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TD Cowen, JP Morgan Initiate Coverage of Tempus AI With Buy, Overweight Ratings

Note: This story has been updated to include JP Morgan's coverage initiation.

NEW YORK – TD Cowen said on Tuesday it has initiated coverage of Tempus AI with a Buy rating on its stock and a price target on the firm's stock of $50 per share, while JP Morgan initiated coverage with an Overweight rating and a price target of $42 per share.

Cowen analyst Dan Brennan said in a note to investors that Tempus has reported high test volumes and rapid growth, and he expects strong growth and rising margins. He said Tempus' data business also has an $800 million backlog that demonstrates the pharma industry's interest in using the firm's data, analytics, and AI tools.

Brennan noted that the firm's genomic, electronic medical record, pathology, and imaging data allow for more effective R&D and the company's database is between 10 times and 50 times larger than peers. By focusing on AI and analytics, Tempus has already yielded about $170 million in high-margin sales, he said.

Meanwhile, JP Morgan Analyst Rachel Vatnsdal said in a note to investors that Tempus has successfully monetized its scaled database of clinical genomic data through licensing agreements with pharma and biotech customers. She is modeling 33 percent compound annual growth rate in the company's revenues through 2027, and she expects that the company will have a positive adjusted EBITDA by the second half of 2025.

Vatnsdal wrote that Tempus' genomics business has grown at a rapid pace since 2021, excluding COVID-19 testing and added that business seems poised to continue growing by leveraging its genomic and clinical data to produce comprehensive patient reports. The company also has inked agreements with 19 of the top 20 pharma companies for the use of the firm's multimodal data, and it has enterprise-level contracts worth hundreds of millions of dollars with companies that use Tempus' datasets in R&D and clinical trial enrollment.

Tempus priced its initial public offering at $37.00 per share in June, and shares of the company were trading on the Nasdaq Global Select Market at $33.20 as of the close of the market on Monday. In early trading on Tuesday, its shares were up about 5 percent to $34.79.

The Chicago-based firm's flagship Tempus Platform is used to collect and apply healthcare data, and the company said this spring that its goal is to embed AI into every aspect of diagnostics to allow for data-driven patient-specific decisions.

The firm also offers clinical next-generation sequencing for oncology, and it previously reported that its NGS testing volume rose from about 31,000 samples in 2018 to 288,000 samples in 2023.

Brennan wrote that Tempus is a differentiated oncology diagnostics company and its focus on the development of a large multimodal clinical database presents an opportunity for the firm to help revamp biopharma research and development.

In addition to oncology, Tempus has been offering its platform for use in disease areas including neuropsychology, radiology, and cardiology, and the firm has said that it intends to deploy its platform in all major disease areas.