Jun 30, 2022

After rapid growth, San Diego COVID-19 test-maker Cue Health lays off 170 workers San Diego health technology company, Cue Health makes COVID-19 test kits at its manufacturing facility. (Courtesy of Cue Health) Cue Health gained notable contracts with the NBA and Google. Now, the company says job cuts are a result of “economic challenges” and a drop in government funding. Print San Diego’s Cue Health, which went public last year in an IPO valued at nearly $3 billion, is laying off 170 manufacturing employees, due to “economic challenges” and cuts to government funding for COVID-19 testing, a company spokesperson said in a statement Wednesday. The cut is approximately 11 percent of Cue’s overall workforce and comes on the heels of massive growth and demand for Cue’s 20-minute COVID-19 test that delivers results directly to the user’s phone. The majority of laid-off workers are based out of the testing company’s Vista location, with the rest working at its two facilities in Sorrento Valley, according to the Worker Adjustment and Retraining Notification Act (WARN) notice filed with the state. Cue Health developed a rapid, at-home COVID-19 test through emergency use authorization and inked major deals with the NBA, Google and the U.S. Department of Defense early in the pandemic. In 2020, Cue netted a $481 million contract with the Department of Defense to produce 6 million COVID-19 tests and some 30,000 reading devices. With demand for diagnostic tests surging during the pandemic, the 12-year-old health technology company grew from 99 employees in January 2020 to 1,585 full-time employees at the end of 2021. Revenue for the first three months of this year was $179 million, up 178 percent from the year ago period, according to SEC filings. (For all of 2020, Cue Health’s revenue totaled $23 million.) Advertisement On Sept. 24, the upstart firm went public raising $200 million. It sold 12.5 million shares at $16 — the midpoint of its expected price range. The stock got off to a hot start, surging 25 percent to close that day at $20 per share on the Nasdaq Exchange. Its stock closed Wednesday at $3.32 per share, down 2.92 percent. But, the landscape and funding for COVID-19 testing have changed. The Biden administration announced earlier this month that it would divert funding for testing to COVID-19 vaccines for the fall. The United States also recently relaxed its pandemic rules for Americans returning from international travel and nixed a requirement to show proof of a negative COVID-19 test. In Cue Health’s annual report for 2021 , the company noted that it has historically relied on the Department of Defense and a small number of customers for the majority of its revenue. Last year, funding from the Department of Defense made up approximately 61 percent of Cue Health’s total revenue. As a result, the company acknowledged that any loss of customers or decline in demand for their COVID-19 tests could have a negative impact on their business operations and revenue. Recently, Cue Health was excluded from a contract issued by the Defense Logistics Agency for COVID-19, influenza and respiratory syncytial virus (RSV) rapid test kits and analyzers, according to the Government Accountability Office . The company protested the decision to exclude its proposal as “the result of an unreasonable and unequal evaluation” but Cue’s protest was denied in May. Despite the COVID-19 test kit being its only commercially available product, Cue Health has been trying to expand and diversify its offerings. “We’re best known right now for our COVID-19 tests. But we’re way more than just a COVID test company,” said Clint Sever, co-founder and chief product officer, in a previous interview with the U-T . “We have a platform that builds on over a decade of development,” he said. “And we have many more products on the way, things like flu and RSV tests, women’s health and sexual health. So, there’s a lot more content coming to the platform.” The company said in a statement to the U-T on Wednesday it remains “confident in our long-term strategy as we continue to broaden the number of customers we serve and advance our menu of future care offerings, reinforcing our mission to improve how healthcare is delivered by making it more efficient and timely, ultimately leading to better outcomes for people’s health.”