Dive Brief:
- Cue Health is laying off another 388 people as it continues to scale back after the fast growth of its diagnostics business during the COVID-19 pandemic.
- The layoffs, which amount to a 26% reduction in global headcount, come six months after the developer of an at-home diagnostic platform parted ways with 170 employees in response to the end of U.S. government funding for COVID-19 tests.
- Cue’s growth in 2020 and 2021 was fueled by government contracts. In the third quarter, sales fell from $223.7 million to $69.6 million year on year, largely because of the end of a deal with the U.S. Department of Defense
Dive Insight:
The pandemic transformed Cue. At the start of 2020, the company employed 99 people. Two years later, Cue’s headcount passed 1,500. The rapid growth came as the company scaled up its manufacturing and corporate infrastructure in response to pandemic-driven demand for its diagnostic platform.
When Cue raised $200 million through an initial public offering in 2021, it sketched out a vision for using the portable diagnostic devices sold during the pandemic to support sales of other types of tests as the COVID-19 crisis abated.
In reality, demand for COVID-19 testing has fallen away faster than Cue has brought new growth drivers online. The company has submitted influenza and influenza-COVID combination tests to the U.S. Food and Drug Administration and is developing tests for respiratory syncytial virus, streptococcus and sexual health tests, but the products are only expected to “more meaningfully” contribute to sales this year, CFO John Gallagher said during a November call with analysts.
After posting an operating loss of $67 million in the third quarter, Cue has decided to reduce its spending by laying off 388 people. The action will cost the company between $6 million and $8 million, but save it money in the longer run. Having raised money at the peak of the pandemic, Cue still had more than $300 million in cash and equivalents at the end of September.
