Specialist
Former senior executive at Align Technology
Agenda
- Key trends and developments in the clear aligners sector, focusing on Align Technology (NASDAQ: ALGN)
- Supply chain inefficiencies and disruptions to manufacturing operations
- Relative positioning of Align vs key competitors such as SmileDirectClub (NASDAQ: SDC), Spark and others
- In-clinic model and ability to maintain leading position with orthodontists
- Clear aligner pricing dynamics and innovative features
- 2022 outlook, opportunity in youth patient population and strategic assessments
Questions
1.
What important trends and drivers have you been following in the clear aligners market over the past 9-12 months or so that might better inform our discussion today on Invisalign?
2.
How do you think global macroeconomic inflation will impact Align Technology’s near-term outlook, both from the manufacturer and consumer demand perspective? How might a more premium product such as Invisalign fare in an inflationary environment as input costs rise and consumers become increasingly conscious of inflating prices?
3.
The teen market opportunity has been discussed on management calls and in sell side research. How penetrated is this market with clear aligners and how would you juxtapose the overall market opportunity with the currently penetrated portion of the teen demographic?
4.
What has been Align’s strategy to capture further share in teens? What marketing initiatives is the company employing to build brand awareness and convince customers of its value, especially at the more premium pricing position?
5.
What is Align doing in terms of offering case packs to orthodontists to get more price competitive in the teen market? How effective do you think these efforts will be?
6.
How do you assess the quality and functionality of the Invisalign product against competing options? How much of a difference do Align’s investments in 3D printing and novel plastics make from a quality perspective?
7.
To what extent does the breadth of occlusions factor in here and what percentage of tooth movement cases can Invisalign, SmileDirect, Candid and Spark handle, respectively?
8.
How strong are Align’s relationships with dentists and orthodontists that it’s built from its first-mover advantage? How sustainable do you think this moat will be as more options at different price points come to market? Could you stratify this by dentist and orthodontist, as well as DSO [dental service organisation] and non-DSO?
9.
What haircuts is Align taking from larger DSOs to sell into the conglomerates?
10.
Why might an orthodontist choose Invisalign over Spark and other offerings? How do clinicians weigh the factors we’ve discussed – such as the perfectionist or quality element, product bundling advantages for a name like Spark who can sell other products in the Envista portfolio – and any other key decision criteria?
11.
When might competition start chipping away at Align’s growth? We’ve been hearing about competition for a long time and the company has fended competitors off reasonably well, but how far away do you think some competitive threats from saturation are? Could it be in the next 1-2 years?
12.
How do you anticipate Invisalign’s ASP to trend given the macroeconomic backdrop? Perhaps excluding the impact of easier cases, such as the light aligner types and recutting various packs, is the core Invisalign product declining in price or sustaining pricing power?
13.
Could you outline Invisalign’s unit economics considering price vs patient throughput of aligners, perhaps against legacy brackets and wires options? Is it correct that aligners are more expensive but require less time for patients in the chair, which increases throughput?
14.
Could you quantify the cross-selling opportunity from Invisalign and the iTero intraocular scanners alongside each other?
15.
To what extent does the iTero scanner’s lack of interoperability with competing aligner products keep orthodontists entrenched with Align? How hard is it for orthodontists to prescribe other aligners without adequate scanning capabilities? Are there any drawbacks to making these scanners Invisalign-exclusive?
16.
How much is time in the chair reduced by using Invisalign vs wires and brackets for an average case?
17.
How valuable is Align’s dataset of over 10 million patient scans and impressions from treatments under the Invisalign system? What advantages does this wealth of data provide when researching new cutting-edge treatments and existing product improvements?
18.
What’s the net-net impact on operating margin from competitive saturation vs scaling? How do you expect it to trend over time, given these conflicting factors, and why?
19.
We know SmileDirect has struggled in marketing, given some iOS changes that have dramatically increased CAC [customer acquisition cost] in the social media channel. To what extent is Align insulated from those headwinds? Is the company’s position in the orthodontist and GP channel shielding it from reliance on social media or might it be exposed to a similar increase in customer acquisition spend?
20.
Do you think the quality of competitive products such as Angel Aligners in the China market has improved, appreciating your purview is mainly North America? How close is Angel to reaching parity with Invisalign?
21.
Do you have any thoughts on the pricing pressure we’re seeing in China? These prices used to be meaningfully higher for aligners than anywhere else. What have been the recent trends impacting ASPs in China, aside from coronavirus lockdowns?
22.
How do you assess Align’s capital deployment strategy over the next few years, assuming the company generates significant free cash flow? Are share buybacks a priority in addition to any other capital expenditure avenues?
23.
Do you see any particular inorganic tuck-in opportunities for Align? You mentioned the 3D printing element. Could the company at least acquire the technology or a player with existing capabilities to help move in that direction?
24.
What do you think is a realistic top-line CAGR for Align over the next five years? Is mid-teens realistic? How would your growth clip break down, considering potential softness in the near term with any rebound over the latter part of that time frame?
