM of approximately $10 million.

Our Mental Health Test

IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions. We estimate a U.S. TAM of approximately $5 billion associated with this test. We began offering the IDgenetix test following our acquisition of AltheaDx in April 2022.

Commercial Expansion Efforts

In late April 2022, we acquired AltheaDx and a commercial team covering approximately 20 outside sales territories. In September 2022, we added additional outside territories for our TissueCypher Barrett’s Esophagus Test and established a new commercial sales team dedicated to our Diagnostic GEP offering, with the current dermatologic commercial team shifting to focus primarily on DecisionDx-Melanoma and DecisionDx-SCC. The new sales teams were fully integrated into our commercial operations by the end of the second quarter of 2023.

We will continue to assess market response in determining further commercial expansions.

Government Regulation and Product Approval

Regulations

On September 12, 2023, we received our Clinical Laboratory Permit from the New York State Department of Health for our laboratory in Pittsburgh.

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Reimbursement

The primary source of revenue for our products is reimbursement from third-party payors, which includes government payors, such as Medicare, and commercial payors, such as insurance companies. Achieving broad coverage and reimbursement of our current products by third-party payors and continued Medicare coverage are key components of our financial success. De novo coverage by government and third-party payors for our pipeline tests will be important over time.

We bill third-party payors and patients for the tests we perform. The majority of our revenue collections is paid by third-party insurers, including Medicare. We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, DecisionDx-UM, TissueCypher and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries, representing approximately 60 million covered lives. A ‘‘covered life’’ means a subscriber, or a dependent of a subscriber, who is insured under an insurance carrier’s policy.

The Medicare rates discussed below are prior to giving effect to applicable sequestration in effect from time to time as described in further detail under “Government Regulation and Product Approval—Healthcare Reform” included in Item 1, Business, of our Annual Report on Form 10-K for the year ended December 31, 2022.

DecisionDx-Melanoma

LCD

Palmetto GBA MolDX (“Palmetto”), the Medicare Administrative Contractor (“MAC”) responsible for administering MolDX, the program that assesses molecular diagnostic technologies, issued a final expanded local coverage determination (“LCD”) for DecisionDx-Melanoma, effective November 22, 2020. With this expanded LCD and the accompanying billing and coding articles, we estimate that a significant majority of the DecisionDx-Melanoma tests performed for Medicare patients will meet the coverage criteria. Noridian Healthcare Solutions, LLC (“Noridian”), the MAC responsible for administering claims for laboratory services performed in our Arizona laboratory, has adopted the same coverage policy as Palmetto and also issued an expanded final LCD for DecisionDx-Melanoma, effective December 6, 2020. More recently, Palmetto converted the DecisionDx-Melanoma test-specific LCD to a “foundational” LCD. This LCD was issued as final May 19, 2022 with Noridian issuing the same on June 16, 2022. The final LCDs did not result in any changes in coverage.

ADLT

On May 17, 2019, CMS determined that DecisionDx-Melanoma meets the criteria for ADLT status. Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021. The rate for 2022 was $7,193 per test and continues to be $7,193 per test for 2023.

DecisionDx-UM

LCD

Palmetto issued a final LCD for DecisionDx-UM, which became effective in July 2017. Noridian has adopted the same coverage policy as Palmetto.

ADLT

On May 17, 2019, CMS determined that DecisionDx-UM meets the criteria for “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status. Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year. For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021. The rate for 2022 was $7,776 per test and the rate for 2023 remains at $7,776 per test.

Diagnostic GEP Offering

MyPath Melanoma

MyPath Melanoma is currently covered under a MolDX LCD policy through Noridian that first became effective in June 2019.

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ADLT

MyPath Melanoma was approved as a new ADLT in September 2019. The rate for 2022 was $1,950 per test. Our 2023 rate is set at $1,755 per test, based on data submitted by the predecessor owner of the Myriad MyPath Laboratory relating to the first half of 2021. Rates for our MyPath Melanoma test continues to be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

DiffDx-Melanoma

In early 2021, we submitted our technical assessment dossier for DiffDx-Melanoma. The dossier was accepted as complete in the first quarter of 2021. In June 2022, Palmetto and Noridian each posted a proposed LCD that would convert the MyPath Melanoma test-specific LCD to a “foundational” LCD and provide coverage for both MyPath Melanoma and DiffDx-Melanoma. On June 22, 2023, Palmetto and Noridian issued final foundational LCDs that will provide coverage for both MyPath Melanoma and DiffDx-Melanoma effective August 6, 2023.

In the second quarter of 2022, we obtained a Proprietary Laboratory Analyses (“PLA”) code for DiffDx-Melanoma. In 2023, DiffDx-Melanoma went through the CMS gapfill process which concluded in September 2023 with CMS posting a final MAC-specific gapfill rate of $1,950 per test. Our DiffDx-Melanoma code and this new rate will be included in the final Clinical Laboratory Fee Schedule (“CLFS”) for 2024 and becomes effective January 1, 2024.

DecisionDx‑SCC

In the first quarter of 2022, we requested that Novitas Solutions, Inc. (“Novitas”), the MAC that manages the Medicare jurisdiction covering our Pittsburgh, Pennsylvania laboratory, conduct a medical review of our DecisionDx-SCC test. That review was completed towards the end of that quarter. In the second quarter of 2022, following the completion of a requested medical review and pricing of our DecisionDx-SCC test by Novitas, we obtained a PLA code and began receiving reimbursement from Novitas for DecisionDx-SCC at a rate of $3,873 per test.

ADLT

On June 30, 2023, CMS determined DecisionDx-SCC meets the criteria for “new ADLT” status. Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test. Effective April 1, 2024 and through December 31, 2025, the published CLFS rate for DecisionDx-SCC will be based on the median private payor rates received between July 1, 2023 and November 30, 2023. Thereafter, the rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year. ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage.

LCD

On June 2, 2023, Novitas finalized the oncology biomarker LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. However, on July 6, 2023, Novitas suspended the final version of the LCD and announced its intent to post a new proposed LCD for comment and presentation at an open meeting. On July 27, 2023, Novitas posted a nearly identical proposed oncology biomarker LCD that continues to intend to rely upon evidentiary reviews sourced from three databases: ClinGen, OncoKB and NCCN. The proposed LCD also recommends non-coverage for our DecisionDx-SCC test. The comment period for the proposed LCD ended on September 9, 2023. We cannot predict whether this LCD will be finalized as proposed or what the timing of any final LCD might be.

In the second quarter of 2020, we submitted our technical assessment dossier for DecisionDx-SCC to Palmetto and Noridian. The dossier was accepted as complete in the third quarter of 2020. On June 8, 2023, both Palmetto and Noridian posted their draft LCD recommending no coverage for DecisionDx-SCC. The comment period for the draft LCDs ended on July 22, 2023.

TissueCypher

TissueCypher is processed in our Pittsburgh, Pennsylvania laboratory and falls under the Medicare jurisdiction managed by Novitas which previously reviewed TissueCypher. We receive payments for claims according to the published CLFS rate. For 2022, the published CLFS payment rate was $2,513 for the test.

On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status. From April 1, 2022 through December 31, 2022, CMS has set the initial period rate equal to the original list price of $2,350 per test. Effective January 1, 2023, the published CLFS rate for TissueCypher is $4,950, which will remain effective through December 31, 2024. This rate is based on the median private payor rates received between April 1, 2022

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and August 31, 2022. Thereafter, the rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

IDgenetix

IDgenetix is currently covered under a Noridian LCD policy and accompanying billing and coding article developed by MolDX. The Medicare coverage includes depression and the following seven additional mental health conditions beyond major depressive disorder: schizophrenia, bipolar disorder, anxiety disorders, social phobia, obsessive-compulsive personality disorder, post-traumatic stress disorder and attention deficit hyperactivity disorder. IDgenetix has historically been billed to Medicare using an unspecified Current Procedural Terminology (“CPT”) code along with the IDgenetix test-specific MolDX Z-code (the “IDgenetix Z-Code”). In February 2023, MolDX notified us that, as part of its annual CPT code updates, IDgenetix should shift billing to a different generic gene sequencing CPT code (the “New CPT Code”) and continue using the IDgenetix Z-Code beginning in March 2023. The New CPT Code is currently contractor priced at $917 while it undergoes CMS’s gapfill pricing process in 2023. Accordingly, as a result of this change, the Medicare reimbursement rate for the IDgenetix multi-gene panel decreased from approximately $1,500 per test to $917 per test. The New CPT Code does not describe all of the components of the IDgenetix test. We subsequently obtained a test-specific PLA CPT code. The new PLA code becomes effective October 1, 2023 and is currently undergoing the 2024 CLFS pricing process. In September 2023, CMS posted a preliminary CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test. The final 2024 CLFS rates will be posted in the fourth quarter of 2023.

Delivered Test Reports

The number of test reports we generate is a key indicator that we use to assess our business. A test report is generated when we receive a sample in our laboratory, and then the relevant test information is entered into our Laboratory Information Management System, the laboratory portion of the test is performed, including proprietary algorithmic analysis of the combined biomarkers, and a report is then generated which is sent to the clinician who ordered the test.

The number of test reports delivered by us during the nine months ended September 30, 2023 and 2022 and for the year ended December 31, 2022 are presented in the table below:


	Proprietary Dermatologic GEP Tests
	DecisionDx- Melanoma	DecisionDx-SCC	Diagnostic GEP offering (1)	Dermatologic Total	DecisionDx-UM	TissueCypher Barrett’s Esophagus Test (3)	IDgenetix(2)	Grand Total
Q1 2023	7,583	2,411	980	10,974	409	1,383	2,150	14,916
Q2 2023	8,597	2,681	953	12,231	461	1,447	2,681	16,820
Q3 2023	8,559	2,820	1,011	12,390	399	2,829	2,791	18,409

For the nine months ended September 30, 2023	24,739	7,912	2,944	35,595	1,269	5,659	7,622	50,145

Q1 2022	6,023	1,142	950	8,115	456	56	—	8,627
Q2 2022	7,125	1,344	955	9,424	431	352	827	11,034
Q3 2022	7,354	1,636	834	9,824	392	690	1,208	12,114
For the nine months ended September 30, 2022	20,502	4,122	2,739	27,363	1,279	1,098	2,035	31,775
Q4 2022	7,301	1,845	822	9,968	432	1,030	1,214	12,644
For year ended December 31, 2022	27,803	5,967	3,561	37,331	1,711	2,128	3,249	44,419

(1)Includes MyPath Melanoma and DiffDx-Melanoma. We offered both MyPath Melanoma and DiffDx-Melanoma under our Diagnostic GEP offering until February 2023 when we suspended the offering of DiffDx-Melanoma, as discussed above.

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(2)We began offering the IDgenetix test on April 26, 2022, following our acquisition of AltheaDx. Includes both single-gene and multi-gene tests.

(3)For the three months ended September 30, 2023, our TissueCypher test report volumes primarily derived from processed backlog orders. We temporarily paused accepting additional orders in July 2023 and resumed accepting new orders in a phased approach in September 2023.

For the three and nine months ended September 30, 2023, our test report volume increased by 52.0% and 57.8% respectively, compared to the same periods of 2022. Our dermatologic test report volume increased by 26.1% and 30.1% for the three and nine months ended September 30, 2023, respectively, compared to the prior periods in 2022, largely driven by continued growth from our DecisionDx-Melanoma and DecisionDx-SCC tests. Increases from our other tests (non-dermatologic), primarily IDgenetix and TissueCypher, also contributed to the overall volume increase. For a discussion of how we recognize revenue derived from our tests, refer to “Net Revenues” under “Components of Results of Operations” below.

We continue to see new clinicians order our dermatologic tests for the first time. For the three months ended September 30, 2023, we saw approximately 500 new ordering clinicians for our dermatologic tests compared to 601 during the same period of 2022. For the nine months ended September 30, 2023 and 2022, we saw approximately 1,606 and 1,801, respectively, new ordering clinicians for our dermatologic tests. Total ordering clinicians for our dermatologic tests were approximately 4,955 and 4,238 for the three months ended September 30, 2023 and 2022, respectively, and 7,865 and 6,763 for the nine months ended September 30, 2023 and 2022, respectively.

For additional information on the metrics we disclose, refer to “Information About Certain Metrics” below.

In developing our DecisionDx-SCC test, we believed that in addition to addressing significant unmet clinical needs, we would see opportunities for leverage, as many of the clinicians currently ordering DecisionDx-Melanoma would likely be the same clinicians who would find value in our DecisionDx-SCC test. For example, we found that during the nine months ended September 30, 2023, approximately 75% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Information About Certain Metrics

The following provides additional information about certain metrics we have disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Test Reports Delivered

Test reports delivered represents the number of completed test reports delivered by us during the reporting period indicated. The period in which a test report is delivered does not necessarily correspond with the period the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives. We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.

New Ordering Clinicians

New ordering clinicians for our dermatologic tests represents the number of clinicians who ordered a dermatologic test from us for the first time during the reporting period specified. Our dermatologic tests currently consist of DecisionDx-Melanoma, DecisionDx-SCC and MyPath Melanoma. We believe this metric is useful in evaluating the effectiveness of our sales and marketing efforts in establishing new relationships with clinicians and increasing the adoption of our suite of dermatologic tests. We also believe this metric provides useful information to investors in assessing our ability to expand the use of our dermatologic tests. Since this metric is based upon the reporting period in which an order is placed, it does not necessarily correspond to the reporting period in which a test report was delivered or revenue was recognized.

Other Events

Impact of Macroeconomic Conditions

Macroeconomic conditions, including uncertainties associated with public health crises such as COVID-19, the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future

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materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Our Financial Results

Our net (loss) income may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606. We expect our expenses will increase substantially over time as we:

•execute clinical studies to generate evidence supporting our current and future product candidates;

•execute our commercialization strategy for our current and future commercial products;

•continue our ongoing and planned development of new products in our pipeline;

•seek to discover and develop additional product candidates;

•hire additional scientific and research and development staff; and

•add additional operational, financial and management information systems and personnel.

Factors Affecting Our Performance

We believe there are several important factors that have impacted, and that we expect will continue to impact, our operating performance and results of operations, including:

•Report volume. We believe that the number of reports we deliver to clinicians is an important indicator of the growth of adoption among the healthcare provider community. Our revenue and costs are affected by the volume of testing and mix of customers. Our performance depends on our ability to retain and broaden adoption with existing prescribing clinicians, as well as attract new clinicians. Our report volume could be negatively impacted by developments related to evolving macroeconomic developments, as discussed above.

•Reimbursement. We believe that expanding reimbursement is an important indicator of the value of our products. Payors require extensive evidence of clinical utility, clinical validity, patient outcomes and health economic benefits in order to provide reimbursement for diagnostic products. Our revenue depends on our ability to demonstrate the value of our products to these payors.

•Gross margin. We believe that our gross margin is an important indicator of the operating performance of our business. Higher gross margins reflect the average selling price of our tests, as well as the operating efficiency of our laboratory operations.

•Expansion of our sales force and marketing programs. We believe the expansion of our direct sales force and marketing organization to educate clinicians and pathologists on the value of our molecular testing products will significantly impact our performance.

•Integrating acquisitions. Revenue growth, operational results and advances to our business strategy depends on our ability to integrate any acquisitions into our existing business and effectively scale their operations. The integration of acquired assets may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.

•New product development. A significant aspect of our business is our investment in research and development activities, including activities related to the development of new products. In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products.

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Components of the Results of Operations

Net Revenues

We generate revenues from the sale of our products. Currently, our revenues are primarily derived from the sale of DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher and DecisionDx-UM. We bill third-party payors and patients for the tests we perform.

Under ASC 606, we recognize revenue at the amount we expect to be entitled, subject to a constraint for variable consideration, in the period in which our tests are delivered to the treating clinicians. We have determined that our contracts contain variable consideration under ASC 606 because the amounts paid by third-party payors may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions. Variable consideration is recognized only to the extent it is probable that a significant reversal of revenue will not occur in future periods when the uncertainties are resolved. Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. For these fully constrained claims, we generally recognize revenue in the period the uncertainty is favorably resolved, if at all. Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period. Our ability to recognize revenue for a test is dependent on the development of reimbursement experience and obtaining coverage decisions. For tests with limited reimbursement experience or no coverage, we recognize revenues on the basis of actual cash collections.

Our ability to increase our revenues will depend on our ability to further penetrate our target markets, and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, including through acquisitions, obtain reimbursement from additional third-party payors and increase our reimbursement rate for tests performed.

Cost of Sales (exclusive of amortization of acquired intangible assets)

The components of our cost of sales are material and service costs associated with testing samples, personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), electronic medical record set up costs, order and delivery systems, shipping charges to transport samples, third-party test fees, and allocated overhead including rent, information technology costs, equipment and facilities depreciation and utilities. Costs associated with testing samples are recorded when the test is processed regardless of whether and when revenues are recognized with respect to that test. As a result, our cost of sales as a percentage of revenues may vary significantly from period to period because we do not recognize all revenues in the period in which the associated costs are incurred. We expect cost of sales in absolute dollars to increase as the number of tests we perform increases. Additionally, we expect cost of sales to increase with the expansion of laboratory capacity and staffing in advance of the anticipated growth of our more recently launched tests and tests acquired through acquisitions. For example, we commenced operations in a new expanded laboratory facility in Pittsburgh, Pennsylvania in the second quarter of 2023.

Gross margin and gross margin percentage are key indicators we use to assess our business. See the table in “Results of Operations—Comparison of the Three Months ended September 30, 2023 and 2022” and “Results of Operations—Comparison of the Nine Months ended September 30, 2023 and 2022“ for details.

Research and Development

Research and development expenses include costs incurred to develop our tests, collect clinical samples and conduct clinical studies to develop and support our products. These costs consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), prototype materials, laboratory supplies, consulting costs, regulatory costs, electronic medical records set up costs, costs associated with setting up and conducting clinical studies and allocated overhead, including rent, information technology, equipment depreciation and utilities. We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.

We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including two important studies that are underway to support our DecisionDx-Melanoma test. The first is the CONNECTION study, which is collecting long-term

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outcomes for up to 10,000 patients who have been tested with DecisionDx-Melanoma. The second is the DECIDE study, which is designed to determine the association of GEP test results with sentinel lymph node biopsy (“SLNB”) surgical decisions in patients eligible for SLNB as well as to track outcomes for patients who did and did not undergo SLNB. In February 2023, we announced the publication of data from the DECIDE study presenting DecisionDx-Melanoma test results influenced 85% of clinicians’ decisions regarding the SLNB surgical procedure. Additionally, use of the tests’ results within current guideline recommendations led to a significant reduction in SLNB procedures performed, demonstrating the clinical value of the test to guide risk-aligned patient care. Also, in 2021, we initiated our IDENTITY Study, a 4,800 patient, prospective, multi-center clinical study to develop, validate and bring to market a pipeline test aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, atopic dermatitis and related inflammatory skin conditions. As of September 30, 2023, we have 57 committed sites and 866 patients enrolled in our IDENTITY study. We announced early discovery data from this study in October 2023 and are targeting launch of this pipeline program by the end of 2025.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses include executive, selling and marketing, legal, finance and accounting, human resources and billing functions. These expenses consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), direct marketing expenses, audit and legal expenses, consulting costs, payor outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities. Other administrative and professional services expenses within SG&A are expected to increase with the scale of our business, but selling and marketing-related expenses are expected to increase significantly, consistent with our growth strategy.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021 and AltheaDx in April 2022.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration is associated with our acquisitions of Cernostics and AltheaDx and the related contingent consideration of up to $50.0 million and $75.0 million, respectively, payable based on the achievement of certain commercial milestones relating to the year ended December 31, 2022 in the case of Cernostics, and the years ending December 31, 2022, 2023 and 2024, in the case of AltheaDx (the “Earnout Payments”). No Earnout Payments were paid relating to the year ended December 31, 2022 in connection with our acquisitions of Cernostics and AltheaDx since the applicable commercial milestones were not achieved. As of September 30, 2023 and December 31, 2022, our contingent consideration liability for AltheaDx was zero.

Interest Income

Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and marketable investment securities, primarily short-term U.S. government obligations.

Interest Expense

Interest expense is primarily attributable to finance leases.

Income Tax Expense (Benefit)

In connection with our acquisition of AltheaDx in April 2022, and taking into consideration the additional deferred tax liabilities resulting from such acquisition, we determined that a portion of our valuation allowance should be reduced, which is reflected in our income tax benefit for the nine months ended September 30, 2022. Our consolidated financial statements do not reflect any federal or state income tax benefits attributable to the pre-tax losses we have incurred, due to the uncertainty of realizing a benefit from those items. As of December 31, 2022, we had federal net operating loss (“NOL”) carryforwards of $207.2 million, of which $106.1 million will begin to expire in 2029 if not utilized to offset federal taxable income, and $101.1 million may be carried forward indefinitely. Also, as of December 31, 2022, we had state NOL carryforwards of $114.0 million, which begin to expire in 2028 if not utilized to offset state taxable income.

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Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):


	Three Months Ended September 30,				Change
	2023		2022
	(unaudited)
Net revenues	$	61,493	$	37,011	$	24,482	66.1	%
Operating expenses and other operating income
Cost of sales (exclusive of amortization of acquired intangible assets)	11,319		8,859		2,460		27.8	%
Research and development	12,923		10,907		2,016		18.5	%
Selling, general and administrative	44,619		36,626		7,993		21.8	%
Amortization of acquired intangible assets	2,272		2,306		(34)		(1.5)	%
Change in fair value of contingent consideration	—		(151)		151		100.0	%

Total operating expenses, net	71,133		58,547		12,586		21.5	%
Operating loss	(9,640)		(21,536)		11,896		55.2	%
Interest income	2,769		1,293		1,476		114.2	%
Interest expense	(2)		(6)		4		66.7	%


Loss before income taxes	(6,873)		(20,249)		13,376		66.1	%
Income tax expense	32		—		32		NA
Net loss	$	(6,905)	$	(20,249)	$	13,344	65.9	%

NA = Not applicable

The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands):


	Three Months Ended September 30,
	2023		2022		Change
	(unaudited)
Cost of sales (exclusive of amortization of acquired intangible assets)	$	1,245	$	975	$	270
Research and development	2,682		1,948		734
Selling, general and administrative	9,116		6,273		2,843
Total stock-based compensation expense	$	13,043	$	9,196	$	3,847

The following table provides a disaggregation of net revenues by type (in thousands):


	Three Months Ended September 30,
	2023		2022		Change
	(unaudited)
Dermatologic(1)	$	51,151	$	33,924	$	17,227
Non-Dermatologic(2)	10,342		3,087		7,255
Total net revenues	$	61,493	$	37,011	$	24,482

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.

(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.

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The following table presents the calculation of gross margin (in thousands, except percentages):


	Three Months Ended September 30,
	2023			2022			Change
	(unaudited)
Net revenues	$	61,493		$	37,011		$	24,482
Less: Cost of sales (exclusive of amortization of acquired intangible assets)	11,319			8,859			2,460
Less: Amortization of acquired intangible assets	2,272			2,306			(34)
Gross margin	$	47,902		$	25,846		$	22,056
Gross margin percentage	77.9		%	69.8		%	8.1		%

Net Revenues

Net revenues for the three months ended September 30, 2023 increased by $24.5 million, or 66.1%, to $61.5 million compared to the three months ended September 30, 2022, due to a $17.2 million increase in revenue from our dermatologic tests and a $7.3 million increase in revenue from our non-dermatologic tests.

The increase from our dermatologic tests was primarily due to higher average selling price per unit for DecisionDx-SCC tests, where we began receiving Medicare reimbursement at a higher rate beginning in July 2023, increases in test report volume of 16.4% for DecisionDx-Melanoma and 72.4% for DecisionDx-SCC, and a slightly higher average selling price for DecisionDx-Melanoma.

The increase in revenue from our non-dermatologic tests of $7.3 million was primarily attributable to the effect of the increase in the Medicare reimbursement rate for our TissueCypher test and higher test report volume during the third quarter of 2023 compared to the third quarter of 2022.

Contributing to the increases in total net revenues was the effect of variations in revenue adjustments related to tests delivered in previous periods, associated with changes in estimated variable consideration, which were $0.9 million of net positive revenue adjustments for the three months ended September 30, 2023, compared to $0.3 million of net negative revenue adjustments for the three months ended September 30, 2022. These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Cost of Sales (exclusive of amortization of acquired intangible assets)

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended September 30, 2023 increased by $2.5 million, or 27.8%, compared to the three months ended September 30, 2022, primarily due to increased expenditures on supplies and higher personnel costs. Supply and service expenses increased largely due to our higher test volumes. The increase in personnel costs consists of higher salaries and wages, stock-based compensation expense and bonuses related to headcount additions as well as existing employees.

Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected growth in volume for our dermatologic, gastrointestinal, mental health and pipeline tests.

Gross Margin

Our gross margin percentage was 77.9% for the three months ended September 30, 2023, compared to 69.8% for the same period in 2022. The increase was primarily due to higher revenues which were attributable to increases in both test report volumes and average selling prices, partially offset by higher supplies expenditures and higher personnel costs, both of which have increased due to our expanded laboratory capacity and higher test report volumes.

Research and Development

Research and development expenses increased by $2.0 million, or 18.5%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. A majority of the increase was attributable to

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higher personnel costs, primarily due to expansions in headcount in support of our growth, including higher stock-based compensation, higher salaries and wages and bonuses. Additionally, 32.1% of the increase is due to higher costs for clinical studies, most of which relates to our IDENTITY study and our inflammatory skin disease pipeline test. Increases in personnel and clinical studies expenses were partially offset by lower advisory costs. We expect to continue to invest in our research and development expenses as we fund ongoing evidence development related to our existing products as well as additional pipeline programs.

