Multinational digital health firm Babylon said it plans to sell its independent physician association business in California to focus on digital-first contracts.

Meritage Medical Network is a group of about 1,800 doctors who provide in-person care across six counties in northern and central California. Babylon said divesting from the network will allow the firm to focus on its core business model, its digital-first, value-based care contracts.

Proceeds from the sale will be enough to fund the company through profitability, Babylon said. When Babylon released its second-quarter earnings in August, it said it was still evaluating how long it would take to reach profitability based on both cash flow and adjusted EBITDA, but the company was targeting no later than 2025.

THE LARGER TREND

In addition to the sale of Meritage Medical Network, Babylon said its previously announced reverse share split will take place during the fourth quarter this year. 

Last month, the company said it had received notice from the New York Stock Exchange that it was not in compliance with a rule that required companies to maintain an average closing share price of at least $1 over 30 consecutive days. The split aims to boost the stock price to prevent Babylon from being delisted. 

The company, which started in the UK, also said it plans to move to U.S. domestic reporting status with the Securities and Exchange Commission in 2023. The company recently dialed back contracts with NHS Trusts in its home market, while it noted its U.S. value-based care members grew by 220% year-over-year in its Q2 results. 

However, Babylon also recently hired Andrew Hine as vice president of the go-to-market team for Asia, Europe, the Middle East and Africa. Fine will manage Babylon's contracts and partnerships and work to increase its offerings and services in those regions, the company said.

ON THE RECORD

"The sale of our IPA business and streamlining of our reporting and governance processes will result in a more focused business, simpler structure and stronger balance sheet," Ali Parsa, Babylon's founder and CEO, said in a statement.