Tempus AI Inc

NASDAQ:TEM

Earnings Call Analysis

Tempus Reports Strong Q2 2024 Results and Significant Growth Outlook

Tempus delivered a strong Q2 2024, reporting a 22% year-on-year growth in its Genomics segment, driven by 4,000 additional tests. The company expects to continue generating 25% to 30% growth in test volumes moving forward. Average reimbursement increased to $1,500 per test, with a new FDA-approved assay priced at $4,500 set for further rollout in 2025. Total guidance for 2024 revenue is approximately $700 million, with expectations for increasing contributions from their Data business, currently representing 75% of revenues. The total remaining contract value is over $900 million, indicating robust future earnings potential.

Strong Start Post-IPO

Tempus has entered the public market with a solid performance, as evident from their second-quarter results for 2024. The company reported a significant growth in its core businesses, indicating that everything is moving as planned. The leadership expressed confidence in delivering strong revenue growth and achieving profitability, emphasizing the strength of their operational alignments.

Revenue Growth and Guidance

Tempus is projecting approximately $700 million in total revenue for the entire year of 2024, with expectations that the majority will stem from their Insights business, which has been growing rapidly. Historically, this revenue was split into two-thirds from Genomics and one-third from Data and services; however, this year, Data services are expected to outperform Genomics, reflecting the strong demand and higher margins associated with data licensing. The Insights segment represents roughly 75% of the Data and services revenues, which is key to the company’s financial health.

EBITDA Progress

On the profitability front, Tempus showed an improvement with an adjusted EBITDA increase of $12.7 million quarter-over-quarter. The management is optimistic about achieving adjusted EBITDA profitability, indicating that operational leverage is indeed beginning to materialize as they anticipate further growth going forward.

Significant Contracts and Revenue Stream

During the earnings call, it was highlighted that Tempus secured multiple contracts with major pharma companies, which are intact and beneficial for future revenue. The total remaining contract value is solidly above $900 million, underscoring the company's robust business pipeline. Management refrained from detailing specific contract values but confirmed that these deals are indeed substantial and pivotal for ongoing success.

Focus on Genomics and ASP Growth

In the Genomics segment, Tempus reported a year-on-year growth of 22%, complemented by 4,000 more tests conducted in Q2 compared to Q1. The average reimbursement rate for tests in Q2 also rose to approximately $1,500, which is a $50 increase from the previous quarter. This improvement is largely attributed to a favorable shift towards Medicare patients, who generally have a higher reimbursement rate than commercial payers.

New Product Launches and Market Expansion

Tempus also launched a new minimal residual disease (MRD) testing platform aimed at improving patient outcomes in oncology. Initial customer feedback has been positive, indicating a strong market reception despite a slow initial rollout due to reimbursement timelines. The pricing for their xT CDx assay is set at $4,500, expected to generate some traction as reimbursement processes develop over the coming quarters.

Sales Force and Market Challenges

The company has expanded its sales team significantly, adding approximately 60 new personnel in the first half of the year. While this should ideally enhance productivity, the rapid changes have temporarily affected efficiency. Management is confident that sales productivity will improve as the team acclimatizes in the coming quarters.

Long-Term Growth Potential in AI Applications

Tempus is also making strides in its Applications business, which leverages AI to enhance healthcare outcomes. While this segment is still nascent, the potential here is considerable, offering a promising avenue for future revenue growth. Efforts are being made to establish reimbursement pathways for AI solutions, as they are currently underutilized in clinical settings.

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by. I am Augusto, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Liz Krutoholow, Vice Investor Relations. Please go ahead.

[Elizabeth Krutoholow, executive]

Thank you. Good afternoon, and welcome to Tempus' Second Quarter 2024 Conference Call. This afternoon, Tempus released results for the quarter ended June 30, 2024. Joining me today from Tempus are Eric Lefkofsky, Founder and CEO of Tempus; and Jim Rogers, CFO.

Before we begin, I would like to remind you that during this call, management may make forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please visit our 10-Q for the quarter ended June 30, 2024, filed on August 6, 2024, as well as any future reports that we file with the SEC.

During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures, are included in our second quarter earnings release, which has been furnished to the SEC and is available on our website at investors.tempus.com.

I would now like to turn the call over to Eric.

[Eric Lefkofsky, executive]

First, welcome, everybody, to our first earnings call as a public company. We're excited to be here and happy to answer questions. I'll just maybe, for 30 seconds, give some color.