Selling, General and Administrative

The following table provides a breakdown of SG&A expenses (in thousands):


	Three Months Ended September 30,
	2023		2022		Change
	(unaudited)
Sales and marketing	$	28,496	$	22,388	$	6,108
General and administrative	16,123		14,238		1,885
Total selling, general and administrative expense	$	44,619	$	36,626	$	7,993

Sales and marketing expenses increased by $6.1 million, or 27.3%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Of the increase, 75.2% is attributable to higher personnel costs, including bonuses, stock-based compensation and salaries. Personnel costs have increased through the expansions of our dermatology-facing and non-dermatology-facing commercial teams and outside sales forces, as described above. In addition, higher personnel costs also reflect salary increases for members of our existing sales force. The remainder of the increase in sales and marketing expenses was primarily associated with travel and conferences, attributable to our expanded commercial operations and headcount. Stock-based compensation expense included in sales and marketing was $4.4 million for the three months ended September 30, 2023, compared to $3.1 million for the three months ended September 30, 2022.

General and administrative expenses increased by $1.9 million, or 13.2%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The increase is primarily attributable to $1.8 million in higher personnel costs and higher information technology-related costs. Increases in personnel costs reflect higher stock-based compensation and bonus expense. Higher personnel costs reflect expanded headcount in our administrative support functions, as well as higher rates of salaries and wages. Increases in personnel costs and information technology-related costs were partially offset by a reduction of professional fees of $0.8 million. Stock-based compensation expense included in general and administrative expense was $4.7 million for the three months ended September 30, 2023, compared to $3.2 million for the three months ended September 30, 2022.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration for the three months ended September 30, 2022 of $0.2 million, a net gain, was primarily related to the remeasurement of the Earnout Payments associated with our acquisition of Cernostics, with no similar activity occurring in the third quarter of 2023.

Interest Income

Interest income increased by $1.5 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily as a result of higher interest rates and our purchases of marketable investment securities beginning in September of 2022.

Stock-Based Compensation Expense

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $13.0 million for the three months ended September 30, 2023, compared to $9.2 million for the three months ended September 30, 2022. The increase is primarily due to our annual grant of equity awards in December 2022. We expect material increases in stock-based compensation expense in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of September 30, 2023, we had 587 employees, compared to 517 as of September 30, 2022. As of September 30, 2023, the total unrecognized stock-based compensation cost related to outstanding awards was $96.4 million, which is expected to be recognized over a weighted-average period of 2.4 years.

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Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):


	Nine Months Ended September 30,				Change
	2023		2022
	(unaudited)
Net revenues	$	153,668	$	98,701	$	54,967	55.7	%
Operating expenses and other operating income
Cost of sales (exclusive of amortization of acquired intangible assets)	32,559		22,489		10,070		44.8	%
Research and development	40,624		33,594		7,030		20.9	%
Selling, general and administrative	136,062		104,577		31,485		30.1	%
Amortization of acquired intangible assets	6,742		6,051		691		11.4	%
Change in fair value of contingent consideration	—		(17,987)		17,987		100.0	%

Total operating expenses, net	215,987		148,724		67,263		45.2	%
Operating loss	(62,319)		(50,023)		(12,296)		(24.6)	%
Interest income	7,504		1,693		5,811		343.2	%
Interest expense	(9)		(13)		4		30.8	%


Loss before income taxes	(54,824)		(48,343)		(6,481)		(13.4)	%
Income tax expense (benefit)	62		(1,823)		1,885		103.4	%
Net loss	$	(54,886)	$	(46,520)	$	(8,366)	(18.0)	%

The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands):


	Nine Months Ended September 30,
	2023		2022		Change
	(unaudited)
Cost of sales (exclusive of amortization of acquired intangible assets)	$	3,719	$	2,725	$	994
Research and development	7,755		5,607		2,148
Selling, general and administrative	27,943		18,066		9,877
Total stock-based compensation expense	$	39,417	$	26,398	$	13,019

The following table provides a disaggregation of net revenues by type (in thousands):


	Nine Months Ended September 30,
	2023		2022		Change
	(unaudited)
Dermatologic(1)	$	130,097	$	90,160	$	39,937
Non-Dermatologic(2)	23,571		8,541		15,030
Total net revenues	$	153,668	$	98,701	$	54,967

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.

(2)Consists of TissueCypher, DecisionDx-UM and IDgenetix.

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The following table presents the calculation of gross margin (in thousands, except percentages):


	Nine Months Ended September 30,
	2023			2022			Change
	(unaudited)
Net revenues	$	153,668		$	98,701		$	54,967
Less: Cost of sales (exclusive of amortization of acquired intangible assets)	32,559			22,489			10,070
Less: Amortization of acquired intangible assets	6,742			6,051			691
Gross margin	$	114,367		$	70,161		$	44,206
Gross margin percentage	74.4		%	71.1		%	3.3		%

Net Revenues

Net revenues for the nine months ended September 30, 2023 increased by $55.0 million, or 55.7%, to $153.7 million compared to the nine months ended September 30, 2022, due to a $39.9 million increase in revenue from our dermatologic tests and a $15.0 million increase in revenue from our non-dermatologic tests.

The increase from our dermatologic tests was primarily due to an increase in DecisionDx-Melanoma test report volume of 20.7%, a higher average selling price for DecisionDx-SCC, where we did not begin receiving Medicare reimbursement until the second quarter of 2022 and then began being reimbursed at a higher rate beginning in July 2023, and an increase in DecisionDx-SCC test report volume of 91.9%.

The increase in revenue from our non-dermatologic tests of $15.0 million was primarily attributable to TissueCypher, due to higher test report volume and a higher average selling price, reflecting a higher 2023 reimbursement rate than our 2022 rates. Our IDgenetix test, which we acquired in connection with our acquisition of AltheaDx in April 2022, also contributed to the increase in non-dermatologic revenues during the period.

The increases in total net revenues were partially offset by the effect of variations in revenue adjustments related to tests delivered in previous periods, associated with changes in estimated variable consideration, which were $3.1 million of net negative revenue adjustments for the nine months ended September 30, 2023, compared to $1.9 million of net negative revenue adjustments for the same period in 2022. These amounts include (i) adjustments for actual collections versus estimated amounts and (ii) cash collections and the related recognition of revenue in current period for tests delivered in prior periods due to the release of the constraint on variable consideration.

Cost of Sales (exclusive of amortization of acquired intangible assets)

Cost of sales (exclusive of amortization of acquired intangible assets) for the nine months ended September 30, 2023 increased by $10.1 million, or 44.8%, compared to the nine months ended September 30, 2022, primarily due to increased expenditures on supplies, higher personnel costs, third-party services and rent. Supply and service expenses have increased due to higher laboratory activity, which is attributable to higher test report volume. The increase in personnel costs, including increases in salaries and wages, stock-based compensation expense and benefits, was primarily due to increased headcount driven by our expanded laboratory capacity. The increased personnel costs also reflect higher salaries and wages for existing employees. Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations. Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period. We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support our expected growth in volume for our dermatologic, gastrointestinal, mental health and pipeline tests.

Gross Margin

Our gross margin percentage was 74.4% for the nine months ended September 30, 2023, compared to 71.1% for the nine months ended September 30, 2022. The increase was primarily due to higher revenues, partially offset by higher supplies expenditures and personnel costs, attributable to increases in laboratory headcount as well as higher rates of pay, and variations in revenue adjustments related to tests delivered in previous periods.

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Research and Development

Research and development expenses increased by $7.0 million, or 20.9%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Higher personnel costs comprise 85.1% of the increase and were primarily due to expansions in headcount in support of our growth, including higher salaries and wages, stock-based compensation expense, bonuses and employee benefits. Additionally, 26.4% is attributable to higher costs for clinical studies, most of which was attributable to our IDENTITY study and our inflammatory skin disease pipeline test. Increases in personnel and clinical studies expenses were partially offset by lower advisory costs. We expect to continue to invest in our research and development expenses as we fund ongoing evidence development related to our existing products as well as additional pipeline programs.

Selling, General and Administrative

The following table provides a breakdown of SG&A expenses (in thousands):


	Nine Months Ended September 30,
	2023		2022		Change
	(unaudited)
Sales and marketing	$	86,693	$	62,190	$	24,503
General and administrative	49,369		42,387		6,982
Total selling, general and administrative expense	$	136,062	$	104,577	$	31,485

Sales and marketing expenses increased by $24.5 million, or 39.4%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Of the increase, 66.0% is attributable to higher personnel costs, including salaries, stock-based compensation, bonuses and employee benefits. Personnel costs have increased through the expansions of our dermatology-facing and non-dermatology-facing commercial teams and outside sales forces. In addition, higher personnel costs also reflect salary increases for members of our existing sales force. The remainder of the increase in sales and marketing expenses was primarily associated with travel, training events, conference fees and other marketing costs, attributable to our expanded commercial operations and headcount. Stock-based compensation expense included in sales and marketing expense was $14.0 million for the nine months ended September 30, 2023, compared to $8.7 million for the nine months ended September 30, 2022.

General and administrative expenses increased by $7.0 million, or 16.5%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase is primarily attributable to $6.2 million in higher personnel costs and $1.5 million in higher information technology-related costs. Increases in personnel costs reflect higher stock-based compensation and salaries. The higher personnel costs reflect expanded headcount in our administrative support functions as well as higher rates of salaries and wages. Increases in personnel costs and information technology-related costs were partially offset by a decrease in professional fees, primarily due to transaction costs incurred in connection with our acquisition of AltheaDx during the nine months ended September 30, 2022. Stock-based compensation expense included in general and administrative expense was $13.9 million for the nine months ended September 30, 2023, compared to $9.3 million for the nine months ended September 30, 2022. The remainder of the increase in general and administrative expenses was primarily associated with general increases across various categories.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets increased by $0.7 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase is primarily associated with amortization of developed technology attributable to the acquisition of AltheaDx in April 2022.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration for the nine months ended September 30, 2022 of $18.0 million, a net gain, was primarily related to the remeasurement of the Earnout Payments associated with our acquisition of Cernostics. There was no such activity during the nine months ended September 30, 2023.

Interest Income

Interest income increased by $5.8 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily as a result of higher interest rates and our purchases of marketable investment securities beginning in the third quarter of 2022.

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Income Tax Expense (Benefit)

We recorded a minimal amount in income tax expense for the nine months ended September 30, 2023. Our income tax benefit was $1.8 million for the nine months ended September 30, 2022, and was primarily attributable to a reduction of $1.8 million in our valuation allowance on net deferred tax assets resulting from our acquisition of AltheaDx in April 2022. Specifically, we took into consideration the additional deferred tax liabilities resulting from the acquisition and determined that a portion of our existing valuation allowance should be reduced.

Stock-Based Compensation Expense

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $39.4 million for the nine months ended September 30, 2023, compared to $26.4 million for the nine months ended September 30, 2022. The increase is primarily due to our annual grant of equity awards in December 2022. We expect material increases in stock-based compensation expense in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees. As of September 30, 2023, we had 587 employees compared to 517 as of September 30, 2022. As of September 30, 2023, the total unrecognized stock-based compensation cost related to outstanding awards was $96.4 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Liquidity and Capital Resources

Sources of Liquidity

Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities and cash generated from the sale of our products. All of our marketable investment securities are considered investment grade, are readily available for use in current operations and have contractual maturities of one year or less. As of September 30, 2023 and December 31, 2022, we had marketable investment securities of $138.5 million and $135.7 million, respectively. As of September 30, 2023 and December 31, 2022, we had cash and cash equivalents of $91.2 million and $122.9 million, respectively.

Since becoming a public company, our liquidity has been primarily derived from the revenue generated from the sale of our products, proceeds from our initial public offering of common stock on July 29, 2019 (the “IPO”), follow-on public offerings of common stock in June 2020 and December 2020 and bank debt, which has since been repaid in full. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations through 2025. However, we have based these estimates on assumptions that may prove to be wrong, and could result in us depleting our capital resources sooner than expected.

As mentioned above, we expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including the clinical studies noted above in “Components of the Results of Operations—Research and Development.”

Material Cash Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, clinical research and development services, laboratory operations, equipment and related supplies, legal and other regulatory expenses, general administrative costs and, from time to time, expansion of our laboratory and office facilities in support of our growth. We anticipate that a substantial portion of our cash requirements in the foreseeable future will relate to the further commercialization of our currently marketed products, the development of our future product candidates in our pipeline and the potential commercialization of these pipeline products, should their development be successful.

In April 2022, we acquired AltheaDx, for $30.5 million in cash and $17.1 million in shares of our common stock. We agreed to pay contingent consideration of up $75.0 million, 50% in cash and 50% in common stock, based on the achievement of certain commercial milestones relating to the years ending December 31, 2022, 2023 and 2024. The portion associated with the commercial milestones for the year ended December 31, 2022 was not paid since the applicable commercial milestones were not met. This portion represented $35.0 million of the $75.0 million total potential payment obligation, exclusive of a potential catch-up payment in 2023 of $17.5 million which will become payable if all 2023 commercial milestones are fully met. Therefore, as of September 30, 2023, we have a potential payment obligation of up to $57.5 million with respect to the remaining commercial milestones for 2023 and 2024. In each case, the number of shares of our common stock that may be issued in connection with the commercial milestone payments is subject to limitations. Our actual liability with respect to these commercial milestone payments from our acquisition will depend, in part, on our ability to successfully integrate IDgenetix (acquired from

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AltheaDx) into our suite of commercial product offerings and the timing thereof. See Note 6 of the unaudited condensed consolidated financial statements for additional information on the acquisition of AltheaDx.

On July 10, 2023, following approval by our board of directors, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building which may be used as our future corporate headquarters. Under the agreement, we had the option to terminate the contract within 90 days, for any reason. On October 4, 2023, we amended the definitive agreement to extend the option period by an additional 30 days. The option period is being used to complete initial suitability diligence. Closing, if it should occur, is expected in late 2023.

Since our inception, we have generally incurred significant losses and negative cash flows. For the year ended December 31, 2022 we had a net loss of $67.1 million and an accumulated deficit of $160.9 million as of December 31, 2022. For the nine months ended September 30, 2023, we had a net loss of $54.9 million and an accumulated deficit of $215.8 million as of September 30, 2023. Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful commercialization of our currently marketed products and the products we plan to launch in the future as well as our spending on research and development activities. We expect to incur additional expenses and losses in the future as we invest in the commercialization of our existing products and the development and commercialization of our current pipeline products and future product candidates. Further, we expect that any acquisitions of businesses, products, assets or technologies will also increase our expenses. We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from the sale of our commercial products will be sufficient to fund our operations for at least the next 12 months and for the foreseeable future. We believe we will meet longer-term expected cash requirements and obligations through a combination of existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products and issuances of equity securities or debt offerings. However, we have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. There are numerous risks and uncertainties associated with developing genomic tests, including, among others, the uncertainty of:

•successful commencement and completion of clinical study protocols;

•successful identification and acquisition of tissue samples;

•the development and validation of genomic classifiers; and

•acceptance of new genomic tests by clinicians, patients and third-party payors.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate our exact working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of, many factors, including those listed above as well as those listed in Part II, Item 1A., “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

We do not currently have any committed external source of funds. In the event additional funding is required, we expect that we would use a combination of equity and debt financings, which may not be available to us when needed, on terms that we deem to be favorable or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. Any disruptions to, or volatility in, the credit and financial markets or any deterioration in overall economic conditions may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we are unable to raise additional funds through debt or equity financing or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product discovery and development activities or future commercialization efforts.

Leases

We have entered into various operating and finance leases, which are primarily associated with our laboratory facilities and office space.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of September 30, 2023 totaled approximately $23.2 million, of which $0.6 million is payable through the remainder of 2023 and $22.6 million is payable through the end of 2033. The leases expire on various dates through 2033 and provide certain options to renew for additional periods. On April 18, 2023, we amended an existing lease agreement

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to lease additional laboratory space in Phoenix, Arizona. Upon taking possession of the additional laboratory space, we expect our undiscounted future minimum payment obligations to increase by approximately $1.7 million.

We expect our lease obligations may increase in the future as we expand our facilities, operations and headcount in support of the anticipated growth in our portfolio of commercial products and pipeline tests.

Cash Flows

The following table summarizes our sources and uses of cash and cash equivalents for each of the periods presented (in thousands):


	Nine Months Ended September 30,
		2023		2022
		(unaudited)
Net cash used in operating activities		$	(24,213)	$	(35,655)
Net cash used in investing activities		(8,511)		(162,063)
Net cash provided by financing activities		999		2,265
Net change in cash and cash equivalents		(31,725)		(195,453)
Cash and cash equivalents, beginning of period		122,948		329,633
Cash and cash equivalents, end of period		$	91,223	$	134,180

Operating Activities

Net cash used in operating activities was $24.2 million for the nine months ended September 30, 2023, and was primarily attributable to the net loss of $54.9 million, increases in accounts receivable of $13.8 million, increases in accretion of discounts on marketable investment securities of $3.9 million, decreases in accrued compensation of $2.0 million and increases in inventory of $1.8 million, partially offset by non-cash stock-based compensation expense of $39.4 million, depreciation and amortization of $9.1 million, a change in accounts payable of $2.7 million and a change in other accrued and current liabilities of $1.4 million.

Net cash used in operating activities was $35.7 million for the nine months ended September 30, 2022, and was primarily attributable to the net loss of $46.5 million, the change in fair value of contingent consideration of $18.0 million, increases in accounts receivable of $5.7 million and deferred income taxes of $1.8 million, partially offset by non-cash stock-based compensation expense of $26.4 million, depreciation and amortization of $7.7 million and the increase in accrued compensation of $3.7 million.

The $11.4 million decrease in net cash used in operating activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is primarily due to increases in collections from customers attributable to higher net revenues partially offset by increases in operating expenditures. In part, the cash used during the nine months ended September 30, 2023 reflects the payment of annual cash bonuses to our employees as well as certain health care benefit payments totaling $17.7 million, that are not expected to recur during the remainder of 2023. In comparison, we paid $11.6 million during the same period in 2022 towards annual cash bonuses and certain health care benefits.

Investing Activities

Net cash used in investing activities was $8.5 million for the nine months ended September 30, 2023 and consisted primarily of purchases of marketable investment securities of $136.7 million and purchases of property and equipment of $9.8 million, partially offset by the maturity of marketable investment securities of $138.0 million. Net cash used in investing activities was $162.1 million for the nine months ended September 30, 2022 and consisted primarily of purchases of marketable investment securities of $131.8 million, the cash portion of the AltheaDx purchase consideration of $27.0 million (net of cash and cash equivalents acquired) and purchases of property and equipment of $3.8 million.

The $6.0 million increase in cash used for the purchase of property and equipment for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily due to the build out and completion of our new laboratory and office facilities located in Pittsburgh, Pennsylvania. Fixed asset purchases for this build out included those made for leasehold improvements, furniture and fixtures, new laboratory equipment and information technology infrastructure.

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Financing Activities

Net cash provided by financing activities was $1.0 million for the nine months ended September 30, 2023, and consisted primarily of $2.0 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”), $0.2 million of proceeds from exercise of common stock options, partially offset by the $1.1 million payment of employee taxes attributable to the vesting of Restricted Stock Units (“RSUs”).

Net cash provided by financing activities was $2.3 million for the nine months ended September 30, 2022, and primarily consisted of $1.8 million in proceeds from contributions to the ESPP and $0.7 million in proceeds from the exercise of stock options.

Inflation

In 2021, the rate of inflation in the United States began to increase but has continued to subside since the second half of 2022. We do not believe that inflation has had a material impact on our financial results during the three and nine months ended September 30, 2023. We are unable to predict if the rate of inflation will increase in future periods.

Critical Accounting Estimates

During the nine months ended September 30, 2023, except as noted below, there were no significant changes to the information discussed under “Critical Accounting Estimates” included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2022.

The following is an updated discussion of our critical accounting estimates related to goodwill impairment testing and requisite service period for stock-based compensation. This information should be read in conjunction with our other information on critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Goodwill—Impairment Testing

On June 2, 2023, a MAC finalized an LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. On June 5, 2023, our stock price decreased significantly and did not recover before June 30, 2023. In response to this trigger, we tested goodwill for impairment at June 30, 2023. We elected to bypass the optional qualitative assessment and proceeded directly to the quantitative assessment. In conducting our interim test, we concluded that our business consists of a single reporting unit. To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Our impairment test indicated that the fair value of our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated. In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective.

Stock-Based Compensation—Requisite Service Period

For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For options and RSUs, the requisite service period is generally the awards’ vesting period (typically four years). Performance-based restricted stock units (“PSUs”) vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. In these cases, the requisite service period takes into consideration the employee’s retirement eligibility, and is reassessed at each reporting date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be involved in legal proceedings arising in the ordinary course of business. We believe there is no pending or threatened litigation that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the nine months ended September 30, 2023 other than the updates to the risk factors or new risk factors set forth below. New risk factors that were not included in our Annual Report on Form 10-K for the year ended December 31, 2022 have been marked with an asterisk (*).

We may disclose changes to risk factors or additional risk factors from time to time in our future filings with the SEC.

Risks Related to Our Business

The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations, financial condition, results of operations or cash flows.*

The recent closures of Silicon Valley Bank, Signature Bank and First Republic Bank have resulted in broader financial institution liquidity risk and concerns. Although we have not experienced an adverse impact to our liquidity or to our current and projected business operations, financial condition, results of operations or cash flows, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages that could materially harm our business and financial condition. In this regard, we continue to maintain our cash deposits with banking institutions, often in balances that exceed the current Federal Deposit Insurance Corporation insurance limits, and the failure of any bank in which we deposit our funds could reduce the amount of cash we have available for our operations or delay our ability to access such funds or collect receivables. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions fail or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds may be threatened and our ability to raise additional capital could be substantially impaired, any of which could materially and adversely affect our business and financial condition. In any event, if the financial market disruptions and economic slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could negatively affect our financial condition and our ability to pursue our business strategy.

Impairment of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition.*

Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired, and intangible assets are measured at fair value upon the acquisition of a business for purposes of such calculations. As of December 31, 2022, our goodwill and other intangible assets balances were $10.7 million and $115.7 million, respectively. Goodwill is evaluated for impairment annually, or more frequently if conditions warrant, by comparing the carrying value of a reporting unit to its estimated fair value. Intangible assets with finite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Declines in operating results, divestitures, sustained market declines and other factors could result in an impairment of goodwill or other intangible assets and, in turn, a charge to net income or loss. Any future charges could have a material adverse effect on our results of operations or financial condition.

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our interim test, we concluded that our business consists of a single reporting unit. To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Our impairment test indicated that the fair value of our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated. In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective.

Factors that could result in a future impairment of goodwill include declines in the price of our common stock, increased competition, changes in macroeconomic developments, unfavorable government or regulatory developments and changes in coverage or reimbursement conditions.

Risks Related to Reimbursement and Government Regulation

We generally have limited reimbursement coverage for our products, and if third-party payors, including government and commercial payors, do not provide sufficient coverage of, or adequate reimbursement for, our products, our commercial success, including revenue, will be negatively affected.

Our revenue depends on achieving broad coverage and adequate reimbursement for our products from third-party payors, including both government and commercial third-party payors. If third-party payors do not provide coverage of, or do not provide adequate reimbursement for, a substantial portion of the list price of our products, we may need to seek additional payment from the patient beyond any co-payments and deductibles, which may adversely affect demand for our products. Coverage determinations by a third-party payor may depend on a number of factors, including, but not limited to, a third-party payor’s determination of whether our products are appropriate, medically necessary or cost-effective. If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our products, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenues and our ability to succeed. To the extent that more competitors enter our markets, the availability of coverage and the reimbursement rate for our products may decrease as we encounter pricing pressure from these competitors.

Since each third-party payor makes its own decision as to whether to establish a policy to cover our products, enter into a contract with us and set the amount it will reimburse for a product, these negotiations are a time-consuming and costly process, and they do not guarantee that the third-party payor will provide coverage or adequate reimbursement for our products. In addition, the determinations by a third-party payor whether to cover our products and the amount it will reimburse for them are often made on an indication-by-indication basis.

In cases where there is no coverage policy or we do not have a contracted rate for reimbursement as a participating provider, the patient is typically responsible for a greater share of the cost of the product, which may result in further delay of our revenue, increase our collection costs or decrease the likelihood of collection.

Our claims for reimbursement from third-party payors may be denied upon submission, and we may need to take additional steps to receive payment, such as appealing the denials. Such appeals and other processes are time-consuming and expensive and may not result in payment. Third-party payors may perform audits of historically paid claims and attempt to recoup funds years after the funds were initially distributed if the third-party payors believe the funds were paid in error or determine that our products were medically unnecessary. If a third-party payor audits our claims and issues a negative audit finding, and we are not able to overturn the audit findings through appeal, the recoupment may result in a material adverse effect on our revenue. Additionally, in some cases commercial third-party payors for whom we are not a participating provider may elect at any time to review claims previously paid and determine the amount they paid was too much. In these situations, the third-party payor will typically notify us of their decision and then offset whatever amount they determine they overpaid against amounts they owe us on current claims. We cannot predict when, or how often, a third-party payor might engage in these reviews and we may not be able to dispute these retroactive adjustments.

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Variable consideration is recognized only to the extent it is probable that a significant reversal of revenue will not occur in future periods when the uncertainties are resolved.

Variable consideration is evaluated each reporting period and adjustments are recorded as increases or decreases in revenues. Variable consideration for Medicare claims that are not covered by Medicare, including those claims undergoing appeal, is deemed to be fully constrained due to factors outside our influence (e.g., judgment or actions of third parties) and the uncertainty of the amount to be received is not expected to be resolved for a long period of time. For these fully constrained claims, we generally recognize revenue in the period the uncertainties are resolved, if favorable. Due to potential future changes in Medicare coverage policies and appeal cycles, insurance coverage policies, contractual rates and other trends in the reimbursement of our tests, our revenues may fluctuate significantly from period to period.

Although we are an in-network participating provider with some commercial third-party payors, including several Blue Cross Blue Shield plans, and certain large, national commercial third-party payors, including Aetna, other commercial third-party payors have issued non-coverage policies that currently categorize our tests as experimental or investigational. If we are not successful in obtaining coverage from third-party payors, in reversing existing non-coverage policies, or if other third-party payors issue similar non-coverage policies, this could have a material adverse effect on our business and operations.

