SEATTLE — Just two months ago, Andy Jassy, almost a year into his reign as Amazon’s chief executive, told investors that driving down costs was a “really big area of focus,” after the company produced its worst quarterly earnings in years. But that didn’t mean he wasn’t open to a deal.
On Thursday, Amazon announced its first major acquisition under Mr. Jassy’s tenure as C.E.O., spending $3.9 billion for One Medical, a chain of primary care clinics around the country. One Medical’s share price was down more than 80 percent since its peak last year, and, in a statement, Amazon said it would acquire the company for $18 per share in an all-cash transaction.
The deal is a sign of Amazon’s long-simmering health care ambitions. As the company has marched from one retail business to another — including books, CDs, electronics, dog food, diapers and clothes — it has had to look in less obvious spots to find opportunities that can provide meaningful expansion.
Health care has been tantalizing to Amazon executives who believe it is an immense market, rife with inefficiencies and generally lacking the kind of customer-focused approach that Amazon tries to take with its businesses. But none of the company’s forays into health care have had notable success nor have they been as big as the One Medical acquisition We think health care is high on the list of experiences that need reinvention,” Neil Lindsay, the senior vice president of Amazon Health Services, said in a statement announcing the deal.
Mr. Lindsay ticked off some of the annoyances of modern health care: booking appointments, sitting in waiting rooms, traveling to a pharmacy, even finding a parking spot. Amazon’s notion of seeing a provider could include more virtual or online care, which health care companies like One Medical and Kaiser Permanente are already doing. Amazon wants to be the “front door” through which customers access health care, said Christina Farr, an investor in health care with OMERS Ventures. “They want to nail the consumer experience.”
Based in San Francisco, One Medical operates a network of 188 medical offices, primarily in large cities, and provides virtual medical services that patients access with a $199 annual membership. Last year, it spent $2.1 billion to acquire Iora Health, which provides care for seniors enrolled in Medicaid. That One Medical sees about five times as many virtual visits as in-person appointments most likely made it attractive to Amazon, according to analysts at the investment bank Cowen. The company also has something Amazon values deeply: data. One Medical built its own electronic medical records system, and it has 15 years’ worth of medical and health-system data Amazon could tap.
While individual patient records are generally protected under federal health privacy laws, the big data expertise that has fueled Amazon’s success can be powerful in health care — for predicting costs, targeting interventions and developing products and treatments, said Dr. Aaron Neinstein, a digital health expert at the University of California, San Francisco and a member of a federal advisory committee on the issue.
One Medical went public in 2020 at $22.07 a share. After hitting a peak of $58.70 last year, its stock price closed on Wednesday at $10.18. The company, which is not profitable, has missed recent Wall Street expectations amid a broader downturn for health care start-ups.
“We look forward to innovating and expanding access to quality health care services together,” said One Medical’s chief executive, Amir Dan Rubin, who will remain in his post after the deal closes. The deal requires approval from regulators and from One Medical’s shareholders
You must be logged in to post a comment.