Future Revenue Growth and Margin Expansion at Castle Biosciences Unrecognized, This Analyst Says

Canaccord Genuity reiterates its Buy rating on Castle Biosciences Inc CSTL but lowers the price target from $60 to $40, citing lower DecisionDxSCC revenue and an increased discount rate.
Novitas (a Medicare Administrative Contractor, posted its future effective Local Coverage Determination (LCD) on June 2, 2023 (effective July 17, 2023), stating that Castle's DecisionDx-SCC (DDSCC) and DecisionDx-Melanoma (DD-Mel) do not meet the criteria necessary for coverage.
DecisionDx-Melanoma will maintain Medicare reimbursement, as the Palmetto/ Noridian LCDs remain unchanged.
The analyst notes that Castle could have the LCD retracted, convince Novitas to reconsider the data (believes the MAC misunderstood it) and/or may appeal the decision.
The company expects to reach a solution in roughly one year.
The analyst says that while the move is not positive, the company still has multiple paths to improve the situation.
It says the shares do not reflect CSTL's attractive long-term revenue growth and margin expansion potential.
Price Action: CSTL shares are up 24.40% at $14.51 on the last check Tuesday.

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