Castle Biosciences Q3 2026 Earnings Call Transcript
Castle Biosciences (NASDAQ:CSTL) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Castle Biosciences reported a revenue of $102.9 million for Q3 2026, marking a 24% increase year-over-year, driven by a 47% growth in TissueCypher test report volume.
The company raised its full-year 2026 revenue guidance to $385-$395 million, reflecting increased confidence in continued TissueCypher test volume growth.
DecisionDx-Melanoma delivered 10,177 test reports, achieving five consecutive quarters of over 10,000 reports, with expectations of mid-single-digit growth for the full year 2026.
Operational highlights include the publication of studies supporting the clinical utility of TissueCypher and Advanced ADTX tests, along with continued investment in expanding clinical evidence.
Despite a net loss of $4.1 million, Castle Biosciences achieved an adjusted EBITDA of $12.7 million for the quarter, with a strong cash position of $278 million, supporting future strategic initiatives.
Management expressed confidence in maintaining strong ASPs and highlighted the focus on expanding commercial penetration of existing products while exploring new opportunities in the pipeline.
Full Transcript
OPERATOR
Good afternoon and welcome to Castle Biosciences’ third quarter 2026 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. Thank you. You may begin.
Camilla Zuckero (Vice President, Investor Relations & Corporate Affairs)
Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences’ third quarter 2026 results conference call. Joining me today are 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, November 5, 2026. 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 three weeks following the conclusion of the call.
Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements, including statements about expected addressable markets; statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2026 total revenue, test report volume growth guidance, and positive adjusted EBITDA for the fourth quarter, full year 2026, and full year 2027; and the impact of our investments and growth initiatives, including our ability to achieve long-term growth and drive stockholder value. 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.
Please refer to the risk factors in our most recent SEC filings for more information. 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 U.S. GAAP. 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.
Derek Maetzold (President and Chief Executive Officer)
Thank you, Camilla, and good afternoon, everyone. Our team closed out a very successful third quarter, reflecting our focused execution and disciplined expense management, underscored by the clinical value our tests provide to clinicians and their patients. We delivered revenue of $102.9 million, 24% growth compared to the third quarter of 2025, primarily driven by TissueCypher test report volume, which grew by 47% compared to the third quarter of 2025.
We generated $19.7 million in net cash provided by operating activities and ended the quarter with cash, cash equivalents, and marketable investment securities totaling approximately $278 million. We are increasing our full year 2026 total revenue guidance from our prior range of $365 million to $375 million to $385 million to $395 million. This represents a $20 million increase at the midpoint, reflecting our year-to-date performance and anticipated continued strength in TissueCypher test volume growth.
Importantly, at the midpoint, our updated guidance represents a $45 million increase from where we entered the year. Now I will walk you through the business highlights from the third quarter, and then Frank will provide additional financial highlights before we turn to your questions. But first, let me take a moment to thank the Castle team. Without each person’s dedication to serving our patients, we would not be in the strong financial position we are in today. So thank you, Team Castle.
Now let’s start with our core revenue drivers for 2026, DecisionDx-Melanoma and TissueCypher. For DecisionDx-Melanoma, we delivered 10,177 test reports in the third quarter of 2026, making our fifth consecutive quarter exceeding 10,000 test reports and contributing to 5% year-over-year volume growth through the first nine months of 2026 compared to the first nine months of 2025. DecisionDx-Melanoma remains a central priority for our dermatology commercial organization.
We’ve aligned commercial focus and incentive structures to reinforce that priority while leveraging our established customer relationships to increase use of our broader portfolio of dermatology tests. Our objective is to drive continued adoption of DecisionDx-Melanoma while building future growth opportunities across our dermatology tests. With DecisionDx-Melanoma continuing to provide a durable foundation for our dermatology business, and reflecting third quarter and year-to-date test report volume, we are refining our outlook for full year 2026 DecisionDx-Melanoma test volume growth and now expect mid-single-digit year-over-year growth compared with 2025.
Now turning to TissueCypher, during the third quarter we delivered 15,574 test reports, representing strong growth of 47% compared to the third quarter of 2025. This performance reflects continued momentum in our commercial execution, driven by increased utilization among our existing clinician base and, to a lesser degree, the addition of new ordering clinicians. Based on our year-to-date performance, we are reiterating our expectation for full year 2026 TissueCypher test report volume growth of 50% to 52% compared to 2025.
