Babylon: More questions
The more you look at the Babylon SPAC deal, the more black box it looks. The sheer complexity of the US insurance system makes it impossible for investors to assess its prospects with any accuracy. And then there is the question of the $230m sale of shares made by “certain accredited investors”. How much of this went to Babylon founder Ali Parsa?
Click here to see our report on the digital health sector.
Babylon’s new business model is to take over a whole bunch of patients with chronic conditions for a per capita fee. The bet is that Babylon can provide effective treatment and keep its costs low enough to make a profit on the $3,000-4,000 per capita fee it is paid by the insurers. To assess whether this model will work you would need to know the exact terms of each contract and the nature of the patient mix and conditions. Some conditions such as diabetes have a very wide delta of outcomes with compliant patients suffering little harm whilst those who self-destruct costing hundreds of thousands. Are the patients volunteers for digital health or is it a much wider group?
Talking to US insurers the complexity rapidly becomes clear. Some contracts say “demonstrate that it works for two years and then we will profit share”. Others might profit share from day one. Others still will have exclusions for particular conditions.
It is also a market which is secretive. One reason why there is so little proof of any digital health methods is because insurers are inclined to regard trial results as competitive intelligence, so it is very hard to know what treatments, if any, work.
If this is not complex enough, Babylon’s SPAC documents include a cryptic paragraph that reads:
Additionally, on the Closing Date, existing shareholders of Babylon completed the sale of an aggregate of 23,000,000 Babylon Class A Shares to certain accredited investors (“PIPE Investors”), at a price per share of $10.00, for gross proceeds to such sellers of approximately $230 million (the “PIPE Investment”), pursuant to a series of subscription agreements (the “Subscription Agreements”) previously entered into between the PIPE Investors and Babylon.
How much of this went to Ali Parsa and his family interests who continue to control Babylon through high-voting B shares is anyone’s guess.
Asked to respond to this a Babylon PR thanked us for “reaching out”, but did not get back in time to comment ahead of publication.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
