Tempus Ai,Inc.(TEM) - 2024 Q4 - Annual Report

Precision Medicine and Intelligent Diagnostics - The company aims to unlock precision medicine through Intelligent Diagnostics, utilizing AI to enhance laboratory test accuracy and personalization [19]. - The company believes that the adoption of Intelligent Diagnostics can significantly improve patient care by incorporating diverse data sources, including molecular and clinical data [35]. - Intelligent Diagnostics can disrupt the clinical trial process by contextualizing test results and incorporating real-world evidence, leading to better data-driven decisions [39]. - The platform is designed to deploy AI at scale, utilizing multimodal datasets across various disease areas, including oncology, neurology, and cardiology [31]. Data Integration and Platform Capabilities - The Tempus Platform integrates approximately 700 unique data connections from around 3,000 healthcare institutions, facilitating real-time data exchange [24]. - The company has established data pipes to facilitate the free exchange of data between physicians and diagnostic companies, addressing the current lack of integrated networks in healthcare [30]. - Tempus's Platform enables ingestion of healthcare data in near real-time, including molecular, clinical, and imaging data, facilitating precision medicine [44]. - The company has developed proprietary software tools that utilize AI techniques to generate patient-specific insights and improve diagnostic capabilities [56]. Product Offerings and Innovations - The company has developed three product lines: Genomics, Data, and AI Applications, which create network effects and enhance the overall value of their offerings [25]. - The Genomics product line provides Next Generation Sequencing (NGS) diagnostics and is designed to improve accuracy through integration with clinical data [26]. - The AI Applications product line includes "Next," an AI platform that identifies care gaps for oncology and cardiology patients, leveraging machine learning [26]. - Tempus has expanded its product offerings to include neuropsychiatry applications, such as TempusPRO, which tracks patient-reported outcomes [74]. Clinical Trials and Patient Enrollment - The Trials product has facilitated the identification of over 30,000 patients for potential enrollment in more than 250 clinical trials as of December 31, 2024 [100]. - The average time to activate new trial sites through the Trials product is approximately two weeks, significantly shorter than the industry average of 6-12 months [102]. - The company utilizes a large genomic sequencing business to identify patients that are molecular matches to clinical trials, enhancing patient access and enrollment [99]. Financial Performance and Business Model - The company has a Remaining Total Contract Value (Remaining TCV) of more than $940.0 million as of December 31, 2024, which includes approximately$300.0 million in potential future contractual opt-ins [92]. - For the year ended December 31, 2024, Net Revenue Retention for the Insights product was approximately 140% compared to the same cohort of customers for the period ended December 31, 2023 [95]. - The company’s business model allows for monetization of de-identified data, enhancing its competitive advantage as the database grows [25]. Regulatory Compliance and Quality Assurance - The FDA regulates the company's diagnostic products and services under the Federal Food, Drug, and Cosmetic Act, which includes extensive requirements for product design, testing, and marketing [173]. - The company has a current CLIA certificate to perform tests at laboratories in Chicago, Atlanta, Raleigh, and Aliso Viejo, subject to biennial inspections [187]. - The company has established a comprehensive quality assurance program to ensure reliable and accurate molecular information [155]. Partnerships and Collaborations - AstraZeneca has committed to spend a minimum of $220 million on products and services under the Master Services Agreement, potentially increasing to$320 million based on stock performance [149]. - GSK has committed to spend a minimum of $180 million under the Strategic Collaboration Agreement, with$70 million paid upon execution [151]. - Recursion Pharmaceuticals will pay an initial license fee of $22 million and an annual license fee totaling up to$160 million under the Master Agreement [152]. Technology and Data Security - The company has developed proprietary software tools that can abstract 50-100 discrete data elements per patient case in approximately one hour [164]. - The security program includes regular audits and maintains ISO 27001 certification to protect sensitive data [166]. - The company maintains significant inventory to avoid work stoppages and has become one of the largest sequencers of cancer patients in the U.S. in a few years [157]. Market Trends and Challenges - The Affordable Care Act (ACA) has significantly impacted healthcare financing and reimbursement, with ongoing efforts to amend or repeal it [210][211]. - The rules and standards used by CMS to determine reimbursement rates are frequently changing, which could materially impact results [217]. - Some large commercial payers have issued non-coverage policies for certain genomic tests, classifying them as experimental [216].