High-Tech’s Business Model Hasn’t Worked for the Cue Covid Test

“I’ve bought this,” coos Gal Gadot in Cue Health’s Tremendous Bowl Tv commercial. Cue hired the “Wonder Woman” actress to be the voice of the company’s new superior-tech covid-19 screening unit. The advert pushes the notion that the at-dwelling covid test generates effects equivalent in precision to a lab-based mostly PCR exam and surpasses it in advantage.

What it doesn’t mention is the value: $249 for the reusable gadget and $195 for a pack of a few exams.

Even as the amount of covid scenarios waned in the course of the winter season, many individuals who observed the ads questioned no matter whether the unit — no subject how practical or technologically wondrous it could possibly be — has the proper tactic. Large-tech startups keen to disrupt the overall health treatment industry are relying on a tried using-and-real marketing and advertising technique: price it significant for early adopters and then decrease the price as the current market grows.

To acquire the Cue check, customers swab their nostrils with a unique wand, insert the wand into a cartridge, and then the cartridge into a white, cube-formed reader. In just 20 minutes, benefits are transmitted by means of Bluetooth to Cue’s smartphone app. These who order a $900 yearly subscription can accessibility a doctor via the application, to certify the final results as legitimate for journey or other reasons.

A hugely accurate at-dwelling covid examination surely has its advantages. And Cue, a publicly traded firm centered in San Diego, claims that 97.8% of the time its test results agreed with a beneficial PCR lab check consequence, nevertheless thought of among the most precise. (The value of a PCR exam differs but can be $100 or far more, and success usually get at minimum 24 hrs, nevertheless quicker final results can be received for extra funds.)

But even the most affordable pricing — yearlong subscriptions, which commence at $480 for 10 assessments (and a discounted device for $149) — is substantially more than the cost of much less-correct antigen assessments, which Us citizens can now normally procure at no expense.

Cue’s price tag puts it out of the attain of most people. But it suits an elite organization model that seeks to appeal to focus and assumes that the rate will drop at some position as the sector grows and demand rises.

For now, except businesses give them, buyers will have to foot the bill for the Cue assessments for the reason that wellbeing insurance coverage organizations, which generally cover lab-based mostly PCR assessments and rapid antigen exams, do not reimburse policyholders for the Cue technique. “We are proactively operating with overall health insurance plan firms to get protection for Cue Wellness methods,” reported Dan Bank, a company spokesperson. But the business has yet to announce an arrangement with any insurance provider.

Even though Cue’s Super Bowl business indicates that its screening solution is aimed for the at-property consumer, its major purchaser has been the Department of Protection, despite the fact that its authorities contract has ended. The exam has also been picked up by athletics leagues and commercial enterprises acquiring models for their workers, such as Main League Baseball, the Nationwide Basketball Association, Netflix, and Google.

In the to start with quarter of 2022, non-authorities profits grew to 98% of profits, or $175.8 million out of a whole of $179.4 million. Net profits for the quarter was $2.8 million, as opposed with $13 million for the exact quarter final calendar year, as the firm stepped up paying out on staff, marketing, and solution improvement. Next-quarter profits is also anticipated to drop, the firm said, slipping to about $50 million.

The business, which sold inventory to the public previous calendar year, has observed its share price tag (enviable inventory symbol HLTH) drop from $22 at its September debut to all-around $5.

The company’s other, even more primary, trouble is that less people today are intrigued in obtaining examined for covid regularly. “There was enthusiasm when covid was in total swing, but now that people today perception the omicron pressure is not so terrible, the concentrate on testing has modified,” claimed Charles Rhyee, an analyst with Cowen. (Cowen, a Wall Road investment decision firm, assisted get Cue general public but does not have a financial relationship with the firm.)

It’s attainable, he stated, that Cue is like other companies that zoomed during the pandemic only to tumble to Earth. “The business is previously searching like Peloton, and a good deal of that sensation is previously baked into the rate of the stock,” Rhyee mentioned.

Cue points out that covid screening is just the initially use of its merchandise. It desires to create and obtain Food and drug administration approval for other checks that can use the $249 product, such as for flu respiratory syncytial virus, or RSV fertility and being pregnant. If a flu examination arrived again optimistic, Cue officers explained, the smartphone application might be ready to hook up the affected individual to a medical doctor early plenty of to receive the benefit from taking an anti-flu treatment these as Tamiflu.

“Just like at-household pregnancy checks fully modified how girls get answers and glucose meters permanently changed how diabetics observe their glucose amounts, we feel the paradigm has permanently shifted for infectious disease testing at residence, and Cue is well positioned to fulfill these requires,” Bank said.

However none of those people checks will be readily available or make any profits in 2022. The firm expects to submit assessments for influenza A and B in late summer months or autumn. The organization has pointed out that the speed at which it can assess new varieties of assessments to provide the Fda could be adversely afflicted by the prevalence of covid, probably restricting its skill to locate take a look at topics or have personnel in its facilities.

To maximize revenue, the company in February decreased the cost of its month-to-month membership and individual checks by $15.

But Charles Rhyee thinks significantly even larger value cuts are essential for results. The shorter-time period solution, he reported, is for Cue to offer its reader product at very low or no price and make its cash from checks, using a common marketing and advertising method that predated the high-tech period by almost a century: the razor-razor blade model, in which the authentic revenue is made on significant-priced blades following promoting shoppers a low cost proprietary manage to hold them.

KHN (Kaiser Wellness News) is a nationwide newsroom that provides in-depth journalism about wellbeing concerns. Collectively with Plan Evaluation and Polling, KHN is 1 of the a few big functioning applications at KFF (Kaiser Loved ones Foundation). KFF is an endowed nonprofit firm giving facts on wellbeing issues to the nation.

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