China releases pent-up demand, boosting second-quarter finan

Jeremy Booth, Dental Tribune International

Tue. 29. August 2023

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LEIPZIG, Germany: Strong patient volumes in most countries, coupled with a dramatic uptick in China, helped major dental manufacturers to post sales growth for the second quarter. Chinese consumers returned to the dental chair during the three-month period—many of them opting for the country’s new half-price dental implants—and the developments were enough to offset the lingering economic difficulties which led to a drop in market activity in stalwart Germany and sluggish sales in the US.

The release of pent-up demand for dental services in China boosted the results of implant specialist the Straumann Group during the three-month period ended 30 June. The company earned CHF 621 million (€635 million) during the second quarter, which represented year-over-year growth of 5.4%. On an organic reporting basis (excluding the effects of acquisitions, product discontinuations and currency fluctuations), total sales were up by 11.7%.

At the regional level, year-over-year increases in sales were recorded in Europe, the Middle East and Africa (5.2%), North America (0.7%), Asia Pacific (9.6%) and Latin America (13.7%). Significant volume growth was recorded in China and led to 23.1% organic revenue growth for Straumann in the Asia Pacific region. Dentists in China struggled to see patients last year, owing to COVID-19 restrictions, which still lingered in January and February this year.

CEO Guillaume Daniellot told analysts that the lifting of these restrictions resulted in the release of the pent-up demand and Straumann reaping the rewards of its investment in China’s volume-based procurement (VBP) programme. The Asia Pacific region was the largest contributor to Straumann’s second-quarter revenue growth, and the result comes after the significant and rare year-on-year sales decline of 28.9% that Straumann posted for the region for the first quarter of this year.

China’s VBP programme has lowered the cost of Straumann implants in the country by around 45%, but it has also made dental implant treatment more accessible to an ageing Chinese population. Crucially, it has also narrowed the price gap between the cost of its dental implants and those of competitor brands from South Korea. Daniellot commented that “patients are also willing to upsell their treatment as the price gap is much lower than it was pre-VBP”.

Speaking about the company’s global business, Daniellot commented: “Despite some isolated consumer weaknesses, we believe that the patient flow seen in the first half of the year is expected to remain at a dynamic level in most geographies.”

More implants for less: Last year, China’s National Healthcare Security Administration implemented a policy to slash the cost of dental implant treatment at public hospitals. (Image: humphery/Shutterstock)

Dentsply Sirona’s confidence boosted by growth in all product categories

Net sales at Dentsply Sirona in the second quarter topped US$1 billion (€918 million), representing a 0.5% year-on-year increase. The company reported a 2.3% increase in organic sales, and CEO Simon Campion said that the results rounded off a good first half of the year for the company, surpassing the expectations of management and boosting confidence for a good full-year result.

Dentsply Sirona’s new leadership team told analysts that all business segments had recorded strong organic sales growth—2.8% for connected technology solutions; 0.7% for essential dental solutions, which includes endodontic, restorative and preventive products; 3.7% in orthodontic and implant solutions; and 3.1% for the Wellspect Healthcare urology and healthcare-related consumables business.

On a regional basis, organic sales increased by 1.1% in the US and declined by 2.0% in Europe, owing to lower implant and CAD/CAM sales and slumping economic conditions. Commenting on the European region, Chief Financial Officer Glenn Coleman singled out macroeconomic challenges emerging in powerhouse Germany. He said: “[We] saw a more pronounced demand softness in Germany, which is a key market for our business, due to recessionary pressures in the country.”

Outside of the US and Europe, Dentsply Sirona’s “rest of world” region recorded organic sales growth of 11%, driven mainly by China—where sales jumped by 25% year on year—and Australia. Coleman explained that dental implant sales returned to growth in the quarter, driven by higher demand for value implants and volume growth in China’s VBP programme, which offset a decline in implant sales in the US. Campion said: “In China, the implants business gained strong traction during the VBP programme roll-out. The incremental volume since implementation has exceeded our expectations, and we now expect that volume will more than offset the pricing headwinds for the full year.”

