With Cue Health IPO On Tap, Other Startups With COVID Tests Are Also Scaling 

Ever since COVID-19 began its global spread, startups have been working on ways to provide more accurate, convenient, or lower-priced tests to detect the virus. Now that several have reached scale, they’re looking to take their offerings to the public markets.

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In the past week, two upstart test providers have advanced plans for share offerings. San Diego-based Cue Health, which develops and sells molecular at-home tests, is pursuing a traditional IPO, and Hong Kong-based Prenetics plans to go public through a merger with a blank-check acquirer.

The two are among more than a dozen venture-funded companies that have products and technology around COVID-19 testing. That’s not surprising, as it’s apparently a big enough opportunity to support multiple major players, with Cue estimating the COVID-19 point-of-care diagnostic market in 2021 alone will total approximately $12 billion.

We used Crunchbase data to assemble a list of some of the startup and recently public players below. Collectively, they’ve raised more than $1.3 billion in private funding, with some also tapping public markets in recent months.

On Cue

Cue, which is expected to make its Nasdaq debut this week, is one of the larger players. Its most recent IPO filing details plans to raise $200 million at a target valuation of around $2.4 billion.

The company’s primary offering lets people run COVID-19 tests from anywhere using its reader and testing kits, with results delivered to the user’s mobile device in about 20 minutes. The company has five other test kits in late-stage development for flu, respiratory syncytial virus (RSV), fertility, pregnancy and inflammation.

Cue’s biggest customer by far is the U.S. Department of Defense, with which it signed a $481 million agreement a year ago to provide testing. As of the end of August, Cue said it was manufacturing over 43,000 test kits per day on average.

Keen testing demand has propelled Cue into the black. The company posted $202 million in product revenue for the first half of this year, up from around $15 million in all of 2020. Net income for the first half of 2021 was around $33 million, compared to a loss of $47 million in all of 2020.

All about Prenetics

Prenetics, a genomic and diagnostic testing provider with a COVID-19 offering, announced an agreement earlier this month to go public on Nasdaq by merging with a SPAC called Artisan Acquisition Corp. The deal sets an equity value for the company of approximately $1.7 billion.

The startup has yet to publish detailed financials, but its latest investor presentation disclosed that it has performed more than 5 million tests globally to date. This includes over 2 million tests for the Hong Kong government as well as regular testing for multiple major airports and for the English Premier League.

Beyond COVID tests, Prenetics also offers prevention-focused genomic testing, infection disease testing, and colorectal cancer screening. Overall, the company projects revenue will grow 215 percent year over year, from $65 million in 2020 to $205 million in 2021.

Choppy markets

So far, companies with COVID testing offerings that have gone public have not performed especially well.

Lucira Health, an Emeryville, California-based maker of infectious disease test kits that went public in February, is currently valued at less than half its initial offering price. It markets at-home tests with results delivered within a half hour.

Biodesix, a Colorado-based diagnostics company best known for its lung disease testing that also provides COVID-19 infection and antibody testing technology, has also not fared so well. After the company’s Nasdaq debut last October, shares have shed roughly half their value.

Test spending set to rise, broader use likely over time

Overall, however, there are some upbeat indicators for testing providers, in particular a major effort by the Biden administration to ramp up spending and infrastructure.

The president’s broad plan for combatting COVID-19, unveiled earlier this month, includes nearly $2 billion to procure 280 million rapid point-of-care and over-the-counter-at-home COVID tests from multiple manufacturers. More pharmacies will be providing free tests, and major retailers will be required to sell at-home tests at cost for the next three months.

For now, the U.S. lags behind many other industrialized nations in its COVID testing infrastructure, with other European nations in particular offering tests for free or at a substantially lower cost to a broader swathe of their populations.

Of course, COVID testing is one of those markets where a sharp plummet in demand would likely be a good thing, in that it would indicate we are coming out of the pandemic. Among COVID testing providers, meanwhile, companies aren’t banking on the pandemic as their long-term revenue driver, with most offering or developing other tests.

Illustration: Dom Guzman