The digital health company Babylon Health is set to withdraw from the New York Stock Exchange and become a private company again as its leading creditor AlbaCore Capital LLP, takes over after months of financial turmoil.
Once the poster company for digital health in the UK and championed by Tory politicians, such as Matt Hancock, as a model for the way the NHS can integrate digital tech, AI and private enterprises, Babylon Health is now having to reassure patients in the UK that the deal will not adversely affect its NHS services. The company argues the financing would offer certainty after months without long-term funding.
The move by AlbaCore is billed as “a restructuring and recapitalisation” of the business, which will leave shareholders wiped out according to the FT. AlbaCore Capital LLP is based in London, but at the end of March it was reported that it is being acquired by the Japanese banking group Mitsubishi UFJ.
Shareholder approval of the deal is not needed nor will they receive any payments under the debt agreements Babylon already has with AlbaCore; the company has already loaned Babylon $300 million and will now extend $34.5 million in new funding.
Babylon has suffered significant financial turmoil since going public. Despite being based in the UK, Babylon chose to go public in New York rather than London and used a somewhat unorthodox manner of listing, via a merger with Alkuri, a special purpose acquisition company (SPAC) in October 2021. This method was popular around this time for small companies and for Babylon it resulted in an implied equity value of about $4.2 billion.
What happened next to the company’s stock has been described by the company’s own CEO, Dr Ali Parsa, in November 2022 as an “unbelievable, unmitigated disaster”. By June 2022, Babylon’s market capitalisation had fallen more than 90%, giving the company a market value of about $334 million. Its share price has fallen from around $11 in October 2021 to around $1 by June 2022.
The takeover by AlbaCore may not adversely affect the NHS but give the company financial stability, according to Babylon, but the recent months of financial troubles certainly have had an impact. Babylon had to undertake a significant restructuring of its business in the UK and with the NHS. In early 2022, the company complained about how little it was receiving for each NHS patient it saw via its GP at Hand service. In May 2022 Parsa said that the company loses money on every patient. Although the company received exactly the same amount as every other GP service in the country.
By Autumn 2022, the company had withdrawn its GP at Hand service from Birmingham, where it had only opened in 2019, leaving around 5,000 patients to find a new GP. The company also pulled out of all its deals with NHS trusts made both before and during the pandemic, including contracts with The Royal Wolverhampton Trust for digital-first integrated care and University Hospitals Birmingham Foundation Trust for its Ask A&E triage app.
The company has also attempted to sell off parts of its business. Despite these efforts net losses have continued to grow, more than doubling to $63.2mn in the three months to the end of March 2023, compared to the same period last year. The company also narrowly avoided being delisted from the New York Stock Exchange after its share price failed to maintain an average closing price of at least $1 over a consecutive 30 trading days, a rule for inclusion on the exchange.
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