Alongside this strong commercial performance, we remain focused on expanding the body of clinical evidence supporting TissueCypher’s utility in helping physicians make more informed, risk-aligned management decisions for patients with Barrett’s esophagus disease. In September we announced the publication of a new decision modeling study in the Annals of Gastroenterology. This study, which leveraged data from 699 patients across five previously published clinical validation studies, demonstrated that incorporating TissueCypher results into clinical decision-making could significantly improve the portion of patients receiving appropriate management, including in patients with non-dysplastic and short-segment Barrett’s who are considered clinically to be at lower risk for neoplastic progression.
In patients with non-dysplastic Barrett’s disease whose disease did progress, use of TissueCypher to guide management decisions increased appropriate management in the form of endoscopic eradication therapy or short-interval surveillance from 30.4% to 56.9%. Notably, among patients with non-dysplastic Barrett’s who later progressed to high-grade dysplasia or esophageal cancer, TissueCypher-guided management would have nearly doubled the proportion of patients receiving appropriate escalation of care from approximately 30% to 57%, while also reducing unnecessary procedures among those patients who did not progress.
We believe these findings add to the growing body of evidence supporting TissueCypher’s clinical value and further reinforce its role in helping physicians tailor patient management based on individualized risk of disease progression. Now let’s move back to dermatology and focus on our advanced ADTX test. During the third quarter of 2026, we delivered 1,109 test reports, reinforcing the value of our advanced ADTX test. We are particularly pleased with the recent publication of a new study in Dermatology and Therapy, highlighting one, the challenges patients with moderate to severe atopic dermatitis experience in achieving their treatment goals, and two, strong patient interest in molecular testing to help guide systemic therapy selection.
Among patients who had been treated with targeted systemic therapies, 55% modified their treatment due to lack of efficacy. Overall, 83% of the respondents expressed interest in molecular testing to guide treatment selection, increasing to 94% among those open to initiating a new systemic therapy. Further, in a real-world clinical use study that was presented in June at the Revolutionizing Atopic Dermatitis, or RAD, conference, 98% of patients tested had their systemic treatments aligned with our advanced ADTX test results.
Meaning the 94% interest in patients new to systemic therapy who are interested in molecular testing aligns well with the 98% that Dr. Ames and colleagues reported at the RAD conference. We believe these findings support the clinical impact that our test is having on patient care, and with that, I will now turn the call over to Frank.
Frank Stokes (Chief Financial Officer)
Thank you, Derek. Good afternoon. Reiterating Derek’s sentiment, we’re pleased with our strong financial results for the third quarter of 2026. Revenue was $102.9 million for the quarter, an increase of 24% over the third quarter of 2025, driven primarily by strong TissueCypher test volume growth. For total revenue for 2026, we are raising our revenue guidance to $385 to $395 million, up from the previously provided range of $365 to $375 million.
This increase is primarily due to anticipated TissueCypher test volume growth and, to a lesser extent, ASP improvement. Our gross margin during the third quarter of 2026 was 75% compared to 75% in the third quarter of 2025. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 77% for the quarter compared to 77% for the same period in 2025.
Turning to expenses, our total operating expenses, including cost of sales, for the third quarter of 2026 were $105.6 million compared to $89.8 million for the third quarter of 2025. Sales and marketing expenses for the quarter were $37.7 million compared to $32.8 million for the same period in 2025, primarily driven by higher personnel costs and higher expenses associated with travel. Higher personnel costs reflect headcount additions in our commercial teams as well as merit and annual inflationary wage adjustments for existing employees.
General and administrative expenses were $26.1 million for the quarter compared to $23.1 million for the same period in 2025, primarily attributable to higher information technology-related costs and higher personnel costs. Higher personnel costs reflect headcount expansions in our administrative functions as well as merit and annual inflationary wage adjustments for existing employees. Cost of sales expenses were $23.9 million in the third quarter of 2026 compared to $18.7 million in the third quarter of 2025, primarily due to higher personnel costs, higher expenses for lab supplies, and higher lab services costs. The increase in lab supplies and lab services costs reflects higher test report volumes. Increases in personnel costs reflect a higher headcount due to higher test volumes. Investment additions were made to support planned business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustments for existing employees.
