Good afternoon, and welcome to Castle Biosciences First Quarter 2022 Conference Call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would now like to turn the call over to Camilla Zuckero, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

Thank you, Operator. Good afternoon, everyone. Welcome to Castle Biosciences First Quarter 2022 Financial Results Conference Call. Joining me today is Castle's Founder, President and Chief Executive Officer, Derek Maetzold; and Chief Financial Officer, Frank Stokes. Information recorded on this call speaks only as of today, May 9, 2022. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately 3 weeks. Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our financial outlook, TAM and similar items referenced in our earnings release issued today and statements containing projections regarding future events or our future financial or operational performance, including our expectations and assumptions related to the impact of the COVID-19 pandemic. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties, and there can be no assurances that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2022, under the heading Risk Factors and in the company's other documents and reports filed with the Securities and Exchange Commission. These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, adjusted gross margin and adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP items should be used in addition to and not as a substitute for any GAAP results. We believe these metrics provide useful supplemental information in assessing our revenue and cash flow performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek.

Thank you, Camilla, and good afternoon, everyone. Thank you for joining us. Today, I will take you through execution and strategy highlights from the quarter, and then Frank will provide financial highlights for the period. And then we will take your questions. As always, I want to thank all of our Castle employees for their hard work during the quarter and continued dedication to our mission of improving health through innovative tests that guide patient care. We had a strong quarter, which we believe will provide us with significant momentum for the rest of the year. We delivered almost 70% growth in total test volume over the first quarter of 2021 and $26.9 million in revenue, which we attribute to our continued focus on our strategy and strong operational performance. We saw strong year-over-year growth in our core dermatology business and our combined dermatology test volume that is DecisionDx-Melanoma DecisionDx-SCC and our comprehensive diagnostic offering of myPath Melanoma and DiffDx-Melanoma, which grew by 69% over the first quarter of 2021. We continue to make careful investments intended to further accelerate growth in our core dermatology business as well as investments in the 2 other pillars of our growth strategy, our pipeline initiatives and strategic opportunities. I will highlight across each of these pillars, starting with our strong core dermatology business. But first, I would like to emphasize that we entered 2020 with an estimated in-market U.S. total addressable market, or TAM, of approximately $540 million. Despite the COVID headwind with the launches of both DecisionDx-SCC and DiffDx-Melanoma test in the second half of 2020, we entered 2021 with an estimated in-market U.S. TAM of just under $2 billion. And as of April 2022, following our acquisition of AltheaDx, we now have an estimated in-market U.S. TAM of just under $8…

Thank you, Derek, and good afternoon. First quarter revenue was $26.9 million, an increase of 18% over the first quarter of 202. Overall, the increased revenues primarily reflects both higher report volumes for our DecisionDx-Melanoma and DecisionDx-UM test, partially offset by lower revenue adjustments related to tests delivered in prior periods. We believe the higher volumes are attributable to a combination of increased patient flows from the easing of COVID-19 restrictions and the effects of our dermatologic sales force expansion last year. Excluding the effects of revenue adjustments related to tests delivered in prior periods, adjusted revenue was $26.3 million, an increase of 50% over the first quarter of 2021. For the 3 months ended March 31, 2022 and 2021, we recorded net positive revenue adjustments of $0.6 million and $5.3 million, respectively, related to tests delivered in previous periods associated with changes in estimated variable consideration. We are raising our full year 2022 revenue guidance and now anticipate generating revenue between $118 million and $123 million, which we believe will be driven by further consistent execution on our growth plans and in particular, the AltheaDx acquisition. Our gross margin during the first quarter was 71.7% compared to 86.7% in the first quarter of 2021. Our adjusted gross margin, which excludes the effects of intangible asset amortization-related to our acquisitions and revenue associated with test reports delivered in prior periods was 77.4% for the quarter compared to 82.7% for the same period in 2021. As you saw in the first quarter, we continue to expect our gross margin percentage to be negatively impacted in the near and mid-term by increased spending on investments to facilitate and support anticipated growth and report volumes in advance of obtaining reimbursement coverage for several of our tests. These investments may include additional laboratory personnel…

Thank you, Frank. In summary, we're off to a great start in 2022, delivering strong year-over-year growth in our cured dermatology business and a laser-like focus on strategy execution. We continue to make thoughtful investments to accelerate growth, and we are seeing results of those investments. I would like to conclude today by thanking our Castle team. I thank you for your continued interest in Castle. Now we are happy to take your questions. Operator?

