San Diego-based Cue Health, which made cutting-edge COVID-19 testing kits, has filed for bankruptcy after reports it will close its doors and lay off its entire staff.
This marks the official end of one of San Diego's highest-profile COVID-19 testing providers during the pandemic. The local company was valued at $2.3 billion when it went public in 2021. But declining demand for COVID-19 tests has hurt Cue and similar diagnostics businesses.
The local biotech company filed for Chapter 7 bankruptcy protection last week in its home state of Delaware to liquidate its remaining assets. At the time of its closure last month, Cue employed about 250 people, most of them in San Diego, and operated eight facilities in the county.
The voluntary bankruptcy filing came after Q had spent months trying to cut costs through job cuts. It had also explored selling the business, but a financial rescue plan was not forthcoming. The company fired its entire staff, including its management team, and abruptly ceased operations on May 24.
“After best efforts and comprehensive review, Cue's board of directors, in consultation with the company's advisors, has concluded that it is in the best interests of the company and its stakeholders to file for chapter 7 relief,” the company said in a May 28 press release.
Cue's assets are valued at between $100 million and $500 million, according to bankruptcy court filings. The company also reported liabilities of between $50 million and $100 million.
Court documents also said Kew has about 200 to 999 creditors, including individuals and entities who may be entitled to payments as a result of the liquidation. On Friday, a judge approved payments to former employees who have not received compensation or benefits as a result of the company's closure.
Cue said in its application that it has facilities in San Diego, Vista and Boca Raton, Florida.
Founded in San Diego in 2010, Cue Health has grown rapidly during the coronavirus pandemic through multimillion-dollar contracts with governments and private companies, supplying COVID-19 test kits to high-profile organizations such as the Department of Defense, Google and the NBA.
The biotech company has grown its employee base from 99 in January 2020 to 1,515 by the end of 2022.
But as those contracts ended, government funding was cut and demand for COVID-19 tests among the general public decreased, Cue struggled to sustain its business model.
The company's sophisticated COVID-19 test, which delivers results directly to patients' smartphones in 15 minutes, was the only product fully approved by the FDA. The company said in its financial filing that its future success and survival depend on its efforts to obtain approval for its COVID-19 test and other products.
Approvals for tests for other illnesses, such as influenza and respiratory syncytial virus, were unsuccessful.Then, in mid-May, the US Food and Drug Administration told consumers to throw out their QC COVID-19 tests because the company had changed its testing methodology without prior approval.
The FDA letter was the final nail in the coffin for Cue, which had already made cuts and replaced senior executives in a futile effort to appease investors and save the company.
Q Health is being represented in the bankruptcy proceedings by Wilson Sonsini Goodrich & Rosati LLP, with FTI Consulting Inc. acting as financial advisor. The company said in its filing that it has agreed to pay about $1.2 million in attorneys' fees related to the bankruptcy proceedings and closure of its business.