R&D expenses were $15.8 million for the quarter compared to $13 million for the same period in 2025, primarily due to higher personnel costs driven by increased headcount to support ongoing research activities and continued business growth related to our pipeline initiatives. Total non-cash stock-based compensation expense, which is allocated among cost of sales, R&D and SG&A expense, was $11.2 million for the third quarter of 2026 compared to $12.1 million in the third quarter of 2025. Interest income was $2.5 million for the third quarter of 2026 compared to $2.8 million in the third quarter of 2025. Our net loss for the third quarter of 2026 was $4.1 million compared to a net loss of $0.5 million for the third quarter of 2025.
Diluted loss per share for the third quarter was $0.13 compared to diluted loss per share of $0.02 for the same period in 2025. Adjusted EBITDA for the third quarter was $12.7 million compared to $9.2 million for the comparable period in 2025. We continue to expect positive adjusted EBITDA for the fourth quarter and full year 2026. Importantly, absent a change in strategic direction, we also expect adjusted EBITDA for the full year 2027 to be positive.
Net cash provided by operating activities was $19.7 million for the third quarter of 2026, and net cash provided by operating activities was $12.8 million for the nine months ended September 30, 2026. As of September 30, 2026, we had cash, cash equivalents and marketable investment securities of approximately $278 million. Importantly, our strong balance sheet continues to provide financial flexibility to invest in our growth priorities. In closing, we delivered strong third quarter results including strong top line growth, positive adjusted EBITDA and operating cash flow, and an upward adjustment to our annual revenue guidance of $20 million at the midpoint. I’ll now turn the call back over to Derek.
Derek Maetzold (President and Chief Executive Officer)
Thank you, Frank. In summary, we remain focused on serving our patients and clinicians, driving operational excellence and advancing our growth initiatives, including advancing our pipeline to deliver long-term value for stockholders. I want to thank the entire Castle team. Our consistent execution is a direct reflection of their contribution and I’m grateful for their effort and commitment. Thank you for your continued interest in Castle Biosciences.
Now we will be happy to take your questions. Operator.
OPERATOR
At this time we’ll be conducting a question and answer session. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. In order to allow everyone in the queue an opportunity to address the Castle management team, please limit your time on the call to one question and only one follow up.
If you have additional questions, please return to the queue. Please stand by while we compile the Q&A roster. Our first question comes from Bradley Bowers with Mizuho. Your line is now live.
Bradley Bowers (Analyst)
Hey there, guys. Thanks for the question. Just wanted to ask on TissueCypher here. You know, obviously a nice step up in what’s typically, I guess, procedurally seasonally like a little bit slower 3Q versus 2Q. Just wanted to hear about what you’re seeing in that business in terms of trend, how we should kind of think about fourth quarter, whether that’s contemplated in the guidance, and then just kind of the pace of, you know, the penetration, what you think you need, the guidelines to go deeper.
Just any thoughts on that? Thank you.
Derek Maetzold (President and Chief Executive Officer)
Sure. Thanks for joining us here. Still real happy with TissueCypher. We’re probably around 15% penetrated on a run-rate basis in terms of the eligible procedures a year. The procedure there is surveillance endoscopy for Barrett’s, and it looks like we’re about 15% penetrated on that. But yeah, I think the trends will continue through the end of the year that we’ve seen. The guidance certainly contemplates that. We’ve got a nice early start in that test here in the early years and still plenty of room to go, but a good, solid quarter for the test.
We see it continuing through the end of the year, and we like the business quite a bit.
Bradley Bowers (Analyst)
Got it. That’s helpful. Just maybe one other one on profit. Gross margin actually held on a bit better than I think we were expecting. I know that there were some one-time pricing items in 1H that would imply that I guess most of this was organic, or are we still kind of expecting a falloff? And what should we be thinking about kind of into the end of the year and next year? Thank you.
