Cue Health Axes 49% of Staff

Diagnostic company Cue Health, which went public in 2021 at a valuation of nearly $2.3 billion, recently announced new layoffs that will amount to about half of its remaining employees — 230 people.

“The [cost reduction plan] will include a reduction in the company’s employee base by 230 employees, which constitutes a reduction of approximately 49% in the company’s global workforce,” according to the SEC filing.

The company is no stranger to layoffs. In fact, in 2022, Cue laid off 170 employees amid “economic challenges” and a decline in COVID-19 testing, 2023 saw an additional cut of 388 people as testing demand fell further, and in January of this year, the company cut more than 200 across two rounds of layoffs.

Cue, which saw sharp growth during the pandemic with government and private contracts for its point-of-care molecular tests, has seen steady decline of its COVID-19 testing sales over the last few years as the pandemic waned. In 2023, the company saw an 85% decrease year over year in revenue ($70.9 million) — of which its COVID-19 tests account for the majority of sales. That same year, it reported a net loss of $373.5 million.

Being the first company to go through the traditional regulatory process for its COVID-19 test, Cue saw de novo clearance last year. However, its only FDA authorized tests are the COVID-19 test and a monkeypox test which was approved through an emergency use authorization. The company’s flu test and RSV test are still under FDA review.

“Our revenue for at least the near term will almost exclusively depend on sales of our COVID-19 test until we can obtain regulatory clearance or other appropriate authorization for, and commercialize, additional tests,” according to an annual filing.

Many have questioned why the company didn’t follow the likes of Hologic, or Abbott, which used its “COVID cash” for tuck-in acquisitions or to diversify offerings. In fall 2023, Cue’s investors seemed to be asking the same questions. Tarsadia Investments, which provides investment services to long-term stockholders of Cue, sent a letter to the board of directors expressing concern for the company’s future.

“We have been investors in Cue Health for over five years and are strong believers in the potential for the company’s industry-leading technology to transform how acute and chronic conditions are diagnosed. However, the company has failed to adapt to a rapidly changing post-COVID reality,” Tarsadia wrote to Cue’s board. “Tarsadia attempted to engage with the board on numerous occasions about our mounting concerns over the company’s declining cash balance and the continued destruction of stockholder value. We have urged the board to initiate a strategic alternatives process, realign costs, and enhance the board. To date, the board has failed to take any concrete action on our proposals, and time is running out for stockholders — urgent change is needed, and it is time for the board to act.”

Since then, additional cuts — including the most recent announcement — have been implemented to refocus the business on its Cue Health Monitoring system, including the development and deployment of point-of-care tests. In its annual report, the company said it may seek additional financing and evaluate financial alternatives to meet cash requirements for the coming year.

“Management, with the oversight and guidance of the company’s board of directors, determined to implement the [cost reduction plan] following a review of the company’s business and operating expenses,” according to the SEC filing. “The [cost reduction plan]  is aligned with narrowing the company’s focus on its core technology offering and is intended to reduce the company’s cost structure and improve its operational efficiency beyond the expected cost savings of the cost reduction plans announced on January 5, 2023, April 28, 2023, January 5, 2024, and January 25, 2024 in the Current Reports on Form 8-K filed with Securities and Exchange Commission on January 5, 2023, April 28, 2023, January 5, 2024, and January 25, 2024, respectively.”

In a statement from Cue Health, the company told MD+DI that, “In close collaboration with Cue’s board of directors and strategic advisors, the company has made the decision to refocus its business on its core technology offering, the Cue Health Monitoring System, specifically on developing and deploying its diagnostic products into the point of care market. In alignment with this strategy, Cue has significantly reduced, or removed altogether, functions that don’t directly support this strategy. There are no additional layoffs planned.”

Additional hiccups in 2024 have been the loss of two C-suite members — CEO Ayub Khattak stepped down in March, and CFO Aasim Javed also plans to resign on May 13.