San Diego’s Cue Health, a COVID-19 test maker that grew voraciously during the pandemic, is now laying off 388 workers in an effort to cut costs.
This is the second round of staff reductions at Cue Health in less than a year. In June, the company laid off 170 workers.
Cue Health developed a rapid, at-home COVID-19 molecular 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.
The company grew from 99 employees in January 2020 to about 1,585 full-time employees at the end of 2021.
The latest layoffs will take effect in early March and reduce Cue’s global headcount by 26 percent, according to the company’s 8-K filing with the Securities and Exchange Commission.
The job cuts affect multiple segments of the business but a number of the eliminated positions are “machine operators,” according to the Worker Adjustment and Retraining Notification Act (WARN) notice filed with the state.
Most of the laid-off workers are based out of the testing company’s location at 9877 Waples St., with the rest working at Cue’s seven other Sorrento Valley locations and two Vista facilities, the WARN notice said. Additionally, 64 remote employees based in and outside of California have been laid off. The company adds in the notice that although these locations are impacted by the job cuts, “none will be permanently closed due to this layoff.”
The San Diego biotech was among a wave of health-tech companies announcing their public market debut or netting rounds of venture funding early in the pandemic. Cue launched an approximately $200 million IPO in September 2021.
Now, Cue is among the growing list of technology companies announcing layoffs or making cost-cutting measures. Health-centered companies like Cue that focused on COVID-19 response are dealing with the reduction in government funding and a reduced demand for testing.
Cue CEO Ayub Khattak, in a letter to staff dated Jan. 5, called the layoffs “one of the most difficult decisions we have had to make” since he and Clint Sever, chief product officer at Cue Health, founded the company in 2010.
Khattak cited the difficult economic environment and shifting concerns with COVID-19 and other respiratory viruses as “demand for COVID testing has come down from peak days of the pandemic.” In addition to COVID-19 tests, he outlined other testing solutions Cue is working on for RSV, flu, strep throat, sexual health and mpox, which was previously called monkeypox.
The company has also recently submitted its COVID-19 and flu tests to the U.S. Food and Drug istration for full approval.
“Despite all this amazing progress that each of you have helped achieve, regulatory approval timelines for new Cue products are uncertain, and we need to lower our costs so that Cue can successfully bring these important products to market and succeed,” Khattak wrote. “With an expanded menu and the additional services we are building on the software platform side to enable broader testing and treatment capabilities, we believe we can sustainably grow into the future in all seasons.”
Severance and benefits are available to laid-off employees, which will cost Cue $6 million to $8 million, according to the 8-K filing.
As of November, “100 percent of the company’s product revenues are derived from the Cue COVID-19 test,” according to the company’s most recent quarterly report. The company also notes in the report that the introduction of COVID-19 vaccinations and other therapies could change the demand for testing and impact the business.
The unaudited financials show that Cue’s total revenue is primarily made up of product revenue and a small sliver of grants and other revenue.
Total revenue dropped by more than half during a three-month period ending Sept. 30 from about $224 million in 2021 to about $70 million in 2022. Cue reported a loss of $66 million for the same period.
