Back in the late 1990′s, the concept of invisible braces
being used as an alternative to typical metal wired braces was a hot topic
within the specialized branch of dentistry that deals with correcting crooked
teeth and improper bites known as orthodontics. By 1997, Zia Chishti, an adult
orthodontics patient and Stanford Graduate School of Business graduate who
noticed that his plastic retainer held the promise to address this demand,
devised an ingenious methodology for implementing invisible braces by using a
combination of 3D computer imaging and a series of customized firm, clear
plastic retainers designed to incrementally adjust the teeth until the desired
dentition (arrangement of the teeth) was obtained. Partnering with some fellow
Stanford grads, Chishti formed Align Technology (NASDAQ: ALGN) and set about
further developing and commercializing the Invisalign® system to treat a
variety of malocclusions, or misalignments of the teeth and dental arches,
achieving FDA approval in 1998 and launching the product into markets the
following year.
Since then, the company has seen continuously accelerating
growth, as brand awareness of their core product spread far and wide across the
planet, owing to Invisalign’s comprehensive efficacy for orthodontic treatment,
as well as the product’s comfort, ease of use, and the clear aesthetic
advantages over unsightly metal braces. The Invisalign system encompasses
proprietary virtual modeling software, as well as the related mass
customization and rapid manufacturing processes for the virtually clear and
easily removable dental aligners, which can include unique features like Power
Ridge® and SmartForce® attachments to enhance specific results. The Invisalign
system is actually an entire family of products which range from the full
treatment option, to highly cost-effective options for minor crowding or
spacing. The Invisalign system’s family of products represents an ideal
solution for a wide variety of simple, or even complex situations, and is
currently prescribed through a network of Invisalign-trained orthodontists and
general practitioners (GP) in over 80 countries around the world.
The company has obviously evolved considerably since its
inception and today Align Technology offers a wide range of digital treatment
solutions tailored to dental industry professionals, including the entry-level,
five-stage clear aligner system, Realine®, which is geared towards the GP
dentistry market and designed for minor cosmetic fixes, as well as crowding or
spacing issues. Realine is distributed exclusively through a partnership (June
2013) with superbly networked health care products and services provider, Henry
Schein (NASDAQ:HSIC) and provides non-Invisalign GP dentists with a
competitively-priced solution for doing basic corrective work. Product
distribution of Realine benefits mightily from HSIC’s enormous reach and the
extensive network of long-term and tightly-knit relationships HSIC has
developed with some 80k plus dental practitioners worldwide, representing a
large, mostly untapped market.
Align Technology enjoys increasingly profitable exposure to
a key niche of the roughly $5.4 billion global dental equipment market, which
is projected to surge to over $7.1 billion within the next four years, growing
at a 5.4% CAGR (Transparency Market Research), via their iTero® Intraoral
scanning system. The significant advantages of the iTero scanning system over
existing competitors are numerous and include such things as high-res,
perfectly focused imaging capabilities which are achievable even if the
scanning wand is right up against the patient’s teeth. Unlike competitors,
whose scanning technology typically requires the scanning wand to hover five to
fifteen millimeters above the teeth in order to stay in focus and produce a
good image, making the scanning process a real chore that requires a
considerable amount of patience and skill. Scanning with iTero is done quickly
and results in highly accurate 3D models (iTero prosthetics enjoy a near-zero
rejection rate), meaning that fewer/shorter patient visits are necessary, and
that the common occurrence with other approaches of having to redo scans via
follow-up appointments is almost completely eliminated. Because the use of
messy, uncomfortable and often inaccurate polyvinyl siloxane (or PVS, a silicone
elastomer), impression molding is also eliminated, the overall process is much
more appealing to patients and dentists/orthodontists are finding they see
increased business by being able to offer patients a solution incorporating the
iTero scanning system.
