cstl-20221231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2022

For the transition period from _________ to _________

Commission File Number: 001-38984

CASTLE BIOSCIENCES, INC.

(Exact name of registrant as specified in its charter)

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter) was $472 million based on the closing price of the registrant’s common stock on June 30, 2022, as reported by the Nasdaq Global Market.

As of February 21, 2023, there were 26,575,616 shares of common stock, $0.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, subsequent to the date hereof pursuant to Regulation 14A in connection with the registrant’s 2023 Annual Meeting of Stockholders, are incorporated by reference into Part III of this Annual Report on Form 10-K. The registrant intends to file such proxy statement with the SEC not later than 120 days after the conclusion of its fiscal year ended December 31, 2022.

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Page

Special Note Regarding Forward-Looking Statements 2

Risk Factors Summary 3

PART I. 5

Item 1. Business 5

Item 1A. Risk Factors 45

Item 1B. Unresolved Staff Comments 89

Item 2. Properties 89

Item 3. Legal Proceedings 89

Item 4. Mine Safety Disclosures 89

PART II. 90

Item 6. [Reserved] 90

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 110

Item 8. Financial Statements and Supplementary Data 110

Item 9A. Controls and Procedures 110

Item 9B. Other Information 111

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 111

Item 10. Directors, Executive Officers and Corporate Governance 112

Item 11. Executive Compensation 112

Item 14. Principal Accountant Fees and Services 112

Item 15. Exhibit and Financial Statement Schedules 113

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•estimates of our total addressable market (“TAM”), future revenue and addressable patient populations, expenses, capital requirements and our needs for additional financing;

•expectations with respect to reimbursement for our products, including third-party payor reimbursement and coverage decisions;

•anticipated cost, timing and success of our product candidates, and our plans to research, develop and commercialize new tests;

•the impact of geopolitical and macroeconomic developments, such as the ongoing conflict between Ukraine and Russia, related sanctions and the COVID-19 pandemic on our business;

•our ability to obtain funding for our operations, including funding necessary to complete the expansion of our operations and development of our pipeline products;

•the implementation of our business model and strategic plans for our products, technologies and business;

•expectations with respect to acquisitions of businesses, assets, products or technologies;

•our ability to manage and grow our business by expanding our sales to existing customers, introducing our products to new customers, addressing areas of high clinical need or reducing healthcare costs;

•our ability to develop and maintain sales and marketing capabilities;

•regulatory developments in the United States and foreign countries;

•the performance of our third-party suppliers;

•the success of competing diagnostic products that are or become available;

•our ability to attract and retain key personnel; and

•our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others.

In some cases, you can identify these statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Annual Report on Form 10-K and are subject to risks and uncertainties. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. We discuss many of the risks associated with the forward-looking statements in this Annual Report on Form 10-K in greater detail in the section entitled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

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RISK FACTORS SUMMARY

We face many risks and uncertainties, as more fully described in this Annual Report on Form 10-K under the heading “Risk Factors.” Some of these risks and uncertainties are summarized below. The summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of these risks and uncertainties contained in “Risk Factors.”

Risks Related to our Financial Condition

•A significant portion of our revenue comes from a small number of third-party payors.

•Due to how we recognize revenue, our quarterly and annual revenues may not reflect our underlying business.

•We have incurred significant losses since inception, and we may never achieve profitability.

•We are an early, commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

•Our quarterly and annual operating results and cash flows may fluctuate in the future, which could cause the market price of our stock to decline substantially.

•If our internal control over financial reporting is not effective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause adverse effects on our business and may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

•We may need to raise additional capital to fund our existing operations, commercialize new products, or expand our operations.

Risks Related to our Business

•Our revenue currently depends primarily on sales of DecisionDx®-Melanoma, and we will need to generate sufficient revenue from this and other products to grow our business.

•Unfavorable U.S. and global economic conditions could adversely affect our business, financial condition, results of operations or cash flows.

•Public health crises, such as pandemics or similar outbreaks, could adversely impact our business.

•Billing for our products is complex and requires substantial time and resources to collect payment.

•We rely on third parties for sample collection, preparation and delivery.

•We rely on our database of samples for some of the development and improvement of our products. Depletion or loss of our samples could significantly harm our business.

•If our primary clinical laboratory facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to conduct our laboratory work for our commercial products and pursue our research and development efforts may be jeopardized.

•New product development involves a lengthy and complex process, and we may be unable to develop and commercialize, or receive reimbursement for, on a timely basis, or at all, new products.

•We rely on limited or sole suppliers for some of the reagents, equipment, chips and other materials used by our products, and we may not be able to find replacements or transition to alternative suppliers.

•The sizes of the TAM for our current and future products have not been established with precision and may be smaller than we estimate.

•The diagnostic testing industry is subject to rapid change, which could make our current or future products obsolete.

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.

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•We conduct business in a heavily regulated industry and failure to comply with federal, state and foreign laboratory licensing requirements including those established by the Centers for Medicare and Medicaid (“CMS”) and the applicable requirements of the U.S. Food and Drug Administration (“FDA”) or any other regulatory authority, could cause us to lose the ability to perform our tests, experience disruptions to our business, or become subject to administrative or judicial sanctions.

•Interim, topline and preliminary data from our clinical studies that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

•Changes in healthcare policy, statutes or regulations, or our ability to comply with applicable healthcare requirements, could have a material adverse effect on our business and operations.

Risks Related to Intellectual Property

•If we are unable to obtain and maintain sufficient intellectual property protection for our technology, our ability to successfully commercialize our products may be impaired.

•Our commercial success depends significantly on our ability to operate without infringing upon the intellectual property rights of third parties.

•We depend on information technology systems that we license from third parties. Any failure of such systems or loss of licenses to the software that comprises an essential element of such systems could significantly harm our business.

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

•We are highly dependent on the services of our key personnel, including our President and Chief Executive Officer.

•Our employees and any current or potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

•We have, 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.

•Product or professional liability lawsuits against us could cause us to incur substantial liabilities and could limit our commercialization of our products.

•Our business could be adversely affected by natural disasters, public health epidemics and other events beyond our control.

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.

•We have broad discretion in the use of working capital and may not use it effectively or in ways that increase our share price.

•We have and may continue to enter into related party transactions that create conflicts of interest, or the appearance of conflicts of interest, which may harm our business and cause our stock price to decline.

•The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

•Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

•Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

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PART I

Item 1. Business.

As used in this Annual Report on Form 10-K, unless the context indicates or otherwise requires, “Castle Biosciences”, the “Company”, “we”, “us”, and “our” refer to Castle Biosciences, Inc., a Delaware Corporation.

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 diagnostic and prognostic (or risk stratification) tests provide.

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Vision and Foundational Strategy

Since our inception in 2008, it has been our vision to transform disease management by keeping people first: patients, clinicians, employees and investors. This foundational strategy remains the guidepost for the direction of our company and the basis of long-term value creation.

We have three strategic guideposts that create value for customers, patients and stockholders:

Exceptional Employees - We hire and keep the right people, by Castle’s commitment to doing the right thing for employees and nurturing our thriving culture.

Continuous Evolution & Improvement - We are an industry leader by challenging the status quo with deep scientific expertise, unique value insight and robust data development.

Customer & Solution Centric - We value best-in-class customer experience at all points along the testing journey, and we leverage multiple solutions for a single customer to provide a single source of high quality molecular diagnostic tests.

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Our Test Portfolio

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma, although each of our other commercial tests do contribute to our overall revenue. We map out the patient journey of diagnostic test services as starting with (i) screening of healthy individuals, to (ii) supporting diagnostic clarity in patients with signs or symptoms of disease, to (iii) risk stratification or prognosis, to (iv) response to treatment for specific treatment selection and to (v) late-stage testing for use in resistant metastatic disease. We currently focus our investments on innovative test services that assist in the following areas along the patient journey: providing diagnostic clarity in patients with signs or symptoms of disease, risk stratification and response to treatment. We have seven commercially available proprietary tests that assist clinicians and patients along this continuum.

Our commercially available proprietary tests focus on answering clinical questions arising during the treatment of:

•Dermatologic cancers—DecisionDx-Melanoma, DecisionDx®-SCC, MyPath® Melanoma and DiffDx®-Melanoma

•Uveal melanoma (“UM”)—DecisionDx®-UM

•Barrett’s esophagus (“BE”)—TissueCypher® Barrett’s Esophagus Test

•Mental health conditions—IDgenetix®

Together, we believe these commercial products support an estimated TAM of $8.0 billion in the United States.

1) U.S. TAM based on estimated patient population assuming average reimbursement rate among all payors.

2) Annual U.S. incidence for Stage I, II or III melanoma estimated at 130,000; annual U.S. incidence for squamous cell carcinoma estimated at 1,000,000 with addressable market limited to carcinomas with one or more high risk features; annual U.S. incidence for suspicious pigmented lesion biopsies estimated at 2,000,000 with addressable market limited to the 15% with an indeterminant biopsy.

3) 415,000 upper GI endoscopies/year with confirmed dx of BE (ND, IND, LGD, EXCLUDING HGD) x $2,513 = U.S. only TAM of ~$1 billion.

In 2022, we developed expanded evidence supporting portfolio of innovative tests through the acceptance/publication of 14 peer-reviewed studies across all franchises. As of December 2022, over 100 peer-reviewed articles have been published demonstrating the analytical validity, clinical validity and clinical utility of our tests.

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. We currently have Medicare coverage for DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, DecisionDx-UM, TissueCypher and IDgenetix. 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. For further detail, see "—Reimbursement" below.

Commercial Launches

We launched DecisionDx-UM in January 2010, a proprietary, risk stratification gene expression profile (“GEP”) test that predicts the risk of metastasis for patients with UM. We believe DecisionDx-UM is the standard of care in the

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management of newly diagnosed UM in the majority of ocular oncology practices in the United States. Based on the substantial clinical evidence that we have developed, we have received Medicare coverage for DecisionDx-UM, and we believe patients 65 years of age and older represents approximately 45% of the addressable patient population for this test. We estimate approximately 2,000 patients in the United States are diagnosed annually with UM.

We launched DecisionDx-Melanoma in May 2013, a proprietary risk stratification GEP test that predicts the risk of metastasis or recurrence for patients diagnosed with invasive cutaneous melanoma. In the management of melanoma, as with nearly all diseases, treatment plans are directed by patient risk stratification. This test has two distinct, complementary clinically actionable uses. The first revolves around predicting the likelihood of having a sentinel lymph node (“SLN”) negative biopsy result so that clinicians and patients can discuss the risk and benefit of undergoing the SLN biopsy (“SLNB”) surgical procedure. The second use is to inform the appropriate treatment plan during the initial five years post-diagnosis, regardless of the decision to undergo or avoid invasive SLNB surgery. In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive cutaneous melanoma in the United States. Based on the substantial clinical evidence that we have developed, we have received Medicare coverage for DecisionDx-Melanoma which we believe represents approximately 50% of the addressable patient population for this test.

We commercially launched DecisionDx‐SCC in August 2020, our cutaneous squamous cell carcinoma (“SCC”) proprietary risk stratification GEP test, for use in patients with one or more risk factors (also referred to as “high-risk” SCC). We commercially launched DiffDx-Melanoma in November 2020, our proprietary GEP test for use in patients with difficult-to-diagnose melanocytic lesions, meaning there is uncertainty related to the malignancy of the biopsied lesion. We believe that these two skin cancer tests address areas of high clinical need in dermatological cancer and, together, represent an estimated addressable population of approximately 500,000 patients in the United States.

Acquisitions

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.

We further expanded our commercially available dermatologic portfolio in May 2021 when we acquired Myriad myPath, LLC (“Myriad MyPath Laboratory”) from Myriad Genetics, Inc. for a cash purchase price of $32.5 million. MyPath Melanoma is a clinically validated GEP test that addresses the same unmet clinical need as our DiffDx-Melanoma test. 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 to leverage the strength of both tests. Our internal data indicates that we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma. As such, 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.

