We finally got access to Looker at Stream and the analytics show that two of the top three transcripts in the Healthcare sector for July were about Align Technology (ALGN). ALGN is the leading manufacturer of Invisalign systems for treating malocclusion or the misalignment of teeth. So brace yourself (get it) for impact because we’re going to take a deep dive into why orthodontists have been talking about ALGN this month.
Below are three expert orthodontists who explain why they prefer Invisalign over its competitors and how 3M is rapidly closing the product gap. You can gain access to these expert call transcripts for a free 14 day trial at Stream by AlphaSense.
The Product Gaps of Clear Aligners
Invisalign will have to lower its high lab fees to maintain superiority in the market
“At this point, I’m only using Invisalign. I work with them very closely and I actually just did a commercial for them. Definitely right now, I’m only Invisalign, but going forward, that’s probably going to change. 3M closest competitor to me right now in terms of quality and scope of what it can achieve. It’s only a matter of time until other brands catch up and Invisalign does have very high lab fees for us.
The motivating factor to leave them would be the lab fee. We’ll see how it goes. Invisalign has a leg up. They’ve been around for 30 years as opposed to these New York brands that have been around for maybe five or six years at best. It’s going to take some time, but I would definitely be very open to switching to other brands if the lab fees are lower…
I think it’s going to be really hard for them [to maintain technological superiority]. I think they’re definitely going to have to reduce their lab fees and in another 10 years or so, I don’t see Invisalign having a leg up on the market anymore.”
The product gap between Invisalign and 3M is closing fast
“I’ve never actually really tried [3M] products. I looked a lot into 3M, and I have colleagues who use 3M. About a year ago is when I still felt that their design and their infrastructure wasn’t strong enough to support a really big patient base for me reliably. I do think the quality of their product is very, very close to Invisalign, if not just as good at this point.
I’m worried about moving to another brand where I don’t know the ins and outs. I don’t know the customer support that they have because I contact Invisalign every day to work with their agents and their customer support. I’m too worried, but I think that gap is closing pretty fast. I don’t think there’s much of a gap between let’s say Invisalign and 3M.”
Another orthodontist claims that 3M is a 100% substitute for Invisalign
“Where I am right now, I don’t have any desire to move to in-house, but I wouldn’t mind going back to the 3M. The workflow at 3M was great, their customer service is great. They would call me instead of me having to log in or my staff and see an issue with anything. They would give us a call which was just pretty nice. It did a good system for the savings on a comprehensive case for $400-ish.
I think it’s very comparable. In my experience, it was a 100% substitutable, if not the 3M, having a little bit of advantage because for whatever reason, I had fewer assignments on a 3M case, which if we’re talking increased efficiency and everything that was worth a lot. I definitely had a good experience with 3M and I didn’t tackle everything.
I hadn’t worked all the way up to doing any major extraction cases with them…but I’d say it’s 100% substitutable. I had a great experience at 3M.”
Product Differentiation and Competitive Landscape
Invisalign and 3M have taken the lead in the clear aligner market, but let’s take a look at how other brands are faring in the competitive landscape.
ClearCorrect’s product was unimpressive to this orthodontist
“I think, again, just because of the newness of it and the number of brands that seem to pop up, I just wrote all of them off. Now, I’m more open to it. I actually did try [ClearCorrect] and was really unimpressed with it. The bells and whistles were cool, but the actual product was very limiting. I tried it on a couple of patients who let me do it for free. They didn’t use attachments, they didn’t do IPR, the customer support wasn’t there. I just didn’t feel like the quality of the product was as good.”
Direct to consumer brands offer a great price point but don’t usually go well
“At first, a lot of people bought SmileDirectClub, they were really intrigued by the price and the convenience. Overall, I actually think that these direct-to-consumer brands have just been a really good advertisement for clear aligners, in general…
Basically, direct-to-consumer aligners, they’re not designed by orthodontists. They’re designed remotely by general dentists, sometimes orthodontists. They don’t use any of the adjuncts that Invisalign uses, like attachments, or interproximal reduction, or elastics. You’re never seen in person by a doctor.
