Peering through the cloudy crystal ball into 2024 healthcare investment and company health

January 25, 2024 | by

crystal-ballWill 2024 be the mirror image of 2023? This time last year, signs pointed to slow, steady growth after the bubble bath of 2020-early 2022 was followed by failures of tech-leveraged banks (SVB and Signature in March 2023) leading to a mid-year bust [TTA 11 Aug 23]. Some big deals kicked off the year (CVS’ Carbon Health investment, Oak Street mega-buy TTA 16 Feb 23). Then as the year went on, they were followed by sheer turmoil–huge losses and business divestitures (Cano Health, Bright Health, insurtechs like Clover and Oscar), bankruptcies and shutdowns (Babylon, Pear, Quil, OliveAI, Smile Direct, Cureatr, Rite Aid), IP lawsuits (Apple-Masimo, Apple-AliveCor, FruitStreet-Sharecare), C-levels walking the plank (Walgreens, Noom), and big layoffs nearly every week. Cigna and Humana called off merging again, perhaps because Cigna didn’t like what it saw. M&A fell to its lowest level in years and IPOs fell to zero.

To cap the year, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued new Merger Guidelines that made the M&A mountain even steeper, and will follow up this year with Pre-Merger Notification guidelines that will make that part even more costly. Both signal hard times for M&A. Add to that the overt hostility the chair of the FTC has to any kind of M&A and the weaponization of the tools government has at hand…..Even early-stage, independent companies which allegedly these agencies are trying to foster don’t catch a break. A change in the tax law hitting hardest in 2023 forces annual expenses in research and experimentation (R&E) to be amortized over five years versus one year which severely affects their financials. (Section 174 explained here)

The crystal ball promises to be more like a Magic 8 Ball this year. Other than a flurry of smaller-scale investments, a rumor of a $5 billion EHR company sale (Netsmart), and predictable layoffs in health systems, the start of the year in healthcare has been fairly (ominously?) quiet.

HealthcareFinance talked to two partners in law firm Akerman’s healthcare practice group to get their take, weaving in some findings from a PWC report: 

  • Buyer interest in acquiring practices and surgery centers
  • Partnerships on rise, for example Amazon’s One Medical with health systems 
  • Smaller hospitals in mid-America will merge as there is “safety in numbers’
  • More investment in life sciences and drug development, especially diabetes/weight loss drugs in the GLP-1 category
  • Anything around AI attracts interest

The two big factors: interest rates (the Federal Reserve has signaled no further increases, and maybe cuts in 2024) and (of course) a presidential election as well as all of the House, much of the Senate, and state gubernatorial offices.

Bubbling under this are reports of two big pending IPOs:

  • Home health, pharmacy, and eldercare services provider BrightSpring Health filed with the SEC on 3 January for a near-billion dollar IPO (publicly released on 17th). This is estimated to raise $960 million, valuing the company at about $3 billion. Common stock will debut between $15 and $18 on Nasdaq under the symbol BTSG. They are also selling 8 million tangible equity units at $50. Proceeds will go from the offerings to repay outstanding debt under various credit facilities and pay penalties associated with terminating its monitoring agreement with Kohlberg Kravis Roberts & Co. L.P. (KKR, the current owner) and Walgreens Boots Alliance. BrightSpring serves 400,000 daily patients and dispensed 34 million prescriptions in 2022. IPO timing is still to be announced. This is the second time the company has filed, abandoning its first attempt in late 2021 as the market softened in 2022. KKR is signalling an exit…will it happen this time? Release, FierceHealthcare
  • Waystar’s IPO is still pending after being announced late last year [TTA 26 Oct 23]. The RCM and payments software company delayed it to 2024 due to an uncertain market at year’s end. Reportedly the roadshows were postponed to December but there has been no confirmation that they took place. Will it happen?

Fasten your seatbelts…it may be a bumpy ride.

Short takes: follow up on Cano Health’s survival moves, eMed transitioning Babylon Health UK but Babyl Rwanda shuts, DEA extends telehealth prescribing for controlled substances thru 2024

October 11, 2023 | by

Cano Health takes the reverse stock split option to stay solvent. In Cano’s latest telenovela episode, a familiar stratagem for companies to drive up a dangerously low share price is to reverse stock split, usually in a large ratio. Cano is facing delisting on the NYSE as its shares traded, as of 11 September, below the $1 minimum for 30 days. [TTA 29 Sept]  Shareholders are being asked to approve a 1 for 60 ratio with the board having the right to adjust it down to 1-for-5 and up to 1-for-100, for both Class A and B common stock. At the current share price of $0.21, a new share’s value would be $12.60. No meeting date has been set, though the press release bluntly states that 30% shareholder ITC Rumba, LLC and the 20% held by current and former members of management and the board intend to vote in favor of it, achieving the necessary simple majority. 1:60 does sound last-ditch, reminiscent of Babylon Health’s late 2022 moves in a 1 for 25 exchange, before attempting to go private–and we know how that turned out. Release

eMed transitioning Babylon Health services in the UK. A check on Babylon Health’s UK website provides FAQs for current users. It leads with promises to expand digital-first primary care services on this registration page for visits, and to develop a chronic care management service starting with medical weight management using Wegovy. The FAQs also state there will be no disruptions to GP at Hand. There is a rebranding (left/above) that sunsets the Babylon name but retains the stylized heart. 

Babyl Rwanda‘s separate website and the eMed pages for Babyl Rwanda are still up, but a local report from 24 September states that the company has ceased operations in Rwanda. As of August, the government was scrambling to find buyers and to maintain operations to 2.4 million Rwandans. “According to Julien Mahoro Niyingabira, the Rwanda Health Communication Centre (RHCC) Division Manager, the Ministry of Health is in discussions with Babyl Rwanda to ensure continuity of services despite the closure of Babylon Health.” How that will be possible without a buyer to pay employees and maintain the operation is debatable. The New Times (Rwanda)

As for the US, the Babylon Health US site also remains up and intact with a small disclaimer at the top that US services are no longer available and to contact your health plan. It is the same as on our last visit on 14 September. It is odd to see, after another month, that no one has disabled the US services or corporate pages such as Investors. This is possibly because the architecture for the US pages are off the UK site (the tab at top has the eMed logo) and nobody is in the US operation to take down the pages. The US operation, in Chapter 7 bankruptcy liquidation, is now in the tender hands of the US bankruptcy courts, where filings, documentation, and processes move slowly indeed with no further public news.

And when you can’t decide, extend. The Drug Enforcement Administration (DEA) and Health and Human Services (HHS) once again are extending Covid-time flexibilities for prescribing controlled substances through 2024.  After 38,000 comments on the proposed changes to rules after the last extension in May, DEA and HHS punted again on reimposing Ryan-Haight Act restrictions that would require in-person evaluations/visits prior to prescribing. This allows clinicians to prescribe Schedule II–V controlled medications via audio-video telemedicine encounters, including Schedule III–V narcotic controlled medications approved by the Food and Drug Administration (FDA) for maintenance and withdrawal management treatment of opioid use disorder. Final rules will be timed for Fall 2024. Another year’s breathing room for  6 Oct DEA announcement, Federal Register 10 October “Second Temporary Extension of COVID-19 Telemedicine Flexibilities for Prescription of Controlled Medications”, Healthcare Dive

Could DocGo be another Babylon Health or Theranos? CEO resignation may be only the start of their troubles.