The process to obtain Medicare coverage is lengthy, time-consuming, has changed over time, may change in the future and requires significant dedication of resources, and as we develop or acquire new products, we may be unsuccessful in receiving Medicare coverage for those products or in maintaining our current Medicare coverage. On a periodic basis, CMS requests bids for its MAC services, and MAC jurisdictions have changed in the past. A change in our MAC, or future changes in the MolDX program, the elimination of the program, or a change in the administrator of that program, may affect our ability to maintain Medicare coverage and reimbursement for products for which we have coverage, obtain Medicare coverage for products for which we do not yet have coverage, or obtain Medicare coverage for any products we may launch in the future, or delay payments for our tests. Additionally, MACs that currently provide coverage for our products may periodically reevaluate their coverage decisions and decide to withdraw coverage based on a number of factors that we may not be able to predict or control. Accordingly, current Medicare coverage of our tests or a history of coverage by Medicare is no guarantee of future Medicare coverage. We have received positive coverage decisions and receive Medicare reimbursement for our DecisionDx-Melanoma, DecisionDx-UM, MyPath Melanoma tests, and IDgenetix. Our DecisionDx-SCC and TissueCypher tests receive Medicare reimbursement as well. If coverage for one or more of our products is withdrawn, our business could be adversely impacted.

On June 2, 2023, Novitas finalized the oncology biomarker LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. However, on July 6, 2023, Novitas suspended the final version of the LCD and on July 27, 2023, Novitas posted a nearly identical draft LCD that also recommends non-coverage for our DecisionDx-SCC test. The comment period for the proposed LCD ended on September 9, 2023. On June 8, 2023, both Palmetto and Noridian posted their draft LCD recommending no coverage for DecisionDx-SCC. The comment period for the draft LCDs ended on July 22, 2023. We cannot predict whether these LCDs will be finalized as proposed or what the timing of any final LCD might be.

Under Medicare, payment for products like ours is generally made under the CLFS with payment amounts assigned to specific procedure billing codes. Medicare reimbursement rates for our tests are subject to change and may decrease from those currently in effect. For example, in February 2023, MolDX notified us that IDgenetix should shift billing to a different generic gene sequencing CPT code and continue using the IDgenetix Z-Code beginning in March 2023. As a result of this change, the Medicare reimbursement rate for the IDgenetix multi-gene panel decreased from approximately $1,500 to $917 per test. The new PLA code becomes effective October 1, 2023 and is currently undergoing the 2024 CLFS pricing process. In September 2023, CMS posted a preliminary CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test. The final 2024 CLFS rates will be posted in the fourth quarter of 2023.

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014 (“PAMA”) which included substantial changes to the way in which clinical laboratory services are paid under Medicare. Under PAMA, certain laboratories are required to report to CMS commercial third-party payor payment rates and volumes for each test they perform. CMS uses this data to calculate a weighted median payment rate for each test, which will be used to establish revised Medicare CLFS reimbursement rates for the test. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties. We bill Medicare for our products, and therefore we are subject to reporting requirements under PAMA.

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If we are unable to obtain and maintain adequate reimbursement rates from commercial third-party payors, this may adversely affect our Medicare rate. It is unclear what impact new pricing structures, such as those adopted under PAMA, may have on our business, financial condition, results of operations or cash flows.

The U.S. federal government continues to show significant interest in pursuing healthcare reform and reducing healthcare costs. Similarly, commercial third-party payors may seek to reduce costs by limiting coverage or reducing reimbursement for our products. Any government-adopted reform measures or changes to commercial third-party payor coverage and reimbursement policies could cause significant pressure on the pricing of, and reimbursement for, healthcare products and services, including our products, which could decrease demand for our products, and adversely affect our sales and revenue.

In addition, some third-party payors have implemented, or are in the process of implementing, laboratory benefit management programs, often using third-party benefit managers to manage these programs. The stated goals of these programs are to help improve the quality of outpatient laboratory services, support evidence-based guidelines for patient care and lower costs. The impact on laboratories, such as ours, of active laboratory benefit management by third parties is unclear, and we expect that it could have a negative impact on our revenue in the short term. It is possible that third-party payors will resist reimbursement for the products that we offer, in favor of less expensive products, may require pre-approval for our products or may impose additional pricing pressure on and substantial administrative burden for reimbursement for our products.

We expect to continue to focus substantial resources on increasing coverage and reimbursement for our current products and any future products we may develop. We believe it may take several years to achieve broad coverage and adequate contracted reimbursement with a majority of third-party payors for our products.

However, we cannot predict whether, under what circumstances, or at what payment levels third-party payors will cover and reimburse our products. If we fail to establish and maintain broad adoption of, and coverage and reimbursement for, our products, our ability to generate revenue could be harmed and our future prospects and our business could suffer.

Our products are currently marketed as laboratory developed tests, and any changes in regulations or the U.S. Food and Drug Administration’s (“FDA”) enforcement discretion for laboratory developed tests, or violations of regulations by us, could adversely affect our business, prospects, results of operations or financial condition.

The diagnostics industry is highly regulated, and we cannot assure you that the regulatory environment in which we operate will not change significantly and adversely in the future. In many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Although the FDA has statutory authority to assure that medical devices are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to in vitro diagnostics that are designed, manufactured and used within a single laboratory. These tests are referred to as Laboratory Developed Tests (“LDTs”). We currently market our products as LDTs.

The FDA has adopted a policy of enforcement discretion with respect to LDTs whereby the FDA does not actively require premarket review of LDTs or otherwise impose its requirements applicable to other medical devices on LDTs. On October 3, 2023, the FDA issued proposed regulations under which it would phase out its enforcement discretion approach to LDTs over a period of four years. Although the proposed regulation is subject to a period of notice and comment, if finalized as proposed, we would be required to obtain premarket approval (“PMA”) for certain of our tests by October 1, 2027. We would also be subject to device registration and listing requirements, medical device reporting requirements and the requirements of the FDA’s Quality System Regulation. We may be required to conduct clinical trials prior to continuing to sell our existing products or launching any other products we may develop. This may increase the cost of conducting, or otherwise harm, our business.

Even if the FDA does not modify its policy of enforcement discretion, the FDA may disagree that we are marketing our LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements. While we believe that we are currently in material compliance with applicable laws and regulations as historically enforced by the FDA, we cannot assure you that the FDA will agree with our determination. A determination that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations or financial condition.

If the FDA begins to actively regulate our diagnostic products, we may be required to obtain premarket clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act (the “FDCA”) or a PMA. The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it

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can take significantly longer and clearance is never guaranteed. The process for submitting and obtaining FDA approval of a PMA is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer, and approval is not guaranteed. PMA approval typically requires extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process. Despite the time, effort and expense expended, there can be no assurance that a particular device ultimately will be cleared or approved by the FDA through either the 510(k) clearance process or the PMA process on a timely basis, or at all. Moreover, there can be no assurance that any cleared or approved labeling claims will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products. If premarket review is required for some or all of our products, the FDA may require that we stop selling our products pending clearance or approval, which would negatively impact our business. Even if our products are allowed to remain on the market prior to clearance or approval, demand or reimbursement for our products may decline if there is uncertainty about our products, if we are required to label our products as investigational by the FDA, or if the FDA limits the labeling claims we are permitted to make for our products. As a result, we could experience significantly increased development costs and a delay in generating additional revenue from our products, or from other pipeline products.

If the FDA imposes significant changes to the regulation of LDTs it could reduce our revenues or increase our costs and adversely affect our business, prospects, results of operations or financial condition.

The FDA may modify its enforcement discretion policy with respect to LDTs in a risk-based manner, and we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.

If the FDA changes or ends its policy of enforcement discretion with respect to LDTs, whether by finalization of regulations initial proposed on October 3, 2023, or otherwise, and our products become subject to the FDA’s requirements for premarket review of medical devices, we may be required to cease commercial sales of our products and conduct clinical trials prior to making submissions to the FDA to obtain premarket clearance or approval. If we are required to conduct such clinical trials, delays in the commencement or completion of clinical trials could significantly increase our product development costs and delay commercialization of any currently marketed testing that we may be required to cease selling or the commercialization of any future tests that we may develop. Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of regulatory clearance or approval. The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial.

The FDA requires medical device manufacturers to comply with, among other things, current good manufacturing practices for medical devices, known as the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process; the medical device reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; labeling regulations, including the FDA’s general prohibition against promoting products for unapproved or ‘‘off-label’’ uses; and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA caused by the device which may present a risk to health.

Even if we were able to obtain FDA clearance or approval for one or more of our products, if required, a diagnostic test may be subject to limitations on the indications for which it may be marketed or to other regulatory conditions. In addition, such clearance or approval may contain requirements for costly post-market testing and surveillance to monitor the safety or efficacy of the test.

In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approvals. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing authorization that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

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Risks Related to Employee Matters and Managing Growth and Other Risks Related to Our Business

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

We have experienced significant revenue growth in a short period of time. We may not achieve similar growth rates in future periods. You should not rely on our operating results for any prior periods as an indication of our future operating performance. To effectively manage our anticipated future growth, we must continue to maintain and enhance our financial, accounting, human resources, laboratory operations, customer support and sales administration systems, processes and controls. Failure to effectively manage our anticipated growth could lead us to over-invest or under-invest in development, operational and administrative infrastructure, result in weaknesses in our infrastructure, systems, or internal controls, give rise to operational mistakes, losses, loss of customers, productivity or business opportunities, and result in loss of employees and reduced productivity of remaining employees.

We also anticipate further growth in our business operations. For example, since May 2021, we have completed the acquisitions of Myriad MyPath Laboratory, Cernostics and AltheaDx, each of which we expect will contribute to our future growth. These acquisitions and other future growth could create strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service and sales organization management. We expect to continue increasing our headcount and hire more specialized personnel in the future as we grow our business and expand our product offerings. We will need to continue to hire, train and manage additional qualified scientists, laboratory personnel, client and account services personnel, and sales and marketing staff and improve and maintain our technology to effectively manage our growth. If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees or if we are not successful in retaining our existing employees, our business may be harmed.

In addition, our anticipated growth could require significant capital expenditures and might divert financial resources from other projects such as the development of new diagnostic tests and services. As we commercialize additional tests, we may need to incorporate new equipment, implement new technology systems, automate or otherwise improve the efficiency of our operational processes or hire new personnel with different qualifications. Failure to manage this growth or transition could result in turnaround time delays, higher costs, declining quality, deteriorating customer service, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products and could damage our reputation and the prospects for our business.

In July 2023, we elected to temporarily pause accepting additional TissueCypher orders to focus on scaling efforts and to work through a significant backlog of orders. In September 2023, we resumed accepting new orders for testing in a phased approach consistent with continued scaling activity aimed at accommodating current demand and future growth. As of mid-October 2023, we have completed the pre-existing backlog orders. However, there can be no assurance that our efforts will be successful, which could damage our reputation and the prospects for our business.

We may not be able to maintain the quality or expected turnaround times of our products, or satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. The time and resources required to implement these new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations. If our management is unable to effectively manage our anticipated growth, our expenses may increase more than expected, our revenue could decline or grow more slowly than expected and we may be unable to implement our business strategy. The quality of our products and services may suffer, which could negatively affect our reputation and harm our ability to retain and attract customers.

We have engaged in, and may continue to engage in, strategic transactions, such as the acquisition of businesses, assets, products or technologies, which could be disruptive to our existing operations, divert the attention of our management team and adversely impact our liquidity, cash flows, financial condition and results of operations.*

From time to time, we may consider strategic opportunities and engage in transactions such as acquisitions of businesses, assets, products or technologies, as well as technology licenses or investments in complementary businesses. For example, in May 2021, December 2021 and April 2022, we completed the acquisitions of the Myriad MyPath Laboratory, Cernostics and AltheaDx, respectively. These and any other strategic acquisition transactions may entail numerous operational and financial risks, including:

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•delays, difficulties and higher than expected costs associated with integration activities, such as those involving operational processes, regulatory and licensure compliance, personnel and information technology systems;

•difficulties in scaling and growing the operations of acquired businesses in a cost-efficient manner;

•disruption of our existing business operations and diversion of management’s time, focus and attention;

•decreases in our liquidity and operating cash flows, increases in our overall operating costs, substantial amounts of amortization expense, increased capital expenditure requirements and non-recurring charges, including possible impairments of acquired assets and losses on the remeasurement of contingent consideration;

•incurrence of substantial debt or dilutive issuances of equity securities, the assumption of additional liabilities, exposure to unknown liabilities and being subject to disputes with former owners of acquired businesses;

•inability to retain key personnel of any acquired businesses; and

•failure to realize any of the anticipated revenues, synergies, efficiencies or other benefits of a transaction within our estimated time frame or at all.

With regard to our acquisitions of the Myriad MyPath Laboratory, Cernostics and AltheaDx, actual results may differ materially from our plans and expectations. For example, there can be no assurances regarding our ability to successfully scale and integrate the MyPath Melanoma, TissueCypher and IDgenetix tests into our commercial offerings and the ability of the combined strengths of Castle, the Myriad MyPath Laboratory, Cernostics or AltheaDx to position us for continued growth and success as a leader in the diagnostics space. Further, there are inherent execution and business risks associated with managing the integration and growth objectives of more than one acquisition at the same time and such circumstances may have the effect of heightening the operational and financial risks related to acquisitions noted above and the other risks described in this “Risk Factors” section.

We are unable to predict the timing, size or nature of any future transactions, whether they will be completed or financed on favorable terms, if at all, or what the impact of those transactions might be on our financial results, including if such transactions are not effectively and profitably integrated into our business. Our failure to successfully complete the integration of any business that we acquire could have an adverse effect on our prospects, business activities, cash flows, financial condition, results of operations and stock price. Additionally, our ability to successfully integrate, manage and derive financial and other benefits from any acquired business, asset, product or technology cannot be assured given our limited historical experience with such transactions.

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile or may decline regardless of our operating performance, and you may lose all or part of your investment.

The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•our operating performance and the performance of other similar companies;

•our success in marketing and selling our products;

•our ability to achieve guideline inclusion for our products;

•reimbursement determinations by third-party payors, including MACs, and reimbursement rates for our products;

•changes in our projected operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock;

•regulatory or legal developments in the United States and other countries;

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•the level of expenses related to product development and clinical studies for our products;

•our ability to achieve product development goals in the timeframes we announce;

•announcements of clinical study results, regulatory developments, acquisitions, strategic alliances or significant agreements by us or by our competitors;

•the success or failure of our efforts to acquire, license or develop additional tests;

•recruitment or departure of key personnel;

•general economic conditions and market conditions specific to our industry;

•interest rates and the rate of inflation;

•the extent and duration of the impacts on our operations of general political and economic conditions, including public health crises such as COVID-19, the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, recessions or market corrections, the duration and effects of elevated inflation, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments;

•trading activity by a limited number of stockholders who together beneficially own a significant percentage of our outstanding common stock;

•general investor interest in emerging growth stocks;

•the size of our market float; and

•any other factors discussed in this Quarterly Report on Form 10-Q.

For example, on June 5, 2023, our stock price decreased 49% after Novitas published a final LCD that would have impacted Medicare coverage for our DecisionDx-SCC test. In addition, the stock market in general, and diagnostic and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our securities, regardless of our actual operating performance. In the past, stockholders of other companies have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Use of Proceeds from IPO of Common Stock

On July 29, 2019, we completed our IPO, pursuant to which we issued and sold 4,600,000 shares of our common stock, including 600,000 shares associated with the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $16.00 per share.

The offer and sale of all of the shares of our common stock in the IPO were registered under the Securities Act pursuant to our Registration Statements on Form S-1, as amended (File Nos. 333-232369 and 333-232796), which were declared or became effective on July 24, 2019.

There has been no material change in our planned use of the net proceeds from the IPO as described in the final prospectus filed with the SEC on July 26, 2019 relating to our Registration Statements on Form S-1 (File Nos. 333-232369 and 333-232796).

Since the effective date of our registration statement through September 30, 2023, we have not used any of the net proceeds from the IPO. Pending such uses, we have invested, and plan to continue to invest, the balance of the net proceeds from the IPO in cash and cash equivalent securities or highly liquid investment securities.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.


Exhibit Number						Description of document
2.1#+						Agreement and Plan of Merger, dated October 18, 2021, by and among the Registrant, Space Merger Sub, Inc., Cernostics, Inc., and Shareholder Representative Services LLC, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, as amended, originally filed with the SEC on December 6, 2021.
2.2#+						Agreement and Plan of Merger, dated April 4, 2022, by and among the Registrant, AltheaDx, Inc., Acorn Merger Sub, Inc. and Fortis Advisors LLC, incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2022.
3.1						Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019.
3.2						Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019.
4.1						Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019.
4.2						Sixth Amended and Restated Investors’ Rights Agreement, dated July 12, 2019, by and among the Registrant and certain of its stockholders, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019.
10.1#*						Purchase Sale Agreement of Land, dated July 10, 2023, by and between the Registrant and Hal B. Boone.
10.2*						Sixth Amendment to Standard Office Lease, dated August 2 , 2023, by and between the Registrant and Alturas Siete I, LLC.
10.3*						First Amendme nt to Purchase Sale Agreement of Land, dated October 4 , 2023, by and between the Registrant and Hal B. Boone.
31.1*						Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
31.2*						Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
32.1**						Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act, and 18 U.S.C. Section 1350.
101.INS*						Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase.
104*						Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

_____________________________________

* Filed herewith

** Furnished herewith.

# Certain schedules or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished.

+ Pursuant to Item 601(b)(2) of Regulation S-K, certain portions of this exhibit have been omitted (indicated by “[***]”) because the Company has determined that the information is not material and is the type that the Company treats as private or confidential.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CASTLE BIOSCIENCES, INC.

Date:

November 2, 2023

By:

/s/ Derek J. Maetzold

Derek J. Maetzold
President and Chief Executive Officer
(Principal Executive Officer)

Date:

November 2, 2023

By:

/s/ Frank Stokes

Frank Stokes
Chief Financial Officer
(Principal Financial and Accounting Officer)

Exhibit 10.1

COMMERCIAL CONTRACT - UNIMPROVED PROPERTY

USE OF THIS FORM BY PERSONS WHO ARE NOT MEMBERS OF THE TEXAS ASSOCIATION OF REALTORS®, INC. IS NOT AUTHORIZED.

©Texas Association of REALTORS®, Inc. 2022

1.PARTIES: Seller agrees to sell and convey to Buyer the Property described in Paragraph 2. Buyer agrees to buy the Property from Seller for the sales price stated in Paragraph 3. The parties to this contract are:

Seller:

Hal B Boone

Address:

P.O. Box 348, Friendswood, TX 77546

Phone:

E-mail:

Mobile:

Fax or Other:

Buyer:

Castle BIosciences, Inc.

Address:

505 S. Friendswood Drive 4th Floor, Friendswood, TX 77546

Phone:

E-mail:

Mobile:

Fax or Other:

2.PROPERTY:

A.“Property” means that real property situated in Galveston County, Texas at

Narnia Way & FM 528 Friendswood, Texas 77546

(address) and that is legally described on the attached Exhibit A or as follows:

ABST 128 A JACKSON SUR TR 4, ACRES approximately 26 Acres, more or less

Seller and Buyer have agreed that Buyer will purchase approximately 24 acres of the above referenced property.

B.Seller will sell and convey the Property together with:

(1)all rights, privileges, and appurtenances pertaining to the Property, including Seller’s right, title, and interest in any minerals, utilities, adjacent streets, alleys, strips, gores, and rights-of-way;

(2)Seller’s interest in all leases, rents, and security deposits for all or part of the Property; and

(3)Seller’s interest in all licenses and permits related to the Property.

(Describe any exceptions, reservations, or restrictions in Paragraph 12 or an addendum.)

(If mineral rights are to be reserved an appropriate addendum should be attached.)

3.SALES PRICE:

A.At or before closing, Buyer will pay the following sales price for the Property:

(1)Cash portion payable by Buyer at closing . . . . . . . . . . . . . . . . . . . . . . . $ 7,579,440.00

(2)Sum of all financing described in Paragraph 4 . . . . . . . . . . . . . . . . . . . . $

(3)Sales price (sum of 3A(1) and 3A(2)) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,579,440.00

(TXR-1802) 07-08-22 Initialed for identification by Seller /s/ HB , and Buyer /s/ DM , Page 1 of 15

This form is for the exclusive use of the subscriber named below. Any use by others is strictly prohibited. Use of this form does not indicate membership in Texas REALTORS®.

Company name goes here, 1360 Post Oak Blv., Suite 1900 HOUSTON TX 77056 Phone: (713)985-4626 Fax: Castle Biosciences

RANDY WILHELM Produced with Lone Wolf Transactions (zipForm Edition) 717 N Harwood St, Suite 2200, Dallas, TX 75201 www.lwolf.com

Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

B.Adjustment to Sales Price: (Check (1) or (2) only.)

☐ (1) The sales price will not be adjusted based on a survey.

☒ (2) The sales price will be adjusted based on the latest survey obtained under Paragraph 6B.

(a)The sales price is calculated on the basis of $ 7.25 per:

☒ (i) square foot of ☒ total area ☐ net area.

☐ (ii) acre of ☐ total area ☐ net area.

(b)“Total area” means all land area within the perimeter boundaries of the Property. “Net area” means total area less any area of the Property within:

☐ (i) public roadways;

☐ (ii) rights-of-way and easements other than those that directly provide utility services to the

Property; and

☐ (iii)

(c)If the sales price is adjusted by more than % of the stated sales price, either party may terminate this contract by providing written notice to the other party within days after the terminating party receives the survey. If neither party terminates this contract or if the variance is less than the stated percentage, the adjustment to the sales price will be made to the cash portion of the sales price payable by Buyer.

4.FINANCING: Buyer will finance the portion of the sales price under Paragraph 3A(2) as follows:

☒ A. Third Party Financing: One or more third party loans in the total amount of $ 5,000,000.00 .

This contract:

☐ (1) is not contingent upon Buyer obtaining third party financing.

☒ (2) is contingent upon Buyer obtaining third party financing in accordance with the attached

Commercial Contract Financing Addendum (TXR-1931).

☐ B. Assumption: In accordance with the attached Commercial Contract Financing Addendum (TXR-1931), Buyer will assume the existing promissory note secured by the Property, which balance at closing will be $ .

☐ C. Seller Financing: Buyer will deliver a promissory note and deed of trust to Seller under the terms of the attached Commercial Contract Financing Addendum (TXR-1931) in the amount of $ .

5.EARNEST MONEY:

A.Not later than 3 days after the effective date, Buyer must deposit $ $150,000.00 as earnest money with Houston Title Holdings (title company) at 7500 San Felipe Ste 1020 Houston, 77027 (address) Frank Vandiver (closer). If Buyer fails to timely deposit the earnest money, Seller may terminate this contract or exercise any of Seller’s other remedies under Paragraph 15 by providing written notice to Buyer before Buyer deposits the earnest money.

B.Buyer will deposit an additional amount of $ with the title company to be made part of the earnest money on or before:

☐ (i) days after Buyer’s right to terminate under Paragraph 7B expires; or

☐ (ii) .

Buyer will be in default if Buyer fails to deposit the additional amount required by this Paragraph 5B within 3 days after Seller notifies Buyer that Buyer has not timely deposited the additional amount.

TXR-1802) 07-08-22 Initialed for identification by Seller /s/ HB , and Buyer /s/ DM , Page 2 of 15

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

C.Buyer may instruct the title company to deposit the earnest money in an interest-bearing account at a federally insured financial institution and to credit any interest to Buyer.

6.TITLE POLICY AND SURVEY:

A.Title Policy:

(1)Seller, at Seller’s expense, will furnish Buyer an Owner’s Policy of Title Insurance (the title policy) issued by any underwriter of the title company in the amount of the sales price, dated at or after closing, insuring Buyer against loss under the title policy, subject only to:

(a)those title exceptions permitted by this contract or as may be approved by Buyer in writing; and

(b)the standard printed exceptions contained in the promulgated form of title policy unless this contract provides otherwise.

(2)The standard printed exception as to discrepancies, conflicts, or shortages in area and boundary lines, or any encroachments or protrusions, or any overlapping improvements:

☐ (a) will not be amended or deleted from the title policy.

☒ (b) will be amended to read “shortages in areas” at the expense of ☒ Buyer ☐ Seller.

(3)Within 15 days after the effective date, Seller will furnish Buyer a commitment for title insurance (the commitment) including legible copies of recorded documents evidencing title exceptions. Seller authorizes the title company to deliver the commitment and related documents to Buyer at Buyer’s address.

B.Survey: Within 30 days after the effective date:

☐ (1) Buyer will obtain a survey of the Property at Buyer’s expense and deliver a copy of the survey to Seller. The survey must be made in accordance with the: (i) ALTA/NSPS Land Title Survey standards, or (ii) Texas Society of Professional Surveyors’ standards for a Category 1A survey under the appropriate condition. Seller will reimburse Buyer (insert amount) of the cost of the survey at closing, if closing occurs.

☒ (2) Seller, at Seller’s expense, will furnish Buyer a survey of the Property dated after the effective date. The survey must be made in accordance with the: (i) ALTA/NSPS Land Title Survey standards, or (ii) Texas Society of Professional Surveyors’ standards for a Category 1A survey under the appropriate condition.

☐ (3) Seller will deliver to Buyer and the title company a true and correct copy of Seller’s most recent survey of the Property along with an affidavit required by the title company for approval of the existing survey. If the existing survey is not acceptable to the title company, ☐ Seller ☐ Buyer (updating party), will,at the updating party’s expense, obtain a new or updated survey acceptable to the title company and deliver the acceptable survey to the other party and the title company within 30 days after the title company notifies the parties that the existing survey is not acceptable to the title company. The closing date will be extended daily up to 30 days if necessary for the updating party to deliver an acceptable survey within the time required. The other party will reimburse the updating party (insert amount or percentage) of the cost of the new or updated survey at closing, if closing occurs.

