CareDx Shares Plummet 38% Amid Proposed Medicare Coverage Limitation

CareDx shares fell 38% on July 17, 2025, due to a proposed local coverage determination from a Medicare contractor that could limit transplant tests for patients. However, management responded, stating that the determination was not final and could be appealed. The company believes its tests are medically necessary and will continue to advocate for patients.

On July 17, 2025, shares of CareDx (NASDAQ: CDNA) experienced a significant drop, plummeting by 38% following a proposed local coverage determination (LCD) from Medicare contractor Molecular Diagnostic Services (MolDX). The proposed LCD could limit the number of transplant tests a patient could receive, potentially impacting CareDx's top line [1].

CareDx, a life sciences company focused on diagnostic solutions for transplant patients, issued a statement on July 18th, stating that they do not expect changes in the use of their testing services in response to the draft LCD. The company believes its tests are medically necessary and will continue to advocate for patients. Despite the company's assurances, the market remained skeptical, with shares only recovering slightly to $11.91 on July 18th [1].

The proposed LCD could have a meaningful impact on CareDx's revenue, as its largest contributor to top-line revenue is its Testing Services, which generated $249.4 million in FY24. This revenue stream accounts for 75% of the company's total revenue. The company's FY25 outlook, which initially projected a 3% growth in earnings on an 11% growth in revenue, has been called into question by the proposed LCD [1].

CareDx's financial performance has been mixed in recent quarters. The company reported a 19% increase in revenue in FY24, moving from a loss of $0.64 per share to earnings of $0.55 per share. However, shares have fallen over 65% from their 2024 high of $34.84 in the past 12 months. The company has faced several legal challenges and regulatory setbacks, including a class action suit against the former management team and a patent litigation suit with Natera (NTRA) [1].

Despite these challenges, CareDx's balance sheet remains pristine, with $186 million in cash and marketable securities as of the end of Q2 2025. The company has no long-term debt and has been actively buying back stock [1].

Analysts have mixed opinions on CareDx's stock. Craig-Hallum and BTIG have reissued Buy ratings on the stock, while H.C. Wainwright and Wells Fargo have maintained Hold ratings. The overall market consensus expects CareDx to earn $0.54 a share in FY25, followed by earnings of $0.90 a share in FY26 and $1.43 a share in FY27 [1].

In conclusion, CareDx faces an uncertain future due to the proposed LCD from MolDX. The company will need to navigate this regulatory challenge and continue to advocate for its patients to maintain its market position. Investors should closely monitor the company's response to the LCD and any potential appeals.

References:
[1] https://seekingalpha.com/article/4814452-play-on-caredx