Cue Health
A home molecular COVID test took it public at USD 2.3 billion; when demand ended it liquidated in 2024
- Founded
- 2010
- Closed
- 2024
- Lifespan
- 14 years
- Total funding
- $435 million
- Peak valuation
- $2.3 billion
- Became a unicorn
- 2021
- Country
- United States
- City
- San Diego
- Sector
- Health
- Founders
- Ayub Khattak, Clint Sever
- Investors
- Perceptive Advisors, MSD Capital, Koch Strategic Platforms, Johnson & Johnson Innovation, Decheng Capital
- At its peak
- Nasdaq listing in September 2021 at about USD 2.3 billion
- Cause of closure
- No market need
What did it do?
Cue Health was a San Diego diagnostics company founded in 2010. It aimed to fit lab-grade molecular testing into a small device for use at home and at the point of care. The FDA granted emergency use authorisation to its COVID-19 test in June 2020. Revenue in the first half of 2021 rose to USD 201.9 million from USD 5 million a year earlier, with more than 80% coming from public-sector sales.
Why did it shut down?
As post-pandemic testing demand fell, Cue went through several rounds of layoffs and failed to add a new growth driver. On 9 May 2024 the FDA sent a warning letter over unauthorised device changes, based on an inspection in October and November 2023. On 13 May 2024 it advised consumers not to use the tests. The company let its remaining staff go that month. It filed for Chapter 7 in Delaware on 28 May 2024. The FDA later revoked the emergency authorisations, the recall of nearly 250,000 kits was classed as Class II, and an asset auction raised USD 2.9 million in gross proceeds.
The story
When Cue Health was founded in 2010, its idea was bold: fit a laboratory molecular test on a kitchen counter. For a decade that was mostly a promise. Then the pandemic came.
The FDA granted emergency authorisation in June 2020. Revenue exploded, reaching USD 201.9 million in the first half of 2021 against USD 5 million a year earlier. More than 80% of sales were to the public sector. In September 2021 the company raised USD 200 million at USD 16 a share and joined Nasdaq at about USD 2.3 billion.
But the product was tied to a virus's calendar. As demand fell, Cue cut staff round after round and found no second source of revenue. May 2024 was the disastrous month: the FDA sent a warning letter and told consumers to throw the tests away, the company let its remaining staff go, and it filed for Chapter 7 at the end of the month. The recall covered nearly 250,000 kits. Assets auctioned from a company once measured in billions raised USD 2.9 million.
Lessons for founders
- Revenue built on one emergency can vanish within a few quarters of that emergency ending. At the peak, tie your second product's timetable to your cash burn.
- If 80% of your revenue is public procurement, your customer is a contract, not a market. Prove that consumer and enterprise channels really sell before that contract ends.
- Unauthorised changes to a regulated product can cost you the last of your trust just when you need it. The FDA's 2024 letter landed in the very weeks the company was seeking a way out.
Sources
- Cue Health Raises $200 Million in IPO At $2.3 Billion Valuation (Mercom Capital Group, 2021-09-28)
- FDA classifies Cue Health COVID-19 test recall as Class II (MedTech Dive, 2024-10-17)
- Cue Health Files for Chapter 7 Bankruptcy to Shut Down (SoCalTech, 2024-05-29)
- FDA warns about using over-the-counter COVID-19 tests from Cue Health (UPI via Yahoo News, 2024-05-13)
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