C.Buyer’s Objections to the Commitment and Survey:

(1)Within 10 business days after Buyer receives the last of the commitment, copies of the documents evidencing the title exceptions, and any required survey, Buyer may object in writing to matters disclosed in the items if: (a) the matters disclosed are a restriction upon the Property or constitute a defect or encumbrance to title other than those permitted by this contract or liens that Seller will

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

satisfy at closing or Buyer will assume at closing; or (b) the items show that any part of the Property lies in a special flood hazard area (an “A” or “V” zone as defined by FEMA). If the commitment or survey is revised or any new document evidencing a title exception is delivered, Buyer may object in writing to any new matter revealed in such revision or new document. Buyer’s objection must be made within the same number of days stated in this paragraph, beginning when the revision or new document is delivered to Buyer. If Paragraph 6B(1) applies, Buyer is deemed to receive the survey on the earlier of: (i) the date Buyer actually receives the survey; or (ii) of the deadline specified in Paragraph 6B.

(2)Seller may, but is not obligated to, cure Buyer’s timely objections within 15 days after Seller receives the objections. The closing date will be extended as necessary to provide such time to cure the objections. If Seller fails to cure the objections by the time required, Buyer may terminate this contract by providing written notice to Seller within 5 days after the time by which Seller must cure the objections. If Buyer terminates, the earnest money, less any independent consideration under Paragraph 7B(1), will be refunded to Buyer.

(3)Buyer’s failure to timely object or terminate under this Paragraph 6C is a waiver of Buyer’s right to object except that Buyer will not waive the requirements in Schedule C of the commitment.

7.PROPERTY CONDITION:

A.Present Condition: Buyer accepts the Property in its present condition except that Seller, at Seller’s expense, will complete the following before closing:

B.Feasibility Period: Buyer may terminate this contract for any reason within 90 days after the effective date (feasibility period) by providing Seller written notice of termination.

(1) Independent Consideration. (Check only one box and insert amounts.)

☒ (a) If Buyer terminates under this Paragraph 7B, the earnest money will be refunded to Buyer less $ 1,000.00 that Seller will retain as independent consideration for Buyer’s unrestricted right to terminate. Buyer has tendered the independent consideration to Seller upon payment of the amount specified in Paragraph 5A to the title company. The independent consideration is to be credited to the sales price only upon closing of the sale. If no dollar amount is stated in this Paragraph 7B(1) or if Buyer fails to deposit the earnest money, Buyer will not have the right to terminate under this Paragraph 7B.

☐ (b) Not later than 3 days after the effective date, Buyer must pay $ as independent consideration for Buyer’s right to terminate by tendering such amount to the title company. Buyer authorizes escrow agent to release and deliver the independent consideration to Seller at any time upon Seller's request without further notice to or consent from Buyer. If Buyer terminates under this Paragraph 7B, the earnest money will be refunded to Buyer and Seller will retain the independent consideration. The independent consideration will be credited to the sales price only upon closing of the sale. If no dollar amount is stated in this Paragraph 7B(2) or if Buyer fails to pay the independent consideration, Buyer will not have the right to terminate under this Paragraph 7B.

☐ (2) Feasibility Period Extension: Prior to the expiration of the initial feasibility period, Buyer may extend the feasibility period for a single additional period of days by delivering $ to the title company as additional earnest money.

(a) $ of the additional earnest money will be retained by Seller as additional

independent consideration for Buyer's unrestricted right to terminate, but will be credited to the

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

sales price only upon closing of the sale. If Buyer terminates under this Paragraph 7B, the additional earnest money will be refunded to Buyer and Seller will retain the additional independent consideration.

(b)Buyer authorizes escrow agent to release and deliver to Seller the following at any time upon Seller's request without further notice to or consent from Buyer:

(i)The additional independent consideration.

(ii)(Check no boxes or only one box.)

☐ all or ☐ $ of the remaining portion of the additional earnest money, which will be refunded to Buyer if Buyer terminates under this Paragraph 7B or if Seller defaults under this contract.

If no dollar amount is stated in this Paragraph 7B(2) as additional earnest money or as additional independent consideration, or if Buyer fails to timely deliver the additional earnest money, the extension of the feasibility period will not be effective.

C.Inspections, Studies, or Assessments:

(1)During the feasibility period, Buyer, at Buyer’s expense, may complete or cause to be completed any and all inspections, studies, or assessments of the Property (including all improvements and fixtures) desired by Buyer.

(2)Buyer must:

(a)employ only trained and qualified inspectors and assessors;

(b)notify Seller, in advance, of when the inspectors or assessors will be on the Property;

(c)abide by any reasonable entry rules or requirements of Seller;

(d)not interfere with existing operations or occupants of the Property; and

(e)restore the Property to its original condition if altered due to inspections, studies, or assessments that Buyer completes or causes to be completed.

(3)Except for those matters that arise from the negligence of Seller or Seller’s agents, Buyer is responsible for any claim, liability, encumbrance, cause of action, and expense resulting from Buyer’s inspections, studies, or assessments, including any property damage or personal injury. Buyer will indemnify, hold harmless, and defend Seller and Seller’s agents against any claim involving a matter for which Buyer is responsible under this paragraph. This paragraph survives termination of this contract.

D.Property Information:

(1)Delivery of Property Information: Within 10 days after the effective date, Seller will deliver to Buyer the following to the extent in Seller's possession or control: (Check all that apply.)

☒ (a) copies of all current leases, including any mineral leases, pertaining to the Property, including any modifications, supplements, or amendments to the leases;

☒ (b) copies of all notes and deeds of trust against the Property that Buyer will assume or that Seller will not pay in full on or before closing;

☒ (c) copies of all previous environmental assessments, geotechnical reports, studies, or analyses made on or relating to the Property;

☒ (d) copies property tax statements for the Property for the previous 2 calendar years;

☒ (e) plats of the Property;

☒ (f) copies of current utility capacity letters from the Property’s water and sewer service provider; and

☐ (g)

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(2)Return of Property Information: If this contract terminates for any reason, Buyer will, not later than 10 days after the termination date: (Check all that apply.)

☒ (a) return to Seller all those items described in Paragraph 7D(1) that Seller delivered to Buyer in other than an electronic format and all copies that Buyer made of those items;

☒ (b) delete or destroy all electronic versions of those items described in Paragraph 7D(1) that Seller delivered to Buyer or Buyer copied in any format; and

☒ (c) deliver to Seller copies of all inspection and assessment reports related to the Property that Buyer completed or caused to be completed.

This Paragraph 7D(2) survives termination of this contract.

E.Contracts Affecting Operations: Until closing, Seller: (1) will operate the Property in the same manner as on the effective date under reasonably prudent business standards; and (2) will not transfer or dispose of any part of the Property, any interest or right in the Property, or any of the personal property or other items described in Paragraph 2B or sold under this contract. After the feasibility period ends, Seller may not enter into, amend, or terminate any other contract that affects the operations of the Property without Buyer’s written approval.

8.LEASES:

A.Each written lease Seller is to assign to Buyer under this contract must be in full force and effect according to its terms. Seller may not enter into any new lease, fail to comply with any existing lease, or make any amendment or modification to any existing lease without Buyer’s written consent. Seller must disclose, in writing, if any of the following exist at the time Seller provides the leases to the Buyer or subsequently occur before closing:

(1)any failure by Seller to comply with Seller’s obligations under the leases;

(2)any circumstances under any lease that entitle the tenant to terminate the lease or seek any offsets or damages;

(3)any advance sums paid by a tenant under any lease;

(4)any concessions, bonuses, free rents, rebates, brokerage commissions, or other matters that affect any lease; and

(5)any amounts payable under the leases that have been assigned or encumbered, except as security for loan(s) assumed or taken subject to under this contract.

B.Estoppel Certificates: Within days after the effective date, Seller will deliver to Buyer estoppel certificates signed not earlier than by each tenant that leases space in the Property. The estoppel certificates must include the certifications contained in the current version of TXR Form 1938 – Commercial Tenant Estoppel Certificate and any additional information requested by a third party lender providing financing under Paragraph 4 if the third party lender requests such additional information at least 10 days prior to the earliest date that Seller may deliver the signed estoppel certificates.

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9.BROKERS:

A.The brokers to this sale are:

Principal Broker:

O’Farrell Realty

Principal Broker:

PCR Brokerage Houston, LLC d/b/a

Partners

Agent:

David O’ Farrell

Agent:

Griff Bandy

Address:

331 E. Parkwood Avenue

Address:

1360 Post Oak Blv., Suite 1900

Friendswood, TExas 77546

Houston, Texas 77056

Phone & Fax:

E-mail:

License No.:

Principal Broker: (Check only one box) Cooperating Broker represents Buyer.

☒ represents Seller only.

☐ represents Buyer only.

☐ is an intermediary between Seller and Buyer.

B.Fees: (Check only (1) or (2) below.)

(Complete the Agreement Between Brokers on page 14 only if (1) is selected.)

☐ (1) Seller will pay Principal Broker the fee specified by separate written commission agreement between Principal Broker and Seller. Principal Broker will pay Cooperating Broker the fee specified in the Agreement Between Brokers found below the parties’ signatures to this contract.

☒ (2) At the closing of this sale, Seller will pay:

Principal Broker a total cash fee of: Cooperating Broker a total cash fee of:

☐ 3.000 % of the sales price. ☐ 3.000 % of the sales price.

☐ . ☐ .

The cash fees will be paid in County, Texas. Seller authorizes the title company to pay the brokers from the Seller’s proceeds at closing.

NOTICE: Chapter 62, Texas Property Code, authorizes a broker to secure an earned commission with a lien against the Property.

C.The parties may not amend this Paragraph 9 without the written consent of the brokers affected by the amendment.

10.CLOSING:

A.The date of the closing of the sale (closing date) will be on or before the later of:

(1)☒ 30 days after the expiration of the feasibility period.

☐ (specific date).

☐ .

(2)7 days after objections made under Paragraph 6C have been cured or waived.

B.If either party fails to close by the closing date, the non-defaulting party may exercise the remedies in Paragraph 15.

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C.At closing, Seller will execute and deliver, at Seller’s expense, a ☐ general ☒ special warranty deed. The deed must include a vendor’s lien if any part of the sales price is financed. The deed must convey good and indefeasible title to the Property and show no exceptions other than those permitted under Paragraph 6 or other provisions of this contract. Seller must convey the Property:

(1)with no liens, assessments, or other security interests against the Property which will not be satisfied out of the sales price, unless securing loans Buyer assumes;

(2)without any assumed loans in default; and

(3)with no persons in possession of any part of the Property as lessees, tenants at sufferance, or trespassers except tenants under the written leases assigned to Buyer under this contract.

D.At closing, Seller, at Seller’s expense, will also deliver to Buyer:

(1)tax statements showing no delinquent taxes on the Property;

(2)an assignment of all leases to or on the Property;

(3)to the extent assignable, an assignment to Buyer of any licenses and permits related to the Property;

(4)evidence that the person executing this contract is legally capable and authorized to bind Seller;

(5)an affidavit acceptable to the title company stating that Seller is not a foreign person or, if Seller is a foreign person, a written authorization for the title company to: (i) withhold from Seller’s proceeds an amount sufficient to comply with applicable tax law; and (ii) deliver the amount to the Internal Revenue Service (IRS) together with appropriate tax forms; and

(6)any notices, statements, certificates, affidavits, releases, and other documents required by this contract, the commitment, or law necessary for the closing of the sale and issuance of the title policy, all of which must be completed by Seller as necessary.

E.At closing, Buyer will:

(1)pay the sales price in good funds acceptable to the title company;

(2)deliver evidence that the person executing this contract is legally capable and authorized to bind Buyer;

(3)sign and send to each tenant in a lease for any part of the Property a written statement that:

(a)acknowledges Buyer has received and is responsible for the tenant’s security deposit; and

(b)specifies the exact dollar amount of the security deposit;

(4)sign an assumption of all leases then in effect; and

(5)execute and deliver any notices, statements, certificates, or other documents required by this contract or law necessary to close the sale.

F.Unless the parties agree otherwise, the closing documents will be as found in the basic forms in the current edition of the State Bar of Texas Real Estate Forms Manual without any additional clauses.

11.POSSESSION: Seller will deliver possession of the Property to Buyer upon closing and funding of this sale in its present condition with any repairs Seller is obligated to complete under this contract, ordinary wear and tear excepted. Any possession by Buyer before closing or by Seller after closing that is not authorized by a separate written lease agreement is a landlord-tenant at sufferance relationship between the parties.

12.SPECIAL PROVISIONS: The following special provisions apply and will control in the event of a conflict with other provisions of this contract. (If special provisions are contained in an Addendum, identify the Addendum here and reference the Addendum in Paragraph 22D.)

See Special Provisions Addendum attached hereto and incorporated herein.

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13.SALES EXPENSES:

A.Seller’s Expenses: Seller will pay for the following at or before closing:

(1)releases of existing liens, other than those liens assumed by Buyer, including prepayment penalties and recording fees;

(2)release of Seller’s loan liability, if applicable;

(3)tax statements or certificates;

(4)preparation of the deed;

(5)one-half of any escrow fee;

(6)costs to record any documents to cure title objections that Seller must cure; and

(7)other expenses that Seller will pay under other provisions of this contract.

B.Buyer’s Expenses: Buyer will pay for the following at or before closing:

(1)all loan expenses and fees;

(2)preparation of any deed of trust;

(3)recording fees for the deed and any deed of trust;

(4)premiums for flood insurance as may be required by Buyer’s lender;

(5)one-half of any escrow fee;

(6)other expenses that Buyer will pay under other provisions of this contract.

14.PRORATIONS:

A.Prorations:

(1)Interest on any assumed loan, taxes, rents, and any expense reimbursements from tenants will be prorated through the closing date.

(2)If the amount of ad valorem taxes for the year in which the sale closes is not available on the closing date, taxes will be prorated on the basis of taxes assessed in the previous year. If the taxes for the year in which the sale closes vary from the amount prorated at closing, the parties will adjust the prorations when the tax statements for the year in which the sale closes become available. This Paragraph 14A(2) survives closing.

(3)If Buyer assumes a loan or is taking the Property subject to an existing lien, Seller will transfer all reserve deposits held by the lender for the payment of taxes, insurance premiums, and other charges to Buyer at closing and Buyer will reimburse such amounts to Seller by an appropriate adjustment at closing.

B.Rollback Taxes: If Seller’s use or change in use of the Property before closing results in the assessment of additional taxes, penalties, or interest (assessments) for periods before closing, the assessments will be the obligation of the Seller. If this sale or Buyer’s use of the Property after closing results in additional assessments for periods before closing, the assessments will be the obligation of Buyer. This Paragraph 14B survives closing.

C.Rent and Security Deposits: At closing, Seller will tender to Buyer all security deposits and the following advance payments received by Seller for periods after closing: prepaid expenses, advance rental payments, and other advance payments paid by tenants. Rents prorated to one party but received by the other party will be remitted by the recipient to the party to whom it was prorated within 5 days after the rent is received. This Paragraph 14C survives closing.

15.DEFAULT:

A.If Buyer fails to comply with this contract, Buyer is in default and Seller, as Seller's sole remedy(ies), may terminate this contract and receive the earnest money, as liquidated damages for Buyer’s

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failure except for any damages resulting from Buyer's inspections, studies or assessments in accordance with Paragraph 7C(3) which Seller may pursue, or

(Check if applicable)

☐ enforce specific performance, or seek such other relief as may be provided by law.

B.If, without fault, Seller is unable within the time allowed to deliver the estoppel certificates, survey or the commitment, Buyer may:

(1)terminate this contract and receive the earnest money, less any independent consideration under Paragraph 7B(1), as liquidated damages and as Buyer’s sole remedy; or

(2)extend the time for performance up to 15 days and the closing will be extended as necessary.

C.Except as provided in Paragraph 15B, if Seller fails to comply with this contract, Seller is in default and Buyer may:

(1)terminate this contract and receive the earnest money, less any independent consideration under Paragraph 7B(1), as liquidated damages and as Buyer’s sole remedy; or

(2)enforce specific performance, or seek such other relief as may be provided by law, or both.

16.CONDEMNATION: If before closing, condemnation proceedings are commenced against any material part of the Property, Buyer may:

A.terminate this contract by providing written notice to Seller within 15 days after Buyer is advised of the condemnation proceedings and the earnest money, less any independent consideration paid under Paragraph 7B(1), will be refunded to Buyer; or

B.appear and defend in the condemnation proceedings and any award will, at Buyer’s election, belong to:

(1)Seller and the sales price will be reduced by the same amount; or

(2)Buyer and the sales price will not be reduced.

17.ATTORNEY’S FEES: If Buyer, Seller, any broker, or the title company is a prevailing party in any legal proceeding brought under or with relation to this contract or this transaction, such party is entitled to recover from the non-prevailing parties all costs of such proceeding and reasonable attorney’s fees. This Paragraph 17 survives termination of this contract.

18.ESCROW:

A.At closing, the earnest money will be applied first to any cash down payment, then to Buyer’s closing costs, and any excess will be refunded to Buyer. If no closing occurs, the title company may require payment of unpaid expenses incurred on behalf of the parties and a written release of liability of the title company from all parties.

B.If one party makes written demand for the earnest money, the title company will give notice of the demand by providing to the other party a copy of the demand. If the title company does not receive written objection to the demand from the other party within 15 days after the date the title company sent the demand to the other party, the title company may disburse the earnest money to the party making demand, reduced by the amount of unpaid expenses incurred on behalf of the party receiving the earnest money and the title company may pay the same to the creditors.

C.The title company will deduct any independent consideration under Paragraph 7B(1) before disbursing any earnest money to Buyer and will pay the independent consideration to Seller.

D.If the title company complies with this Paragraph 18, each party hereby releases the title company from all claims related to the disbursal of the earnest money.

E.Notices under this Paragraph 18 must be sent by certified mail, return receipt requested. Notices to the title company are effective upon receipt by the title company.

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F.Any party who wrongfully fails or refuses to sign a release acceptable to the title company within 7 days after receipt of the request will be liable to the other party for: (i) damages; (ii) the earnest money; (iii) reasonable attorney's fees; and (iv) all costs of suit.

G.☒ Seller ☐ Buyer intend(s) to complete this transaction as a part of an exchange of like-kind properties in accordance with Section 1031 of the Internal Revenue Code, as amended. All expenses in connection with the contemplated exchange will be paid by the exchanging party. The other party will not incur any expense or liability with respect to the exchange. The parties agree to cooperate fully and in good faith to arrange and consummate the exchange so as to comply to the maximum extent feasible with the provisions of Section 1031 of the Internal Revenue Code. The other provisions of this contract will not be affected in the event the contemplated exchange fails to occur.

19.MATERIAL FACTS: To the best of Seller’s knowledge and belief: (Check only one box)

☐ A. Seller is not aware of any material defects to the Property except as stated in the attached Commercial Property Condition Statement (TXR-1408).

☐ B. Except as otherwise provided in this contract, Seller is not aware of:

(1)any subsurface: structures, pits, waste, springs, or improvements;

(2)any pending or threatened litigation, condemnation, or assessment affecting the Property;

(3)any environmental hazards or conditions that materially affect the Property;

(4)whether the Property is or has been used for the storage or disposal of hazardous materials or toxic waste, a dump site or landfill, or any underground tanks or containers;

(5)whether radon, asbestos containing materials, urea-formaldehyde foam insulation, lead-based paint, toxic mold (to the extent that it adversely affects the health of ordinary occupants), or other pollutants or contaminants of any nature now exist or ever existed on the Property;

(6)any wetlands, as defined by federal or state law or regulation, on the Property;

(7)any threatened or endangered species or their habitat on the Property;

(8)any present or past infestation of wood-destroying insects in the Property’s improvements;

(9)any contemplated material changes to the Property or surrounding area that would materially and detrimentally affect the ordinary use of the Property;

(10)any condition on the Property that violates any law or ordinance.

(Describe any exceptions to (1)-(10) in Paragraph 12 or an addendum.)

20.NOTICES: All notices between the parties under this contract must be in writing and are effective when hand-delivered, mailed by certified mail return receipt requested, sent by a national or regional overnight delivery service that provides a delivery receipt, or sent by confirmed facsimile transmission to the parties addresses or facsimile numbers stated in Paragraph 1. The parties will send copies of any notices to the broker representing the party to whom the notices are sent.

☒ A.Seller also consents to receive any notices by e-mail at Seller’s e-mail address stated in Paragraph 1.

☒ B. Buyer also consents to receive any notices by e-mail at Buyer’s e-mail address stated in Paragraph 1.

21.DISPUTE RESOLUTION: The parties agree to negotiate in good faith in an effort to resolve any dispute related to this contract that may arise. If the dispute cannot be resolved by negotiation, the parties will submit the dispute to mediation before resorting to arbitration or litigation and will equally share the costs of a mutually acceptable mediator. This paragraph survives termination of this contract. This paragraph does not preclude a party from seeking equitable relief from a court of competent jurisdiction.

22.AGREEMENT OF THE PARTIES:

A.This contract is binding on the parties, their heirs, executors, representatives, successors, and permitted assigns. This contract is to be construed in accordance with the laws of the State of Texas. If any term or condition of this contract shall be held to be invalid or unenforceable, the remainder of this contract shall not be affected thereby. All individuals signing represent that they have the authority to sign on behalf of and bind the party for whom they are signing.

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

B.This contract contains the entire agreement of the parties and may not be changed except in writing.

C.If this contract is executed in a number of identical counterparts, each counterpart is an original and all counterparts, collectively, constitute one agreement.

D.Addenda which are part of this contract are: (Check all that apply.)

☒ (1) Property Description Exhibit identified in Paragraph 2;

☒ (2) Commercial Contract Financing Addendum (TXR-1931);

☐ (3) Commercial Property Condition Statement (TXR-1408);

☐ (4) Commercial Contract Addendum for Special Provisions (TXR-1940);

☐ (5) Notice to Purchaser of Real Property in a Water District (MUD);

☐ (6) Addendum for Coastal Area Property (TXR-1915);

☐ (7) Addendum for Property Located Seaward of the Gulf Intracoastal Waterway (TXR-1916);

☐ (8) Information About Brokerage Services (TXR-2501);

☐ (9) Information About Mineral Clauses in Contract Forms (TXR-2509);

☐ (10) Notice of Obligation to Pay Improvement District Assessment (TXR-1955, PID); and

☒ (11) Special Provisions Addendum

(Note: Counsel for Texas REALTORS® has determined that any of the foregoing addenda which are promulgated by the Texas Real Estate Commission (TREC) or published by Texas REALTORS® are appropriate for use with this form.)

E.Buyer ☒ may ☐ may not assign this contract. If Buyer assigns this contract, Buyer will be relieved of any future liability under this contract only if the assignee assumes, in writing, all obligations and liability of Buyer under this contract.

23.TIME: Time is of the essence in this contract. The parties require strict compliance with the times for performance. If the last day to perform under a provision of this contract falls on a Saturday, Sunday, or Federal Reserve Bank holiday, the time for performance is extended until the end of the next day which is not a Saturday, Sunday, or federal reserve bank holiday.

24.EFFECTIVE DATE: The effective date of this contract for the purpose of performance of all obligations is the date the title company receipts this contract after all parties execute this contract.

25.ADDITIONAL NOTICES:

A.Buyer should have an abstract covering the Property examined by an attorney of Buyer’s selection, or Buyer should be furnished with or obtain a title policy.

B.If the Property is situated in a utility or other statutorily created district providing water, sewer, drainage, or flood control facilities and services, Chapter 49, Texas Water Code, requires Seller to deliver and Buyer to sign the statutory notice relating to the tax rate, bonded indebtedness, or standby fees of the district before final execution of this contract.

C.Notice Required by §13.257, Water Code: “The real property, described below, that you are about to purchase may be located in a certificated water or sewer service area, which is authorized by law to provide water or sewer service to the properties in the certificated area. If your property is located in a certificated area there may be special costs or charges that you will be required to pay before you can receive water or sewer service. There may be a period required to construct lines or other facilities necessary to provide water or sewer service to your property. You are advised to determine if the property is in a certificated area and contact the utility service provider to determine the cost that you will be required to pay and the period, if any, that is required to provide water or sewer service to your property. The undersigned purchaser hereby acknowledges receipt of the foregoing notice at or before the execution of a binding contract for the purchase of the real property

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described in the notice or at closing of purchase of the real property.” The real property is described in Paragraph 2 of this contract.

D.If the Property adjoins or shares a common boundary with the tidally influenced submerged lands of the state, §33.135 of the Texas Natural Resources Code requires a notice regarding coastal area property to be included as part of this contract (the Addendum for Coastal Area Property (TXR-1915) may be used).

E.If the Property is located seaward of the Gulf Intracoastal Waterway, §61.025, Texas Natural Resources Code, requires a notice regarding the seaward location of the Property to be included as part of this contract (the Addendum for Property Located Seaward of the Gulf Intracoastal Waterway (TXR-1916) may be used).

F.If the Property is located outside the limits of a municipality, the Property may now or later be included in the extra-territorial jurisdiction (ETJ) of a municipality and may now or later be subject to annexation by the municipality. Each municipality maintains a map that depicts its boundaries and ETJ. To determine if the Property is located within a municipality’s ETJ, Buyer should contact all municipalities located in the general proximity of the Property for further information.

G.Brokers are not qualified to perform property inspections, surveys, engineering studies, environmental assessments, or inspections to determine compliance with zoning, governmental regulations, or laws. Buyer should seek experts to perform such services. Buyer should review local building codes, ordinances and other applicable laws to determine their effect on the Property. Selection of experts, inspectors, and repairmen is the responsibility of Buyer and not the brokers. Brokers are not qualified to determine the credit worthiness of the parties.

H.NOTICE OF WATER LEVEL FLUCTUATIONS: If the Property adjoins an impoundment of water, including a reservoir or lake, constructed and maintained under Chapter 11, Water Code, that has a storage capacity of at least 5,000 acre-feet at the impoundment’s normal operating level, Seller hereby notifies Buyer: “The water level of the impoundment of water adjoining the Property fluctuates for various reasons, including as a result of: (1)an entity lawfully exercising its right to use the water stored in the impoundment; or (2) drought or flood conditions.”

