From Product to Platform in Dentistry
For nearly 20 years, Align Technology — the maker of Invisalign — operated a virtual monopoly in clear aligners by fiercely protecting patents for its computer-aided design (CAD) and manufacturing (CAM) systems. CAD/CAM technology ensures each clear aligner fits the precise specifications of each unique patient at each stage of treatment. Without it, the type of mass customization required for clinically viable clear aligner treatment is impossible (or at the very least meaningfully inferior and extremely difficult to deliver at scale).

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In 2017, these CAD/CAM patents expired, opening the doors to competition. One narrative prophesied new entrants would commoditize the market, compress margins, and cast Invisalign aside. That didn’t happen — and likely won’t — but the competitive landscape still looks vastly different now.

For most of Align’s history, the challenge was proving the clinical viability of clear aligners as a treatment for malocclusion (misaligned teeth). Today, clear aligners are a widely accepted alternative to metal braces, but the challenge is driving adoption (among both doctors and patients) and differentiation in a crowded marketplace.

The technology and processes required to produce a competent clear aligner offering takes time to develop, so real competition didn’t emerge overnight. But now, more than five years later, several firms have developed noteworthy solutions and are pursuing various strategies of differentiation.

Direct-to-Consumer Channel
On the direct-to-consumer side, Smile Direct Club, Candid, Byte (owned by Dentsply Sirona), Dr. Smile (owned by Straumann) and several others have joined the marketplace. I won’t spend too much time on this segment because I’m skeptical of the business model (it requires inordinate marketing expense to drive patient traffic), the application is generally limited to low acuity cases, and a truly viable competitor has yet to emerge.

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DTC treatment also doesn’t use an intra-oral scan, which can result in overcorrection, poor bite formation, and other issues related to roots. Regardless of the business model challenges, the clinical efficacy is questionable.

Candid exited the DTC business in January 2022 (perhaps after recognizing this) to focus on CandidPro, which integrates its technology into practices. This may be a better strategy, but it remains nascent with only ~23,000 patients to date.

Doctor-Directed Channel
Invisalign’s direct competitors sell to orthodontic and dental practices. These include SureSmile (owned by Dentsply Sirona), Spark (owned by Envista), ClearCorrect (owned by Straumann), and Angel Aligner (in China).

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Reasonable Yield's avatar
A name I have not remembered about for a while, thanks for reminding me (and updating me) about this one!

Do you own it?
Investor's Perspective's avatar
@reasonableyield Glad it was helpful! I do own some but not as much as I would like. I bought some in 2019, 2020, and a month or so ago that I’ve held onto, but I’d have to see a return to growth or a drop in the valuation before I add more to it.
Joey Hirendernath's avatar
Really interesting to learn about $ALGN. Also fascinating to see its moat is intrinsically linked to its IP.

In our opinion what are the main factors hindering the adoption among both doctors and patients?
Investor's Perspective's avatar
@joeyhirendernath I’d speculate it’s the combination of a few things
  1. Inertia. Many orthos have been practicing with braces for well over a decade or several decades. They’re used to it and don’t want to relearn a system.
  1. Many specialists don’t think they can earn as much money so they’re reluctant to switch.
  1. You need a sales force. Seems like not many practices will proactively reach out to get started. Salespeople have to convert them, show them the system, and demonstrate why it’s profitable.
  1. Lack of historical viability. If you look at growth since it’s achieved a critical mass of being able to treat 90% of cases, it’s very strong. I expect this will continue outside of the current macro environment, and the entry of established firms like Sirona, straumann, etc adds legitimacy. It’s still relatively early since that capability
Joshua Simka's avatar
@gallagher_ip To your point about inertia, which is a very real thing for any medical device or treatment that disrupts the standard of care—I guess the ones who have been using metal braces the longest are liable to retire soonest! $ALGN is a great long term story and I'm glad I own shares.



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