Frank Stokes (Chief Financial Officer)
I think adjusted gross margins stay pretty consistent through the year here. We’ve done some nice work in the lab improving our efficiencies there. Some of it’s with people, some with technology, but I think that number is probably pretty durable through the year. Importantly, a big part of that is the number of unpaid tests, and so it looks like that’s kind of staying consistent through the year as well.
OPERATOR
Our next question comes from Max Mazzuki with Roth Capital Partners. Your line is now live.
Max Mazzuki (Analyst)
Hey, thanks for taking the questions. Just first one, you know, even if you carry forward the Q3 beat, the implied Q4 guide is strong. So talk about are there any sort of emerging drivers or areas of outperformance that are powering that Q4 implied strength, and is that coming from the core business or any sort of new incremental contributors?
Derek Maetzold (President and Chief Executive Officer)
Just core business. Max, good to talk to you. Just continuing to see the core business do well through the end of the year.
Max Mazzuki (Analyst)
Okay, got it. And so moving to DecisionDx-Melanoma, I think previously you called out reps adjusting to selling multiple tests. Just curious, looking for a little bit more detail on the growth trends for DecisionDx-Melanoma in the quarter and if there’s anything, you know, any impact coming from, you know, softer ordering or competitive pressures. So really just structural versus kind of transitory factors in the quarter.
Derek Maetzold (President and Chief Executive Officer)
Yeah, this is Derek Maetzold. Good to hear you. We certainly have nothing structural. We remain on target to reach our volume guidance that we provided at the start of the year. So nothing’s changed in that perspective. And we are quite pleased with the year-to-date growth and the expectation we have for the fourth quarter.
Max Mazzuki (Analyst)
Okay, got it. Maybe I’ll sneak one more quick one in. It’s great to see the ESOPredict volumes for, I believe, the first time. It looks like it implies a strong sequential ramp this quarter. So what are the headline takeaways for that launch, I guess even year to date, and just more broadly, how should we think about the role of that test within your portfolio and commercial potential over the longer term?
Derek Maetzold (President and Chief Executive Officer)
Max, you broke just a minute there. Which test were you asking about?
Max Mazzuki (Analyst)
ESOPredict.
Derek Maetzold (President and Chief Executive Officer)
Sure. When we acquired the test, we saw an opportunity there to potentially incorporate that into the patient flow for our broader Barrett’s prognostic business. And so it’s not a large number, but occasionally we do have samples we get in that we can’t get adequate tissue to run TissueCypher on. ESOPredict is a different technology, so we’re able to, in many cases, pivot that over and provide a test report using ESOPredict. And that’s really more about, certainly we want to be able to provide a clinical answer for as many patients as we can.
So by incorporating that into the flow, again, it’s not a big piece of business, but if you’re one of those patients or their physician and there’s an issue with the tissue and you can’t quite get the answer we need with TissueCypher, it’s quite comforting and clinically beneficial to be able to pivot that over to ESOPredict and provide a clinical answer. So I guess the summary there is it’s doing exactly what we hoped it would do when we made that acquisition now just a bit over a year ago.
Max Mazzuki (Analyst)
Great. Thanks, team.
OPERATOR
Our next question comes from Sabu Nambi with Guggenheim Securities. Your line is now live.
Ethan (Analyst)
Hi, guys, this is Ethan on for Sabu. Thanks for taking my question. Congrats on the quarter. You know, I just saw on AVANCE ADT, you know CMS proposed gap-fill instead of the panel’s recommendation of crosswalk. I was just wondering if you submitted a comment or are seeking an alternative there. And if gap-fill is the final decision, does that change anything about assumptions for Medicare revenue or your commercial payer negotiations?
Derek Maetzold (President and Chief Executive Officer)
Yeah, Ethan, this is Derek. Good questions there. So we were surprised to go ahead and see CMS, not only with our AVANCE ADT test, but also other tests that are being priced, I don’t know if it’s ignore or set aside the advisory panel’s recommendations, to go to gap-fill. Yes, we did submit appropriate additional crosswalk tests that actually had private payer data. I think schedule-wise, if you aren’t aware of this, I think they anticipate probably taking a little bit longer to post this year for the final recommendations.
It usually comes around Thanksgiving week, but I think we’ve been led to believe it could be early December. And I think we have logic that would say they should be crosswalking to existing gene expression profile tests run on NGS in which there is private payer data.
