SRx’s application under the Companies’ Creditors Arrangement Act could be a cautionary tale as investors, some backed by private equity, have turned in recent years to the health sector.Jacques Boissinot/The Canadian Press
A Canadian chain of specialty pharmacies and clinics that served patients with complex conditions has filed for creditor protection after the collapse of what a board member described as an aggressive, debt-fuelled expansion spree.
SRx Health Solutions Inc.’s application under the Companies’ Creditors Arrangement Act could be a cautionary tale as investors, some backed by private equity, have turned in recent years to the health sector.
The company was founded in 2013 by pharmacist Adesh Vora. At the time of SRx’s application to the Ontario Superior Court of Justice on Aug. 12, it operated 17 specialty pharmacies and 19 clinics across Canada, treating patients for HIV/AIDS, cancer, liver diseases and other complex disorders, and had more than 200 employees, according to an affidavit written by Michael Young, a board member.
The business had been growing comfortably and profitably for many years, Mr. Young wrote, until company leadership decided in September of 2023 to pursue a “roll-up strategy,” which refers to buying up many small businesses in an industry to assemble a larger one.
At that time, SRx obtained a total of $55-million in credit facilities from Canadian Western Bank – and then went into default that December, Mr. Young wrote.
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“This marked the beginning of the Applicants’ aggressive and unprecedented growth which led to increased (and unsustainable) operating costs and debt-related expenses,” he wrote.
The company used the funds to buy new clinics and expand into other areas, such as clinical research trials. Most notably, according to the affidavit, it spent $10-million to develop a patient support program operation. A PSP is a service funded by pharmaceutical companies that helps patients – often those with complex, chronic conditions – manage their treatments and navigate insurance coverage.
“The SRx Group invested heavily in this new business line, including to build a proprietary Salesforce-based customer database to manage patient data,” Mr. Young wrote in the affidavit.
In early 2025, SRx signed a contract with Celltrion, a global drugmaker based in South Korea, to provide PSP services to more than 9,000 patients, according to the affidavit. But SRx was unable to hire enough staff and keep up with the required workload, and left the contract by June.
“Critically, the SRx Group had been investing all available capital into the launch and maintenance of the PSP, despite cash flow issues at the pharmacy and clinic levels,” Mr. Young wrote.
A court application filed by Advanz Pharma Canada Inc. against SRx in February provides details of one cash-flow challenge. According to Advanz’s application, the drugmaker was owed $1.4-million in unpaid invoices. E-mails included in the application show an SRx executive saying the company would have the funds to pay the invoices once it was successful with other transactions it was attempting, such as a reverse takeover (RTO).
Mr. Young, in his affidavit, said the company’s financial situation was exacerbated by these attempts to go public. “First through a Canadian RTO, which was unsuccessful, and subsequently through a cross-border reverse merger with a U.S. NYSE stock exchange listed entity, both of which consumed millions of dollars, draining resources at the expense of the SRx Group’s operations,” he wrote.
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SRx was bought by U.S. pet-food company Better Choice (then chaired by Mr. Young) in April for US$125-million, at which time the combined company’s ticker on the New York Stock Exchange changed to SRXH from BTTR. The stock, which traded at US$2 a share at the time of the purchase, closed at US$0.40 on Monday.
Rachel Wasserman, a merger-and-acquisition lawyer who runs Wasserman Business Law, said this case shows the dangers of the roll-up strategy, which in recent years hit health care businesses including pharmacies, veterinary clinics and dentists’ offices. Companies that loaded up with credit in an era of low rates may now be unable to carry their loans and are facing new headwinds, such as the threat of U.S. tariffs.
“They planned for a world that no longer exists,” Ms. Wasserman said.
SRx declined a request for comment.
In its court application, SRx listed $99.5-million in assets and $66.2-million in liabilities as of Sept. 30, 2024, its fiscal year-end. The application lists at least $76-million currently owing to creditors.
After its application, SRx obtained court approval for an expedited sales process for its assets. Those sales were approved by a judge on Aug. 21, with prices remaining confidential until the purchases are finalized.
Mr. Young’s affidavit described the company’s key asset as a pre-1954 pharmacy business charter. A company that possesses one of these charters is exempt from a legal requirement in Ontario that says a pharmacy must be owned by a pharmacist.
PurposeMed, a Calgary-based virtual-care company, purchased the charter, along with an SRx pharmacy located on Wellesley Street in downtown Toronto. PurposeMed did not respond to a request for comment.