Q2 was a strong quarter as we provided some additional insight in our overview letter. Our core businesses remain on track. Everything is how you want to see it up into the right, and we're executing as we had intended both when we began the process a few months ago going public and then certainly carry into the quarter. So I would say that we feel like we're in good shape and happy to answer any questions people have.

[Elizabeth Krutoholow, executive]

Operator, we can open the line for questions, please.

[Operator]

[Operator Instructions] For our first question, Tejas Savant with Morgan Stanley.

[Tejas Savant, analyst]

Congrats on a good start out of the gate post-IPO. Eric, maybe you or Jim can chime in on this. Nice progress on ASPs here on the Genomics side in the quarter. Can you just walk us through how you're thinking about potential [ SDFs ] upside in the back half of the year. You've got the ADLT rate on xT coming through as well, but any color on how much of that is baked in versus progress on the commercial payer front would be great.

[Eric Lefkofsky, executive]

Well, I'll start by covering just the core Genomics business and volumes, and Jim could talk a little bit about on the reimbursement side. I think in terms of the overall strength of our units and the unit growth, as we covered in our overview letter, we feel like we're completely on track. We delivered roughly 4,000 more tests in the quarter in Q2 over Q1. We expect that trend to continue.

And there's obviously some kind of percentage seasonality of growth rate in that you could have fewer days in the quarter or ASCO depending on when it falls, could have some impact. But we feel like our -- the core Genomics business is performing as we expected, we feel like we can be in that 25% to 30% growth range in terms of units. And given our size and scale, at this point is certainly one of the largest therapy selection sequencers that are out there, we feel like that's a really healthy place to be. And in terms of ASP and the reimbursement, I'll I hand over to Jim.

[James Rogers, executive]

Yes. Thanks, Tejas, for the question. So our average reimbursement in Q2 was about $1,500, an increase about $50 over where it was that in Q1 of 2024. The biggest drivers in kind of that uplift were a slight mix shift to more Medicare, Medicare Advantage patients, which typically get reimbursed at a higher rate than we did from commercial payers.

As a reminder, we're primarily an out-of-network provider with commercial payers. So average reimbursement is significantly lower than what we've received from Medicare. This presents an opportunity for us going forward as we negotiate with those payers to cover kind of the various tests that we have in [ market ].

And Tejas, you also mentioned kind of the ADLT status for our xT CDx assay, which is our FDA-approved version of xT. The initial price there was set at $4,500, but that pricing process will play out over the back half of this year. So there won't be a meaningful impact to ASPs in 2024 as it relates to the FDA-approved version. But as we start to migrate volume to that version of the assay in early 2025, we should see some additional tailwinds.

[Tejas Savant, analyst]

Got it. That's helpful. And then, guys, I just want to dig in a little bit on the MRD launch. Any anecdotal early customer feedback you can share? Any sort of like differences you'd like to call out and the reception for the tumor-naive version versus NeXT Personal at this stage? And how are you thinking about volume contribution from MRD in the back half of the year? And then is reimbursement essentially a back half 2025 dynamic? Or could it happen sooner than that?

[Eric Lefkofsky, executive]

Yes. Again, I'll cover the overall launch, and maybe Jim can cover some thoughts on reimbursement. So we launched -- for those who don't know, we launched basically our entire MRD platform at ASCO with a tumor-naive assay in colorectal cancer. And then in partnership with Personalis, we brought a breast, lung and IO to market as well with a tumor-informed assay.

The -- I think the response has been quite positive even though we're both metering out volume at this point because if we kind of opened up the floodgates, you would likely have an enormous amount of volume that's at the present moment not reimbursed. So given that it takes some time to get reimbursement, we're metering out accounts that we offer the assay to and ramping up slowly so that we can kind of manage the expense side of getting the tested market. That said, everything we hear anecdotally is super positive.

I think two, as I mentioned, to a bunch of folks historically, tumor naive has a place in the market, given that logistically and administratively, it's just easier than tumor informed for many accounts that can't do an additional biopsy or don't have enough tissue to basically run a second set of sequencing, consumes a lot of tissue every time you sequence a patient. So if you've done therapy selection, [ one time ] you could do MRD for an informed assay, it can be logistically problematic. So I think naive has a place.