I’ve seen patients come in and their mouths are just a mess because all of these factors haven’t been accounted for. They’ll end up with crossbites or open bites or their teeth are so crowded. I’ve seen all of that. I think the mentality has shifted just because most people now know someone who has dabbled in these direct-to-consumer products, and most of the time, they don’t go well.”
Impact of Economic Downturn
One orthodontist claims that people are more wary to spend their money with the economic downturn
“I definitely would say a year ago, it was booming. Now, I think with the economic downturn that some people are a little bit more wary to spend their money. It’s interesting because I work in two practices and one of them has slowed down considerably. Last year, it was almost like I barely had to walk in the room for a patient to want to move forward with treatment. Now, it’s, pardon the pun, but it’s like pulling teeth a little bit…
I’ve definitely just seen in that practice, a lot of the patients are very clearly worried about finances. They’ve expressed that to me and to our managers very clearly. That does really seem to be the reason why a lot of people don’t want to proceed right now.
I would say it started probably about three or four months ago, it’s when I really noticed it. I know from trends that economies bounce back. I do think it’s going to get better eventually. I am worried for the next couple of years on how things are going to go.”
But another orthodontist claims that economically stable people are more inclined to seek clear aligners
“It might depend, but I definitely don’t think that people would be jumping in to do elective therapy when they don’t have enough money. I think it is somewhat sensitive. Actually, the ones that seek clear aligners tend to be a little bit more on the economically stable side but even then, everyone gets affected. It’s not super sensitive, but just moderate.”
People with lower incomes are able to afford clear liners because of insurance compensations
“I do have one practice that’s doing very well and people seem to want this treatment. I do expect a slight downturn to last maybe a couple years. I am surprised. I think my lower income practice takes a lot of insurances and my high-end one does not. I think overall, a lot more people are coming to that practice because they get compensation from their insurance companies. I think that’s probably the biggest reason why.”
A third orthodontist states that there will not be an impact
“I’ll just say, no. I don’t think so. I think they come in and they ask for Invisalign specifically because that’s what’s marketed to them and that’s what they know. I say they’re good candidates for each and if they come in wanting Invisalign, they know what they want, they know what they would like to do. I don’t think we’ve had any real reduction in any case starts or anything so I’d say no. I don’t think there’s been any change over the last couple of months.”
Five Years from Now…
Our three experts gave the following responses when asked what percentage of aligner cases will they continue to use Invisalign in the practice five years from now:
“Probably they’d go down by 50%-75% in five years. If Invisalign maneuvers, changes their lab fees, and they can be competitive, then I would have no reason to change.”
“I think there’s still room for Invisalign for sure, just because it’s just the most developed and it’s still the bastion in the clear aligner industry. It does have a lot of data. I’ll still be using it. Among the ones that are set up, like the all-inclusive systems, Invisalign is still by far my favorite. Spark, the interface is just not as great. Invisalign does look very aesthetic for sure…The ones that are faster adopters may move out of Invisalign while the older adopters move into Invisalign. That might be the GPs, or the older orthodontists, or general dentists.”
“I don’t know about 100%, especially over five years I could definitely see it transitioning just as we talk about it. If the ownership structure changes and incremental cost it moves a little bit more because I am personally familiar with other brands, notably 3M, I’d have no trouble changing over completely. That’s a huge range so I’d say in five years given those changes, I’ll probably go 70% with Align in five years.”
Align Technology Q2 Earnings
On July 27, 2022, ALGN announced its Q2 earnings that is very telling of the current state of the clear aligner market. According to this equity analyst report at AlphaSense by Evercore ISI, ALGN missed all major metrics as the economic downturn slows consumer spending. Clear aligner revenue missed by about 4% as cases declined by about 10%.
Furthermore, competition from smaller competitors has caused a degree of pricing pressure among Invisalign’s lower utilization providers that cannot partially offset with improved cost management.
The future could be quite different for the clear aligner market as product gaps close and orthodontists seek more affordable solutions. In the next Healthcare Pulse, we will discuss how ALGN’s exclusivity with iTero scanners is binding for dentists and the value of in-house clear aligner printing.
Keep your finger on the pulse with us here at Stream!
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