Babylon Holdings Limited
 | |
| NYSE: BBLN | |
| Industry | Health care |
| Founded | 2013 |
| Founder | Ali Parsa |
| Headquarters | London, United Kingdom |
| Revenue | US$322.9 million[1] (2021) |
Number of employees | 2,189[2] (2021) |
| Website | |
Babylon Holdings Limited operates as a digital healthcare company. It offers end-to-end care solution that facilities through its digital health suite, virtual care, in-person medical care, and post-care offerings. The company also provides Babylon Cloud services. It operates in the United Kingdom, the United States, the Asia Pacific, Canada, and internationally. The company was founded in 2013 and is headquartered in London, the United Kingdom.
Since the COVID-19 pandemic, the NHS still hasn't fully recovered. With extended waiting times for patients, inefficient referral practices, issues with under-staffing in hospitals cause patients to have delays in reiving critical care. Babylon Health aims to tackle this issue through the use of AI technology to streamline these operations leading to a more efficient healthcare system. Through partnerships with privatised healthcare brands and NHS practices, Babylon Health is revolutionising the way we think about healthcare. The services they offer to users includes
Babylon Health delivers tailored ‘AI-powered, Physician-led Virtual Healthcare’ to patients in over 15(?) countries globally. Operating in 16 languages across their global network, Babylon Health helps a patient every 6 seconds. Reviews of the company are met largely with success with a 4 or 5 star rating from over 90% of users worldwide. However, Babylon’s stock price has drastically declined in value since their SPAC merger with Alkuri Global in October 2021. In this report we aim to tackle this reason with in-depth explanation into this series of events.
Mission Statement
Babylon is a leading value-based care company with the aim to make high-quality healthcare accessible and affordable to everyone worldwide. Babylon wishes to re-engineer how people engage with healthcare. Aiming to switch the model from reactive to preventative healthcare
Their company mission is as follows: Global healthcare market has been unable to balance accessibility, quality and affordability. Babylon’s goal is to make high quality healthcare accessible and affordable for everyone. To this end, they are building an integrated digital first primary care service that can manage population health at scale.
Product Offering and ServicesEdit
Babylon delivers millions of clinical consultations and AI interactions to patients across the globe. Their aim is to allow patients to experience better health at reduced costs. This is achieved by leveraging a highly scalable, digital-first platform combined with high quality, virtual clinical operations to provide integrated, personalized healthcare. They endeavor to support patients’ health needs, all from their devices, with the aim to promote longer and healthier lives. When sick, Babylon provides assistance to navigate the health system, connecting patients digitally to the right clinician 24/7, at no additional cost.
Business Model
Babylon separates their operating streams into 3 main lines of service:
- Value based care
- Clinical Services
- Software licensing
Within their value based care stream, Babylon Health generates revenue from capitation(…) for delivery of services under VBC (….) contracts with US health plans and providers. Revenue from capitation for delivery of services under VBC contracts with US health plans and providers. In their clinical services stream Babylon health works with affiliated providers to deliver medical consultations, on a fee-for-service basis or ffs and capitation fees. This includes per-member-per-month subscription fees for virtual consultations. They also use Software Licensing as another revenue stream through selling a digital suite of products to partners who can provide care through their own medical networks. These three lines of service act as Babylon Health's main revenue streams. Services are funded through a subscription based model, pay-as-you-go, centrally funded initiatives like NHS or as part of health insurance packages.
[[Add this in correct place]] According to the Financial Times, Babylon's Health GP at Hand app is used by around 100,000 people in the UK, who use it to access NHS physicians virtually.
B2C Products
Babylon Health allows patients to interact with healthcare professionals over text or video, sending images and receiving advice, utilising technology and AI to streamline and accelerate these processes. The main services that Babylon health offers to patients includes:
- Babylon Private
- Babylon GP at Hand
- Babylon for Bupa
- Babylon360 and Babylon Cloud Services
Babylon services treat patients in an affordable, time saving manner through the use of AI to speed up wait-times and costs within healthcare. Their unique team of doctors, specialists, scientists and engineers use AI technology to transform healthcare for the better. This technology helps patients and providers gain advances medical insights to make better, well-informed decisions.
