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Shares of Veracyte (VCYT) - Get Veracyte Inc Report are sliding after the Centers for Medicare and Medicaid Services, or CMS, proposed a reimbursement rate reduction on the company's Afirma GEC diagnostic test. While Stephens analyst Drew Jones remains bullish on the stock, as he expects the company to "vigorously" appeal, his peer at Leerink sees this proposed pricing as a "meaningful" test price cut that will negatively impact several diagnostic test providers, especially CareDx (CDNA) - Get CareDx, Inc. Report and Veracyte.

ENTHUSIASM REMAINS: Last Friday, CMS released draft reimbursement rates for several multianalyte assays, with the draft reimbursement rate for Veracyte's Afirma GEC test coming in below expectations, Stephens's Jones told investors. The analyst said that this does not "dampen" his enthusiasm around the company, adding that this rate decrease might not even stick as Veracyte will "vigorously" appeal it. Additionally, Jones noted that for Veracyte's regional Medicare Administrative Contractor, or MAC, Noridian, the suggested reimbursement rate remained at $3,200. Jones also expects the Protecting Access to Medicare at, or PAMA, legislation, which should be put into place by January 2018, will make any negative changes to the reimbursement rate of the company's Afirma GEC potentially temporary. Besides Veracyte, industry partners are also expected to be very active during the upcoming 30-day comment period in fighting the lower proposed rate, he added. The analyst says he would take advantage of any weakness in the company's stock and reiterates an Overweight and $14 price target on the shares.

NEGATIVE IMPACT: Leerink analyst Dan Leonard is less optimistic. After the CMS proposed preliminary pricing determinations for 2017 for several diagnostics reimbursement codes, Leonard said the proposed pricing represents "meaningful" test price cuts for some diagnostic test providers and initiates or affirms trivial pricing for others. The analyst believes CareDx will be the most negatively impacted, followed by Veracyte. The preliminary pricing, if finalized, may also negatively impact InVitae (NVTA) - Get Invitae Corp. Report and, indirectly, Illumina (ILMN) - Get Illumina, Inc. Report , according to Leonard.

PRICE ACTION: In morning trading, shares of Veracyte have dropped about 4% to $5.05, while CareDX has slid over 17.5% to $4.88 per share.

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Reporting by Jessica de Sa-Mota.