Castle Biosciences taps into Cernostics' GI cancer test franchise with $80M deal

Skin cancer diagnostic maker Castle Biosciences has set its sights a little deeper, with plans to launch a gastrointestinal oncology franchise with an $80 million deal for Cernostics and its spatial genomics portfolio.

Cernostics specializes in the artificial-intelligence-driven image analysis of biopsy samples, with its TissueCypher assay for evaluating Barrett’s esophagus and predicting a patient’s chances of developing esophageal cancer or new precancerous lesions.

The companies estimate about 4 million patients in the U.S. have been diagnosed with Barrett’s—a condition affecting the cells lining the esophagus, which is often seen as a precursor to potentially fatal tumors—with about 400,000 annual endoscopies forming a billion-dollar market. 

“Unfortunately, the incidence of esophageal cancer is increasing at one of the fastest rates of all cancers in the U.S., so we need new clinical tools to reverse this growth trend in the diagnosis of [esophageal adenocarcinoma],” Castle’s president and CEO, Derek Maetzold, said in a statement.

The TissueCypher test addresses an unmet need, Maetzold added, by aiming to predict progression early and direct patients to more timely ablation procedures before the cancer can develop. Currently, esophageal adenocarcinoma has a five-year survival rate of less than 20%.

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Cernostics, previously backed by Illumina Ventures, presented validation data for its TissueCypher test this year, taken from a study funded by the National Institutes of Health and the National Cancer Institute. 

The study showed patients with Barrett’s esophagus who received a high-risk result from the test were nearly five times more likely to develop cancer or high-grade dysplasia compared to those categorized as low-risk.

“We believe the TissueCypher Barrett’s Esophagus Assay is a valuable tool for improving prevention of esophageal cancer, particularly, to help physicians and patients make more informed management decisions based on the unique biology of an individual patient’s esophageal biopsy,” said Cernostics CEO Mike Hoerres.

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Under the agreement, Castle will pay $30 million upfront with up to an additional $50 million tied to commercial milestones spanning 2022’s sales performance. The deal is expected to close before the end of the year.

Pittsburgh-based Cernostics will operate as a wholly owned subsidiary and is set to maintain its executive management, staff and laboratory operations in Pennsylvania.

“We believe the combined strengths of Castle and Cernostics will position us for continued growth and success as a leader in the diagnostics space, complementing our first-to-market dermatologic franchise,” said Maetzold.