Castle Could Crumble When IPO Lockup Expires

The 180-day lockup period for Castle Biosciences Inc. (CSTL) ends on January 21, 2020. When the lockup ends, company's pre-IPO shareholders and insiders may choose to sell more than 10.4 million shares of CSTL in the secondary market. The number of currently-restricted shares dwarfs the 4 million shares of CSTL offered in the IPO and significant sales of currently-restricted stock could flood the secondary market and negatively impact the stock price of CSTL when the lockup expires.

Trading in Castle Biosciences has been somewhat mixed during this six-month period, but CSTL has a return from IPO of nearly 100%. The stock had a first day return of 33.8%. We believe that CSTL's high return from IPO will make pre-IPO shareholders and company insiders particularly interested in cashing in on their gains.

Business Overview: Commercial Stage Bioscience Company Focused on Skin Cancers

Castle Biosciences is a commercial-stage company that develops and markets treatments for skin cancers. The company uses clinically-actionable, personalized genomic data that enables physicians to make more accurate treatment choices. This goes beyond the conventional approach of using only clinical and pathology factors. The company's product line offers non-invasive treatments produced by using an assessment of the specific risk factors of each patient by using proprietary algorithms to pinpoint those risks. In particular, the assessments identify risks of metastasis or recurrence of the skin cancer that may indicate a need for an escalation of treatment. The products also identify those with lower risks who may not need unnecessary surgical and medical interventions.

(Source: CSTL website)

Their lead product is DecisionDx-Melanoma, which identifies risks for patients with invasive cutaneous melanoma. The company also markets DecisionDX-UM, which identifies risks for patients with uveal melanoma. Both products qualify for Medicare coverage. Castle Biosciences also has two late-stage products being developed to treat cutaneous squamous cell carcinoma.

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Disclosure: I am/we are short CSTL.

Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any ...

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