NEW YORK – A month after Tarsadia Investments sent a letter outlining its concerns about spending and management to Cue Health's board of directors, a second group of shareholders followed suit last week.
A group of stockholders who collectively own more than 7 percent of Cue's outstanding stock, including one of the firm's founders, Kelly Day, sent a letter dated Oct. 6 to the board saying that it must "take immediate action to stabilize the company, substantially reduce its cash burn, and focus on its core diagnostic business," according to a statement from the group. The core technology and diagnostic platform should receive the full attention and resources of the board and management team, the shareholders added.
Cue currently offers its molecular testing device, which includes a reader and test cartridge and provides test results in about 30 minutes. The company's at-home molecular COVID-19 test received de novo marketing authorization from the US Food and Drug Administration in June, making it the first at-home molecular test authorized using a traditional premarket review pathway for any respiratory illness.
In addition, the firm has expanded its services into new business areas, including telemedicine and broader laboratory-based testing.
Last week's letter said that the board and management team took the temporary increase in COVID-19-related revenues as "a sign to undertake an undisciplined expansion of the company's business outside of its singular area of excellence." The firm's quarterly cash burn is "alarming" and "threatens to imperil the company's future, or condemns it to seeking a massively dilutive and punitive financing," according to the letter.
The stockholders said they believe the board is not adequately supervising the management team and that the board "should reflect a greater representation of direct stockholder voices."
The group noted that it is acting independently from Tarsadia but that it believes the investment management firm raised valid concerns about Cue in its letter from August. In that letter, Tarsadia recommended that the company undergo a strategic review of its long-term business plan, realign its cost structure and capital allocation to save an additional $50 million per year, and appoint independent stockholder representatives to the board of directors.
Additional shareholders have anonymously raised concerns about Cue's future direction.
Since going public in 2021, Cue's share price has fallen 97 percent, and in the second quarter of 2023, its total revenues fell 89 percent year over year. The company has gone through multiple rounds of layoffs and implemented multiple cost reduction plans to bring its costs under control.