In December 2021, we extended our commercial portfolio of proprietary tests into the gastroenterology market through our acquisition of Cernostics, Inc. (“Cernostics”) and the TissueCypher platform, for total consideration of $49.0 million, consisting of cash consideration of $30.7 million and contingent consideration with an acquisition date fair value of $18.3 million. The TissueCypher platform focuses on unlocking, in the case of the initial test for use in patients with BE, the importance of the location of the expression of proteins or lack thereof within the morphology of the disease (also known as spatialomics). This “spatialomic” information is then interpreted using artificial intelligence approaches to predict the likelihood of progression to high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE. We believe the addition of expertise in the spatialomics area positions us for continued growth and success in the diagnostics space, complementing our first-to-market dermatologic franchise and our proprietary test for UM.

In April 2022, we completed our acquisition of AltheaDx, Inc. (“AltheaDx”), a commercial-stage molecular diagnostics company specializing in the field of pharmacogenomic (“PGx”) testing services that are focused on certain mental health diagnoses, and the provider of IDgenetix, a PGx test for mental health conditions, for a total consideration of $47.6 million, consisting of cash consideration of $30.5 million and equity consideration of $17.1 million. Traditional PGx tests focus on drug-gene interactions where our IDgenetix test also incorporates drug-drug interactions and lifestyle factors into the final patient report, which we believe offers additional value to clinicians and patients. This acquisition enabled us to offer a testing solution that we believe has the potential to accelerate our impact on patient care in an area of high unmet clinical need, significantly expanded our in-market estimated U.S. TAM by approximately $5 billion and offer incremental value to patients and clinicians over the standard of care trial-and-error approach. A randomized controlled trial showed that patients diagnosed with depression, who were

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assessed with the IDgenetix test, showed a 2.5 times improvement in remission rates compared to those who did not have their genes tested.

Pipeline Initiatives

We have significant expertise in developing proprietary algorithms, conducting clinical studies and using the necessary instrumentation required for efficiently developing our pipeline products.

In 2021, we announced the launch of our innovative pipeline initiative to develop a genomic test aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, atopic dermatitis and related inflammatory skin conditions. In the U.S. alone, there are approximately 18 million patients diagnosed with psoriasis and atopic dermatitis. Approximately 450,000 of these patients annually are eligible for systemic therapies. If successful, this inflammatory skin disease pipeline test has the potential to add approximately $1.9 billion to our current estimated U.S. TAM. In 2021, we initiated a 4,800 patient, prospective, multi-center clinical study to develop and validate this pipeline test and ended 2022 with more than 50 active clinical study sites, exceeding our initial target. In 2021, we formed a steering committee comprised of leading experts in the field, received Institutional Revenue Board (“IRB”) approval and enrolled our first patient in the development and validation study for this genomic test. We believe we are on track to launch this pipeline test by the end of 2025. We have initiated work on additional pipeline tests which branch out upstream, downstream and parallel to our commercial tests, within or adjacent to our established dermatology commercial call points.

Test Report Volume and Revenue

The number of test reports we generate is a key indicator that we use to assess our business. The numbers of test reports delivered by us and our net revenues during the past five years are presented in the table below:

Years Ended December 31,

TissueCypher Barrett’s Esophagus Test(3) 2,128 27 — — —

IDgenetix(4) 3,249 — — — —

(1)On August 31, 2020, we commercially launched our cutaneous SCC proprietary GEP test for use in patients with one or more risk factors.

(2)Includes MyPath Melanoma and DiffDx-Melanoma. On November 2, 2020, we commercially launched our DiffDx-Melanoma test. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021. We offered both MyPath Melanoma and DiffDx-Melanoma under our Diagnostic GEP offering until February 2023 when we suspended the clinical offering of DiffDx-Melanoma, as discussed above.

(3)We began offering the TissueCypher Barrett’s Esophagus Test on December 3, 2021, following the completion of our acquisition of Cernostics.

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

Our Markets Overview

Our current test portfolio serves the markets for dermatologic cancers, UM, BE and mental health conditions. The sections that follow provide an overview of each of these markets.

Dermatologic Market Overview

The foundation of our business is our dermatologic cancer franchise, and our lead product is DecisionDx-Melanoma.DecisionDx-Melanoma is a proprietary GEP risk stratification test that predicts the risk of metastasis, or recurrence, for patients diagnosed with invasive cutaneous melanoma, a deadly skin cancer. In the management of

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melanoma, as with nearly all diseases, treatment plans are directed by patient risk stratification. This test has two distinct, complementary clinically actionable uses. The first revolves around predicting the likelihood of having a SLN negative biopsy result so that clinicians and patients can discuss the risk and benefit of undergoing the SLNB surgical procedure. The second use is to inform the appropriate treatment plan during the initial five years post-diagnosis, regardless of the decision to undergo or avoid invasive SLNB surgery. We launched DecisionDx-Melanoma in May 2013. Based on the substantial clinical evidence that we have developed, we have received Medicare coverage for DecisionDx-Melanoma, which represents approximately 50% of the addressable patient population for this test.

Skin cancer is the uncontrolled growth of abnormal skin cells. There are six types of pre-cancers and skin cancers that result in a total annual incidence of 5.5 million patients. The three most common forms of skin cancers are basal cell carcinomas, SCC and cutaneous melanoma. SCC, the second most common form of skin cancer, is an uncontrolled growth of abnormal cells arising from the squamous cells in the epidermis, the skin’s outermost layer. Melanoma, an aggressive form of skin cancer, originates in the pigment-producing melanocytes in the basal layer of the epidermis. We do not, at this time, have an active focus on basal cell carcinomas.

Pre-cancers include suspicious pigmented lesions, which are unusual-looking lesions that may be melanoma, and actinic keratosis, which may give rise to SCC.

Cutaneous Melanoma

Melanoma is a malignancy of the pigment-producing melanocytes in the basal layer of the epidermis and is growing in incidence in the United States. Published statistics suggest that there were nearly 300,000 new cases of melanoma diagnosed worldwide, and an estimated annual incidence of 130,000 in the United States, representing an estimated U.S. TAM of $540 million. This estimated annual incidence number is based upon a calculation using data from the U.S. Surveillance, Epidemiology, and End Results (“SEER”) registries and subsequently adjusted for the documented underreporting of melanoma diagnoses which range from 30%-72%. Based on currently available data, we estimate the targetable clinician base treating melanoma is between 11,000 and 15,000.

After a diagnosis of invasive cutaneous melanoma, healthcare providers have traditionally relied solely on clinical and pathological factors from the initial biopsy to estimate the patient’s risk of metastasis to then determine a risk-based treatment plan. This estimation or “staging” process is then used to determine nearly all treatment decisions. Invasive melanoma tumors are staged as Stage I through Stage IV based on thickness of tumor (Breslow thickness), presence of ulceration, and presence of regional or distant disease spread.

All patients who are diagnosed with an invasive cutaneous melanoma will undergo a wide local excision procedure with the surgical margins determined by the depth of the tumor.

Guideline committees base recommendations for the invasive SLNB surgery on an estimated risk of the likelihood of positivity determined by Breslow thickness and ulceration and the presence of certain adverse pathologic features, such as high mitotic rate or transected base. If the likelihood of a positive SLN result is less than 5%, SLNB surgery is not recommended. If the likelihood of a positive SLN result falls between 5% and 10%, then consideration of an SLNB surgery is recommended, and if the likelihood exceed 10%, then discussing and offering SLNB surgery is recommended. Guideline committees have generally converged on the 5% threshold due to a reported regional false negative rate of the SLNB surgery of 5% (meaning that 5% of the time, or more, the guideline committees expect a patient with an SLN-negative biopsy result will subsequently develop SLN metastasis). Clinicopathologic staging factors provide an imprecise population-based estimation of risk of SLN positivity and do not evaluate nor incorporate the biology of the patient’s primary tissue biology. A positive SLN biopsy result, meaning that at least one melanoma cell was seen in the SLN tissue, leads to re-staging the patient from stage I or II to stage III, indicating regional spread of disease.

Importantly, the National Cancer Institute (the “NCI”) recently completed a landmark, prospective, randomized multi-center study (the “MSLT-I study”) which showed that the death rate from melanoma was the same in patients who were randomized to the SLNB surgery compared to those who merely underwent observation, indicating that SLNB surgery is prognostic, and not therapeutic.

On average, 12% of patients undergoing the SLNB surgery will have an SLN-positive biopsy result, indicating that 88% of patients will not derive clinical benefit from the procedure. The 88% SLN-negative rate in these surgeries carries significant patient and healthcare system implications. For example, the overall complication rate of SLNB surgery was shown to be 11.3% in a systematic review of 21 articles representing 9,047 patients. A separate review reported that the regional false negative rate of the SLNB surgery ranged from 5% to 21%, with a median rate of 18%.

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Both the complication and false negative rates are above the recommended 5% and 10% positivity rates proposed by guideline committees as thresholds at which clinicians should either consider (5%) or offer (10%) the procedure to their patients. The SLNB surgery requires the use of general anesthesia leading to an average reimbursed cost of $20,000 to $24,000. Thus, patients undergoing SLNB surgery are exposed to the complications from surgery, including general anesthesia risks, high medical costs and a median false negative rate of 18%.

In addition to the significant clinical issues involved in only using traditional clinical and pathology factors to evaluate the appropriateness of SLNB surgery, there is a discord between an individual’s “stage” and their actual risk of metastasis or death from melanoma. Based on data from SEER and the American Joint Committee on Cancer (“AJCC”), out of the cutaneous melanoma tumors diagnosed as Stage I, II or III, 80% are classified as Stage I (the lowest risk) and 12% are classified as Stage II (the next lowest risk). While Stage I and II patients have a lower population-based estimated risk of melanoma specific death, due to the higher incidence of these ‘lower risk’ stage groups, these lower risk stages account for 60% of all deaths in patients receiving Stage I, II or III diagnoses.

Furthermore, while patients with Stage III melanoma are at a higher population risk of metastasis and death from melanoma than Stage I or II, the five-year melanoma-specific survival rate for Stage III patients is 77% without any intervention. We believe that the limitations of the current staging system not only result in unnecessary SLNB surgeries for certain low-risk patients, but also lead to overtreatment with adjuvant immune-oncology and targeted therapies for certain patients with Stage III melanoma.

In summary, risk stratification, or the risk of metastasis, determines the treatment plans in newly diagnosed patients, including the recommendation for the SLNB surgery, decisions around the initiation of advanced imaging for active surveillance, frequency and specialty for clinical follow-up, initiation of adjuvant therapy and discussion of clinical trial enrollment opportunities.

Cutaneous Squamous Cell Carcinoma

Cutaneous SCC, the second most common form of skin cancer, is an uncontrolled growth of abnormal cells arising from the squamous cells in the epidermis, the skin’s outermost layer. Approximately one million patients are diagnosed with SCC annually in the United States. While worldwide data on SCC diagnoses are inconsistently reported, the incidence outside the United States is estimated to be greater than two million diagnoses annually.

Historically, SCC has been classified as one of the “non-melanoma skin cancers” with a clinical focus on curative primary surgery. However, high risk SCC is now recognized as a significant cause of morbidity and mortality, and due to the increased incidence, more patients are now estimated to die annually from SCC in the United States (approximately 15,000 patients) than from cutaneous melanoma. Similar to melanoma, treatment plan decisions are based solely upon clinical and pathology factors from the initial biopsy to estimate a patient’s risk of recurrence or metastasis. However, unlike melanoma, which uses population-based risk analysis of these factors, the estimates are based upon small patient cohorts, and our research shows that most clinicians rely upon individual clinical and pathologic features rather than a staging “group” for guiding treatment plan decisions. Our DecisionDx-SCC test, which we launched on August 31, 2020, is intended for guiding the treatment of the estimated 20% of SCC patients, or 200,000 annually, who present with one or more high risk features, representing an estimated U.S. TAM of $820 million.

Identifying high risk SCC presents challenges for clinicians. Unlike in cutaneous melanoma, where longitudinal databases were developed in an attempt to align population-based risk of metastasis with particular clinical and pathology factors, the same level of organization has not been given to SCC. To date, there has been a lack of reliance on the two primary staging systems in the United States, the AJCC Eighth Edition staging system and the Brigham and Women’s Hospital (“BWH”) system, which are marked by widely divergent classifications for its two risk categories (high and low). Further, the National Comprehensive Cancer Network (“NCCN”) staging method organizes clinical and pathology features into three risk categories (low, high and very high) based on their association with recurrence risk. A 2014 study compared the then-current AJCC Seventh Edition staging system and NCCN systems to assess concordance between the two. The AJCC system classified 82% as low risk while the NCCN system classified 13% as low risk. Because of the level of discordance among the risk assessment staging systems for SCC, and the lack of available databases, these staging systems end up minimally impacting treatment plans, with patients frequently being over- and under-treated, because of hesitancy by clinicians to rely on them.

