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Cue Health Q3 Revenues Decline 69 Percent

NEW YORK – Cue Health on Wednesday afternoon announced that revenues for the third quarter beat both Wall Street expectations and previous guidance from the firm.

For the three months ended Sept. 30, the San Diego-based diagnostic test development company posted $69.6 million in revenues, down 69 percent compared to $223.7 million in Q3 a year ago. The analysts' average estimate was $58.2 million.

The company previously forecast revenues of $55 million to $60 million. While the company said that it saw stronger than expected COVID-19 testing orders from existing customers, it did not provide further details.

Product revenues were $66.7 million, decreasing 70 percent compared to $222.6 million in Q3 2021, while grant and other revenues more than doubled to $2.9 million from $1.1 million.

The company recorded public sector revenue of $3.7 million compared to $129.5 million in Q3 2021. It posted $65.9 million in private sector revenue, down 30 percent from $94.2 million in the prior quarter and making up 95 percent of total revenue.

During Q3, Cue submitted its influenza A/B test to the US Food and Drug Administration for de novo clearance and its influenza A/B and COVID-19 combination test to the agency for Emergency Use Authorization. The firm also began clinical studies for its respiratory syncytial virus test and expects to begin clinical studies for its chlamydia and gonorrhea combination test in Q4, Cue said in a statement.

The firm has also developed a Streptococcus test, with clinical studies expected to begin during the current respiratory season, and a monkeypox test that it expects to submit to the FDA for EUA in Q1 2023.

Disposable test cartridge revenue in Q3 2022 was $61.4 million, down 66 percent from $179.0 million the prior quarter. On a conference call to discuss the firm's financial results, Cue CEO Ayub Khattak said that the firm shipped more than 9,000 Cue Readers during the quarter.

He added that it is "reasonable" to assume there could be a small amount of non-COVID-19 testing revenue in Q1 2023, depending on the speed of FDA approvals for the firm's other tests. Khattak said that the firm could also get revenues from its sexual health test category in 2023.

Cue Health had a net loss of $66.3 million, or $.45 per share, in the recently completed quarter compared to a net income of $19.3 million, or $.13 per share, in Q3 a year ago. The consensus Wall Street EPS estimate was a loss of $.54.

The company's R&D costs quadrupled year over year to $42.5 million from $9.1 million, while its SG&A expenses grew 13 percent to $43.8 million from $38.7 million. The firm's R&D spending was "in line" with its priorities for software development and test menu expansion, CFO John Gallagher said on the conference call.

Cue Health exited the third quarter with $304.7 million in cash and cash equivalents and $1.3 million in restricted cash.

The company said Q4 2022 revenues are expected to be in the range of $45 million to $50 million excluding any adjustment to the deferred revenue balance of $92.4 million that is related to Cue's agreement with the US Department of Defense. Cue didn't specify the nature of the agreement, but in 2020 the firm received a $481 million award from the agency to expand the company's capacity for COVID-19 tests.