By Joyce Yu
Philadelphia, PA–Wall Street closed higher on Friday fueled by gains in financial shares after positive stress test results, but drug distributors continued their sluggish performance from yesterday following the announcement of Amazon’s entrance into drug retail business.
“We’re clearly in a sideways market,” Arian Vojdani, investment strategist at MV Financial, told CNBC. “The narrative — aside from strong economic data and good earnings — is not good.” “Investors are sort of holding their cards to the chest because they want to see how this (trade spat) turns out,” he said.
Amazon.com Inc said on Thursday it would buy small online pharmacy PillPack, putting the world’s biggest online retailer in direct competition with drugstore chains, drug distributors and pharmacy benefit managers. The deal wiped out about $14 billion in market value from pharmacy chains and drug wholesalers on day of the announcement while Amazon gained about $5.5 billion. CVS and Rite Aid which fell 6.1% and 11.1% respectively on Thursday slide further on Friday despite narrowing loss.
Having share price slashed nearly 10% on Thursday, Walgreens rebounded slightly on Friday. During an analyst call Thursday, Walgreens Chief Executive Stefano Pessina said company doesn’t see “any reason to be worried” about the deal. The newest Dow component also announced plans to repurchase as much as $10 billion of its shares and raised its dividend by 10%, a move that is normally seen as a signal to boost market confidence.
Amazon’s proposed acquisition of PillPack, which supplies pre-sorted prescription drugs and other services to people who take multiple medications, is expected to disrupt major players in the US prescription drug market valued at more than $450 billion, according to research firm IQVIA. Although PillPack expects sales to exceed only about $100 million this year, Amazon’s huge customer base and existing shipping infrastructure could allow the company to scale up quickly.
Industry experts say Amazon could also negotiate directly with pharmaceutical companies, giving them the ability to offer cheap generic drugs even to customers without health insurance. “Amazon’s acquisition of PillPack is a warning shot in what is about to become a major battle within the pharmacy space,” Neil Saunders, managing director of GlobalData Retail told Reuters.
