Align (ALGN) - Med.Technology leader

I’ve recently invested Align Technology and believe this rapidly growing business might be of interest to this board. Thus, I’m providing my notes on ALGN below:

Align is the global leader in the orthodontic medical device space and makes invisible aligners (braces) - Invisalign .

The business was founded in 1999, is headquartered in California and got listed on the NASDAQ in 2001.

The company also sells the iTero scanners which formulate Invisalign’s 3D printing templates.

So far, the company has shipped 471 million aligners and it has trained approximately 147,000 doctors worldwide.

Up until now, 6.1 million patients have been treated and there are 74,091 active Invisalign doctors - therefore, the company has gathered heaps of data which helps it in its design and manufacturing process.

The business manufactures 359,000 aligners per day and it owns 836 patents worldwide.

60% of the revenue is generated in Americas; 40% is generated in the rest of the world.

The vast majority of the business is derived from adults (37.7% share) but the company is now making inroads in the teen market (5.6% share).

Currently, the company has just penetrated 10% of an expanding TAM - 300 million patients, 12 million new cases every year.

Clear aligners have only captured 15% of the braces market so far; so there is a long runway for growth.

The business has a tremendous head start over competition; and its products are superior quality and benefit from intangible assets (brand awareness).

The business is now opening retail stores in various cities to improve visibility and further strengthen brand awareness.

The aligners cost between US$3,000-8,000 based on complexity and others are now coming out with cheaper alternatives (Danaher, 3M, Dentsply).

Many of the new entrants are direct-to-consumer (no orthodontists involved) and they only cater to the simpler cases - good for Align.

The business serves complex orthodontic cases, has complex R&D capabilities and these two facets
should keep competitors at bay.

The FDA has recently approved Invisalign for mandibular advancement cases (moving lower jaw forward whilst aligning teeth).

The above approval is a big deal because these cases represent 45% of the total 9m per year teen market.

The company owns proprietary technology and also enjoys regulatory barriers to entry - two additional ‘moat’ sources.

According to analysts, the business should grow revenue by 23% CAGR over the next 5 years and EPS is also likely to grow by around 25% CAGR.

The business generates a very high rate of return on invested capital/equity and its net profit margin is around 20%.

Align has a 19% stake in SmileDirectClub, which is a direct-to-consumer clear aligner business
Align manufactures the aligners for SmileDirectClub under its private-label.

The TAM for this business is truly massive and given the under-penetration in the international markets, there is a long runway for growth.

The business operates in 103 countries, employs 1,000 sales and marketing personnel and 4,000 manufacturing and CAD/CAM designers. Total worldwide employee count is around 11,200.

The management team is solid; the current CEO was previously, CEO of ABB and the previous long-standing CEO serves on the Board of Directors.

The Chairman is also highly experienced in the medical device industry and management gets rewarded based on stock performance.

The stock had a huge run up until October 2018; which is when it collapsed by almost 50% within a month. The stock is now trading around 40 times year-end earnings and given the 5yr projected EPS growth CAGR of 25%, valuation seems fair.

In summary, Align is the global leader in the invisible aligner market and its products should remain in high demand (after all, who wants to be seen with bracket and wire braces which are both uncomfortable and quite unattractive!?). As an added bonus, after the recent crash in its stock price, the business finally seems to have become fairly valued. Technically, the stock has broken out of its severe downtrend and after a period of base building, it is gaining some upward momentum.

Given all of the above factors, I’ve recently invested in this dominant business.


I recently exited this business due to several factors you noted as an advantage, specifically;

Expiration of IP and emergence of generic brands (MMM)

Erosion of growth and depression of average sales price isn’t something I want to be in when there are better companies on the table


Mgt. has confirmed it is getting rid of the promotional pricing - that it was a bad idea.

Generic competition is coming but they dont have the FDA approval for the more complex use cases.

The total market is 300 million, with 12 million people being added every year.

So far, Align has treated just over 6 million patients - so still early in the game.

If operating results deteriorate, I will exit fast.