View:
United States securities and exchange commission logo
May 19, 2021
Ayub Khattak
Chief Executive Officer
Cue Health Inc.
4980 Carroll Canyon Rd.
Suite 100
San Diego, CA 92121
Re: Cue Health Inc.
Draft Registration
Statement on Form S-1
Submitted April 19,
2021
CIK No. 0001628945
Dear Mr. Khattak:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
General
1. Please provide us with
supplemental copies of all written communications, as defined in
Rule 405 under the
Securities Act, that you, or anyone authorized to do so on your behalf,
have presented or
expect to present to potential investors in reliance on Section 5(d) of the
Securities Act, whether
or not you retained, or intend to retain, copies of those
communications. Please
contact the staff member associated with the review of this filing
to discuss how to
submit the materials, if any, to us for our review
Ayub Khattak
FirstName
Cue HealthLastNameAyub Khattak
Inc.
Comapany
May NameCue Health Inc.
19, 2021
May 19,
Page 2 2021 Page 2
FirstName LastName
Overview, page 1
2. We note that the disclosure throughout the Overview section appears
overly anticipatory
in nature versus the company's actual business and operations. In this
regard, we note that
you only have one approved product and that the majority of your
diagnostic test kits
remain subject to technical development and FDA approval. We also note
that a
significant majority of your revenue is derived from two major
customers. Please revise
this section and the prospectus throughout to more accurately describe
the current status of
the company, its sole approved product and test kit, products and test
kits in technical
development and subject to FDA approval and the actual status and use
of the company's
platform and apps by active customers and users. We also note that the
U.S. DoD
agreement contains significant contractual obligations and
restrictions which
constrain your business and operations in the near-term. Please revise
the Overview
section to prominently discuss this agreement and any near-term
constraints the agreement
places on your business and operations.
3. We note that your platform, apps and sole approved product are
relatively new. We also
note your discussion throughout the prospectus regarding customers and
users and their
potential engagement via your platform and apps. Please disclose in an
appropriate
section the number of active customers and users on your platform and
apps and how you
define such terms.
4. We note that you have significant contractual obligations under the
U.S. DoD agreement
including certain production and delivery requirements. We also note
that the U.S.
government is entitled to all of your manufacturing output during the
term of the
agreement, subject to certain exceptions. Please revise the summary to
highlight and
discuss this agreement in greater detail as it appears to
significantly affect your only
approved product. In this regard, we note your risk factors on pages
21 and 22. Please
also discuss your current shortfall with respect to the production
target under the
agreement, and the right of the U.S. government to terminate the
agreement if you are
unable to meet such targets.
Reinventing How We Interact with Our Health, page 1
5. Please refer to the fifth paragraph. We note your disclosure that your
platform enables
fast, frequent, lab-quality diagnostics by anyone, anywhere,
facilitating a new continuous
care model of personalized and contextualized healthcare. Please
provide us with your
basis for these statements. In this regard, we note that you only have
one approved test kit
and that your output and production is generally reserved for the U.S.
DoD.
6. Please refer to the sixth paragraph and your discussion of your
COVID-19 Test Kit.
Please revise to clarify that your COVID-19 Test Kit is currently
being marketed pursuant
to EUAs and that it is your sole revenue generating product. Please
also revise to balance
the discussion by disclosing that you cannot predict how long the EUAs
will remain in
effect, and if they are terminated you will be required to stop
selling the COVID-19 tests.
Ayub Khattak
FirstName
Cue HealthLastNameAyub Khattak
Inc.
Comapany
May NameCue Health Inc.
19, 2021
May 19,
Page 3 2021 Page 3
FirstName LastName
Please also discuss the steps necessary to receive FDA approval for
the COVID-19 test
through the standard regulatory pathway and the associated costs and
timing, including
whether you have started such process.
7. Please refer to the last paragraph on page 2. Please revise to
disclose your revenue and
net loss for 2019. In this regard, we note that you generated no
product revenue in 2019
and reported a net loss. Additionally, please revise to clarify that
two customers
accounted for 80% of your product revenue in 2020.
