Amazon — One Medical : 3.5 Billion Dollar deal a foray into global dominance?

Amazon the global giant with a market capitalisation of $1.245 Trillion, acquired One Medical this past week for 3.5 billion dollars, barely a sneeze for Amazon. Good news for Amazon : They will either learn or earn from this acquisition.

Let’s go over the basics of the deal:

1. One medical — an app and website members use to book appointments , track health records and renew prescriptions
2. Not yet profitable since going public in 2020. Losses in the first three months of 2022 reached a whopping $90million
3. The acquisition will bring Amazon to compete with pharma biggies like Optum, CVS Health and hospital systems
4. Amazon’s previous $1 billion dollar acquisition into shipping prescriptions hasn’t been very successful yet. However, this acquisition might help it’s 2019 launch of Amazon Care
5. Amazon’s pharmacy business after the acquisition of online PillPack two years ago, hasn’t gained much traction.

What could be good about the deal?

1. Target attractiveness

One medical got traded like a distressed asset, bought at almost $18 / share — a 66% rise over its previous close yet 20% less than its IPO and almost 70% less than its all time high.

2. Synergies

One medical wasn’t doing that great to begin with, their locations resemble the lobby of a boutique hotel, how’s it going to give some “primary care” to its patients? Amazon can add value through its investments and one medical could gauge some conglomerate advantage for its improvement.

Amazon Care getting a medicare advantage with this acquisition? A merger of its 125 brick and mortar locations with one medicals already existing assets. For Urgent Care , Amazon is better equipped with One Medical’s large client base and Amazon’s brick and mortar locations .

One Medical serves largely non diverse, healthy, young, non diabetic and affluent client base. To add to that Amazon Care clientele. A more robust 24/7 telemedicine offering for individuals who are insured as well as uninsured. A largely rich client base added to the already existing list of patients.

Amazon is one of the biggest employers, 1 out of 153 Americans work at Amazon. So Amazon’s own employees provide critical mass. Just imagine all of these employees being Amazon’s own clients.

What’s next in terms of post merger integration?

One Medical can be a quick integration into Amazon Care business. The synergies that exist are too many. Processes need to be aligned and the losses can be quickly converted into profits over the next 5 years. That being said, this move is more of a jump into acquiring data and getting a dominance into the healthcare industry — revenues aren’t the end goal. However let’s hope One Medical is a life boat to Amazon’s other not so profitable healthcare ventures.

Jeff Bezos has slowly forayed into media, pharma, retail, outer space, you name it. If Amazon isn’t headed for global dominance, then I don’t know what is.