The digital health landscape has been nothing short of transformative, with companies like Babylon leading the charge. However, the recent news of Babylon filing for bankruptcy protection for two of its U.S. subsidiaries paints a sombre picture of the challenges even industry giants face. The decision to seek Chapter 7 relief, which essentially means liquidation of assets instead of restructuring, is a testament to the depth of the company’s financial troubles.
Babylon’s filings, dated August 9, encompass two related entities: Babylon Inc. and Babylon Healthcare Inc. While both entities have hundreds of creditors listed, it’s been indicated that only those secured creditors, whose debt is backed by collateral, might see any repayment. This essentially means that unsecured creditors are unlikely to receive any funds. Such a move is indicative of the dire straits the company finds itself in.
The silence from Babylon’s end is deafening. Neither Babylon’s CEO, Ali Parsa, nor their press team have responded to the unfolding situation. It’s worth noting that Babylon has other U.S. subsidiaries incorporated in Delaware, but as of now, no bankruptcy filings have been located for these entities. Adding to the intrigue, Paul-Henri Ferrand, Babylon’s chief operating officer, who was responsible for signing the filings, seems to be unreachable. His email address bounced back, and it’s been reported that his role was among those set to be eliminated, as per a WARN notice filed with the Texas Workforce Commission.
Babylon’s journey from its 2021 SPAC deal to its current predicament is filled with twists and turns. The company has been grappling with financial challenges for months, trying to secure the necessary financing to keep its operations afloat. The liquidation of Babylon’s U.S. operations is a culmination of a series of unfortunate events, including a failed “business combination” with Switzerland-based digital therapeutics company, MindMaze. This deal, which was brokered by Babylon creditor AlbaCore Capital, did not materialise. Furthermore, it’s been reported that Babylon is also scaling down its operations in Rwanda, where it once served a staggering 2.8 million patients.
The exact amount Babylon owes its U.S. creditors remains undisclosed. However, a press release from the company on August 7 suggests that the proceeds from any third-party sales might not surpass the total amount of the Group’s debt to AlbaCore. This implies that Babylon shareholders are unlikely to see any returns. As of May 2023, the owed amount to AlbaCore, a European investment firm, stood at around $300 million in principal on loans due in 2026. This is in addition to a secured bridge loan of up to $34.5 million.
Babylon’s financial health has been deteriorating for a while. At the close of December 2022, the company reported a net loss of $221.4 million, despite a global revenue of $1.1 billion. By the first quarter of 2023, Babylon had cash and cash equivalents amounting to $77.7 million, with $52.1 million of that earmarked for a sale that never materialised. The New York Stock Exchange took the drastic step of suspending trading and delisting Babylon by the end of June.
The bankruptcy filings reveal that Babylon’s assets and liabilities range between $100 million and $500 million. The company has until August 24 to provide detailed documents outlining its debtors and a summary of its assets and liabilities. A meeting with Babylon’s creditors is slated for September 12.
Babylon’s fall from grace serves as a cautionary tale for the digital health industry. It underscores the importance of sustainable financial strategies and the perils of rapid expansion without a solid foundation. As the digital health landscape continues to evolve, Babylon’s story will undoubtedly be referenced as a pivotal moment, reminding stakeholders of the delicate balance between innovation and financial prudence.
Source: Forbes.