September 18, 2023 | by

Another ‘fake it till you make it’ healthcare enterprise? Only a short month ago, things were fair and warmer for DocGo. They had recently transitioned from a mobile Covid-19 testing company under various contracts back to their original purpose–a telehealth/RPM, mobile urgent care, disease management, and medical transportation provider, with mobile vans covering the NYC metro. Founded in 2015 by Stan Vashovsky, now chairman, new CEO Anthony ‘Al’ Capone had successfully leveraged their mobility into a $425 million no-bid contract with New York City to provide medical services and more for over 19,000 migrants flooding into the city and being housed in the surrounding upstate counties. The company also plumped that they were up for a multibillion-dollar Federal contract with the US Customs and Border Protection agency.

DocGo’s stumbles starting in July continuing into August in both medical and non-medical services to migrants housed upstate put them on the press radar, notably the capital’s paper of record, the Albany Times-Union, in the weeks after their bright Q2 report [TTA 10 Aug, 16 Aug].

On 14 August, some basic checking by the Times-Union uncovered that Mr. Capone’s masters in computer science from Clarkson University not only was never granted but also he never attended Clarkson, according to the university. This degree claim was included in the SEC filing and touted to investors by him as an MS in computational learning theory, a subset of artificial intelligence. His undergraduate degree from SUNY Potsdam was not confirmed by that university or by his spokesperson. Mr. Capone had worked for DocGo since 2017, previously serving as president, chief technology officer, and CPO, becoming CEO only this year. In nearly six years, no one had checked his credentials.

On Friday 15 Sept, Mr. Capone resigned from DocGo, citing typical ‘personal reasons’. His apology and taking ‘full responsibility’ did not save him. He has been replaced by Lee Bienstock, the company president and chief operating officer.  Mr. Bienstock came to DocGo from Google in 2022 and holds an MBA from Wharton (University of Pennsylvania). Times-Union 15 Aug, Release

But…there’s more.

  • The no-bid NYC contract was contested two weeks ago (6 Sept) by the city comptroller, Brad Lander. Mr. Lander, like a corporate CFO, can send back a contract to a city agency, in this case to Housing Preservation Development (HPD). His review cited insufficient budget detail, possible inadequacy of the vendor to provide services, and a few other important items. Unlike a CFO, Mr. Lander’s office is largely toothless and can’t say no. HPD plans to sign off on it anyway as DocGo is quite tight with Mayor Eric Adams. Mayor Adams spoke at the DocGo in-person Investor Day on Tuesday 20 June about their partnership with the city. Adams has already stated that “We are going to move forward with it.” FierceHealthcare  
  • According to the New York Post and Fortune, New York State Attorney General Letitia James and Gov. Kathy Hochul have launched investigations into the company, focusing on how DocGo could contract for logistical operations to transport, house, feed, and care for these thousands of migrants in New York State, an outcome of DocGo’s failures reported last month by the Times-Union.

DocGo is a public company traded on Nasdaq under DCGO. Share prices fell 12% on Mr. Capone’s resignation but rebounded to about 7% down off off the recent $10 high after their mid-August reporting.  Seeking Alpha  DocGo went public through the then-popular SPAC method with Motion Acquisition in November 2021, raising $158 million in cash at that time. Unlike other SPACs, their share price generally hovered around the introductory $10 pricing and recovered fairly quickly from two bad dips to $6 in May and December 2022. NS Medical Device

DocGo’s response to the AG’s office and to the comptroller, the politics of the New York State and City crisis around thousands of migrants flooding housing, the streets, and schools, whether their contracts continue, and their internal financials will determine DocGo’s viability in the future. For those of us with long memories though, DocGo is repeating a pattern: first Peak Hype Altitude, then the Pileup of Problems on their wings, finally crashing to Total Hull Loss. Those are the ominous parallels with Theranos and Babylon Health.

Echoes of Theranos in Babylon Health? And additional information on GP at Hand.

September 14, 2023 | by

Was Babylon Health all a fraud, and where would it place on the Theranos scale? There is an excellent article in MedCityNews that if true, exposes Babylon’s technology as, at minimum, far less than ever claimed. From the perspectives presented, their crash was inevitable.

MedCityNews returns to the original debunker, best known to our UK Readers as @DrMurphy11. In February 2020, while Babylon rode a tide of UK hype (not yet in the US), Dr. David Watkins, a consultant oncologist, revealed himself publicly via BBC’s Newsnight [TTA 27 Feb 2020]. He had been documenting Babylon’s chatbot diagnosis problems in GP at Hand to the government’s MHRA (Medicines and Healthcare products Regulatory Agency) and the independent CQC (Care Quality Commission) since 2017. Scenarios offered to the chatbot missed events such as probable heart attack offering instead panic attack (for a female) and gastritis (for a male). According to MedCityNews, Dr. Watkins had earlier debated a Babylon representative in a debate at the Royal Society of Medicine in London, presumably leading to Newsnight host Emily Maitlis interviewing both Babylon’s Dr. Keith Grimes and Dr. Watkins. Dr. Watkins also received emails from past and current Babylon employees confirming that the “AI chatbot”, the Probabilistic Graphical Model (PGM), was not built on any good quality data.

Cardiac activists in the UK and Canada (Carolyn Thomas, the “Heart Sister”, also listed in our sidebar) also criticized how Babylon’s chatbot ‘diagnosed’ possible events at the time. [TTA 9 Jan 2020]. 

Hugh Harvey, Babylon’s former regulatory affairs head from 2016 to 2017, was also interviewed on Newsnight in 2020. After the Babylon failure, he spoke to MedCityNews about how the AI software was ‘jury-rigged’ to impress the BBC. After he left, Babylon continued to misrepresent the accuracy of its AI system. “To publicize the accuracy of its AI system, the firm set-up a promotional event where it pitted its system against the Royal College of General Practitioners exam used to assess trainee doctors. Babylon conducted this test itself rather than turning to an independent body, and Harvey claims that the company cherry-picked the questions included in the test….Babylon announced that its AI scored 81% on the exam, surpassing the average score of 72% for UK doctors.” 

What was at stake? Babylon got where Theranos never did. A year later, it went public via a SPAC in October 2021 at a valuation of $4.2 billion, with the SPAC organizer Alkuri providing $575 million in gross proceeds to Babylon, including $230 million in a private placement from investors such as AMF Pensionsförsäkring and Palantir Technologies. Two years later, its total hull loss was valued at $5,000.

Some of that money, more than $30 million, went to buying Higi, a health kiosk placed in supermarkets and drugstores that is still in operation in 6,000 locations that uses Babylon’s technology. By early 2023, Higi had separated itself in its public releases from Babylon. It’s unknown how the US Chapter 7 will affect the Higi operation.