The two principal staging systems for SCC, AJCC (which is limited to head and neck SCC) and BWH, both classify patients according to the tumor (T), node (N) and metastasis (M) staging method and rely upon a combination of clinical or pathology factors to stage or classify risk of metastasis. The NCCN’s staging method identifies the majority of patients who do go on to metastasize, but its system suffers from the lowest positive predictive value (“PPV”) compared to the AJCC and BWH staging methods. Our initial clinical validation study for DecisionDx-SCC

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included 321 patients, of which 93% had one or more high-risk features. Within this study cohort, the risk criteria established within the NCCN guidelines demonstrated a sensitivity of 96% while PPV was 7% and negative predictive value (“NPV”) was 90.5%. The low PPV means that 93 out of 100 SCC instances labeled as high risk by the NCCN criteria did not actually metastasize. The AJCC and BWH guidelines demonstrated a sensitivity of 38.5% and 25%, respectively, PPV of 33% and 35%, respectively and NPV of 88% and 86%, respectively. A clinician that relies solely upon NCCN criteria, given the low PPV, may end up developing an adjuvant treatment plan that includes radiation, or chemotherapy or complete lymph surgical dissection, or a combination of these, for a “high-risk” patient that is ultimately appropriate for only one out of fourteen high-risk patients who will metastasize, but not for the remaining thirteen patients who would not have metastasized. The AJCC and BWH staging systems do demonstrate stronger PPV but would still recommend that two out of three patients undergo an adjuvant treatment plan who will not benefit. These accuracy metrics have created significant discordance in the approach to managing patients with high-risk features, from one end of the spectrum advocating surgical intervention for all high-risk patients to another extreme calling for a “watch and wait” approach for all high-risk patients. The end result is an unacceptable clinical discordance in the approach to treatment plans and significant over- and under-treatment for a diagnosis that leads to the most skin cancer deaths in the United States.

Difficult-to-Diagnose Melanocytic Lesions

Difficult-to-diagnose melanocytic lesions are pigmented lesions that may be melanoma. There are approximately two million skin biopsies performed annually specifically to rule in or rule out a diagnosis of melanoma in the United States. Approximately 15% of these biopsies are classified as indeterminate, in which case a pathologist cannot make a definitive diagnosis as to whether the biopsy is benign or malignant. A pigmented lesion biopsy that is difficult to diagnose may lead to an indeterminate diagnosis, in which case the treating clinician generally leans towards making a conservative decision and assumes that the lesion is melanoma. A definitive diagnosis of invasive cutaneous melanoma results in a treatment plan that involves wider margins for the definitive wide local excision surgery, consideration of the SLNB surgery and post-diagnosis management plans, including frequent, high intensity surveillance using advanced imaging, frequent clinical visits and encouragement to enroll in clinical studies. If the indeterminate lesion were benign, the recommendation in the majority of cases would be no additional intervention. Thus, the tendency of clinicians to treat an indeterminate diagnosis as melanoma leads to significant over-treatment decisions, complications and increased healthcare costs.

MyPath Melanoma and DiffDx-Melanoma are independent GEP tests that together comprised Castle’s Diagnostic GEP offering of molecular testing solutions for difficult-to-diagnose melanocytic lesions, representing an estimated U.S. TAM of $600 million. Our internal data indicates that we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma. As such, 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.

Uveal Melanoma Market Overview

The incidence of UM has remained relatively constant over time with approximately 2,000 patients diagnosed annually in the United States, representing an estimated U.S. TAM of $9.3 million. UM arise from the three tissues comprising the uveal tract and vary by location with approximately 90% occurring in the choroid, 5% in the ciliary body and 5% in the iris. UM may also be referred to as ocular melanoma.

Approximately 97% of patients with UM have no evidence of metastatic disease at the time of diagnosis and the success rate for definitive treatment of the primary tumor is over 90%. However, within three years, approximately 30% of all patients will experience metastases. Prior to commercial availability of DecisionDx-UM, other clinical staging and molecular diagnostic tests for UM had been commercialized, but due to the lack of prospective studies, coupled with their low accuracy, tests were primarily used for research purposes rather than for clinical management of patients in the United States. As a result, nearly all U.S. centers grouped patients into a single, high-risk treatment plan that included frequent, high intensity surveillance using advanced imaging, frequent clinical visits and encouragement to enroll in clinical studies.

DecisionDx-UM is our proprietary GEP test that helps healthcare providers predict the risk of metastasis in patients with UM.The test has been shown to have higher prognostic accuracy than chromosomal testing, mutation analysis or clinical features of the tumor, and is recommended by the NCCN for prognosis of UM tumors.

Barrett’s Esophagus Market Overview

Barrett’s esophagus is a protective response to chronic acid reflex resulting in the replacement of normal esophageal squamous mucosa with specialized intestinal metaplasia that is more resistant to acidic environments and is the only known precursor to esophageal adenocarcinoma (“EAC”), which is one of the fastest increasing

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cancers in incidence in the United States with a five-year survival rate of approximately 20%. There are approximately 4 million patients in the U.S. currently diagnosed with BE and approximately 435,000 endoscopies are performed annually on BE patients—either for initial diagnosis or repeat endoscopy for assessing possible progression of BE (active surveillance). We estimate the U.S. TAM at $1 billion for our TissueCypher Barrett’s Esophagus Test, which we acquired through our acquisition of Cernostics on December 3, 2021.

Patients with BE symptoms undergo an endoscopic biopsy procedure to both visualize lesions that may be present in a patient’s esophagus as well as collect one or more biopsy specimens. These biopsy specimens serve as the diagnostic specimens to determine if the patient has BE, perhaps esophageal cancer, another disease or no diagnosed disease. The extent of BE dysplasia, which represents the extent of abnormality detected in the tissue that may precede development of cancer, is graded by the pathologist as either non-dysplastic (“NDBE”), IND, LGD or HGD. Treatment plans for BE are risk stratified according to these grades. Patients with HGD and many LGD patients receive esophageal eradication therapy with the intent of eliminating the BE lesion. They may also receive varying levels of repeat endoscopic biopsy procedures, which can occur at frequent or less frequent intervals, with the goal of detecting progression to HGD or EAC.

Similar to the staging limitations that are seen in cutaneous melanoma, at least half of the patients who progress to HGD or esophageal cancer are originally diagnosed as ND or IND patients at lower risk for disease progression based on pathological assessment alone due to the high relative incidence of ND/IND diagnoses relative to LGD/HGD diagnoses. This highlights the poor sensitivity of diagnosis by histology in predicting progression and inadequacy of surveillance to detect progression in patients originally diagnosed with low-risk NDBE. Thus, improvement is needed in the assessment of the risk of progression in patients with Barrett’s esophagus to better inform risk-aligned treatment plans.

1.415,000 upper GI endoscopies/year with confirmed dx of BE (ND, IND, LGD, excluding HGD) x $2,513 = U.S. only TAM of ~$1 billion.

Mental Health Market Overview

Finding an optimal medication for patients diagnosed with a mental illness has traditionally relied on trial and error, often times resulting in inadequate therapy response, low remission rates, and a high rate of adverse drug events. Using current standard-of-care treatment approaches, less than half of patients with major depressive disorder achieve an adequate response to first line treatment and nearly 3 of 4 do not achieve remission. There is a high prevalence of adverse drug events and increasing rates of discontinuation with repeated medication trials. This frustration has led to a need in the mental health community for more personalized care with selection of an optimal therapy the first time, achieving a fast response/remission with few to no side effects and at a low out of pocket cost. For the approximately 50 million patients experiencing mental health illness in the United States, meeting these expectations could require a new approach to medication selection. PGx can help improve medication selection and avoid the need for multiple medication trials. A traditional PGx test is designed to assess a patient’s DNA to identify variances that result in drug-gene interactions. These interactions can lead to variation in medication responses by altering drug metabolism or impacting how the body responds to a drug. In addition to drug-gene interactions, our IDgenetix test also incorporates drug-drug interactions and lifestyle factors into the final patient report, which we believe offers additional value to clinicians and patients.

Our Testing Solutions

We use multi-analyte assays with algorithmic analysis (“MAAA”) to characterize an individual patient’s tissue biology to inform specific prognosis of tumor development, death due to disease, metastasis or recurrence and aid the decision-making process of the treating clinician and their patient to help optimize health outcomes and reduce

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healthcare costs. Due to the biological complexity of diseases, developing accurate products takes scientific diligence, stringent clinical protocols, machine learning expertise, proprietary algorithms and significant investments of time and capital. In addition, the underlying tissue samples and associated clinical outcomes data required to develop and validate these products are difficult to obtain. Once successfully developed and validated, commercial success requires generating ongoing evidence, such as clinical use documentation, to support appropriate clinician adoption, reimbursement success and guideline inclusion.

We currently offer five proprietary MAAA tests for use in the dermatologic, ocular and gastroenterology fields: DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, DecisionDx-UM and TissueCypher. We also offer our proprietary PGx test, IDgenetix, to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions. The accuracy of each product in our portfolio is typically supported by multiple studies published in peer-reviewed journals following completion of the initial clinical validation studies. Also, multiple clinical impact studies have demonstrated a significant impact on clinician decisions to alter their treatment plan when the results of our tests are considered in concert with the traditional clinical and pathology factors. DecisionDx-Melanoma, DecisionDx-SCC, DecisionDx-UM, TissueCypher, MyPath Melanoma and IDgenetix are currently reimbursed by Medicare. In addition, we have received widespread positive private payor coverage and positive guideline inclusion for DecisionDx-UM, our first melanoma test, launched in January 2010. Since our inception, we have processed more than 140,000 clinical patient samples across our product portfolio.

Data as of Dec. 31, 2022

1. One TissueCypher study involves patients and ~250 physicians. 2. Number reflects studies that span Castle’s dermatology, ophthalmology and gastroenterology portfolios. 3. SEER cancer registries linked CM cases diagnosed from 2013-2018 to data for patients with stage I-III CM tested with the 31-GEP as of Dec. 31, 2022; includes patients in studies not yet published. 4. SEER cancer registries linked UM cases diagnosed in 2018 for patients with primary uveal melanoma tested with the 15-GEP; includes patients in studies not yet published.

Our products are designed to provide the following benefits:

•Clinically Actionable Information for Clinicians. Our commercial tests provide clinicians and their patients with reports that contain clinically actionable information to inform the treatment plan for each individual patient. Our reports are updated as new clinical data is generated that may enable additional clinical decisions to be made. Studies show that clinicians use our test results to make treatment plan changes. For example, four studies were initially conducted to evaluate the clinical actionability of our DecisionDx-Melanoma test, physicians utilizing the results of our test reports changed a patient’s treatment in approximately 50% of cases, indicating physician confidence in the evidence underlying our reports.

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•Informed Patient Care. The clinical evidence shows that our products are accurate predictors of a patient’s specific risk of progression to cancer, or metastasis or recurrence of their cancer based upon the GEP of an ocular or dermatologic tumor or, in the case of our BE test, the spatial assessment of biomarkers, independent of available clinical and pathology factors. Clinicians use this information to identify patients who are likely to benefit from an escalation of care as well as those who may avoid unnecessary treatments, such as medical, surgical and radiation interventions.

•Reduced Healthcare Costs for Payors. We believe our products have the potential to reduce overall healthcare costs by enabling clinicians and their patients to avoid unnecessary medical and surgical interventions. As an example, without DecisionDx-Melanoma, 88% of patients who receive the SLNB surgery, which has an average in-patient reimbursed cost of $20,000 to $24,000, are found to be SLN-negative and remain classified as low risk. If all patients eligible for the SLNB surgery were tested with DecisionDx-Melanoma and their test results were acted upon, we estimate the potential savings to the U.S. healthcare system could be up to $250 million, after considering the cost of DecisionDx-Melanoma.

DecisionDx-Melanoma

Overview

DecisionDx-Melanoma is our proprietary risk stratification GEP test developed to identify the risk of metastasis, or recurrence, for patients diagnosed with invasive cutaneous melanoma, a deadly skin cancer. Under the traditional staging methods, patients with melanoma are classified into low or and high-risk categories based on population-wide clinical and pathology features, and risk of recurrence guides a clinician’s treatment plan recommendations about whether or not to offer invasive SLNB surgery, frequency and use of clinical imaging and follow-up, and/or consider referral for adjuvant therapy.