I.PUBLIC IMPROVEMENT DISTRICTS: If the Property is in a public improvement district, Seller is required by §5.014, Property Code to give Buyer a written notice concerning the obligation to pay assessments. The form of the required notice is available as a part of the Notice of Obligation to Pay Improvement District Assessment (TXR-1955).

J.LICENSE HOLDER DISCLOSURE: Texas law requires a real estate license holder who is a party to a transaction or acting on behalf of a spouse, parent, child, business entity in which the license holder owns more than 10%, or a trust for which the license holder acts as a trustee or of which the license holder or the license holder’s spouse, parent or child is a beneficiary, to notify the other party in writing before entering into a contract of sale. Disclose if applicable: .

26.CONTRACT AS OFFER: The execution of this contract by the first party constitutes an offer to buy or sell the Property. Unless the other party accepts the offer by 5:00 p.m., in the time zone in which the Property is located, on July 12, 2023 , the offer will lapse and become null and void.

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

READ THIS CONTRACT CAREFULLY. The brokers and agents make no representation or recommendation as to the legal sufficiency, legal effect, or tax consequences of this document or transaction. CONSULT your attorney BEFORE signing.

Seller:

Hal B Boone

Buyer:

Castle Biosciences, Inc.

By:

By (signature):

/s/ Hal B Boone

By (signature):

/s/ Derek Maetzold

Printed Name:

Title:

By:

By (signature):

Printed Name:

Title:

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Commercial Contract - Unimproved Property concerning Narnia Way & FM 528 Friendswood, Texas 77546

AGREEMENT BETWEEN BROKERS

(use only if Paragraph 9B(1) is effective)

Principal Broker agrees to pay ________________________________________________ (Cooperating Broker) a

fee when the Principal Broker’s fee is received. The fee to be paid to Cooperating Broker will be:

$ ___________________ , or

_____________ % of the sales price or

_____________ % of Principal Broker’s fee.

The title company is authorized and directed to pay Cooperating Broker from Principal Broker’s fee at closing.

This Agreement Between Brokers supersedes any prior offers and agreements for compensation between

brokers.

Principle:

Cooperating Broker:

By:

ATTORNEYS

Seller’s attorney:

Michael Blue

Buyer’s attorney:

Paul LeBlanc

Terrazas PLLC

Address:

1001 S. Capital of Texas Hwy Bldg 6-250

Address:

Austin, Texas 78746

Phone & Fax:

Email:

Seller’s attorney requests copies of documents,

Buyer’s attorney requests copies of documents,

notices, and other information:

the title company sends to Seller.

the title company sends to Buyer.

Buyer sends to Seller.

Seller sends to Buyer.

ESCROW RECEIPT

The title company acknowledges receipt of:

A. the contract on this day June 10,2023 (effective date);

B. earnest money in the amount of $_______________ in the form of _____________________________

on _________________.

Title company:

Title Houston Holdings

By:

Assigned file number (GF#):

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COMMERCIAL CONTRACT FINANCING ADDENDUM

USE OF THIS FORM BY PERSONS WHO ARE NOT MEMBERS OF THE TEXAS ASSOCIATION OF REALTORS®, INC. IS NOT AUTHORIZED.

©Texas Association of REALTORS®, Inc. 2010

ADDENDUM TO COMMERCIAL CONTRACT BETWEEN THE UNDERSIGNED PARTIES CONCERNING

THE PROPERTY AT


Narnia Way & FM 528 Friendswood, Texas 77546

The portion of the Sales Price not payable in cash will be paid as follows (Check all that apply.)

☒ A. THIRD PARTY FINANCING:

(1)The contract is contingent upon Buyer obtaining a third party loan(s) secured by the Property in the amount of $ 5,000,000.00 for not less than 5 years with the initial interest rate not to exceed 9.000 % per annum and payments calculated on an amortization period of no less than 5 years.

(2)Buyer will apply for the third party loan(s) described in Paragraph A(1) promptly after the effective date. If Buyer cannot obtain the loan(s), Buyer may give Seller written notice within 60 days after the effective date and the contract will terminate and the earnest money, less any independent consideration under Paragraph 7B(1) of the contract, will be refunded to Buyer. If Buyer does not give such notice within the time required, this contract will no longer be subject to the contingency described in this Paragraph A.

(3)Each note to be executed under this addendum is to be secured by vendor’s and deed of trust liens.

☐ B. ASSUMPTION:

(1)Buyer will assume the unpaid principal balance of the existing promissory note secured by the Property payable to _________________________________________________________ dated ___________________________ which balance at closing will be $_____________.

(2)Buyer’s initial payment will be the first payment due after closing. Buyer’s assumption of the existing note includes all obligations imposed by the deed of trust securing the note, recorded in ____________________________________________________________ (recording reference) in the real property records of the country where the Property is located.

(3)If the unpaid principal balance of the assumed loan as of the date of closing varies from the loan balance stated in Paragraph B(1), the cash payable at closing will be adjusted by the net amount of any variance; provided, if the total principal balance of the assumed loan varies in an amount greater than $______________ at closing, either party may terminate this contract and the earnest money will be refunded to Buyer unless either party elects to eliminate the excess in the variance by an appropriate adjustment at closing.

(4)Buyer may terminate the contract and the earnest money, less any independent consideration under Paragraph 7B(1) of the contract, will be refunded to Buyer if the note holder on assumption requires:

(a)Buyer to pay an assumption fee in excess of $_____________ and Seller declines to pay such excess;

(b)an increase in the interest rate to more than _________%; or

(c)any other modification of the loan documents.

(5)Unless Seller is released of liability on any assumed note, Seller requires a vendor’s lien and deed of trust to secure assumption, which will be automatically released on execution and delivery of a release by the note holder.

(TXR-1931) 01-26-10 Initialed for identification by Seller /s/ HB , ____ and Buyer /s/ DM , Page 1 of 4

This form is for the exclusive use of the subscriber named below. Any use by others is strictly prohibited. Use of this form does not indicate membership in Texas REALTORS®.

Company name goes here, 1360 Post Oak Blv., Suite 1900 HOUSTON TX 77056 Phone: (713)985-4626 Fax: Castle Biosciences

RANDY WILHELM Produced with Lone Wolf Transactions (zipForm Edition) 717 N Harwood St, Suite 2200, Dallas, TX 75201 www.lwolf.com

Commercial Contract Financing Addendum concerning Narnia Way & FM 528 Friendswood, Texas 77546

(6)If assumption approval is required by the note holder, Buyer will apply for assumption approval within _____ days after the effective date of the contract and will make every reasonable effort to obtain assumption approval. If Buyer cannot obtain assumption approval, Buyer may give Seller written notice within _______ days after the effective date and the contract will terminate and the earnest money, less any independent consideration under Paragraph 7B(1) of the contract, will be refunded to Buyer. If Buyer does not give such notice within the time required and Buyer does not close because Buyer is not able to assume the existing note, Buyer will be in default.

☐ C. SELLER FINANCING:

(1)At closing, Buyer will execute and deliver a promissory note (the note) from Buyer to Seller in the amount of $_, bearing _% interest per annum. Matured, unpaid amounts will bear interest at the maximum rate of interest allowed by law.

(2)The note will be payable as follows:

☐ (a) In one payment, due _____________________________________________ after the date of the note, with interest payable: ☐ (i) monthly ☐ (ii)______________________________.

☐ (b) In installments of $ _______________________ ☐ including interest ☐ plus interest beginning ___________________________________________ after the date of the note and continuing at ☐ monthly ☐_____________________________ intervals thereafter for _________________when the entire balance of the note will be due and payable.

☐ (c) Interest only in ☐ monthly ☐ ☐ installments for the first _____________ years and thereafter in installments of _______________ ☐ including interest ☐ plus interest beginning _______________________________after the date of the note and continuing at ☐ monthly ☐ _______________________ intervals thereafter for _____________________ when the entire balance of the note will be due and payable.

(3)The note will be secured by vendor’s and deed of trust liens and an assignment of leases payable at the placed designated by Seller.

(4)The note will provided that if Buyer fails to timely pay an installment within 10 days after the installment is due, Buyer will pay a late fee equal to 5% of the installment not paid.

(5)The note ☐ will ☐ will not provide for liability (personal or corporate) against the maker in the event of default.

(6)The note may be prepaid in whole or in part at any time without penalty. Any prepayments are to be applied to the payment of the installments of principal last maturing and interest will immediately cease on the prepaid principal.

(7)The lien securing payment of the note will be inferior to any lien securing any superior note described in this addendum. If an owner’s policy of title insurance is furnished, buyer, at Buyer’s expense, will furnish Seller with a mortgagee title policy in the amount of the note at closing.

(8)If all or any part of the Property is Sold or Conveyed without Seller’s prior written consent, Seller, at Seller’s option, may declare the outstanding principal balance of the note, plus accrued interest, immediately due and payable. Any of the following is not a sale or conveyance of the Property:

(a)the creation of a subordinate lien;

(b)the creation of a subordinate lien;

(c)a sale under a subordinate lien;

(d)a deed under threat or order of condemnation;

(e)a conveyance solely between the parties; or

(f)the passage of title by reason of death of a maker or operation of law.

(TXR-1931) 1-26-10 Initialed for identification by Seller /s/ HB , ____ and Buyer /s/ DM , ______ Page 2 of 4

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Commercial Contract Financing Addendum concerning Narnia Way & FM 528 Friendswood, Texas 77546

(9)Deposits for Taxes and Insurance: Together with the principal and interest installments, Buyer ☐ will ☐ will not deposit with Seller a pro rata part of the estimated annual ad valorem taxes on the Property and a pro rata part of the estimated annual insurance premiums for the improvements on the Property.

(a)If Buyer deposits taxes and insurance deposits with Seller, Buyer agrees that the taxes and insurance deposits are only estimates and may be insufficient to pay total taxes and insurance premiums. Buyer agrees to pay any deficiency within 30 days after Seller notifies Buyer of any deficiency. Buyer’s failure to pay the deficiency is a default under the deed of trust.

(b)If any superior lien holder on the Property collects payments for taxes and insurance, any requirement to deposit taxes and insurance deposits with Seller under this addendum is inoperative so long as payments are being made to the superior lien holder.

(10)Any event that constitutes a default under any superior lien constitutes a default under the deed of trust securing the note.

(11)The note will include a provision for reasonable attorney’s fees for any collection action.

(12)Unless the parties agree otherwise, the form of the note and loan documents will be as found in the current edition of the State Bar of Texas Real Estate Forms Manual without any additional clauses.

☐ D. CREDIT APPROVAL ON ASSUMPTION OR SELLER FINANCING:

(1)To establish Buyer’s creditworthiness for assumption approval or seller financing, Buyer will deliver to Seller the following information (Buyer’s documentation) within _____ days after the effective date of the contract:

☐ (a) verification of employment, including salary;

☐ (b) verification of funds on deposit in financial institutions;

☐ (c) current financial statement;

☐ (d) credit report;

☐ (e) tax returns for the following years _______________________________________;

☐ (f) _______________________________________________________________________ ___________________________________________________________________________.

(2)If Buyer does not timely deliver Buyer’s documentation or Seller determines, in Seller’s sole discretion, that Buyer’s creditworthiness is not acceptable, Seller may terminate the contract by giving written notice to Buyer not later than days after the date Buyer must deliver Buyer’s documentation under Paragraph D(1) and the earnest money, less any independent consideration under Paragraph 7B(1) of the contract, will be refunded to Buyer. If Seller does not timely terminate the contract under this paragraph, Seller will be deemed to have accepted Buyer’s credit.

☐ E. SPECIAL PROVISIONS:

(TXR-1931) 1-26-10 Initialed for identification by Seller /s/ HB , ____ and Buyer /s/ DM , ______ Page 3 of 4

Produced with Lone Wolf Transactions (zipForm Edition) 717 N Harwood St, Suite 2200, Dallas, TX 75201 www.lwolf.com Castle Biosciences

Commercial Contract Financing Addendum concerning Narnia Way & FM 528 Friendswood, Texas 77546

Seller:

Hal B Boone

Buyer:

Castle Biosciences, Inc.

By:

By (signature):

/s/ Hal B Boone

By (signature):

/s/ Derek Maetzold

Printed Name:

Derek Maetzold

Title:

President and CEO

By:

By (signature):

Printed Name:

Title:

(TXR-1931) 1-26-10 Initialed for identification by Seller /s/ HB , ____ and Buyer /s/ DM , ______ Page 4 of 4

Produced with Lone Wolf Transactions (zipForm Edition) 717 N Harwood St, Suite 2200, Dallas, TX 75201 www.lwolf.com Castle Biosciences

SPECIAL PROVISIONS ADDENDUM TO

COMMERCIAL CONTRACT - UNIMPROVED PROPERTY

BETWEEN HAL B. BOONE, AS SELLER, AND

CASTLE BIOSCIENCES, INC. OR ITS ASSIGNS, AS BUYER, RELATING TO

THAT CERTAIN REAL PROPERTY LOCATED IN GALVESTON COUNTY, TEXAS

This Special Provision Addendum to Commercial Contract - Unimproved Property (this “Addendum”) is entered into between HAL B. BOONE, an individual residing in Friendswood, Texas (the “Seller”), and CASTLE BIOSCIENCES, INC., a Delaware corporation, or its assigns (the “Buyer”), and amends that certain Commercial Contract - Unimproved Property of even date herewith executed by Seller and Buyer (as amended or otherwise modified from time to time, the “Contract”), relating to the sale and purchase of the real property described above (the “Property”) as such Property is further described in the Contract. To the extent that the terms of this Addendum conflict with the terms of the Contract, the terms of this Addendum shall control. All capitalized terms used, but not defined, herein shall have the same meaning as in the Contract except where otherwise specifically defined.

Seller and Buyer agree as follows:

1. Legal Description. The following language shall be added at the end of Paragraph 2.A. of the Contract:

“The survey (as described in Paragraph 6.B. hereof) will contain a field note description of the Property, which shall (once approved by Seller and Buyer, which approval will not be unreasonably withheld, conditioned or delayed) be the description of the Property used in (i) the special warranty deed from Seller to Buyer delivered at closing and (ii) the other closing documents (as applicable) delivered at closing.”

2. Title Policy. Paragraph 6.A.(2) is deleted in its entirety and amended to read as follows:

“(2) Buyer shall have the right to cause the title company to issue any endorsements (“Buyer Endorsements”) to title policy as Buyer may elect, at Buyer’s sole cost and expense. Seller shall deliver to the title company such customary owner’s affidavit as is reasonably necessary to permit the title company to issue the tile policy with the Buyer Endorsements that Buyer elects to purchase.”

3. Required cure matters. The following language shall be added at the end of Paragraph 6.C.(1) of the Contract:

“Notwithstanding anything to the contrary set forth in this Contract (as amended by the Addendum), seller shall cause any real property taxes or assessments for 2022 and prior years, and any deeds of trust mortgages, mechanic’s liens and liens which may be cured by the payment of discernible amount (unless caused solely by Buyer or Buyer’s representatives) (collectively, “Required Cure Matters”) disclosed on any title commitment or update thereof, and such Required Cure Matters to be fully

discharged and released on or before the closing date, in a manner reasonably acceptable to Buyer and at no additional cost to Buyer. Buyer shall have no obligation to object to any such Required Cure Matters, all of which shall automatically deemed unpermited exceptions.”

4. Curing Title Objections. The second and third sentences of Paragraph 6.C.(2) of the Contract are hereby deleted in their entirety and replaced with the following:

“The closing date will be extended as necessary to provide such time to cure the objection that Seller has agreed to cure. If Seller fails to cure the objections by the time required, Buyer may, as its sole and exclusive remedy, terminate this contract by providing written notice to Seller within 5 days after the time by which Seller must cure the objections.”

5. Feasibility Period Extension. Paragraph 7.B.(2) of the Contract is hereby deleted in its entirety and replaced with the following:

“(2) Buyer shall have the right, but not the obligation, to extend the feasibility period for (2) periods of thirty (30) days each (individually an “Extension Period” and collectively, the “Extension Periods”) by providing (i) written notice to Seller on or prior to the expiration of the feasibility period or the then-current Extension Period, as applicable, and (ii) the payment of the Additional Earnest Money (as defined below) on or prior to the expiration of the feasibility period or the then-current Extension Period, as applicable. As used herein, the term “Additional Earnest Money” shall mean the amount of Twenty Thousand and 00/100 Dollars ($20,000.00). Nine Thousand and 00/100 Dollars ($9,000.) of the Additional Earnest Money delivered in connection with the first Extension Period will be retained by Seller as additional independent consideration for Buyer’s unrestricted right to terminate. The remainder of the Additional Earnest Money, once paid to the title company, shall become a part of the earnest money under the Contract for all purposes. All of the Additional Earnest Money delivered under this paragraph shall be applied against the sales price at closing.”

6. Buyer’s Entry on the Property. Paragraph 7.C.(3) of the Contract is hereby deleted in its entirety and replaced with the following:

“Notwithstanding anything to the contrary contained in this contract: (a) the right of entry hereunder will terminate automatically upon any termination of contract; (b) any entry of Buyer and/or its employees and agents onto the Property is at the sole risk of Buyer and its employees and agents, except as otherwise set forth in this Paragraph; (c) Buyer hereby releases Seller from all liabilities, obligations and claims of any kind or nature arising out of or in connection with the entry of Buyer and/or its employees and agents onto the Property (other than those which arise as a result of the gross negligence or intentional misconduct of Seller or its employees or agents and other than any environmental conditions existing on the Property that are merely discovered by Buyer as a result of its activities conducted on the Property pursuant to this contract) INCLUDING WITHOUT LIMITATION ALL LIABILITIES,

OBLIGATIONS AND CLAIMS ARISING OUT OF ANY NEGLIGENCE ON THE PART OF SELLER, IT BEING EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PROVISION SHALL BE EFFECTIVE TO RELEASE SELLER FROM CLAIMS ARISING OUT OF SELLER’S OWN NEGLIGENCE; (d) other than in connection with a Phase 1 environmental site assessment or a geotechnical survey of the Property, neither the Buyer nor any of its employees or agents will conduct any drilling or boring activities withing the Property or engage in any invasive or destructive testing of any kind or nature within the Property without the prior written consent of Seller, which consent will not be unreasonably withheld, conditioned or delayed; (e) Buyer shall pay when due all costs and expenses related to the activities of Buyer and/or its employees and agents upon, within or with respect to the Property and BUYER AGREES TO INDEMNIFY AND HOLD AND SAVE SELLER HARMLESS FROM AND AGAINST ALL SUCH COSTS AND EXPENSES AND ALL OBLIGATIONS, LIABILITIES, CLAIMS AND COSTS ARISING IN CONNECTION THEREWITH, INCLUDING WITHOUT LIMITATION COURT COSTS AND REASONABLE ATTORNEYS’ FEES; and (f) Buyer shall not permit any liens to attach to the Property by reason of any activities of Buyer or its employees and agents. This paragraph survives termination of this contract.”

7. Delivery of Property Information. The first clause of Paragraph 7.D.(1) of the Contract prior to the colon is hereby deleted in its entirety and replaced with the following:

“Within 5 days after the effective date, Seller will deliver to Buyer, without representation or warranty as to the accuracy, completeness, or ownership thereof, the following to the extent in Seller’s possession or control:”

8. Satisfaction of Liens at Closing. Paragraph 10.C.(1) of the Contract is hereby deleted in its entirety and replaced with the following:

“with no liens, assessments, or other security interests against the Property which will not be satisfied our of the sales price, unless securing loans Buyer assumes or arising from work for which Buyer ordered or is otherwise responsible to pay for,”

9. Closing Documents. The following language shall be added at the end of Paragraph 10.F. of the Contract:

“The Special Warranty Deed to be delivered at closing shall be in substantially the same form as attached hereto as Exhibit “B” and incorporated herein by reference for all purposes.”

10. Rollback Taxes. Paragraph 14.B. is deleted in its entirety and amended to read as follows:

“Seller agrees to provide Buyer a credit at closing in the amount of One Hundred Thousand and 00/100 Dollars ($100,000.00) for rollback taxes which may become due on the Property after closing for periods related to when Seller owned the Property. Following closing, Buyer shall be solely responsible for any rollback taxes or other taxes, penalties, or interest related to the Property, regardless of whether or

no they related to the period when Seller owned the Property. Buyer shall indemnify and hold Seller harmless for any such taxes, interest, or penalties. The provisions of this Paragraph 14.B shall survive closing.”

11. Buyer’s Remedies. Paragraph 15.C of the Contract is hereby deleted in its entirety and replaced with the following:

“Except as provided in Paragraph 15B, if Seller fail to comply with this contract with respect to any provision that does not provide a specific remedy for such failure, Seller is in default and Buyer may:

(1)Terminate this contract and receive the earnest money, less any independent consideration under Paragraph 7B(1), as liquidated damages and as Buyer’s sole and exclusive remedy; or

(2)enforce specific performance; provided, however, that Buyer’s right to the remedy of specific performance is conditioned on the following: Buyer must

(x) notify seller in writing of Buyer’s intent to seek specific performance and

(y) file a lawsuit seeking specific performance, all within 60 days of the expiration of the notice and cure period required by this contract.”

12.Amendment of the Contract. Paragraph 22.B of the Contract is hereby deleted in its entirety and replaced with the following:

“This contract contains the entire agreement of the parties and may not be changed except in writing signed by both the Buyer and Seller.”

13.Assignment. Paragraph 22.E of the Contract is hereby deleted in its entirety and replaced with the following:

“Buyer will not assign, transfer, or convey its rights or obligations under this contract or with respect to the Property without Seller’s written consent. However, Buyer may assign its rights under this contract without Seller’s consent to an Affiliate (as defined below), as long as (a) Buyer gives Seller written notice of the assignment at least five (5) days before the closing date, and the notice includes the name of the assignee and the assignee’s signature block, and (b) the Affiliate assumes, jointly and severally, in writing Buyer’s obligations under this contract and agrees in writing to be subject to all of the terms and conditions in this contract. The term “affiliate” means (a) an entity that directly or indirectly controls, is controlled by, or is under common control with the Buyer, (b) any fund or entity sponsored by Buyer, or (c) and entity at least a majority of whose economic interest is owned by Buyer; the term “control” means the power to direct the management of the entity through voting rights, ownership, or contractual obligations.”

14.Seller’s Covenants, Representations and Warranties. Paragraph 19 of the Contract is hereby deleted in its entirety. In lieu thereof, Seller hereby covenants, agrees with, and represents and warrants to Buyer, effective as of the date of execution of the Contract and as of the date of the closing, that:

(a)Status and Authority of Seller. Seller has full right, title, authority, and capacity to execute and perform the Contract and to consummate all of the transactions contemplated herein. No consent, waiver, approval or authorization is required from any person or entity in connection with the execution, delivery and performance of the Contract by Seller. The Contract is fully binding on and enforceable against Seller except as limited by bankruptcy or other laws and general principles of equity.

(b)No Prohibitions. Seller is not prohibited from (i) executing or delivering the Contract, (ii) complying with the terms of the Contract, or (iii) consummating the transactions contemplated by the Contract by any applicable governmental requirement, agreement, instrument, restriction, or by a judgment, order, or decree of any governmental authority having jurisdiction over Seller or Seller’s properties.

(c)No Breach. Performance of the Contract will not result in any breach of or constitute any default under, any agreement or other instrument to which Seller is a party or by which Seller might be bound.

(d)Intentionally deleted.

(e)Seller not a Foreign Person. Seller is not a Foreign Person within the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1954, as amended, and any applicable regulations thereunder.

(f)OFAC. Seller is not, nor will it become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign asset Control of the Department of Treasury (“OFAC”) (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transaction with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.

(g)No Bankruptcy or Insolvency Proceedings. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorships, or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws contemplated or filed by Seller and Seller has received no notice of any of the same pending or threatened against Seller or the Property.

(h)No Liens. At closing, the Property will be conveyed free and clear of all mechanic’s liens, liens, mortgages, or encumbrances of any nature except those matters approved or deemed approved by Buyer pursuant to the Contract, and no work has been performed within the past 24 months or is currently in progress by Seller, and no materials have been furnished to the Property or any portion thereof, which might give rise to mechanic’s materialman’s, or other liens against the Property, or any portion thereof.

(i)No Lease; Parties in Possession. There are no other leases on the Property or on any part thereof, and there are no other parties in possession of the Property or of any part thereof. There are no brokerage or leasing agreements currently in existence related to the rental or use of all or any part of the Property, nor have there been any such agreements in the last two years.

(j)Condemnation. There are no pending or, to the knowledge of Seller, threatened condemnation or eminent domain proceedings, moratoriums upon zoning, platting, construction, or extension or connection of utilities, or suites affecting the Property or any part thereof, or assessments affecting the Property, or any part thereof, nor to the best knowledge and belief of Seller are any such proceedings or assessments contemplated by any governmental authority.

(k)No Litigation. There are no claims, actions, lawsuits, or proceedings pending, or, to the knowledge of Seller threatened, against Seller or the Property which can materially adversely affect the Property or could affect Seller’s ability to consummate the transactions contemplated by the Contract.

(l)Compliance with Laws. Seller has not received any notice, written or otherwise, from any governmental or quasi-governmental authority requiring the correction of any condition with respect to the Property.

(m)Environmental. Seller has not received any written notice that either Property or Seller is in violation of or subject to any existing, pending, or threatened investigation or inquiry by any governmental authority or to any remedial obligations under any applicable laws pertaining to the health or the environment (hereinafter sometimes collectively called “Applicable Environmental Laws”), including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act of 1976 (“RCRA”), the Texas Water Code and the Texas Solid Waste Dispose Act. The terms “hazardous substance” and “release” shall have the meanings specified in CERCLA, and the terms “solid waste” and “disposal” (or “disposed”) shall have the meanings specified in RCRA; provided, to the extent that laws of the State of Texas establish a meaning for “hazardous substance,” or “release,” “solid wast,” or “disposal” which is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply.