Now the commentaries by Dr. Watkins and Mr. Harvey are based on their experiences from some years ago. Babylon could have then created a reliable AI system in GP at Hand and their other diagnostic technologies. But generally, it’s very hard to fix the aircraft as it’s being flown.  The situation usually winds up in an episode of ‘Air Disasters’ (‘Air Crash Investigation’ in UK). For those who believe that the problems were never fixed, Dr. Watkins’ analogy would apply. “[Babylon founder and CEO Ali Parsa] should spend some time with Elizabeth Holmes”. Ms. Holmes, as we know, is serving her time in Bryan, Texas for about the next 11 years.  That would be an interesting albeit improbable conversation indeed.

Interestingly, over one month later, there’s evidently no one left at Babylon Health who can pull down the website. It’s fully operational save for this banner on the home page:

Babylon’s US clinical services and appointments are no longer available. For details about your health plan benefits and to find a new provider, contact your health plan.

The investor page, including the stock ticker symbol and last price, is intact. Will the last person out the door turn out the lights and turn off the website?

Additional information on GP at Hand (UK)

This Editor while away sought clarification from Alvarez & Marsal’s press office on the status of GP at Hand. GP at Hand is not part of the administration. The ownership contracted with Babylon for the app. According to their website, there are three partners: Dr. Stephen Jefferies, Dr. Matt Noble, and Rita Bright. How this arrangement will continue is not disclosed. 

This dovetails with their response:

  • GP is a completely separate 3rd party partnership that is a GP practice that contracted with the Babylon Group.
  • It therefore hasn’t gone through any insolvency process and is still contracting with Babylon Healthcare Services Limited (which has remained outside of an insolvency).
  • The GP at Hand practice wasn’t part of the deal because it couldn’t be as it’s not part of the Group.

Previously: Babylon Health in UK administration, assets sold to eMed Healthcare Ltd.

Babylon Health UK in administration, assets sold to eMed Healthcare Ltd.

September 1, 2023 | by

While this Editor is on vacation leave, she also knows that Readers are interested in the outcome of Babylon Health’s administration in the UK. The basic story:

  • The UK administrator appointed by the courts is Alvarez & Marsal, an experienced international advisory services firm. We thank A&M for sending us their release.
  • They are supervising the sale of assets of Babylon Group Holdings Limited (“BGHL”) and one of its subsidiaries, Babylon Partners Limited (“BPL”) (“the Companies”).
  • eMed Healthcare UK Ltd., a new subsidiary of a US company in primarily medical testing, acquired certain assets of BGHL and BPL. 
  • These assets did not include GP At Hand, which apparently is still operating.

More details, including employees to be transitioned and the fate of GP At Hand, to come. The US Chapter 7 will take its time through the bankruptcy court.

TechCrunch, and hat tip to HIStalk.

Babylon Health UK operations on fire sale–buyers to be announced Friday 25 August (updated)

August 23, 2023 | by

Quickly and softly, softly, Babylon Health’s UK operations are being sold. The sale will include the proprietary tech stack. If you planned to bid, the deadline passed on Monday 21 August. Winning bids will be announced on Friday 25 August at the latest.  Update: As of 29 August, the bidders have not been announced.

The rush is due to the extreme position that Babylon Health’s operations are in. A UK shutdown is likely without a quick sale. Their UK business is with Bupa insurance, a little left with the NHS, some B2B, and GP At Hand/direct to consumer. Business consultancy Alvarez and Marsal are running the sale, presumably as part of the UK receivership.

Bidders, who were invited by letter, may include Bupa, Vitality, tech companies HealthHero and Cera–and even CEO Ali Parsa, which might lead to questions by customers or the court. Kry/Livi stated to press that they were not bidding. Customers Bupa, with a contract to 2025, and the NHS may have a say in the eventual deals.

The proceeds of the sale are projected not to exceed the $300 million debt owed to AlbaCore Capital nor its last $34.5 million tranche. Other debtors and vendors will be left in the proverbial lurch. Sifted.eu, Becker’s

The sale does not include the US operations that are included under the Chapter 7 liquidation which is still in the filing of documents stage. Babylon US, which generated most of Babylon’s revenue, has already shut down. Close to half its business was with Centene entities such as Ambetter and WellCare, which terminated their contracts on 8 August, the day after the collapse of the AlbaCore deal. The only operating part of Babylon is the Meritage Medical Network, a medical practice IPA. Next steps start tomorrow, Thursday 24 August, for documentation of its secured and unsecured debtors and summaries of assets and liabilities. Babylon’s creditors will meet on Tuesday 12 September.

The UK fire sale also does not include Babyl Rwanda, a semi-independent unit that is engaging with the Rwandan government to find a buyer. There is no further information available on other operations in India or other countries. 

Most recent coverage on Babylon in TTA: 23 August, 17 August, 10 August, 8 August

Mid-week roundup: Babylon Rwanda update, CVS Health laying off 1,700+, Optum laying off too, Veradigm’s third non-compliance Nasdaq notice, AireHealth auctioning assets, Viome’s $86M raise + CVS retail kit deal

August 23, 2023 | by

It’s another jump into the unknown between bankruptcies, layoffs, and funding raises for the Lucky Few. Emblematic of this year as we prepare to wind up this Crazy Summer in the next few weeks.

Rwandan government scrambling to keep Babyl services going. According to a local website, The EastAfrican, on 7 August “Health Minister Sabin Nsanzimana convened a meeting with the head of Babyl’s operations in Rwanda, Shivon Byamukama, to formulate a contingency plan to mitigate the impact of the company’s bankruptcy.” The Rwanda Ministry of Health is trying to secure the Babyl Rwanda operation that serves 2.4 million Rwandans (not Babylon’s 2.8 million, but still close to 20% of population) and employs over 600 people–doctors, nurses, call center agents, and software developers, Babyl is maintaining normal daily operations for now while Babyl Rwanda’s managing director, Dr. Shivon Byamukama, told the publication that the Rwanda operation is in active discussions with potential investors and partners either as a standalone entity or in partnership with another body. One wonders where the $2.2 million in funding from the Bill & Melinda Gates Foundation went.

CVS Health is starting to wield the knife on its promised (to investors) 5,000-person layoff, starting with at least 1,200 in October. The bulk of the layoffs will be in Connecticut and Rhode Island, both home to much of the Aetna operations. State labor departments in Rhode Island and Connecticut have already received WARN notices from CVS that over 1,200 employees in those states will be terminated effective 21 October. In other states, WARN notices have been filed for another 580 also effective 21 October.

