On Thursday, Lake Street Capital Markets adjusted its price target for CVRx Inc (NASDAQ:CVRX), a medical device company, from the previous $18.00 to $12.00, while maintaining a Buy rating on the stock. The revision follows a recent proposal from the Centers for Medicare & Medicaid Services (CMS) that may impact the company's pricing strategy and revenue forecasts.
CVRx experienced a setback when CMS proposed a change that could force the company to lower the Average Selling Price (ASP) of its Barostim device for Medicare patients from approximately $29-$30K to around $25K in 2025.
This proposal contrasts with the November 2023 unanimous decision by CMS to upgrade Barostim to a new technology Ambulatory Payment Classification (APC 1580), which would have allowed for a reimbursement of about $45K, ensuring sufficient patient access and enabling CVRx to maintain its ASP.
The proposed adjustment by CMS is more severe than anticipated and has prompted a negative reaction in CVRx's stock price. If the CMS proposal is finalized, Lake Street Capital Markets forecasts that CVRx's revenue estimate for 2025 could decrease by 10-15%, from $67M to approximately $55-$60M, depending on unit growth and the mix of Medicare and private payers.
Despite the potential challenges, the firm views the initial sell-off of CVRx shares as an overreaction. Lake Street Capital Markets anticipates that the company's second-quarter results will be satisfactory and expects that CVRx will reiterate its guidance.
Additionally, the firm suggests that a more detailed explanation or response from CVRx regarding the CMS proposal could clarify the situation for investors, potentially reinstating the higher reimbursement rates or assuring profitable operations under the new conditions.
The firm's lowered price target reflects the anticipated near-term impact of the uncertainty surrounding the CMS proposal on CVRx's stock valuation.
InvestingPro Insights
Following the recent developments around CVRx Inc (NASDAQ:CVRX), including the CMS proposal affecting its pricing strategy, investors are closely monitoring the company's financial health and stock performance. According to InvestingPro data, CVRx's market capitalization currently stands at $154.41 million, with a negative P/E ratio reflecting the company's lack of profitability in the last twelve months as of Q1 2024. Despite a noteworthy revenue growth of 59.59% during the same period, the company's operating income margin was deeply negative at -126.34%, underscoring the challenges it faces in achieving profitability.
Two key InvestingPro Tips highlight both strengths and concerns: CVRx holds more cash than debt on its balance sheet, which may provide some financial flexibility in the near term. However, analysts have revised their earnings downwards for the upcoming period, indicating that the market is adjusting its expectations in light of the CMS proposal and other factors impacting the company. With the stock having taken a significant hit over the last week, month, and three months, investors may want to stay informed about potential shifts in the company's financial outlook.
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