Eric Lefkofsky, co-founder of online coupon flop Groupon, is about to unleash his latest creation onto public markets and tap into investors' obsession with artificial intelligence via the up to US$410.7m Nasdaq IPO of Tempus AI.
A nine-firm syndicate led by Morgan Stanley, JP Morgan and Allen is marketing 11.1m new Class A shares in the AI-driven life sciences diagnostics provider at US$35–$37 each ahead of pricing on Thursday.
Lefkofsky's early success with Groupon turned him into a billionaire but the daily discount website fizzled out within a year or so of its late 2011 IPO that valued it at nearly US$13bn compared with less than US$600m now.
This time, and in a US IPO market slowly building its pipeline of AI plays, the seasoned entrepreneur is pitching Tempus with a fully diluted market cap of around US$6bn.
That translates into a relatively expensive 6.5–7 times forward revenue and several turns higher than listed peers such as Guardant Health.
"The company will be comped to high-growth life sciences tools and diagnostics companies but it also has the AI pixie dust," said a banker close to the offering.
Tempus collects, structures and analyses vast amounts of clinical, imaging and molecular data to help accelerate the discovery of novel drugs, predict the effectiveness of treatments and diagnose disease earlier.
Last year the company reported a net loss of US$214m on revenue of US$532m, up 66%.
Most of its sales come from its genomics product line to study DNA/RNA for genetic variation, molecular genotyping and other pathology testing to healthcare providers, life sciences companies and researchers.
Fixation
Lefkofsky started Tempus in September 2015, about a year after his wife was diagnosed with breast cancer.
"During her treatment, I became frustrated by how small a role technology played in her care and I became fixated on how data and artificial intelligence might improve outcomes, not just for her but for all cancer patients," he said in the online roadshow presentation.
"Our 'a-ha' moment came when we realised doctors routinely interact with all kinds of laboratory tests and if we could embed AI into the results themselves, we might be able to seamlessly infuse AI into the healthcare system and advance precision medicine."
Lefkofsky will own 30.1% of Tempus' Class A shares post-money and all the super-voting Class B shares to give him 65% control.
In April, Tempus raised US$200m from SoftBank Group through the sale of securities that convert into equity at 90% of the IPO price. It also counts Google owner Alphabet and UK fund manager Baillie Gifford as investors following earlier funding rounds.
The IPO comes with staggered lockup arrangements that could allow employees, including Lefkofsky, to sell inside the standard 180-day restriction, assuming the stock is up by 30% or more.
Tempus expects to use about US$74.5m of the proceeds to cover tax obligations on restricted stock units held by management and employees. It could also use some of the proceeds to repay a US$265.8m term loan provided by Ares Capital.