dentalcorp Holdings Ltd.
(DNTL-T) C$10.87
Advancing the Insourcing Agenda with Dental Implants Partnership
Event
dentalcorp announced a new partnership with Envista (NYSE:NVST, not covered) to offer dental implants across its network of 500+ practices. For background, Envista is a collection of >30 brands (including Nobel Biocare) which manufacture dental products/equipment including consumables, implants, digital imaging technologies, and orthodontics.
Impact: SLIGHTLY POSITIVE
This agreement marks another step in dentalcorp's insourcing strategy following its March 2022 Invisalign partnership, which looks to leverage its scale to provide the necessary tools and training/education to its dentists to perform a full suite of dental procedures in house (i.e. increase "share-of-chair" by recapturing patients historically referred to specialists).
As part of the agreement, Nobel Biocare is providing the dentalcorp network with an extensive implant training program and suite of services that includes dedicated support, clinical education and mentorship, and operatory guidance (which we understand is a one of a kind arrangement in Canada). Additionally, we presume the agreement provides cost savings to dentalcorp on the physical implants.
Implant market size: Currently, the field of Prosthodontics represents ~10% of the $18bn Canadian dental spend. Implants are one of the fastest growing segments of the dental industry, displacing traditional dentures and benefiting from increased adoption as product innovation and service delivery improve, as well as longer-term demographic tailwinds (aging baby boom population; according to the CDC, 26% of Americans aged 65 or older have 8 or fewer teeth and 17% have no teeth).
Financial impact to DNTL: We understand that dental implants could represent a ~$100mm revenue opportunity annually once the program is fully implemented. However, similar to the Invisalign opportunity, we anticipate the program roll-out across dentalcorp's 500+ locations will occur progressively over a multi-year horizon, reflecting the time required to educate dentists across the network, but should bolster organic growth above historical industry rates of 2-4%.
In our view, these types of corporate partnerships are a win-win for the DSO and its respective dentists. Recall, dentists are paid based on a % of net revenues (generally ~40%) and therefore agreements to bring down COGS provide an opportunity for the dentist to earn more, increasing the relative attractiveness of working at a DSO.