(n)No Tax Protest. For the prior two tax years, Seller has not retained any person or firm to file any notice of protest against, or to commence any action to review, any real property tax assessment against the Property.

(o)Insurance. Seller has not received, and has no other knowledge or information of, a notice from an insurance company or board of fire underwriters requesting the performance of any work or alteration with respect to the Property which has not been performed, or requiring an increase in the insurance rates applicable to the Property.

(p)No Liabilities. All obligations of Seller arising from the ownership operation of the Property and business operated thereon, including, without limitation, taxes, salaries and leasing commissions, have been paid as they became due or will be paid at or prior to closing. Except for debts, liabilities, and obligations for which provision is made in the Contract for proration or other adjustment at closing and for the permitted encumbrances, there will be no debts, liabilities, or obligations of Seller with respect to the Property outstanding as of the date of the closing.

(q)Material Facts. To the best of Sellers knowledge and belief and except as otherwise provided in the Contract, Seller is not aware of:

(i)any subsurface: structures, pits, waste, springs, or improvements, other than the abandoned pipeline running through Property;

(ii)except as may have occurred with respect to the abandoned pipeline running through the Property, whether the Property is or has been used for the storage or disposal of hazardous materials or toxic waste, a dump site or landfill, or any underground tanks or containers;

(iii)whether radon, asbestos containing materials, urea-formaldehyde insulation, lead-based paint, toxic mold (to the extent that it adversely affects the health of ordinary occupants), or other pollutants or contaminants of any nature now exist or ever existed on the Property;

(iv)any wetlands, as defined by federal or state law or regulation, on the Property;

(v)any threatened or endangered species or their habitat on the Property;

(vi)any contemplated material changes to the Property or surrounding area that would materially and detrimentally affect the ordinary use of the Property; or

(vii)any condition on the Property that violates any law or ordinance.

(r)Covenants of Seller. Seller hereby covenants that during the Contract:

(i)Seller shall not commit waste of the Property, shall keep the Property in good order and repair and shall operate and manage the Property consistent with past practice.

(ii)Seller shall comply with all federal, state, and municipal laws, ordinances, codes, regulations and orders relating to the Property, as the same as presently enforced.

(iii)Seller shall give the Buyer immediate written notice of the institution by Seller or receipt of written notice or other knowledge by Seller of any litigation or threatened litigation, arbitration, or administrative hearing affecting the Seller or the Property which would in any way constitute or have the effect of presently or in the future creating a lien or claims or obligations of any kind against the Property or the owner thereof.

(iv)Seller shall not lease, convey, or further encumber any portion of the Property in any manner without the prior written consent of Buyer.

(v)Seller shall pay all claims for bills outstanding at the closing of the Contract or received thereafter for labor done and/or services rendered and/or materials supplied to the Property pursuant to the request of Seller prior to closing, and shall indemnify and hold Buyer harmless from any liability for such.

(vi)Seller shall not enter or extend any service contracts pertaining to the Property which would bind the Property following closing. Prior to closing, Buyer shall notify Seller of any existing service contracts which Buyer shall elect to continue under following closing, and Seller shall cooperate with Buyer in having all such service contracts assigned to Buyer prior to or at closing. For existing service contracts which Buyer elects to not assume following closing, Seller shall terminate such contracts effective at or prior to closing.

15.Buyer’s Conditions Precedent to Closing: Notwithstanding anything in the Contract to the contrary, Buyer’s obligation to close the transaction contemplated hereby is contingent upon the following conditions (collectively, the “Closing Conditions”):

(a)the Property appraising for not less than the sales price; and

(b)Buyer receiving approval of the environmental condition of the Property from Buyer’s lender.

If the Closing Conditions are not satisfied prior to or on the closing date, Buyer shall have the right, upon written notice to Seller prior to or on the closing date, to terminate this Contract and recover the earnest money plus any interest earned thereon, whereupon neither party shall have any further rights or obligations hereunder except for those that expressly survive termination or closing. Buyer shall the right to waive any condition to closing at its sole discretion.

16.Buyer’s Covenants, Representations and Warranties. Buyer hereby covenants agrees with, and represents and warrants to Seller, effective as of the date of execution of the Contract and as of the date of the closing, that:

(a)Status and Authority of Buyer. Buyer has been duly organized and is in good standing under the laws of the state of its organization. Buyer has full right, title, authority, and capacity to execute and perform the Contract and to consummate all of the transactions contemplated herein. The execution, delivery, and performance of the Contract have been duly authorized, and no other action by Buyer is required for the valid and binding execution, delivery, and performance of the Contract, except as otherwise expressly provided. The Contract is fully binding on and enforceable against Buyer except as limited by bankruptcy or other laws and general principles of equity.

(b)OFAC. Buyer is not, nor will it become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Assets Control of the Department of Treasury (“OFAC”) (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.

(c)Knowledge of Buyer. Buyer has no actual knowledge of any facts or circumstances that Buyer has not disclosed to Seller and which would reveal any breach of any representation, warranty or covenant on the part of Seller under the Contract.

17.Notice and Opportunity to Cure. In the event of any breach of any representation, warranty, or covenant by either party under the Contract or this Addendum (other than Buyer’s failure to timely deliver the earnest money or to deliver the sales price to Seller at closing) or any other default by either party under the Contract or this addendum (the breaching or defaulting party being referred to herein as the “Defaulting Party”) the other party (the “Non-Defaulting Party”) will not exercise any of such Non-Defaulting Party’s rights or remedies under the Contract until and unless the Non-Defaulting Party’s rights or remedies under the Contract until and unless the Non-Defaulting Party has provided to the Defaulting Party a written notice of the breaches or defaults of the Defaulting Party (the “Default Notice”) and the Defaulting Party has failed to remedy or cure the breaches or defaults specified in the Default Notice within five (5) days after the date of the Non-Defaulting Party’s delivery of the Default Notice. If multiple defaults occur, the curing period shall run from the date of the initial default and not from the date of any subsequent default.

18.AS IS. BUYER IS ACQUIRING THE PROPERTY AS IS, WHERE IS, WITH ALL FAULTS AND DEFECTS, AND BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE WARRANTY OF TITLE IN THE DEED TO BE DELIVERED BY SELLER AT CLOSING AND THE SPECIFIC REPRESENTATIONS AND WARRANTIES IN THE CONTRACT, SELLER HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING, OR WITH RESPECT TO (A) THE NATURE, QUALITY, OR CONDITION OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO THE WATER, SOIL, AND GEOLOGY, OR THE PRESENCE OR ABSENCE OF ANY POLLUTANT, HAZARDOUS WASTE, GAS, OR SUBSTANCE OR SOLID WASTE ON OR ABOUT THE PROPERTY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES THAT BUYER MAY INTEND TO CONDUCT, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES, OR REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR BODY HAVING JURISDICTION, (E) THE HABITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, OR (F) ANY OTHER MATTER RELATED TO OR CONCERNING THE PROPERTY, EXCEPT AS EXPRESSLY SET FORTH IN THIS CONTRACT; AND BUYER WILL NOT SEEK RECOURSE AGAINST SELLER ON ACCOUNT OF ANY LOSS, COST, OR EXPENSE SUFFERED OR INCURRED BY BUYER WITH REGARD TO ANY OF THE MATTERS DESCRIBED IN CLAUSES (A) THROUGH (F) ABOVE. BUYER ACKNOWLEDGES THAT, HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, BUYER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY OR ON BEHALF OF SELLER. BUYER FURTHER ACKNOWLEDGES THAT NO INDEPENDENT INVESTIGATION OR VERIFICATION HAS BEEN OR WILL BE MADE BY SELLER WITH RESPECT TO ANY INFORMATION SUPPLIED BY OR ON BEHALF OF SELLER CONCERNING THE PROPERTY, AND SELLER MAKES NO REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF THAT INFORMATION, IT BEING INTENDED

BY THE PARTIES THAT BUYER WILL VERIFY THE ACCURACY AND COMPLETENESS OF THAT INFORMATION ITSELF. BUYER ACKNOWLEDGES THAT THE DISCLAIMERS, AGREEMENTS, AND OTHER STATEMENTS IN THIS SECTION ARE AN INTEGRAL PORTION OF THIS CONTRACT AND THAT SELLER WOULD NOT AGREE TO SELL THE PROPERTY TO BUYER FOR THE PURCHASE PRICE WITHOUT THE DISCLAIMERS, AGREEMENTS, AND OTHER STATEMENTS IN THIS SECTION. The provisions of this paragraph shall survive the closing under the Contract.

19.Notice of Non-Representation of Seller. SELLER HEREBY ACKNOWLEDGES THAT SEYFARTH SHAW LLP HAS ONLY SERVED AS COUNSEL FOR BUYER AND HAS NOT UNDERTAKEN TO REPRESENT SELLER IN THIS TRANSACTION. SELLER ACKNOWLEDGES THAT IT HAS THE RIGHT TO SEEK THE ADVICE OF ITS OWN LEGAL COUNSEL WITH RESPECT TO THE TRANSACTION CONTEMPLATED HEREBY.

20.Broker Indemnification. Each party represents and warrants to the other that, except as set forth in Section 9 of the Contract, there has been no broker, finder, real estate agent or similar agent engaged in connection with the transaction contemplated hereby and each party agrees that should any claim be made for brokerage commissions or finder’s fees by any broker, finder or agent by, through or on account of any acts of the indemnifying party or its agents, employees or representatives, the indemnifying party will hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including, without limitation, attorneys’ fees, accountants’ fees, court costs and interest) in connection therewith. The provisions of this Section shall survive closing.

21.Counterparts. The Contract and this Addendum may be executed in multiple counterparts of each of which shall constitute and original, and together which shall constitute one and the same document.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

SIGNATURE PAGE TO

ADDENDUM TO COMMERCIAL CONTRACT - UNIMPROVED PROPERTY

SELLER:


/s/ Hal B. Boone

HAL B. BOONE

BUYER:

CASTLE BIOSCIENCES, INC.,

a Delaware corporation



By:			/s/ Derek Maetzold
Name:			Derek Maetzold
Title:			President and CEO

EXHIBIT “A”

To Commercial Contract - Unimproved Property

between

HAL B. BOONE

and

CASTLE BIOSCIENCES, INC. or its assigns

Property Description

[see attached]

EXHIBIT “B”

To Commercial Contract - Unimproved Property

between

HAL B. BOONE

and

CASTLE BIOSCIENCES, INC. or its assigns

SPECIAL WARRANTY DEED

Exhibit 10.2

SIXTH AMENDMENT TO STANDARD OFFICE LEASE

THIS SIXTH AMENDMENT TO STANDARD OFFICE LEASE (this “Sixth Amendment”) is dated August 2, 2023 (the “Amendment Date”), and made by ALTURAS SIETE I, LLC, an Idaho limited liability company (“Landlord”), and Castle Biosciences, Inc., a Delaware corporation (“Tenant”), and amends that certain Standard Office Lease dated October 5, 2015 (the “Original Lease”), as previously amended by that certain First Amendment to Lease dated December 4, 2018 (the “First Amendment”), that certain Second Amendment to Standard Office Lease dated December 16, 2019 (the “Second Amendment”), that certain Third Amendment to Standard Office Lease dated November 29, 2021 (the “Third Amendment”), that certain Fourth Amendment to Standard Office Lease dated March 11, 2022 (the “Fourth Amendment”), and that certain Fifth Amendment to Standard Office Lease dated October 24, 2022 (the “Fifth Amendment”, and together the Original Lease, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, and the Fifth Amendment are referred to collectively as the “Lease”), between Landlord and Tenant, for the lease of those certain premises that consist of approximately 20,825 rentable square feet known as Suites 100, 125, 130, 160, and 170 (the “Premises”) in the building located at 3737 North 7th Street, Phoenix, Arizona 85014 (the “Building”), as follows:

1.SECOND EXPANSION COMMENCEMENT DATE. Landlord and Tenant agree that the Second Expansion Commencement Date (as defined in the Fifth Amendment) occurred on May 1, 2023.

2.SECOND EXPANSION IMPROVEMENTS.

a.Section 6 of the Fifth Amendment (Condition of Second Expansion Premises; Second Expansion Improvements) and Exhibit B attached to the Fifth Amendment (Letter of Acceptance) are deleted in their entirety. As set forth in this Section 2, Tenant, and not Landlord, will construct the Second Expansion Improvements (as defined below).

b.Tenant took occupancy of the Second Expansion Premises (defined in the Fifth Amendment as Suite 100 of the Building, consisting of approximately 3,005 rentable square feet) on the Second Expansion Commencement Date. Tenant is leasing the Second Expansion Premises “AS IS” based on its own inspection and investigation and not in reliance on any statement, representation, inducement or agreement of Landlord. By taking possession of the Second Expansion Premises, Tenant is deemed to have accepted the Second Expansion Premises as being in satisfactory condition and completed in accordance with any requirements of Landlord set forth in the Lease.

c.Subject to Tenant’s compliance with the requirements for alterations to the Premises as set forth in the Lease, Tenant may construct improvements within the interior of the Second Expansion Premises (collectively, the “Second Expansion Improvements”). Landlord shall have the right to approve or reject Tenant’s contractor that will perform the Second Expansion Improvements. Provided that Tenant has not defaulted under the Lease, Landlord shall provide Tenant with an allowance equal to $45,075.00 (based on $15.00 per rentable square foot of the Second Expansion Premises) (the “Second Expansion Improvement Allowance”), as reimbursement for the Second Expansion Improvements. If the actual cost of the Second Expansion Improvements exceeds the Second Expansion Improvement Allowance, then Tenant shall be solely responsible for all costs in excess of the Second Expansion Improvement Allowance. Except as provided in this paragraph, the Second Expansion Improvements shall be performed and completed at Tenant’s sole cost and expense. Tenant shall only be entitled to receive the Second Expansion Improvement Allowance if Tenant satisfies the following conditions: (a) Tenant delivers to Landlord unconditional final lien waivers and releases for all of its contractors, subcontractors and suppliers in the form required under A.R.S. 33-1008 for the Second Expansion Improvements, (b) Tenant delivers to Landlord copies of all invoices paid by Tenant in connection with

the Second Expansion Improvements, and (c) Landlord inspects the completed Second Expansion Improvements and approves of the Second Expansion Improvements as being in compliance with the approved plans. The Second Expansion Improvement Allowance shall only be available to Tenant if Tenant delivers to Landlord a written request of the disbursement of the Second Expansion Improvement Allowance on or before the date that is the one year anniversary of the Amendment Date.

d.In addition, at Tenant’s option and at Tenant’s sole cost, Tenant may request that Landlord demolish the existing multi-tenant corridor and create a new exterior entrance for the Premises (the “Additional Improvements”). The Additional Improvements shall be subject to approval by Landlord and the City of Phoenix. Further, if the existing multi-tenant corridor is demolished in connection with the Additional Improvements, then upon expiration of the Lease, at Landlord’s option, Tenant shall reimburse Landlord for the reconstruction of the multi-tenant corridor.

3.BASIC RENTAL. The Basic Rental table set forth in Section 3 of the Fifth Amendment is deleted in its entirety and replaced with the following:


Period	Annual Basic Rental Per Rentable Square Foot	Monthly Basic Rental
5/1/23 - 8/31/23	(see paragraph below)
9/1/23 -2/29/24	$21.50	$37,311.46
3/1/24 -2/28/25	$22.00	$38,179.17
3/1/25 - 2/28/26	$22.50	$39,046.88
3/1/26 - 2/28/27	$23.00	$39,914.58
3/1/27 - 2/29/28	$23.50	$40,782.29
3/1/28 - 2/28/29	$24.00	$41,650.00
3/1/29 - 2/28/30	$24.50	$42,517.71
3/1/30 - 2/28/31	$25.00	$43,385.42
3/1/31 - 2/29/32	$25.50	$44,253.13
3/1/32 - 2/28/33	$26.00	$45,120.83
3/1/33 - 7/31/33	$26.50	$45,988.54

During the period from the Second Expansion Commencement Date (May 1, 2023) through August 31, 2023 (the “Partial Abatement Period”), the Basic Rental applicable to the Second Expansion Premises only (3,005 rentable square feet) shall be fully abated. Tenant shall pay the Basic Rental applicable to the remainder of the Premises (17,820 rentable square feet) during the Partial Abatement Period. The amount of the Monthly Basic Rental during the Partial Abatement Period is $31,927.50 per month.

The amount of the abated Basic Rental during the Partial Abatement Period is stipulated to equal $21,535.84 ($5,383.96 per month for 4 months) (the “Abated Rent”). Tenant shall be credited with having paid all of the Abated Rent on the expiration of the Term only if the Tenant has fully, faithfully and punctually performed all of Tenant’s obligations under the Lease during the Term. If an event of default by Tenant exists and Tenant does not cure within the applicable grace period during the Term, the Abated Rent shall immediately become due and payable in full and this Lease shall be enforced as if there were no such rent abatement or rent concession.

Tenant shall remain responsible for and shall pay all applicable rental tax. All such amounts shall be paid concurrently with Monthly Basic Rental.

4.REAL ESTATE BROKERAGE. Tenant represents that it has not had dealings with any real estate broker, finder or other person with respect to this Sixth Amendment, other than Cushman & Wakefield, who represents Landlord (the “Broker”), and that Tenant is not represented by a real estate broker, finder or other person with respect to this Sixth Amendment. Landlord shall pay the Broker a commission with respect to this Sixth Amendment pursuant to a separate agreement. If any other person shall assert a claim to a finder’s fee, brokerage commission or other compensation on account of alleged employment as a finder or broker or for performance of services as a finder or broker in connection with this transaction, the party under whom the finder or broker is claiming shall indemnify, defend, and hold harmless the other party for, from and against any and all obligations, debts, covenants, conditions, representations, costs, and liabilities and any and all demands, causes of action, and claims, of every type, kind, nature or character, direct or indirect, known or unknown, absolute or contingent, determined or speculative, at law, in equity or otherwise, including attorneys’ fees and litigation and court costs, in connection with such claim or any action or proceeding brought on such claim.

5.CONDITION OF PREMISES. Except as set forth in this Sixth Amendment, Tenant is in possession of and has accepted the Premises and Tenant acknowledges that all work to be performed by Landlord in the Premises as required by the terms of the Lease has been satisfactorily completed.

6.EXISTING CLAIMS. Tenant represents and warrants that there are no existing claims or causes of action against Landlord arising out of the Lease, either currently or that would exist with the giving of notice or with the passage of time, nor are there any existing defenses that Tenant has against the enforcement of the Lease by Landlord.

7.MISCELLANEOUS. Except as set forth in this Sixth Amendment, the Lease shall continue in full force and effect. This Sixth Amendment supersedes and replaces all previous terms in the Lease that may conflict with the terms in this Sixth Amendment. Capitalized terms used in this Sixth Amendment without definition will have the meaning stated in the Lease. This Sixth Amendment may be executed in counterparts, each of which when so executed and delivered shall be deemed an original for all purposes, and all such counterparts shall together constitute but one and the same instrument. A signed copy of this Sixth Amendment delivered by DocuSign, facsimile or scanned .pdf and emailed signatures, or any combination thereof, shall be deemed to have the same legal effect as delivery of an original signed copy of this Sixth Amendment. The warranties contained in this Sixth Amendment are made and given in addition to, and not in lieu of, any other warranties made in the Lease.

[signature page follows]

IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment on the Amendment Date.

LANDLORD:

ALTURAS SIETE I, LLC,

an Idaho limited liability company



By:	Alturas Capital Partners, LLC, a Delaware limited liability company

Its:	Manager

	By:	/s/ Devin Morris
	Print Name:	Devin Morris
	Title:	Chief Operating Officer

TENANT:

CASTLE BIOSCIENCES, INC.,

a Delaware corporation


By:			/s/ Kristen Oelschlager
Print Name:			Kristen Oelschlager
Title:			Chief Operating Officer

EXHIBIT A

Space Plans of Third Expansion Premises

EXHIBIT B

Letter of Acceptance

Exhibit 10.3

FIRST AMENDMENT TO COMMERCIAL CONTRACT- UNIMPROVED PROPERTY

THIS FIRST AMENDMENT TO COMMERCIAL CONTRACT- UNIMPROVED PROPERTY

(this “First Amendment”) is made and entered into as of October 4, 2023 (the “Effective Date”) by and between HAL B. BOONE, an individual residing in Friendswood, Texas (the “Seller”) and CASTLE BIOSCIENCES, INC., a Delaware corporation, or its assigns (the “Buyer”).

RECITALS:

A.Buyer and Seller entered into that certain Commercial Contract - Unimproved Property dated as of July 10, 2023 (the “Contract”), as modified by that certain Special Provisions Addendum to Commercial Contract - Unimproved Property dated of even date therewith (the “Addendum” and, collectively with the Contract, the “Agreement”) pursuant to which Seller agreed to sell, and Buyer agreed to purchase that certain property located in Galveston County, Texas, having a physical address of Narnia Way & FM 528 Friendswood, Texas 77546, as more particularly described in the Agreement (the “Property”). Capitalized terms used but not defined herein shall have the meanings given such terms in the Agreement.

B.Buyer and Seller desire to amend the Agreement as set forth herein.

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in hand paid by Buyer to Seller, as well as the mutual covenants hereinafter set forth, which the parties agree constitutes good and sufficient consideration for the rights and obligations of the parties herein, the parties do hereby covenant and agree that the Contract is hereby further modified as follows:

1.Feasibility Period. Seller and Buyer hereby agree to extend the feasibility period for one (1) period of thirty (30) days from the Effective Date. Notwithstanding anything in the Agreement to the contrary, and for the avoidance of doubt, Buyer shall continue to have the right to extend the feasibility period for the Extension Periods, as more particularly set forth in Section 5 of the Addendum.

2.Miscellaneous.

(a)The Agreement, as amended by this First Amendment, shall constitute the entire agreement between the parties relative to the subject matter hereof, and shall supersede any prior agreement or understanding, if any, whether written or oral. This First Amendment may only be altered, supplemented, modified or amended in a writing signed by Buyer and Seller.

(b)This First Amendment may be executed in multiple counterparts each of which shall constitute an original, and together which shall constitute one and the same document.

(c)Time is of the essence of this First Amendment and of each and every one of the provisions hereof.

(d)This First Amendment shall be construed and interpreted in accordance with the laws of the State of Texas.

(e)Except as amended by this First Amendment, the Agreement remains in full force and effect and is unchanged.

[Signature Page(s) to Follow]

305202921v.1

Exhibit 10.3

IN WITNESS WHEREOF, the parties have caused this First

Amendment to be executed to be effective as of the Effective Date.

