ConvaTec Group PLC (LSE:CTEC) was the top of the FTSE 100 leaderboard on Monday as markets reacted to a delay announced by the federal agency that administers the US Medicare and Medicaid programmes.
This is the US Centers for Medicare & Medicaid Services (CMS), a federal agency within the US Department of Health and Human Services (HHS), which administers Medicare and collaborates with state governments to administer Medicaid.
The CMS announced a delay in the implementation date for the local coverage determination regarding skin substitute grafts/cellular and tissue-based products for the treatment of diabetic foot ulcers and venous leg ulcers.
This delay is attributed to the "transition to a new administration", which is assumed to be linked to President Trump and Elon Musk's 'department of government efficiency' (DOGE).
Analysts at Peel Hunt noted that the implementation date for this change in the reimbursement mechanism, which involves the removal of reimbursement for over 200 products that did not meet the requirement to demonstrate clinical data justifying their use as 'reasonable and necessary,' has been postponed from 13 April 2025 to 1 January 2026.
CMS has previously described this policy as "future effective," and the analysts said they believe that physician behaviors (i.e., overuse of these products) and company attitudes (towards generating more robust clinical trial data to support product effectiveness claims) are "already evolving".
ConvaTec said earlier this year that it expected its InnovaMatrix wound-care product to be hit by the changes, and had guided for an expected reduction of circa $50 million due to the anticipated April implementation date.
In light of this new delay, Peel Hunt said it will now add that $50 million of additional revenues to ConvaTec’s 2025 Woundcare segment for additional sales of InnovaMatrix.
The broker said this adjustment increases its target price to 280p from 270p, and with an implied 13% upside to the current share price of 248p, upgraded its recommendation from 'Hold' to 'Add'.