  • The Woonsocket, RI headquarters and a neighboring office in Cumberland will lose 770 workers. 198 live in RI, the others are remote workers reporting to RI-based supervisors.
  • 306 employees are based at the insurer’s headquarters in Hartford, Connecticut. An additional 215 work remotely but are supervised out of the Connecticut offices, for a total of 521.
  • Other employees will be terminated in New York (167), Plantation, Florida (288), and Arizona (134), according to notices filed in each state.
  • Updated 24 Aug: another 825 across four additional states. In NJ, 207 employees at multiple locations starting 15 November. In Texas, 167 employees in Richardson and Irving; in Pennsylvania, 157 employees at an Aetna office in Blue Bell; in Illinois, 294 employees in Chicago, Buffalo Grove, and Northbrook starting 21 October.  Becker’s
  • CVS refused to disclose other layoffs to Healthcare Dive in other states where the number fell below WARN notice requirements

These positions include assistants, data engineers, customer care pharmacists, actuary executives, corporate vice presidents, project managers, program managers, and managers/directors of network development. While these constitute only 2% of CVS’ overall workforce of 300,000, it is cold comfort to those affected, many of whom have worked years for Aetna or CVS.   Becker’s  

The timing is revealed in the Becker’s Payer Issues article: When CVS acquired Aetna, “its agreement with state insurance regulators included a promise to keep employment levels at Aetna and its subsidiaries at 5,300 for at least four years after the closure of the deal. The employment levels reflected staffing as of Oct. 1, 2018, and the agreement expired in 2022.” Notice the similarities in the numbers.

In the interim, CVS went on an acquisition binge of $18.6 billion, buying Signify Health and Oak Street Health only months apart in strategic moves to buy up practices and network extenders such as ACOs in value-based care and home health.

  • Oak Street Health and its 169 practices do not project profitability until 2025–maybe–and clocked an over $500 million loss last year [TTA 4 May]. In the views of many on the Street, Oak Street was a $10 billion waste.
  • No one knows if Signify Health is profitable or not with practices and home health, but that company took a bath on Remedy Partners in Episodes of Care models and wound down that business right before the auction. CVS Health got caught up in a four-way bidding war only a year ago (in a universe that feels quite far away) that topped out at over $8 billion in cash. Ill-considered in retrospect?

CVS Health is already dealing with 2023 and 2024 projections that are downtrend: increased Medicare Advantage costs, higher drug utilization, and lower consumer spending expectations affecting retail operations. Mr. Market does not ignore Where The Money Comes From, and the piper that is paid comes from where it usually does–the people working for the company.

Optum not immune from layoffs either. Optum Health’s MedExpress Urgent Care clinics are eliminating registered nursing positions at nearly 150 facilities as part of a larger group of layoffs at Optum. MedExpress’ RNs are circulating an online petition protesting the change as ‘negligent’. Social media has also posted about gradual current layoffs at UnitedHealth Group and Optum building to major layoffs affecting worldwide operations. There are no WARN filings so these are suspected to be below the 50-100 WARN threshold (number and time period e.g. 6 months may vary by state) but cumulatively across UHG substantial. Becker’s    Becker’s updated coverage today 23 August

Veradigm’s ‘problem’ with Nasdaq continues. The former Allscripts still has not filed an annual report for 2022, nor Q1 or Q2 financial reports, with the Securities and Exchange Commission (SEC) which are required for Nasdaq stock listing under Nasdaq Listing Rule 5250(c)(1). TTA previously reported in June that Veradigm is not reporting because they had a software flaw that affected its revenue reporting going back to 2021. This has been going on since March. Veradigm has requested multiple extensions from the exchange and are set to ask for another. Veradigm stock closed today at $12.89, which is well out of the usual trouble, but an accounting software problem this long unresolved from a software company specializing in practice EHRs and practice management software…does not compute. Healthcare Dive, Business Wire

AireHealth auctioning off assets. This respiratory health company based in Winter Park, FL founded in 2018 developed a FDA-cleared nebulizer with Bluetooth functionality plus AI and machine learning software to generate predictive data on patients’ clinical conditions. The online auction of patents, software, hardware, and intellectual property for the company’s remote patient respiratory care platform will be held by Florida-based Fisher Auction Company. Apparently, there was no bankruptcy filed but the early-stage company decided to shutter anyway and sell assets. Mobihealthnews

On the other hand, gut health is hot and Viome scored a Series C of $86.5 million for a total $175 million raise plus gut testing in 200 CVS locations. Lead investors are Khosla Ventures, Bold Capital, and WRG Ventures. With the raise, Viome announced the launch of its Gut Intelligence Test in 200 CVS locations. Online, the Gut Test retails for $149 on current sale. Viome also markets oral and throat tests plus a ‘full body’ test in the $200+ range. The gut test is not currently FDA-cleared, though its saliva-based oral and throat cancer test received FDA breakthrough device designation in 2021. They claim that its RNA sequencing technology that utilizes AI and advanced algorithms to analyze the world’s largest gene expression data from over 600,000 samples, was originally developed out of research from the Los Alamos National Laboratory, “is clinically validated, fully automated, exclusively licensed by Viome [to analyze] biological samples at least 1,000 times greater than other technologies.” Release, Mobihealthnews, TechCrunch

Babylon Health files for US Chapter 7 bankruptcy, winding down Babyl Rwanda and ending care for 2.8 million users (updated)

August 17, 2023 | by

When added to the UK receivership, it looks like total hull loss* for Babylon. Their US bankruptcy was just made public through a Forbes article (hat tip to HIStalk) that Babylon Health filed for Chapter 7 bankruptcy with papers dated Wednesday 9 August. This is two days after shutting their Austin HQ and laying off 94 staffers. This confirms that the US company will be liquidated for the value of the assets, which will be sold through the court and the proceeds distributed to secured creditors. One wonders who will be lining up for the IP and other scraps.

Babylon Inc. and Babylon Healthcare Inc. are the two entities filing Chapter 7. There are hundreds of creditors, but as is typical in Chapter 7 bankruptcy, only the creditors secured by collateral will have some chance of being paid something on the dollar. AlbaCore Capital alone is owed $34.5 million from their recent bridge financing and an earlier $300 million in notes due 2026.

Katie Jennings, the writer, notes that Babylon has three other subsidiaries incorporated in Delaware, none of which filed for bankruptcy. In the filings, Babylon’s assets and liabilities are listed as between $100 and $500 million. She attempted to reach their chief operating officer Paul-Henri Ferrand, the signature on the Chapter 7 filing, but his email bounced. (The COO position was eliminated per the Texas Workforce Commission notice.)

Next steps according to the article in the filing: next Thursday 24 August to document its secured and unsecured debtors and summaries of assets and liabilities. Babylon’s creditors will meet on Tuesday 12 September. Bankruptcy documents are on Pacer and on Inforuptcy (fees required)

Update 18 August: The Healthcare Dive article published today has links to both Babylon Inc. and Babylon Healthcare bankruptcy filings. The precipitating act was that Centene first notified Babylon Healthcare on contract non-renewal on 4 August. On 8 August, after the AlbaCore deal collapsed the prior day, Centene terminated all contracts with Babylon effective immediately, save three contracts with Babylon’s IPA, Meritage Medical Network. The Centene contracts constituted over 48% of their US business in 2022. 8 August SEC Form 8-K

In Rwanda, Babylon Health through its Babyl unit is also winding down virtual care that covers 20% of the country. Babylon has a 10-year agreement with the government of Rwanda to provide virtual primary care services to people in that country, subsidized by $2.2 million in funding from the Bill & Melinda Gates Foundation in a partnership dating back to 2016. By the end of 2022, Babyl reported 2.8 million users, or 20% of that 13.2 million person country, claiming a daily 4,000 medical consults a day, which constitutes an outstanding success by the numbers. But that won’t be preserved in the parent company collapse.