Our Expected Future Care Offerings, page 10
8. We note your disclosure that you have five tests in late-stage
technical development and
that you anticipate submitting several tests to the FDA for
authorization or clearance by
the end of 2022. Please clarify what you mean by "late-stage technical
development" and
"several tests" and revise this section to discuss the five tests and
their technical
development in greater detail. In this regard, for each of the five
tests, please revise to
specifically identify the diagnostic test category, the stage of
technical development,
regulatory filings or other requirements (i.e. the necessity of
clinical studies, trials or FDA
510(k) or other clearance or approvals) and associated costs and
timelines. Please
consider presenting this information in a pipeline table or other
format so that investors
can easily appreciate the technical development of your various
diagnostic test kits.
If the U.S. DoD terminates or fails to renew our agreement..., page 21
9. You state that if the DoD agreement is terminated for cause, you may
be required to grant
the U.S. government a non-exclusive, paid up, perpetual license to the
patents and
documentation necessary to develop the COVID-19 test. Please indicate
whether your
inability to meet production targets would allow the U.S. government
to terminate the
agreement for cause, and, if so, the impact on your current and future
results of operations
if you were required to grant the U.S. government a license to the
COVID-19 intellectual
property.
We currently rely upon the U.S. DoD and a very small number of other
customers..., page 21
10. Please disclose the term of the DoD agreement so that investors
understand the length of
time during which you are restricted from acquiring new customers. In
this regard, we
note your disclosure on page F-15 that the agreement term ends upon
final payment and is
anticipated to end in October 2021. Please clarify elsewhere as
appropriate whether you
anticipate that the agreement will terminate in October 2021, and, if
so, any material
impact due to such termination.
The COVID-19 pandemic could materially adversely affect our business, page 33
11. We note your disclosure that the COVID-19 pandemic delayed your
clinical trial for your
influenza test. Please revise to discuss the nature of this delay in
greater detail.
Ayub Khattak
FirstName
Cue HealthLastNameAyub Khattak
Inc.
Comapany
May NameCue Health Inc.
19, 2021
May 19,
Page 4 2021 Page 4
FirstName LastName
Clinical trials necessary to support a future test submission, page 61
12. Please revise this risk factor to clarify which diagnostic tests in
your development pipeline
will require clinical studies or trials.
Use of Proceeds, page 82
13. We note your disclosure that you intend to use net proceeds to fund
research and
development and clinical studies to expand your test menu and to
continue to invest in
your technology applications and interfaces. Please revise to disclose
the net proceeds
intended to be used for each principal purpose individually.
Additionally, with respect to
net proceeds allocated to fund research and development and clinical
studies, please revise
to quantify the amounts allocated to fund the research and development
of each diagnostic
test kit individually and specify how far in the technical development
you expect to reach
with such net proceeds. If a material amount of other funds are
necessary to complete the
technical development of these diagnostic test kits, state the amounts
and sources of such
other funds. Refer to Instruction 3 of Item 504 of Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Components of Our Results of Operations
Revenue, page 97
14. You disclose that your Cue Integrated Care Platform consists of
hardware and software
components and these components are designed to work together
seamlessly, creating an
easy-to-use workflow for your consumers. Please disclose your
accounting policy for
each component in your Cue Integrated Care Platform. In addition,
provide us your
accounting basis that supports your accounting referring to ASC 606
and other
authoritative literature, as applicable, specifically considering ASC
606-10-25-14 through
22.
Research and Development Expense, page 98
15. With regards to your research and development, you disclose that you
are developing tests
in the fields of respiratory health, sexual health, cardiac and
metabolic health, women's
health, men's health, and chronic disease management, with several of
these tests expected
to be submitted to the FDA for authorization or clearance by the end
of 2022. You further
note that you have five tests in late-stage technical development. As
such, please disclose
the costs incurred during each period presented for each of your key
research and
development projects. If you do not track your research and
development costs by
project, please disclose that fact and explain why you do not maintain
and evaluate
research and development costs by project. Provide other quantitative
or qualitative
disclosure that provides more transparency as to the type of research
and development
expenses incurred (i.e. by nature or type of expense) which should
reconcile to total
research and development expense on the Statements of Operations.