[Operator Instructions] Our first question today comes from the line of Puneet Souda, SVB Leerink.

So first one is on guide. I just wanted to understand. I mean, you delivered about $1 million ahead of us and the consensus, I believe, as well. And you're expecting $2 million for AltheaDx. So given that, that seems to account for the increase in the guide at the midpoint combining those 2 elements. So I just wanted to understand, given the momentum you're seeing in the market, is there anything that giving you a pause a little bit. Is it still COVID sluggishness? Is there rep access? Anything else that you would point to that is giving you -- a slight more confidence that it appeared to me that you would have more confidence at this point in time given where the current markets are, and we're out of -- somewhat out of COVID at this point in time, hopefully.

That's a great question, Puneet. Derek here. I'll maybe give some flavor and Frank can correct me. I think that one, its only the first quarter. And so you're right, we exited last year with really, really strong momentum. Certainly in our dermatology business, we're early on in the launch of both TissueCypher of course, only closed this quarter on AltheaDx. And so there certainly is some conservative as I think in terms of thinking through the opportunities for the other new products, I guess, we say from a launch standpoint, but nothing we see reflect any kind of a pullback rep access, et cetera, et cetera. But do you want to --

I would just remind you that the range, the Althea revenue guide was $1 million to $3 million rather than in a single midpoint. And I think that the revised guidance reflects our enthusiasm and excitement about the tremendous execution in our core derm business that we continue to see.

Okay. That's helpful. And then Derek, maybe taking a step back, when you look at the AJCC guidelines overall, where DecisionDx-Melanoma is today the momentum that you've had in the data generation that you've had for the last few years. The fact that DecisionDx-Melanoma and correct me if I'm wrong, it's mid-teens to high teens penetrated in the market. At what point do you think you can approach the AJCC guidelines and potentially, we can see a potential or inclusion of this test longer term into the guidelines?

Yes, excellent collection again. I would maybe separate out slightly. So AJCC really is about diagnostic workup only. And I think it was until the last version, which was probably, what, December '17 or January '18 when you saw them including even Oncotype for breast in terms of the diagnostic workup guidelines. So I think impacting AJCC diagnostic criteria is a ways off, but that's mainly because they try to harmonize with the WHO equivalent. As it relates to NCCN guidelines, which I thought maybe before your question was going, we certainly believe that this recent National Cancer Institute/SEER collaborative study that we have ongoing with NCI is a very significant real-world large prospective data set that shows that when clinicians have an opportunity to incorporate the results of our test with the other standard of care information they get with them, clinical and pathologic features that they're able to make, I'm interpolating were slightly better decisions that results in living longer, and that's pretty significant. And given that it's not a Castle study, but a third-party large NCI study, I think, should bear weight. I certainly think we should expect the NCCN Committees members to evaluate that data, and they should be doing what over 5,000 U.S. clinicians do, which is to incorporate it and use of their practice. Now that being said, I think the diagnostic numbers, as you know, around melanoma are kind of squishy part to do -- we think the kind of the COVID squishiness is, but I think we expected that we exited last year at around 18% to 20%, more like 20%. Is that right?

Reduced number of diagnosis.

Reduced number of diagnoses. So we're already sort of testing last year, 1 in 5 patients. and doing some assessment work, it looked to us like things like Oncotype DX for breast cancer, for example, didn't get incorporated into NCCN guidelines for breast cancer hit around 30%. So we're going to just a year or 2 away from there. So I think that will be around the corner is my expectation because clinicians are using our test and record numbers to help treat their patients. And although we do recognize NCCN as being a laggard indicator of adoption, that labyrinth is coming pretty close from our perspective.

Our next question comes from the line of Catherine Schulte with Baird.

First, you mentioned melanoma diagnosis aren't yet back to pre-COVID levels. Where were they for the quarter? And then you mentioned you're considering this the new normal, why don't you think that will rebound to pre-COVID levels? And does that change how you think about the ideal ultimate size of your sales force if diagnoses and/or rep access is going to be different going forward versus pre-COVID?

