Good morning and welcome to Castle Biosciences myPath Melanoma conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session regarding the transaction. I would like to turn the call over to Frank Stokes, CFO. Please go ahead.
Thank you, Operator. Good morning, everyone. Welcome to the call. Joining me today is Castle's Founder, President, and Chief Executive Officer, Derek Maetzold. Information recorded on this call speaks only as of today, April 27, 2021. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the investor relations page of the company's website for approximately three weeks. Before we begin, I'd like to remind you that some of the information discussed today may contain projections or other forward-looking statements regarding future events or the future financial performance of the company and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning the expectation that Castle will complete the acquisition of Myriad myPath, and the estimated timing for completion of the transaction is based upon current expectations and involves inherent risks and uncertainties. There can be no assurances that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements, including that the closing conditions of the transaction may not be satisfied, the transaction may be delayed, or not close at all, and we may not realize the anticipated benefits of the transaction. These factors and other risks and uncertainties are described in detail in the company's annual report on Form 10-K for the year ended December 31st, 2020, and in the company's other documents and reports filed with the Securities and Exchange Commission.
These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. I'll now turn the call over to Derek.
Thank you, Frank. Good morning, everyone. Thank you for joining us this morning. You may have seen our exciting news early this morning: the announcement we have signed a definitive agreement to acquire Myriad myPath, LLC , from Myriad Genetics. Myriad myPath, LLC is a CLIA-certified specialty laboratory where the myPath Melanoma 23-gene expression profile test was developed and is currently offered. We expect the transaction to close in approximately four weeks, at which time Castle will be the successor owner of the Myriad myPath laboratory and sole provider of the myPath Melanoma test. We're going to discuss today what that potentially means for us, and most importantly, what it means for our customers and their patients.
myPath Melanoma is a clinically validated test designed to be used as an adjunct to histopathology when the distinction between a benign nevus and a malignant melanoma cannot be made confidently by histopathology alone. There are a number of terms that dermatopathologists and dermatologists use to describe these lesions, including difficult to diagnose, suspicious pigmented or suspicious melanocytic lesions, and lesions where there is uncertainty regarding the malignant potential. Stated differently, the dermatologist and the patient are faced with a biopsy lesion where the treatment plan is uncertain. Do the dermatologist and the patient lean in the direction of a benign lesion and risk missing a melanoma? Or conversely, is the working diagnosis changed to melanoma, which subjects the patient to not only a wide local excision but potentially referral to a surgeon for someone to biopsy surgical procedure, initiation of advanced imaging, etc., etc.?
You may recall that Castle launched its own clinically validated genomic test designed to aid clinicians in characterizing these difficult to diagnose melanocytic lesions, DecisionDx-DiffDx Melanoma, in November of 2020. The DiffDx Melanoma and myPath Melanoma tests are both commercially available and will remain available through Castle and Myriad, respectively, until the closing of the transaction. As a successor owner, after closing the transaction, Castle will be the sole provider of myPath Melanoma, the 23 GEP test. With this myPath Melanoma laboratory acquisition, we believe this acquisition will add incremental value to both myPath Melanoma and DiffDx Melanoma by leveraging the strength of these two validated tests. Thus, through this acquisition, we believe that more patients will receive actionable results more of the time, enabling a more confident diagnosis and a clearer treatment path.
When we develop DiffDx Melanoma employing our artificial intelligence tools, we're able to achieve our target product profile goals, which were improved accuracy metrics and a substantially reduced intermediate risk zone. The test has been demonstrated to provide a definitive result in more than 96% of the reported cases, which allows for clinicians to have a greater direct impact on patient care. However, while we are building our clinical validation data, we do not presently have enough data to enable testing of pediatric patients. MyPath Melanoma, which is distinct from DiffDx Melanoma, has its own set of strengths, including enough data to support its use today in pediatrics, as well as a deeper data set for use in spitzoid lesions. What does this mean for our customers and us today? First and foremost, we are a data-driven, evidence-based company.
As you know, we have invested heavily in evidence development, supporting not only our existing tests but our pipeline tests as well. We believe our leadership in dermatologic skin cancer testing is a result of this evidence-based mindset, which has allowed us to provide actionable, innovative tests to the dermatology community, and our commercial team has years of existing relationships with this same community. What about today? First, we anticipate that adding myPath Melanoma to our difficult-to-diagnose test offerings will complement our DiffDx Melanoma business by upgrading the value proposition of both tests to our customers. Second, we now have two differential tests included in the NCCN guidelines. Specifically, NCCN guidelines state that ancillary tests, including GEP tests such as myPath Melanoma and DiffDx Melanoma, may facilitate interpretation of cases that are diagnostically uncertain or controversial by histopathology. What a great position to be in.