Babylon can be used by consumers to for overall preventative health, specialist advice (since GPs can refer you to a specialist after an initial appointment on Babylon), and for mental health practices, helping patients with stress, anxiety, bereavement and depression.
Partnerships
Babylon health have established partnerships with the NHS (Babylon GP at Hand), Ambetter Health (an example of a US healthcare partnership providing 24/7 primary care), Rwanda (helping the government deliver healthcare to 20% of the population).
Their partnerships with the NHS has been met with some controversy, however. Using new technology to attract patients often attracted younger, healthier individuals who are not as in need of immediate care as their older counter-part. This led a surge of NHS referrals of mostly healthy, young people being transferred to NHS practices when they did not necessarily need that level of care. The over use of the technology from healthier individuals caused unnecessary work for NHS workers and diverted the focus away from older individuals who may not be using the app.
TeamEdit
Executive Team
Board of Directors
Eugene I. Davis: Director
Mairi Johnson: Chief Partnerships Officer and Director
David Warren: Director
Aidan de Brunner: Director
Valuations and FinancialsEdit
Financial Performance Highlights
Babylon Holdings reported its Q1 2023 financial results, showing impressive revenue growth of 1.2x year-over-year, reaching $311.1 million. However, the company also reported a net loss of $63.2 million for the same period It's worth noting that Babylon's stock price has experienced a drastic decline in value since its IPO in October 2021.
Revenue Streams and Business Model
Babylon Health's main revenue streams come from its three operating lines of service:
· Value-Based Care (VBC): Babylon generates revenue from capitation contracts with US health plans and providers for the delivery of services under VBC contracts. This stream is focused on delivering value-based care solutions.
· Clinical Services: Under the Clinical Services stream, Babylon collaborates with affiliated providers to deliver medical consultations. They generate revenue on a fee-for-service basis (FFS) or through capitation fees. They also earn subscription fees for virtual consultations.
· Software Licensing: Babylon's Software Licensing stream provides another revenue source by selling a digital suite of products to partners who can deliver care through their own medical networks.
Financial Snapshot
Babylon Holdings' financial snapshot as of Q1 2023 reveals assets, liabilities, and shareholders' equity, as well as detailed financial figures like net loss, EBITDA, Adjusted EBITDA, and various margins related to their revenue and expenses. The company operates with a debt/equity ratio of -93.8%. As of July 28, 2023, Babylon Holdings Limited (BBLN) has experienced significant stock price fluctuations, with a 1-year change of -99.87% and a drop of 99.99% since its IPO. The stock has significantly underperformed the US Healthcare Services industry and the US Market during the past year.
Technical Analysis
Babylon Holdings' stock (NYSE: BBLN) has experienced significant price fluctuations and decline since its IPO in October 2021. As of July 26, 2023, the stock price was trading at USD 0.0331, representing a substantial decrease of -46.48%. The company's market cap is $14.10 million with 25.03 million outstanding shares.
Investment Suitability and Risks
While Babylon Health's global network and success in virtual healthcare have been met with positive reviews and an ambitious mission, its financial performance and stock price performance raise concerns for investors. The company reported a net loss of $255.58 million and a net profit margin of -22.14%. The negative trailing PE ratio indicates a loss for the period, making it essential for investors to carefully evaluate risk-adjusted returns and diversify their portfolios when considering investments in BBLN.
Conclusion
Given Babylon Holdings' impressive revenue growth and innovative approach to providing digital-first healthcare solutions, there may be opportunities for future growth. However, potential investors should be cautious due to the company's financial performance, net losses, and significant stock price fluctuations. Evaluating the risks and uncertainties mentioned in the financial reports and understanding the implications of the proposed take-private deal, will be crucial for investors looking to make informed decisions about investing in Babylon Holdings Limited.
Stock Price Timeline and ExplanationEdit
Having successfully completed series A, B and C funding, worth $25mn, $60mn and $550mn respectively, in the six years following its birth, Babylon was taken public in the final quarter of 2021. Babylon made the decision to divert from the traditional Investment Bank IPO route and instead chose to look in the direction of SPACs.
