Bankruptcy Hits Formerly Valued $2 Billion Telehealth Startup, Sold for Assets

The downfall of Babylon Health, a once-promising London telehealth startup that had garnered a valuation of nearly $2 billion with support from entities like DeepMind and prominent health insurance companies, has reached its conclusion. Having seen its U.S. shares become worthless and its financial situation deteriorate into insolvency earlier this month, the UK subsidiary of Babylon Health has now formally entered administration. Simultaneously, the administrators overseeing the process have sold a substantial portion of the company’s assets to eMed Healthcare UK, a newly established subsidiary of the U.S.-based firm eMed.

Alvarez & Marsal, the appointed administrators, have communicated that eMed is acquiring Babylon Healthcare Services Limited, which comprises the bulk of what remained of Babylon Health. This includes a preventative telehealth service catering to approximately 700,000 individuals in the UK through agreements with major providers such as the private healthcare group Bupa.

However, the sale does not encompass GP at Hand, an application and service powered by Babylon that allows UK residents to designate it as their primary healthcare provider. This service remains unaffected and operational. Notably, the primary proprietors of GP at Hand appear to be Dr. Stephen Jefferies, Dr. Matt Noble, and Rita Bright.

Andrea Jakes, MD at Alvarez & Marsal Europe LLP, stated, “The appointment of administrators over Babylon’s U.K. business to facilitate a sale to eMed ensures the least possible disruption for Babylon users, which should continue to operate as normal.”

Financial terms of the transaction have not been disclosed. While it’s understood that the deal includes employees, the exact number of individuals affected is unknown. The U.S. operation’s halted shares have become essentially worthless, with a market capitalization of slightly over $5,000.

This development follows months of turbulence within Babylon Health.

The company expanded into the U.S. market through a SPAC (Special Purpose Acquisition Company) plan worth over $4 billion in 2021. Although this seemed like a bold move, it also allowed Babylon to distance itself, along with its investors, from significant controversies in its core operations.

A clinician in the UK had raised concerns for years about Babylon’s patient safety practices and corporate governance. In 2021, it became evident that a medical regulator in the UK had also been sharing and supporting these concerns for some time.

Despite these issues, Babylon’s business development remained relatively unaffected. Prior to the COVID-19 pandemic and the subsequent surge in demand for remote health services, the company secured a decade-long contract to develop an app and healthcare services for the city of Wolverhampton. Nevertheless, the company faced setbacks. By 2022, it experienced significant contract losses in its home market, including the Wolverhampton NHS deal.

By 2023, Babylon was actively seeking a buyer, and it appeared to find one in the Swiss health tech startup MindMaze, known for its VR and AR medical research and healthcare efforts, in partnership with AlbaCore, a Babylon shareholder.

During these negotiations, Babylon’s shares plummeted and were delisted from the New York Stock Exchange. However, the acquisition with MindMaze ultimately fell through at the start of August.

To manage the situation, Babylon initiated the process of identifying asset buyers, putting its U.S. business under Chapter 7 insolvency to prioritize its UK operations, which had been on the verge of bankruptcy. Finally, on the night of the mentioned date, the UK operations succumbed to bankruptcy.

In response to these events, a spokesperson from Babylon stated, “Babylon recently made the difficult decision to wind down its US Operations as its transaction with AlbaCore and MindMaze could not be finalised due to unforeseen circumstances.”

As of now, eMed plans to maintain the acquired Babylon business operational, though the long-term strategy remains uncertain. eMed itself was a startup once, supported by investors such as Bessemer Ventures Partners, SV Health Investors, and Credit Suisse. The majority of eMed’s business was acquired by Cedara Software in 2022, with a current focus on offering telehealth services for remote management of COVID-19 tests, assessments, prescriptions, weight loss programs, and more.

However, questions remain about eMed’s ability to turn a profit from a business that significantly deteriorated under its previous ownership.