And then the next assay that Personalis has brought to market, which we're obviously, they're part in, is really ultrasensitive. And so there's a place for that as well, where people are really looking for that ultra sensitivity and specificity and [ real limits ] of detection. And so I think you -- we have a -- we feel like we've got a really nice MRD bag in market where we have a really good logistical product and a really ultrasensitive product, and we think we can meet the needs of the market across that spectrum, but we don't dial up those units for that volume until reimbursement is in sight. And maybe Jim can give us some comments on that.

[James Rogers, executive]

Yes. In terms of reimbursement for our internal tumor-naive panel, we're packaging that up to submit the MoldX right now. And then that process will play out. So you mentioned kind of back half of '25, Tejas. I think that's the typical time frame, but we'll certainly provide more color as that process unfolds.

[Operator]

Our next question comes from Rachel Vatnsdal with JPMorgan.

[Rachel Vatnsdal Olson, analyst]

Perfect. So first up, on the Genomics' performance in the quarter, that grew 22% year-on-year, you mentioned all tests performed well in the quarter, but I was wondering if you could unpack that for us a bit more? Walk us through even if it's from a high-level color standpoint how each test performed in 2Q. And then were there any notable shifts in terms of volume contribution by each test as well?

[Eric Lefkofsky, executive]

Yes, there was -- I mean there was nothing material in terms of like a systemic shift of how the orders came in. We have a platform that's -- we're in inherited cancer risk we're in solid tumor profiling and liquid biopsies. So we kind of cover all 3 pretty broadly. And I would say all are kind of performing in terms of both units and revenue growth as they historically have. There has been no -- there was no very large cyclical shift as if like all of a sudden, our solid tumor went one way or liquid one another. They're all kind of moving in the same direction.

They were moving in -- obviously -- or not obviously, but liquid for us was a newer product than solid. Solid was the first assay we launched and liquid came later. And so the growth rates of that product historically have been higher. But at the end of the day, as these products now get to scale, and we are at scale in terms of ctDNA assays, we're at scale in terms of solid tumor for profiling, and approaching scale at inherited cancer risk, I would suspect that the growth rates will start to normalize where you won't see very large differentials between the 3 as we keep getting bigger. And I think we've also historically said that liquid was about 1/4 of our volume and it remains as such. There's been no systemic shift there.

[Rachel Vatnsdal Olson, analyst]

Perfect. Okay. That's helpful. And then maybe just for my follow-up, can you break down for us the Data revenues into Insight trials and AI Applications in 2Q? And then if I look at guidance, you pointed us towards that $700 million mark on revenues for the year, how should we think about that mix between Data versus the Genomics business? And then is there any seasonality that we should be aware of across 3Q and 4Q for each of those segments as well?

[Eric Lefkofsky, executive]

I'll cover the first part, and Jim can take the second part, which seems to be a theme today. So in terms of the Data business, which, obviously, has some accelerating growth, we provided some color that Insights led the way. We had a really strong Insights quarter, which is our data licensing business. The Trials business grew but didn't grow as fast as our data licensing product, Insights. Insights also has a much higher margin. So to the extent, we want some part of our Data and services business growing. We want the Insights portion growing. It has the highest margin, and it's the one that we spend a lot of time focused on.

Our Trials business is really made up of a few components. It's made up of our just-in-time network, which we call TIME. It's made up of the small studies component, and it's also made up of our CRO business that we called Compass, and we are not investing as heavily in growing our CRO. It's not a core part of our growth strategy. It's an important component of what we do, but it isn't something that we focus on growing as much as we do, for example, our Insights business. So I would suspect that over time, if we continue to deliver, Insights will continue to outpace our Trials business, and so I would suspect that will be a trend we see going forward as well.

[James Rogers, executive]

Yes. And just adding a little bit of color with that breakdown. So the Insights business represents about 75% of the Data and services revenues. And to Eric's point, also growing the most quickly amongst those components.

In terms of the -- about approximately $700 million of total revenue for a full year 2024, historically, it's been kind of a 2/3, 1/3 split, 2/3 Genomics, 1/3 Data and services. Obviously, the Data and services side of things growing more quickly than the Genomics business. And so we would kind of slightly towards the Data other business over Genomics for the remainder of the year.

[Operator]

Michael Ryskin with Bank of America.

[John Kim, analyst]

This is John Kim on for Mike. Any update on the Guardant lawsuit? I know it's going to take a few years to play out, but yes, I wanted to see if you guys have any updates.

