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Align Technology Idea Proposal (ALGN)

Align Technology Idea Proposal (ALGN)
 

Can Align maintain share and margins in the face of competitors with lower prices and products that require fewer visits to the dentist?

Report Available: June 27, 2019

 

Blueshift’s initial research found ALGN preforming well despite losing key patents in October 2017 and 2018. ALGN posted back-to-back record revenue in the two previous quarters and guided for strong growth in Q2. This performance is impressive considering ALGN is now facing challenges to its Invisalign clear aligner product line from competitors that are using telemedicine, ecommerce, and charging nearly 50% less to gain share. In addition, ALGN was found to have breached a non-compete agreement with a competitor that resulted in a material charge in the first quarter. ALGN’s performance will continue to be tested as competitors with similar products, fewer required dentist visits, and lower prices fight for a foothold in the lucrative clear alignment market.

 

Observations

  1. ALGN posted strong Q1 results, beating both EPS and revenue expectations. ALGN reported record Q1 revenue of $549 million up 25.6% year to year and 2.8% above Q4’s $534 million, which was also a record-setting quarter. ALGN’s Invisalign product volumes were up 28.3% year to year, and ASP increased by $10 to $1,245. During the quarter, ALGN trained 1,700 new Invisalign doctors in the Americas region to grow its worldwide count to more than 57,000 active Invisalign doctors. ALGN’s iTero scanner and services also performed well in the quarter with sales up 55.1% year to year. Q2 guidance projects a revenue increase of 20% to 22% year to year with Invisalign case shipments up 26% to 27%.
  2. Competition in the clear alignment market is intense and could threaten ALGN’s market position and pressure its margins. Wikipedia listed more than 27 clear teeth aligner companies in 2017. These companies’ products and programs include counselors and coaches to ensure compliance and success, faster teeth realignment, elimination of the need to see an orthodontist, cheaper realignment, and specials, deals and financing. Some of these competitors charge significantly less than ALGN for similar solutions. A partial list of companies in the space includes Straumann Holdings AG’s (STMN.SW) ClearCorrect, XRAY’s SureSmile Aligners, DHR’s Ormco product line, Angelalign, Shanghai Smartee Denti-Technology Co. Ltd, Digital Dentistry Studio Inc.’s Irok, BioMers’ SimpliClear, ClearPath Orthodontics, Geniova, Clarus Company’s True Smile, EZ SMILE, MMM’s Clarity Aligners, Scheu Dental, Candid Care Co., and SmileDirectClub.
  3. In addition to facing intense competition, ALGN must navigate a litigious market. ALGN has recently been on both the winning and losing side of litigation and has a pending infringement suit against 3Shape. ALGN’s victory came after 14 years of claims and counterclaims regarding patent infringements with ClearCorrect Inc., now part of the Straumann Group. ALGN’s loss came in an arbitration decision that found it has violated a noncompete agreement, misused confidential information and violated its fiduciary duties with SmileDirectClub. The settlement requires ALGN to close its 12 retail stores, extends the noncompete clause to 2022, and calls for ALGN to divest its 19% stake in SmileDirectClub.
  4. As a market leader in the clear aligner industry, ALGN continues to innovate. At the International Dental Show (IDS) in Cologne, Germany in March, the company introduced SmileView. SmileView is an online tool that allows prospective Invisalign patients to visualize a new, straighter smile within 60 seconds of taking a smiling selfie. The system then directs the prospective patient to the ALGN Smile Concierge team to find a trained doctor in their area.

 

Can ALGN maintain its market leading position in the clear aligner market? Will ALGN maintain its margins? Will competition in the clear aligner space lead to pricing pressure for ALGN? Will clear aligner products become commoditized? Is the Invisalign technology superior to competitors? Who are ALGN’s biggest competitive threats? What are the initial results from ALGN’s SmileView? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Dental practices offering Invisalign, Dental practices offering competitive products, and Industry specialists.

 

Companies: Align Technology Inc. (ALGN), 3M Company (MMM),  Danaher Corporation’s (DHR), Dentsply Sirona Inc.’s (XRAY), Straumann Holdings AG’s (STMN.SW)

 

Research Begins: June 10, 2019

 

 

To see other ideas Blueshift Research is currently working on, please click here.

 

 

Blueshift Research’s sister company, Intro-act, is launching its Intro-act Scorecard, the C-suite’s standard, ongoing measure of corporate investor engagement.

 

The Scorecard optimizes the ROI on corporate access by measuring: Concentration, Directionality, Breadth, Impact, Depth, and Duration