Tempus AI (NASDAQ:TEM), a provider of AI-enabled precision medicine, has been initiated with a 'buy' rating by Bank of America, which likes how the company combines a patient's molecular, clinical and other data to provide a new level of medical diagnostics.
There are other companies that provide similar molecular diagnostics – Guardant Health, Foundation Medicine, NeoGenomics (NASDAQ:NEO) for three – Tempus differs from most of them by adding layers of additional patient information such as MRI imaging data, patient records, as well as AI techniques such as neural networks, deep learning, and large language models.
"As a result, Tempus brings together what had previously been dispersed data silos in healthcare to generate patient-specific insights - 'intelligent diagnostics' that lead to better patient outcomes," the BofA analysts said.
Pulling together previously siloed data onto its platform, TEM has built one of the largest oncology databases, one of it its biggest differentiating points from its peers.
Tempus serves a large total addressable market of at least $70 billion, the bank said, with an "impressive scale" achieved in a short period of time, with sales topping $500 million in 2023, with BofA forecasting a 20%-plus future growth rate.
The bank's price objective is $41, versus the last close at $33.20.
Risks were cited as peers potentially building out their own intelligent diagnostics platforms over time, along with significant regulatory and legal risks, including reimbursement for its Dx menu, for the novel and unproven 'AI Algorithms' business, and for patient healthcare data privacy.
"Tempus is also burning through cash," it was noted, with a current cash balance of around $550 million estimated to be "sufficient to last" through 2026, though its ability to achieve profitability and turn cash-flow-positive is "also uncertain".