In the eight years since its launch in the U.K., Babylon has grown rapidly and expanded its presence from Rwanda all the way to Missouri.
Users of Babylon's digital platform increased 55% year-on-year to 8.2 million in the first six months of 2021, the company recently reported with its 2021 first-half financial results.
Founded in 2013, Babylon offers a digital healthcare app for AI-powered diagnosis and video appointments that covers 24 million people across four continents, according to the company. Revenue in the first half of this year swelled by 472% to reach $128.8 million compared to $22.5 million during the first half of 2020.
According to Babylon CEO and founder Ali Parsa, the healthcare delivery system is on the verge of a fundamental overhaul and he aims for the company to be a leader in that movement.
"I think somebody in healthcare will build one of the world’s largest and most valuable companies and there may be more than one. Every decision we make at Babylon is about that long-term game," he told Fierce Healthcare.
Babylon's growth strategy will get a boost from its merger with a blank-check firm led by former Groupon chief Rich Williams, at a pro-forma equity valuation of $4.2 billion. The SPAC deal with Alkuri Global Acquisition Corp. will provide up to $575 million in gross proceeds to Babylon, including $230 million private placement from investors such as AMF Pensionsförsäkring and Palantir Technologies.
That deal is expected to close later this month. Once the merger is closed, the new company will become Babylon Holdings Limited and will be listed on the New York Stock Exchange under the ticker symbol BBLN.
Babylon joins a growing list of health tech and digital health companies jumping into the public market.
A SPAC deal is a more efficient way to go public versus a traditional IPO, Parsa said.
"If you are a company where disruption and innovation are in your DNA, then by definition, you're going to look at things and say 'Is that a better way of doing something, is it faster or easier?" he said.
The company says that it's digital-first services result in more preventative healthcare rather than reactive sick care, resulting in better patient health, improved patient experience and reduced costs.
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It has expanded its digital health services to countries including Rwanda in Africa, the United States and Canada.
The company has seen massive growth, with annual revenue jumping by 400% in 2020, according to its investor presentation. Babylon reported $16 million in unaudited revenue in 2019 and that grew to $79 million in 2020, a 394% year-over-year increase. The company is projecting revenue will jump to $321 million in 2021, reach $710 million by 2022 and top $1.4 billion by 2023.
But the company also still has sizeable losses, reporting a net loss $76 million in the first half of 2021, which actually improved from a net loss of $91 million the same period a year ago.
Babylon has been growing at a rate of 4x for several years, Parsa said.
"It took a long time for us to build a value proposition that works," he said. "Once you build it, then it’s just a matter of gradually but surely opening up the capabilities for more people to come on our platform. We're now picking up more capabilities to maintain that growth."
The digital health market is getting increasingly competitive and this was accelerated by the demand for virtual care and app-driven healthcare services during the COVID-19 pandemic. But there continue to be significant tailwinds propelling Babylon's growth, according to Parsa.
"There is a massive shift happening from analog to digital on one hand and from fee-for-service to value-based care on the other hand," he said.
Babylon's offerings include Babylon 360, a digital-first value-based care service that includes the option for telehealth visits, and Babylon Cloud Services, a suite of digital self-care tools for patients and doctors, including an AI-enabled symptom checker. Its digital-first care network provides members with a "care pyramid" that shifts the majority of member interactions to the mobile device and provides timely and targeted in-person care when needed, according to the company.
In 2020, the company helped one patient every five seconds with approximately 6 million patient interactions, Babylon executives said.
The company makes money by taking on medical risk for its members and looking for cost savings and through licensing fees for its software, according to its investor presentation.
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Scaling up in the U.S. market
In the past two years, the company has gained strong traction in the U.S. and has recently been making a big push into the market by buying two California-based medical practices. The company acquired Meritage Medical Network and First Choice Medical Group and opened an office in Palo Alto. It's part of the company's strategy to explore how to provide "seamless, integrated care" moving from virtual to in-person, Parsa said.
In May 2020, Babylon acquired an option to buy Higi, the maker of FDA-cleared health kiosks, representing its first official U.S. investment. It intends to acquire the remaining equity stake in Higi it doesn't currently own, the company said when it announced the SPAC merger deal.
Babylon covers three million lives in the U.S., 84,000 of which are capitated, and has licensed providers in all 50 states, according to the company's data.
"The U.S.is a very important market for us, it's where 40% of all expenditures in healthcare are happening in the world. This is a market of massive needs and a market that requires massive re-engineering. We've seen demand for what we do, which is to manage a patient throughout their care continuum," Parsa said.
Parsa envisions a future healthcare system that collects continuous, real-time data on patients and analyzes that data to intervene early and keep them healthy rather than reacting when patients get sick. Data analytics software company Palantir has taken a strategic stake in Babylon and Parsa points to this partnership as an opportunity to apply advanced data analytics to patient health data.
"We can fundamentally change the experience of healthcare," he said.
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A crowded digital health playing field
Babylon faces intense competition in the U.S. market as it works to expand, especially from big virtual health players such as Teladoc and Amwell, as well as tech-enabled primary care companies like One Medical and Oak Street Health. And the big tech players Amazon and Google also are moving deeper into healthcare.
Whether Amazon is massive enough to deliver services as opposed to goods remains to be seen, Parsa said.
"Even if Amazon had a $300 billion healthcare business in the U.S., that’s still only 10% of U.S. healthcare. What happens with the other 90%? People get excited about all these big companies coming in. Amazon still makes the vast majority of its money in retail and then plays in lots of other things. Google makes the vast majority of its money in advertising and plays in other things," he said.
Babylon has plans to expand in Southeast Asia but is currently focused on opportunities in the U.S. market.
"Our natural tendency is to go to another market that is very different [from the U.S.] then get those learnings and bring everything together by expanding faster," Parsa said.