CSTL - Castle Biosciences jumps after reversal in coverage policy

2023-07-07 10:45:34 ET

Update 10:45 AM EST: Adds comments from Craig Hallum

Diagnostics firm Castle Biosciences ( NASDAQ: CSTL ) added ~41% in the morning hours Friday in a move attributed to an unexpected policy reversal regarding Medicare coverage for the company’s DecisionDx cancer test for squamous cell carcinoma (SCC).

The upsurge in CSTL shares comes after regional Medicare administrative contractor Novitas decided to withdraw a draft policy that would have declined coverage for Castle’s cancer test. Novitas said it would draft a new policy proposal.

Noting "as we digest this bizarre twist from Novitas and the surprise from CMS," Lake Street analyst Thomas Flaten raised his estimates for Castle ( CSTL ).

Flaten pointed out that Novitas would continue to cover Castle’s ( CSTL ) Dx-SCC test contrary to prior assumptions.

"No doubt this is good news," the analyst added, reaffirming his Buy rating and $32 per share target on the stock.

Meanwhile, Craig Hallum’s Alexander Nowak argues that "the entire diagnostics space could breathe some relief" after Novitas’ withdrawal of local coverage determination.

The analyst has a Buy rating on Natera ( NTRA ) and a Hold rating on CareDx ( CDNA ), with price targets of $117 and $8 per share, respectively.

More on Castle

• Castle Biosciences expects to meet or exceed guided FY22 revenue
• Castle Biosciences: Potential To Re-Rate With Supportive Fundamentals

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