Dentistry lacking bite amid sluggish market trends

Jeremy Booth, Dental Tribune International

Mon. 18. November 2024

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LEIPZIG, Germany: Third-quarter financial results from the largest dental manufacturers show that the industry is not out of the woods yet. In the US, the stability of Henry Schein’s dental equipment distribution business and reports of strong diagnostics sales hinted at improving consumer sentiment; however, such highlights remained sparse, and growth was mainly seen outside of the most established dental markets. Financial reports for the period underscored the ongoing retreat from direct-to-consumer (D2C) orthodontics as well as growing demand for dental implants in Asian and South American markets.

Align Technology reports mixed results

The world’s largest aligner treatment provider continued to grow its teen shipments in the third quarter. A total of 236,300 aligner cases were shipped to young patients, a year-on-year increase of 6.7% and 9.1% more cases than in the prior quarter. Align’s earnings from imaging systems and CAD/CAM services continued a similarly positive trend, increasing by 15.6% year on year to reach US$191 million (€171 million*). 

CEO Joseph M. Hogan told analysts that a record number of teen case starts in China and more than 25,000 Invisalign Touch-Up cases had boosted the company’s results. Total aligner shipments reached 617,220, up by 2.5% year on year and down by 4.0% sequentially, and the company banked US$978 million in sales for the period, 1.8% more than it did a year earlier. Align nonetheless fell short of its earnings outlook for the period, owing to what Hogan described as “more pronounced seasonality for clear aligners than expected, as well as continued weak consumer sentiment and a soft dental market, especially in the United States”. 

“[The] dental market in the United States remains sluggish and our doctor customers cite similar trends.”—Joseph M. Hogan, Align Technology

Hogan said: “Overall, [third-quarter] results were mixed and reflect strong system and services year-over-year revenue growth as well as good clear aligner volume in [the] Asia-Pacific, [Europe, Middle East and Africa (EMEA)], and Latin America regions, partially offset by declines in the United States. As recently reported by many analysts and third-party research firms, the underlying dental market in the United States remains sluggish and our doctor customers cite similar trends.” 

Align announced in its results that it plans to implement a global restructuring plan that includes redundancies in all operating regions. The position of managing director of the Americas region, executive vice president and chief marketing officer—held since August by Raj Pudipeddi—has been eliminated, and Align said it anticipates that the plan will incur severance-related costs of some US$30 million. 

Envista sales drop by 4.8%

Sales at Envista Holdings in the third quarter totalled US$601 million, representing a year-on-year drop of 4.8%, or US$30 million. Envista, whose portfolio of companies includes Nobel Biocare, Ormco, DEXIS and Kerr, reported negative core sales growth of 5.2% and 5.6% for its specialty products and technologies, and equipment and consumables businesses, respectively.

Envista CEO Paul Keel told analysts that the results were in line with the company’s expectations, given the difficult operating environment. Keel explained: “Dental market growth still remains slow, slower than the historical 3%–5% that we all know over time, and quite a bit slower than the post-COVID run-up. Now, there are a couple of early signals that things will or may improve moving forward. People point to interest rates coming down, and then of course, unmet patient demand is still very high. But, at present, there just isn’t enough tangible evidence of improvement to expect an imminent upturn anytime soon.” 

“Dental market growth still remains slow, slower than the historical 3%–5% that we all know over time.”—Paul Keel, Envista Holdings 

Eric Hammes, chief financial officer at Envista, reminded analysts of the global weakness in dental diagnostics sales and said that sharp declines had been observed in Europe and China during the quarter. Bucking the trend, the North American diagnostics market increased modestly in size for the third consecutive quarter. “The quarter did play out much like we had thought,” Hammes commented, adding that the uptick in diagnostics sales in the US and positive trends in orthodontics had been encouraging. 

Straumann Group maintains steady growth

Having a growing stake in profitable implant markets in Asia and South America, Straumann Group appears once again to have navigated a turbulent quarter more successfully than its competitors. Group sales for the period amounted to CHF 585.5 million (€623.8 million*), and the company boasted 7.7% year-on-year sales growth. On an organic basis, where the impacts of currencies and acquisitions are excluded, year-on-year growth reached 11.2%. 

