) participated at the Morgan Stanley Healthcare Conference where
the Vice President, Finance and Chief Financial Officer of Align,
Kenneth Arola clearly spoke about the company's key focus areas and
According to Arola, Align, a public company for the last 12-13
years, has been greatly successful in the malocclusion market,
serving nearly 2 million patients. In this time, Align delivered 75
to 80 million aligners, the company's class II medical devices and
generated more than $2 billion in revenues.
Currently the company is focusing on four important areas of
development. The first point of focus is to introduce clinical
innovations to help doctors work more efficiently. The second focus
point of the company is educating customers about the know-hows of
Invisalign, the company's core product.
Invisalign is an exclusive method to treat malocclusion based on
a series of doctor-prescribed, custom manufactured, clear plastic
removable orthodontic aligners. The Invisalign system offers a
range of treatment options, specialized services, and proprietary
software for treatment visualization and comprises several phases.
Arola claims that educating patients would improve Align's customer
base, as this would help patients understand the capabilities of
Invisalign, thus pushing doctors toward using the product.
The third emphasis of the company is customer experience, which
will help the doctors to prepare ClinCheck approvals. Last but not
the least is Align's strategy of international expansion.
Primarily, the company plans to improve the adoption of Invisalign
in the core markets of Europe and China. A year back, the company
had opened some offices in four major cities across these
Notably, cases shipped to the international market during the
last reported quarter were 22,6000 (representing 23.7% of total
worldwide volume), a year-over-year increase of 35% and a
sequential increase of 13%. Despite macroeconomic concerns in
Europe, the company benefited from its solid direct business model.
Its Asia-Pacific (APAC) business also did well. In Europe, there
was balanced growth across all countries including the U.K. During
the quarter, the company launched Invisalign i7 in the U.K., a
seven stage aligner offering for minor crowding and spacing.
Moreover, China and Japan are also exhibiting strong growth.In
China, the launch of Invisalign during the second quarter of 2011
was also followed by the introduction of Invisalign 4 and
Invisalign Teen in that region. The company believes that the new
features and functionality delivered with Invisalign G3 and G4 are
even more effective outside North America, especially in Asia, due
to the higher complexity of cases among the Asian population.
Last year, Align acquired a privately-held Cadent Holdings, a
provider of 3D digital scanning solutions for orthodontics and
dentistry practices and maker ofthe iTero and OrthoCAD iOC scanning
systems. According to Arola, utilizing Cadent's products, Align
will be able to boost placement of Invisalign in the market.
Align believes that intra-oral scanning will become an important
part of the normal dental practice. At present doctors submit PVS
impressions of the patient's dentition to Align to start a new
Invisalign case. However, through intra-oral scanning, doctors will
be able to submit fully digital intra-oral scans of the dentition
instead of a physical impression, an option that is more
user-friendly for the doctors as well as more comfortable for the
We believe that based on its several strategic initiatives,
Align will continue to exhibit strong growth momentum. Banking on
its core product, Invisalign, the company witnessed balanced sales
growth across all its channels. Cadent's contribution is also
helping Align to further expand its presence in the malocclusion
Moreover, its focus on the international market, especially
Europe and China is encouraging. We are also encouraged with the
company's new product development and believe that the newly
introduced Invisalign G4 platform will lead to solid revenue
growth. Considering the strong untapped potential of the
malocclusion market, we are optimistic about the prospects of the
company, which retains a Zacks #2 Rank (Buy) in the short term.
However, the current economic uncertainty continues to cast a
negative impact on dental procedures because of its elective
nature. Moreover, the company faces significant competition from
players such as
). This resulted in a continuous decline in the international ASP
over the past few quarters. We also remain concerned about
increased expenses leading to contraction in the gross margin. We
currently have a Neutral recommendation on the company in the long
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