Limitations of the current AJCC staging recommendations and the NCCN recommendations for patient management, are demonstrated by the statistic that nearly 60% of the patients who die each year from melanoma are initially diagnosed with Stage I or II melanoma.This reflects a need for better risk stratification or prognostic markers to identify high-risk patients.

To address this need for a more accurate predictor of metastatic risk, we discovered, developed, validated and continue to support the performance of the DecisionDx-Melanoma test. This product is designed to identify tumors at high risk for metastasis from patients receiving a Stage I, II or III diagnosis. DecisionDx-Melanoma is administered from the formalin-fixed, paraffin embedded biopsy or wide local excision tissue used to diagnose and stage melanoma and assesses the expression of 31 genes to result in classification of metastatic risk as Class 1A (lowest risk), Class 1B/2A (increased risk) and Class 2B (highest risk). DecisionDx-Melanoma has been validated to provide additional information on a patient’s risk of metastasis not obtainable from staging alone and can improve the accuracy of risk stratification beyond traditional staging approaches. The results of the test have been incorporated into clinical practice to inform important decisions about recommendation for invasive SLNB surgery, use of advanced imaging for active surveillance, and frequency and specialty for clinical follow-up. As of February 28, 2023, we have received orders from more than 11,200 clinicians for an aggregate of more than 120,000 tests.

In March 2021, we announced that DecisionDx-Melanoma utilizes an Integrated Test Result (“ITR”), designed to provide more precise risk stratification for patients with Stage I, II or III melanoma. The ITR uses an independently validated algorithm (“i31-SLNB”) that integrates the DecisionDx-Melanoma continuous score with clinical and pathological features, including Breslow thickness, ulceration, mitotic rate and age to provide a precise and personalized prediction of SLN positivity. In October 2021, we announced the completion of independent validation of a new, separate algorithm that integrates the DecisionDx-Melanoma continuous score with Breslow thickness, ulceration, mitotic rate, SLN status, age and tumor location to provide a prediction of an individual patient’s risk of metastasis and recurrence (“i31-ROR”). This new i31-ROR algorithm includes the additional endpoints of recurrence-free survival (“RFS”) and distant metastasis-free survival, which are not currently provided by the AJCC Eighth Edition staging system. These endpoints are anticipated to be helpful when determining appropriate

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treatment pathways for each patient’s disease. Results generated by the i31-ROR algorithm guide discussions and recommendations, within current risk-based guidelines, for the SLNB surgical procedure or for surveillance methodologies.

Two intended uses for DecisionDx-Melanoma

Source: Whitman et al. JCO PO 2021; Jarell et al. JAAD 2022.

In 2021, we initiated a collaboration with the NCI to link SEER Program registries’ data on cutaneous melanoma cases with DecisionDx-Melanoma testing data. Data from this large, real-world and unselected patient population found that when controlling for clinicopathologic as well as socioeconomic factors, patients who received DecisionDx-Melanoma as part of their clinical care had improved melanoma-specific survival compared to patients who did not have the DecisionDx-Melanoma test as part of their clinical care. The first phase of the collaboration links SEER cutaneous melanoma registries that were diagnosed between 2013 and 2018 with DecisionDx-Melanoma results and additional clinicopathologic information from patients tested between 2013 and 2018. We expect that the peer-reviewed publication will be available in 2023. The next planned phase of the collaboration with the NCI is to link the SEER registries’ cutaneous melanoma cases diagnosed post-2018. We expect further data read outs in the first half of 2023 and beyond.

Clinical Validation

More than 40 peer-reviewed articles have been published demonstrating the analytical validity, clinical validity and clinical utility of DecisionDx-Melanoma. We believe the clinical validation studies represent the largest clinical validation program of the metastatic risk of cutaneous melanoma ever conducted. In 2022, we developed expanded evidence supporting DecisionDx-Melanoma through the acceptance/publication of seven peer-reviewed studies. Based on our published data, we have shown that DecisionDx-Melanoma is an accurate, independent predictor of the risk of metastasis or recurrence.

Across multiple validation studies including more than 10,000 patients, DecisionDx-Melanoma has demonstrated improved prognostication of recurrence, distant metastasis, and melanoma-related death independent of traditional clinical and pathological factors defined by the AJCC and NCCN and clinical utility in improving risk-aligned management, indicating the test adds information and can be used as an adjunct to AJCC staging to further risk stratify within stages. DecisionDx-Melanoma has over 70% sensitivity for predicting distant metastasis and death, even in node-negative (Stage I-II) patients. Moreover, a low-risk Class 1A result is associated with excellent survival outcomes (~99% melanoma-free survival). Our long-term outcomes data shows that DecisionDx-Melanoma can provide a more specific individual risk of metastasis and death from melanoma that is distinct from the AJCC staging approach that limits prediction to clinical and pathology factors. Within patients diagnosed with Stage I melanoma, a DecisionDx-Melanoma high-risk Class 2B result identifies a patient with a risk of death that is similar to a patient with Stage IIIA melanoma (see graph below). By comparison, DecisionDx-Melanoma low-risk Class 1A results

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indicate a 99.7% likelihood of survival from melanoma at five years. Within patients diagnosed with Stage II melanoma, a high-risk Class 2B result is associated with a higher risk of death from melanoma that is similar to a patient with Stage IIB melanoma, whereas a low-risk Class 1A result can identify patients who have a very low risk of death from melanoma (>97.1% likelihood of survival at 5-years). Within patients diagnosed with Stage III melanoma, high-risk Class 2B results can identify patients who have a risk of death from melanoma similar to a patient with Stage IIIC melanoma, whereas a low-risk Class 1A likelihood of death from melanoma is similar to a patient with Stage IIA melanoma.

The ability of DecisionDx-Melanoma to accurately reclassify the risk of recurrence or risk of death is clinically significant because NCCN guidelines recommend that the duration and frequency of follow-up and intensity of cross-sectional imaging be based on a patient’s individual conditional probability of recurrence. The NCCN guideline cut-point for these decisions is between Stage I-IIA versus Stage IIB-III. For example, the chart below demonstrates that a patient diagnosed with Stage I melanoma but who has received a DecisionDx-Melanoma Class 2B test result has a melanoma specific survival rate of 92.8%, which is similar to the risk for a patient diagnosed with Stage IIIA melanoma. Today, patients diagnosed with Stage III melanoma are recommended to have an increased follow-up schedule, undergo routine cross-sectional imaging, consider initiation of adjuvant therapy, such as an anti-PD1 inhibitor, and consider enrollment in a clinical trial.

The first prospective, multi-center study of 322 patients diagnosed with Stage I, II and III melanoma was published in August 2017. This initial analysis reported a RFS rate of 97% and overall survival rate of 99% for patients with Stage I, II and III melanoma who received a DecisionDx-Melanoma Class 1A test result. An update to this study published in 2021 that included long-term outcomes of these patients demonstrated consistent findings, with patients with a Class 1A result maintaining significantly improved survival outcomes over patients with Class 2B results. Moreover, this study demonstrated that patients diagnosed with early stage I-IIA disease that received a Class 2B result had risk of recurrence and death from melanoma similar to that of patients with stage IIB-III disease for whom NCCN guidelines recommend increased intensity of management, indicating the level of risk associated with a high-risk result is meaningful and actionable. A total of 8 publications from 6 prospective studies have been published and each consistently demonstrate the accurate and independent prognostic value provided by DecisionDx-Melanoma for identifying low- and high-risk melanoma tumors.

The American Academy of Dermatology and other organizations use the Strength of Recommendation Taxonomy (“SORT”) system to evaluate prognostic tests such as DecisionDx-Melanoma. The SORT system ranks evidence of clinical validity as levels 1, 2 or 3, and assigns a strength of recommendation as levels A, B or C. A SORT level 1A is the highest level and 3C is the lowest. For SORT ranking, “a systematic review or meta-analysis of good quality studies” or “a prospective study with good follow-up” represents a level 1 for good quality evidence of clinical validity. For SORT strength of recommendation, “consistent, good quality evidence” represents a level A recommendation. A systematic review and meta-analysis was published in the Journal of the American Academy of Dermatologyin 2020 in an article titled “Molecular risk prediction in cutaneous melanoma: a meta-analysis of the

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31-GEP prognostic test in 1,479 patients.” This meta-analysis reviewed multiple peer-reviewed published clinical validation studies of DecisionDx-Melanoma, including prospective studies. The meta-analysis and the prospective studies satisfied the level 1 ranking of good quality studies and the consistency of DecisionDx-Melanoma data across these studies satisfied the level A strength of recommendation. Thus, the authors concluded that DecisionDx-Melanoma achieved a 1A level of evidence of clinical validity and strength of recommendation under the SORT system. Furthermore, as shown below, the multi-variate analysis for RFS found DecisionDx-Melanoma to be the strongest predictor of ROR compared to the evaluable clinical and pathology factors.

In addition, we conducted a prospective, multi-center study of 1,421 patients, which was published in Future Oncology in January 2019, that focused on the performance of DecisionDx-Melanoma to predict metastasis to the SLN. This study found that patients with a DecisionDx-Melanoma Class 1A test result with melanomas less than or equal to 2.0 mm thick, which represents 86% of all melanomas, have a 95% probability for an SLN-negative biopsy result. Analyzing this data by age shows that patients 65 years of age or older have a 98% NPV, those between 64 and 55 years of age have a 95% NPV and patients under 55 years of age have a 92% NPV. For clinicians and patients evaluating whether to use DecisionDx-Melanoma to guide decision-making on the SLNB surgery, the impact on melanoma specific survival is an important consideration if the SLN status is not known. To address this, we analyzed the long-term outcome data from our Gastman 2019 publication and showed that patients of all ages with a melanoma less than or equal to 2.0 mm thick and a DecisionDx-Melanoma Class 1A test result had a five-year melanoma specific survival rate of 99.6%, while similar patients 55 years or older had a melanoma specific survival rate of 99.3%. This study showed that use of DecisionDx-Melanoma for patients with melanomas of less than or equal to 2.0 mm thick could potentially result in 74% fewer SLNB surgeries.

Clinical Utility

We completed and published six clinical utility studies documenting how DecisionDx-Melanoma impacts treatment plan decisions. Based on the results of our DecisionDx-Melanoma test reports, physicians changed their treatment plan recommendations approximately 50% of the time. This change in the management of patient treatment plan

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recommendations compares favorably to leading molecular diagnostic tests as well as to the SLNB surgery, which only changes clinical decision-making approximately 12% of the time.

Study Design # of Patients Results

In 2022, additional follow-up from a prospective, multi-center study evaluated 5-year management plan changes for lab work, frequency of clinical visits and imaging in 509 patients pre- and post-31-GEP results. After receiving results, 51% of patients had a change in management plans in clinical visits, lab work or surveillance imaging. The changes were risk-aligned with GEP result in 76.1% of Class 1 results and 79% of Class 2 results. In early 2023, a publication of a prospective, multi-center study evaluating the impact of DecisionDx-Melanoma to guide SLNB decisions showed the test influenced 52% of clinical decisions to forego SLNB and 33% of decisions to perform SLNB. Compared to the baseline rate of SLNB performance in a contemporary cohort, there were 29% less SLNB procedures performed in patients with a Class 1A result.

Building on our clinical utility evidence, in October 2020, the publication in Future Oncology of a retrospective study, titled “Integrating the melanoma 31-GEP test to surgical oncology practice within national guideline and staging recommendations,” showed that DecisionDx-Melanoma impacted management decisions for patients diagnosed with Stage I – III melanoma under the AJCC framework. Study authors developed a recommended melanoma patient care algorithm that incorporates DecisionDx-Melanoma to help inform frequency and duration of follow-up visits, blood work and surveillance imaging in line with predicted metastatic risk. The patients’ DecisionDx-Melanoma test result was found to have an impact on the number and duration of follow-up and surveillance visits, and patients assessed as having a high risk of metastasis (designated by a DecisionDx-Melanoma Class 2 test result) received more intensive management than patients assessed as having a low risk (designated by a DecisionDx-Melanoma Class 1 test result). Clinicians using the test were shown to adjust patient management in a risk-appropriate direction, within recommendations of national guidelines.

