Struggling healthcare company files Chapter 7 bankruptcy

The company, worth billions during the pandemic, suddenly stopped operations and laid off all its workers.

Jun 11, 2024 - 02:30

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Struggling healthcare company files Chapter 7 bankruptcy

During the early days of the Covid pandemic, it seemed like Americans might learn some lessons about how the health of one person impacts the health of others.

It seemed like the existence of a highly communicable disease that could kill you would make us, as a nation, reconsider things like not mandating that food and service industry workers get paid time off.

It seemed like we would have all learned that we're all only as healthy as the person making our pizza or the worker who bags our groceries. Logic would have suggested that we would have at least embraced testing for easily passed viruses and preventative mask-wearing for public-facing workers who were even mildly worried about passing on an illness.

Those things are logical, but logic can't trump politics, so mask-wearing, getting doctor-suggested vaccines, and advocating for sick days for service industry workers became — at least to some Americans — signs of wokeness.

Believing in science and trusting doctors somehow became liberal traits even as people got sick, buried friends and relatives, and saw that people wearing masks actually cut down on non-Covid-related disease transmission.

Wearing a mask or taking a test when you think you might have a communicable disease seems as basic as covering your mouth when you sneeze, but the political divide seems to sometimes replace logic. Testing for Covid and other illnesses seemed like it was going to be a long-term growth industry, but like mask-wearing, it has actually become much less common than you might have guessed during the darkest days.

Food industry workers often do not get paid sick leave.
Image source: Shutterstock

A Covid testing leader runs out of time

Demand for Covid testing has dropped. It once seemed like being able to test for Covid reliably in the workplace would be a growth industry. Now that the impact of the pandemic has faded, however, most companies have turned a blind eye to the ongoing possibility of infection.

There was a long period in 2020 where restaurants and retail chains like Walmart WMT, Amazon (AMZN) , and Target (TGT) required health checks before workers could do their jobs.

That has gone away because it's time-consuming, sometimes leads to actually sending needed workers home, and testing has political overtones that many companies want to avoid.

That, for a while, turned into a growth market in Covid and other virus testing into a struggling area with shrinking demand.

Cue Health, which once had a market capitalization of as much as $2.3 billion, failed in its efforts to cut staff and other expenses in order to survive. Plus its products had accuracy problems.

The company has filed for Chapter 7 bankruptcy, laid off all workers, and will be liquidated.

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Cue started with promise

Cue Health, founded in 2010, started with great hopes as it promised a way to accurately test for Covid-19 (and theoretically other viruses) without needing a lab.

"We designed and developed a new molecular testing platform bringing lab complexity to an easy-to-use, portable device. Now you can get the best of lab molecular testing — speed, accuracy, and versatility - at home, the office, or on the go," the company shared on its website.

The company went public (with the ticker (HLTH) ) in 2021 at $16 and rose to $20.55 and carried that massive $2.3 billion valuation.

For a while, things look great. Cue had contracts with the NBA, Major League Baseball and the Department of Defense. Meanwhile, it won Food & Drug Administration greenlights for its palm-sized cartridges and readers that aimed to provide lab-quality PCR results.

In early 2022, the job count had topped 1,500.

But the pandemic faded. By early 2023, despite efforts to find new markets for its products, the shares had fallen 97% from Cue's IPO price. Revenue was down 97%, too.

The company laid off most of its workers.

Cue's problems were not unique. During the worst of the pandemic, investors poured billions into hot new health companies. The IPO market for those stocks in 2020 and 2021 soared.

However, investor interest waned because too many investors were chasing too few quality deals. The iShares Biotechnology ETF (IBBQ) fell 36% from its 2021 peak into 2022. It is now trading only at 2020 levels.

There were no health-related IPOs for more than two years.

Through 2023 and into this year, Cue unsuccessfully tried to shore up operations, get new products to market, and find new capital.

In May, however, the FDA advised customers not to use two of its products at all because they did not deliver accurate results.

Finally, its board and executives threw in the towel. On May 28, the company announced it was ceasing operations and filed for bankruptcy in Delaware's U.S. Bankruptcy Court.

The company's assets will be sold off at an undetermined date, and the proceeds will be distributed to creditors.