Cue Health, which makes Covid-19 test children at home, made its public market debut on Friday.
In April, Google began sending Covid-19 tests to its U.S. employees at home from a little-known San Diego startup called Cue Health.
Most of Cue Health’s business to that point had emerged from a contract with the US Department of Defense to provide rapid tests to the federal government. Google immediately became the healthcare technology company’s largest private customer.
Cue Health has used this relationship to develop a story that is attractive enough to public market investors. On Friday, the company debuted on the Nasdaq under the ticker symbol “HLTH” and the stock climbed 25% to $ 20 at close of trading. Cue Health estimates that at $ 2.9 billion.
Founded in 2010, Cue Health had low sales prior to the Covid-19 pandemic. It spent most of a decade as a diagnostic testing company in research mode.
Everything changed in 2020 when the worst pandemic in a century suddenly made access to immediate testing essential. In June 2020, the company received its first emergency approval for Covid-19 testing from the Food and Drug Administration.
The Cue Health test kit includes a wand, cartridge, and reader. Users take a nasal swab with the wand and insert it into the small box, where a reader sends the results to a smartphone app in around 20 minutes. Processing in a laboratory is not required.
In July 2020, a month after emergency clearance, the National Basketball Association began using cue health testing on their “NBA bubble” in Orlando, which resumed fan-free games. Three months later, the company signed a $ 480.9 million contract with the DoD to “meet the unprecedented demand for rapid, accurate molecular diagnostic testing,” the prospectus said.
Cue Health Covid-19 test
The company is still operating under an emergency clearance as the products have not been fully cleared or approved by the FDA.
“We worked really hard through the pandemic,” said Ayub Khatak, CEO of Cue Health, in an interview with CNBC on Friday after the IPO. The team “showed great determination to scale up amid the pandemic, which was quite a challenge”.
Khattak originally founded the company with product manager Clint Sever under the name Ruubix. Before last year, they mainly focused on research and development.
The most recent boon to the business came from Google, a deal that was not publicly announced and was first published in one sentence in Cue Health’s IPO prospectus earlier this month.
“In April 2021, the company and Google LLC reached an agreement to provide Google’s US-based employees with Cue Health Reader and Cue COVID-19 test kits by the end of the year,” the filing said.
Cue said sales reached $ 201.9 million for the first half, up from $ 5 million for the same period last year. Around 84% of sales come from sales to the public sector. Of the remaining $ 34.8 million in revenue, $ 28.9 million was from a “sole proprietorship customer,” said Cue Health.
Khatak declined to name this customer, but people familiar with the matter confirmed to CNBC that it was Google. People asked not to be identified as the information is confidential.
Google did not respond to requests for comment.
Scale up production
By August, Cue had sold 5 million test kits and said it was manufacturing cartridges at a rate of more than 15 million a year.
“We assume that we will increase our production capacity to a rate of tens of millions of cue cartridges per year by the end of 2021,” the submission states.
Cue Health had to discontinue to meet the scaling requirements. The company had fewer than 100 employees in 2020 and now has more than 1,250. In April, Glenn Wada, Senior Vice President at Salesforce, was named Chief Commercial Officer. Khatak said that despite being competitive for technical talent, Cue Health has been able to recruit new employees because it addresses such a tangible global problem.
In addition to Covid-19, Cue Health is working on a range of tests that can be done on saliva, urine and blood samples, as well as nasal swabs. These diagnostic tests will cover things like respiratory health, sexual health, and determining your risk for chronic diseases like heart disease.
Khattak said the company hopes to offer consumers virtual care and testing for common diseases like strep.
For Google, the agreement with Cue Health enabled employees to order additional test strips through the company’s internal resource portal. Without the availability of office perks like free food or other amenities, the company has tried other ways to engage employees and offer resources for mental and physical health.
Google had planned for employees to return to the office in September, but that date has been postponed to January 10, 2022.
Khatak said the Google partnership began because his company took advantage of the Google Cloud platform, which competes with Amazon Web Services and Microsoft Azure. Google reached out to Cue Health when it realized its employees needed the kind of test product that Khattak’s team was developing.
“At that point it kind of converged,” said Khatak. “We did everything we could to scale and meet our customers’ needs, so we weren’t necessarily in outreach mode. But given the connection we had, we picked them and they chose us. “
Their work together goes deeper.
In August of this year, Cue and Google Cloud partnered to develop real-time variant tracking and sequencing of Covid-19, the prospectus says.
They aim to create “an advanced respiratory bio-threat detection system that spans from the company’s diagnostic testing at home to full real-time virus sequencing, as well as analytical and predictive capabilities with Google Cloud-based solutions,” according to the filing.
Another testing company in court
Cue’s public debut comes when Elizabeth Holmes, founder of the defunct blood testing company Theranos, is on trial for wire fraud and conspiracy to commit wire fraud. She pleaded not guilty.
Khatak said that given the timing of the two events, Theranos naturally appears in the conversation.
“As a company that is growing and has something like that in your backyard, this is essentially something that is essentially a much higher hurdle,” said Khattak. “But we are fortunate to have a product that is widely available. There is no black box that you cannot understand.”
Cue Health also has independent clinical studies from the Mayo Clinic and has been thoroughly reviewed through health validations.
“We are happy to overcome many of these hurdles,” said Khatak.
SEE: Cue Health CEO on FDA Emergency Approval for Covid Testing at Home