A Monday 7 August email obtained by Forbes states that Babylon will be winding down operations there on a non-disclosed timetable and without a clear path for its 650 employees there. “It is with a heavy heart that we will begin the process of winding down Babyl Rwanda, while in parallel exploring opportunities to find Babyl Rwanda a new home. We have entered into discussions with potential investors and partners and will leave no stone unturned to secure the best possible outcome for our business and Babylonians.” (sic) Regarding layoffs, the email confirmed most of the US layoffs would be immediate, UK employees would largely be retained, and Rwanda and India workers would be told more at team meetings. Employees were warned not to talk to the press and the email was signed ‘Babylon Leadership’.  The Gates Foundation did not comment on whether the foundation had been informed of Babylon’s plans to wind down service.

Previous TTA coverage back to May:

Babylon Health shuts US operations, goes into UK receivership, Babylon merger with AlbaCore and MindMaze collapses, selling UK and transitioning US businesses, bankruptcy anticipated, Babylon Health to go private with AlbaCore in planned ‘Take Private Proposal’, combine with MindMaze, Babylon Health to go private (includes summary of Q1 financials)

This story is developing. *’Hull loss’ describes an aviation accident that results in catastrophic, unrecoverable damage to the aircraft.

Babylon Health shuts US operations, goes into UK receivership

August 10, 2023 | by

Babylon reached the end of the runway, smack into the lights and barriers. In the US, Babylon Health shut its Austin, TX headquarters on Monday 7 August, the same date as the announcement of the termination of their merger with AlbaCore Capital and their MindMaze business [TTA 8 Aug]. The required filing of a closure notice with the Texas Workforce Commission came to light late yesterday. The layoff of 94 employees left in the office was immediate and the closure permanent. 

As of this writing, there is no change to their US website, but LinkedIn has many posts from the now laid-off. There are no statements from founder and CEO Ali Parsa.

No transition in the US for users. With the US office closure, there is no service for current contracts such as with Ambetter’s (Centene) commercial exchange product nor with other payers or value-based providers and plans, mainly in Medicaid, which have been using Babylon apps. According to the Forbes article published yesterday, users have found that their Babylon 360 app no longer works and have been redirected to their health plan for assistance.

“When Linda, a patient in New York who requested her last name not be used for privacy reasons, went to login for a scheduled therapy appointment today, she received the following message on her Babylon app, according to a screenshot. “Babylon’s clinical services and appointments are no longer available. For details about your health plan benefits and to find a new provider, contact your health plan.”

It appears that Babylon is putting the responsibility of the “transition” on patients and their insurance companies. An email Linda received from Babylon at 11:02 am ET said: “We know you may have questions about this change. Your health plan’s dedicated Member Services team can assist you. You can find your health plan’s contact information on your ID card.”

In the UK, Babylon has entered UK administration (=US bankruptcy). Its main product is GP At Hand which is still active and up for sale in the dissolution of the company. Last year, it exited its three contracts with NHS Trust hospitals two years into ten-year contracts [TTA 24 Aug 22, Wired], leaving Reading and Birmingham controversially [TTA 24 Aug 2022] but may have had a fourth continue with Hammersmith and Fulham in London, one of its earliest users back to 2018-19. GP At Hand is still active in London with about 100,000 users reported by Pulse but is only enrolling patients in Fulham (West London). No further information on the administration filing but that would likely be with the High Court in London as previously disclosed by Babylon.

It is quite stunning that a company that the UK’s Health Secretary Matt Hancock lauded as the future of healthcare in 2018 and plumped for at every turn, survived a beatdown on BBC Two’s Newsnight in February 2020, successfully went public in a US SPAC two years ago (Oct 2021) at a value of $4.2 billion/$272 per share, that entered the US and bought two large US medical practices, had operations in 16 countries and as of last December had 1,895 employees with 35% (660 people), in the US, has collapsed so completely and thoroughly. As of 4pm EDT today, their market capitalization was just above $425,000.

As to the non-US/UK operations and multiple user services in places like Rwanda and India–their fate is unknown. Perhaps another reason why Babylon, like its Biblical namesake, eventually collapsed.

FierceHealthcare, Computing (UK–may require free signup), BMJ, The Telegraph (via Yahoo Finance)  Our Babylon Health file here.  This story is developing. If you were a Babylon employee, you may email Editor Donna in confidence or leave a public comment below.

Babylon merger with AlbaCore and MindMaze collapses, selling UK and transitioning US businesses, bankruptcy anticipated

August 8, 2023 | by | 2 Comments

Babylon running out of runway, likely to hit the barriers and lights at the end unless there’s a miracle. On 7 August, Babylon, in a tersely written announcement, stated that their 23 June agreement to execute the ‘Take Private Proposal’ with AlbaCore Capital to merge with another of their holdings, MindMaze Group SA, has fallen through and will not proceed. No reasons were given for this surprising development six weeks later.

The release is headlined in the usual guarded terms of being “in discussions of new strategic alternatives” for their US and UK businesses but the reality is in the release copy.

  • Babylon is selling its UK businesses. The company is pursuing the divestiture of its UK business to third parties to provide financing to assure the continuity of Babylon’s operations. There is non-surprising coverage language in the release that “it cannot provide assurance that any of these initiatives will result in Babylon entering into a definitive agreement for or completing a divestiture” which means that the UK businesses may close without a transition. 
  • Babylon will be transitioning its US business to other providers. It is exiting its core US business. As to the transition, no providers are disclosed as of this time.
  • The sale of the Meritage Medical Network IPA is still pending.
  • After the bridge financing by AlbaCore Capital that was provided in May along with AlbaCore’s interim funding proposal of $34.5 million, Babylon is out of money. It is actively seeking additional financing but cannot assure that it will fund continued operations or that a third party sale will be executed in time.
  • This anticipates a complete shutdown of operations, not a reorganization. “The applicable entities of the Group will file for bankruptcy protection or implement other alternatives for an orderly wind down and liquidation or dissolution, which may include commencing Chapter 7 proceedings under the U.S. Bankruptcy Code and/or a UK administration for the applicable entities of the Group in the near term.” For American readers, UK administration for insolvent companies is similar to US bankruptcy procedures in equivalents of US Chapter 11 reorganization and Chapter 7 asset sale and closing. Administrators for Babylon would be appointed by the High Court in London.

Any sales to third parties for any of the above are subject to AlbaCore approval. The proceeds will go to AlbaCore to settle Babylon’s indebtedness to them. As before, common shareholders of Babylon will be shut out as their shares are near worthless today at $0.28. 

