Castle Biosciences, Inc. (CSTL) has agreed to snap up an Illumina Ventures company, Cernostics, Inc., in a cash-and-stock deal worth $30 million. The deal also involves future contingent milestone payments in cash or stock of up to $50 million.
Following the news, shares of the commercial-stage dermatologic diagnostics company jumped 7.8% to close at $67.58 on Tuesday.
Through this acquisition, Castle Biosciences’ U.S. TAM is projected to expand by $1 billion. The purchase price is likely to include $20 million in cash and $10 million in the common stock of Castle Biosciences. The acquisition, which awaits certain approvals, is likely to close before the end of 2021.
Markedly, Cernostics is specialized in spatial biology and artificial intelligence-driven image analysis of tissue biopsies. Its TissueCypher Barrett’s Esophagus Assay is the first precision medicine test, which is designed to forecast the future development of high-grade dysplasia (HGD) and/or esophageal cancer in patients with Barrett’s esophagus (BE), the company said. (See Castle Biosciences stock charts on TipRanks)
The CEO of Castle Biosciences, Derek Maetzold, said, “Acquiring the TissueCypher platform is aligned with our commitment to utilizing innovative technology to provide clinically actionable information that guides disease management and improves patient outcomes…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 (EAC).”
Disappointingly, around 4 million patients in the U.S. are diagnosed with BE, and about 400,000 endoscopies are executed on BE patients annually.
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In August, Robert W. Baird analyst Catherine Ramsey Schulte maintained a Buy rating on the stock and increased the price target to $78 from $73 (15.4% upside potential).
According to Schulte, the company provided a conservative updated 2021 outlook, given the rise in COVID cases.
Consensus among analysts is a Strong Buy based on 3 unanimous Buys. The average Castle Biosciences price target stands at $84.33 and implies upside potential of 24.8%. Shares of the company have gained 37.4% over the past year.
Investors should always be aware of the risks involved in any stock. According to the new TipRanks’ Risk Factors tool, the Castle Biosciences stock is at risk mainly from three factors: Finance and Corporate, Tech and Innovation, and Legal and Regulatory, which contribute 31%, 27%, and 13%, respectively, to the total 67 risks identified for the stock. Under the Finance and Corporate risk category, CSTL has 21 risks, details of which can be found on the TipRanks website.
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