Ethan (Analyst)
Thank you.
OPERATOR
Our next question comes from Mason Carricko with Stevens. Your line is now live.
Mason Carricko (Analyst)
Hey, guys, thanks for taking the question. So ASP has obviously been strong throughout this year. Could you just talk through some of maybe the coverage wins that have helped drive that and maybe your expectations around the durability of ASP moving forward, or any maybe near-term incremental gains that you have visibility into today.
Frank Stokes (Chief Financial Officer)
Yeah, thanks for the question, Mason. As you know, we don’t typically talk about coverage decisions, and we’ll probably continue to take that stance. We’re pleased with what we’re seeing on the ASP front. It represents both. I think it’s a durable patient mix, Mason. I think that progress is probably durable. We don’t necessarily model incremental upside going forward, and if we see it, we’ll take it. But I think we’re pleased with where we’ve gotten on both of our primary drivers here, and I think we expect that progress to be durable for the near to midterm here.
Mason Carricko (Analyst)
Got it. Okay, thanks. And maybe moving to dermatology here. Could you expand, I guess, or give us some color on what the split looked like from a commercial standpoint across kind of your three core dermatology products and maybe how we should think about how much time the commercial team is spending on each as we move into ’27 and AD Tx kind of volumes open up.
Derek Maetzold (President and Chief Executive Officer)
Yeah. And by split you mean sort of focus time and focus on? Yeah. Still very much focused on melanoma. You know, we certainly haven’t abandoned SCC, as you can see from the volumes. It’s still a very clinically relevant test. And, you know, we’ve not meaningfully supported that from a marketing perspective for several quarters here, but the volumes have stayed—have stayed to be impressive. And I think that speaks to, one, the value of that clinical information to physicians. And we talked with you before about the challenge and the decision they have with a high-risk SCC patient, particularly of a Medicare age, who may be more fragile from a health perspective otherwise anyway, and trying to make that really hard decision about whether to send that patient to adjuvant radiation therapy or not. So I think that we’re—we don’t have to say anything.
The volume says that that’s a clinically very important test. AD is—we’re just not really putting a lot of force behind it while we go through the process here of figuring out what the ASPs are going to look like, and we’ll make that decision soon. And it’s a really—there’s a lot of value in that test as well. There’s a lot of economic benefit from the test. But for now, we’re still really focused—the derm team primarily—on melanoma and that business in progress.
Mason Carricko (Analyst)
Got it. Thanks, guys.
OPERATOR
Our next question comes from Kyle Nixon with Canaccord Genuity. Your line is now live.
Charlotte Maurer (Analyst)
Hi, this is Charlotte Maurer on for Kyle Mixon. Congrats on the great quarter and thanks for taking our questions. First, on DecisionDx-SCC, volume has remained under pressure following the loss of Medicare coverage. Where does that process stand today, and what should we view as the next meaningful milestone? Is a CAC meeting in the first half of 2027 a reasonable expectation, or how do you think we should think about the potential timing from there to a draft LCD and then ultimately coverage?
Derek Maetzold (President and Chief Executive Officer)
That was actually a question. Charlotte, this is Derek here. I think the sort of, I guess, our expectation or guidance we put out will be certainly we don’t have in our 2027 revenue any assumptions for recovering Medicare coverage in ’27, so we put it into our ’28 plan right now. I think seeing a draft LCD come out with or without a TAC meeting is probably a reasonable expectation. There’s nothing formal for us to go and provide you at this time, but I think certainly something we just go into the next couple of months—next quarter or two—is not an unreasonable expectation.
Charlotte Maurer (Analyst)
Great, thank you. And then if I could ask another question, total revenue during the quarter came in well ahead of expectations given the volume performance across DecisionDx-Melanoma and TissueCypher. Could you help us bridge where that revenue upside maybe came from? And then what drove that guidance increase—like how much was driven by stronger ASPs or prior period collections across your core products versus volume or other factors? Thanks.
