Dive Brief:
- J&J-backed Cue Health has raised $200 million through an initial public offering to fund work to scale up commercial and manufacturing infrastructure in support of its portable diagnostic platform.
- The platform, which Google and Mayo Clinic use to test for COVID-19, is designed to enable consumers to test themselves at home and thereby support the move to telehealth.
- Cue Health's Friday debut on the Nasdaq valued the company at $2.9 billion. Having been boosted by the pandemic, Cue Health is now working to use its base of installed devices as a launchpad for sales of other tests and the expected transition to at-home testing.
Dive Insight:
San Diego-based Cue Health has risen rapidly during the pandemic, building on earlier work to develop a rapid mobile testing technology by raising $235 million from private investors and entering into deals with groups including Google, Mayo Clinic and the National Basketball Association for COVID-19 tests. The Google deal also covers the development of "a secure real-time COVID-19 variant tracking and sequencing solution."
With attention now turning to the post-pandemic diagnostic landscape, Cue Health has raised more money. The company, which had $246 million in the bank at the end of June, plans to use up to $70 million to scale up its commercial infrastructure, including by adding sales and marketing staff. A further $30 million to $35 million is earmarked for manufacturing scale up.
The other big item in Cue Health’s spending plan is R&D. Cue Health intends to spend up to $65 million, split between work on five tests in late-stage technical development and investment in its software and technical capabilities.
At up to $45 million, the budget for development of tests for flu, RSV, pregnancy, fertility and inflammation will swallow up most of the money set aside for R&D. The goal is to start submitting the tests to FDA in the second half of next year. Cue Health will use a further $20 million to fund work on capabilities such as its cloud-based analytics system and integrations with third-party applications and sensors.
Introducing the new products could position Cue Health to continue growing as the pandemic abates. Cue Health generated revenues of $22.9 million last year, mostly from product sales. Net income over the first half of 2021 came in at $32.8 million. Cue Health contends it is the only company that offers a "portable, intuitive, accurate and connected platform," although Prenetics, which is not mentioned in the IPO paperwork, sees itself as a competitor.
In 2018, the SEC subpoenaed Cue Health to request "certain documents and information." The test maker said it has been cooperating fully with the SEC and does not believe the investigation "will have a material adverse effect on our business."
The Cue Health IPO paperwork provides a look inside the previously closed off private company. Cue Health began generating revenue from product sales in August 2020 following the receipt of its first FDA emergency use authorization for its 20-minute molecular COVID-19 test in June 2020.
The company in October 2020 was awarded $481 million by the Department of Defense, on behalf of Health and Human Services, to expand its U.S.-based manufacturing capacity and deploy six million molecular, point-of-care COVID-19 tests by March 2021.
Cue Health and Google in April 2021 entered into an agreement to provide test kits and readers to Google’s U.S.-based employees through year end. Revenue in the first half of 2021 reached $201.9 million, up from $5 million in the same period a year earlier, with more than 80% of its revenue coming from sales to the public sector while $28.9 million was from a single undisclosed enterprise customer.
