By Sam Boughedda
CareDx (NASDAQ:CDNA) shares plunged a further 16% Friday after Thursday's more than 32% fall following news that MolDX issued a billing and coding article that severely limits coverage of the company's tests in multiple areas.
The Billing Article, effective March 31, 2023, removes current Medicare coverage for multimodality in heart.
Reacting to the report on Friday, CareDx said that after discussions with MolDX regarding the Billing Article release, it is now their "understanding that MolDX does not plan to modify the foundational LCD but instead issued this Billing Article revision for clarification purposes."
The company said its next steps will include having follow-up discussions with MolDX, submitting additional data for HeartCare, and updating its procedures in line with the revised Billing Article.
Reacting to the news, Craig-Hallum analysts downgraded CDNA to Hold from Buy, cutting the firm's price target on the stock to $9 from $26 per share. They said, "the worst-case scenario just occurred for CareDx in a decision we have been worried about since Medicare's CAC meeting last November."
"The update dramatically changes reimbursement for transplant testing," wrote the analysts. "The policy appears to: 1) eliminate HeartCare reimbursement and make KidneyCare reimbursement a non-starter, and 2) dramatically weakens reimbursement for kidney transplant testing when used in the surveillance setting. Surveillance testing is defined as a test used when no biopsy is considered, or no center-specific surveillance biopsy protocol is in place."
"MolDx's change is dramatic and will completely reshape the transplant testing market and its market leader, CDNA. We estimate that at least $15M of revenue is from HeartCare (specifically the AlloSure Heart component), which will be reduced to $0," the analysts added.
Raymond James downgraded the stock to Market Perform from Strong Buy, removing their price target. In a note, analysts told investors that in their estimates, "this could mean somewhere in the realm of 30% of overall revenues are at risk."
"Importantly, the impact will flow beyond the top-line as the reductions come with high margins, likely taking CareDx from a cash-rich, near-breakeven business into a substantial cash burner. Again, this may not be permanent, but with the myriad of noise elsewhere and opacity on if/when these items could be unwound, we believe the stock is unlikely to outperform in the near- and intermediate-term," said the analysts.