Billionaire Groupon Founder Eric Lefkofsky’s Health Tech Went Public Today

Five years in the past, Chicago-based billionaire and serial entrepreneur Eric Lefkofsky instructed Forbes he hoped well being analytics and precision drugs firm Tempus AI can be his “legacy venture.” It’s at the moment his most beneficial asset—and his fourth firm to go public.

Shares of the corporate had been priced on the Nasdaq on Thursday at $37 per share and began buying and selling on Friday, giving Tempus a market capitalization of $6.1 billion, decrease than Tempus’ final personal valuation of $8.5 billion from a 2022 funding spherical. Lefkofsky, who’s founder and CEO, holds an estimated 33% stake within the firm, price $2 billion. That makes Lefkofsky’s web price roughly $3.9 billion. Tempus is his first firm to go public because the IPO of discount-deal e-commerce firm Groupon in 2011, a list that made him a billionaire.

If Tempus’ share value holds or goes up, it might pave the way in which for a number of of Tempus’ personal rivals to go public as effectively, after a number of years of a moderately inactive IPO market.

(Replace: Tempus ended the day buying and selling at $40.25, a 9% leap on its IPO value. Lefkofsky’s stake is now price $2.2 billion.)

Lefkofsky based Tempus in 2015, after his spouse was identified with breast most cancers and he was “simply perplexed at how little information had permeated her care,” he instructed Forbes in 2019. The agency, which has 2,300 workers, began as an oncology-focused firm—sequencing, for instance, most cancers sufferers’ tumor samples and analyzing them with machine-learning-trained fashions to assist decide a extra correct analysis and personalised remedy—and has progressively expanded to different illness areas: neuropsychiatry, radiology and cardiology. Its prospects embrace greater than 2,000 healthcare suppliers who ship their sufferers’ samples for testing and 19 of the 20 largest pharmaceutical corporations on the earth, which license Tempus’ large troves of knowledge to be used in drug discovery. Tempus misplaced $214 million on $532 million in 2023 income; main bills embrace the price of working genetic checks, spending on analysis and growth, and buying and coaching information. Its long-term purpose, in keeping with a submitting with the Securities and Alternate Fee concerning the public providing, is to make use of synthetic intelligence to research healthcare information and additional personalize care to “all main illness areas globally.”

“I’m excited to maintain working the corporate in our subsequent interval of our story, as a public firm,” Lefkofsky instructed Forbes in a name on Friday morning. “We’re nonetheless in such early days of making use of any type of AI to healthcare. There’s a lot to do and a lot profit that may be derived by sufferers, which is an incredible place to be.”

Tempus launched with $10 million in funding from Lightbank, a enterprise capital agency cofounded and seeded by Lefkofsky and his longtime enterprise companion and Groupon cofounder Brad Keywell. Since then, buyers together with Google, New Enterprise Associates, billionaire and AOL cofounder Steve Case’s Revolution, Softbank and funding agency Baillie Gifford have poured greater than $1.3 billion into Tempus. The agency has additionally raised cash by way of debt financing, largely from various funding agency Ares Administration; in its SEC submitting concerning the public providing, Tempus says it would use among the proceeds from the providing to pay down the $266 million mortgage. Tempus raised $410 million in its public providing.

Lefkofsky’s 33% stake after a public providing is uncommon on the earth of high-growth, venture-capital-backed tech corporations, the place outdoors funding sometimes dilutes. Lefkofsky additionally owns all of Tempus’ supervoting shares, giving him roughly 65% of voting management. Different main stakeholders in Tempus embrace fellow billionaire Brad Keywell and his ex-wife Kimberly Keywell, who every personal roughly 10% of the corporate, and Baillie Gifford, which owns about 6%.

Tempus is one in every of a minimum of 9 corporations Lefkofsky has based or cofounded— it additionally acquired roughly 20% of his most up-to-date startup, drug growth agency Pathos AI, for round one cent per share, or roughly $4 million. (Pathos is now price an estimated $400 million; Lefkofsky owns roughly 65%.)