Public listing (October 2020)
SPACs, or Special Purpose Acquisition Vehicles, are blank cheque companies that have no commercial operations. Formed by groups of investors, SPACs raise capital through an initial IPO which is then placed in an interest generating trust account. After the management team has identified a particular target company, it will merge with that company using the money in the trust. This allows the target company to become public without going through an Investment Bank or a traditional underwriter.
During 2020 and 2021, there was a huge surge in the use of SPACs due to excessive liquidity that had arisen from the pandemics over-expansive monetary policy. A key player in the then exponentially growing telemedicine market, Babylon looked to capitalise on its position as soon it could. SPACs offer a significantly faster time to market than traditional routes which seemed most applicable for Babylon at the time. Ultimately, this decision lead to a sharp demise in investor confidence as the share price has dropped 99.99% since IPO.
Ahead of its stock market debut, Babylon was valued at $4.2bn, set to receive $575mn from the merger with the SPAC, Alkuri Global. Typically in SPACs, shareholders have the option to redeem their shares prior to the business combination, for a pro-rata share of the funds in the investment trust. Since the SPAC target company often hasn’t been identified when the SPAC is formed, this procedure incentivises investors who may be worried about risks involved. On the date of the merger, 90% of shareholders chose to redeem their shares despite having all voted to approve the deal. As a result, Babylon was left with just $275mn in cash, $300mn less than originally calculated. To make up for this shortfall, Babylon had to cut staff, cancel two existing NHS contracts early and raise $80mn in additional cash – a disaster.
Shortly after going public, the share price of Babylon Holdings LTS, under the ticker BBLN, peaked at $272.50 with a market cap of over $3.5billion. On the day of writing, it sits at $0.0331 with a market cap just under $850k.
Omicron Variant (November 2021)
Adding to an already tough first month of being public, in November 2021 reports of the new Omicron COVID-19 variant spread around the globe. After a period of hope that the worst of pandemic was over, the stock market rally was stunted by reports of rekindled restrictions enforced to stop the spread of the new variant. A move that would again lead to economic slowdown, investor risk appetite fell due to the uncertainty in the near future. This lead to a large collapse in global equities, hitting Babylon as hard as anyone else.
Reverse stock split (December 2022)
In September 2022, Babylon received notice from the NYSE that it violated rules stating that listed companies must maintain an average closing price of at least $1 a day, over a 30 day consecutive closing period. In response, Babylon decided to issue a 1-for-25 reverse stock split that became effective on the morning of 16th December 2022. In this move, Babylon Holdings LTS Class A Ordinary Shares were reduced from approximately 620 million to approximately 24.8 million shares. By reducing the number of shares outstanding, it was hoped that this would increase the price per share and allow its continued listing on the NYSE. Despite this change, Babylon's stock price continued to slide in the following months.
Announcement of planned delisting from stock exchange (May 2023)
Other factors influencing share price
Changing consumer demands
Babylon’s poor stock performance since its first listing in October 2021 can also be put down to the over inflated state of the telemedicine market at the time. During the pandemic, digitisation within the healthcare industry accelerated sharply, driven by the need to access patients who were forced into self-isolation. In a world where a return to pre-covid life seemed only imaginary, the telemedicine industry was in the forefront of investors’ minds, with Matt Hancock even describing Babylon’s services as “revolutionary”.
However, as the world recovered from the pandemic, the rate of healthcare digitisation slowed as it became less of a pressing concern to many people. Having listed on the NYSE near the peak of this focus, investment into Babylon’s public equity only had room to fall as telemedicine expectations dropped to pre-covid levels. Additionally, the stock market started to peak in October 2021 before a long downward trend, driven first by the Omicron variant and then later an extremely volatile geopolitical climate, along with monetary and fiscal contraction in response to soaring inflation.
Target market not reached
RiskEdit
In March and May of 2023, Babylon Health initiated two lines of credit, referred to as the Bridge Facility and the Additional Bridge Facility. These agreements came with restrictive debt covenants, which are stringent conditions. In addition, Babylon Health is planning to execute certain transactions according to a strategy to privatize the company, as laid out in the Framework Agreement. However, these plans may be modified if satisfactory proposals from third parties surface during this interim period.