Ayub Khattak
FirstName
Cue HealthLastNameAyub Khattak
Inc.
Comapany
May NameCue Health Inc.
19, 2021
May 19,
Page 5 2021 Page 5
FirstName LastName
Healthcare 1.0, page 109
16. Please revise this section and the Healthcare 2.0 section throughout
to clarify that the
various statements, characterizations and conclusions of the current
healthcare system and
Healthcare 2.0 are the company's beliefs.
We are Positioned to Be at the Center of Healthcare 2.0, page 112
17. Please revise the first paragraph to balance the discussion by
clarifying that the company
currently only has one approved test kit pursuant to EUAs.
Our First Product Offering - Cue COVID-19 Test Kit, page 121
18. We note that your COVID-19 test kit has two EUAs. Please revise this
section to discuss
the remaining steps necessary to receive FDA approval through the
standard regulatory
pathway and the associated costs and timing.
Clinical Results, page 124
19. We note that the company completed a clinical study of its COVID-19
test kit. Please
revise to discuss the clinical study in greater detail. Please include
enough details so that
investors can understand the specific details of the study to include
dates, locations, study
purpose, endpoints and study results.
Future Care Offerings, page 130
20. For each diagnostic test described in this section, please revise to
discuss in greater detail
the technical development of each test including the remaining stages
of technical
development, regulatory filings or other requirements (i.e. the
necessity of clinical studies,
trials or FDA 510(k) or other clearance or approvals) and associated
costs and
timelines. To the extent clinical studies or trials will be required,
please discuss these
requirements and any plans, costs and timelines to complete these
studies or trials. Please
include enough details so investors can clearly appreciate where each
test resides in your
development pipeline and the steps, costs and timelines necessary to
obtain final FDA
approval. Please revise the Sexual Health, Chronic Disease Management
and Women's
Health sections accordingly.
Sexual Health, page 132
21. We note that this section references a number of potential sexual
health tests. However,
based on your disclosure, it appears that you have only began
preliminary technical
development on a Chlamydia and Gonorrhea test kit. If true, please
revise to clarify that
you have not completed any technical development on the other
referenced sexual health
tests, i.e. HIV, Herpes and Hepatitis C. To the extent these sexual
health tests are
aspirational in nature, please revise to clearly disclose that fact.
Please revise the Chronic
Disease Management and Women's Health sections in a similar manner.
Ayub Khattak
Cue Health Inc.
May 19, 2021
Page 6
Principal Stockholders, page 181
22. Please revise to disclose the natural person or persons who have
voting or investment
power with respect to the common stock held by the entities listed in
the table.
Note 2, page F-8
23. Your accounting policy disclosures state that depreciation expense is
allocated to R&D
and G&A which does not appear consistent with your disclosure on page
F-17 that $3.2
million of your 2020 $6.2 million total depreciation and amortization
expense was
alloacted to cost of product revenue. The $3m difference equals the
depreciation and
amortization expense line item on your Statements of Operations
suggesting that nothing
was allocated to the R&D and G&A expense line items. Please clarify
the disclosures in
the filing.
Note 3, page F-15
24. Please provide us with more details concerning the $184.6 million
advance you received
from DoD to facilitate the scaling of the Company s manufacturing
capacity.
Specifically, please fully describe any contractual restrictions on
how you can use this
advance and all circumstances under which you could be required to
refund the advance.
Further, tell us whether there are any circumstances under which the
DoD has a
contractual right to take a security interest in any assets you
acquire using the proceeds
from the advance. Please clarify whether the advance impacts your cost
basis in
associated inventory and/or property and equipment costs. Also, please
quantify the
amount of payments you have received under this contract in 2021.
You may contact Sasha Parikh at 202-551-3627 or Al Pavot at 202-551-3738
if you have
questions regarding comments on the financial statements and related matters.
Please contact
Donald Field at 202-551-3680 or Erin Jaskot at 202-551-3442 with any other
questions.
FirstName LastNameAyub Khattak Sincerely,
Comapany NameCue Health Inc.
Division of
Corporation Finance
May 19, 2021 Page 6 Office of Life
Sciences
FirstName LastName