CVS Health shares fell about 6 percent Friday after news broke of its talks to acquire health insurance provider Aetna for $66 billion. however analysts say the drop could be more related to Amazon entering the health-care space, than to pre-acquisition arbitrage.
“There can be something in play today with Amazon. All that will risk, discussion about Amazon going into the pharmacy space. that will’s putting a lot of pressure today on the whole drug supply chain,” Jeffries analyst Brian Tanquilut said on CNBC’s Power Lunch.
Shares for an acquiring company, like CVS, typically fall before a merger for numerous reasons. The company may take on debt, struggle to culturally integrate or pay a premium for shares. however shortly after news broke of the potential acquisition Thursday, CVS stocks rebounded, suggesting investors supported the idea.
“They are under pressure in their retail business, they are under pressure in their retail pharmacy business in addition to they are under pressure in their [pharmacy benefit manager] business, so the need to diversify can be pretty important,” Richard Barasch, former CEO of Universal American said. In 2011, CVS bought Universal American’s Medicare prescription drug business for $1.25 billion.
In an industry where standalone businesses are diminishing, analysts in addition to investors seem to agree that will the potential partnership between CVS in addition to Aetna would likely secure the companies a place within the future health space. Diversifying could steel the Rhode Island-based pharmacy against United Health Care, which has data analytics, pharmacy benefits in addition to physician groups at their disposal.
however Amazon poses brand new unknowns for the healthcare industry.
“They’re terrific at mail order. They are great at distribution,” Barasch said, describing Amazon.
Experts anticipate This specific could take the internet commerce company about a decade to even get 10 percent market share, however the market still reacted. CVS shares were trading in tandem with Walgreens Friday afternoon.