Updated Tuesday, Sept. 5
It's the end of the line for digital primary care provider Babylon Health. The company agreed to sell most of its assets to U.S.-based eMed Healthcare through a bankruptcy process.
Babylon's U.K. subsidiary went into administration last week. Babylon’s U.S. business entered into Chapter 7 proceedings in the U.S. earlier in August.
Restructuring firm Alvarez & Marsal Europe LLP issued a press release Aug. 30 announcing that it had been appointed administrator over Babylon Group Holdings Limited and one of its subsidiaries, Babylon Partners Limited.
Immediately following the appointment, a sale of certain of the companies’ U.K. businesses and assets was completed to eMed Healthcare UK Limited, a subsidiary of the U.S.-based healthcare services company, the firm said. Those assets include the majority of what was left of Babylon Health, including technology-driven preventive healthcare service that currently serves 700,000 patients, according to the company.
"The appointment of administrators over Babylon’s UK business to facilitate a sale to eMed ensures the least possible disruption for Babylon users, which should continue to operate as normal," Andrea Jakes, managing director, Alvarez & Marsal Europe LLP, said in a statement.
In the U.K., the company provides Babylon GP at Hand, an online-first primary care medical service under a contract with the National Health Service. TechCrunch reported that Babylon GP at Hand is not a part of the sale, nor was put through any insolvency process, according to a spokesperson. That service is still operational.
Founded in 2013, Babylon operated an integrated primary care model that leverages remote patient monitoring to intervene and treat sooner. It also offered a healthcare app for AI-powered diagnosis and video appointments, with a value-based care platform called Babylon 360.
The once high-flying digital health startup was among a string of health tech companies to go public via deals with special purpose acquisition companies. In October 2021, the company went public via a $4.2 billion SPAC deal with Alkuri Global Acquisition Corp.
In a filing (PDF) with the U.S. Securities and Exchange Commission (SEC) on Aug. 31, Babylon Holdings Limited said that after exploring strategic alternatives, substantially all of the company's remaining assets in the form of its U.K. business have been acquired by eMed.
"The new go-forward organization will be focused on continuing the day-to-day operations of the UK business. We will continue to provide quality care and services to our NHS GP at Hand, direct-to-consumer and private patients and members," the company said in the SEC filing. "The sale will provide financial stability and allow us to positively impact the lives of many more people within the UK and carry on exploring innovative approaches to proactive healthcare."
As a result of the sale and the previously announced exit of the core U.S. business, the remaining entities controlled by Babylon Holdings will be expected to be wound down in accordance with applicable geographical jurisdiction processes, the company said.
"This sale will not provide for any payment to Babylon’s Class A ordinary shareholders and other equity instrument holders," the company said in the SEC filing.
Babylon expanded in the U.S. market quickly in 18 months but burned through cash as its losses ballooned.
In 2022, the company reported a net loss of $221 million on $1 billion in revenue. In May, Babylon reported a first-quarter loss that doubled in size compared to a year ago. The company saw its losses grow to $63 million in the first quarter compared to $29.1 million in the first quarter of 2022.
In May, the company announced it would be taken private through a deal with digital neurotherapy company MindMaze, but that take-private arrangement collapsed a month ago.
With the current funding environment, Babylon will not be the last digital health startup to fail, noted Nathan Ray, a partner at West Monroe.
"I imagine we're going hear more of this as the funding environment and cost of capital has played out to the point where many of these companies that were pre-profitability, maybe even pre-revenue, they're just not in an economic environment that can sustain them anymore," Ray told Fierce Healthcare.
He added that there are lessons to be learned from the fall of Babylon.
"Exciting ideas and successful ideas often take very different trajectories and we confuse one for the other, because of marketing or cash inflows or other things. In an economy that that values money more than we did a couple years ago, it is much better to have an idea of the value you're creating and then create a platform that allows that to grow, rather than to grow something and then ultimately try and achieve value after the fact," he said.
Updated Monday, Aug. 21
Beleaguered digital health company Babylon Health filed for bankruptcy in Delaware for two of its subsidiaries as it looks to liquidate its assets.
The company shuttered its Austin, Texas, headquarters earlier in August and laid off 94 employees as it struggled to secure more financing to continue operations. The moves come after Babylon's take-private deal with digital neurotherapy company MindMaze collapsed.