Lot of you as no questions there, Catherine. Let's see, first of all, we don't believe we have accurate first quarter diagnoses numbers based upon the vendor that we've been using. We believe if there wasn't any pullback. There's nothing to indicate from kind of a sales force access perspective, they were a knowledge in the marketplace. In January or February that Omicron had any material difference. I think the question is that we're in this about, what, 7 quarters or so, and we keep wondering when we get back to diagnosing around 130,000 patients a year versus call it 110,000 or 115,000. And I guess in the short term, one, I can't tell when they come back, if that's due to kind of a reduction in telehealth over time or if we should. So we just sort of -- we wanted to be as transparent as possible, obviously, and just indicate that as of now, we should probably view the normal patient flow as being what it's going to be. I think, unfortunately, those patients who had delayed diagnosis, which I think is largely due to the implementation of telehealth medicine, which I think for older patients certainly makes it much more difficult to get your phone around the back of your head or your back and say, "Hey, is that a melanoma doctor. So that's kind of concerning from a patient care standpoint." But I think until we sort of see that kind of primary care in person activity returning, we would expect a slow dribble of these patients coming back in as they self-diagnose a melanoma that's bigger today than it would have been in a normal PCP interaction a year or 2 ago. But I think if people are modeling in kind of a rush to a catch-up of all these missing patients. I think that's hard to predict from our standpoint, which you've always said we just try to be a bit more open and are transparent at this time.

Got it. You did --

In terms of size of the sales force question was tarred there, I don't think it impacts that we have such a large untapped medical need in melanoma. As you know, we're just now scratching the surface for squamous cell carcinoma, and we also have our myPath and DiffDx tests. Those are all largely at the same customers. So a few thousand less melanoma patients doesn't necessarily change the opportunity we have to really impact patient care who have skin cancer or one of the right of skin cancers in the dermatologist practice. So I think that doesn't impact our planning or decision-making process.

Okay. Got it. And then for squamous cell, had those volumes drop sequentially. So I'm just curious if you could talk through what you're seeing with that test? Is there seasonality there? Just a little surprised to see that given it's so early in the launch and given the sales force expansion. So any color on what you're hearing in terms of doc feedback would be great.

Yes. Catherine, it's Frank. The physician feedback is tremendous. It's the clinical utility of our squamous cell test may wind up being even more compelling than the clinical utility of our melanoma test, which is, of course, well published and well validated. Important to remember, the reps, our area managers are still directed to focus most of their time on the melanoma test. And given where we are in the reimbursement journey, we certainly don't want to have a squamous report at the expense of the melanoma. Now if a physician and many of them do, if they want to talk about squamous, the area managers are well equipped, well trained, and they'll do it. But we are guiding them fairly heavily to focus the majority of their interactions on melanoma. So we're quite happy with where the squamous volume was this quarter. It may bounce around a little bit. I think that the real measure is going to be once we get the reimbursement puzzle fixed there, I think you'll see that start tracking angles and trends like melanoma.

Yes. I wouldn't focus any effort or concern around quarter-over-quarter, especially this quarter. We haven't been in market in a -- having launched the squamous cell test only in sort of late August 2020, we really don't have any non-COVID oral patient flow experience, assuming squamous cell tracks like melanoma does in terms of patient flow. And we've seen pre-COVID the number of patients diagnosed and report growth in first quarter over the fourth quarter being nothing to write home about. It's usually flattish or something like that. So I think this is not a difficult from that standpoint. And certainly, we've heard, I would say only positive impact in terms of the decisions we're having our tests make in terms of patient care. Assuming squamous cell tracks seasonality close to melanoma, which I don't think there's a reason why it shouldn't, I don't think, we would expect melanoma to have an increase in the rate of diagnosis, and we expect our report growth to occur in the second quarter versus first quarter. We would see a little bit more in the third quarter versus second, and then we have third to fourth and fourth to first being kind of flattish. So that's not atypical. And I think reinforced now we're giving around 10% effort to kind of a launch product, but that's just due to kind of where we are in reimbursement is a perfectly adequate place we want to be at today.

Our next question comes from Mason Carrico with Stephens.

First, could you walk through some of the growth dynamics in the quarter for your dermatology portfolio specifically? Any color you can provide on growth you're seeing from -- growth in new clinicians adopting use of the test versus increases in utilization?

Yes. Sorry, Mason. We -- it was really twofold. We had a tremendous quarter in terms of new ordering positions. That is a metric that we not only track, but we drive, area manager results are impacted heavily by that. And the reason is because if we can convert a physician and have them began using the test on a handful of their patients, we typically see as they review the data and see the benefit of the test that they'll expand it to a larger group. So a great quarter in terms of new ordering physicians and then continued volume and uptake from the docs we have. As Derek said, at this point, and I know you've heard us say, we have a little bit of a tough time getting a real precise number on the total number of clinicians who are targetable in the country, just given the subspecializations that you see in dermatology, but somewhere around half the docs that are targetable here use the test in the last year. And that's 1 out of 2 is close -- getting pretty close to standard of care. So I think that as we continue to see the penetration levels grow, physicians will see their colleagues, and they'll see that their colleagues are using the test and benefiting from the test. And also this quarter, we had one of the most powerful data study data points we've had yet, which was the collaboration with NCI and the SEER data. So working hard to get that published. That's a key goal of ours. And we'll amplify the dialogue around that even more.

