General IPO
September 26, 2021
5 minutes read

Markets: Covid Testing Provider Cue Health Goes Public

A diagnostics startup that found treasures amid dirt from the Covid-19 pandemic has stamped its success with a successful initial…

A diagnostics startup that found treasures amid dirt from the Covid-19 pandemic has stamped its success with a successful initial public offering (IPO). It’s Cue Health, a little-known startup from San Diego that rapidly switched its focus to making Covid-19 testing kits on the onset of the pandemic and has built a big business with that.

Cue Health debuted on the Nasdaq exchange on Friday, the 24th of September, raising $200mn before commissions and other underwriting expenses. Its stock climbed 25% on that day to end trading at $20, giving it a market cap of $2.9bn.

Cue Health is one of the significant startup success stories to emerge from the pandemic. Before it started providing Covid testing kits, its annual sales were numbered in the low-digit millions but shot up to $23mn in 2020 on the pandemic’s onset and $202mn in the first half of 2021.

Because of its fast pivot to providing Covid testing kits, Cue Health was an early mover. Thus, it got lucrative testing contracts from several big clients, including the US government and tech giant Google as they sought to manage the pandemic’s effects. Both entities have been using Cue Health’s at-home Covid testing kits for their large number of employees, representing a large revenue base.

For example, Cue Health was awarded a $481mn contract last October to provide testing kits for the US Department of Defense (DOD). The contract included funds for the company to scale up its manufacturing capacity and then deliver 6 million Covid tests to the US government.

Cue Health has also enjoyed lucrative deals from customers such as Google, the National Basketball Association (NBA), and the hospital chain Mayo Clinic in the private industry space. Google, in particular, seems to be Cue Health’s biggest private customer, as hinted in the company’s S-1 filing.

Though Cue Health didn’t name Google directly, its S-1 indicated that of the $35mn in sales from the private sector in this year’s first half, $29mn was from a “single enterprise customer.” By our guesstimates, that customer is likely to be Google.

Cue Health was founded in 2010 and spent most of its years afterwards as a diagnostics startup in its R&D phase. Fortunately, the Covid pandemic was the right time for the company to find its calling and deliver very well at that.