Tempus AI shares jump 9% in stock market debut as IPO priced at over $6B valuation

Tempus AI, a precision medicine company that, as its name implies, uses artificial intelligence to process medical data, popped in its stock market debut Friday, with shares jumping 15%.

It marks the latest AI tech company to go public this year, boosted by investors' strong appetite for AI.

SoftBank-backed Tempus AI priced 11.1 million shares at $37 per share, at the higher end of the company's expected range, according to a statement.

At that price, Tempus raised $410.7 million via its IPO at an implied valuation of $6.1 billion.

The company's shares saw early gains Friday, trading at $42 per share. If those gains hold, it would give the company a valuation of roughly $7 billion, CNBC reported.

Tempus' shares closed at $40 per share on Friday, up about 9%.

Tempus' stock market debut follows another health tech company that went public last week. Healthcare payment software maker Waystar debuted on the public market June 7, raising $967.5 million. Based on Waystar's initial share price, the company's market cap is about $3.5 billion. Including debt, the company has an enterprise value of about $5 billion.

Waystar and Tempus' IPOs signal a potential upswing in the public investor market. The macroeconomic environment effectively put a freeze on the IPO market for health tech companies during the past three years. There were 20 digital health companies that went public in 2021 and only two, including prescription digital medicine company Akili, in 2022. There were no digital health IPOs in 2023.

Chicago-based Tempus provides AI and data and analytics tools for precision medicine. It filed for an IPO with the U.S. Securities and Exchange Commission (SEC) on May 21. 

Founded in 2015, Tempus, led by Groupon co-founder Eric Lefkofsky, says it’s built the world’s largest library of clinical and molecular data along with an operating system to make those data accessible and useful for providers to inform patient care. Over the past seven years, Tempus built out capabilities in precision medicine and AI to power drug discovery and genomic sequencing. 

The company started in genomics by generating large amounts of molecular data, which in turn gave rise to its data and services business, according to the filing.

Tempus expanded the reach of its AI-enabled patient data platform into AI-enabled diagnostics and personalized medicine for cancer, cardiology, neuropsychology and radiology. The company is strategically focused on expanding its capabilities and commercial traction beyond oncology to include other disease categories, according to the filing.

The company has about 2,300 employees.

Tempus generated $321 million in revenue in 2022, and that grew to $532 million in revenue in 2023. The company brought in $146 million in the three months ended March 31, 2024, according to the S-1 filing.

However, the company is not yet profitable, bringing in losses of $290 million and $214 million in 2022 and 2023, respectively.

As of March 31, 2024, Tempus has an accumulated deficit of $1.5 billion.

Tempus has pocketed $1.3 billion in funding over nine funding rounds. Two years ago, the tech company banked $200 million in financing rounds, reportedly driving its valuation to $8.1 billion.

In its SEC filing, the company said it aims to "unlock the power of precision medicine by creating Intelligent Diagnostics through the practical application of artificial intelligence in healthcare."

Intelligent Diagnostics use AI, including generative AI, to make laboratory tests more accurate, tailored and personal, according to the company.

The company developed its Tempus Platform, which comprises both a technology platform to free healthcare data from silos and an operating system to make the resulting data useful. "Our goal is to embed AI, including generative AI, throughout every aspect of diagnostics to enable physicians and researchers to make personalized, data-driven decisions that improve patient care," the company said in the filing.

The platform includes proprietary software and dedicated data pipelines that create a network of healthcare institutions through approximately 450 unique data connections across more than 2,000 healthcare institutions. 

Tempus says more than 7,000 physicians across hundreds of provider networks, including more than 65% of all academic medical centers in the U.S., use its tech platform.

It also claims it can count approximately 95% of the largest public pharmaceutical companies based on 2023 revenue as its customers.

Tempus' competitors in the genomics market include certain diagnostics companies, such as Foundation Medicine—which was acquired by Roche Holdings—Caris Life Sciences, Guardant Health, Neogenomics and ResolutionBio, which Agilent acquired, the company wrote in the S-1 filing. The company also competes with Quest and LabCorp with respect to its precision oncology tests.

Guardant Health has sued Tempus AI for allegedly infringing five patents related to liquid biopsy cancer tests. Guardant developed tests that use fragments of DNA circulating in a patient's bloodstream to detect cancer cells or the presence of other diseases.

"Guardant’s technology is built on a series of cutting-edge innovations that Guardant’s scientists developed over many years and at great cost through an extensive research and development program," the company said in the lawsuit filed in Delaware federal court and made public Wednesday.

Since its inception, Tempus has "capitalized on Guardant’s pioneering efforts to develop copy-cat cell-free DNA liquid biopsy tests," the company claims in the lawsuit. In the lawsuit, the company claims that Tempus' xF, xF+ and xM Monitor liquid biopsy panels use the same technology as Guardant's tests and infringe its patents.

In the past several years, Tempus has notched partnerships with global pharmaceutical companies to boost its work in drug discovery and precision oncology. As part of a multiyear strategic collaboration, Pfizer will tap multiple parts of Tempus' AI platform and its data library to advance clinical discovery.

The company has an expanded collaboration with GSK to enable the U.K. pharma giant to leverage its AI-enabled patient data platform. GSK recently paid Tempus $70 million upfront for three more years of partnering.

Tempus also inked a partnership with AstraZeneca to use its AI technologies to advance cancer drug development.

Tempus scooped up three startups in the past five years—clinical lab AKESOgen in 2019, clinical trial company Highline Sciences in 2022 and medical imaging AI developer Arterys, also in 2022.

In October 2022, Tempus picked up $275 million in debt financing to scale its operations and capabilities.

Morgan Stanley, J.P. Morgan, Allen & Company, BofA Securities, TD Cowen, Stifel and William Blair are among the underwriters on Tempus' offering.

Tempus trades under the ticket symbol "TEM."