As Lefkofsky has gotten richer and extra skilled, he’s held onto greater and greater stakes within the corporations he cofounded. At advertising and marketing expertise InnerWorkings’ public providing in 2006, Lefkofsky held round 11% of the corporate; after Echo International Logistics’ IPO in 2009, he had 13% and when Groupon went public in 2011, he had 21%. (Each InnerWorkings and Echo International have stopped buying and selling; Groupon’s share value has fallen 95% from its IPO value).

Tempus’ long-term success within the public markets might depend upon its skill to interrupt even sooner moderately than later. Regardless of a 66% leap in income from 2022 to 2023, Tempus continues to be dropping cash. It at the moment has $57 million in working capital and $450 million in debt—sufficient to “fund its present working plan” for a minimum of one other 12 months, in keeping with the corporate’s registration assertion.

Tempus’ Financials From 2019-2023

“The corporate is dropping an infinite amount of cash at a time when corporations are penalized for dropping huge quantities of cash,” stated Donovan Jones, an analyst for In search of Alpha. Proper now, tech corporations that go public “are usually a little bit extra determined” for money than the businesses that may wait,” Jones added.

However Lefkofsky is optimistic about Tempus, given its spectacular income development. If Tempus stays on its present trajectory, the corporate expects to develop into worthwhile within the “not-too-distant future,” he says.

Baillie Gifford, in a weblog publish detailing why it invested so closely into Tempus, emphasised Tempus’ two-pronged enterprise mannequin: genomics and associated testing, which makes up 62% of Tempus’ income, and information and companies, which generate the remaining 38%. Tempus’ skill to monetize the information itself—which grows and improves as extra sufferers ship samples to Tempus for evaluation—might push it towards profitability.

Bruce Quinn, a healthcare expertise marketing consultant, touted Lefkofsky’s imaginative and prescient for bringing collectively the medical information and medical testing companies into one firm: “That’s what I see as distinctive in [Lefkofsky’s] management.” He added that Tempus can develop if it continues to increase its pharmaceutical collaborations, which basically “are often money stream constructive.” There’s the next barrier to entry in the case of increasing Tempus’ genomics income, particularly since there’s a smaller marketplace for it in non-cancer ailments, in keeping with Quinn.

Tempus is coming into a not-so-friendly IPO market and in a crowded aggressive house, together with public corporations Guardant Well being and Neogenomics, in addition to ConcertAI, a subsidiary of billionaire Romesh Wadhwani’s SymphonyAI. On Tuesday, Guardant filed a lawsuit in opposition to Tempus, alleging that 4 of Tempus’ merchandise use liquid biopsy expertise that violates a few of Guardant’s patents. “We intend to vigorously defend ourselves on this matter,” Tempus wrote within the submitting. Tempus declined additional remark.

As Tempus continues to develop, Lefkofsky hopes that it could actually monetize companies just like the AI fashions that Tempus helps create for medical doctors to assist in suggesting checks and therapies for sufferers. Such fashions at the moment don’t generate a lot income for the corporate (lower than $1 million within the final three months, regardless of being lively in additional than 100 hospitals). “We nonetheless have not found out the fitting method to reimburse corporations like ours for this, however we consider that over time, if that turns into the case, they will be deployed broadly,” he says.

Despite the fact that Tempus is Lefkofsky’s fourth firm to go public, he says it’s a singular story for him as a result of it’s the primary time he has been CEO of an organization he’s based at its public providing.

“You study one thing from every one in every of these companies, whether or not they go tremendous nice or they don’t,” Lefkofsky says. “After we began Tempus, one of many huge learnings was we actually wished to take our time and get the inspiration of the enterprise proper. Deal with oncology, focus in a single market, on this case the US. Be diligent about constructing a basis that we felt might maintain long-term development as a substitute of rising too rapidly and rising too rapidly internationally.”