NEW YORK – After a tumultuous year, Cue Health's "number one strategic priority" in 2024 is expanding its test menu.
In the midst of announcing the firm's fourth quarter and full-year 2023 financial results on Wednesday, CEO Ayub Khattak updated the firm's research and development pipeline for both its respiratory and sexual health categories and said that after receiving de novo approval from the US Food and Drug Administration for its COVID-19 standalone test and Emergency Use Authorization for its mpox assay last year, the company expects additional FDA approvals in 2024 to build out its current test menu for its Cue Reader.
After submitting its molecular test for respiratory syncytial virus to the FDA last year, Cue has been asked to provide additional clinical data from infants and elderly people, Khattak said on a conference call. The firm has successfully collected the data and submitted it to the agency and anticipates receiving de novo approval for the test in the third quarter of 2024. Once approved, it will be launched immediately to existing customers.
The firm is also working on its standalone influenza test, which it submitted to the FDA in 2022. Cue previously disclosed that the agency requested additional data on its performance with influenza B samples, which the company has collected and submitted. Cue is also collecting additional stability data for high temperature storage, Khattak said. As with the RSV test, the firm expects de novo approval for the influenza test in Q3 2024.
In addition, the company is developing a multiplex COVID-19, influenza, and RSV test with $28 million in funding from the US Department of Health and Human Services' Biomedical Advanced Research and Development Authority. Cue plans to start clinical trials on the test in the summer using patients' samples from the Southern Hemisphere and expects to have it on the market with EUA by the end of 2024. The company will then collect Northern Hemisphere patient samples during the 2024 to 2025 respiratory season and submit data from those samples for full regulatory approval in 2025, Khattak said.
Meantime, the company plans to resubmit its combination flu and COVID-19 test for EUA after its original submission was denied by the FDA in January. The agency requested that a different comparator test for COVID-19 be used for the submission and more real-time stability data be included. According to Khattak, the firm plans to submit the test in the second half of 2024.
Regarding the need for both COVID-19 standalone and COVID-19/influenza/RSV multiplex tests, Khattak said that both combination and single-target tests have places in the market. Developing both kinds of tests is a "risk mitigation strategy" that allows Cue to be able to bring single-target tests to market more quickly and then follow up with additional capabilities, he said.
In addition, single-target tests and multiplex tests have different billing codes for reimbursement, and it "could work really well" to have both types of tests available for payment, he added.
On the sexual health side of its menu, Khattak said Cue plans to submit its combination herpes and mpox test for EUA in the second quarter of 2024 and expects to receive authorization by the end of this year. The test "will allow us to … serve the very large, underserved, point-of-care herpes testing market," he said.
During the past year, Cue has struggled with its cash position, and on the call, Khattak said the clinical studies for its chlamydia and gonorrhea test have been delayed to conserve cash in the near term. The company is "mindful of the need to balance near-term costs and long-term opportunities," he said.
Cue is developing a chlamydia and gonorrhea test, but it is focusing on the herpes and mpox test, despite the large market opportunity for chlamydia/gonorrhea, because of what the company believes will be an easier regulatory pathway, Khattak noted. The pathway for the herpes/mpox test is clearer due to the company's existing EUA for the mpox test, and the herpes/mpox test has a "very different regulatory cost" than the chlamydia and gonorrhea test.
The herpes and mpox market also "has an opportunity to be a really good market but with a much different cost profile for getting it through authorization," he added.
If and when its FDA authorizations are received, the company is prepared to launch the assays into its existing sales channels. All the tests use the same manufacturing process and will be made on existing production lines, without significant additional capital investment, Khattak said.
Cost reduction has been a focus of the company in the past year, as it has implemented multiple cost reduction plans with multiple rounds of layoffs. The firm has also come under shareholder fire due to high spending and concerns about its strategic direction, and some shareholders advocated for independent board members and a change of strategy.
In response, the firm last month announced an independent board member would be appointed. Cue also appointed to its board a member of Tarsadia Investments, one of the shareholders that had pushed for such action. That appointment allows Cue to "move forward in harmony with our shareholders and really incorporate their point of view" and shows the company's commitment to working with its shareholders, Khattak said.
CFO Aasim Javed noted on the call that the firm's cost-reduction plans have resulted in $200 million in annualized cost savings and that Cue remains "very judicious with where we deploy our cash."
Khattak added that Cue is "maximizing the shareholder value with our approach of lowering the costs [and] executing on menu expansion as our number one priority."
Cue Health also announced on Wednesday that its fourth quarter 2023 revenues decreased 87 percent year over year but beat the consensus Wall Street estimate.
For the three months ended Dec. 31, the San Diego-based diagnostic test development company posted $18.8 million in revenues, down from $146.8 million in Q4 a year ago. The analysts' average estimate was $17.7 million. Q4 2022 revenues included $92.4 million in deferred revenues from the firm's agreement with the US Department of Defense.
Product revenues for Q4 2023 were $17.4 million, down 88 percent from $145.7 million in Q4 2022. Grant and other revenues were $1.4 million, up 27 percent from $1.1 million in the prior-year quarter.
The company recorded public sector revenues of $1.8 million, down 98 percent from $94.4 million in Q4 2022. Excluding deferred revenues, public sector revenues in Q4 2022 were $1.9 million. Cue posted $17.0 million in private sector revenues, a 68 percent decline from $52.4 million in Q4 2022. Private sector revenues made up 91 percent of Cue's total revenues.
Disposable test cartridge revenues in Q4 2023 were $15.5 million, down 69 percent from $50.5 million in the prior-year quarter.
Cue Health had a net loss of $148.4 million, or $.96 per share, in the recently completed quarter compared to a net loss of $31.5 million, or $.21 per share, in Q4 a year ago. Adjusted loss per share was $.32, which beat the consensus Wall Street loss per share estimate of $.44.
The firm's full-year 2023 revenues were $70.9 million, declining 85 percent from $483.5 million in 2022. It beat the Wall Street estimate of $69.8 million.
Product revenues for the year were $64.2 million, down from $474.2 million in 2023. Grant and other revenues declined 39 percent year over year to $6.7 million from $9.3 million.
Public sector revenues were $7.9 million, down 93 percent from $108.8 million in 2022, while private sector revenues were $63.0 million, declining 83 percent from $374.7 million in the prior-year quarter. Private sector revenues made up 89 percent of total revenues for the year, Cue said.
Disposable test cartridge revenue was $58.5 million for the full year.
Cue's net loss for 2023 was $373.5 million, or $2.44 per share, compared to a net loss of $194.1 million, or $1.31 per share, in 2022. Its adjusted loss per share was $1.75, which beat the consensus Wall Street estimate of a loss of $1.89 per share.
Cue Health exited the year with $80.9 million in cash and cash equivalents and $800,000 in restricted cash.
The firm added that Q1 2024 revenues are expected to be in the range of $9 million to $11 million.
On Thursday morning, BTIG downgraded Cue Health from a Buy rating to a Neutral rating. In a note to investors, analyst Mark Massaro wrote that the FDA's denial of EUA for the firm's COVID-19/flu test is a "material setback to the setup in 2024, as we now believe we may need to wait until this summer or fall to see another FDA approval come in."
In Thursday morning trading on the Nasdaq, Cue Health's shares were down 9 percent to $.27 per share.