By Bloomberg
June 28, 2018

Amazon.com Inc.’s plans to buy online pharmacy PillPack sent shock waves through the health-care sector. Stocks tumbled and mounting investor fears led Evercore ISI to compare the situation to a scene from “Game of Thrones.” While speculation about Amazon entering the health-care space has plagued the sector for months, Robert W. Baird & Co. called the PillPack news “a full frontal attack” on companies whose valuations were already near historical lows.

Here’s a roundup of what some analysts are saying about the news:

Robert W. Baird health supply-chain analyst, Eric Coldwell

Amazon buying PillPack is “a full frontal attack” on the health-care space. “The Street will view this Amazon move as the beginning of the threat, not the entirety of it.”

“Honestly, not sure what to do with stocks here,” especially after Walgreens earlier had a mixed-bag earnings report that wasn’t going to be loved on Wall Street.

Most supply-chain stocks that are falling Thursday were already near historical lows. These companies have the ability to buy back very inexpensive stock.

The financial implications for supply-chain stocks will probably be insignificant through 2019.

Evercore ISI health tech and distribution analyst, Ross Muken

Amazon’s move has triggered a “Wall of worry” that looks “like a scene from ‘Game of Thrones.”’ Muken said investors will be petrified about share loss and margin compression.

“While we can argue that PillPack’s scale is minuscule and it is hard to envision it being particularly relevant broadly for the foreseeable future it just won’t matter frankly.”

Muken lowered price targets across his coverage area to reflect a less constructive view of long-term margins.

RBC Capital Markets health-services analyst, George Hill

Amazon’s official entry into the health space will place a cap on drug supply-chain multiples regardless of Amazon’s ability to scale the PillPack business. Hill sees supply-chain stocks potentially trading below 10 times their price-to-earnings multiples as competition heats up.

Cantor Fitzgerald managed care analyst, Steven Halper

Halper isn’t worried about Amazon’s entrance into the prescription-drug business as pharmacy networks are controlled by managed-care companies and pharmacy benefit managers.

The acquisition may turn out like Drugstore.com, which ultimately exited the prescription business and focused on over-the-counter products before being bought by Walgreens and ultimately shutting down.

Halper doesn’t expect the deal to have a material impact on managed-care stocks.

Mizuho health services analyst, Ann Hynes

Hynes recommended buying shares of CVS Health and Express Scripts on weakness as Amazon’s “bark is likely worse than the bite, at least initially.”

While the announcement will weigh on valuation for health stocks, Amazon’s market share gains will be dependent on customer preference. PillPack is part of CVS Caremark’s network and likely other larger payer networks, as well.

Amazon’s move makes the pending mega-mergers between Aetna and CVS Health, and Express Scripts and Cigna, even more important.

Bloomberg Intelligence, Jitendra Waral and Charles Allen

“Amazon is still in the early stages of figuring out the best way to tackle the health-care retail market.”

“Longer term, Amazon will become a key player in health care, but the timeline is likely longer than most expected, given last-mile delivery infrastructure needs to scale first.”

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