Speculation of Amazon entering the pharmaceutical space drastically spiked in October 2017. The topic has been top of mind for health care companies ever since.
Running a search for Amazon ($AMZN) on intelligent search engine AlphaSense, and limiting the sources to Event Transcripts, Company Presentations and Press Releases by companies in the Health Care industry, the spike in mentions is obvious in the trend chart:
Who Should Be Worried?
Amazon says they will make their intentions of entering the pharmaceutical space clear before Thanksgiving 2017. Speculation shows that if they do enter the space, the threat lies much more on retailers, such as CVS ($CVS), Walgreens ($WBA), Rite Aid ($RAD), etc., and not so much on distributors.
- From Leerink’s Healthcare Distribution: Supply Chain Review, found on AlphaSense, “We continue [to] believe that the retailers face the biggest threat from Amazon and while CVS has its own PBM which should help minimize risk and reduce potential share loss, the threat from Amazon continues to weigh on the stock.”
- From Cowen’s Health Care Technology & Distribution: Drug Distributors report, found on AlphaSense, “We believe the threat of Amazon to the distributors is overblown, at least in the near to medium term, as we do not believe Amazon represents a better or cheaper alternative to either downstream customers (retail pharmacies) or upstream customers (drug manufacturers).”
What are Analysts Asking?
Questions from analysts on earnings calls about the potential threat that Amazon is posing to pharmaceutical companies and retailers are expected and have already started coming in.
- From J.P.Morgan’s Healthcare Technology & Distribution report on AmerisourceBergen ($ABC), found on AlphaSense, “We expect the focus of the call to be on the initial 2018 guidance, outlook for branded inflation and generic deflation, the pricing environment in the independent pharmacy segment, underlying growth in the pharma distribution business, performance in specialty, the potential threat from Amazon and M&A opportunities.”
- Question from Q1 2018 Premier Inc ($PINC) Earnings Call transcript, found on AlphaSense, Mohan A. Naidu: “…based on a high level, there is a lot of discussion about potential threat from Amazon in [the] health care market. And how do you see possible disruption from Amazon coming into the supply chain if there is anything relating to GPO market or supply chain in health care?”
- Question from Q3 2017 Pfizer Inc ($PFE) Earnings Call transcript, found on AlphaSense, Jamilu E. Rubin: “Has Pfizer had discussions with other companies regarding alternative drug distribution models or potential new entrants into the drug distribution business? Obviously, I’m referring to the sort of havoc that has wreaked upon that industry because of the threat from Amazon. Just would love your thoughts on that.”
Given the unique artificial intelligence (AI) technology used in AlphaSense, researching industry topics such as the above and gauging the reaction of the market, competitors and The Street are quick and easy.
AlphaSense provides users with the ability to filter their results, so they are only viewing relevant information. Those results can further be sorted by relevancy score. The middle pane of the 3-pane display shows search results in context, so users are able to quickly jump to the portion of the article or report that is relevant to them.
For now, it remains to be seen if Amazon will decide to enter the pharmaceutical space and what real affect that will have on the marketplace. As information is released, AlphaSense will send me email updates on my saved searches, so I can be sure I won’t miss out on any new information.
1. Leerink, “Healthcare Distribution: Supply Chain Preview – Pricing and Volume Trends do not Appear Favorable,” October, 23 2017
2. Cowen, “Health Care Technology & Distribution: Drug Distributors – Cardinal Health,” November 6, 2017
3. J.P.Morgan, “Healthcare Technology & Distribution: Earnings Preview for Week of Oct 30,” October 30, 2017
4. Q1 2018 Premier Inc Earnings Call, November 9, 2017
5. Q3 2017 Pfizer Inc Earnings Call, November 1, 2017