How Envista Holdings’ (NVST) foray into intraoral scanner business can be a recipe for disaster?

If we look at Envista’s revenue mix based on geography, China stands out as contributing >10% of the company’s total revenue. However, this statement alone does not convey the complete story. What’s even more important is the YoY growth that NVST is witnessing in the country, especially leveraging on its portfolio of implants and orthodontics services – that spearheaded the company’s growth rate at high double-digit.
Just one glance at Mainland China’s clear aligner treatment services market, it’s hard to miss that the market is highly consolidated. US’s Align Technology (ALGN) and its Chinese archnemesis Angelalign Technology Inc’s (6699-HKSE) combined market share exceeds 82 percent - leaving little room for other players in the category who are scavenging for growth.
FY21 Angelalign Technology Inc shipped out more than 150,000 case shipments to +25,000 dentists (including both GPs and Specialist Orthodontists). This growth trajectory isn’t expected to slow down any time soon, since it is estimated that only 11 percent of all orthodontic treatments in the country were performed with clear aligners – translating into huge potential for future growth.
Now, one would rather wonder why are we talking about the Chinese clear aligner market and how is it related to Carestream Dental’s (or soon NVST's) Intraoral Scanner business unit?
During FY20 and FY21, Carestream IO scanner has managed to cement its market share in the Chinese dental services market – witnessing high double-digit growth. Contrastingly, this trend didn’t replicate elsewhere globally – even in more mature markets like US or other selected Western EU markets that have much higher penetration of intraoral scanners than in Mainland China.
FY17 Hong Kong based PE Group CareCapital Holdings acquired 25% ownership stake in Carestream Dental. The remaining 75% stake in the company, which had just spun off from Carestream Health was acquired by another PE Group - Clayton, Dubilier and Rice. In its effort to ride the wave of fast-growing clear aligner market in its home country, CareCapital group also owned (since a long time) 67% equity stake in Angelalign Technology Inc.