Babylon is headquartered in Jersey (Channel Islands) along with Austin, Texas. The company was once a leader in the UK telehealth scene with remote consults and cooperative deals with GPs that received considerable criticism, then expansion to the US after their SPAC with Alkuri Global Acquisition in October 2021. Shares reflected the telehealth bull market of the time with a share price of $272 per share. The SPAC cracked like so many others, deflating shares to double then single digits to around $6 in May. Despite some success in the US market with payers, developing chronic care management programs for high-risk patients, reorganizing as a foreign private issuer to a domestic one, and the reverse share split on 15 December 2022, this last ‘rabbit out of hat’ didn’t work and apparently AlbaCore’s deal with a forced merger with a very different company, MindMaze in neurotherapeutics, didn’t work either. ‘Wicked Tuna’ indeed.

At present, there are no further announcements or changes on the website, nor any confirmed layoffs, a situation which undoubtedly will change.

Also Mobihealthnews, Healthcare Dive, Sifted (UK/EU), and UKTN

Babylon Health to go private with AlbaCore in planned ‘Take Private Proposal’, combine with MindMaze

June 26, 2023 | by

Babylon Health moving forward with AlbaCore Capital LLP ‘Take Private Proposal’ with AlbaCore affiliate MindMaze Group SA. On Friday, Babylon Health as Babylon Holdings Limited filed their Form 8-K with the Securities and Exchange Commission confirming their acceptance of AlbaCore Capital’s ‘Take Private Proposal’. No surprises here as announced in May along with AlbaCore’s interim funding proposal of $34.5 million plus the June timing of Babylon (inevitably) selecting the AlbaCore proposal. [TTA 11 May, 11 May followup]. Babylon did not disclose that there were other proposals under consideration between 10 May and last Friday. 

The 23 June Form 8-K (filed on a summer Friday when corporate news goes to hide till the following week) is brief in content despite its eight pages, half of which is devoted to the press release. It delivers the following:

  • The core operating subsidiaries of Babylon will be transferred to MindMaze. MindMaze is a private Lausanne, Switzerland-headquartered healthcare company in neuroscience and digital neurotherapeutics in areas such as stroke, traumatic brain injury, Alzheimer’s disease, and Parkinson’s disease. This apparently covers the ‘Go-Forward Business” mentioned in May. 
  • “The Proposed Transaction provides for a new capital structure and a reduction of pro forma company debt, and is expected to include immediate material funding for current business operations as well as a commitment to fund the combined business of MindMaze and the Company.” This presumably will resolve Babylon’s debt to AlbaCore of $300 million from the SPAC.
  • BBLN shares will cease trading upon closing. Class A ordinary shareholders or other equity instrument holders will receive no payment, as disclosed in May. (Shares are trading at $0.65 today, amazingly, but whatever shares are out there are being bought and sold, for instance in restricted stock units being vested and sold for whatever value could be obtained.)

There is no further mention in either the 8-K or the press release of the appointment of UK administrators (similar to a US Chapter 11). Per the May 8-K, these would be appointed by the High Court in London to supervise the transfer of assets from Babylon Holdings Limited to Babylon Group Holdings Limited and then their sale to the ‘NewCo’ formed after the reorganization by AlbaCore Capital as the Go-Forward Business. It may be that the transfer to MindMaze avoids that. Babylon is headquartered in Jersey (Channel Islands) along with Austin, Texas.

The transaction is expected to close in July, subject to regulatory approvals in the US and UK, with Babylon continuing in its business plan and in the press release’s terms, “accelerating its core mission” at least for the short term. In going private, Babylon will no longer have to disclose its ongoing problem of growing losses after this quarter. In Q1, they had a net loss of $63.2 million, a (20.3)% net loss margin, which was 117% greater than last year’s loss of $29.1 million or (10.9%) margin. Noticeably in the release, Babylon CEO and founder Ali Parsa is not quoted.

How it’s positioned: Both companies will operate independently until such time as they can 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.” Over the longer term, the combination will “align the strengths of their organizations to deliver a truly novel care paradigm and deliver exceptional outcomes for all stakeholders.” No transition of headquarters, leadership, and staff was announced in the release.

The reality–one or the other will change: This Editor considers this a ‘marriage of convenience’ for their chief investor, AlbaCore, to financially reconcile two of their healthcare businesses. Neither are alike or complementary.

  • We know how Babylon is performing (or not) as a public company for now. We do not with MindMaze, hidden behind the veil of private financing and ownership.
  • Their core businesses are very different–primary care patient access and population health for Babylon, more rarefied and clinical neurotherapeutics for MindMaze.
  • Babylon Health is in a crowded primary care and enterprise telehealth sector of healthcare. Morphing to connect populations ‘from reactive sick care to proactive care’ has a few elephants in it named Teladoc and Amwell, along with multiple niche and private label players.
  • MindMaze’s public profile is that they have built a long-term clinical footprint–examples such as Izar, a FDA-cleared hand motor therapeutic, a partnership with the Vibra health system in two states, and Mount Sinai in NYC–along with two racing sponsorships in 2022–Andretti Autosport for US Indycar and internationally with Alfa Romeo F1 Team ORLEN, for promoting their MindMaze Labs R&D. According to Crunchbase, the company has raised $340 million over 10 rounds since 2012 including rounds by film star Leonardo DiCaprio, Concord Health Partners in NJ, and London-based Hambro Perks along with AlbaCore. 

Taking bets on which company and management survives.

Mobihealthnews and FierceHealthcare recap the releases and recent news for both companies.

Babylon Health ‘Take Private Proposal’ includes London High Court administration request

May 11, 2023 | by

An added fillip to Babylon Health’s going private under a ‘Take Private Proposal’ is the inclusion of administration in the UK. This was revealed in their 8-K (001-40952) filed on Wednesday with the Securities and Exchange Commission (SEC). It states that the Framework Implementation Agreement ‘contemplates’ that part of the Take Private Proposal will involve the appointment of administrators, the British form of the US Chapter 11 reorganization procedure. Specifically, the Babylon Holdings Limited board will request that administrators be appointed by the High Court in London. These administrators will then supervise the transfer of assets from Babylon Holdings Limited to Babylon Group Holdings Limited and then their sale to the ‘NewCo’ formed after the reorganization by AlbaCore Capital as the Go-Forward Business. Any assets or subsidiaries not transferred will be dissolved along with Babylon Holdings Limited. 

This was not disclosed in the press release or the earnings announcements. Our article yesterday.

The pertinent paragraphs (the last two above ‘Forward Looking Statements’) also reinforce that ordinary Class A shareholders and holders of other equity instruments receive nothing. With the shares on the NYSE trading at $1.19 (1pm EDT 11 May), they are almost there.

One wonders if the NHS and private users of Babylon Health’s apps are aware of this development buried in an 8-K filed in the US.