These studies illustrate how clinicians use DecisionDx-Melanoma to inform the treatment pathway for patients who have been diagnosed with invasive cutaneous melanoma. Our DecisionDx-Melanoma test informs two initial treatment decisions: (1) to determine whether to offer and recommend the SLNB surgery to patients with melanomas less than or equal to 2.0 mm thick, and (2) following this decision, to guide the appropriate post-SLNB surgery treatment plan for their patients, including decision-making regarding advanced imaging, frequency of clinical visits, referral to medical oncology, adjuvant therapy, clinical trial enrollment, and watchful waiting. From 2020 – 2022, three independent expert physician panels published consensus guidelines on incorporation of the DecisionDx-Melanoma test into clinical practice based on this evidence.

Health Economics

We believe our products have the potential to reduce overall healthcare costs by enabling clinicians and their patients to avoid unnecessary medical and surgical interventions. As an example, without DecisionDx-Melanoma, 88% of patients who receive the SLNB surgery, which has an average in-patient reimbursed cost of $20,000 to $24,000, are found to be SLN-negative and remain classified as low risk under the AJCC framework. If all patients eligible for the SLNB surgery were tested using DecisionDx-Melanoma and their test results were acted upon, we estimate the potential savings to the U.S. healthcare system could be up to $250 million, after considering the cost of DecisionDx-Melanoma.

In addition, DecisionDx-Melanoma can be used to make more informed decisions on advanced imaging, frequency of clinical visits, referral to medical oncology, adjuvant therapy initiation and clinical trial enrollment. In some cases, a DecisionDx-Melanoma test result may guide an appropriate reduction in these decisions based upon a low risk of

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metastasis, while in others it will guide an appropriate increase in medical or surgical intervention with the end result being improved use of healthcare resources.

The American Medical Association’s (the “AMA’s”) Current Procedural Terminology Editorial Panel accepted Castle’s application for a Category I MAAA, Current Procedural Terminology (“CPT”) code for its DecisionDx-Melanoma test. The CPT Editorial Panel is an independent group of expert volunteers representing various sectors of the healthcare industry. Its role is to ensure that code changes undergo evidence-based review and meet specific criteria. The code became effective on January 1, 2021. With this acceptance, two of our proprietary MAAA tests, DecisionDx-Melanoma and DecisionDx-UM, have met the criteria required for a Category I MAAA CPT code.

DecisionDx-SCC

DecisionDx-SCC has been validated to improve prediction for the risk of metastasis in patients with cutaneous SCC and one or more risk factors, as identified by clinical and pathological staging criteria. The current staging systems that rely on a combination of clinical or pathological factors to stage or classify risk of metastasis suffer from a low PPV for risk of metastasis. As a result, many patients categorized as high risk received adjuvant therapy and other unnecessary medical and surgical interventions even though they would not have gone on to metastasize. Conversely, the low predictive accuracy of current methods to identify high-risk patients can lead to undertreatment if patients with a truly high biologic risk are missed. Because these patients cannot currently be identified, they will miss the opportunity to receive the most aggressive of today’s therapeutic options.

To address this clinical need in SCC, we developed DecisionDx-SCC, a proprietary 40-GEP test that uses an individual patient’s tumor biology to predict individual risk of SCC metastasis for patients with one or more risk factors. The test result, in which patients are stratified into a Class 1, 2A or 2B risk category, predicts individual metastatic risk to inform risk-appropriate management. DecisionDx-SCC was developed to improve upon the PPV of the current staging systems for SCC.The test has been shown to be an accurate and independent predictor of recurrence risk in a cohort of 420 cutaneous SCC tumors and demonstrated a PPV of greater than 50% in that cohort.We believe that integrating DecisionDx-SCC can drive risk-appropriate treatment management decisions for clinicians and patients.

We commercially launched DecisionDx-SCC on August 31, 2020. Fourteen peer-reviewed publications support the analytic validity, clinical validity and clinical utility of DecisionDx-SCC. In 2022, we developed expanded evidence supporting DecisionDx-SCC through the acceptance/publication of five peer-reviewed studies. Clinical validation studies demonstrate that DecisionDx-SCC is an independent predictor of metastatic risk and that integrating with prognostic methods can add PPV to clinician decisions regarding staging and management.

Clinical Validation

In 2020, development and validation data on DecisionDx-SCC was published in the Journal of the American Academy of Dermatology in an article titled “Validation of a 40-Gene Expression Profile Test to Predict Metastatic Risk in Localized High-Risk Cutaneous Squamous Cell Carcinoma.” The study findings indicate that DecisionDx-SCC demonstrated strong independent prognostic value in multivariate analysis compared to the traditional BWH and AJCC staging systems. More recently, further validation results from an expanded cohort of 420 patients with high-risk SCC from 33 U.S. centers were published in Future Oncology. The study titled, “Enhanced Metastatic Risk Assessment in Cutaneous Squamous Cell Carcinoma With the 40-Gene Expression Profile Test,” upheld previous results demonstrating that DecisionDx-SCC demonstrated significant prognostic value, and that cases with a Class 1 result had metastasis rates near the general SCC population while Class 2B patients had rates greater than 50%. Additionally, a study focused on tumors of the head and neck region also showed strong stratification of risk by DecisionDx-SCC in that cohort, and independent value added to risk prognosis by the test in multivariable models that include other risk factors. We have ongoing multi-center studies involving more than 75 U.S. centers.

Clinical Utility

Prospective studies including nearly 600 physicians have consistently demonstrated that DecisionDx-SCC delivers clinically actionable results that can change clinician assessment of risk of metastasis and potentially change patient management plans in a risk-aligned manner within NCCN guideline recommendations.

In 2022, Hooper et al. published “Real-world evidence shows clinicians appropriately use the prognostic 40-GEP test for high-risk cutaneous squamous cell carcinoma patients”. This study was a real-world clinical study involving

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clinicians (n=34) who have adopted the DecisionDx-SCC test for patients with one or more high risk factors and shows that integrating the DecisionDx-SCC test result significantly impacted recommended patient treatment plans in a risk-aligned manner within the context of the NCCN guidelines, including changes to surveillance imaging, nodal assessment, and adjuvant radiation.

In addition, an initial analysis of a prospective, multi-center clinical utility study was published by Saleeby et. al., titled “A prospective, multi-center clinical utility study demonstrates that the 40-gene expression profile (40-GEP) test impacts clinical management for Medicare-eligible patients with high-risk SCC”. In this study, the DecisionDx-SCC was the single most influential factor in determining management plans for 42% of Medicare patients and resulted in a pre-test to post-test management change in 24% of patients. These data demonstrate clinical actionability on par with other contemporaneously developed molecular diagnostic tests used to guide similar clinical decisions, particularly in disease states, such as breast and prostate cancer.

Diagnostic GEP Offering

Of the two million suspicious pigmented lesions biopsied annually in the U.S., we estimate that approximately 300,000 of those cannot confidently be classified as either benign or malignant through traditional histopathology methods. A biopsy of a pigmented lesion may lead to an indeterminate diagnosis, in which case the treating clinician generally leans towards making a conservative decision and assumes that the lesion is melanoma.

DecisionDx DiffDx-Melanoma is a proprietary 35-GEP test designed to be used as an ancillary tool to histopathology when the distinction between a benign lesion and melanoma is uncertain. We commercially launched this product on November 2, 2020. DiffDx-Melanoma classifies these lesions as benign (GEP suggestive of benign neoplasm); intermediate-risk (gene express profile cannot exclude malignancy); or malignant (GEP suggestive of melanoma). Interpreted in the context of other clinical, laboratory and histopathologic information, DiffDx-Melanoma is designed to add diagnostic clarity and confidence for dermatopathologists while helping dermatologists deliver more informed patient management plans. Validation of this test included a variety of benign and malignant lesions. Similar to DiffDx-Melanoma, MyPath Melanoma is a proprietary GEP test that we acquired from Myriad Genetics. in May 2021, following rigorous validation in cutaneous melanocytic lesions to accurately differentiate between benign and malignant melanocytic lesions of unknown potential. MyPath Melanoma has over 35,000 clinically resulted cases and 13 publications supporting the accurate diagnosis of benign or malignant lesions by the test.

DiffDx-Melanoma, in tandem with MyPath Melanoma, were provided under our Diagnostic GEP offering of molecular testing solutions for difficult-to-diagnose melanocytic lesions. Our Diagnostic GEP offering had robust diagnostic resolution for melanocytic lesions with unknown malignant potential, with validation studies demonstrating accurate diagnosis of benign and malignant lesions for greater than 98% of cases tested. Our internal data indicates we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma. As such, 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.

Clinical Validation

The development and validation study of DiffDx-Melanoma titled “Development and Validation of a Diagnostic 35-Gene Expression Profile Test for Ambiguous or Difficult-To-Diagnose Suspicious Pigmented Skin Lesions,” showed that our DiffDx-Melanoma test had a technical success rate of 97%, meaning that a test result was successfully generated, and achieved accuracy metrics that could alleviate uncertainty in difficult-to-diagnose lesions leading to decreased unnecessary procedures while appropriately identifying at-risk patients.

The test evaluates the expression of 23 genes using standard quantitative qRT-PCR and provides an accurate and objective classification suggestive of benign, intermediate, or malignant lesions. MyPath Melanoma was developed in a training cohort of 464 melanocytic lesions and subsequently validated in three separate cohorts comprised of more than 1,300 melanocytic neoplasms, independent from the training cohort. These clinical validation studies utilized both histopathologic interpretation by experts and actual patient outcomes as reference standards, and MyPath Melanoma demonstrated strong diagnostic accuracy against both reference standards. Across multiple

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validation studies, MyPath Melanoma differentiated malignant melanoma from benign nevi with a sensitivity of 90-94%, and accurately classified benign nevi with a specificity of 89-96%.

Clinical Utility

Clinical utility has been demonstrated by DiffDx-Melanoma and MyPath Melanoma. Four studies have been published demonstrating that dermatopathologists use diagnostic GEP testing to improve diagnostic accuracy and impact treatment recommendations, and that dermatologists incorporate test results to adjust treatment plans, including reduction of re-excisions in 63-76% of cases with benign results. These tests provide opportunities for clinicians to deliver more informed patient management plans.

The offering of both MyPath Melanoma and DiffDx-Melanoma in an integrated workflow to enhance both accuracy and technical reliability of diagnostic testing is supported by 15 peer-reviewed publications. Our internal data indicates we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma. As such, 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.

DecisionDx-UM

Overview

At the time of diagnosis nearly all patients with UM have no evidence of metastasis yet, approximately 30% of UM patients will metastasize within five years and nearly 50% of UM patients will metastasize at some point. Traditional clinical staging and molecular diagnostic tests for UM have been commercialized, but until recent years the lack of prospective studies of these tests, coupled with low accuracy, resulted in these tests primarily being used for research purposes rather than for clinical management of patients in the U.S. As a result, before commercial availability of DecisionDx-UM, nearly all U.S. centers grouped patients into a single, high-risk treatment plan that included frequent, high intensity surveillance using advanced imaging, frequent clinical visits and encouragement to enroll in clinical studies.

DecisionDx-UM is our proprietary GEP test that helps healthcare providers predict the risk of metastasis in patients with UM. We licensed the intellectual property for DecisionDx-UM from The Washington University in St. Louis, Missouri (“WUSTL”) and completed analytical validation and began marketing DecisionDx-UM in late 2009 for use in patients diagnosed with UM without evidence of metastatic disease. DecisionDx-UM identifies patients at low risk for progression of their UM so that their clinicians can appropriately de-escalate the level of care provided. We launched DecisionDx-UM in January 2010. Based on the substantial clinical evidence that we have developed, we received Medicare coverage for DecisionDx-UM, which represents approximately 45% of the addressable patient population as well as widespread commercial payor coverage. 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, and it is estimated that nearly 8 in 10 patients diagnosed with UM in the United States receive the DecisionDx-UM test as part of their diagnostic workup.

As of December 31, 2022, 24 peer-reviewed publications involving more than 3,600 patients support the clinical validity and utility of DecisionDx-UM.

