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Babylon performance after float a ‘disaster’, chief says

by Ozva Admin

The chief executive of Babylon, the British health care service that rose in popularity during the pandemic, described the company’s stock performance since it went public last year as an “absolute and unbelievable disaster” that required significant restructuring of the business.

Ali Parsa had turned down a London listing of the group, which had grown rapidly through partnerships with England’s NHS, in favor of listing on the New York Stock Exchange through a special acquisition company.

But shares in the digital healthcare service have fallen 90 percent since its debut on the stock market in October last year, prompting it to focus its business on the US market and engage in painful cost-cutting.

“What an unbelievable and utter disaster, with the benefit of hindsight it’s super simple to understand,” Parsa told the Financial Times. “We learned a big lesson, which is that we should have thought a lot more through Spacs.”

“[We were] unfortunate at the time, or we made wrong decisions, but now we fix it,” he added.

Babylon was one of the victims of the sudden turnaround in enthusiasm for the so-called Spac deals and struggled to secure support from US institutional investors at a time when the company was not well known in North America.

Parsa, a British-Iranian businessman and former banker, founded the healthcare platform in 2013 and developed the GP at Hand app, which allows UK patients to virtually access their NHS GPs, acting as their digital healthcare practice. primary care.

But unable to make partnerships with the NHS financially viable, Parsa has closed its UK operations to focus on the US market, which accounts for more than 90 per cent of its revenue, through health insurance programs such as Medicaid and Medicare.

Stock price line chart ($) showing Babylon Holdings

Prior to the company’s IPO, Babylon was valued at $4.2 billion and was set to receive $575 million from its merger with blank check company Alkuri Global.

But as the date to vote on the merger approached, about 90 percent of shareholders asked to redeem their shares despite approving the deal, which left Babylon with just $275 million in cash. Most of that sum came from a so-called private investment in a public equity deal from investors including data firm Palantir and Swedbank Robur.

To make up for the $300 million shortfall, the company cut staff, terminated contracts early and raised $80 million in additional funding from existing investors such as Swedish venture capital group Kinnevik.

Telemedicine, where healthcare is delivered remotely, has increased during the pandemic as hospital costs have risen and demand for services has led to an increase in digital solutions.

The sector reached an investment peak in 2021, with more than $29.2 billion in US venture funds invested in digital health, according to figures from venture firm Rock Health. Its tracking from last month suggests only $12.6bn has been invested this year as the market cools and adjusts to pre-Covid levels.

Babylon nearly halved its pretax loss to $89.6 million in the three months to the end of September from the previous quarter, while revenue nearly tripled year-over-year to $288.9 million.

In September, the company received a notice that it was violating New York Stock Exchange rules that require publicly traded companies to maintain an average closing share price of at least $1 over a 30-day trading period. in a row. As a result, Babylon has issued a reverse stock split, where existing shares are consolidated into fewer, higher-priced shares, to be completed in December before the notice period expires and the exchange commences.

The company is also in the process of selling Meritage Medical Network, its network of about 1,800 doctors in California, by the end of the year. Babylon bought the group for an undisclosed amount 18 months ago, but Parsa said it was too difficult to go digital.

He added that “the competition is significant” and believes that after the sale, Babylon will be able to become profitable.

Despite being based in London, Babylon’s UK presence is waning this year: two NHS Trusts contracts were terminated early and the company shut down its Symptom Checker, an artificial intelligence chatbot used to respond to NHS 111 consultations and triage patients.

Its GP at Hand service still has more than 100,000 patients on its books, but Parsa said the company was slowing its growth in the NHS as there was currently no way to provide its service without losing money.

“We still lose money on each patient,” Parsa said. “There is a structural problem. The NHS itself is underfunded. . . services are not paid enough and therefore [it is] very difficult for companies to do [it] work economically.

However, Babylon has faced widespread criticism from some NHS doctors who argue that it attracts younger, healthier patients, leaving traditional practices struggling to treat complex cases with limited resources, as well as the digital nature. off the platform, causing clinicians to potentially miss signs of serious disease.

Babylon is slowing its partnerships with the NHS until it can find a way to break even financially, Parsa said.

“Our team is killing itself by providing[this service to the NHS]. . . Because money is so tight and because connectivity in the system is so broken, brand damage is upon us right now,” he added.

Additional reporting by Ian Johnston and Rafe Uddin in London

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