Babylon, the struggling digital health company on the lookout for a buyer, has informed the Texas Workforce Commission about its decision to permanently shut down its Austin headquarters by August 7. Alongside this move, the company will immediately lay off 94 employees, as indicated in an official notice filed with the agency. The UK-based firm, which became public through a SPAC deal in 2021, has been facing financial challenges for months. Founder and CEO Ali Parsa had pitched the idea that AI software could enhance accessibility and affordability in primary healthcare, but the road to profitability was a tough one.
In 2022, Babylon posted a net loss of $369.8 million against $1.1 billion in revenue. By Q1 2023, the company held $77.7 million in cash and cash equivalents, with $52.1 million earmarked for a pending sale. Trading of Babylon on the New York Stock Exchange was suspended, and the company was delisted in June.
Recent news revealed Babylon's decision to abandon a proposed "business combination" involving Swiss digital therapeutics company MindMaze and Babylon creditor AlbaCore Capital LLP. The company's focus now is maintaining UK operations while discontinuing its core US business. The plan includes a safe transition of US members to other healthcare providers. However, the press release lacked details about timing, the total number of affected US employees, and the future care of Babylon's existing US patients. The company did not respond immediately to requests for comment.
In the US market, Babylon operated on value-based contracts with insurers. This setup involved receiving a lump sum for addressing each patient's medical needs and retaining any "savings" from cost-effective care. However, it also meant Babylon was responsible for financial overages. As of December 2022, the company reported around 261,000 US patients under value-based care contracts. Babylon's website suggested collaborations with insurers in 12 states, primarily focused on Medicaid plans for low-income individuals. These collaborations included Medicaid programs in California, Georgia, Iowa, Indiana, and Mississippi, among others.
As of December 2022, Babylon had approximately 1,895 employees, with about 660 individuals (around 35%) based in the US. The federal Worker Adjustment and Retraining Notification Act (WARN) typically mandates a 60-day notice for significant layoffs, with exceptions. In the WARN notice submitted in Texas, Babylon explained its failure to provide notice by stating that doing so would have hindered its ongoing capital-raising efforts with various parties over the past few months.
Babylon noted that it had diligently pursued financing and transaction options but couldn't secure a deal. Consequently, the company finds itself compelled to halt operations, liquidate remaining assets, and close its business.
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