The fall of Babylon: Failed telehealth startup once valued at $2B goes bankrupt, sold for parts

It's the end of the road for Babylon Health, the London telehealth startup once valued at nearly $2 billion after being backed by the likes of the founders of DeepMind and deep-pocketed health insurance companies. After the company's U.S. shares became worthless and its operation turned insolvent earlier this month, last night, the U.K. subsidiary of the business formally went into administration. At the same time, the administrators sold a large chunk of its assets to eMed Healthcare UK, a new subsidiary of U.S. company eMed.

The administrators, Alvarez & Marsal, said in a short statement Babylon Healthcare Services Limited -- the piece eMed is buying -- covers the majority of what was left of Babylon Health, including a preventative telehealth practice that currently serves some 700,000 people in the U.K. through contracts with major providers like the private healthcare group Bupa.

GP at Hand, an app and service powered by Babylon that can be selected by U.K. residents as their primary health practice, is not a part of the sale, nor was put through any insolvency process, a spokesperson said. It's still operational. (According to the site, it appears that three partners -- Dr. Stephen Jefferies, Dr. Matt Noble and Rita Bright -- are the primary owners of it.)

“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,” said Andrea Jakes, MD, Alvarez & Marsal Europe LLP, in a statement.

Financial terms of the deal are not being disclosed. We understand that employees are also included as part of the deal but we have been unable to get a number of people impacted. The shares that have been halted in the U.S. operation are virtually worthless, with a market cap of just over $5,000.

The deal and U.K. administration phase come after many months of business turmoil at the company.

Babylon moved to the U.S. market on the back of a $4 billion+ SPAC plan in 2021. But while that might have looked like a power move to the market, in reality it also gave the company a chance to distance itself (and investors) from serious drama in its core business.

A clinician in the U.K. had for years been raising alarm bells about the company's practices regarding patient safety and corporate governance. Some of that came to a head in 2021, when it emerged that a U.K. medical regulator had also been sharing and agreeing with the concerns for some time.

None of that had impacted business development for Babylon just yet. Even before the arrival of COVID-19 and the demand for more remote health services, Babylon had managed to ink a 10-year deal to build an app and health services for the city of Wolverhampton. But eventually the house of cards crashed. By 2022, the company was starting to reel after losing major contracts in its home market (including that NHS deal with Wolverhampton).

Perhaps unsurprisingly, by 2023, Babylon was looking for a buyer, which it appeared to find in the form of Swiss health tech startup MindMaze -- venture-backed and covered by us as one of the efforts in using VR and AR in medical research and healthcare -- which had partnered up with AlbaCore, a shareholder of Babylon.

But talks were happening, it seemed, at a scramble: During the negotiations, Babylon's shares tanked and were delisted from the New York Stock Exchange.

Then at the start of August, that acquisition fell through. (We have tried to reach MindMaze to ask about the reasons; we have so far had no response. Babylon also declined to talk about specific details.)

Starting the process of looking for buyers of the assets, Babylon put the U.S. business in Chapter 7 insolvency to focus on its U.K. operations, which have been teetering on the brink of bankruptcy all month, until last night, when it finally fell.

"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. Firstly, we want to emphasize that there is no impact to the services we provide to our UK NHS GP at Hand, Direct-to-Consumer or Private patients and members. We continue to uphold the highest standards of care and service for our patients and members. Our UK business is a successful, distinct, and sustainable business, which provides high quality healthcare to many," a spokesperson told TechCrunch. "We are committed to continuing our day to day operations and innovating our technology capabilities and have reopened our GP at Hand list to patients effective Monday, 7th August 2023. We are in active discussions with a number of potential investors and partners to secure the financial future and continuity of the UK operation either as a standalone entity or in partnership with another body. Early interest in our business has been extremely encouraging and we will provide updates as they are available."

And that's how it landed today. From what we understand, eMed is going to keep the Babylon business it acquired operational for now, but it's unclear what the plans will be going forward. eMed itself was once a startup itself, backed by the likes of Bessemer Ventures Partners, SV Health Investors and Credit Suisse. It looks like, according to PitchBook data, Cedara Software acquired the majority of the business in 2022. Its focus these days appears to be on the provision of telehealth services for people to remotely manage test, assessments and prescriptions for COVID-19, flu, weight loss programs and more.

Still to be addressed, however, are questions of whether eMed can make a profit out of a business that so clearly fell apart under its previous owner.

Updated to note that AlbaCore was not an investor but a lender to Babylon; and that DeepMind's founders invested in the startup.