Third, as you know, we submitted our technical assessment dossier for our DiffDx Melanoma test to Palmetto and Noridian MolDX programs earlier this year and received notice that the file was complete. We believe that we remain on track to have a draft LCD posted in 2021, with the final LCD effective in 2022. The story is a little different with myPath Melanoma. Myriad received Medicare coverage through the MolDX process in 2019, and this coverage is active today. Further, Myriad sought and was awarded Advanced Diagnostic Laboratory Test or ADLT status by CMS in 2019. Importantly, our existing laboratory in Phoenix, Arizona, and our new laboratory, post-closure, of course, in Salt Lake City, Utah, are both managed by Noridian Healthcare Solutions, which we view as a positive for Castle going forward. Let's shift from today and talk about what's just around the corner.
Myriad has, since the LCD for myPath Melanoma was effective in 2019, supported the test with a small sales team of 10 or so representatives that have largely focused on the dermatopathology call point. You will recall that we launched our own DiffDx Melanoma test in November of 2020. We also launched with a sales team of 10 representatives, also focusing during the initial launch period on dermatopathologists. However, as we've talked about as a company, the treating dermatologist is the treating clinician, and they, together with their patients, are making the decisions around definitive surgery and treatment plans, many times alone but sometimes in concert with the multidisciplinary care team. Because of this, we believe it is important to expand our educational outreach efforts to dermatologists to ensure that they also understand the value differential diagnostic tests have for difficult-to-diagnose melanocytic lesions.
As we discussed at our 2020 year-end earnings call in March of this year, we are currently scaling our sales force. We expect to enter the third quarter of 2021 with a total of 60-65 sales representatives, all calling on dermatologists as their primary call point, followed by surgeons who work in skin cancer and dermatopathologists, with some call activity with medical oncologists. This expansion will nearly double our dermatology-focused sales efforts compared to the 32 outside sales territories we currently have, and does so just as we expect continued positive trends of offices opening back up for in-person sales calls. Additionally, we have seen that our market is promotionally responsive. We expect that as offices open more fully, our sales force expansion efforts should have a nice impact on our 2021 exit volume and should set us up for a stronger 2022.
Our current plan calls for each of our 60-65 sales representatives to sell all four of our dermatologically focused tests: the myPath Melanoma test and our DiffDx Melanoma test for use in suspicious pigmented lesions, our DecisionDx-Melanoma test to inform or influence more accurate treatment plan decisions in patients with a diagnosis of melanoma, and our DecisionDx-SCC test to influence or inform more accurate treatment plan decisions for patients diagnosed with squamous cell carcinoma and the presence of one or more high-risk features. What's exciting here is that these four tests are focusing on an estimated total U.S. patient population of 630,000 people. That is a significant patient pool that can be primarily reached through dermatologists.
In addition to our commercial investments, we expect to continue to expand our evidence development initiatives, including with respect to evidence development for the myPath Melanoma test once acquired, as well as our DiffDx Melanoma test. In summary, this is an exciting time for us. We believe this acquisition, in which we will be adding myPath Melanoma to our family of skin cancer tests, is a significant milestone towards a goal to deliver the most valuable, actionable, comprehensive genomic test offerings to our customers and their patients to guide cancer management decisions. We expect to add incremental value to both myPath Melanoma and DiffDx Melanoma by leveraging the strength of these two distinct, validated tests. Both tests are included in NCCN guidelines, and myPath Melanoma, of course, enjoys Medicare coverage under an existing LCD.
Thus, we view the acquisition as a significant gain in value to our customers and to our patients. Through this acquisition, we believe we will further our position as a leading dermatologic diagnostics company, as well as support our potential for continued growth and value creation in the near and long term. We believe the acquisition of the Myriad myPath laboratory comes at an opportune time, just before the doubling of our sales force focused on dermatologists and just as we are seeing reopening through in-person sales call. We look forward to an exciting rest of the year. This concludes our remarks, and thank you for your interest in Castle. Operator, we're now ready for Q&A.
Thank you. As a reminder to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Puneet Souda, with SVB Leerink. You may proceed with your question.
Yeah. Hi, Derek. Thanks and congrats on the acquisition. My first one is, I mean, this was a smaller business for Myriad, obviously, but wondering what can you provide us in terms of the contribution here for the full year for Castle? Obviously, this has been a product that's been out on the market and reimbursed since 2019. Can you maybe provide us sort of growth rates that you have seen? Obviously, pandemic impacted things meaningfully last year. Despite that, what sort of growth rates are you seeing, and what should we expect here for 2021?
Sure. Hey, Puneet. This is Frank. Thanks for the question. You're right. It was a smaller business in the hands of Myriad. The derm effort was one of, I believe, six of their therapeutic focus areas. They did not break it out separately, so they have not disclosed publicly the progress they've made in building the test demand. I think we're more focused on what it can look like in the hands of our soon-to-be 60-65 sales reps, focused on derm within a company that is exclusively focused on dermatology because it is, as you know, our passion, our core business. We're going to be finalizing our views on what we think things will look like based on medical commerce returns and things like that, and we'll work with you on that.
For now, we're just excited to see what we can do with this in the hands of our specialty team.
Thank you. Our next question comes from Catherine Schulte with Baird. You may proceed with your question.
