High tech business model didn’t work for covid cue test

“I’ve got this,” coos Gal Gadot in Cue Health’s Super Bowl TV commercial. Cue has hired the ‘Wonder Woman’ actress to be the voice of the company’s new high-tech covid-19 testing device. The announcement pushes the idea that the home covid test produces results with equal accuracy to a lab-based PCR test and surpasses it in convenience.

What it doesn’t mention is the price: $249 for the reusable device and $195 for a three-pack of tests.

Even as the number of covid cases dwindled over the winter, many people who saw the adverts wondered if the device – however practical or technologically wonderful – had the right approach. Tech startups eager to disrupt the healthcare industry rely on a proven marketing strategy: set a high price for early adopters, then lower the price as the market grows.

To pass the Cue test, users swab their nostrils with a special wand, insert the wand into a cartridge, and then the cartridge into a white cube-shaped reader. Within 20 minutes, results are transmitted via Bluetooth to Cue’s smartphone app. Those who purchase a $900 annual subscription can access a doctor through the app, to certify results as valid for travel or other purposes.

A highly accurate home covid test certainly has its benefits. And Cue, a publicly traded company based in San Diego, says 97.8% of the time its test results agreed with a positive PCR lab test result, still considered one of the most accurate. (The price of a PCR test varies but can be $100 or more, and results usually take at least 24 hours, although faster results can be obtained for more money.)

But even the cheapest price — one-year subscriptions, which start at $480 for 10 tests (and a discounted device for $149) — is considerably higher than the cost of the less accurate antigen tests, which the Americans can now often get them for free.

Cue’s price puts it out of reach for most consumers. But this fits an elite business model that seeks attention and assumes that the price will at some point drop as the market expands and demand increases.

For now, unless employers provide them, consumers must foot the bill for Cue tests because health insurance companies, which typically cover laboratory PCR tests and rapid antigen tests, do not reimburse policyholders. for the Cue system. “We are proactively working with health insurance companies to secure coverage for Cue Health Solutions,” said Dan Bank, company spokesperson. But the company has not yet announced an arrangement with an insurer.

Although Cue’s Super Bowl ad implies that its test product is aimed at the home user, its biggest customer has been the Department of Defense, although its government contract has expired. The test has also been picked up by sports leagues and commercial companies that buy units for their employees, including Major League Baseball, the National Basketball Association, Netflix and Google.

In the first quarter of 2022, non-government revenue reached 98% of sales, or $175.8 million out of a total of $179.4 million. Net income for the quarter was $2.8 million, compared to $13 million for the same quarter last year, as the company increased spending on personnel, marketing and product development. Second-quarter revenue is also expected to fall, the company said, falling to about $50 million.

The company, which sold shares to the public last year, saw its share price (enviable ticker symbol HLTH) drop from $22 in its September debut to around $5.

The other, even more fundamental problem with the company is that fewer people are interested in getting tested regularly for covid. “There was excitement when covid was in full swing, but now that people feel the omicron strain isn’t that bad, the focus on testing has changed,” said Charles Rhyee, analyst at Cowen. (Cowen, a Wall Street investment firm, helped Cue’s IPO but has no financial relationship with the company.)

It’s possible, he said, that Cue is like other companies that zoomed in during the pandemic only to fall to Earth. “The company already looks like Peloton, and a lot of that sentiment is already priced into the stock price,” Rhyee said.

Cue points out that covid testing is just the first use of its product. He wants to develop and receive FDA approval for other tests that can use the $249 device, including for the flu; respiratory syncytial virus, or RSV; fertility; and pregnancy. If a flu test comes back positive, Cue officials said, the smartphone app may be able to connect the patient to a doctor early enough to reap the benefits of taking an anti-flu drug such as Tamiflu. .

“Just as home pregnancy tests have completely changed the way women get answers and blood glucose meters have forever changed the way diabetics monitor their blood sugar, we believe the paradigm has definitely changed for infectious disease testing. home, and Cue is well positioned to meet those needs,” the bank said.

Yet none of these tests will be available or generate revenue in 2022. The company plans to submit tests for influenza A and B in late summer or fall. The company stressed that the speed at which it can evaluate new types of tests to offer to the FDA could be affected by the prevalence of covid, potentially limiting its ability to find test subjects or have staff at its facilities.

To increase sales, the company in February lowered the cost of its monthly subscription and individual tests by $15.

But Charles Rhyee thinks much deeper price cuts are needed to succeed. The short-term solution, he said, is for Cue to offer its playback device at low cost or for free and profit from testing, using a classic marketing technique that predated the high-tech era. nearly a century old: the razor-razor. blade model, in which real money is earned on high-priced blades after selling customers a cheap proprietary handle to hold them.

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.