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Amazon announcement sends shares of Henry Schein, competitor down

Henry Schein Inc. said it will not be

Henry Schein Inc. said it will not be moving from its Melville headquarters. Credit: Barry Sloan

Shares of Henry Schein Inc. moved lower Thursday, a dip that Wall Street analysts attributed to Amazon.com's newly announced acquisition of an online pharmacy, the retail giant's latest foray into health care.

Stock in Melville-based Henry Schein, Long Island's largest publicly traded company based on revenue, shed 2.2 percent to $72.17 Thursday afternoon after hitting an intra-day low of $70.68.

"Investors have become highly sensitive to interpreting any move by Amazon in healthcare as affirmation of risk to dental distributors such as Henry Schein and Patterson Companies," Jeff D. Johnson, an analyst at Milwaukee-based investment company Robert W. Baird & Co. Inc.,  said in an email. 

Johnson said investor jitters continue "even though our continued survey work and industry checks suggest Amazon is seeing almost no traction with their dental offerings over the last 12-24 months."

Another analyst, Ross J. Muken of Manhattan-based investment firm Evercore ISI, agreed that the weakness in Henry Schein shares Thursday could be traced to Amazon's "deeper push into healthcare."

Bloomberg, quoting an unnamed source, said that the Seattle-based online retailer would pay about $1 billion for PillPack, a Boston-based online pharmacy that packages medications by dose.

Henry Schein distributes supplies to clinics and the offices of dentists, doctors and veterinarians. Dental distribution is its largest business and its largest competitor is St. Paul, Minnesota-based Patterson Companies Inc., whose stock fell 3.8 percent to $22.85 Thursday afternoon. 

A Henry Schein spokeswoman said the Amazon acquisition "should have no impact on our business since we are not in the retail pharmacy segment of health care distribution."

The spokeswoman said that Henry Schein's services and solutions, such as practice management software, "are not easily replaced."

The company's chief financial officer, Steven Paladino, estimated at a Deutsche Bank conference in May that Amazon's market share of the dental and medical products distribution market is about 1 percent.

In April, Henry Schein announced plans to spin off its veterinary unit, which accounted for 28 percent of the company's $12.5 billion in revenue.

A survey of dentists by Evercore ISI found that about 44 percent of respondents used Amazon.com at least once to buy supplies. Those who used the online retailer said they purchase about 2.5 percent of their total supplies through the web site, but expect that to increase to 6.8 percent in 2019.

Shares of Amazon.com rose 2 percent to $1,694.21 Thursday afternoon.

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