Why it's Notable:

Babylon has experienced mounting losses over the last couple of years. It reported a net loss of $369 million on $1 billion revenue in 2022, and this year reported a first-quarter loss that doubled in size compared to last year. Subsequently the company was delisted from the stock exchange last month. The go-private deal with MindMaze was pursued as a strategic alternative, however with this deal falling through, the company has been left with no option but to cease operations of its U.S business entirely.

This came after months of struggling to secure funding for the business, despite the company’s pitch that AI could make primary care more affordable and accessible. Babylon was a leading company in the early digital health scene, promoted as the future of the NHS, and winning several NHS contracts for its GP at hand service. However, warnings from experts reported the technology was overhyped and unproven.

Industry Implications:

The immediate closure of its U.S. headquarters in Austin Texas has resulted in the layoff of 94 employees. The company is pursuing the sale of its UK business in the hope to continue operations. However, any sale to a third party is not expected to result in Class A shareholders receiving proceeds due to existing debt agreements with AlbaCore Capital. If a third-party sale or additional funding is not secured, Babylon may have to file for bankruptcy protection or implement other alternatives. 

The collapse of Babylon Health reflects similar trends experienced by other telemedicine providers in recent years. Teladoc, for example, has experienced significant losses and a dramatic drop in share price in 2022. This may be due to the explosion of telemedicine providers during the pandemic which saturated this market space, and there has been a subsequent shift in patient preferences for more hybrid and face-to-face care post-pandemic. 

This is also in keeping with the broader macro trend of diminishing market investment in health technology over recent years, and highlights the struggle for profitability experienced by many companies that went public via SPAC, among growing competition. 

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