Tight iTero integration with Invisalign, as well as the
company’s OrthoCAD® digital services, represents another significant advantage
for dental professionals. The storage of all associated scanning data in an
easily exported file that can be handed off to any laboratory with an open
CAD/CAM (computer-aided design and manufacturing) system for completion makes
iTero an easy solution to integrate into any existing workflow. Moreover, iTero
features like iCast and iRecord, which provide a digital alternative to typical
stone-cast models, as well as the architecture’s simplified data
storage/retrieval paradigms, vastly improve the overall workflow for already
busy practitioners. Since late 2013, the iTero Intraoral Scanner has been fully
compatible with the leading chairside design and milling system as well, which
is produced by private company E4D and which is exclusively distributed by
HSIC. This powerful combination allows clinicians with the iTero scanner to
significantly expand services to their patients, offering them fast turnaround
options like same-day restorations such as crowns, bridges and veneers. The
iTero scanner is a smaller, but important chunk of the overall ALGN story and
it represents an important vector for the company to gain increasing access to
the $6.5 million plus global dental implant and prosthetics market, where
CAD/CAM continues to be a rising star.
CAD/CAM has really revolutionized several aspects of
dentistry and has shaved immense amounts of time off procedures like designing
dental crowns and bridges, simultaneously leading to vastly improved diagnosis
and procedure planning. Align Technology is at the forefront of the CAD/CAM and
clear aligner space, with innovative solutions that place the company on an
equal or greater footing than other sector operators like Sirona Dental Systems
(NASDAQ:SIRO) or Dentsply International (NASDAQ:XRAY). Consolidative forces
within the broader industry, like those which led to the acquisition of Swiss
dental implant maker, Nobel Biocare, by Danaher Corp. (NYSE:DHR) in late 2014
for some $2.2 billion, make the company’s top-shelf offerings stand out even
more. Align has even teamed up with SIRO as of March 2015 to make Sirona’s
CEREC Omnicam a valid option for executing Invisalign case submissions,
enabling Invisalign providers with a CEREC Omnicam and the related software to
simply submit a digital impression instead of the typical PVS impression. ALGN
and SIRO also agreed to fully support the sizeable iTero laboratory consumer
base with an all-digital workflow. Using Sirona’s inLab software, as of version
15.0, technicians are able to natively import iTero scan data. Comparing the
scanning technology, software, services and broad array of aligner offerings
from ALGN to relatively less compelling product portfolios from aligner
developers like Danaher offshoot, Ormco, with their Simpli5™ express aligner
system that is designed only for minor corrections and relapses, makes Align
Technology really shine as a one of the sector’s only full-spectrum providers.
Especially when you throw in Align’s clearly established practice of going to
great lengths in order to cement its platform technologies as the premier
choice within the industry by initiating symbiotic partnerships.
The recently upgraded ClinCheck Pro software tool for
Invisalign treatment is another big selling point when it comes to the
company’s sophisticated digital imaging capabilities, as the software provides
extremely precise 3D controls that now make it possible for the first time ever
to individually position each tooth right on the 3D model itself and perform
design visualization in real-time, leading to better outcomes. Similarly, the
company’s Invisalign Outcome Simulator application, which is powered by the
iTero scanner, allows doctors to do chairside consultation and visualization
directly with the patient, enabling patients to inspect their current dentition
right alongside the projected and corrected version, increasing their
confidence and ultimately patient retention. The iTero system has quickly
become the key leaping off point for many procedures within the industry today
and because it is the only scanner on the market with certified milling system
and milled model service connectivity, the platform’s multipurpose 3D digital
model file and extensive software options have secured its role as the go-to
choice for restorations, orthodontics, implant solutions, and 3D case planning
procedures in many offices.
