As of May 1, San Diego-based Cue Health already told 191 employees they would lose their jobs in July. The cuts were part of a new cost reduction plan following previous layoffs, with the latest cuts to total around 230 employees — nearly half of the total workforce.
But on May 9, the FDA issued a warning letter to the company and told consumers and health care providers to discard any unused Cue Health COVID-19 tests due to an increased risk of false results.
This week, the company told all U.S. employees they would lose their jobs as of May 24 “due to the fluid nature of this situation and based on the information available at this time,” Chief Human Resources Officer Allison Blackwell said in a letter to California officials.
“This action will be permanent,” Blackwell wrote.
She said Cue Health will issue final paychecks to all employees on Friday, including compensation and benefits they would have been eligible for if they had continued working for the remaining weeks until the layoffs were scheduled to take effect.
Cue Health secured emergency use authorization (EUA) for clinical and point-of-care use of its COVID-19 molecular nucleic acid amplification test in 2020, and followed up in 2021 with an EUA for over-the-counter, at-home use of the system.
Last year, Cue Health won FDA de novo authorization for the system, saying it was the first de novo authorization for a home-use COVID-19 test and for any home-use respiratory test.
But after inspecting Cue Health’s San Diego headquarters in October and November 2023, the FDA said it learned that the company made changes to the tests that reduced their ability to detect SARS-CoV-2, the virus that causes COVID-19.
Cue Health promised “PCR-quality” testing at home with the system. Each test kit includes a single-use COVID-19 cartridge and a Cue Wand swab. After collecting a nasal sample with the wand, the user inserts it into the cartridge and places the cartridge into the Cue Reader, which delivers results via a smartphone app.
Cue Health shipped more than 275,000 readers, the company says on its website. Readers are still posted for sale at $199 each, though tests kits are listed as out of stock. The company’s homepage does not mention the FDA issues, and customer service agents this month responded to refund requests by saying they “have no further information which we can share until we release information publicly through available channels.”
According to SEC filings, Cue Health co-founder Ayub Khattak resigned from the board as of May 14, the date of the company’s annual meeting. Khattak led the company from 2010 to 2024, stepping down as president, chair and CEO in March 2024. He was replaced by co-founder and Chief Product Officer Clint Sever.
“Cue was founded on the vision of diagnostic-enabled healthcare for everyone, where fast, accurate, and easy-to-use testing is connected seamlessly to care and treatment, empowering people to live their healthiest lives,” Sever said in a news release announcing his new role as CEO. “This vision continues to inspire and drive the important work we do every day.”
The company’s latest annual report said it had a deal to provide readers and test kits to Google employees through December 2024
Rishi Reddy, another Cue Health board director, resigned on May 15. Reddy joined the board in February after his investment firm, Tarsadia, criticized Cue Health’s “flawed capital allocation and unsustainable cost structure” in August.
“We have been investors in Cue Health for over 5 years and are strong believers in the potential for the company’s industry-leading technology to transform how acute and chronic conditions are diagnosed,” the investment firm said at the time. “However, the company has failed to adapt to a rapidly changing post-COVID reality.”
Cue Health went public in 2021 at a valuation of nearly $2.3 billion. It reported 726 full-time employees at the end of 2023, but cut that down to 479 by the end of January 2024 to save costs.
Layoffs in medtech: These companies recently reduced their workforce
