More Joining the Battleground of Invisible Aligners as China Crowns the World with Most Potential

Dental orthodontics, especially invisible aligners have become extremely popular in Europe and the United States. The orthodontics market size and the attention from the capital market have been pushed to a new height. Analysts from Bridge Point Capital performed a thorough analysis of the dynamic orthodontics market through an in-depth understanding of the increasingly competitive global market. We strive to demonstrate a clearer industry prospect for our investors.

What is Invisible Orthodontics? Who is Leading the Market?

Orthodontics is a specialty of dentistry that deals with the diagnosis, prevention, and correction of mispositioned teeth and jaws. Dental braces and invisible aligners are two common methods used in typical orthodontic treatments, and the latter is favored by most people because of its convenience and aesthetics.

Rely on its self-innovated ClinCheck software for dental scans and transparent plastic devices to adjust teeth, Invisalign clear aligners (developed by Align Technology) was once the pronoun of invisible orthodontics. In the past 20 years, Invisalign has accumulated 7.5 million customers worldwide, among which 1.8 million are teenagers (approx. ~20%), which is still a key demographic to target. The growth for Invisalign worldwide FY 19 is still strong at 20.7% YOY.

Players Vying for the Throne

In recent years, however, Align Technology has been facing stronger competition due to patents expiring and more players joining the battleground. More than 40 of its patents have lost legal protections in the United States as of 2017 - a long-awaited moment for competitors to bring their invisible aligner products to the market and to squeeze down Align Technology’s profit, further challenge its dominance over the market.

Industry giants have also begun to look at this tempting niche market - serious contenders include ClearCorrect developed by Straumann that leverages Zendura® wear-resistant materials; Henry Schein, the biggest dental distributor around the world, invented SLX® Clear Aligner System with Sagittal First/Motion 3D technology embedded to provide direct and customizable therapy; Clarity® owned by 3M utilizes uLab Systems to bring more personalized automated telemedicine solutions to patients; top dental products manufacturer Dentsply Sirona completed an acquisition of an orthodontics product Suresmile®, which uses GAC lingual brackets that are small and comfortable with a self-ligating feature.

As invisible aligners become more and more popular among the younger generation, the affordability and quality of services became the most critical factors. Working with dental clinics, Invisalign requires routine dental visits throughout the course of the treatment. This in most cases is a more complex,time-consuming and expensive process with the average cost being around $5,500. Newer competitors like Candid, on the other hand, have developed a brand-new business model where the orthodontists work remotely with the patients. They examine the patients’ condition through telemedicine. By using a test kit, they can develop and convey the treatment plan online. The aligners can then be mailed to the patients after examination and diagnosis. By utilizing advanced telemedicine and 3D printing technology, these newer players have built their unique advantages in accessibility, convenience, and price (average cost of $2,000). They have gained enormous growth in recent years and are challenging the traditional players in the orthodontics space.

Clear Potential in China

China is the second-largest orthodontics market in the world and is still far from saturation. According to Ping An Securities and the Chinese Stomatological Association, the morbidity rate of malocclusion among Chinese aging from 5 to 34 is about 70%, meaning 378 million candidates for aligners. Within such an enormous patient population, only 0.5% of the patients received proper treatments. Using the permeability rates in developed countries as a benchmark, we see the Chinese orthodontics market potential reaching approximately 100 to 200 billion CNY (14 to 28 billion USD), which is a 5 to 10 times growth potential based on the current market valuation of 25 billion CNY (3 billion USD). The invisible aligners market surged 57.7% from 2016 to 2017, even though it only occupies 15% of the total orthodontics market.

Such rapid market growth in China provides an appealing upside for new entrants of invisible aligners to establish a foothold in the market. Align Technology launched a new Invisalign treatment planning facility in Chengdu, China. The state-of-the-art facility is Align's first manufacturing operation in China and represents the company's commitment to geographic expansion and investment in East Asia. Emerging companies and domestic players in the invisible orthodontics space are also entering the Chinese market. Right now, the leading local brands in China include Angelalign, Smartee, and Henghui Technology. Meanwhile, the increasingly high acceptance of invisible aligners by costumers and dentists has laid the foundation for overseas companies with more advanced technologies to implement their China strategy.