SELLER:

By: /s/ Hal B. Boone

HAL B. BOONE

BUYER

CASTLE BIOSCIENCES, INC.,

a Delaware Corporation


By:	/s/ Frank Stokes
Name:			Frank Stokes
Title:		Chief Financial Officer

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Derek J. Maetzold, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Castle Biosciences, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	November 2, 2023	/s/ Derek J. Maetzold
		Derek J. Maetzold President and Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Frank Stokes, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Castle Biosciences, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	November 2, 2023	/s/ Frank Stokes
		Frank Stokes Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 of Castle Biosciences, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Derek J. Maetzold, President and Chief Executive Officer of the Company, and Frank Stokes, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:

	(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

	(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	November 2, 2023

/s/ Derek J. Maetzold		/s/ Frank Stokes
Derek J. Maetzold President and Chief Executive Officer (Principal Executive Officer)		Frank Stokes Chief Financial Officer (Principal Financial and Accounting Officer)


This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Castle Biosciences, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2023	Oct. 26, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-38984
Entity Registrant Name	CASTLE BIOSCIENCES, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	77-0701774
Entity Address, Address Line One	505 S. Friendswood Drive
Entity Address, Address Line Two	Suite 401
Entity Address, City or Town	Friendswood
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77546
City Area Code	866
Local Phone Number	788-9007
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	CSTL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		26,910,548
Entity Central Index Key	0001447362
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current Assets
Cash and cash equivalents	$ 91,223	$ 122,948
Marketable investment securities	138,530	135,677
Accounts receivable, net	37,003	23,476
Inventory	5,769	3,980
Prepaid expenses and other current assets	7,097	6,207
Total current assets	279,622	292,288
Long-term accounts receivable, net	1,338	1,087
Property and equipment, net	22,273	14,315
Operating lease assets	11,613	12,181
Goodwill and other intangible assets, net	119,607	126,348
Other assets – long-term	1,566	1,110
Total assets	436,019	447,329
Current Liabilities
Accounts payable	6,929	4,731
Accrued compensation	22,405	24,358
Operating lease liabilities	1,091	1,777
Other accrued and current liabilities	5,899	5,262
Total current liabilities	36,324	36,128
Noncurrent operating lease liabilities	13,435	11,533
Deferred tax liability	441	428
Other liabilities	36	90
Total liabilities	50,236	48,179
Commitments and Contingencies (Note 11)
Stockholders’ Equity
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued and outstanding as of September 30, 2023 and December 31, 2022	0	0
Common stock, $0.001 par value per share; 200,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 26,890,488 and 26,553,681 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	27	27
Additional paid-in capital	601,618	560,409
Accumulated deficit	(215,791)	(160,905)
Accumulated other comprehensive loss	(71)	(381)
Total stockholders’ equity	385,783	399,150
Total liabilities and stockholders’ equity	$ 436,019	$ 447,329

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	26,890,488	26,553,681
Common stock, shares outstanding (in shares)	26,890,488	26,553,681

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
NET REVENUES	$ 61,493	$ 37,011	$ 153,668	$ 98,701
OPERATING EXPENSES AND OTHER OPERATING INCOME
Cost of sales (exclusive of amortization of acquired intangible assets)	11,319	8,859	32,559	22,489
Research and development	12,923	10,907	40,624	33,594
Selling, general and administrative	44,619	36,626	136,062	104,577
Amortization of acquired intangible assets	2,272	2,306	6,742	6,051
Change in fair value of contingent consideration	0	(151)	0	(17,987)
Total operating expenses, net	71,133	58,547	215,987	148,724
Operating loss	(9,640)	(21,536)	(62,319)	(50,023)
Interest income	2,769	1,293	7,504	1,693
Interest expense	(2)	(6)	(9)	(13)
Loss before income taxes	(6,873)	(20,249)	(54,824)	(48,343)
Income tax expense (benefit)	32	0	62	(1,823)
Net loss	$ (6,905)	$ (20,249)	$ (54,886)	$ (46,520)
Loss per share, basic (in dollars per share)	$ (0.26)	$ (0.77)	$ (2.05)	$ (1.79)
Loss per share, diluted (in dollars per share)	$ (0.26)	$ (0.77)	$ (2.05)	$ (1.79)
Weighted-average shares outstanding, basic (in shares)	26,834	26,316	26,725	25,938
Weighted-average shares outstanding, diluted (in shares)	26,834	26,316	26,725	25,938

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Comprehensive Income [Abstract]
Net loss	$ (6,905)	$ (20,249)	$ (54,886)	$ (46,520)
Other comprehensive income (loss):
Net unrealized gain (loss) on marketable investment securities	73	(189)	310	(189)
Comprehensive loss	$ (6,832)	$ (20,438)	$ (54,576)	$ (46,709)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Preferred stock, shares outstanding (in shares) at Dec. 31, 2021		0
Beginning balance at Dec. 31, 2021	$ 411,740	$ 0	$ 25	$ 505,482	$ (93,767)	$ 0
Common stock, shares outstanding (in shares) at Dec. 31, 2021			25,378,520
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	8,419			8,419
Exercise of common stock options (in shares)			62,102
Exercise of common stock options	399			399
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			2,466
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(56)			(56)
Issuance of common stock under the employee stock purchase plan (in shares)			42,332
Issuance of common stock under the employee stock purchase plan	1,457			1,457
Net loss	(24,623)				(24,623)
Preferred Stock, Shares Outstanding, Ending Balance at Mar. 31, 2022		0
Ending balance at Mar. 31, 2022	397,336	$ 0	$ 25	515,701	(118,390)	0
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2022			25,485,420
Preferred stock, shares outstanding (in shares) at Dec. 31, 2021		0
Beginning balance at Dec. 31, 2021	411,740	$ 0	$ 25	505,482	(93,767)	0
Common stock, shares outstanding (in shares) at Dec. 31, 2021			25,378,520
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net unrealized gain on marketable investment securities	(189)
Net loss	(46,520)
Preferred Stock, Shares Outstanding, Ending Balance at Sep. 30, 2022		0
Ending balance at Sep. 30, 2022	411,433	$ 0	$ 26	551,883	(140,287)	(189)
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2022			26,350,530
Preferred stock, shares outstanding (in shares) at Mar. 31, 2022		0
Beginning balance at Mar. 31, 2022	397,336	$ 0	$ 25	515,701	(118,390)	0
Common stock, shares outstanding (in shares) at Mar. 31, 2022			25,485,420
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	8,783			8,783
Exercise of common stock options (in shares)			36,634
Exercise of common stock options	110			110
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			6,358
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(32)			(32)
Issuance of common stock in acquisition of business (in shares)			763,887
Issuance of common stock in acquisition of business	17,111		$ 1	17,110
Net loss	(1,648)				(1,648)
Preferred Stock, Shares Outstanding, Ending Balance at Jun. 30, 2022		0
Ending balance at Jun. 30, 2022	421,660	$ 0	$ 26	541,672	(120,038)	0
Common Stock, Shares, Outstanding, Ending Balance at Jun. 30, 2022			26,292,299
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	9,196			9,196
Exercise of common stock options (in shares)			17,093
Exercise of common stock options	166			166
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			4,818
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(46)			(46)
Issuance of common stock under the employee stock purchase plan (in shares)			36,320
Issuance of common stock under the employee stock purchase plan	895			895
Net unrealized gain on marketable investment securities	(189)					(189)
Net loss	(20,249)				(20,249)
Preferred Stock, Shares Outstanding, Ending Balance at Sep. 30, 2022		0
Ending balance at Sep. 30, 2022	$ 411,433	$ 0	$ 26	551,883	(140,287)	(189)
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2022			26,350,530
Preferred stock, shares outstanding (in shares) at Dec. 31, 2022	0	0
Beginning balance at Dec. 31, 2022	$ 399,150	$ 0	$ 27	560,409	(160,905)	(381)
Common stock, shares outstanding (in shares) at Dec. 31, 2022	26,553,681		26,553,681
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	$ 13,525			13,525
Exercise of common stock options (in shares)			30,495
Exercise of common stock options	95			95
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			24,835
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(314)			(314)
Issuance of common stock under the employee stock purchase plan (in shares)			77,190
Issuance of common stock under the employee stock purchase plan	1,652			1,652
Net unrealized gain on marketable investment securities	245					245
Net loss	(29,204)				(29,204)
Preferred Stock, Shares Outstanding, Ending Balance at Mar. 31, 2023		0
Ending balance at Mar. 31, 2023	$ 385,149	$ 0	$ 27	575,367	(190,109)	(136)
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2023			26,686,201
Preferred stock, shares outstanding (in shares) at Dec. 31, 2022	0	0
Beginning balance at Dec. 31, 2022	$ 399,150	$ 0	$ 27	560,409	(160,905)	(381)
Common stock, shares outstanding (in shares) at Dec. 31, 2022	26,553,681		26,553,681
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of common stock options (in shares)	49,757
Net unrealized gain on marketable investment securities	$ 310
Net loss	$ (54,886)
Preferred Stock, Shares Outstanding, Ending Balance at Sep. 30, 2023	0	0
Ending balance at Sep. 30, 2023	$ 385,783	$ 0	$ 27	601,618	(215,791)	(71)
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2023	26,890,488		26,890,488
Preferred stock, shares outstanding (in shares) at Mar. 31, 2023		0
Beginning balance at Mar. 31, 2023	$ 385,149	$ 0	$ 27	575,367	(190,109)	(136)
Common stock, shares outstanding (in shares) at Mar. 31, 2023			26,686,201
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	12,849			12,849
Exercise of common stock options (in shares)			15,606
Exercise of common stock options	89			89
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			82,201
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(534)			(534)
Net unrealized gain on marketable investment securities	(8)					(8)
Net loss	(18,777)				(18,777)
Preferred Stock, Shares Outstanding, Ending Balance at Jun. 30, 2023		0
Ending balance at Jun. 30, 2023	378,768	$ 0	$ 27	587,771	(208,886)	(144)
Common Stock, Shares, Outstanding, Ending Balance at Jun. 30, 2023			26,784,008
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	13,043			13,043
Exercise of common stock options (in shares)			3,656
Exercise of common stock options	13			13
Issuance of common stock from vested restricted stock units and payment of employees' taxes (in shares)			40,142
Issuance of common stock from vested restricted stock units and payment of employees’ taxes	(271)			(271)
Issuance of common stock under the employee stock purchase plan (in shares)			62,682
Issuance of common stock under the employee stock purchase plan	1,062			1,062
Net unrealized gain on marketable investment securities	73					73
Net loss	$ (6,905)				(6,905)
Preferred Stock, Shares Outstanding, Ending Balance at Sep. 30, 2023	0	0
Ending balance at Sep. 30, 2023	$ 385,783	$ 0	$ 27	$ 601,618	$ (215,791)	$ (71)
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2023	26,890,488		26,890,488

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
OPERATING ACTIVITIES
Net loss	$ (54,886)	$ (46,520)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9,106	7,702
Stock-based compensation expense	39,417	26,398
Change in fair value of contingent consideration	0	(17,987)
Deferred income taxes	13	(1,839)
Accretion of discounts on marketable investment securities	(3,851)	(184)
Other	284	186
Change in operating assets and liabilities:
Accounts receivable	(13,779)	(5,678)
Prepaid expenses and other current assets	(892)	(1,870)
Inventory	(1,789)	(1,502)
Operating lease assets	(590)	694
Other assets	(455)	533
Accounts payable	2,693	2,155
Operating lease liabilities	1,093	(559)
Accrued compensation	(1,953)	3,669
Other accrued and current liabilities	1,376	(853)
Net cash used in operating activities	(24,213)	(35,655)
INVESTING ACTIVITIES
Purchases of property and equipment	(9,828)	(3,845)
Asset acquisition, adjustment to purchase price	0	547
Acquisition of business, net of cash and cash equivalents acquired	0	(26,966)
Proceeds from sale of property and equipment	10	9
Purchases of marketable investment securities	(136,693)	(131,808)
Proceeds from maturities of marketable investment securities	138,000	0
Net cash used in investing activities	(8,511)	(162,063)
FINANCING ACTIVITIES
Proceeds from exercise of common stock options	197	675
Payment of employees’ taxes on vested restricted stock units	(1,119)	(134)
Proceeds from contributions to the employee stock purchase plan	2,027	1,812
Repayment of principal portion of finance lease liabilities	(106)	(88)
Net cash provided by financing activities	999	2,265
NET CHANGE IN CASH AND CASH EQUIVALENTS	(31,725)	(195,453)
Beginning of period	122,948	329,633
End of period	91,223	134,180
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and equipment	902	1,131
Common stock issued in acquisition of business	0	17,111
Contingent consideration in acquisition of business	0	1,528
Operating lease assets obtained in exchange for lease obligations	499	5,912
Property and equipment acquired with tenant improvement allowance	$ 1,281	$ 51

Organization and Description of Business	9 Months Ended
Organization and Description of Business	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Description of Business	Organization and Description of Business Castle Biosciences, Inc. (the ‘‘Company”, “we”, “us” or “our”) was incorporated in the state of Delaware on September 12, 2007. We are a commercial-stage diagnostics company focused on providing clinicians and their patients with personalized, clinically actionable information to inform treatment decisions and improve health outcomes. We are based in Friendswood, Texas (a suburb of Houston, Texas) and our laboratory operations are conducted at our facilities located in Phoenix, Arizona and Pittsburgh, Pennsylvania. We have a history of recurring net losses and negative cash flows and as of September 30, 2023, we had an accumulated deficit of $215.8 million. We believe our $91.2 million of cash and cash equivalents and $138.5 million of marketable investment securities as of September 30, 2023, and anticipated revenue from our test reports, will be sufficient to meet our cash requirements through at least the 12-month period following the date that these unaudited condensed consolidated financial statements were issued.

Summary of Significant Accounting Policies	9 Months Ended
Summary of Significant Accounting Policies	Sep. 30, 2023
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Basis of Presentation Our unaudited condensed consolidated financial statements include the accounts of Castle Biosciences, Inc. and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’). All intercompany accounts and transactions have been eliminated in consolidation. Unaudited Interim Financial Information The accompanying condensed consolidated balance sheet as of September 30, 2023; the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of stockholders’ equity, each for the three and nine months ended September 30, 2023 and 2022; and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our consolidated financial position as of September 30, 2023, the results of our consolidated operations for the three and nine months ended September 30, 2023 and 2022 and our consolidated cash flows for the nine months ended September 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2023 and 2022 are also unaudited. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023 (the "2022 Form 10-K"). Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include revenue recognition, the valuation of stock-based compensation, assessing future tax exposure and the realizability of deferred tax assets, the useful lives and recoverability of long-lived assets, the goodwill impairment test, the valuation of acquired intangible assets and the valuation of contingent consideration and other contingent liabilities. We base these estimates on historical and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions. Cash and Cash Equivalents including Concentrations of Credit Risk Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds, which are not insured by the Federal Deposit Insurance Corporation (“FDIC”), that are primarily invested in short-term U.S. government obligations. Cash deposits at financial institutions may exceed the amount of insurance provided by the FDIC. Management believes that we are not exposed to significant credit risk on our cash deposits due to the financial position of the financial institutions in which deposits are held. Marketable Investment Securities All debt securities are recognized in accordance with Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) Topic 320, Investments-Debt Securities (‘‘ASC 320’’). Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. All debt securities are classified as available-for-sale and are recorded at fair value in accordance with ASC 320. We recognize the unrealized gains and losses related to changes in fair value as a separate component of accumulated other comprehensive loss within total stockholders’ equity, net of any related deferred income tax effects, on our condensed consolidated balance sheets. Premiums or discounts from par value are amortized to interest income over the life of the underlying investment. Realized gains and losses on available-for-sale securities are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations. Impairments of available-for-sale debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations. See Notes 5 and 10 for further details. Revenue Recognition In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we follow a five-step process to recognize revenues: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied. We have determined that we have a contract with the patient when the treating clinician orders the test. Our contracts generally contain a single performance obligation, which is the delivery of the test report, and we satisfy our performance obligation at a point in time upon the delivery of the test report to the treating clinician, at which point we can bill for the report. The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration. See Note 3 for further details. Accounts Receivable and Allowance for Credit Losses We classify accounts receivable balances that are expected to be paid more than one year from the consolidated balance sheet date as noncurrent assets. The estimated timing of payment utilized as a basis for classification as noncurrent is determined by analyses of historical payor-specific payment experience, adjusted for known factors that are expected to change the timing of future payments. We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected. Management’s estimates are typically based on historical loss information adjusted for current conditions. We generally do not perform evaluations of customers’ financial condition and generally do not require collateral. Historically, our credit losses have not been significant. The allowance for credit losses was zero as of September 30, 2023 and December 31, 2022. Adjustments for implicit price concessions attributable to variable consideration, as discussed below, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that it may be impaired. We perform annual impairment reviews of our goodwill balance during the fourth quarter of each fiscal year. We may perform a qualitative assessment to determine if it is necessary to perform a quantitative impairment test. If we determine that a quantitative impairment test is necessary, we apply the guidance in Accounting Standards Update (“ASU”) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, by comparing the fair value of the reporting unit to its carrying value, including the goodwill. If the carrying value exceeds the fair value, we recognize an impairment loss for the amount by which the carrying value exceeds fair value, up to the total amount of goodwill allocated to the reporting unit. We did not incur any goodwill impairment losses in any of the periods presented. On June 2, 2023, a Medicare administrative contractor (“MAC”) finalized a local coverage determination (“LCD”) pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. On June 5, 2023, our stock price decreased significantly and did not recover before June 30, 2023. In response to this trigger, we tested goodwill for impairment at June 30, 2023. We elected to bypass the optional qualitative assessment and proceeded directly to the quantitative assessment. In conducting our interim test, we concluded that our business consists of a single reporting unit. To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Our impairment test indicated that the fair value of our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated. In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective. During the third quarter of 2023, we continued to monitor our market capitalization against the carrying value of our reporting unit and did not observe any significant changes since our impairment test at June 30, 2023. We are currently performing our annual impairment test, as of October 1, 2023, and we have not identified any additional indicators of impairment to date. Accrued Compensation We accrue for liabilities under discretionary employee and executive bonus plans. Our estimated compensation liabilities are based on progress against corporate objectives approved by our board of directors, compensation levels of eligible individuals and target bonus percentage levels. Our board of directors reviews and evaluates the performance against these objectives and ultimately determines the actual achievement levels attained. We also accrue for liabilities under employee sales incentive bonus plans with accruals based on performance achieved to date compared to established targets. As of September 30, 2023 and December 31, 2022, we accrued approximately $15,535,000 and $18,209,000, respectively, for liabilities associated with these bonus plans. These amounts are classified as current or noncurrent accrued liabilities in the unaudited condensed consolidated balance sheets based on the expected timing of payment. Stock-Based Compensation Stock-based compensation expense for equity instruments issued to employees is measured based on the grant-date fair value of the awards. The fair value of employee stock options and offerings under the 2019 Employee Stock Purchase Plan (the “ESPP”) are estimated on the date of grant using the Black-Scholes option-pricing valuation model. For restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), the fair value is equal to the closing price of our common stock on the date of grant. For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For options and RSUs, the requisite service period is generally the award’s vesting period (typically four years). PSUs vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. In these cases, the requisite service period takes into consideration the employee’s retirement eligibility, and is reassessed at each reporting date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date. Forfeitures are accounted for as they occur. Comprehensive Loss Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss is made up of net loss plus net unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss).

Revenue

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue

Disaggregation of Revenues

The table below provides the disaggregation of revenue by type (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Dermatologic(1)	$	51,151	$	33,924	$	130,097	$	90,160
Non-Dermatologic(2)	10,342		3,087		23,571		8,541
Total net revenues	$	61,493	$	37,011	$	153,668	$	98,701

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma).

(2)Consists of TissueCypher Barrett’s Esophagus Test, DecisionDx-UM and IDgenetix.

Payor Concentration

We rely upon reimbursements from third-party government payors (primarily Medicare) and private-payor insurance companies to collect accounts receivable related to sales of our tests.

Our significant third-party payors and their related revenues as a percentage of total revenues and accounts receivable balances are as follows:


	Percentage of Revenues
	Nine Months Ended September 30,				Percentage of Accounts Receivable (current) as of				Percentage of Accounts Receivable (noncurrent) as of
	2023		2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Medicare	49	%	52	%	23	%	28	%	*		*
Payor A	14	%	12	%	19	%	14	%	16	%	16	%
Payor B	*		*		10	%	*		11	%	*

* Less than 10%

There were no other third-party payors that individually accounted for more than 10% of our total revenue or accounts receivable for the periods shown in the table above.

Loss Per Share

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Loss Per Share

Loss Per ShareBasic loss per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options, vesting of RSUs and PSUs or purchases under the ESPP. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Contingently issuable PSU awards are included in the computation of diluted loss per share when the applicable performance criteria would be met and the common shares would be issuable if the end of the reporting period were the end of the contingency period. However, potentially dilutive shares are excluded from the computation of diluted loss per share when their effect is antidilutive.Because we reported a net loss for all periods presented, all potentially dilutive securities are antidilutive and are excluded from the computation of diluted loss per share for such periods.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	3,302	3,542	3,339	3,538
RSUs and PSUs	3,422	1,743	3,403	1,444
ESPP	371	168	320	124
Total	7,095	5,453	7,062	5,106

Marketable Investment Securities

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Marketable Investment Securities

The following tables present our available-for-sale debt securities (in thousands):


	September 30, 2023
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	138,601	$	—	$	(71)	$	138,530
Total	$	138,601	$	—	$	(71)	$	138,530


	December 31, 2022
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	136,058	$	—	$	(381)	$	135,677
Total	$	136,058	$	—	$	(381)	$	135,677

There were no realized gains or losses on sales of investments for the three and nine months ended September 30, 2023 and 2022.

Additional information relating to the fair value of marketable investment securities can be found in Note 10.

Acquisition

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisition

Unaudited Pro Forma Financial Information


	Pro Forma Data
	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Net revenues	$	37,011	$	99,253
Net loss	$	(20,302)	$	(52,247)

Related Parties

Property and Equipment, Net

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Lab equipment(1)	$	12,576	$	9,721
Leasehold improvements	9,673		5,171
Computer equipment	3,942		4,336
Furniture and fixtures	2,352		1,660
Construction-in-progress	909		1,275
Total	29,452		22,163
Less accumulated depreciation(1)	(7,179)		(7,848)
Property and equipment, net	$	22,273	$	14,315

Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	505	$	267	$	1,205	$	621
Research and development	84		85		246		255
Selling, general and administrative	313		265		913		775
Total	$	902	$	617	$	2,364	$	1,651

Goodwill and Other Intangible Assets, Net

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

Goodwill

The balance of our goodwill was $10.7 million as of September 30, 2023 and December 31, 2022. There were no accumulated impairments of goodwill as of September 30, 2023 or December 31, 2022.

Other Intangible Assets, Net

Our other intangible assets, net consist of the following (in thousands):


	September 30, 2023
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(16,759)	$	108,558	12.3
Assembled workforce	563		(206)		357		3.4
Total other intangible assets, net	$	125,880	$	(16,965)	$	108,915


	December 31, 2022
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(10,102)	$	115,215	12.9
Assembled workforce	563		(122)		441		4.0
Total other intangible assets, net	$	125,880	$	(10,224)	$	115,656

Other Accrued and Current Liabilities

9 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

Other Accrued and Current Liabilities

Other accrued and current liabilities consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Clinical studies	$	3,020	$	1,822
Accrued service fees	2,208		2,125
ESPP contributions	213		900

Other	458		415
Total	$	5,899	$	5,262

Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring us to develop our own assumptions.


	As of September 30, 2023
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	88,123	$	—	$	—	$	88,123
U.S. government securities(2)	$	138,530	$	—	$	—	$	138,530
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—


	As of December 31, 2022
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	108,673	$	—	$	—	$	108,673
U.S. government securities(2)	$	135,677	$	—	$	—	$	135,677
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—

(1)Classified as “Cash and cash equivalents” in the unaudited condensed consolidated balance sheets.

(2)Classified as “Marketable investment securities” in the unaudited condensed consolidated balance sheets.

(3)Current portion, if any, classified as “Other accrued and current liabilities” in the unaudited condensed consolidated balance sheets.

Contingent Consideration

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies From time to time, we may be involved in legal proceedings arising in the ordinary course of business. We believe there is no threatened litigation or litigation pending that could have, individually or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.

Stock Incentive Plans and Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Incentive Plans and Stock-Based Compensation

Stock Incentive Plans

Stock Options

Stock option activity under our stock plans for the nine months ended September 30, 2023 is set forth below:


		Weighted-Average
	Stock Options Outstanding	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2022	3,419,840	$	35.11

Granted	170	$	25.06
Exercised	(49,757)	$	3.96
Forfeited/Cancelled	(93,819)	$	45.24
Balance as of September 30, 2023	3,276,434	$	35.29	6.8	$	7,087
Exercisable at September 30, 2023	2,537,555	$	32.21	6.5	$	7,087

Restricted Stock Units

The following table summarizes our RSU activity for the nine months ended September 30, 2023:


	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	3,477,922	$	27.56
Granted	315,950	$	17.65
Vested(1)	(200,824)	$	28.19
Forfeited/Cancelled	(253,548)	$	26.45
Balance as of September 30, 2023	3,339,500	$	26.67

(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 53,646 for the nine months ended September 30, 2023.

Performance-Based Restricted Stock Units

PSUs represent the right to receive shares of our common stock contingent upon the achievement of certain financial performance measures. We issue new shares of common stock upon the vesting of PSUs.

The following table summarizes our PSU activity for the nine months ended September 30, 2023:


	Performance-Based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	196,033	$	23.23
Granted	—	$	—
Vested	—	$	—
Forfeited/Cancelled	—	$	—
Balance as of September 30, 2023	196,033	$	23.23

Retirement Policy

Employee Stock Purchase Plan

Determining Fair Value - Summary of Assumptions


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	5.0	5.9
Expected stock price volatility	75.57% - 76.01%	68.34% - 73.33%
Risk-free interest rate	3.57% - 3.57%	1.54% - 3.03%
Dividend yield	—%	—%

The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP:


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	1.3	1.2
Expected stock price volatility	93.17% - 130.95%	62.98% - 91.78%
Risk-free interest rate	4.74% - 5.33%	0.60% - 3.45%
Dividend yield	—%	—%

We use the closing price of our common stock on the date of grant to determine the fair value of RSUs and PSUs.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	1,245	$	975	$	3,719	$	2,725
Research and development	2,682		1,948		7,755		5,607
Selling, general and administrative	9,116		6,273		27,943		18,066
Total stock-based compensation expense	$	13,043	$	9,196	$	39,417	$	26,398

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesIn connection with our acquisition of AltheaDx in 2022, we recorded deferred tax liabilities based on our allocation of the fair values of assets acquired and liabilities assumed. As a result of these additional deferred tax liabilities, we recorded a $1,769,000 reduction to our existing valuation allowance on deferred tax assets, which was reflected in our income tax benefit on the condensed consolidated statements of operations for the nine months ended September 30, 2022 as a discrete item.