The Kaplan-Meier plot from the initial prospective, multi-center Collaborative Ocular Oncology Group (“COOG”) study found that a DecisionDx-UM Class 2 result was more strongly associated with metastasis than any other clinical, pathological or molecular factor, and the NPV for patients with a DecisionDx-UM Class 1 result was 99%. This study also compared DecisionDx-UM to the traditional staging based on clinical and pathology factors, and chromosome 3 status (an alternative molecular test to predict the risk of metastasis in UM), using Cox multivariate

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analysis, and found that the only statistically significant factor in predicting a likelihood of metastasis was DecisionDx-UM.

The data from the COOG study, as well as the consistency shown from the additional clinical validity studies, has supported widespread adoption of DecisionDx-UM with more than 90% of the ocular oncology institutions in the United States ordering this test. DecisionDx-UM has been used to guide treatment plan decisions regarding the intensity of a patient’s surveillance and management plan as well as clinical trial enrollment. The current NCCN Guidelines for UM (last updated June 2021) incorporate DecisionDx-UM as the first risk of distant metastasis predictor and recommend that class result be used to guide frequency and intensity of systemic imaging. We expect that the second ongoing COOG study, commonly referred to as COOG2, will report findings in 2023 that continue to support DecisionDx-UM as the strongest prognostic factor for identifying patients at high risk of metastasis and mortality from UM. We anticipate that these results may inform clinical improvements in the value of our UM test.

TissueCypher

Esophageal cancer is one of the fastest-growing cancers (by incidence) in the world. The incidence of this once rare cancer has increased by more than 500% since the 1970s. Esophageal cancer remains highly lethal, with a five-year survival rate of 19%.

Chronic reflux in the esophagus causes changes to the molecular and cellular features of the esophagus, which often results in a condition called BE. BE is a serious complication of gastroesophageal reflux disease (“GERD”) and a risk factor for the development of esophageal cancer.

There are approximately 4 million patients in the United States diagnosed with BE, and annually, approximately 435,000 endoscopies are performed on BE patients. The TissueCypher Barrett’s Esophagus Test addresses an unmet need in BE, as it is designed to objectively and accurately predict progression from ND, IND and LGD BE to HGD or esophageal adenocarcinoma EAC. This is critical, as EAC is highly lethal, and endoscopic eradication therapy in patients with BE has been proven to reduce progression to EAC. As of February 28, 2023, nine peer-reviewed publications have demonstrated the clinical validity and utility of the TissueCypher Barrett’s Esophagus Test. Recent presentations at major gastroenterology conferences have further supported the validity and utility of the TissueCypher Barrett’s Esophagus Test. At Digestive Diseases Week 2022, results from a new study were presented showing that TissueCypher outperforms pathologist diagnoses when predicting progression in patients diagnosed with BE with LGD. A presentation at the American College of Gastroenterology 2022 annual meeting reported that use of the TissueCypher test results to guide patient management decisions significantly increased the likelihood of BE patients with LGD receiving appropriate management per their known outcome, and use of the test results also improved the consistency of management decisions for BE patients with LGD by reducing the impact of variable pathology review. An independent, peer-reviewed article published by investigators at the Mayo Clinic in the journal Clinical Gastroenterology and Hepatology reinforced the ability of TissueCypher to significantly improve

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predictions of progression to esophageal cancer in patients with BE, compared to predictions based on clinical and pathology variables alone, allowing for more informed disease management decisions. In the study, a TissueCypher high-risk score independently predicted increased risk of progression to HGD/esophageal cancer, with improved accuracy over expert pathologist diagnoses of LGD and IND. Further, a TissueCypher high-risk score was associated with a strong independent risk of progression in NDBE patients.

BE is the only known precursor to EAC, which is highly lethal and has a five-year survival rate of 19%, according to Cancer Facts and Figures, ACS 2020. Treatment options, particularly for advanced EAC, are limited, and early detection is critical for optimal patient management. As a result, an estimated 4 million patients with BE in the U.S. are in active surveillance programs, which involve periodic endoscopic surveillance of the esophagus with the goal of detecting malignant progression at a treatable stage. During the endoscopy, biopsies are obtained from the affected tissue, and BE is graded based upon pathology features (histologic assessment) of these biopsies into HGD, LGD, IND and ND. Generally, patients with HGD undergo esophageal eradication therapy, which may include ablation or surgical removal of the BE lesions. Patients with LGD generally undergo either endoscopic surveillance every three to six months or endoscopic eradication therapy, while patients with IND or ND generally undergo endoscopic surveillance every three months to five years. While treatment decisions, including surveillance timing, are directed by pathology grading, this approach is limited by significant inter-observer variation (pathology discordance) in the grading of tissue biopsies. This discordance is found between community pathologists, as well as pathologists who specialize in BE in large academic centers. Furthermore, molecular and cellular changes associated with progression to cancer often precede the morphologic changes that pathologists can evaluate using histology.

Additionally, while patients with ND, IND and LGD do have a lower rate of progression to EAC than HGD, due to the higher incidence of ND, IND and LGD, these patients represent the majority of patients who may progress to EAC. Since endoscopic eradication therapy is performed with the expectation that it will reduce or stop progression to EAC, the fact that the majority of patients who progress are not graded as having HGD represents a significant unmet clinical need. In addition, the recommendations for the frequency of endoscopic surveillance are based upon low to moderate quality evidence. Together, these limitations in the current standard of care for risk assessment of patients with BE leads to overuse of endoscopies and imprecise use of endoscopic eradication therapy procedures, adding unnecessary costs that fail to reduce the incidence and mortality associated with EAC.

The TissueCypher Barrett’s Esophagus Test was designed and developed to address these limitations in the current standard of care for risk stratification of patients with BE. TissueCypher guides clinical management of BE by:

1.Identifying patients who are at high risk of developing EAC but are currently missed due to reliance on traditional histopathology and clinical variables. This should enable early therapeutic intervention to prevent EAC, or increase surveillance for early detection of EAC at a treatable stage; and

2.Identifying patients who are at low risk of developing EAC, enabling extension of surveillance intervals and reduction in unnecessary procedures.

IDgenetix

Finding an optimal medication for patients diagnosed with a mental illness has traditionally relied on trial and error, resulting in inadequate therapy response, low remission rates, and a high rate of adverse drug events. Using current standard-of-care treatment approaches, less than half of patients with major depressive disorder achieve an adequate response to first line treatment and nearly 3 of 4 do not achieve remission. There is a high prevalence of adverse drug events and increasing rates of discontinuation with repeated medication trials. This frustration has led to a need in the mental health community for more personalized care with selection of an optimal therapy the first time, achieving a fast response/remission with few to no side effects and at a low out of pocket cost. For the 50 million patients experiencing mental health illness in the United States, meeting these expectations will require a new approach to medication selection. PGx can improve medication selection and avoid the need for multiple medication trials. Traditional PGx tests are designed to assess a patient’s DNA to identify variances that result in drug-gene interactions. These interactions can lead to variation in medication responses by altering drug metabolism or impacting how the body responds to a drug. In addition to drug-gene interactions, our IDgenetix test

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incorporates drug-drug interactions and lifestyle factors into the final patient report, which we believe offers additional value to clinicians and patients.

Following our acquisition of AltheaDx in April 2022, we began offering a proprietary PGx test service focused on mental health, IDgenetix, a PGx test for depression, anxiety and other mental health conditions designed to analyze a patient’s genetic make-up to guide timely and evidence-based decisions on the optimal drug for each patient. IDgenetix is designed to provide important genetic information to clinicians to help guide personalized treatment plans for their patients, with the potential to help patients achieve a faster therapeutic response and improve their chances of remission by identifying appropriate medications more efficiently than the standard of care trial-and-error approach. IDgenetix is supported by a published, peer-reviewed randomized controlled trial that demonstrated clinical utility over the standard of care when physicians used IDgenetix prior to prescribing a medication. The trial was conducted across 20 independent clinical sites within the United States specializing in Psychiatry, Internal Medicine, Obstetrics & Gynecology, and Family Medicine. A total of 685 patients were randomized by disease and severity and allocated in a 1:1 ratio to the experimental group (guided by the IDgenetix test) or control group (using standard of care) and followed for a period of twelve weeks. Medication changes in the experimental group were aligned with the report recommendations 70% of the time, as compared to only 29% alignment in random selection in the control group. More importantly, clinical decision-making based on IDgenetix resulted in a two-fold increase over the control group for response (p=0.001) and a 2.5x increase over the control group for remission (p=0.02). Collectively, these data speak to the ability of the IDgenetix test to guide provider decision making and to significantly improve clinical outcomes. IDgenetix is currently reimbursed by Medicare for the following eight mental health conditions: major depressive disorder, schizophrenia, bipolar disorder, anxiety disorders, social phobia, obsessive-compulsive personality disorder, post-traumatic stress disorder, and attention deficit hyperactivity disorder.

Our Commercial Channel

Sales and Marketing

Our sales and marketing efforts are primarily focused on the United States skin cancer, gastroenterology and mental health markets. We employ a direct sales and marketing strategy to educate clinicians, nurses, laboratory and pathology personnel, and finance administrators on the clinical and economic benefits of our products. Our sales approach is highly technical, and our team is trained to articulate the scientific and clinical evidence behind our products and how they influence the clinical care pathway and ultimately improve patient outcomes.

In dermatology, we began 2020 with 32 outside sales territories. In the third quarter of 2020, we expanded our dermatologic commercial team to create a dedicated sales force of ten territories to support the launch of our DiffDx-Melanoma test to dermatopathologists. During the first half of 2021, we folded this dedicated team into our existing sales team and completed a further expansion, bringing our dermatologic sales force to the mid-60s. In September 2022, we 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. We expect the new sales team to be fully integrated into our commercial operations by the second quarter of 2023.

In connection with our acquisition of Cernostics in December 2021, we hired an initial commercial team of approximately 14 outside sales territories, along with commensurate internal sales associates and medical science liaisons, to support our launch of the TissueCypher Barrett’s Esophagus Test. This dedicated team focuses on gastroenterology specialists that diagnose and manage patients with BE. In September 2022, we added additional outside territories for our TissueCypher Barrett’s Esophagus Test.

In April 2022, we added a mental health commercial team covering approximately 20 outside sales territories through our acquisition of AltheaDx.

DecisionDx-UM addresses a small cancer market, and patients are managed by a small group of ocular oncology surgeons, generally ophthalmology or retina trained specialists. We serve these patients and their clinicians by providing highly technical interactions that focus on optimizing the appropriate use of our proprietary and ancillary products.

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

In 2021, we entered into an agreement with Modernizing Medicine (“ModMed”) that established an interface with ModMed’s electronic health records system, EMA®. The interface is designed to enable dermatologic clinicians to order our DecisionDx skin cancer tests from directly within a patient’s medical record in EMA. Our full suite of dermatologic tests is now available to order within EMA with our integrated accounts.

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Medical Affairs

We also deploy an experienced medical affairs group to assist education of treating clinicians and key opinion leaders, to identify and engage sites for our sponsored clinical studies and to evaluate collaborative study opportunities. Our medical affairs strategy complements our sales, marketing and clinical research operations efforts.

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. 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 Part 1, Item 1, “Business”, in this Annual Report on Form 10-K. A ‘‘covered life’’ means a subscriber, or a dependent of a subscriber, who is insured under an insurance carrier’s policy.

Government Payors

Medicare coverage is limited to items and services that are within the scope of a Medicare benefit category and that are reasonable and necessary for the diagnosis or treatment of an illness or injury. Local coverage determinations (“LCD”) are made through an evidence-based process by Medicare Administrative Contractors (“MACs”) with opportunities for public participation. Coverage and payment may also be obtained from MACs through medical review and pricing in absence of an LCD. 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" below.

Palmetto GBA MolDX (“Palmetto”) is the MAC responsible for administering MolDX, the program that assesses molecular diagnostic technologies. Noridian Healthcare Solutions, LLC (“Noridian”) is the MAC responsible for administering claims for laboratory services performed in Arizona and California laboratories. Novitas Solutions (“Novitas”) is the MAC responsible for administering claims for laboratory services performed in Pennsylvania laboratories.

Advanced Diagnostic Laboratory Tests

Advanced Diagnostic Laboratory Test (“ADLT”) status is a designation granted by CMS for clinical diagnostic laboratory tests covered under Medicare Part B that is offered and furnished only by a single laboratory. Additionally, an ADLT cannot be sold for use by a laboratory other than a single laboratory that designed the test or a successor owner, and must meet one of the following criteria:

Criterion A: The test:

•Is an analysis of multiple biomarkers of DNA, RNA or proteins: When combined with an empirically derived algorithm, yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or respond to a particular therapy or therapies;

•Provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests; and

•May include other tests.

