Tempus AI, Inc. Class A Common Stock Morgan Stanley 24th Annual Global Healthcare Conference

I think both the quarterly performance and I think the year performance has really been anchored around 2 main themes. One is the core strength of our diagnostic business, in particular around comprehensive genomic profiling, and how durable those unit growth rates are, both in terms of solid tumor profiling and liquid biopsy. So you have this very strong therapy selection business in terms of demand that also has rising ASPs, and so that's one of the big bellwethers of our business. It's the biggest part of our business. So even though MRD has higher growth rates, it's the biggest part of our business. So our diagnostic unit has been buoyed by really strong demand that we don't see slowing down. On the other side, the data business continues to perform really well.

I think our data licensing business grew at about 36% or something in the last quarter. Really continued strong growth, and we've had something like three quarters in a row of more than $100 million of TCV. I think last quarter was around $200 million of TCV add, meaning our bookings for that quarter, people signing new data licenses were $200 million or whatever that was. Really strong demand that I think is starting to really be catalyzed by migration to AI solutions by biopharma. Every time you turn around, they're announcing a deal to bring in NVIDIA chips or cut a deal with Anthropic or OpenAI for inference and compute, and we're the fuel that makes a lot of that spend intelligent, so we just have seen a frenzy of demand.

Yeah. We've long said that we would rather have a business growing at 25% for a decade than 35% for a few years. We just architect ourself around long-term growth. On the diagnostic side, that business is really going to be benefited by not just this robust demand in terms of therapy selection, but really significant rise in ASP. We have two big levers that are going to work in our favor, I think. One is our main solid tumor assay got FDA-approved, not just tumor normal, but also tumor-only, which allows us to migrate that entire platform to ADLT pricing. That should add somewhere in the neighborhood of $80 million-$100 million of incremental ASP lift and profit and free cash flow and all the things that comes with it if you didn't reinvest next year alone.

Our second-largest, our product, our liquid biopsy, which is also quite large in terms of units, that is in front of the FDA now. We expect that will be approved at some point. That also will have ADLT pricing. The benefit to us is that that assay is roughly similar in size to Guardant's larger assay that just got approved, and they signaled that they're getting ADLT pricing, or they expect ADLT pricing north of $8,000. So we had historically thought that assay would be priced at, let's say $5,000 or $6,000, but now it looks like it'll be priced closer to $7,000 or $8,000. So that should add something like $250 million or $300 million of lift on an annual basis once that's approved. So you just have these really big revenue drivers that will accrue to the benefit of the diagnostic business in therapy selection.

We have the same thing happening in MRD. We have even stronger unit growth rate, rising ASPs, so that business for the next, whatever, three to five years will likely just have really robust revenue growth. At the same time, as I just mentioned, the data business, you have record demand, and you have this migration to people leveraging these large language models for their benefit is not going to slow down or stop. In fact, it's probably going to accelerate because these people are just now starting to leverage those technologies. I think the data business also has really long-term visibility. If anything, if you said to me today, "Are you going to under or over-deliver that 25% growth rate?" If you got to bet at all, every day of the week and twice on Sunday, we over-deliver.

Yeah. We have long thought that Personalis' assay was best in class. It's whole genome based. It has incredible sensitivity and specificity. Its limits of detection are really extraordinary. So we have long thought that it was a best-in-class assay, and we had cut a deal with Personalis years ago to be their exclusive distributor in the U.S. or in the world. I think it's U.S. I am not sure if it's U.S. or world based. U.S. In the U.S. So, we thought that that was a great way to enter the market, and the deal was structured where they were paying us basically a sales and marketing fee to distribute the assay, whether or not they got paid or not. For the last several years, this deal was largely in our favor, right? Because we were getting paid about $400 per test.

They were not getting paid because they did not have reimbursement approved, and so it was just in our favor. I had been pretty vocal that why would you want to change that? You have to wait until the things flip. When they got lung and breast and recently IO approved by MolDX, it became apparent to us that we were getting close to that point, that their ASPs would rise pretty dramatically, and that there would come a time in the next few months, few quarters, whatever, where their ASPs would actually be higher than they are paying us. So we began having conversations. This is all kind of detailed in the S4 that was filed. We began having conversations. Those conversations were accelerated when another party showed up and made an offer to buy the company.

Whereas we may have bought them toward the end of the year or maybe early next year, we accelerated it by a few months because there was all of a sudden some activity. It makes a ton of sense in that it's a best-in-class assay. The unit growth is really strong. We're already distributing it, so it's already a part of our portfolio, and they will have ASPs that will rise. They'll get to $1,000. They'll get north of $1,000, similar to Natera, and it'll become a really strong financial product. It makes a ton of sense inside our platform.