Babylon Health, the app-based primary care service, has flourished in recent years and 2019 was particularly momentous: the company galloped to unicorn status in August after USD 550m in Series C funding lifted its value to USD 2bn.
Third Bridge Forum spoke to several experts in 2019 about the opportunities in the relatively nascent but rapidly growing digital health space. Babylon, which facilitates 4,000 remote doctor consultations a day, was widely regarded as a disruptive player with ambitious growth plans.
The company has secured increasing rounds of funding in recent years, including GBP 47m in 2017 and USD 25m in 2016. The latest round was the largest in the European or US digital health sector to date and brought in several new partners: the Public Investment Fund of Saudi Arabia, one of the world’s largest sovereign wealth funds; a large unnamed US health insurer; and Ergo Fund of Munich Re Ventures, part of Munich Re. Existing Babylon shareholders Kinnevik AB and Vostok New Ventures also invested.
Babylon is using the fresh cash to strengthen its AI technology and expand into chronic care management. With 4.3 million members already across the UK, Rwanda, Canada, Malaysia and Saudi Arabia, it is also ramping up in the US and Asia.
One of the specialists believes the UK-based company and its peers will prosper because people are inevitably embracing the advent of on-demand healthcare. Babylon is seemingly paving an important path of solving simple issues remotely, which reduces the need for people to visit their GP. Meanwhile, regulators and governments are recognising the ways in which technology can help to alleviate some of the pressures associated with squeezed workforces and tight budgets.
Although it is early days for telemedicine on the whole, the global health technology industry is expected to soar in value from USD 86.4bn in 2018 to USD 504.4bn by 2025.1https://www.prnewswire.com/news-releases/worldwide-digital-health-market-to-hit-504-4-billion-by-2025-global-market-insights-inc-300807027.html Mobile health apps in particular are springing up apace: there were 44,384 available via the Apple App Store in Q3 2019 versus 28,343 in Q1 2015.2https://www.statista.com/statistics/779910/health-apps-available-ios-worldwide/ All other factors being equal — such as ease of use — those that offer a clinical service will be the most lucrative in the long term, another expert said. “That’s why Babylon is as valuable as it is.”
Besides remote consultations, which can take place within minutes of being requested, the company also offers an AI-led symptom checker as well as Babylon Healthcheck and Babylon Monitoring. AI has become a big topic in digital health, led by claims that technology is poised to eventually supersede humans when it comes to diagnosing medical conditions. One example of this is that companies are beginning to demonstrate how AI can interpret MRI scans or X-rays more accurately than doctors, and at a fraction of the cost.
A challenge for private companies working to develop such technology is being privy to the “feedback loop” of how AI has performed in various scenarios and across patients’ medical journeys. Babylon may have an advantage in this respect because it can gather large amounts of data to discern the accuracy of early AI triaging relative to the outcome. One specialist commented: “That’s one of the big reasons Babylon wants to be in the NHS, because you can only really properly develop your artificial intelligence if you have a way of finding out whether what it decided was right or wrong”. Babylon is currently the only company of its kind to partner with the NHS.
Of course, the company is just one in the growing ranks of telemedicine players, so competition is likely to heat up further. Experts we spoke to also sounded some notes of caution, despite their positive outlook for the industry overall. While Babylon is well placed to become the leading UK player because of its long-standing presence there, the race in other markets could be tougher and longer. For example, although the US is undoubtedly a “very attractive market”, the company may struggle to get its foot in the door because the market is already advanced and crowded.
Another challenge is aligning with the regulatory landscape in new markets. Germany only recently gave the green light to telemedicine services, having previously been sceptical about their ability to replicate the level of care associated with a physical setting. Similarly, although the challenges of healthcare are global, solutions must be tailored to the unique needs and culture of individual countries, where certain diseases or allergies may be more prevalent. Building and maintaining trust is also paramount; people want to know who is behind the brand, who is handling their data and, crucially, that it’s safe.
Given the complexity of this market, safety concerns have inevitably been raised, with some doctors claiming that AI services can miss symptoms in life-threatening situations. It is important to note that Babylon’s AI services only provide information; they do not diagnose. That said, the company’s private UK service and its NHS practice have been rated by the UK’s Care Quality Commission as “good”. The company was also found to be safe and well led.
Even though obstacles remain for Babylon and the sector at large, the task of overcoming them will guide the industry through its next phase of development. One specialist stated that focusing on learning from the challenges will help to drive future success. However, he also believes these solutions need to go through more rigorous testing in order to win the full backing of clinicians.
Nonetheless, figures show that investors are piling into digital health, which has grown into a “robust sector” fuelled by nearly one in 10 venture capital dollars in the US.3https://rockhealth.com/rock-weekly/the-year-of-the-digital-health-ipo/ Our Interviews on Babylon and the wider industry also suggest that telemedicine is not a winner-takes-all market. One expert anticipates that ultimately three or four players will each have a substantial share of a growing market. While that is “a good place to be”, the challenge is being one of those “chosen few” players. So, even though Babylon has “gotten so much sunshine lately”, there is seemingly all to play for.
Read other articles in the series on Thomas Cook, Boeing, PG&E, Sealed Air and Disney.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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