High-Tech’s Business Model Hasn’t Worked for the Cue Covid Test

Eric Taub

“I’ve got this,” coos Gal Gadot in Cue Health’s Super Bowl Tv professional. Cue employed the “Wonder Woman” actress to be the voice of the company’s new significant-tech covid-19 screening system. The advert pushes the idea that the at-household covid test creates benefits equivalent in accuracy to a lab-primarily based PCR examination and surpasses it in usefulness.

What it does not mention is the rate: $249 for the reusable product and $195 for a pack of 3 checks.

Even as the quantity of covid cases waned for the duration of the wintertime, several individuals who noticed the adverts questioned irrespective of whether the device — no issue how convenient or technologically wondrous it may possibly be — has the suitable method. Higher-tech startups keen to disrupt the wellbeing treatment market are relying on a attempted-and-correct marketing system: price tag it superior for early adopters and then reduce the price tag as the marketplace grows.

To acquire the Cue examination, customers swab their nostrils with a specific wand, insert the wand into a cartridge, and then the cartridge into a white, cube-formed reader. Within just 20 minutes, final results are transmitted by means of Bluetooth to Cue’s smartphone application. All those who obtain a $900 yearly membership can accessibility a doctor via the application, to certify the results as valid for vacation or other purposes.

A extremely precise at-dwelling covid exam certainly has its advantages. And Cue, a publicly traded corporation centered in San Diego, suggests that 97.8% of the time its check effects agreed with a favourable PCR lab test final result, nevertheless viewed as among the the most precise. (The rate of a PCR exam varies but can be $100 or extra, and outcomes generally acquire at least 24 several hours, even though more quickly effects can be obtained for extra money.)

But even the most inexpensive pricing — yearlong subscriptions, which start at $480 for 10 assessments (and a discounted device for $149) — is significantly far more than the charge of less-accurate antigen checks, which People can now frequently procure at no value.

Cue’s price tag puts it out of the attain of most people. But it suits an elite organization design that seeks to draw in notice and assumes that the value will drop at some position as the current market grows and demand from customers rises.

For now, unless of course businesses deliver them, shoppers must foot the invoice for the Cue assessments because well being insurance coverage companies, which frequently address lab-centered PCR checks and quick antigen checks, do not reimburse policyholders for the Cue process. “We are proactively functioning with health and fitness insurance businesses to get coverage for Cue Health options,” explained Dan Financial institution, a company spokesperson. But the company has however to announce an arrangement with any insurance provider.

Even though Cue’s Super Bowl professional implies that its screening product is aimed for the at-home user, its major client has been the Section of Protection, whilst its government agreement has finished. The check has also been picked up by sporting activities leagues and industrial enterprises acquiring models for their staff, like Key League Baseball, the Nationwide Basketball Association, Netflix, and Google.

In the to start with quarter of 2022, non-federal government revenue grew to 98% of profits, or $175.8 million out of a full of $179.4 million. Internet revenue for the quarter was $2.8 million, in contrast with $13 million for the exact same quarter final 12 months, as the company stepped up spending on staff, marketing and advertising, and solution growth. Second-quarter profits is also anticipated to drop, the company reported, slipping to about $50 million.

The enterprise, which bought stock to the general public last calendar year, has viewed its share value (enviable inventory symbol HLTH) drop from $22 at its September debut to close to $5.

The company’s other, even extra basic, difficulty is that fewer folks are intrigued in receiving examined for covid routinely. “There was enthusiasm when covid was in full swing, but now that folks perception the omicron pressure is not so terrible, the emphasis on testing has changed,” said Charles Rhyee, an analyst with Cowen. (Cowen, a Wall Road financial commitment agency, helped consider Cue community but does not have a financial connection with the corporation.)

It is feasible, he said, that Cue is like other organizations that zoomed during the pandemic only to slide to Earth. “The business is by now seeking like Peloton, and a lot of that sensation is by now baked into the cost of the stock,” Rhyee mentioned.

Cue factors out that covid tests is just the initially use of its merchandise. It wishes to produce and get Food and drug administration approval for other checks that can use the $249 system, together with for flu respiratory syncytial virus, or RSV fertility and pregnancy. If a flu exam arrived back again positive, Cue officers reported, the smartphone app might be capable to join the patient to a health practitioner early sufficient to acquire the benefit from taking an anti-flu medication this kind of as Tamiflu.

“Just like at-house pregnancy tests fully transformed how ladies get responses and glucose meters permanently improved how diabetics watch their glucose levels, we believe the paradigm has forever shifted for infectious illness testing at dwelling, and Cue is perfectly positioned to meet these wants,” Lender stated.

However none of those tests will be offered or produce any cash flow in 2022. The business expects to submit exams for influenza A and B in late summer time or autumn. The enterprise has pointed out that the pace at which it can evaluate new sorts of tests to give the Fda could be adversely impacted by the prevalence of covid, likely limiting its capacity to obtain exam topics or have personnel in its facilities.

To raise income, the business in February decreased the cost of its every month membership and specific exams by $15.

But Charles Rhyee thinks much more substantial value cuts are needed for success. The short-time period resolution, he mentioned, is for Cue to give its reader product at low or no price and make its money from tests, working with a classic marketing and advertising system that predated the superior-tech era by just about a century: the razor-razor blade design, in which the authentic income is manufactured on superior-priced blades following offering customers a low cost proprietary deal with to keep them.

KHN (Kaiser Wellbeing News) is a national newsroom that provides in-depth journalism about overall health challenges. Collectively with Plan Assessment and Polling, KHN is just one of the three significant functioning packages at KFF (Kaiser Spouse and children Basis). KFF is an endowed nonprofit organization providing data on well being difficulties to the country.

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