“We have a full plate and are making progress in all regards” – Simon Campion, CEO Dentsply Sirona

Asked about how Dentsply Sirona’s new leadership would steer the dental giant away from the internal problems that left it beleaguered in 2021 and struggling in 2022, Campion told analysts: “We have a full plate and are making progress in all regards. In addition to the cultural transition, we are building up the team [...] We have changed the leadership in Australia and New Zealand, we have put the customer at the centre of everything we do, in addition to driving ethical and compliant behaviour, which we know is extremely important. We will drive that at every single meeting; in fact, at the top 100 leaders meeting that we had in Charlotte, the first presentation on the agenda was on ethics and compliance, so we are not screwing around, it is really important.”

Envista says dental market weaknesses being offset by demand for restorative care

Envista Holdings, which owns popular dental brands such as Nobel Biocare, Ormco, DEXIS and Kerr, posted sales of US$662 million for the second quarter—up 2.6% year on year. Chief Financial Officer Howard Yu said that sales in Europe increased by high single digits and that strong growth was seen across all emerging markets, except for Russia. Yu told analysts: “China grew in the quarter with a strong rebound in volume offsetting the VBP-related price declines. For 2023, we expect China to show modest growth net of the VBP pricing impact.”

Sales of Spark clear aligners helped to stir 1.7% growth in Envista’s products and technologies segment, despite sales of traditional brackets and archwires declining by high single digits as a result of international sanctions imposed on Russia. Envista’s dental implants business experienced a sales decline of low single digits during the period, hampered by what Yu said were “pockets of weakness in North America”. However, sales growth returned to Envista’s dental equipment and consumables segment, helped by strong sales of DEXIS IOS. The category earned Envista US$245 million during the period, which represented year-over-year core sales growth of 2.9%.

Amir Aghdaei, CEO of Envista, commented: “Globally, the dental market remains dynamic. While patient demand remains resilient, macro uncertainties, including geopolitical risks, continue to weigh heavily in the mind of both patients and clinicians, creating an uneven operating environment. In the second quarter, we saw some notable, but not widespread, weakness in higher-end dental procedures, including adult orthodontic cases and full-arch restorations. This weakness mostly came in the form of patients postponing treatments versus cancelling the procedures.”

Aghdaei said that soft patient volumes were offset by strong demand for restorative dental care and continued investment by clinicians in their practices. He explained: “Clinicians are working to digitise their practices, and as a result, we saw a strong growth in our DEXIS IOS business in the second quarter. As we look to [the second half of the year], we expect dental demand to remain resilient and our performance to strengthen as we focus on execution.”

Align Technology sees improvement in operating environment

The maker of Invisalign clear aligners performed well in the second quarter, suggesting an improvement in the operating environment for orthodontics. Align Technology earned US$1 billion in the period, an increase of 6.3% sequentially and 3.4% year over year. Sales of clear aligners netted the company US$832.7 million—up 4.3% year over year—and its shipments of clear aligners totalled 604,400, a 0.9% year-over-year increase. Notably, shipments of clear aligners in the teens category, which represents the lion’s share of orthodontic case starts, increased by 9.7% year over year to 194,500 cases, and CEO Joseph Hogan pointed out to industry analysts that the company continued to “focus on gaining share from traditional metal braces through teen-specific sales and marketing programmes and product features unique to the Invisalign system” during the period.

Hogan said that the results had been better than expected, and he pointed to improving trends in sales of clear aligners in China, Japan, Taiwan, South Korea and India. The US$169 million that Align banked from sales of imaging systems and CAD/CAM services during the quarter represented a year-over-year decrease of 1%.

In November last year, Hogan alerted investors to shrinking orthodontic case starts. Chief Financial Officer John Morici said in August that, although the macroeconomic environment remains uncertain, the company has seen improvements in the operating environment and in consumer demand.