Ali Parsa, Babylon’s CEO and founder, joined MobiHealthNews to discuss lessons Babylon has learned since going public in 2021 and where its focus lies going forward.
MobiHealthNews: The company is making a lot more revenue now than when it went public, but has seen a steep decline in its stock price. What’s your view on how this has all played out?
Ali Parsa: We took our stock public in October ’21 through a SPAC [special purpose acquisition company], and we had to choose a SPAC for exactly the reason you said – we had 400% growth.
But in hindsight, that was a very big mistake. There’s no question.
It cost us a lot to go that way, and, more importantly, it left us with almost near no U.S. shareholders. So, you’re in the U.S. New York Stock Exchange with no U.S. shareholder base supporting your stock.
The reality is the company is growing faster. Its profitability is improving faster. Everything is working our way, but we do have this issue of our cost of capital that we need to fix, and we put an asset that we have for sale. Once we sell it, we are fully financed, and then we’ll go from there. Markets always – eventually over a long period of time – fix themselves.
MHN: How is Babylon going to become profitable, and what are you doing to ensure that happens sooner rather than later?
Parsa: We have some announcements to make on that shortly that you wouldn’t have expected or believed [regarding] the profitability. Until a year ago, everybody was focused on growth. This churning mentality to go from growth to immediate profitability is a very new thing.
It takes time to get the mentality of your management team to switch from growth to profitability, then to get the mentality of your people to switch from growth to profitability, then to get your clients to say, “Hey, I can’t take deals that are loss-making this year, but profitable in three years. Let’s reorganize.”
And all of these things take time. In the minds of investors, that can change overnight. In the real world, for organizations to change, it takes time. We spent much of last year just fundamentally improving this.
I think that, and this is not public, we have taken about $125 million of cost out of the business. We have gotten rid of some of our less profitable contracts. We refocused, from less Medicaid and more into commercial.
We just announced that we did a very significant deal with Ambetter on a commercial deal of $200 million or short of that. So, all of this, bit by bit, changes the tune. We will make an announcement in due course on what are the effects of all of this from what we said before.
In the past, we said that we will be EBITDA [earnings before interest, taxes, depreciation and amortization] profitable sometime towards the end of ’25. And I think that you will be surprised to know that that has significantly improved now.
MHN: What’s happening this year with Babylon? What are you really going after?
Parsa: For us, this last year was a really difficult, tough year, because it was all about the hurricane coming in, and you just had to clean the house or just make sure that you survived the hurricane.
That’s done now. And now for us it is all about, in the new environment, how do we grow again, and how do we reset ourselves? We still have a little bit of tiny work to do. We have the IPA [independent physician association] in California that we need to sell. We need the cash from the sale. Once we’ve done all of that, we will reorientate the business towards going back to our core and delivering our mission.
We believe it is absolutely possible for you, while you’re sitting at home … to be continuously monitored for all your vital signs, and then that data to be streamed securely in real time, for agents (be it AI or analytical, it doesn’t really matter) to watch continuously and to alert you when something is wrong.
That is a long-term project for Babylon. And then of course, accidents happen, illnesses happen, things happen, and when that happens, how do we make that experience hugely seamless? That’s what we’re building at Babylon.