The company filed for Chapter 7 bankruptcy on Aug. 9 for Babylon Healthcare and Babylon Inc., indicating that it plans to liquidate assets rather than attempt to restructure.
Both Babylon subsidiaries list hundreds of creditors with liabilities between $100 million and $500 million, according to the filing signed by Chief Operating Officer Paul-Henri Ferrand. After any administrative expenses are paid, no funds will be available for distribution to unsecured creditors, the company said in the Delaware bankruptcy court filing.
The London-based company, which went public in October 2021 through a $4.2 billion SPAC deal, filed a notice with the Texas Workforce Commission Aug. 8 saying that it would "permanently close" its Austin office Aug. 7.
Forbes first reported the layoffs. A Babylon spokesperson could not be reached for comment.
The company also is looking for a buyer for its U.K. business.
Founded in 2013, the company bills itself as a digital-first, value-based primary care company. It offers a healthcare app for AI-powered diagnosis and video appointments, with a value-based care platform called Babylon 360. In 2022, the company reported a net loss of $221 million on $1 billion in revenue.
In May, Babylon reported a first-quarter loss that doubled in size compared to a year ago. The company saw its losses grow to $63 million in the first quarter compared to $29.1 million in the first quarter of 2022.
In late June, the digital health company, which faced mounting losses, announced it would go private in a deal with digital therapeutics company MindMaze and Babylon creditor AlbaCore Capital. That take-private deal dissolved, leaving the company on the brink of bankruptcy.
Babylon said it was shutting down core operations in the U.S. while searching for a buyer for its U.K. business. It said it was pursuing "divestiture of its U.K. business to third parties that may provide financing to assure the continuity of the operations." However, any sale to a third party will be subject to AlbaCore’s rights under its debt agreements with Babylon, and sale proceeds are not expected to exceed Babylon's debt to AlbaCore, the company said in the press release.
If the company's secure financing or no acquisition deal is reached, Babylon said it would have to file for bankruptcy protection or find another way to wind down its operations.
In the press release, the company said it would "safely transition its US members to other providers." The company did not provide any more detail on who would provide care to Babylon's existing U.S. patients.
Babylon also said it would continue with the sale of Meritage Medical Network, an independent physicians association, which it previously announced in October.
"We were actively seeking financing that would have allowed us to continue the company as a going concern. In our efforts, we diligently pursued several financing and transaction options which would have provided us with sufficient financing to postpone or potentially avoid a shutdown and ultimately a liquidation," the company wrote in its notice to the Texas Workforce Commission. "Unfortunately, however, a deal could not be reached with any investors or lenders and, as a result, we are now forced to cease operations, liquidate its remaining collateral and shut down the business."
Fierce Healthcare obtained a copy of the Worker Adjustment and Retraining Notification Act (WARN) notice.
Under the federal WARN Act, some employers are required to provide notice 60 days in advance of plant closures or mass layoffs.
"While we would have preferred to give employees at least 60 days of advance notice of this decision, we reasonably believed in good faith that providing such notice would have made it impossible for us to obtain the needed capital we sought with multiple parties over the last several months. We are therefore providing employees with as much notice as possible," Babylon wrote in the notice.
According to its latest annual report, Babylon had 1,895 employees at the end of 2022, with 35% in the U.S.
The company says its offerings include value-based care, clinical services and software licensing, supporting patients in 15 countries.
At the end of 2022, Babylon had 261,000 U.S. value-based care patients, according to its annual report.
The company also has made a number of acquisitions to expand its U.S. business such as buying health kiosk company Higi Health in 2022.
In March, Babylon rolled out personalized programs for high-risk members living with chronic conditions. The chronic conditions targeted include diabetes, hypertension, anxiety, depression, low back pain and prenatal care.
In the U.K., the company provides Babylon GP at Hand, an online-first primary care medical service under a contract with the National Health Service.
At the annual J.P. Morgan Healthcare Conference back in January, Babylon founder and CEO Ali Parsa shrugged off the company's plummeting stock price and said Babylon's story and stock are "misunderstood."
"The story of our stock is almost super simple. We were brought public through a SPAC," Parsa told investors and executives during a presentation at JPM. "Our SPAC happened in October 2021 at a time when almost all the SPACS fell apart."
Parsa also predicted that Babylon would be profitable "in the near term."
"It might be the end of next year [2024] or the beginning of the year after [2025]. We will break even," Parsa said during JPM in January.