Medly Health, parent company of a New York City-based digital pharmacy startup that took off during the COVID-19 pandemic, filed for Chapter 11 bankruptcy protection Friday.
Founded in 2017, Medly touted itself as a full-service pharmacy that provides on-demand, same-day prescription delivery and also validates and files insurance claims and worked directly with patients to manage adherence to medication and refills.
The company raised $100 million backed by investors Volition Capital and venture capital firm Greycroft, Horsley Bridge and Lerer Hippeau.
The company filed in the U.S. Bankruptcy Court in Delaware.
Medly Health reported more than $110 million in secured debt and is seeking the court’s permission to sell its 22-store Pharmaca businesses, according to court documents.
The company has estimated assets and liabilities of $100 million to $500 million.
The filing requests that bankruptcy petitions for Medly Health and 31 of its affiliates, including Pharmaca, be jointly administered in the petition.
Medly Pharmacy Inc., based in Brooklyn, New York, acquired Pharmaca in late 2021. The company operates four full-service digital pharmacies, 21 brick-and-mortar, full-service specialty pharmacies serving 20 markets across nine states and one health and wellness store in Seattle. Medly Health also operates an e-commerce business through the Pharmaca.com website, according to court documents.
By August, the company was consistently losing money month over month, Medly CEO Richard Willis declared in court documents. Medly then failed to get a $100 million loan for which it applied last summer. For three and a half weeks, Medly was unable to purchase drugs to fill prescriptions.
"Sales plummeted by eighty percent (80%). With the debtors unable to disburse necessary medications, many customers simply took their prescriptions elsewhere so they could be timely filled," Willis declared.
As a result, the company said it closed more than 20 of its stores.
"After suffering a severe liquidity crisis this summer and fall, precipitated by a loss of anticipated financing and the discovery of certain accounting irregularities, the debtors, under new management, have commenced these Chapter 11 Cases to preserve and maximize value for all stakeholders through one or more asset sales," Willis declared in court documents.
The company is asking the court's approval to sell four remaining Medly pharmacies’ prescription lists to "ensure patients are able to transfer their prescriptions prior to the closing of those stores."
The company also wants to sell off its Pharmaca business line, which includes 22 stores. "The debtors have identified a buyer to act as a stalking horse in such sale. The debtors believe pursuing both sales in these Chapter 11 cases is the best path forward and is in the best interests of their estates and creditors," Willis declared.
MedPharmaca Holdings Inc. has agreed to place a starting $18.5 million bid at a bankruptcy auction for just about all of Medly’s assets, including the Pharmaca stores, the Daily Camera reported.
The company lists debts including $81 million to affiliates of TriplePoint Capital and $20 million to Silicon Valley Bank.
The once high-flying company grew rapidly during the pandemic, fueled by consumer demand for home delivery of medications and investor interest in the sector.
By June 2022, Medly was serving 32,000 patients in 51 stores across the U.S. and had raked in nearly $270 million in revenue since the start of the year, Insider reported, citing a company presentation. Medly planned to have 100 locations in three years.
According to court documents, in August, Medly laid off approximately 617 employees. In total, approximately 52% of the company's employees were let go between early August and early November.
Company founder Marg Patel stepped down as CEO in early September.
Medly let go 1,100 of its 1,850 to 1,900 full-time employees in two rounds of layoffs without written notice, according to a lawsuit filed against the company by employees who claim the company failed to provide mandatory advanced written notice of the layoffs.
Despite its growth, Medly failed to curb its losses as it ran out of money, posting losses of $35 million in the first half of the year even before accounting for expenses like interest and taxes, Insider's Rebecca Torrence reported, citing a slide obtained by the publication from a company presentation.