Hat tip to Ari Gottlieb of A2 Strategy via LinkedIn, who read the 8-K, noticed this in his posting (recommended reading), and has had watch on Babylon for some time.

Babylon Health to go private in June as shares plummet, Q1 loss increases 117%

May 11, 2023 | by

Babylon Health revealed its long-expected move to go back private, in conjunction with rising revenue, but also losses. Today (10 May) Babylon announced an agreement between it and AlbaCore Capital LLP that provided interim funding of $34.5 million. This buys time to implement a framework agreement between Babylon and AlbaCore to restructure and recapitalize the company to strengthen their balance sheet and provide additional liquidity. The ‘Take Private Proposal’ has the core operating subsidiaries of Babylon returning to private ownership as the ‘Go-Forward Business’ and sold to a newly formed entity capitalized by AlbaCore and other investors. Their additional debt will be amended and/or extended, such as AlbaCore’s $300 million principal amount of AlbaCore notes due 2026.

Timing: interim funding is May-early June and the Take Private Proposal is later in June. Class A and other equity shareholders will be left out in the cold as no payments will be made to them as AlbaCore will be exercising rights under its debt agreements with Babylon. 10 May release

After a cracked SPAC on the NYSE via Alkuri Global Acquisition that Ali Parsa finally admitted was a mistake with a share price that declined from $272 per share to around $11, selling non-core businesses like the Meritage IPA, reorganizing as a foreign private issuer to a domestic one, and the reverse share split on 15 December, a temporary fix that barely boosted the price, the remaining rabbit out of a hat is to go private. Mr. Market did not much care for the move, with the shares taking a further crack from Tuesday’s close of $6.88 to today’s close of $2.05.

Babylon’s Q1 results were further confirmation that all the bad news is being lumped together with some progress. Their total revenue was $311.1 million which was a tidy $44.7 million (16.7%) increase over Q1 2022’s $266.4 million, but missed Street expectations by $25.8 million. Their problem was that the net loss of $63.2 million, a (20.3)% net loss margin, was 117% greater than last year’s loss of $29.1 million or (10.9%) margin. Net income in Q1 2022 included a $78.8 million gain primarily relating to the Company going public, which made it look better than it was. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $45.8 million, compared with $82.6 million in Q1 2022. 

Progress was made on their value-based care revenue mix with a brand new digital-first commercial exchange product, Ambetter (Centene), that moved non-Medicaid VBC revenue to 60%. It also exceeded projections with 38% membership growth YTD with encouraging engagement numbers: members are 12+ times faster to register and have demonstrated 8x engagement rates. There was also some impressive growth in their UK Private business, with appointment growth of 83% to 186,000.

With the announcement that they are going private, Babylon withdrew its full-year 2023 revenue (originally targeted to be over $1 billion), adjusted EBITDA guidance, plus its mid-2024 target for adjusted EBITDA profitability that was issued on 9 March–and canceled their earnings call scheduled for today (10 May). Earnings release.  Also Mobihealthnews

Mid-week news roundup: Parsa admits Babylon SPAC was ‘big mistake’, FTC’s strategy on GoodRx action, Oracle signs Accenture for VA training, Constellation delays ’22 reports, Emirates Health launches Care.ai and Digital Twin

February 15, 2023 | by

Regrets? Babylon has a few. A short but surprising interview in Mobihealthnews by Ali Parsa will give Readers an idea of the bubbly mindset of 2020-21 and the crises that followed for some companies. Babylon had 400% growth, then felt it had to go public via a SPAC in October 2021. It cost them a lot, including losing US shareholders, yet being listed on the NYSE. Parsa admitted “But in hindsight, that was a very big mistake. There’s no question.” While their revenue has continued to climb, on target to hit over $1 billion this year as of January, the cracked SPAC (opening at $272, today at $11.50) has forced Babylon to reorganize, selling non-core businesses like the Meritage IPA, reorganizing as a foreign private issuer to a domestic, and planning a reverse share split. These were announced last fall to avoid an NYSE delisting when the shares fell below $1 [TTA 13 Oct 22].  It also is leading them to shed Medicaid business and target commercial payers, such as Centene’s Ambetter. There’s a hint at the end of the article of some tech changes to promote continuous vital signs monitoring. You have to give Mr. Parsa credit for not papering over his errors.

FTC’s moves against GoodRx a preview of coming courtroom attractions–and collections? The start of February marked the first time that the Federal Trade Commission used the never-used-before Health Breach Notification Rule (HBNR), enacted in 2009, to elicit a penalty. With GoodRx choosing to settle for $1.5 million rather than fight [TTA 3 Feb], the FTC has now demonstrated a willingness to use Federal action against other online health companies sharing user data with third parties and monetization of that data. An attorney quoted in the Healthcare Dive article analyzing the ramifications: “This is the FTC trying to signal all these apps and other startup companies that are collecting a lot of sensitive data that we have a mechanism for enforcing data privacy rules against you.” Seven charges against GoodRx were around deceptive representations and unfair practices, with the HNBR the eighth layer of cake icing. According to another attorney quoted, the FTC is expanding the definition of breach into data that is shared or distributed “without the consent or authorization of the person whose data it is.” It seems like HBNR are yet more initials to be dreaded by digital health businesses that aren’t covered entities and stay well outside HIPAA privacy laws. 

Oracle Cerner getting help in digging through the Mound of Misery around their VA EHR implementation. FedScoop reported today (14 Feb) on Oracle’s signing of Accenture to improve clinician training on the Cerner Millenium system. Oracle EVP Ken Glueck confirmed that “We signed a contract with Accenture probably a month ago. So they are part and parcel of the training procedure for the continued rollouts when they resume in June of 2023.” They also confirmed that it was within the current ‘budget envelope’. Not surprisingly, Accenture is part of the Leidos Partnership for Defense Health that is implementing the Department of Defense’s considerably further along and relatively less troubled version of the Cerner EHR, MHS Genesis.

EHR watchers last year also noted the $700 million sale of EHR pioneer Allscripts (now Veradigm) five hospital and large physician practice EHRs to Constellation Software, integrated into their N. Harris Group [TTA 6 May 22] and now called Altera. Constellation has delayed reporting its Q4 and FY2022 results, usually released about this time, to a date to be determined, because of the Altera acquisition. Release Constellation, a Canadian company, trades on the Toronto Stock Exchange at an eye-watering share price of C $2,405 and a capitalization of C$49 billion.