Hey, guys. Thanks for the questions. First, you mentioned pediatric patients. There's something that myPath can currently address. What percent of the market is that, and do you plan to develop evidence to support that and the use case for DiffDx in the future? Is this something where you envision both tests being available long term, and if so, maybe the two development pathways for those two tests on why they'll continue to be complementary to each other?
Yeah. Excellent questions there, Catherine. The pediatric population is not insignificant. I want to call them all again and maybe get back to you on that here as we get closer to first quarter earnings. We launched our DiffDx Melanoma test, not testing pediatric patients because we did not have enough cases that we felt we were comfortable in making accurate calls, whereas Myriad's evidence development, which began earlier last decade, is deeper than ours. That certainly is one near-term advantage of this acquisition, to be able to service that marketplace that, at this point in time, we are not servicing. The exact percentage, I think we will have to go and look at the actual play over time here. In terms of evidence development, we have a number of plans that are on the books.
We also have a protocol approved and ready to go post-close to begin pushing forward harder evidence development, both for the myPath Melanoma test and for our own DiffDx Melanoma test. Some of that data will be able to come out likely later this year, early next year, depending on publication timelines. Definitely want to keep pushing evidence development, which we think will be important to increase the confidence in dermatologists and their patients in terms of thinking through actionability of this kind of a test in their hands.
Okay. Great. Will you keep the Salt Lake City lab, or are you going to integrate MyPath into the Phoenix lab?
We'll certainly go ahead and offer the myPath Melanoma test in both laboratories for a period of time, and I think look at the efficiencies once we get past that transition period.
Great. Thank you.
Yeah.
Thank you. As a reminder to ask a question, you'll need to press star one on your telephone. Our next question comes from Puneet Souda with SVB Leerink. You may proceed with your question.
Hey, guys. Thanks. I don't know what happened last time. I had a couple more quick questions. I appreciate the details that you provided in terms of the differences in the test, but could you just maybe walk us through how is a rep going to approach these two different tests with a physician who is maybe potentially new to DiffDx and myPath? Maybe just walk us through that. Someone that's maybe a little bit more experienced and already using DiffDx, how would you pursue those physicians? I just wanted to get a sense on how commercially the execution of these two tests are going to work in the market.
That's an excellent question, Puneet. I think, one, we will have to obviously wait until post-close to understand or appreciate the complete customer approach. I would say that our expectation is that we will have a number of customers who will be, I guess we could call them loyalists to the DiffDx Melanoma test, a number of customers that we expect to be loyalists to the myPath Melanoma test. We believe, based upon careful customer interactions in the last short period of time, that what most of our clinicians want, be either dermatopathologists or dermatologists, is, "Give me the best answer for this patient sitting in front of me." I think there will be a level of trust that will say, "I have a dermatopathology pathology report in front of me with an uncertain lesion, i.e., not a certain diagnosis.
I'd like to have you run a differential diagnostic gene expression profile test and give me your best call afterwards. I think we expect most of our customers will fall into that line, expecting us to go ahead and let evidence development really go ahead and drive the appropriate choice in terms of which test to run first. The benefit we have, of course, is that with the Myriad MyPath test, there is a certain number of lesions that come back indeterminate, which is not necessarily completely not viable to a clinician, but having either a malignant or benign outcome is certainly far more actionable from a confidence standpoint. We will be able to take the alternative test whenever we see an indeterminate test report call and run that in a secondary fashion to be able to improve the utility overall of the sort of offerings from Castle.
Does that make sense?
Okay. Yeah. That makes sense, Derek. Thanks for that. I wanted to clarify on the workflow and any change or impact to gross margins that you expect as an introduction of this test. Should we expect a faster turnaround time after the two labs providing services here across the country? Lastly, should we assume 75 reps with the 10 coming in from Myriad, or is this still a 60-65 rep organization that you expect?
Excellent question. Now, we sized our territories this spring to 60-65 people, which would include fold-ins from the Myriad group as well. And on the.
Okay. The first question.
Yeah. From a COGS perspective, you want to handle that?
Yeah. One of the really appealing things here, Puneet, is that myPath Melanoma is run on the same instrument platform that we use for our other tests. So we would expect that long-term gross margins will be very, very similar.
Would you expect a very similar turnaround?
Let's see here. Based upon the public data from Myriad's website or website for myPath Melanoma, it looks like our turnaround time is a little quicker than theirs. I think the safe thing from a customer standpoint is not an elongation. Our belief is that we can turn these around quicker than what Myriad was providing earlier. To be quite honest, we don't necessarily have their turnaround data to see exactly where the overall normal truth lies. I think from a customer standpoint, there shouldn't be any dissatisfaction and hopefully only an increase in satisfaction regarding turnaround time.
Okay. Got it. Great. Thank you.
Thank you. I'm not sure of any further questions at this time. I would now like to turn the call back over to Derek Maetzold for any further remarks.
All right. Thank you for the opportunity to let us walk you through the acquisition this morning. We look forward to moving towards close in the next four weeks or so. This concludes the call. Again, we thank you for joining us this morning and for your continued interest in Castle Biosciences.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.