Got it. That's helpful. On your IDgenetix test, in the sense that it incorporates drug-to-drug interaction. I was wondering, one, is that unique to IDgenetix versus some competitor tests out there? And also, is there a general percentage of patients with major depressive disorder who are on one or more medications?

So I'll answer the first one, and we'll come back to the second one for a little bit clarification. So on the first one, there have been 4 clinical studies done with 4 different pharmacogenomic tests in patients with depression. 2 were negative. Both of those only do -- so there's been 5, I guess, 2 negative, both of those only do drug gene interaction reporting. Myriad's GeneSight test had a positive outcome study showing an improvement in terms of remission and response rate, if I recall correctly compared to physician's choice. They only report drug gene interactions. AltheaDx is -- early scientists made the proactive choice that actually both complements are important, and the doctors should see sort of a summary up of not only what the patient is on today, but also the genomic impact of their own body on processing these kinds of therapies so that we saw, obviously, in the AltheaDx study, a positive improvement in terms of both remission and response rates. Now I don't want to raise up or cut down the validity of inter-study comparisons, but if you look at the GeneSight study, the robustness of responses was more muted than it was in the AltheaDx study. That could be a protocol design issue. It could be site selection. It could be timing of the study start or could be actually because you have 1 report that includes both drug gene and drug and one that is not. So our perspective is that when we share in an honest manner the protocol design and the ease at which a clinician can order our IDgenetix test and the fact that we give them 1 lab report back, which includes what they want as opposed to saying, "Hey, if you're interested in the other part of therapeutic response go over online and figure it out, doctor, we can't help you." I think that's an important advantage to us. Now that being said, the main opportunity, I think, is not so much grabbing share. It really is helping these people, the vast majority who have had -- not had access to pharmacogenomic testing to actually have better choices made the first time around. So I think that's the real opportunity, but we do think we have a very nice strong competitive advantage, which is easy to communicate. On the multiple medication issue -- my understanding is that, yes, these patients, and the patients for the other indications that we have approval for anxiety, the expanded approval with Medicare coverage, a week or 2 ago, which included 7 other indications that many of those patients are going to be on multiple drugs, unfortunately, which just increases the value of our test to clinicians and our patients.

Our next question comes from Thomas Flaten with Lake Street Capital Markets.

Sticking with IDgenetix, from a rep productivity perspective, obviously, the guide is pretty marginal at this point, but 20 feet on the street, what kind of productivity could you get out of that team without a significant expansion in the say, near to intermediate term?

Yes. Tom, this is Frank. So we would expect that we, at some point, we'll expand that group. We'll do it as we grow volumes, having Medicare coverage at hand allows us to sort of scale that as appropriate as the volumes come forward. So I don't know -- I can't guide you when we might expand. It's certainly -- I think it's clear that there are lots of uncovered areas that we could still tap. And so we'll use our typical casual structure of a group of outside area managers, coupled with medical science liaisons and inside sales associates to penetrate that space. It's too early for us to really see at what point a rep is doing so much business that we need to scale that territory down a little bit. But I would expect that in our behavioral health effort, we will probably take the same approach we do on our others, which is we would like our area managers to be able to spend about half their time converting new physicians and about half their time providing information and service to physicians who are using the test. And we'll give you more insight as we develop it here.

And out of curiosity, are those territories built around high prescribers of a certain basket of meds? Or anything you can share about how those territories are built or design?

So with the millions of potential patients, in only 20 or so or 19 sales stores out there, they were originally designed based upon just massive geography. There were some expansions done earlier last -- or late last year, earlier this year that were targeting much more so the early responsiveness. But I think the opportunity here is to really -- I mean let us get past the next couple of months, and it's the integration of the group and as Frank said, organizing or integrating the commercial team and the medical teams into Castle's approach, and we'll be able to go in March for very, very strongly towards the end of this year, which is also part of why we make sure we were setting up modest expectations so that we aren't having to make rapid choices for the wrong reasons, but let's make rapid choices for the right reasons.

