Shares of Silk Road Medical Inc. (SILK, -20.43%) took a sharp nosedive of 21.9% in premarket trading on Tuesday, dropping to a more-than three-year low. This significant decline came after an adverse government ruling on Medicare coverage for carotid artery stenting. The Centers for Medicare & Medicaid Services (CMS) recently proposed that the coverage of percutaneous transluminal angioplasty (PTA) of carotid arteries concurrent with stenting (CAS) is deemed "reasonable and necessary" only when using devices that are approved or cleared by the Food and Drug Administration.
J.P. Morgan analyst, Robert Marcus, promptly downgraded Silk Road Medical to a neutral rating after three years of being overweight on the stock. This decision by the CMS now places CAS on an equal footing with Silk Road's own treatment for carotid artery disease, known as TransCarotid Artery Revascularization (TCAR). Marcus acknowledged that although this outcome was anticipated by many investors, it still poses a challenging situation for the stock. The resolution of this overhang will require time to either validate or refute.
Year-to-date, the company's stock has plummeted by a staggering 51.8%, while the S&P 500 (SPX, +0.81%) has recorded a solid 16.6% growth.