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Shares of dental suppliers drop on potential new threat from Amazon

  • Morgan Stanley warns dental investors that "Amazon is here," sending shares of dental supply distributors Henry Schein and Patterson Cos. tumbling.
  • Those companies both closed more than 4 percent lower on Wednesday.
  • By accessing dental supplies directly from a manufacturer like Dentsply Sirona, Amazon could work to deliver medical devices and products directly to dentists and other physicians.

Shares of dental supply distibutors sank Wednesday after Morgan Stanley issued a stark warning to investors: "Amazon is here."

Dental supply distributors Henry Schein and Patterson Cos. both closed down more than 4 percent after analyst Steve Beuchaw said that Amazon is buying supplies directly from oral goods manufacturer Dentsply Sirona.

"We have new evidence that Amazon is accessing critical products from Dentsply Sirona," wrote Beuchaw on Tuesday. "While Amazon makes up a small share of average total spending both backward (4 percent) and forward looking (5 percent), it was used by 34 percent of practitioners in our survey in the last year suggesting it is making inroads into many practices."

The analyst downgraded both suppliers to underweight from equal weight. Shares of Henry Schein fell 5 percent while shares of Patterson Companies slipped 4.7 percent.

"We are unaware of any market-leading dental manufacturer that has a direct relationship with Amazon," a Henry Schein spokesperson said. "We believe that at this time Amazon is a minor player in the dental consumables markets, with an insignificant market penetration."

For its part, Amazon offered the following statement for this story: "We don't comment on individual relationships, but Amazon Business customers have a choice of products from numerous dental suppliers and manufacturers."

Patterson Companies did not respond to CNBC's request for comment.

Many have speculated that Jeff Bezos and his company could try to disrupt the medical or pharmacy supply chain and undermine established distributors like Henry Schein and Patterson. By accessing dental supplies directly from a manufacturer like Dentsply Sirona, Amazon could work to deliver medical devices and products directly to dentists and other physicians.

Amazon indicates a majority of the dental products on its business-to-business portal are sourced directly from manufacturers, with the other 50 percent sourced by third parties, wrote the analyst in November, allowing a distributor of Dentsply Sirona products to resell via Amazon.

— With reporting by CNBC's Michael Bloom.