Castle Biosciences downside risk ‘limited’ on MolDx decision, says Leerink

Leerink notes that MolDx, part of the Palmetto GBA MAC, finalized and maintained a non-coverage decision, or LCD, for Castle Biosciences’ DecisionDx-Squamous Cell Carcinoma, or DDx-SCC, test. This leaves Novitas’ Oncology LCD finalization as the potential next step in the resolution of coverage questions for Castle’s SCC test in 2024, noted the analyst, who points out that sustainability of coverage has remained a question and an overhang on Castle shares. While a positive MolDx decision “would have been overwhelmingly positive for the stock,” the firm believes the downside risk is “already reflected in the model” with the firm and the Street both modeling no DDx-SCC revenue after Q2 of 2024. The firm, which thinks the Novitas decision could be a meaningful catalyst if it resolves the reimbursement overhang, views downside risk as limited at current levels and keeps an Outperform rating on Castle shares, which are down about 16% to $17.83 at time of writing.