Yesterday, Amazon announced they are buying One Medical for $3.9 billion. They are paying $18 a share, an 80% premium to Wednesday's closing price. That may seem like a steep premium, but the 12-month high for One Medical is $30, and the all-time high in February 2021 was $58. Amazon is taking advantage of the selloff in loss-making but fast-growing companies.
One Medical is a tech-healthcare company which is looking to improve the medical experience through the use of technology. It was founded in 2007, with Google as an early investor, and later listed on the Nasdaq in 2020. It currently has 188 medical offices in 25 regions, and like many fast-growing start-ups, it still makes losses. They lost $90 million on $245 million of revenue in the last quarter.
Amazon already has a fledgling healthcare division. In 2018 they bought Pillpack for $750 million, to create their online pharmacy. They also have Amazon Care, a virtual health consultancy program, initially only for Amazon employees but has now opened to the public. The purchase of One Medical now adds physical healthcare facilities to the division, meaning that Amazon covers most of the value chain offering with virtual consults, physical consults and delivering the prescribed medicine via their pharmacy.
Healthcare is an industry ripe for disruption, particularly in the US. If Amazon can crack the code, it will be very good for patients as well as shareholders.