[Eric Lefkofsky, executive]

No, there's no update. And there likely won't be a material update unless something happens like -- for years, these things take a long time to get resolved. As we've said historically, we don't feel like it's material. We feel like we've got appropriate defenses, and it's not something that we're overly concerned with. And I suspect it will take years to play out.

Unfortunately, in our space, mitigation has been a pervasive component of a lot of activity, and I would expect that will continue just by nature. But we're focused on doing what's right for patients. We're focused on making sure that our tests are the best in the market and people have access, and that's where we continue to keep [indiscernible].

[John Kim, analyst]

Got you. And then in terms of the cost, they came in as expected. But looking ahead, you guys also gave us the EBITDA guide there. Any thoughts on when -- any change in your thoughts on when you're going to hit the adjusted EBITDA profitability?

[Eric Lefkofsky, executive]

At a high level, we made, I think, really strong progress in the quarter. I mean we were 12.5...

[James Rogers, executive]

$12.7 million.

[Eric Lefkofsky, executive]

$12.7 million in improvement quarter-over-quarter. So I think, as we told people, we felt like the leverage was showing up in the business, and that was demonstrated, I think, in Q2, and we would suspect additional leverage will continue as we keep growing. And so we feel like we're right on track.

[Operator]

Daniel Brennan With TD Cowen.

[Daniel Brennan, analyst]

Congrats on the quarter here on the IPO. A lot of detail in your prepared remarks or in the script that's on the website regarding the Insights business and some of the new contract signings. Maybe can you just expand a little bit there. Maybe starting with Novartis, you discussed there, you're going to deliver this throughout 2024.

Can you help kind of us think through kind of the size of that contract or any details around it? And then the new 5-year agreement with Takeda, you discussed that as a significant expansion in size and scope. Maybe can you provide some color on that contract and how we might think about sizing it.

[Eric Lefkofsky, executive]

Yes. I mean we obviously didn't include numbers for a variety of reasons, not the least of which we're sensitive to -- that we've got partners and those things. There are times that they're appropriate. Times, they're not. These are all good-sized deals for us. They're -- I think what we represented in the quarter is that we had multiple large pharma companies, and we didn't list all the smaller biotechs that we also signed various agreements with -- but we had kind of 4 larger pharma companies that all did significant deals in the quarter. And for us, it was just a sign of both in terms of the revenue we delivered in our Insights business and the bookings we delivered Q2 was a really strong data licensing quarter, and that was good to see.

We expected to see if it was good to see, and we expect that momentum to continue at least in the foreseeable future. But we don't really comment on the size of these deals unless they get so big that we kind of have effectively no choice. And these deals were really good size deals, but they weren't $300 million deals where we would be -- talk about a [indiscernible] deal.

[James Rogers, executive]

And I would also add that the total remaining contract value is still north of $900 million. So again, as Eric pointed out, we delivered a lot of revenue, but obviously, ad bookings that kind of refilled that total remaining contract value. In the other metric, which we present annually, is net revenue retention, but these are again the highlighting ones that we had agreements in place, and we're able to expand those in subsequent years. So we're excited about all the agreements that were mentioned in the release.

[Eric Lefkofsky, executive]

Yes. It's really -- another -- just to jump on Jim's comment, as one of the most exciting things about the Astellas indicated arrangements in addition to Novartis', these are people that had multiyear agreements and re-up for larger agreements or we up for larger periods of time. And so that's what you want to see -- Tempus is only 8 years old, right? We've been licensing data for 5 or 6 years. So what you want -- and which means that most of these -- most of our clients have only been clients for 2 or 3 years on the data side. So seeing big renewals occur over and over again is a really good sign that we're adding a ton of value, and that value is resonating with our [ plans ].

[Operator]

Dan Arias from Stifel.

[Daniel Arias, analyst]

Eric, maybe to your point there on data contracts, one of the questions that we got during the process was on the $900 million plus in revenues that are already contracted but -- which contains the $300 million from customers that haven't formally renewed. Can you just talk to confidence in re-upping those 2 accounts? And then maybe remind us when it is if those contracts actually come up again for renewal?

