Align has invested heavily to develop and market its offerings to juveniles and win over parents.

Business Strategy & Outlook

In the 25 years since Align was granted U.S. Food and Drug Administration approval for its clear dental aligners, the Invisalign brand has become synonymous with effective and discreet orthodontic treatment. The serviced addressable market comprises 15 million new orthodontic case starts each year, three fourths of which represent the teen market and the remainder adults. The Invisalign has achieved low-teens market penetration, largely due to its success at appealing to the adult market. Through two decades of research and development and an unrivaled database from roughly 10 million treated patients, Invisalign estimates that the system can treat over 90% of malocclusion cases (misaligned teeth), a substantially wider array of patients than seen with most other clear aligner firms.

Align is focused on disrupting the traditional metal braces market, which represents the lion’s share of the 21 million orthodontic cases today (over 80%), through innovation in customized 3D-printed clear aligners and industry-leading scanners and design software. The dental industry is still in the early stages in the shift to digital technologies, largely stuck to old workflows. Intraoral scanners, such as Align’s iTero device, combined with computer-aided design software (CAD/CAM) are typically seen as the gateway for dental providers to shift new case volumes over to clear aligners (nearly 90% of all Invisalign cases are submitted via digital scan). On the demand side, Align’s largest obstacle has been capturing a more meaningful share of the teen market (currently mid-single-digit penetration). In recent years, Align has invested heavily to develop and market its offerings to juveniles and win over parents, adding solutions for younger patients with mixed dentition, free replacement trays, and physical indicator “dots” that monitor treatment compliance. Additionally, Align has been focused on driving growth through treatments initiated by general practitioner dentists. While traditional metal braces are under the domain of orthodontists, clear aligner treatments offer a separate, incremental stream of revenue to the general dentist.

Financial Strengths

As of fiscal year-end 2021, cash and cash equivalents were $1.2 billion, and the company held no outstanding debt. One cannot have any concerns about Align’s ability to meet minimum purchase agreements with suppliers and do not foresee any liquidity issues facing the company. The free cash flow of $933 billion in 2022 and do not anticipate the firm initiating a dividend in the near term, as Align prefers to return capital to shareholders via share repurchases. The company has $650 million remaining under its existing share-repurchase plan, and recently announced it would use $200 million for accelerated repurchases.

Bulls Say

Align’s first-mover advantage has allowed the company to build a dominant market share and a brand synonymous with clear aligners.

Align’s 10 million-plus treated patient data set is unrivaled by competitors and grants the company an edge in developing new indications of treatment.

Invisalign starts saw a tailwind in 2021 as a result of the so-called Zoom effect, with a sharp uptick across cosmetic procedure categories.

Company Description

Align is the leading manufacturer of clear dental aligners globally, having pioneered the technology with the introduction of its Invisalign branded aligners in 1998. Since then, Invisalign has become a household name, having treated over 10 million patients with malocclusion (misaligned teeth) through orthodontist and dentist-guided treatment plans. The company maintains dominant market share of clear aligners, despite the introduction of direct-to-consumer competitors upon the expiration of key patents that began in 2017. Align also manufactures intraoral scanners (iTero), used for orthodontic treatment and restorative dental procedures (digital models for crowns, veneers, and implants).

(Source: Morningstar)

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