Frank Stokes (Chief Financial Officer)
Yeah, sure. Prior period wasn’t really a big factor in there. The drivers were primarily ASPs on our two—our two lead products. And we did, you know, we did have some ahead-of-expectation SCC revenue. We don’t break it out, but it was certainly ahead of what we had, you know, this time last year what we modeled it would be. So primarily ASPs, a little bit of volume on SCC, but just good solid progress from the core drivers of revenue. And as it relates to the revised guidance, I think what you see is that’s reflective of our confidence in the state of play for Q3 continuing into Q4 through the end of ’26 here.
OPERATOR
Our next question comes from Matthew Parisi with KeyBanc Capital Markets. Your line is now live.
Matthew Parisi (Analyst)
Hi. Yes, this is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on a great quarter and thanks for the questions. You called out the increase in lab headcount to handle the increase in test volumes that you’re seeing. Should we expect to continue to see lab headcount and expenses rise with the rising test volumes, or do you now have the infrastructure in place to be able to kind of handle them going forward?
Frank Stokes (Chief Financial Officer)
So definitely, as volumes grow, headcount in our COGS area in the labs does grow along with it. It’s not one-for-one. We get leverage and we get incremental efficiencies. But the technology in the lab is very good, the efficiency is very good, but it’s just a matter of bandwidth you have to have as the volumes grow. We will have to add people in both facilities, Pittsburgh and Scottsdale, and we would expect to see that going forward as well.
Matthew Parisi (Analyst)
Awesome. Appreciate the insight. And then if I can squeeze in one more, would you expect any long-term impact for DecisionDx-Melanoma stemming from the Moderna personalized cancer vaccine readout? Just kind of what you’re thinking about that long term.
Derek Maetzold (President and Chief Executive Officer)
Uplift on the vaccine readout, you mean? Okay, yes, I think that potentially could be a very interesting area of driving our DecisionDx-Melanoma growth over the long term. As you may recall, today there are adjuvant therapies—PD-1 inhibitors, ipi—approved for, I guess, stage 2B–C and stage 3 patients. Unfortunately, of course, the majority of patients who we test are really earlier, which are kind of stage 1 to 2A. So there are no really adjuvant therapies available today.
So most of our clinical use, as you know, is going to be either avoiding an unnecessary sentinel biopsy surgical procedure and also then, if you happen to have a high-risk DecisionDx-Melanoma test result, we see many physicians pushing forward on either implementing routine imaging. Some are adopting early use of ctDNA to kind of look for early recurrences. So those are important actionable steps because we have seen that if you can initiate immunotherapy when a metastatic spread is detected, when it’s small—which is usually asymptomatic and picked up on imaging or DNA trends—then those patients have a higher likelihood of a more robust response.
I think the hope would be that as the vaccines progress, and assuming that the developments are all successful, that those could hopefully move into earlier-stage patient populations—the ones that we are more routinely testing. And I think then the thesis becomes: now you have a dermatologist, a surgeon, or a medical oncologist saying, okay, I have a lower-risk patient by staging, but a very high risk by the DecisionDx-Melanoma test. This is a patient we should preferentially look to initiate that adjuvant therapy.
So I think that’s where we see it going, and that’s where your question was heading. That’s where I hope the marketplace gets to.
Matthew Parisi (Analyst)
Great. Thank you. And congrats again on the great quarter.
Derek Maetzold (President and Chief Executive Officer)
Thank you.
OPERATOR
Our next question comes from Thomas Falatten with Lake Street Capital. Your line is now live.
Thomas Falatten (Analyst at Lake Street Capital)
Hey, guys, appreciate you taking the questions. Just a quick one. On the pipeline, what cadence of news and activities should we anticipate over 2027, particularly with respect to the Sybase collaboration?
Derek Maetzold (President and Chief Executive Officer)
I don’t think—I thought we had talked about in third quarter earnings that in the first half of next year we expect to go ahead and have updates on pipeline progress. But I think beyond that I can’t—we aren’t prepared to go give you any more specific dates and months at this point in time, Thomas.
Thomas Falatten (Analyst at Lake Street Capital)
No, no, no worries. And then, Frank, just if I’m doing my back-of-the-envelope math correctly here, the midpoint of the guide implies a slightly down to flat fourth quarter over a third quarter. Is that just conservatism baked in, or are there other things we should be attuned to? And I apologize if we’re retreading ground here.
