Tempus, Genomic Testing Firm, Sees Successful Nasdaq Debut
Tempus Goes Public on Nasdaq with a $6 Billion Valuation
Tempus, a genomic testing and data analysis company founded by Eric Lefkofsky, who is also known for creating Groupon, made its debut on Nasdaq with a 15% surge in its stock price. The initial public offering (IPO) was priced at $37 per share, generating nearly $411 million and valuing the company at over $6 billion, although its last private valuation was higher at $8.1 billion. Tempus closed at $40.25 on its first trading day, representing a 9% increase from the IPO price.
Despite being unprofitable, Tempus executed a successful IPO during what is typically considered an unfavorable period for such launches. The company reported revenues of $531 million in 2023, with a net loss of $290 million. However, it has substantially decreased its operating losses, and Lefkofsky is optimistic that Tempus will achieve positive cash flow and EBITDA by 2025.
Founded in 2015, Tempus was inspired by Eric Lefkofsky's personal experience with his wife's battle with breast cancer, which highlighted the need for data-driven approaches in healthcare. The company is striving to incorporate artificial intelligence (AI) into its diagnostic tools, even though AI presently only contributes 1% of its revenue. Lefkofsky retains a 30.1% ownership stake in Tempus and controls 65% of the voting power.
Noteworthy shareholders include Kimberley Keywell's firm with a 10.2% stake, and Scottish asset manager Baillie Gifford, holding a 5.9% stake valued at $350 million at the IPO price. Early investors in Tempus comprise NEA, Revolution, and T. Rowe Price, with SoftBank leading a $200 million Series G5 funding round in April. This marks Lefkofsky's fourth company to go public, following the notable success and subsequent decline of Groupon.
Key Takeaways
- Tempus saw a 15% increase in stock price on its first trading day after debuting on Nasdaq at $37 per share.
- The IPO raised $411 million and valued Tempus at over $6 billion, despite its previous private valuation of $8.1 billion.
- Although unprofitable, Tempus reduced its operating losses from 83% to 37% within a year.
- Founder Eric Lefkofsky anticipates positive cash flow and EBITDA for Tempus by 2025.
- Tempus aims to integrate AI into all diagnostic tools, despite AI currently accounting for only 1% of its revenue.
Analysis
Tempus' IPO reflects investor confidence in genomic technology despite its existing losses. The company's pivot towards AI integration in diagnostics could drive future profitability, aligning with the ongoing digital transformation in healthcare. Eric Lefkofsky's significant ownership and control, along with strategic investments from firms like Baillie Gifford, underscore the company's long-term growth potential. While short-term volatility may be expected for shareholders, the expanding market for personalized medicine could benefit Tempus and its investors in the long run.
Did You Know?
- Fully-Diluted Valuation: This encompasses the total shares a company would have if all convertible securities were exercised, providing a comprehensive view of its value.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A financial metric that indicates a company's profitability by excluding non-operating and non-cash expenses.
- Series G5 Funding Round: This denotes an advanced stage of investment in a company's lifecycle and reflects significant investor interest or specific strategic needs.