Criterion B: The test is cleared or approved by the FDA. Laboratories requesting ADLT status under this criterion are required to submit documentation of premarket approval or premarket notification from the FDA.

DecisionDx-Melanoma

LCD

Palmetto issued a final expanded 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-

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Melanoma tests performed for Medicare patients will meet the coverage criteria. Noridian adopted the same coverage policy as Palmetto and also issued an expanded final LCD for DecisionDx-Melanoma, effective December 6, 2020.

In the second quarter of 2021, Palmetto and the other MACs that participate in the MolDX program posted a revised draft LCD for DecisionDx-Melanoma. The draft LCD included commentary about two publications regarding the clinical utility of GEP tests and included an assessment stating that the new data is not sufficient to change the coverage criteria. There was an open public comment period, and we submitted comments in support of Medicare coverage. The comment period ended on August 8, 2021. Palmetto issued a final LCD on May 19, 2022 with Noridian issuing the same on June 16, 2022. The final LCDs did not result in any change in coverage.

ADLT

On May 17, 2019, CMS determined that DecisionDx-Melanoma meets the criteria for “new ADLT” status. From July 1, 2019 through March 31, 2020, the Medicare reimbursement rate was equal to the initial list price of $7,193 per test. From April 1, 2020 through December 31, 2021, the rate was also $7,193 per test, which was calculated based upon the median private payor rate for DecisionDx-Melanoma from July 1, 2019 to November 30, 2019.

Beginning in 2022, the rate for DecisionDx-Melanoma has been 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. Our rate for 2022 was $7,193 per test and will continue 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, and Noridian issued a similar LCD that became effective in September 2017. The Noridian LCD provides for coverage to determine metastatic risk in connection with the management of a patient’s newly diagnosed UM and to guide surveillance and referral to medical oncology for those patients. Similar to cutaneous melanoma, the median age at diagnosis for UM is estimated at 58-62 years old. The Medicare eligible population represents close to 45% of the addressable market.

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. For 2020, our rate was set by Noridian, our local MAC, but effective in 2021 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. Our rate for 2021 was $7,776 per test. Our rate remained at $7,776 per test for 2022 and will remain at $7,776 per test for 2023.

Diagnostic GEP Offering

Our Diagnostic GEP offering included MyPath Melanoma and DiffDx-Melanoma. We began offering MyPath Melanoma following our acquisition of the Myriad MyPath Laboratory on May 28, 2021. Our internal data indicates that we have improved the technical performance of MyPath Melanoma such that it is now comparable to the technical performance of DiffDx-Melanoma. As such, 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.

MyPath Melanoma

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

On September 6, 2019, MyPath Melanoma was approved as a new ADLT. The rate for 2022 was $1,950. Beginning in 2023, the rates for our MyPath Melanoma test will be 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 2023 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 will continue to be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

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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 draft LCD that would provide coverage criteria for DiffDx-Melanoma, and each of the comment periods closed during the third quarter of 2022. We believe the LCD for DiffDx-Melanoma will be finalized by the end of the second quarter of 2023. However, there is no assurance that any draft or final LCD will match our expectations, be posted in a timeframe consistent with our historical experience or will be posted at all.

In the second quarter of 2022, we obtained a Proprietary Laboratory Analyses (“PLA”) code for DiffDx-Melanoma. DiffDx-Melanoma will go through CMS’s Gapfill pricing process in 2023, which we expect to conclude in late 2023.

DecisionDx‐SCC

We issue our DecisionDx-SCC tests from our Arizona and Pittsburgh labs, with a majority of tests being issued from our Pittsburgh lab. As previously discussed, the Palmetto MolDX program oversees MAAA tests that are reported from our Arizona laboratory and Noridian is the MAC responsible for administering claims for test reports issued by our Arizona laboratory. Novitas is the MAC responsible for administering claims for test reports issued by our Pittsburgh laboratory.

Novitas

On June 9, 2022, Novitas posted a draft oncology biomarker LCD that proposes to rely upon evidentiary reviews sourced from three databases for all oncology biomarker tests: ClinGen, OncoKB and NCCN. We believe the purpose of the proposals in this draft LCD are to streamline future reviews. Two of the databases do not review GEP tests and NCCN has not yet, to our knowledge, reviewed DecisionDx-SCC. If finalized as proposed, then DecisionDx-SCC would not be included as a covered test in the associated billing and coding article. The comment period for the draft LCD ended on September 6, 2022. We cannot predict whether this draft LCD will be finalized as proposed or what the timing of any final LCD might be.

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 approximately $3,800 per test. In November 2022, CMS set our rate of reimbursement for DecisionDx-SCC at $3,873 per test. DecisionDx-SCC will go through CMS’s Gapfill pricing process in 2023, which we expect to conclude in late 2023. We expect our current rate of $3,873 per test to be maintained through the Gapfill process and for the Gapfill rate to go into effect in 2024.

Palmetto MolDX

In the second quarter of 2020, we submitted our technical assessment dossier for DecisionDx-SCC to Palmetto. The dossier was accepted as complete in the third quarter of 2020. To date, Palmetto has not issued a draft LCD for DecisionDx-SCC. There is no assurance that the timing of any draft or final LCD will match our expectations or our historical experience with LCDs for our other tests.

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.

ADLT

On March 24, 2022, CMS determined TissueCypher meets the criteria for “new ADLT” status. ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients. From April 1, 2022 through December 31, 2022, CMS set the initial period rate equal to the original list price of $2,350. 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 and August 31, 2022.

IDgenetix

Our IDgenetix test was processed in our San Diego laboratory until the lab’s closure in December 2022. We intend to process future tests in our Arizona laboratory. As previously discussed, Noridian is the MAC responsible for administering claims for laboratory services performed in Arizona and California laboratories.

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IDgenetix is currently covered under an LCD policy through MolDX and an accompanying billing and coding article through Noridian. 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. The IDgenetix multi-gene panel is currently reimbursed by Medicare at approximately $1,500 per test. IDgenetix has historically been billed to Medicare using a multi-test unspecified 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 multi-test 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 goes through CMS’s Gapfill pricing process in 2023. The New CPT Code does not describe all of the components of the IDgenetix test. We, therefore, do not believe the New CPT Code, in conjunction with the IDgenetix Z-Code, provides additional specificity and thus we believe the New CPT Code is not appropriate for IDgenetix.

Commercial Third-Party Payors

We are actively engaged in efforts to achieve broad coverage and reimbursement for our products, followed by contracting with commercial payors. Achieving positive coverage reduces the need for appeals and reduces failures to collect from the patient’s commercial insurance payor. Even with positive coverage decisions, we still experience delays in time to payment. Achieving in-network contracts with third-party payors can shorten the time required to receive payments. Implementing our strategy includes our managed care and medical affairs teams educating third-party payors regarding our strong clinical utility and outcomes data, which we believe validates the value of our products and will persuade more third-party payors to provide value-based reimbursement.

We have broad positive policy coverage for our DecisionDx-UM test, have executed contracts with certain commercial payors and anticipate further increases in contracting. We also have positive policy recommendations from many third-party technical assessment review groups.

We began engaging commercial third-party payors for positive coverage for DecisionDx-Melanoma and have seen some positive coverage policies. With the continued evidence development, we anticipate additional positive coverage policies occurring.

Dependence on Third-Party Payors

We receive a substantial portion of our revenue from a small number of third-party payors. Our revenue from patients covered by Medicare as a percentage of total revenue, was 53% for the year ended December 31, 2022. Additionally, there is a commercial payor from which 12% of our revenue from patients was derived for the year ended December 31, 2022.

Competition

We are focused on improving health through innovative tests that guide patient care. We believe, today, that there is limited existing competition for our products that provide evidence-based genomic and proteomic solutions to clinicians and their patients.

We believe the principal competitive factors in our target markets include:

•Proprietary, disciplined approach to genomic and proteomic analysis including the use of proprietary deep learning, machine learning, artificial intelligence and other techniques to identify and optimize biomarker selection and algorithmic approaches to answer the clinically important questions with accurate tests. This involves the ability to design and efficiently conduct the right clinical studies at the right time;

•Research and development investments to document the quality, quantity, consistency and strength of the clinical validity data, the impact our products have on clinical use, and demonstration of net health outcome improvement that reduce health system costs;

•Maintaining a strong reputation with the treating clinician by providing consistent, transparent, and clinically relevant information that will improve the appropriate management of their patients;

•Ease of use in accessing our products, reimbursement support for our patients and laboratory reports that clearly communicate the clinically relevant data points;

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•Demonstrated ability to work with, and secure coverage and reimbursement from, governmental and commercial payors;

•Ability to efficiently commercialize pipeline products to the same customer base as our current products.

We believe we compete favorably on the factors described above.

Today, our principal competition for DecisionDx-Melanoma is existing traditional clinical and pathology staging criteria. While some clinical and pathology criteria have changed over time, this approach has been the standard of care in the United States for many years, and clinicians may be unwilling to accept the validity of the published data and adopt our test until it has become incorporated into national guidelines. In addition, we may, in the near future, face competition from a limited number of companies who are working in this disease space, such as SkylineDx and Neracare.

We are unaware of late-stage work being performed to develop and validate a product that would compete with DecisionDx-SCC. We believe that the current primary competitor for DecisionDx-SCC is existing traditional clinical and pathology staging criteria. In the future, we may face competition from SkylineDx who has been working to develop a diagnostic test.

DecisionDx-UM competes with a subsidiary of LabCorp and several academic laboratories all of which have had tests available for several years. To date, our data has demonstrated that DecisionDx-UM is clinically and statistically superior to these products.

Today, principal competition for the TissueCypher Barrett’s Esophagus Test is existing traditional clinical and pathology assessment. In the future this assessment may include the use of immunohistochemical evaluation of individual protein biomarkers as an aid to pathology. While some clinical and pathology criteria have changed over time, this approach has been the standard of care in the United States for many years, and physicians may be unwilling to accept the validity of the published data and adopt our test until this has become incorporated into clinical guideline recommendations from gastrointestinal clinical societies, or other national guidelines. In addition, we may in the near future, face competition from a limited number of companies who are working in this disease space, such as Interpace Diagnostics. Other companies actively engaged in GERD screening to diagnose BE may also look to develop prognostic tests for patients diagnosed with BE, and these could compete with TissueCypher in the future.

With respect to IDgenetix, our competition arises from other parties using the same or similar methods as well as alternative methods of PGx testing. IDgenetix competes with Myriad Genetics’s GeneSight test, Genomind’s PGx test, and test from numerous small commercial and academic laboratories.

Laboratory Operations

In 2022, we operated laboratory facilities in Phoenix, Arizona; Pittsburgh, Pennsylvania; and San Diego, California. All of our facilities are Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified, College of American Pathologists (“CAP”) accredited labs, most recently the Pittsburgh facility. We manage these laboratories to produce the volume of testing required to cover our portfolio of products while maintaining efficiencies, redundant capabilities, and business continuity. Our facilities are positioned to operate in all 50 states, including those requiring additional licenses or certifications such as California, Pennsylvania, Rhode Island, Maryland and New York. As of December 2022, we have folded operations from our San Diego lab into the Phoenix facility and permanently closed our California location.

Raw Materials and Suppliers

We procure certain reagents, equipment, chips/cards and other materials used to perform our tests from sole suppliers such as ThermoFisher Scientific, Inc. and Qiagen, Inc. Some of these items are unique to these suppliers and vendors. While we have developed alternate sourcing strategies for these materials and vendors and have experienced no business interruption due to an inability to source these materials, we cannot be certain whether these strategies will be effective or whether alternative sources will be available when we need them. If these suppliers can no longer provide us with the materials we need to perform our test services, they do not meet our quality specifications, or we cannot obtain acceptable substitute materials, our business would likely be negatively affected.

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License Agreement with The Washington University

In November 2009, we entered into a license agreement (the “License Agreement”) with WUSTL to license certain patent rights and technical information from WUSTL for the development of melanoma products (the “Products”), and services (the “Services”). The rights licensed under this agreement are used in DecisionDx-UM only.