Frank Stokes (Chief Financial Officer)
No, no, just your math’s good. You know, typically Q4 can be a little bit seasonally lighter, just as practices—there’s a big range of how medical practices handle the December holidays. And so that treatment of the holidays tends to disrupt part of the quarter a little bit. So that’s all you’re seeing there.
Thomas Falatten (Analyst at Lake Street Capital)
Got it. Appreciate it. Thank you.
OPERATOR
Our next question comes from Puneet Sarda with Larink Partners. Your line is now live.
Carlos (Analyst at Larink Partners)
Hey, everyone, this is Carlos on for Puneet. Thanks for the question and congrats on the quarter. So, you know, one thing that we’ve seen emerge this year has been a bit more seasonality in TissueCypher. And, you know, if I’m doing my math right, I think sequentially you’re going to be up around 1,000 units in the fourth quarter compared to just shy of 600 this quarter. And we saw
Frank Stokes (Chief Financial Officer)
Yeah. You know, with all of our therapeutic areas and all of our tests within those areas, there’s definitely going to be seasonality. And, you know, sometimes you’ll hear it called out with, you know, maybe there’s a weather event or, you know, maybe there’s a holiday or something like that. So quarter to quarter, the number of business days in a quarter may be close, but the number of those days that are actually operating days kind of varies from quarter to quarter.
And I would expect we’ve always seen that. But when you’re in the earlier growth stages, you’re kind of growing through it, and the growth kind of camouflages that. We don’t really have any particular strategy or tactic to try to manage that. Our teams have quarterly expectations and they don’t change. For better or for worse, they’re consistent regardless of where it falls in the calendar. But the other thing just to keep in mind through this year is we have had a couple of changes in the size of the sales force on Tissue Cipher, and so that causes— the good news is you add sales reps, you’ve got a bigger— but, you know, short term, there are some dislocations in coverages, and sometimes that can create a little bit of bumpiness as well.
But I expect we’ll see that with Tissue Cipher going forward. It doesn’t really change our view on the opportunity or how we execute against it. It just means that some quarters, you get more working days than others. And, you know, sometimes those working days are more fruitful than others. So no real change and just sort of a— I think it’s just the reality of the business. I would assume ASPs are steady from here. We hope to see upside, but as you note, it’s difficult to predict both scale and timing. I think that when you look at the ability to identify really high-risk patients that weren’t being appropriately surveilled and the benefits of that, I think that resonates with certainly clinicians, but also payers as well. And then you have the other side of the coin. You have the patient who might have been over-surveilled and you can downgrade that and have a very beneficial impact on the patient’s care as well as on the cost of that care.
So we continue to work very hard to demonstrate the clinical utility and the economic benefit to payers, and we would hope and expect to continue to have successes through the next couple of years. But in terms of modeling and how we look at the business, we just sort of assume we’re going to hold where we are and we’ll take the win when it comes.
OPERATOR
Helpful. Our next question comes from Mark Mazzaro with U.S. Bancorp. Your line is now live.
Megan (Analyst)
This is Megan on for Mark. Thank you for taking our questions. So we’re just curious if you have an update on the size of the sales team since Q2, especially with regards to Tissue Cipher with volumes up, and we’re just looking to see if there’s any new territories being opened or if the current headcount is sufficient to sustain the growth that we’ve been seeing.
Frank Stokes (Chief Financial Officer)
Expansion on Tissue Cipher. Megan, did I hear that correctly? You’re just looking for sales force on both sides, right? Both are around 100. Around or under 100. And we think both are sufficient for now. I don’t think we had— it’s been a bit since we had an expansion on either side. I think second quarter was the tissue side’s most recent expansion. So those, if our historical norms in terms of when the new area managers or sales representatives are sort of fully operational, that’s kind of, what, five to six months in our model. So we should expect to see some impact here in the fourth quarter, but more so going into 2027.
So I think we are set up well for continued growth in 2027 based on our investments this year.
Megan (Analyst)
Great. Thank you, guys.
OPERATOR
We have reached the end of the question and answer session. I’d now like to turn the call back over to Derek Maetzold for closing comments.
Derek Maetzold (President and Chief Executive Officer)
Thank you. Thank you. This concludes our third quarter 2026 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences. Thanks, everybody.
OPERATOR
This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.
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