Castle Biosciences Inc. deepened the moat around its position in melanoma diagnostics with the acquisition of Myriad Mypath LLC from Myriad Genetics Inc. The acquisition gives Castle (NASDAQ:CSTL) the Myriad Mypath Laboratory in Salt Lake City where the Mypath Melanoma 23-gene expression profile (GEP) test is owned and offered. Mypath Melanoma joins Castle's Decisiondx Diffdx-Melanoma, enabling Castle to provide comprehensive molecular testing for difficult-to-diagnose melanocytic lesions.
Friendswood, Texas-based Castle will finance the $32.5 million acquisition with cash and cash equivalents on hand. The companies anticipate closing the transaction within four weeks, assuming resolution of customary conditions. In the interim, Mypath Melanoma will continue to be commercially available through Salt Lake City-based Myriad (NASDAQ:MYGN). Upon closing, Castle will be the exclusive provider of Mypath Melanoma.
“With the acquisition of Myriad Mypath Laboratory, Castle strategically expands its suite of genomic tests for skin cancer and expects to offer the most comprehensive testing solution for difficult-to-diagnose melanocytic lesions,” said Derek Maetzold, president and CEO of Castle Biosciences.
“We believe [the transaction] enhances CSTL's core competitive position in the suspicious pigmented lesion vertical that the company launched in late 2020,” said Puneet Souda of SVB Leerink LLC. “While CSTL recently launched a competitive test with their Decisiondx Diffdx Melanoma assay (Diffdx), the company expects the MYGN Mypath assay to complement its offering, providing the most comprehensive molecular testing solution for difficult to diagnose lesions.”
About 20% of dermatopathologists in the U.S. have ordered Mypath Melanoma and it has been used more than 40,000 times.
“With the acquisition, and market consolidation, CSTL further entrenches their position in the skin cancer market, with limited competition,” Souda added. “The company has a leading assay in cutaneous melanoma, a recently launched product in squamous cell carcinoma, and now owns both franchises that are commercial or commercializing in the suspicious pigmented lesions market.”
The deal falls in line with Myriad’s strategic plans as well. Myriad announced in November 2020 that it planned to divest Mypath and its RBM pharmaceutical contract research services business and in January 2021 said it was seeking a buyer for its rheumatoid arthritis test, Vectra DA. The divestitures will allow the company to focus on its core strengths of women’s health, hereditary cancers, and its Genesight assay for depression with the goal of turning around several quarters of declining revenue that predated the pandemic.
Castle launched Diffdx-Melanoma in November 2020 and expects the acquisition to add incremental value to both tests by providing more actionable results more often and clarifying a patient’s treatment path. According to the National Comprehensive Cancer Network Guidelines Version 2.2021, ancillary tests such as Mypath Melanoma and Diffdx-Melanoma can assist in the interpretation cases that are diagnostically uncertain based on histopathology alone.
“When we developed Diffdx-Melanoma employing our artificial intelligence tools, we were able to achieve our target product profile goals, which were improved accuracy metrics and a substantially reduced intermediate-risk zone, and 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,” Maetzold told BioWorld. Myriad reported about an 11% technical failure rate and similar rate of intermediate results.
With the two tests, “should a clinician order Mypath Melanoma and the result come back intermediate or even not reportable due to technical failure, we will have the opportunity to quickly run the Diffdx Mealanoma test so that the clinician and the patient have an actionable results,” Maetzold explained.
Mypath Melanoma also adds established data in pediatrics, which Diffdx-Melanoma lacks, as well as a deeper dataset for use in Spitzoid lesions.
Mypath Melanoma already has Medicare coverage with a reimbursement rate of about $2,000, offering an immediate boost to Castle’s revenue. Castle submitted a technical assessment dossier for Diffdx-Melanoma earlier this year and expects a draft local coverage determination (LCD) policy sometime in 2021 and a final determination in 2022. “Based on Mypath’s current LCD and the fact that the two tests have the same intended clinical use, we are hopeful that the timeframe for review of our Diffdx-Melanoma test could be shortened,” Maetzold added.