[Eric Lefkofsky, executive]

Yes. I mean, they've actually -- both contracts have work actually already been extended in terms of timing. So I think in one of the amendments, we [ add ] another year, I think, to AstraZeneca, something like that. And we have a longer duration now going out with GSK as well. So we have -- we've got, I don't know the exact dates, but I'll say roughly 2027, '28, summer of '27, '28. So these contracts go kind of years in the future, so there's no immediate clips coming up, and we feel good about all of our larger deals in terms of the value that we're delivering, and we would suspect that the vast majority of all our big deals renew and hopefully expand.

[Daniel Arias, analyst]

Yes. Okay. And then just as a follow-up on the excess asset. Do you think you end up submitting that this quarter? Or is it best to think about it as by the end of the year?

[James Rogers, executive]

Sorry, Dave, I didn't catch that one. What was that?

[Eric Lefkofsky, executive]

Excess of what?

[Daniel Arias, analyst]

The submittal of the assay to the FDA, I was under the impression that, that was -- that's a process that's ongoing now. I'm just curious whether you think you get over the hump on that in the next couple of months? Or is it more like in December?

[Eric Lefkofsky, executive]

I don't have the exact timing, but it's -- those teams are working on a submittal that's fairly imminent. And so I think the bigger issue for us is both in terms of RNA and our liquid biopsy, we've got efforts in place for both to submit. And whether it's 1 quarter away or 2 quarters away, it's -- these things are all kind of imminently coming.

[Operator]

Andrew Brackmann with William Blair.

[Andrew Brackmann, analyst]

Maybe on the rep side of things, I know you added a few -- or I think it was somewhere around 30% in the first part of the year, so can you just give us an update on the productivity of that new cohort as well as just sort of working through any sales force changes or disruptions that may occur as a result of that?

[Eric Lefkofsky, executive]

Yes. I mean productivity is not where we want it to be. That's the nicest way for me to say that. I mean we added -- I think it was probably closer to 60, not 30, in terms of total heads that got added in a fairly short duration across the entire sales infrastructure. So we added a lot of folks in the first half of this year. We made a lot of territory changes. We introduced a new assay. And the combination of adding a lot of people, changing a lot of territories and adding a new assay means that our -- the efficiency of our sales force in Q2 was not where we want it to be.

We continue to see improvement, and I'm confident we'll get back to where it was in Q3 or shortly thereafter. But at the end of the day, when you're growing as quick as we are and you're adding a lot -- bunch of new assays, from time to time, you have these step functions and territorial change, and you've got to manage it really well. And we're a young company, and we're always going to have some amount of bumps to get over.

We see in the numbers. We kind of -- as you can see the numbers, we managed through all that and still grew the Genomics business at 22%. So we feel good about it.

[Andrew Brackmann, analyst]

Perfect. And then maybe just on the PurIST algo, first, can you just remind us the importance of that test for your portfolio and how it can be a differentiator? But then also, you received the PLA code last month, so how are you thinking about obtaining potential reimbursement there or to be sort of a first in the process to obtain reimbursement for these AI test?

[Eric Lefkofsky, executive]

Yes. It was very exciting to be the first company ever had to have on these algorithms get a code and get to this point. It's very cool. But I think the way I think about this business and our apps business in general is we're fortunate that we have a Genomics business that's healthy and growing with high margin. We have a Data business that's healthy and growing with high margin. And so in the near term, we don't have to rely on our apps business to generate lots of revenue, which is a very good thing because we, as a country and as a health care system haven't figured out how to pay for AI.

We haven't figured out when it should be ordered. We haven't figured out how it should be delivered. We haven't figured out how it should be paid for. It's just too new of the space. And so even though we're excited that, a lot of these codes are getting issued and physicians want these kind of algorithmic diagnostics, we still have a ways to go before we can figure out how to get it in the guidelines, how to get into routine practice and how to ultimately get reimbursed for these kind of tests. And I would suspect that's a kind of a multiyear journey.

We also had our cardiac algorithm to predict atrial fibrillation, was also approved by the FDA, which is amazing. But again, there's not currently a reimbursement pathway for that test. So we need to work on demonstrating -- we've obviously already demonstrated analytical validity. Now we got to demonstrate clinical validity and ultimately convince payers that it's in their best interest to pay for these kind of tests. So that's a multiyear journey.

I would suspect that we'll continue to bring many algorithms to market. And our hope is to build a very broad portfolio of lots of algorithmic diagnostics that are part of our Applications business and to begin this journey of getting reimbursed. And to the extent we're successful, this could be a very big business one day. I mean as we've said historically, it could dwarf the other business. But it is a long journey, and I can't tell you that we're 6 months or a year away from seeing light at the end of the tunnel, it's just too new. So as we know, we'll let you know.

