Thursday, August 22, 2019

MolDx Proposed LCDs and Resulting First-Day Equity Market Reactions

One August 22, 2019, the MolDx program released 13 new molecular test LCDs, four of which directly involved publicly-held companies.  (Discussion here.)

How did the market react, and how fast?


Natera gained new coverage of its Signatera test, for minimal disease monitoring in colon cancer.   The stock price was quiet for about about three hours, then popped circa 5% (market value $130M).   This was a predictable gain, and could probably have been a profit opportunity for anyone watching this throughout the morning hours.


This small publicly held company had a favorable LCD on new products, and the market value popped on market opening at 9:30 am - by about 14% or circa $50M market value.  Unlike Natera, the reaction was immediate and the armchair investor had no opportunity with CSTL.


Myriad had opined on an investor call a few days ago that it was "optimistic" that a forthcoming LCD would remove a restriction of psychiatrist-only ordering for its GeneSight test.*

No such luck - the restriction remained, at least in this draft at this time.  The LCD involved is pretty verbose and confusing even to experts, and the market didn't react til 10 am.  Then, the stock slid 8% in two stages, one in morning and one after 2 pm.  Market cap value lost, circa $130M.


This company gained coverage for its donor organ circulating DNA test in heart patients; it already had coverage for AlloSure in renal transplant patients.  The cardiac transplant market is pretty tiny, and if anything, AlloSure new sales might be at parity with existing AlloMap sales.  Given the small market, there wasn't much reaction.

click to enlarge**
Take Home Lesson

To my eye, either the Castle or Natera rise in market values were easily foreseeable by a normal reading of each new LCD.  There wasn't time for an LCD reader to take advantage of the information with CSTL, but there was plenty of time for Natera. 

Given the books (Flash Boys) and movies (The Hummingbird Project) about millisecond and microsecond trading, Natera today was a case where that wasn't necessary.   Despite the usual warnings about risks of out-thinking the market, about the market immediately incorporating new information (here), at least one of these stocks lagged in a surprising way.


Myriad:  "There's also the Medicare LCD that would potentially provide expansion into primary care that we're excited about, and we feel optimistic about that as well, which would be another significant opportunity."

Data charts are noisy and numbers are only approximate.