Our next question comes from Kyle Mikson with Canaccord.

Just sticking with the acquisitions, the current TAM of your legacy term business, it's grown quite a bit through these acquisitions and the launch of all these products. But it's still -- the legacy business is still below $2 billion in TAM. And I know the pipeline offers upside like $5 billion to $6 billion but you added $1 billion from Cernostics and $5 billion from Althea. I'm sure those are big reasons for the acquisitions. I'm just kind of wondering, though, like what gives you confidence to be able to successfully penetrate those incremental TAMs that you've added over the past year? And I guess it would be helpful to kind of talk about that in the context of your objective to kind of achieve cash flow breakeven by 2025 before we even launch some of these pipeline tests on the derm side as well.

So clarify what you're thinking about with the word incremental. The incremental as in Cernostics incremental to dermatology or incremental in dermatology. I just want to make sure we're answering the question correctly.

Sure, Derek. See the $1 billion from Cernostics and the $5 billion from Althea, I mean, those are all kind of relatively with white face opportunities for Castle, right? So like what's going to give you -- what gives you confidence that you can kind of penetrate those successfully just given the kind of relatively nascent businesses, I guess.

Yes, excellent question. So our belief is we kind of went through the COVID period of understanding where we were going to ensure strong growth in the kind of mid- to long-term was do we only want to stay or should we only stay within dermatology. Or when we think we've gotten size properly in terms of infrastructure support, back office support, do we think it makes sense as well to maybe go outside of dermatology. If we can find areas that offer the same kind of check box that we get with dermatology, which is, to us, are there more than 1 areas of high unmet clinical need that could be solved potentially with advanced micro-diagnostics, yes or no, i.e., can we leverage a franchise investment through multiple products? Two was if we do it ourselves, that's a high-point development time line, and then as we know, it's an uncertain but a elongated time line to getting at least your first steps in reimbursement taking care of. And do we see areas where we could find things that would mean that we view as complementary to Castle's strength? And so I think going back to gastroenterology in our TissueCypher test for a patient with Barrett's Esophagus, there's a clear unmet clinical need as we talk to gastroenterologists who are concerned about the poor predictive value of pathology in terms of predicting which patients with Barrett's Esophagus actually will go on to progress and which will not. And that results in both the undertreatment of people who maybe could be safe for advancing the adenocarcinoma esophagus as well as over management, which is really repeat endoscopies every year, every 2 years for the rest of one's life when your chance of progressing is so low is that one of the…

Okay. Just sticking with Althea maybe the new indications for IDgenetix under the coverage expansion. I assume that's going to be the kind of like $1,500 rate as for depression. Can you just talk about any off-label use of the test in these newly reimbursed areas to date? And ultimately, is there any material upside through the '22 revenue or maybe gross margin expectations that you provided here today? I don't think they're baked in. And if you could quantify the milestone payment, was that in connection with this reason catalyst, that'd be helpful.

So after a couple of those questions I know Frank that will cover. In terms of the expanded indications, those are disease states that I believe AltheaDx was reporting on prior to the expanded Medicare coverage. So what really was expanded -- and it wasn't so much the MolDX program saying, "gee, we think that you can now add value to these patients, is really that reviewing data in patients of those indications. The kind of overriding drive of sort of IDgenetix is really looking at what CPIC does, C-P-I-C, which is a quasi-governmental body or GO chief executive officer rather, composed of academics and pharmaceutical companies as well as, I think, current FDA or who really looks around and says, "Gee, of the FDA-approved drugs, what do we know about drug, drug or drug being interaction? Let's create a list that's evidence-based that as clinicians physicians treating patients and go to the CPIC website and be able to see the various interactions that may be occurring on a drug, drug or drug drain perspective, for a given disease age. So CPIC really is sort of the clear clearing house, I would say, for potential use of a test like IDgenetix. Now that being said, what I just described you is not what doctors get paid to do. They get paid to see patients. And so the actual value of CPIC has not seen very well, but the opportunity to go ahead and look at saying, "Hey, what are some areas of recognized drug gene or drug-drug interactions that could be added to future reports. And the CPIC group happens to be one of the consortium that one can look at and say, "does this make sense? Does it align with our current kind of customer call base? Should we look at developing data that could demonstrate that we can actually measure drug-drug or drug gene interactions in these sanctions with those disease states or are those diagnostic states, and we kind of move forward from there?" So I don't think I would characterize any use of the IDgenetix test as off-label. We really only report interactions that are relevant for patients which have certain stated disease or diagnosis today, and we can expand that over time, of course, with additional data development. Did I answer those kind of, that part of the question, Frank?