Swinging over to the UAE, Emirates Health Services at Arab Health 2023 launched both the Care.ai and Digital Twin services for its facilities across the region. Care.ai is an Orlando-based company. For EHS, this will create an AI-enabled automation system that will update and analyze patient data and and assist doctors in diagnosing patients using computer vision. Digital Twin is an energy management system developed in partnership with Schneider Electric and Microsoft using Azure. At Al Qassimi Hospital, it cut consumption by up to 30% and reduced breakdowns and maintenance work by up to 20% .EHS release  Hat tip to HISTalk 

Interesting pickups from JPM on CVS, Talkspace, Veradigm backs Holmusk, ‘misunderstood’ Babylon Health; six takeaways

January 19, 2023 | by

Out of a decidedly soggy JPMorgan healthcare conference that concentrated mainly on pharma and biotech, there was some news in the downtrodden health tech and related areas. Selected from FierceHealthcare’s Heather Landi’s take:

CVS Health’s open checkbook for the right companies in primary care, provider enablement, and home health was a throwback to the palmy days of 2020-21. A big announcement at JPM was their investment in in-home kidney care and end-stage renal disease management provider Monogram Health. Their Series C raise of $375 million was lead-funded by CVS Health, Cigna Ventures, Humana, Memorial Hermann Health System, and SCAN.  Release, Mobihealthnews This added up to a busy January for CVS with leading Carbon Health‘s $100 million series D [TTA 11 Jan] and $25 million for Array Behavioral Care [TTA 12 Jan].

Talkspace, the cracked telemental health SPAC most recently rumored to be in buy talks with Amwell, touted their “defined, very significant path to profitability within a short period of time.” New CEO Jon Cohen, MD, a surgeon and veteran healthcare exec, touted the strength of the telemental health model, the effectiveness of their asynchronous messaging therapy for depression and anxiety,  and their market change from consumer to employers and health plans. Talkspace has some distance to go, quickly, with a loss through Q3 2022 of $61 million on revenues of $89 million and a share price today of $0.74, which means eventual delisting from Nasdaq. Is a quick buy in their future?

Veradigm, still settling in on their new corporate name, has its own bet on behavioral health data on the analytics side, with a lead investment in Holmusk‘s $45 million Series B. Holmusk will pull in de-identified patient data from Veradigm to their NeuroBlu Database.  Release

And on to Babylon Health, where Ali Parsa must feel like Eric Burdon of the 1960s blues group The Animals in the depth of being ‘misunderstood’. Dr. Parsa promises a path to breakeven by end of 2024.  Babylon’s revenue is on target to hit over $1 billion. They operate in over 15 countries with well over 5 million transactions. But their SPAC cracked too from a high of $272 per share after listing in October 2021 to today’s price just above $11, leaving a lot of investors in the lurch. Even though Q3 revenue increased by $288.9 million versus $74.5 million in 2021, an increase of $214.4 million or 3.9x, and the Q3 loss correspondingly widened to $89.9 million, the loss was significantly lower as a percentage of revenue. They are also converting from a foreign private issuer to a domestic, planning a reverse share split, and selling non-core businesses like the Meritage IPA [TTA 22 Nov 22] It’ll either be more correctly understood by Mr. Market or…be bought?

Arundhati Parmar in MedCityNews had a tart take on the proceedings, leading with the convergence of therapeutics with devices and data, Primary Care-Primary Care-Primary Care, billion-dollar bolt-on acquisitions that may be good for biopharma (but not necessarily so in health tech where integration is leading), and innovative therapies that don’t save but actually cost mo’ money. All of which is no surprise to our Readers. And why is there a JPM every year? Healthcare insanity may be catching.

News roundup: Babylon Health Q3 revenue up 3.9x; surprise–DOJ to appeal UHG-Change buy approval; Walmart loses senior health exec Pegus to JPM

November 22, 2022 | by

Earlier this month, Babylon Health announced its Q3 financials. Both revenue and value-based care membership grew. Losses also grew but the margins narrowed considerably. Highlights of their release:

Comparing Q3 2022 to Q3 2021

  • Revenue increased by $288.9 million versus $74.5 million, an increase of $214.4 million or 3.9x. This was largely driven by a 285% increase in Medicare membership.
  • Losses were there but margins improved due to aggressive cost reductions. Q3 loss was $89.9 million, or a 31.1% loss for the Period Margin (percent of revenue). Last year’s loss was $66 million, or 88.6% Period Margin. This represented an improvement of 57 points. When looking at EBITDA, Adjusted EBITDA totaled $(54.3) million, an (18.8)% Adjusted EBITDA Margin. This compared to last year’s $(47.5) million Adjusted EBITDA, or (63.7)% Adjusted EBITDA Margin, an improvement of 45 points.
  • Value-based care membership grew 2.7x to approximately 271,000
  • They acquired Medicare Advantage members in New Mexico, and commercial members via a digital-first product for Centene’s Ambetter plans in six states
  • In the UK, their Bupa partnership was extended for three years. Bupa has 2.3 million health insurance customers.

For year 2022, Babylon is updating its revenue guidance from $1.0 billion or greater to $1.05 billion to $1.1 billion.

Babylon is selling Meritage Medical Network, an independent physician association (IPA) based in Northern and Central California with 1,800 providers in six counties serving 90,000 patients, advised by  a major investment bank. They will also comply with SEC reporting requirements for a domestic issuer versus previously as a foreign private issue. Babylon will report its Q4 and 2022 yearend results under U.S. GAAP. They are also proceeding with a 25-to-1 reverse stock split to boost share price and prevent a NYSE delisting [TTA 13 Oct]. Mobihealthnews

The Department of Justice (DOJ) wiped egg off its face Friday, appealing the District Court of the District of Columbia approval in late September of UnitedHealth Group’s acquisition of Change Healthcare. The two companies closed on the buy in early October. DOJ was joined in the appeal by New York and Minnesota. The surprising appeal, after six weeks and the closing, is unusual but not unprecedented. At the time, the DOJ statement was written so that industry observers expected an appeal.

While the merger is closed, an appealed decision, if favorable to the DOJ, would force a separation of the businesses. Of course, UHG believes that “the appeal is without merit.” Stay tuned to see if this goes anywhere. Becker’s, Healthcare Dive

Walmart loses another healthcare exec. Cheryl Pegus, MD, will be departing Walmart as EVP of health and wellness and joining Morgan Health as a managing director. At Morgan, she will be focusing on population-based health initiatives and bringing clinical expertise to mental health, diabetes, and other chronic diseases. She is also joining Atria, a physician-owned organization of heart specialists.

During two years at Walmart, Dr. Pegus helmed development of a low-cost private brand analog insulin, expanded Walmart’s retail health center network across major markets, and the company’s pandemic response. Morgan Health was set up in 2021 to improve the quality, affordability, and equity of employer-sponsored healthcare. It has opened advanced primary care centers in Ohio. JPM a few weeks ago opened a Life Sciences Private Capital group [TTA 2 Nov]. Becker’s, Healthcare Dive

Walmart, despite their size, has had a certain wobbliness in their strategy. Aggressively starting out of the gate in 2018 with high-profile exec Sean Slovenski leading and plans to open up 1,000 clinics, he departed in 2020 and that put the brakes on the clinic strategy for awhile. In 2021, they bought privately held telehealth provider MeMD. Earlier this year, they announced the opening of more health ‘superstores’ in Florida, having established 20 in Arkansas, Illinois, and Georgia starting in 2019. Meanwhile, Walgreens is going big with VillageMD and its acquisition of Summit Health, and CVS Health is snapping up Signify Health to expand into value-based care and home health.