Amazon.com’s (AMZN) pursuit of being the retailer of choice for as many product lines as possible has reached into the prescription drug industry with its purchase of online pharmacy PillPack Inc. (Private Company) for an estimated $1 billion. This follows CEO Jeff Bezos’ recent alliance with Berkshire Hathaway Inc. (BRK/AB) and JPMorgan Chase (JPM) to form a joint venture to address the complexity and high cost of worker health benefits. Stocks in the soon to be disrupted Drug Retail and Healthcare Distribution Sectors felt the pain immediately with the average stock price in the two sectors down 5.6% at the close. AMZN’s stock price is up 2.5% on the news, generating a $20 billion increase in its market cap on the impending $1 billion PillPack purchase.
The acquisition of PillPack will allow Amazon to get a foothold in the online and mail order pharmacy sector in all 50 states and compete directly with established competitors such as CVS Corp (CVS), Walgreens Boots Alliance (WBA), Rita Aid Corp (RAD), McKesson Corp (MCK) and Cardinal Health (CAH), which had the largest percentage losses for the day.
| Drug Retail Sector
(in $ millions) |
Ticker | Short
Interest |
YTD MTM
P/L |
YTD MTM
P/L % |
Day Price
Change |
DAY MTM
P/L |
Day MTM
P/L % |
| CVS Corp | CVS | $3,146 | +$331.6 | +11.35% | +$4.27 | +$191.8 | +6.10% |
| Walgreens Boots | WBA | $1,421 | +$265.7 | +21.32% | -$6.56 | +$140.7 | +9.90% |
| Henry Schein | HSIC | $1,416 | -$83.1 | -6.71% | -$1.14 | +$21.9 | +1.54% |
| McKesson Corp | MCK | $1,125 | +$160.2 | +14.16% | -$8.86 | +$68.9 | +6.12% |
| AmerisourceBergen | ABC | $589 | +$38.2 | +6.84% | -$3.72 | +$24.4 | +4.14% |
| Patterson Cos | PDCO | $412 | +$139.2 | +44.83% | -$0.69 | +$12.0 | +2.91% |
| Cardinal Health | CAH | $367 | +$110.1 | +15.79% | -$2.56 | +$17.7 | +4.84% |
| Rita Aid Corp | RAD | $325 | +$7.6 | +2.75% | -$0.22 | +$36.1 | +11.11% |
| Diplomat Pharmacy | DPLO | $263 | -$43.5 | -23.86% | -$1.23 | +$11.8 | +4.50% |
| Owens & manor | OMI | $181 | +$21.5 | +12.74% | -$0.16 | +$1.7 | +0.92% |
| Petiq Inc | PETQ | $121 | -$15.5 | -20.19% | +$0.53 | -$2.5 | -2.08% |
| Total Sector | $9,366 | +$932.0 | +10.58% | +$524.5 | +5.60% | ||
| Amazon.com | AMZN | $8,328 | -$2,897.9 | -38.33% | +$40.94 | -$205.3 | -2.47% |
We should continue to see short selling in the Drug Retail and Healthcare Distribution Sectors as Amazon’s footprint in the sector continues to expand. We saw increased short activity today as momentum short sellers jumped onto the coattails of the existing fundamental/value shorts, specifically in CVS Corp and Rite Aid Corp. There were also some buy-to-covers in Walgreen Boots Alliance stock as short sellers that added $585 million to WBA’s short interest over the last month took some profits. In addition to the increased short selling in outright equities we are also seeing short selling in CVS corporate bonds.
With short sellers in the sector now outperforming both the S&P 500 and Nasdaq, they are more likely to hold onto their positions and ride the Amazon disruption wave as far as it can take them.
Want deeper insight into the above analysis?
Contact: Ihor.Dusaniwsky@S3Partners.net
Managing Director Predictive Analytics, S3 Partners, LLC
For more information on S3’s reporting, data and analytics solutions, email us at sales@s3partners.net
Start your free trial of the BLACK App – the only source of real-time short interest on the Bloomberg Terminal or Thomson Reuters Eikon.
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decisions.
