Profile: Align Technology Inc. designs, manufactures, and distributes their Invisalign brand medical devices that treat the misalignment of teeth. The company’s clear casings gently move teeth to desired positions. The company offers a line of 
ancillary products for cleaning casings and adjusting tools for dental professionals. The company was founded in 1997 and is headquartered in Santa Clara, CA.
Thesis
Recently, Align Technology (ALGN) and their Invisalign brand have been on a roll. The stock has attracted a lot of attention to itself after a record quarter in Q2 2010. Invisalign are the clear aligners that fix misalignment of teeth through casings rather than the typical metal braces. Invisalign gained a lot of popularity after their launch because they made it less obvious that one was wearing braces. They have been especially popular with adults who decide to use braces to fix misalignment.
The company, despite its unique idea and recent success, does not appear that it has a long term potential at its current price levels. The company, for one, is starting to face mounting competition from OrthoCare and the new DENSTPLY International (XRAY). The company offers a similar type of clear casing (MTM Clear Aligner) that fixes misalignment at a much cheaper price. The popularity of the bracket-free orthodontic products is bringing new competition to the playing field and will eat away at Invisalign’s current stranglehold on the industry.
Invisalign really has no economic moat on the industry since the technology is reproducible and it really becomes a matter of cost for consumers. Cost brings about a strong point that the operation is completely elective in nature. During tough economic times, elective operations are often deferred. If not deferred, then a most cost-effective option would be very popular even if quality or brand name is better for Invisalign.
On the positive side, the company should still continue to see growth. The company has grown its revenue every year for the past four years, and it is estimated to increase its revenue by 20% this year and 10% in 2011. The company definitely is still strong and coming out of a recession will be a place that will see strong growth as people start to unload money on more discretionary purchases.
Some of this growth, though, has been negated for Align by the fact that the company has suffered significant lawsuits from their distribution line, which is dentists and orthodontists. A group of orthodontists have…
