Clarifying Invisalign’s Success
For decades, those needing dental realignment had only one option: wire-frame braces. In 1999, that changed with the introduction of Invisalign. Produced by Align Technology, Inc., Invisalign is a clear aligner, a see-through form of braces that is barely visible when worn. Invisalign was an immediate success, and in 2001, Align went public, trading on the Nasdaq as ALGN. Align purchased Israeli company Cadent in March of 2011 for $190 million so that it could begin selling intraoral cameras and 3D scanners, as well as related software. Scanners currently account for 11% of Align’s revenue, with the other 89% coming from clear aligners. By 2016, Align’s sales reached $1 billion, and its customers accounted for 8% of all braces-wearers. However, in October 2017, Invisalign’s patent expired, opening the door to generic competition. Despite this, Align only has one major competitor (ClearCorrect, which was founded in 2006 with its own patent), and sales have still been very strong.
Align’s revenues have been accelerating in recent years. Align’s revenue grew by 27.7% in 2016 and increased by 36.1% in 2017. This has been due to growing sales of both Invisalign and iTero, Align’s intraoral scanners. Sales of Invisalign were 36.5% higher in the first quarter of 2018 than they were in the first quarter of 2017, and scanner sales were up 87.6% in the same period. Sales are expected to continue to rise: Analysts expect sales in the second quarter of 2018 to grow at an annualized rate of 32.4%. However, sales are expected to begin decelerating, with third quarter sales expected to grow by 29.8% and 2019 sales only expected to grow by 24.8%. Taken alone, these are promising numbers, but when compared to past growth rates, they show that sales will likely start slowing. [1]
Expected slowing sales may be due to legal troubles, which are expected to divert some resources from marketing. SmileDirectClub, a minor competitor, sued Align for allegedly breaching non-compete provisions by opening Invisalign stores in the vicinity of SmileDirectClub stores. Align prevailed on June 29 when a Tennessee court denied SmileDirectClub’s request for Align to stop opening new stores. Despite this victory, the case is emblematic of a larger problem: Align will begin to see new competitors now that its patent has expired. [2]
Align has attempted to preemptively counter increased competition by marketing internationally. So far, they have been successful: While North American revenue grew by 33.9% in 2017, international revenue grew by 44.9%. On June 25, Invisalign reached its millionth patient in the Europe, Middle East, and Africa region, according to a press release. There are now over 34,000 Invisalign-trained orthodontists and dentists in that region, a number which is expected to continue growing. [3]
Align has not only been able to achieve high sales growth in the past few years, but accelerating sales. Now, with legal and competitive challenges on the horizon, some analysts doubt they can continue this impressive growth. However, if Align is successful in expanding Invisalign beyond North America, perhaps they can continue to realize accelerating sales. But, at least the wind at their backs as the scale of the global dental market is predicted to be around 37 billion U.S. dollars by 2021. The CAGR for the period 2016-2021 is projected to be 5.6 percent. [4]
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[1] All financial information from Yahoo Finance (retrieved July 2, 2018) and the Securities and Exchange Commission
[2] House, D. W. (2018, July 02). Align Tech prevails in legal challenge to Invisalign store pilot program. Retrieved from https://seekingalpha.com/news/3367528-align-tech-prevails-legal-challenge-invisalign-store-pilot-program
[3] Align Technology, Inc. (2018, June 25). Align Technology Reaches One Millionth Invisalign(R) Patient in the EMEA Region. Retrieved from https://globenewswire.com/news-release/2018/06/25/1529078/0/en/Align-Technology-Reaches-One-Millionth-Invisalign-R-Patient-in-the-EMEA-Region.html
[4] https://www.statista.com/statistics/731751/global-dental-market-size/