Regarding the company’s regional performance, Straumann posted CHF 216.4 million in sales for its stalwart EMEA region, a year-on-year gain of 11.2%. Germany, Spain, Italy and Belgium were the main contributors to EMEA revenue growth. Speaking to analysts, CEO Guillaume Daniellot said: “[In] North America, we see a less dynamic picture due to the effect of the unfavourable macroeconomic environment.” Daniellot explained that high interest rates had affected the US market, stemming patient flow at dental practices and large dental support organisations as well as growth in implant and orthodontic treatments. North America sales totalled CHF 162.9 million for the quarter, down by 1.4% year on year. 

Asia-Pacific revenue reached CHF 149.4 million, a year-on-year increase of 16.5% that was primarily driven by sales of premium and challenger implants. Daniellot pointed out that the region had achieved double-digit revenue growth even without the Chinese market, driven by markets like Thailand, India and Malaysia. Dental Tribune International reported earlier this year that Straumann’s business in Asia is growing. Asia-Pacific sales accounted for 23.4% of Straumann’s entire business in the first nine months of this year, compared with 19.6% in the comparable period of 2023. Over the same period, the value of US sales as a share of Straumann’s total revenue slipped by nearly two percentage points. 

Dental implant sales were an important source of revenue growth during the third quarter of this year. (Image: In Green/Shutterstock)

Latin America continued to be a solid earner for Straumann, despite a difficult year-on-year comparison. The company banked CHF 56.8 million in Latin American sales, 2.3% more than it did in the third quarter of 2023, when year-on-year growth of 15.9% was recorded. Daniellot said to investors that the challenger implant brand Neodent was the main growth agent, backed by orthodontic sales in Brazil and Mexico. Straumann said in its earnings results that it had laid the foundation stone for a manufacturing and distribution facility in Curitiba in Brazil during the quarter—the company’s third such facility. Aiming to foster international expansion of Neodent, the site will cover some 40,000 m² and is slated for operation by the end of 2026. 

Dentsply Sirona suspends Byte, records goodwill impairment charge

For the third quarter, Dentsply Sirona posted US$951 million in sales, representing a flat year-on-year increase of 0.5%. The company’s essential dental solutions business recorded net sales growth of 6.6%; however, negative sales growth of 2.3%, 4.6% and 0.4% was attributed to its connected technology solutions, orthodontic and implant solutions, and Wellspect HealthCare businesses, respectively. US sales were strong, growing by 5.0% year on year, and those in Europe and remaining markets declined by 1.8% and 3.0%, respectively. The company posted a net loss of US$494 million, owing to a non-cash charge of US$495 million for the impairment of goodwill relating to its orthodontic and implant solutions business. Outgoing Chief Financial Officer and Executive Vice President Glenn Coleman explained to investors that the goodwill impairment charge “was the result of sustained macroeconomic pressures, legislative challenges impacting Byte and weakened demand and competitive pressures in implants”. 

Dentsply Sirona announced on 24 October that it had suspended sales and marketing of its Byte D2C aligners and impression kits, including the shipment of new and recent orders. The decision to suspend Byte sales was made in consultation with the US Food and Drug Administration, pending an internal review of the US regulatory requirements relating to D2C aligner treatment. The company said that the regulatory environment had been adversely affecting its Byte business model. Based in Los Angeles in the US, Byte was founded in 2017 to provide at-home treatment for malocclusion via a network of licensed US general dentists and orthodontists. Dentsply Sirona acquired the company in December 2020 for US$1.04 billion (€846.6 million**) in cash. 

CEO Simon Campion told investors: “We are not at a point in our analysis to make a definitive decision concerning Byte and we are thoroughly evaluating strategic options, which may include a discontinuation of some or all of this business. Our decision will be data-driven, taking into account the legislative environment, recent performance, longer-term prospects and the ongoing regulatory review, which may take time and require additional investment.” 

Dentsply Sirona lowered its organic sales outlook for the full year, taking into consideration macroeconomic pressures in the US market and the review of Byte. 

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