Align Technology is constantly developing new iterations of
their product line as well and the company’s recent announcement of the launch
of their Gen 5 Invisalign developments, engineered specifically for deep bite
malocclusion, alongside the rollout of their upgraded ClinCheck Pro software
package, shows how the company is constantly eating up new and greater market
share. The announcement in March of this year at the highly influential
International Dental Show in Cologne, Germany, that the latest edition of their
market leading iTero Element Intraoral scanning system has been made available,
was met with considerable excitement by the attendees, who no doubt salivated
over the significantly improved imaging technology, with 20 times faster
scanning speed, improved color scans, and backwards compatibility with older iTero
workflows. The backwards compatibility is a prime example of Align’s commitment
to satisfying their customer base, which has collectively done over 1.2 million
implant scans, over 1.3 million orthodontic scans, and over 600,000 Invisalign
scans to date. The newest version of the scanner unit is also much smaller
overall, with a more compact form factor and footprint, as well as being
considerably lighter. The new unit also features a 40% smaller and lighter
scanning wand with built-in controls and an instant defogging system, as well
as a 19″ high-def multi-touch display, and integrated gyro capabilities for
easily rotating the on-screen models.
Invisalign has risen to prominence in a very short time and
is considered by many practitioners in the industry as the Gold Standard of
clear aligners. The Invisalign system is generally seen by many in the industry
as having so much development time and resources built into the overall
platform that it is impossible for others to really compete. Cheaper, less
comprehensive alternatives within the global dental consumables market, like
ClearCorrect™, only make up a small portion of the total clear aligner niche
dominated by Invisalign. The $15 billion plus global dental consumables market
was recently projected by Transparency Market Research as being on-track to hit
somewhere around $23.8 billion by 2018, growing on a CAGR of approximately 7.1%
and Align Technology looks positioned extremely well to capitalize on this
growth. Rising aesthetic standards across the globe are a particularly bullish
undercurrent here and the 2015 iData Research report on the roughly $600
million APAC dental implant fixture and final abutment market makes a great
argument for the future of ALGN. Projected 10% annual growth of this market in
coming years, driven by mounting dental health awareness and income levels
throughout China, as well as the proliferation of CAD/CAM technology, means the
market could triple in size by as early as 2020.
A recent study by the American Dental Association showed
that people consistently found a person’s smile to be the most important
physical feature, outstripping the body, eyes, and hair. It seems reasonable
that the rapidly rising popularity of cosmetic and preventative dentistry in
particular will continue to drive the orthodontics equipment and consumables
markets in coming years and Baird Equity Research’s RW Baird dental stock
index, which beat the S&P 500 in 2013 by 5%, looks to be setting up for
another solid year in 2015, as the sector benefits from stable returns in NA,
as well as growing revenues from APAC and EMEA (Europe, the Middle East and
Africa) markets.
Align Technology recently (March 3) celebrated a major
milestone with their 3 millionth Invisalign customer, shortly after having
reported superb Q4 and full-year 2014 financials earlier in January, which saw
an 11.4% jump in revenues year-over-year to $198.6 million, and over 126k
Invisalign cases served. It is worth noting that it took the company 12 years
to hit the 1 million customer mark with Invisalign, but only 3 additional years
to acquire their next million, and they closed the gap on the third million in
just under two years. Invisalign accounted for the lion’s share of 2014
revenues for ALGN, at around 94% of total, with the iTero scanner and services
components making up the remainder. Continued strong growth for ALGN in the
APAC and EMEA markets, as well as solid baseline results in NA, reinforced by a
16.1% year-over-year increase in global sales among teenagers (who represent
roughly one quarter of their overall market), clearly underscores the growing
global brand awareness for their core product line.
A considerable portion of the company’s increasing brand
presence is likely attributable to their sleek and highly functional web
footprint, as well as their enhanced marketing efforts of late focused on the
lucrative teen demographic. With some 5.8 million consumers hitting Align’s
various sites last year, 650,000 consumers completing their Smile Assessment
form and 443,000 plus consumers actively searching for an Invisalign trained
practitioner, the company really knows how to ignite a firestorm of interest.
The company enjoys a continually expanding social media footprint as well, with
66% growth last year to over 115,000 followers. International web stats were
also robust, with over 2 million visitors from the EMEA region and over 760,000
visitors in APAC, driven in large part by successful regional programs and
consumer demand targeted campaigning. The company even opened a series of three
dedicated flagship clinics in South East Asia, synced up with a PR blitz to
inform and entice consumers.
For more information on Align Technology, visit
www.aligntech.com
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