Under the License Agreement, we obtain an exclusive, worldwide, royalty-bearing license to certain patent rights owned by WUSTL (the “Patent Rights”) and a non-exclusive, worldwide license to certain technical information and research property owned by WUSTL, with the right to grant sublicenses under certain conditions, in order to develop the Products and the Services. WUSTL retains the right to use the Patent Rights for research purposes.

The Patent Rights that we license pursuant to the License Agreement have been generated through the use of U.S. government funding and are therefore subject to certain federal regulations. See “Risk Factors—Risks Related to Intellectual Property—Our in-licensed intellectual property has been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.”

Under the License Agreement, we are required to use best efforts to carry out the activities under an agreed-upon development plan (the “Development Plan”) and meet any and all milestones set forth in the Development Plan. We are required to make milestone payments to WUSTL upon successful completion of development and commercialization milestones as set forth in the Development Plan. For each Product or Service that receives FDA approval, premarket approval (“PMA”) or premarket notification, we are obligated to make a milestone payment to WUSTL in the mid-four digits. For the issuance of the first U.S. patent and the first foreign patent, we are obligated to make aggregate milestone payments to WUSTL in the low-five digits.

Under the License Agreement, we were obligated to pay WUSTL an initial license issue fee in the low-five digits. We are also obligated to make royalty payments to WUSTL equal to (i) a percentage in the mid-single digits of our and any of our affiliates’ or sub-licensees’ net sales of the Products and (ii) a percentage in the low-single digits of our and any of our affiliates’ or sub-licensees’ revenue from the Services. We are also obligated to make royalty payments to WUSTL in the low-to-mid single digit percentage of net sales, with minimum royalty payments to WUSTL every six-month period following the first commercial sale.

The term of the License Agreement will continue for ten years following the last-to-expire valid claim relating to the Patent Rights, unless terminated earlier. WUSTL may terminate the License Agreement upon written notice in the event of (i) our material breach if such breach remains uncured for 90 days, (ii) the exercise of certain rights by us with respect to the Patent Rights and/or the licensed technical information outside the scope of the License Agreement, or (iii) for certain insolvency-related events. We may terminate the License Agreement without cause upon written notice to WUSTL and payment of any amount due to WUSTL under the License Agreement.

Intellectual Property

Our core technology for our products is related to methods and devices for analysis of genetic expression. Using this technology, we are able to provide a more accurate prediction of a patient’s metastatic risk as compared to other methods. We have secured and continue to pursue intellectual property rights globally, including through patent protection covering analysis of metastasis in cutaneous melanoma, the treatment of cutaneous SCC, BE and gastroenterology, and PGx for mental illness. We also rely on trademarks, trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position. For more information, please see “Risk Factors—Risks Related to Intellectual Property.”

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Patents and Patent Applications

We have developed a global patent portfolio that as of December 31, 2022, is comprised as follows:

Number of Applications and Patents

Commercial Focus United States International Total

Owned Patent Families

Methods for predicting risk of metastasis in cutaneous melanoma 3 16 19

Methods of diagnosing and treating patients with pigmented skin lesions 1 1 2

Genes and gene signatures for diagnosis and treatment of melanoma 5 30 35

Method for automated tissue analysis 2 3 5

Systems and compositions for diagnosing BE and methods of using same 3 13 16

Methods of predicting progression of BE 2 23 25

Expression profiling using microarrays 1 — 1

Strategies for gene expression analysis 1 — 1

Licensed Portfolio from WUSTL

Method for predicting risk of metastasis 2 — 2

Compositions and methods for detecting cancer metastasis 2 2 4

Included in the table above are 15 issued U.S. patents and 69 issued international patents. This global patent portfolio has filing dates ranging from 2004 to 2022, and therefore are projected to expire between 2024 and 2042, subject to any patent term extension or patent term adjustment that might be available in a particular jurisdiction. The owned and licensed families contain issued patents and pending applications that relate to devices, systems, and methods for macromolecular analysis, and reflect our active and ongoing research programs.

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued for regularly filed applications in the United States are granted a term of 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a period due to delay by the United States Patent and Trademark Office (the “USPTO”) in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective non-provisional filing date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country to country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Trademarks and Trade Secrets

As of the date of this Annual Report on Form 10-K, our U.S. trademark portfolio contained 16 trademark registrations.

We rely upon trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our competitive position. We seek to protect our intellectual property and proprietary technology, in part, by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, as applicable, our advisors. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with an employee or a third party. These agreements may be breached, and we may not have adequate remedies for any breach. We additionally seek to preserve the integrity and confidentiality of our data and trade secrets, such as our proprietary algorithms, by maintaining the

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physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Government Regulation and Product Approval

Regulations

Clinical Laboratory Improvement Amendments of 1988

As a clinical reference laboratory, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business. Under CLIA, we are required to hold a certificate applicable to the type of laboratory tests we perform and to comply with standards applicable to our operations, including test processes, personnel, facilities administration, equipment maintenance, recordkeeping, quality systems and proficiency testing. We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare beneficiaries.

To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Because our Phoenix, Arizona laboratory is a CAP accredited laboratory, CMS may defer the survey and inspection to those conducted by CAP. We may also be subject to additional unannounced inspections. The regulatory and compliance standards applicable to the testing we perform change periodically, and any such changes are published by CAP. Our SOPs, documents & records are updated accordingly and as needed. Any such changes may have a material effect on our business.

Penalties for non-compliance with CLIA requirements include suspension, limitation or revocation of the laboratory’s CLIA certificate, directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties.

State Laboratory Licensing

In addition to federal certification requirements of laboratories under CLIA, CLIA provides that states may adopt laboratory regulations and licensure requirements that are more stringent than those under federal law. Such laws, among other things, establish standards for the day-to-day operation of a clinical reference laboratory, which includes ensuring personnel have the adequate knowledge and training to maintain quality control. We currently provide laboratory services in all 50 states. Additionally, we maintain licenses in New York, California, Maryland, Pennsylvania and Rhode Island which require specific licensure for out-of-state laboratories that accept specimens from those states.

Because we receive specimens from the state of New York, our clinical reference laboratory is required to be licensed by New York, have a lab director with a specific certificate of qualification and is subject to biennial New York state inspections to ensure the lab is compliant with New York licensing standards. New York regulations also mandate proficiency testing for laboratories licensed under New York state law, regardless of whether such laboratories are located in New York. If a laboratory is out of compliance with New York statutory or regulatory standards, the New York State Department of Health (the “NYSDOH”) may suspend, limit, revoke or annul the laboratory’s New York license, censure the holder of the license, or assess civil money penalties. We have received formal approval from the NYSDOH to offer the following of our proprietary assays to New York patients: DecisionDx-Melanoma, DecisionDx-CMSeq, DecisionDx-UM, DecisionDx-PRAME, DecisionDx-UMSeq, DecisionDx-SCC, MyPath Melanoma, DiffDx-Melanoma and IDgenetix. Additionally, we have submitted and are working through the NYSDOH approval process for our Pennsylvania laboratory and TissueCypher. We are able, under an allowed process, to offer the test service to New York patients while undergoing review.

Federal Oversight of Laboratory Developed Tests

The laws and regulations governing the marketing of diagnostic products are evolving, extremely complex, and in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Clinical laboratory tests are regulated under CLIA, as administered by CMS, as well as by applicable state laws. In addition, the Federal Food, Drug and Cosmetic Act (the “FDCA”) defines a medical device to include any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals. Our in vitro testing products are considered by the FDA to be subject to regulation as medical devices. Among other things, pursuant to the FDCA and its

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implementing regulations, the FDA regulates the research, testing, manufacturing, safety, labeling, storage, recordkeeping, pre-market clearance or approval, marketing and promotion, and sales and distribution of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses.

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 for use only in that laboratory. These tests are referred to as Laboratory Developed Tests (“LDTs”). As a result, we believe our diagnostic services are currently subject to the FDA’s enforcement discretion and are not currently subject to the FDA’s oversight. However, reagents, instruments, software or components provided by third parties and used to perform LDTs may be subject to regulation.

In recent years, the FDA has stated its intention to modify its enforcement discretion policy with respect to LDTs. For example, on July 31, 2014, the FDA notified Congress of its intent to modify, in a risk-based manner, its policy of enforcement discretion with respect to LDTs. On October 3, 2014, the FDA issued two draft guidance documents entitled “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs),” or the Framework Guidance, and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs),” or the Reporting Guidance. The Framework Guidance states that FDA intends to modify its policy of enforcement discretion with respect to LDTs in a risk-based manner consistent with the classification of medical devices generally in Classes I through III. The Reporting Guidance would further enable FDA to collect information regarding the LDTs currently being offered for clinical use through a notification process, as well as to enforce its regulations for reporting safety issues and collecting information on any known or suspected adverse events related to the use of an LDT.

Although the FDA halted finalization of the guidance in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give congressional authorizing committees the opportunity to develop a legislative solution, the FDA could ultimately modify its current approach to LDTs in a way that would subject our products marketed as LDTs to the enforcement of regulatory requirements.

Medical Device Regulatory Framework

Although we currently market our proprietary testing products as LDTs, which are currently subject to enforcement discretion, we could be subject to more onerous FDA compliance obligations in the future. Specifically, if the FDA begins to actively regulate LDTs, then, unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a PMA, application. Both the 510(k) clearance and PMA processes can be resource intensive, expensive, and lengthy, and require payment of significant user fees.

Device Classification

Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.

Class I devices are those with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to a set of FDA regulations, referred to as the General Controls for Medical Devices, which require compliance with the applicable portions of the FDA’s Quality System Regulation, facility registration and product listing, reporting of adverse events and malfunctions, and appropriate, truthful and non-misleading labeling and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.

Class II devices are those that are subject to the General Controls, and Special Controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These Special Controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance. Most Class II devices are subject to premarket review and clearance by the FDA. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process.

Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are subject to the PMA

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application process, which is generally more costly and time-consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMA typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.

The Investigational Device Process

In the United States, absent certain limited exceptions, human clinical trials intended to support medical device clearance or approval require an investigational device exemption (“IDE”), application. Some types of studies deemed to present “non-significant risk” are deemed to have an approved IDE once certain requirements are addressed and IRB approval is obtained. If the device presents a “significant risk” to human health, as defined by the FDA, the sponsor must submit an IDE application to the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate IRBs at the clinical trial sites. Submission of an IDE will not necessarily result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended success criteria.

All clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational device labeling, prohibit promotion and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. Clinical trials must further comply with the FDA’s good clinical practice regulations for IRB approval and for informed consent and other human subject protections. Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable, or, even if the intended safety and efficacy success criteria are achieved, may not be considered sufficient for the FDA to grant marketing approval or clearance of a product. The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons.

The 510(k) Clearance Process

Under the 510(k) clearance process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is “substantially equivalent” to a legally marketed predicate device. A predicate device is a legally marketed device that is not subject to a PMA, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was previously found substantially equivalent through the 510(k) process. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence.

After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If it is accepted for filing, the FDA begins a substantive review. By statute, the FDA is required to complete its review of a 510(k) notification within 90 days of receiving the 510(k) notification. As a practical matter, clearance often takes longer, and clearance is never assured. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.

If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the much more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the de novo process. The de novo classification process is an alternate pathway to classify medical devices that are automatically classified into Class III, but which are low to moderate risk. A manufacturer can submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. De novo classification may also be available after receipt of a “not substantially equivalent” letter following submission of a 510(k) to FDA.

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After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA application. The FDA requires each manufacturer to determine whether the proposed change requires a new submission in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. Many minor modifications are accomplished by a letter-to-file in which the manufacturer documents the change in an internal letter-to-file. The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for such change. The FDA can always review these letters to file in an inspection. If the FDA disagrees with a manufacturer’s determination regarding whether a new premarket submission is required for the modification of an existing 510(k)-cleared device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained. In addition, in these circumstances, the FDA can impose significant regulatory fines or penalties for failure to submit the requisite application(s).

The PMA Approval Process

Following receipt of a PMA application, the FDA conducts an administrative review to determine whether the application is sufficiently complete to permit a substantive review. If it is not, the agency will refuse to file the PMA. If it is, the FDA will accept the application for filing and begin the review. The FDA has 180 days to review a filed PMA application, however, in practice the application review process often exceeds this deadline. During this review period, the FDA may request additional information or clarification of information already provided, and the FDA may issue a major deficiency letter to the applicant, requesting the applicant’s response to deficiencies communicated by the FDA.

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