[Operator]

[ Mark Chappell ] with [ Loop ] Capital Markets.

[Unknown Analyst]

Congrats on the quarter and the IPO. Eric, kind of building on the earlier question. I was just wondering if you could just talk about the uptake of your emerging AI Applications business. I know it's still early days, but maybe just talk about what you saw in the quarter on that front. And then, maybe just talk a little bit more about your efforts and initiatives to kind of get those solutions into the health care ecosystem, if you would.

[Eric Lefkofsky, executive]

Yes. We have -- it's a really promising story, but it's super tiny in terms of revenue. So the growth rate of our Applications business is really high, but it's also relatively small because, again, this stuff, we, as a health care system, haven't figured out how to pay for a lot of these applications. So the core components of our Apps business today, our Applications business today, we are the biggest next, where we're basically closing care gaps in real time and then we have a series of algorithms, whether that's across digital pathology or cardiology that are also algorithm-based.

But if you look, for example, at Next, just take that one product, it's an amazing product in that we're able to scan real-time clinical data, a relatively real-time clinical data and see essentially errors or mistakes occurring in real time, where there are guidelines established and there's routine practice. And yet for some reason, some patient has fallen through a care gap. And it happens in health care. It's just part of the system. No one's perfect. Using AI and technology to spot those and try to correct them is really powerful in terms of the benefit it provides, patients and physicians.

How you get paid for that, though, is a bit harder. And so again, we're experiencing, I would say, really positive, strong signs of adoption. People want these kind of applications. They're excited to deploy them. We're making a ton of progress, but there's still a significant amount of work we have to do as a system, not just Tempus, but anyone who's in AI in health care to get these things paid for at scale. And so that's what it takes us from being a high growth but small business to a high growth in a big business.

[Operator]

Ryan MacDonald with Needham.

[Ryan MacDonald, analyst]

Congrats on the successful quarter and IPO. Eric, I'm kind of curious, from our health care IT side of things, we've actually seen the data space as one that's been really challenged in terms of the level of investment or spend that a lot of large pharmas and biotechs are willing to allocate this year from other vendors. Can you just talk about why you've been able to see so much success on the data side of the business and how you're differentiating there? And then maybe within the quarter sort of with the mix of expansions versus net new logos you brought on in the Data business.

[Eric Lefkofsky, executive]

Yes. I mean we're experiencing really positive momentum and really strong growth in our Data business, I think, in a very tough background. And I think you highlighted that. I mean the macro conditions are not great. You have biotechs, especially smaller biotechs that have had a really hard time raising capital for the past several years. And big pharma has been really conscientious about its R&D budgets. And so we're growing really quickly and continuing to sign big deals despite what I think of as a tough environment.

So I think I'm hopeful that the next year or 2, when the environment changes, and I believe it will change. I think biotech will eventually be able to go public again and raise capital, I think we're going to have some really nice tailwind to that business.

But at the end of the day, the reason that I think we're growing is it's a very simple equation. If you deliver something of value that people want that's helping them improve their efforts in early-stage discovery, improve their ability to design clinical trials, improve their ability to develop assets more efficiently and bring them to market, get clinical trials, close quicker, these things are all a big deal and companies are willing to pay money, but you got to demonstrate that value. So in tougher markets, there's kind of nice-to-have and need-to-have. And Tempus at least at the present moment is kind of need-to-have data for a lot of people. And I think you're right, probably cutting back on budgets for nice-to-have things.

[Ryan MacDonald, analyst]

Very helpful color. Maybe as a follow-up. On the Genomics side, given all the positive news that you continue to receive in terms of reimbursement for assays from CMS, you talk about how you're sort of going about using this in discussions with the commercial payers to potentially improve reimbursement? And what sort of stage are we at in sort of the progression of those discussions?

[James Rogers, executive]

Yes. So I think on the commercial payer side, we're certainly on the same journey that kind of all sequencers have kind of followed. Getting CMS coverage is great. That unlocks and FDA approval. Somewhere that unlocks kind of the ability to have these discussions with commercial payers. We have gone in network with Cigna, Humana and Aetna, and so we have started to make some progress. Still, plenty of work to be done. And we're having those discussions, but they just take a long time to play out. So over the next few quarters, we'll certainly share the progress [indiscernible].

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.