Amazon.com Inc on Thursday set its sights on the pharmacy market with the acquisition of tech-focused retailer PillPack, sending shock waves through the sector over prospects of disruption by the US online colossus.
Amazon has long been rumored to be interested in the pharmacy business and the entry by a powerful new player could unsettle a business dominated by large US chains, including CVS Health Corp and Walgreens Boots Alliance Inc.
Terms were not disclosed about the deal for PillPack, an online pharmacy which operates in all 50 US states and offers presorted dose packaging and home delivery.
Some media reports said Amazon paid US$1 billion and outbid rival retail giant Walmart Inc.
“PillPack’s visionary team has a combination of deep pharmacy experience and a focus on technology,” Amazon Worldwide Consumer chief executive Jeff Wilke said in a statement. “We want to help them continue making it easy for people to save time, simplify their lives and feel healthier.”
CVS shares slid 6.1 percent at the close on the news, while Walgreens shares slumped 9.9 percent.
Neil Saunders of the research firm GlobalData Retail called the Amazon acquisition “a warning shot” for the pharmacy sector.
“Not only has Amazon finally made a solid move into pharmacy, it has done so via an innovative supplier which helps patients manage and organize their prescription drugs,” Saunders said in a research note. “[This] is only the first play in an increasingly aggressive strategy.”
“This is incredibly bad news for traditional players, like Walgreens and CVS, who stand to lose the most from Amazon’s determination to grow its share,” Saunders added.
Saunders said that “Amazon’s entry into any market will put downward pressure on prices and upward pressure on costs as others try to match its service,” and that CVS and Walgreens could be vulnerable.
Walgreens chief executive Stefano Pessina on Thursday told a conference call on the firm’s quarterly results that “we are not particularly worried” about Amazon, but added that “we know that we have to change the level of our services to the customers and we are working quite hard on that.”
PillPack was launched by two members of the “hacking medicine” initiative at the Massachusetts Institute of Technology.
It helps people manage multiple medications with a software platform that offers reminders, dose-specific packaging and delivery.
The Boston-based company has said it has raised US$118 million from investors and venture funds since its launch in 2013.
“Together with Amazon, we are eager to continue working with partners across the healthcare industry to help people throughout the US who can benefit from a better pharmacy experience,” PillPack cofounder and chief executive T.J. Parker said in a statement.
Amazon and PillPack said they expected to close the deal by the end of the year, subject to regulatory approval.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a