Subsequent Event	9 Months Ended
Subsequent Event	Sep. 30, 2023
Subsequent Events [Abstract]
Subsequent Event	Subsequent EventOn July 10, 2023, following approval by our board of directors, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments. Under the agreement, we had the option to terminate the contract within 90 days, for any reason. On October 4, 2023, we amended the definitive agreement to extend the option period by an additional 30 days. The option period is being used to complete initial suitability diligence. Closing, if it should occur, is expected in late 2023.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation	Our unaudited condensed consolidated financial statements include the accounts of Castle Biosciences, Inc. and our wholly owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’).
Consolidation	All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates	The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include revenue recognition, the valuation of stock-based compensation, assessing future tax exposure and the realizability of deferred tax assets, the useful lives and recoverability of long-lived assets, the goodwill impairment test, the valuation of acquired intangible assets and the valuation of contingent consideration and other contingent liabilities. We base these estimates on historical and anticipated results, trends, and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents	Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds, which are not insured by the Federal Deposit Insurance Corporation (“FDIC”), that are primarily invested in short-term U.S. government obligations.
Concentration of Credit Risk	Cash deposits at financial institutions may exceed the amount of insurance provided by the FDIC. Management believes that we are not exposed to significant credit risk on our cash deposits due to the financial position of the financial institutions in which deposits are held.
Marketable Investment Securities	All debt securities are recognized in accordance with Financial Accounting Standards Board (‘‘FASB’’) Accounting Standards Codification (‘‘ASC’’) Topic 320, Investments-Debt Securities (‘‘ASC 320’’). Management determines the appropriate classification of securities at the time of purchase and re-evaluates such determination at each balance sheet date. All debt securities are classified as available-for-sale and are recorded at fair value in accordance with ASC 320. We recognize the unrealized gains and losses related to changes in fair value as a separate component of accumulated other comprehensive loss within total stockholders’ equity, net of any related deferred income tax effects, on our condensed consolidated balance sheets. Premiums or discounts from par value are amortized to interest income over the life of the underlying investment. Realized gains and losses on available-for-sale securities are calculated at the individual security level and included in interest income in the condensed consolidated statements of operations. Impairments of available-for-sale debt securities, if any, are recorded in our unaudited condensed consolidated statements of operations.
Revenue Recognition	In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we follow a five-step process to recognize revenues: (1) identify the contract with the customer, (2) identify the performance obligations, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations and (5) recognize revenues when the performance obligations are satisfied. We have determined that we have a contract with the patient when the treating clinician orders the test. Our contracts generally contain a single performance obligation, which is the delivery of the test report, and we satisfy our performance obligation at a point in time upon the delivery of the test report to the treating clinician, at which point we can bill for the report. The amount of revenue recognized reflects the amount of consideration to which we expect to be entitled, or the transaction price, and considers the effects of variable consideration.
Accounts Receivable	We classify accounts receivable balances that are expected to be paid more than one year from the consolidated balance sheet date as noncurrent assets. The estimated timing of payment utilized as a basis for classification as noncurrent is determined by analyses of historical payor-specific payment experience, adjusted for known factors that are expected to change the timing of future payments.
Allowance for Credit Losses	We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected. Management’s estimates are typically based on historical loss information adjusted for current conditions. We generally do not perform evaluations of customers’ financial condition and generally do not require collateral. Historically, our credit losses have not been significant. The allowance for credit losses was zero as of September 30, 2023 and December 31, 2022. Adjustments for implicit price concessions attributable to variable consideration, as discussed below, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses.
Goodwill	Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, our goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that it may be impaired. We perform annual impairment reviews of our goodwill balance during the fourth quarter of each fiscal year. We may perform a qualitative assessment to determine if it is necessary to perform a quantitative impairment test. If we determine that a quantitative impairment test is necessary, we apply the guidance in Accounting Standards Update (“ASU”) No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, by comparing the fair value of the reporting unit to its carrying value, including the goodwill. If the carrying value exceeds the fair value, we recognize an impairment loss for the amount by which the carrying value exceeds fair value, up to the total amount of goodwill allocated to the reporting unit. We did not incur any goodwill impairment losses in any of the periods presented. On June 2, 2023, a Medicare administrative contractor (“MAC”) finalized a local coverage determination (“LCD”) pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023. On June 5, 2023, our stock price decreased significantly and did not recover before June 30, 2023. In response to this trigger, we tested goodwill for impairment at June 30, 2023. We elected to bypass the optional qualitative assessment and proceeded directly to the quantitative assessment. In conducting our interim test, we concluded that our business consists of a single reporting unit. To measure the fair value of our reporting unit, we used a market approach whereby we calculated our total market capitalization on the impairment test date, based on the closing price of our common stock as reported on the Nasdaq Global Market, and applied a reasonable control premium. The control premium was based on an analysis of control premiums paid in recent acquisitions of companies in the same or similar industry as us. Our impairment test indicated that the fair value of our reporting unit exceeded its carrying value by 13% and therefore no impairment was indicated. In July 2023, the MAC suspended the LCD and then posted a new draft LCD for comment that is substantially the same as the LCD that was to become effective. During the third quarter of 2023, we continued to monitor our market capitalization against the carrying value of our reporting unit and did not observe any significant changes since our impairment test at June 30, 2023. We are currently performing our annual impairment test, as of October 1, 2023, and we have not identified any additional indicators of impairment to date.
Accrued Compensation	We accrue for liabilities under discretionary employee and executive bonus plans. Our estimated compensation liabilities are based on progress against corporate objectives approved by our board of directors, compensation levels of eligible individuals and target bonus percentage levels. Our board of directors reviews and evaluates the performance against these objectives and ultimately determines the actual achievement levels attained. We also accrue for liabilities under employee sales incentive bonus plans with accruals based on performance achieved to date compared to established targets. As of September 30, 2023 and December 31, 2022, we accrued approximately $15,535,000 and $18,209,000, respectively, for liabilities associated with these bonus plans. These amounts are classified as current or noncurrent accrued liabilities in the unaudited condensed consolidated balance sheets based on the expected timing of payment.
Stock-Based Compensation	Stock-based compensation expense for equity instruments issued to employees is measured based on the grant-date fair value of the awards. The fair value of employee stock options and offerings under the 2019 Employee Stock Purchase Plan (the “ESPP”) are estimated on the date of grant using the Black-Scholes option-pricing valuation model. For restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), the fair value is equal to the closing price of our common stock on the date of grant. For awards with graded vesting and only service conditions, we recognize compensation costs on a straight-line basis over the requisite service period of the awards. For options and RSUs, the requisite service period is generally the award’s vesting period (typically four years). PSUs vest upon the achievement of certain performance conditions and the provision of service with us through a specified period. Accruals of compensation cost for PSUs are based on the probable outcome of the performance conditions and are reassessed each reporting period. We recognize compensation cost for PSUs separately for each vesting tranche on a ratable basis over the requisite service period. The requisite service period for PSUs is based on an analysis of vesting requirements and performance conditions for the particular award. Certain employees are entitled to acceleration of vesting of a portion of their awards upon retirement, subject to age, service and notice requirements. In these cases, the requisite service period takes into consideration the employee’s retirement eligibility, and is reassessed at each reporting date. For the ESPP, the requisite service period is generally the period of time from the offering date to the purchase date. Forfeitures are accounted for as they occur.
Comprehensive Loss	Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss is made up of net loss plus net unrealized gain (loss) on marketable investment securities, which is our only other item of other comprehensive income (loss).

Revenue (Tables)

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedules of Disaggregation of Revenue

The table below provides the disaggregation of revenue by type (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Dermatologic(1)	$	51,151	$	33,924	$	130,097	$	90,160
Non-Dermatologic(2)	10,342		3,087		23,571		8,541
Total net revenues	$	61,493	$	37,011	$	153,668	$	98,701

(1)Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic Gene Expression Profile offering (MyPath Melanoma and DiffDx-Melanoma).

(2)Consists of TissueCypher Barrett’s Esophagus Test, DecisionDx-UM and IDgenetix.

Schedules of Concentration of Risk, by Risk Factor

Our significant third-party payors and their related revenues as a percentage of total revenues and accounts receivable balances are as follows:


	Percentage of Revenues
	Nine Months Ended September 30,				Percentage of Accounts Receivable (current) as of				Percentage of Accounts Receivable (noncurrent) as of
	2023		2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Medicare	49	%	52	%	23	%	28	%	*		*
Payor A	14	%	12	%	19	%	14	%	16	%	16	%
Payor B	*		*		10	%	*		11	%	*

* Less than 10%

Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2023

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	3,302	3,542	3,339	3,538
RSUs and PSUs	3,422	1,743	3,403	1,444
ESPP	371	168	320	124
Total	7,095	5,453	7,062	5,106

Marketable Investment Securities (Tables)

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Debt Securities, Available-for-Sale

The following tables present our available-for-sale debt securities (in thousands):


	September 30, 2023
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	138,601	$	—	$	(71)	$	138,530
Total	$	138,601	$	—	$	(71)	$	138,530


	December 31, 2022
	Amortized Cost		Unrealized				Estimated Fair Value
			Gains		Losses
U.S. government securities	$	136,058	$	—	$	(381)	$	135,677
Total	$	136,058	$	—	$	(381)	$	135,677

Acquisition (Tables)

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Unaudited Pro forma Financial Information and Net Income

The following unaudited pro forma financial information (in thousands) is for informational purposes only and is not necessarily indicative of (i) the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2021 or (ii) the results of operations that are expected in future periods:


	Pro Forma Data
	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Net revenues	$	37,011	$	99,253
Net loss	$	(20,302)	$	(52,247)

Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Lab equipment(1)	$	12,576	$	9,721
Leasehold improvements	9,673		5,171
Computer equipment	3,942		4,336
Furniture and fixtures	2,352		1,660
Construction-in-progress	909		1,275
Total	29,452		22,163
Less accumulated depreciation(1)	(7,179)		(7,848)
Property and equipment, net	$	22,273	$	14,315

Depreciation expense was recorded in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	505	$	267	$	1,205	$	621
Research and development	84		85		246		255
Selling, general and administrative	313		265		913		775
Total	$	902	$	617	$	2,364	$	1,651

Goodwill and Other Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

Our other intangible assets, net consist of the following (in thousands):


	September 30, 2023
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(16,759)	$	108,558	12.3
Assembled workforce	563		(206)		357		3.4
Total other intangible assets, net	$	125,880	$	(16,965)	$	108,915


	December 31, 2022
	Gross carrying value		Accumulated amortization		Net		Weighted-Average Remaining Life (in years)
Developed technology	$	125,317	$	(10,102)	$	115,215	12.9
Assembled workforce	563		(122)		441		4.0
Total other intangible assets, net	$	125,880	$	(10,224)	$	115,656

Other Accrued and Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

Schedule of Accrued And Current Liabilities

Other accrued and current liabilities consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Clinical studies	$	3,020	$	1,822
Accrued service fees	2,208		2,125
ESPP contributions	213		900

Other	458		415
Total	$	5,899	$	5,262

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis


	As of September 30, 2023
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	88,123	$	—	$	—	$	88,123
U.S. government securities(2)	$	138,530	$	—	$	—	$	138,530
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—


	As of December 31, 2022
	Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Money market funds(1)	$	108,673	$	—	$	—	$	108,673
U.S. government securities(2)	$	135,677	$	—	$	—	$	135,677
Liabilities
Contingent consideration(3)	$	—	$	—	$	—	$	—

(1)Classified as “Cash and cash equivalents” in the unaudited condensed consolidated balance sheets.

(2)Classified as “Marketable investment securities” in the unaudited condensed consolidated balance sheets.

(3)Current portion, if any, classified as “Other accrued and current liabilities” in the unaudited condensed consolidated balance sheets.

Stock Incentive Plans and Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Share-based Payment Arrangement on Stock Option Activity

Stock option activity under our stock plans for the nine months ended September 30, 2023 is set forth below:


		Weighted-Average
	Stock Options Outstanding	Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance as of December 31, 2022	3,419,840	$	35.11

Granted	170	$	25.06
Exercised	(49,757)	$	3.96
Forfeited/Cancelled	(93,819)	$	45.24
Balance as of September 30, 2023	3,276,434	$	35.29	6.8	$	7,087
Exercisable at September 30, 2023	2,537,555	$	32.21	6.5	$	7,087

Schedule of Share-based Payment Arrangement on Restricted Stock Units

The following table summarizes our RSU activity for the nine months ended September 30, 2023:


	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	3,477,922	$	27.56
Granted	315,950	$	17.65
Vested(1)	(200,824)	$	28.19
Forfeited/Cancelled	(253,548)	$	26.45
Balance as of September 30, 2023	3,339,500	$	26.67

(1)The aggregate number of shares withheld upon vesting for employee tax obligations was 53,646 for the nine months ended September 30, 2023.

Schedule of Share-Based Payment Arrangement, Performance Shares, Activity

The following table summarizes our PSU activity for the nine months ended September 30, 2023:


	Performance-Based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022	196,033	$	23.23
Granted	—	$	—
Vested	—	$	—
Forfeited/Cancelled	—	$	—
Balance as of September 30, 2023	196,033	$	23.23

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The following table sets forth the assumptions used to determine the fair value of stock options:


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	5.0	5.9
Expected stock price volatility	75.57% - 76.01%	68.34% - 73.33%
Risk-free interest rate	3.57% - 3.57%	1.54% - 3.03%
Dividend yield	—%	—%

Schedule of Share-based Payment Award, ESPP, Valuation Assumptions

The following table sets forth assumptions used to determine the fair value of the purchase rights issued under the ESPP:


	Nine Months Ended September 30,
	2023	2022
Average expected term (years)	1.3	1.2
Expected stock price volatility	93.17% - 130.95%	62.98% - 91.78%
Risk-free interest rate	4.74% - 5.33%	0.60% - 3.45%
Dividend yield	—%	—%

Schedule of Share-based Payment Arrangement, Expensed and Capitalized, Amount

Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of sales (exclusive of amortization of acquired intangible assets)	$	1,245	$	975	$	3,719	$	2,725
Research and development	2,682		1,948		7,755		5,607
Selling, general and administrative	9,116		6,273		27,943		18,066
Total stock-based compensation expense	$	13,043	$	9,196	$	39,417	$	26,398

Organization and Description of Business (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 215,791	$ 160,905
Cash and cash equivalents	91,223	122,948
Marketable investment securities	$ 138,530	$ 135,677

Summary of Significant Accounting Policies - Narrative (Details) - USD ($)	9 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Allowance for credit losses	$ 0	$ 0
Percentage of fair value in excess of carrying value (percent)	13.00%
Goodwill impairment	$ 0
Accrued bonuses	$ 15,535,000	$ 18,209,000
Vesting period	4 years

Revenue - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Revenue - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenue from Contract with Customer [Abstract]
Number of days contract with customer is generally paid			30 days
Variable consideration adjustments included in revenue	$ 883	$ (277)	$ (3,085)	$ (1,850)

Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Total net revenues	$ 61,493	$ 37,011	$ 153,668	$ 98,701
Dermatologic
Disaggregation of Revenue [Line Items]
Total net revenues	51,151	33,924	130,097	90,160
Non-Dermatologic
Disaggregation of Revenue [Line Items]
Total net revenues	$ 10,342	$ 3,087	$ 23,571	$ 8,541

Revenue - Concentration of Risk, by Risk Factor (Details) - Third-Party Payor Concentration Risk	9 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Medicare \| Percentage of Revenues
Concentration Risk [Line Items]
Concentration risk percentage	49.00%	52.00%
Medicare \| Percentage of Accounts Receivable (current)
Concentration Risk [Line Items]
Concentration risk percentage	23.00%		28.00%
Payor A \| Percentage of Revenues
Concentration Risk [Line Items]
Concentration risk percentage	14.00%	12.00%
Payor A \| Percentage of Accounts Receivable (current)
Concentration Risk [Line Items]
Concentration risk percentage	19.00%		14.00%
Payor A \| Percentage of Accounts Receivable (noncurrent)
Concentration Risk [Line Items]
Concentration risk percentage	16.00%		16.00%
Payor B \| Percentage of Accounts Receivable (current)
Concentration Risk [Line Items]
Concentration risk percentage	10.00%
Payor B \| Percentage of Accounts Receivable (noncurrent)
Concentration Risk [Line Items]
Concentration risk percentage	11.00%

Loss Per Share - (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
Loss Per Share - (Details) - shares shares in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (in shares)	7,095	5,453	7,062	5,106
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (in shares)	3,302	3,542	3,339	3,538
RSUs and PSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (in shares)	3,422	1,743	3,403	1,444
ESPP
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (in shares)	371	168	320	124

Marketable Investment Securities - Schedule of Available-for-Sale Debt Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Securities, Available-for-Sale [Line Items]
Amortized Cost	$ 138,601	$ 136,058
Unrealized gains	0	0
Unrealized losses	(71)	(381)
Estimated Fair Value	138,530	135,677
U.S. government securities
Debt Securities, Available-for-Sale [Line Items]
Amortized Cost	138,601	136,058
Unrealized gains	0	0
Unrealized losses	(71)	(381)
Estimated Fair Value	$ 138,530	$ 135,677

Marketable Investment Securities - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Realized gain (loss) on sale of investment	$ 0	$ 0	$ 0	$ 0
Impairment loss	0	$ 0	0	$ 0
Allowance for credit loss	0		0		$ 0
Accrued interest receivable	$ 0		$ 0		$ 0

Acquisition - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended		12 Months Ended
Acquisition - Narrative (Details) - USD ($) $ in Thousands	Apr. 26, 2022	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2022
Business Acquisition [Line Items]
Goodwill		$ 10,700		$ 10,700			$ 10,700
Income tax (expense) benefit		(32)	$ 0	(62)	$ 1,823
AltheaDx, Inc
Business Acquisition [Line Items]
Percentage of voting interest acquired	100.00%
Payments to acquire business	$ 30,500
Consideration transferred, equity interests transferred	17,100
Total consideration transferred	47,600
Finite-lived intangible assets acquired	35,000
Goodwill	10,700
Cash acquired	3,500
Deferred tax liability acquired	$ 1,700
Loss from acquisition date					8,199
Contingent consideration in acquisition of business		$ 0		$ 0			$ 0
AltheaDx, Inc \| Acquisition-related Costs
Business Acquisition [Line Items]
Transaction costs expensed					$ 1,711	$ 1,711
AltheaDx, Inc \| Income Tax Adjustment
Business Acquisition [Line Items]
Income tax (expense) benefit						$ 1,769

Acquisition - Schedule of Unaudited Pro forma Financial Information and Net Income (Details) - AltheaDx, Inc - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2022
Business Acquisition [Line Items]
Net revenues	$ 37,011	$ 99,253
Net loss	$ (20,302)	$ (52,247)

Property and Equipment, Net - Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Total	$ 29,452	$ 22,163
Less accumulated depreciation	(7,179)	(7,848)
Property and equipment, net	22,273	14,315
Lab equipment
Property, Plant and Equipment [Line Items]
Total	12,576	9,721
Finance lease, right-of-use asset, before accumulated amortization	369	369
Finance lease, right-of-use asset, accumulated amortization	243	137
Leasehold improvements
Property, Plant and Equipment [Line Items]
Total	9,673	5,171
Computer equipment
Property, Plant and Equipment [Line Items]
Total	3,942	4,336
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Total	2,352	1,660
Construction-in-progress
Property, Plant and Equipment [Line Items]
Total	$ 909	$ 1,275

Property and Equipment, Net - Depreciation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Property, Plant and Equipment [Line Items]
Depreciation	$ 902	$ 617	$ 2,364	$ 1,651
Cost of sales (exclusive of amortization of acquired intangible assets)
Property, Plant and Equipment [Line Items]
Depreciation	505	267	1,205	621
Research and development
Property, Plant and Equipment [Line Items]
Depreciation	84	85	246	255
Selling, general and administrative
Property, Plant and Equipment [Line Items]
Depreciation	$ 313	$ 265	$ 913	$ 775

Goodwill and Other Intangible Assets, Net - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 10,700,000		$ 10,700,000		$ 10,700,000
Goodwill accumulated impairment	0		0		$ 0
Amortization of acquired intangible assets	$ 2,272,000	$ 2,306,000	$ 6,742,000	$ 6,051,000

Goodwill and Other Intangible Assets, Net - Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	$ 125,880	$ 125,880
Accumulated amortization	(16,965)	(10,224)
Net	108,915	115,656
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	125,317	125,317
Accumulated amortization	(16,759)	(10,102)
Net	$ 108,558	$ 115,215
Weighted-Average Remaining Life (in years)	12 years 3 months 18 days	12 years 10 months 24 days
Assembled workforce
Finite-Lived Intangible Assets [Line Items]
Gross carrying value	$ 563	$ 563
Accumulated amortization	(206)	(122)
Net	$ 357	$ 441
Weighted-Average Remaining Life (in years)	3 years 4 months 24 days	4 years

Other Accrued and Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Clinical studies	$ 3,020	$ 1,822
Accrued service fees	2,208	2,125
ESPP contributions	213	900
Other	458	415
Total	$ 5,899	$ 5,262

Fair Value Measurements - Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	$ 138,530	$ 135,677
U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	138,530	135,677
Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	88,123	108,673
Contingent consideration	0	0
Fair Value, Recurring \| U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	138,530	135,677
Fair Value, Recurring \| Quoted Prices in Active Markets for Identical Items (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	88,123	108,673
Contingent consideration	0	0
Fair Value, Recurring \| Quoted Prices in Active Markets for Identical Items (Level 1) \| U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	138,530	135,677
Fair Value, Recurring \| Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Contingent consideration	0	0
Fair Value, Recurring \| Significant Other Observable Inputs (Level 2) \| U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	0	0
Fair Value, Recurring \| Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	0
Contingent consideration	0	0
Fair Value, Recurring \| Significant Unobservable Inputs (Level 3) \| U.S. government securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale debt securities	$ 0	$ 0

Fair Value Measurements - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
Fair Value Measurements - Narrative (Details) - USD ($)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022	Apr. 26, 2022	Dec. 31, 2021
AltheaDx, Inc
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Additional consideration payable based on achievement of certain commercial milestones						$ 75,000,000
Contingent consideration, portion not paid					$ 35,000,000
Contingent consideration, catch up payment			$ 17,500,000
Potential payment obligation	$ 57,500,000		57,500,000
Earnout payment, amount due	0		0
Recognized (gain) loss of contingent consideration	0	$ (200,000)	0	$ 300,000
Value of contingent consideration	0		0		0
Cernostics, Inc.
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Additional consideration payable based on achievement of certain commercial milestones							$ 50,000,000
Earnout payments					0
Contingent consideration					$ 0
Increase (decrease) in amount of contingent consideration	$ 0	$ 0	$ 0	$ (18,300,000)

Stock Incentive Plans and Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Thousands		3 Months Ended	9 Months Ended
	Jan. 01, 2023 shares	Sep. 30, 2023 USD ($) shares	Sep. 30, 2023 USD ($) vesting_period $ / shares shares	Sep. 30, 2022 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Accelerated recognition of compensation expense \| $		$ 500	$ 1,600
Unrecognized compensation costs \| $		$ 96,424	$ 96,424
Unrecognized compensation expense, period for recognition			2 years 4 months 24 days
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date vesting in period \| vesting_period			4
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted, weighted average grant date fair value (in dollars per share) \| $ / shares			$ 15.99	$ 14.34
2019 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in number of shares authorized for issuance (in shares)	1,327,684
Percentage of common shares outstanding			5.00%
Number of shares available for grant (in shares)		124,383	124,383
2022 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)		164,306	164,306
Employee stock purchase plan \| ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in number of shares authorized for issuance (in shares)	265,536
Number of shares available for grant (in shares)		940,263	940,263
Shares issued during period (in shares)			139,872
Options granted, weighted average grant date fair value (in dollars per share) \| $ / shares			$ 11.51	$ 16.79

Stock Incentive Plans and Stock-Based Compensation - Activity Under Stock Incentive Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2023
Stock Options Outstanding
Beginning balance (in shares)	3,419,840
Granted (in shares)	170
Exercised (in shares)	(49,757)
Forfeited/Cancelled (in shares)	(93,819)
Ending balance (in shares)	3,276,434
Options exercisable, number of options (in shares)	2,537,555
Exercise Price
Beginning balance (in dollars per share)	$ 35.11
Granted (in dollars per share)	25.06
Exercised (in dollars per share)	3.96
Forfeited/Cancelled (in dollars per share)	45.24
Ending balance (in dollars per share)	35.29
Options exercisable, weighted average exercise price (in dollars per share)	$ 32.21
Stock Option Activity, Additional Disclosures
Options outstanding, weighted average remaining contractual term	6 years 9 months 18 days
Options exercisable, weighted average remaining contractual term	6 years 6 months
Options outstanding, aggregate intrinsic value	$ 7,087
Options exercisable, aggregate intrinsic value	$ 7,087

Stock Incentive Plans and Stock Based Compensation - Restricted Stock Units and Performance Stock Units (Details)	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Restricted Stock Units (RSUs)
Restricted Stock Units Outstanding
Beginning Balance (in shares)	3,477,922
Granted (in shares)	315,950
Vested (in shares)	(200,824)
Forfeited/Cancelled (in shares)	(253,548)
Ending Balance (in shares)	3,339,500
Weighted-Average Grant Date Fair Value
Weighted average grant date fair value at beginning balance (in dollars per share) \| $ / shares	$ 27.56
Granted (in dollars per share) \| $ / shares	17.65
Vested (in dollars per share) \| $ / shares	28.19
Forfeited / Cancelled (in dollars per share) \| $ / shares	26.45
Weighted average grant date fair value at ending balance (in dollars per share) \| $ / shares	$ 26.67
Withheld upon vesting for employee tax obligations (in shares)	53,646
Performance-Based Restricted Stock Units
Restricted Stock Units Outstanding
Beginning Balance (in shares)	196,033
Granted (in shares)	0
Vested (in shares)	0
Forfeited/Cancelled (in shares)	0
Ending Balance (in shares)	196,033
Weighted-Average Grant Date Fair Value
Weighted average grant date fair value at beginning balance (in dollars per share) \| $ / shares	$ 23.23
Granted (in dollars per share) \| $ / shares	0
Vested (in dollars per share) \| $ / shares	0
Forfeited / Cancelled (in dollars per share) \| $ / shares	0
Weighted average grant date fair value at ending balance (in dollars per share) \| $ / shares	$ 23.23

Stock Incentive Plans and Stock-Based Compensation - Assumptions Used in Fair Value of Stock Options and ESPP (Details)	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Employee stock purchase plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average expected term (years)	1 year 3 months 18 days	1 year 2 months 12 days
Expected stock price volatility, minimum	93.17%	62.98%
Expected stock price volatility, maximum	130.95%	91.78%
Risk-free interest rate, minimum	4.74%	0.60%
Risk-free interest rate, maximum	5.33%	3.45%
Dividend yield	0.00%	0.00%
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average expected term (years)	5 years	5 years 10 months 24 days
Expected stock price volatility, minimum	75.57%	68.34%
Expected stock price volatility, maximum	76.01%	73.33%
Risk-free interest rate, minimum	3.57%	1.54%
Risk-free interest rate, maximum	3.57%	3.03%
Dividend yield	0.00%	0.00%

Stock Incentive Plans and Stock-Based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 13,043	$ 9,196	$ 39,417	$ 26,398
Cost of sales (exclusive of amortization of acquired intangible assets)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	1,245	975	3,719	2,725
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	2,682	1,948	7,755	5,607
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 9,116	$ 6,273	$ 27,943	$ 18,066

Income Taxes - (Details) $ in Thousands	9 Months Ended
Income Taxes - (Details) $ in Thousands	Sep. 30, 2022 USD ($)
AltheaDx, Inc
Business Acquisition [Line Items]
Reduction of existing valuation allowance on deferred tax assets	$ 1,769

Subsequent Event (Details) - Plot of Land, Friendswood Texas - USD ($) $ in Millions	Oct. 04, 2023	Jul. 10, 2023
Subsequent Event [Line Items]
Purchase of land		$ 7.6
Option to terminate contract		90 days
Subsequent Event
Subsequent Event [Line Items]
Option to terminate contract, extended period	30 days

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