Beleaguered digital health company Babylon Health finalized plans to go private and will combine with digital therapeutics company MindMaze.
The take-private proposal comes from investment manager AlbaCore Capital, and the transaction provides for a new capital structure with a significant reduction of pro forma company debt, the company said in a press release. The transaction will include "immediate material funding for current business operations as well as a commitment to fund the combined business, allowing the pro forma company to focus on its strategy of delivering concurrent growth and profitability over the near to mid-term," the company said.
The deal also will result in a "substantially strengthened and more flexible financial profile," the company said.
Babylon will receive $34.5 million in interim funding in addition to an amendment of its $300 million loan agreement from AlbaCore. The proposed deal, which is expected to close next month, will not provide for a payout for Babylon's shareholders as a condition under AlbaCore's loan facility, according to a Securities and Exchange Commission regulatory filing (PDF).
The London-based digital health company announced last month plans to be taken private as it continues to be saddled with mounting losses. Babylon Health went public less than two years ago, and, in May, it reported a first-quarter loss that doubled in size compared to a year ago.
Babylon saw its losses grow to $63 million in the first quarter compared to $29.1 million in the first quarter of 2022.
"The proposal strongly positions Babylon to accelerate its core mission—to make high quality healthcare more accessible and affordable by combining the most cutting-edge technology with the best medical expertise," Babylon executives said in a press release issued Friday. "In combination with MindMaze, a global leader in brain technology and digital neurotherapeutic solutions for brain health and recovery, the pro forma business is positioned to uniquely address patient and member needs across the continuum-of-care, from healthcare through sick care. Collectively, the new organization is positioned to become a leading value-based care platform with cutting edge technological, clinical and operational ability to both provide holistic primary care and effectively diagnose, manage and treat major episodic and chronic diseases."
MindMaze developed a neuro-rehabilitation video game platform and has raised $340 million to date, according to Crunchbase, including an unspecified investment from actor Leonardo DiCaprio. The startup raised $105 million last year after it picked up $125 million in 2021.
The company’s tech employs brain sensing, motion capture and artificial intelligence plus virtual and augmented reality platforms to help deliver a series of customizable video games that aim to ease the brain through the process of recovering from neurological damage and regaining function in cognition, balance and movement, Fierce Medtech's Conor Hale reported.
The combination of Babylon Health and MindMaze will form a "powerful digital-first global AI-driven healthcare business that will help transform the industry from sick care to predictive and preventative healthcare," executives said in the press release.
Babylon and MindMaze plan to tackle a broad range of chronic conditions, including but not limited to neurological conditions.
Babylon Health shares have been on a steep slide since reaching a high of $272.50 per share right after it went public via a SPAC merger in October 2021. On Friday afternoon, the company's stock traded at 77 cents per share.
As part of the take-private proposal, Babylon will stop trading on the New York Stock Exchange.
Founded in 2013, Babylon operates an integrated primary care model that leverages remote patient monitoring to intervene and treat sooner. It offers a healthcare app for AI-powered diagnosis and video appointments, with a value-based care platform called Babylon 360. The company says it supports a global patient network across 15 countries and operates in 16 languages. In 2021 alone, Babylon helped a patient every six seconds, with approximately 5.2 million consultations and AI interactions, according to executives.
Babylon has grown rapidly. But as its revenue has expanded, so have its losses. After going public in 2021 via a blank-check company, the company announced a reverse share split last fall intended to boost the company’s stock price so it wouldn’t be delisted.
In 2022, Babylon reported revenue of $1.1 billion, up significantly from 2021's $323 million. But the company also was dragged down by $221 million in losses, up from a loss of $83 million in 2021.
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Looking at the company's performance in the first quarter compared to a year ago, net income in the first quarter of 2022 included a $78.8 million gain primarily relating to the company going public, so, once adjusted for this, net losses improved $44.7 million year on year. Net loss improved from $100.1 million in the fourth quarter of 2022 to $63.2 million in the first quarter of 2023.
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 previously 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 March, Babylon Health rolled 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.