It is important to note, however, that there are no guarantees that the Additional Bridge Facility and the Framework Agreement will be implemented in a way that secures Babylon Health's necessary funding. It is also possible that Babylon Health may not be able to acquire additional financing, or if they do, it might not be on terms that are favorable to them. If these transactions are carried out, they have the potential to significantly dilute, or even completely wipe out, the economic interests of Babylon Health's shareholders. This could subsequently result in a change in the company's ownership or control.
Babylon Health previously financed their operations through the sale of their equity securities, revenue from operations and debt financing. They had $338.7 million of indebtedness as of March 31 2023. Babylon holdings have risks associated with financing their operations and despite high growth rates remain in net loss, and continued debt. They require additional funding, which has created significant doubts on whether they will be able to receive this funding as they continue over the next 12 months.
To aim to combat their financial worries they are considering strategic alternatives, including restructuring or refinancing debt, seeking additional debt or equity capital, selling assets or other measures such as putting Babylon into administration under UK law. This will also face risks and uncertainties in executing their business plan until this alternative strategy has been implemented.
Another risk Babylon faces is with the efficacy of their platform. With limited AI funding and some reviews questioning the impact and value of their service Babylon can come under scrutiny if proven to be ineffective. To mitigate this, funding is needed to constantly evolve and improve their software and fix any outstanding errors. A risk related to this is whether Babylon's service is creating value to the correct target groups. Some criticism form NHS practitioners has suggested Babylon's model using new technology may attract the wrong customer base. Some have said their service may be counter productive since younger healthier individuals are using the app and gaining NHS referrals when they are mostly healthy. This is wasting valuable NHS time an resourcing through directing care away from those who may be older and need this service more prominently, to those who would not have otherwise used NHS services for a smaller illness as Babylon's platform makes this easier to do so.
Risk summary
- Operations are dependent on physician owned entities so a damage to those relationships will drastically effect Babylon’s operational ability
- Significant portion of Babylon’s revenue is coming from a small number of customers. This leaves Babylon very dependant and therefore vulnerable to this group. If opinions change, a huge revenue source will be lost immediately.
- Babylon’s move to go private without paying shareholders could negatively impact sentiment towards the firm. This could result in long term damage to the company’s reputation which could negatively affect its growth prospects.
- Babylon’s move to go private is in place to restructure the business which is currently accumulating losses. If the company restructuring fails to have the desired effect, Babylon could continue to be unprofitable until eventually, available funding dries up.
- The healthcare industry is a heavily regulated industry, with many licenses and authorisations required for participation. If any of these are lost, Babylon’s may lose the right to operate some its services, ending revenue streams and preventing Babylon from being able to grow in the market.
ESGEdit
ESG is central to Babylon's mission to make quality healthcare accessible and affordable to every person on Earth. Their initial merger with AlbaCore Group had sustainability at the forefront of the deal. AlbaCore Group made a sustainability-linked investment of $200 million in Babylon Holdings Limited.
Although a somewhat limited ESG management throughout the company reports, it's clear sustainability is at the forefront of their mission and product service offering. The key aim of allowing wider access to healthcare with lower costs for consumers.
Babylon Health has partnerships with the NHS. Notable trusts within the NHS that have partnered with Babylon include the Royal Wolverhampton NHS Trust that announced a 10-year partnership with Babylon in January 2020. This partnership had the aim of developing a new model of digital-first integrated care and was followed by the introduction of a Covid-19 care assistant in April 2020. This partnership was extended to primary care in August 2021 which saw the roll out of the Babylon 360 app. Babylon Health aims to expand this part of their business aiming to combat the 'overwhelming demand' for GP services in the UK since the pandemic.
Babylon Health aims to make healthcare accessible and affordable the world over, through building specialised health services for those countries with little or no access to basic health care. They are doing this through creating partnerships across the world in countries with limited access to basic healthcare. Babyl Rwanda is their notable partnership that provides healthcare services in Rwanda. Rwanda was struggling with easily accessible and affordable healthcare. In an effort to address this issue, in 2016 Babylon Health partnered with the Government of Rwanda and the Bill & Melinda Gates Foundation to offer Rwandans one of the most progressive solutions in healthcare. Their service, under the local name Babyl, is integrated into Rwanda’s National Health Insurance Scheme and is the largest digital health provider in the country.