Yes. And Kyle, the milestone or contingent consideration potential payments are based on revenue growth and reimbursement performance.

Our next question comes from Mark Massaro from BTIG.

I wanted to ask about gross margins. So Frank, you talked you'll make in lab personnel and amortization of intangible assets from acquisitions. Legacy Castle, you guys are quite unique with 80% gross margins. So can you just maybe help us at a high level think about your mid- to long-term gross margin trajectory and when you think you might be able to get back to those potential 80% gross margins? Or is this mid- to high 70s, you think maybe the new normal?

Yes. I'll divide that more from a GAAP gross margin, which includes the amortization of intangible assets that were part of the acquisitions. That's going to change based on that amortization, right? There's not anything that's going to change there. But the adjusted gross margin, if you take that out, it's -- when you're not appropriately paid for your service, it has a negative effect on gross margin. So when we do have the reimbursement path of repaired or fixed or correct, I guess, is the way to think about it, then we would expect to get back close to the gross margin that we had before. IDgenetix is also run on Quad Studios. So similar throughput, similar workflow there. And so I think that it's a matter of getting reimbursement to catch up with volume, which is something we work very hard on.

And so one exercise --

Sorry, continue, Derek.

I was going to say, for example, 1 exercise that we don't do in our filings is just take the volume for the test that you believe have reasonable reimbursement, such as the DecisionDx-UM test, our DecisionDx-Melanoma test and our myPath Melanoma test and just use those as your test report denominators and the buyback into the cost of goods, and you'll see it sitting up where you expect it to go and be. So I think it's a matter of progress on reimbursement that lets that volume that we're producing reports on today that aren't being reimbursed appropriately that will move the needle right as Frank said.

Okay. That's helpful. And then I think your R&D outlook for the year contemplates $65 million to $80 million in investment in 2022. Can you give us a sense for the breakdown between derm, GI and mental health? And then you guys talked about how GI could sort of be a -- maybe a sort of a new area where you could add additional indications over time. How are you guys thinking about potentially adding those organically versus inorganically? And can you give us a sense for what that pipeline is that you acquired?

Yes. I think your R&D to be high, Mark. We'll make sure we get that we get that cleared up for you. We haven't broken out how much is in which category. I would tell you that we will continue to support our end market derm test very aggressively. We'll continue to support TissueCypher in IDgenetix very aggressively as well. We've been incredibly successful as a company and developing signatures internally. Our UM test was licensed, as you know, but our 3 derm test taken apart -- taken out the myPath portion of our comprehensive diagnostic offering, those were all developed in-house. And so we've got a tremendous amount of confidence in our R&D team and their ability to develop signatures. Our -- the tricky part is just making sure that you're identifying a clinical question that physicians have and need an answer for. So if we can do that, we're confident that we can. And by the way, we have identified questions in GI. So if we identify a question of this group of physicians has, we're very confident we can develop a signature for it. So we would like to add additional products to our GI offering. We're working on several in term as well, and we'll keep doing that. The opportunity with these groups of physicians is quite significant. And as we saw with our squamous cell quick update, when you educate a group of physicians on the value gene expression profile diagnostic testing, when you have new patients that you can help them, it's a much easier, but to get them to understand that value in the next group of physicians.

Okay. That's great. One last one for me. You guys have a strong balance sheet with over $300 million of cash. You have been acquisitive recently. You've got new channels where you could plug additional assets into valuations have declined significantly in the last 3 months. How do you look at the environment for potential tuck-ins at this current time.

I think one is, of course, you can never say never, anyways. But I think that we have an opportunity here to really integrate, achieve and digest driving into 3 areas in terms of our current commercial opportunities in GI, in mental health and in dermatology. We have laid out the fact that we believe dermatology is our significant near or mid-term core revenue drivers, certainly, and that one of our growth pillars are looking at external opportunities like TissueCypher and like IDgenetix. That being said, I think that one of the leverage points that we like about dermatology is how do we leverage gastroenterology in our sort of mental health call point. So I think from an acquisition perspective, there are certainly items that are looked at all the time, I think it's much more likely that we're -- if we make additional moves and largely be focused on growing out our current call points, we can get greater leverage than -- of those commercial investments. Do you want to add anything? This concludes our second quarter 2022 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences.

Thank you, everyone, for joining us today. This concludes our call. You may now disconnect your lines.