Envista says dental markets are recovering

Jeremy Booth, Dental Tribune International

Thu. 6 August 2020

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BREA, Calif., U.S.: Dental practices are struggling during the SARS-CoV-2 pandemic and so too are the companies that supply them with equipment and consumables. Envista Holdings cut its operating costs by more than $100 million (€84 million) between April and June and still posted an operating loss of close to $108 million. Staggering drops in earnings are the current reality for Envista and its competitors, but the dental giant said that recovery in dental markets is picking up pace.

In this regard, Amir Aghdaei, president and CEO of Envista, said: “We are encouraged by the pace of recovery in the global dental markets, which has steadily progressed during the quarter.” Speaking to investors during a webcast conference call about the company’s second-quarter results, he added that dental markets had continued to improve in July.

The sales made by the company, which owns more than 30 dental brands, declined to various extents across dental markets during the three-month period. “Geographically, sales in developed markets were down approximately 50%, with both Western Europe and the U.S. declining at a similar rate,” said Howard Yu, a senior vice president and chief financial officer at Envista.

Yu explained that demand in the U.S. and Western Europe had improved during the period, but that improvements in demand in the latter had taken place at a slower rate. Sales in China improved during the period, after having declined by around 35% between January and March. “Emerging markets outside of China were most impacted from the COVID-19-related office shutdowns,” Yu said, explaining that the company’s sales in India and the Middle East for the second quarter were down by more than 70%.

Total sales at Envista for the three-month period amounted to $362 million, representing a year-over-year decrease of 49.2%. Envista posted an operating loss of $107.9 million, compared with an operating profit of $75.9 million for the same period last year.

Will rising SARS-CoV-2 infections affect dental demand?

Envista saw the strongest resurgence in sales in its implants and orthodontic portfolios. For the Spark clear aligner system, made by Ormco, Aghdaei confirmed that Envista’s sales expectations this year were unchanged, despite the pandemic. “And the reason for it is demand is there, [the] number of cases are coming. Right now, we’re getting more cases than we did back in January,” he explained.

The N1 implant system, made by Nobel Biocare, has been approved for sale in Europe, and Envista will continue rolling out the implant system throughout the second half of this year.

Other positive developments at the company were due to the pandemic, and not in spite of it. Envista’s infection business grew at a double-digit rate in the first half of this year, and its CaviWipes and CaviCide solutions received registration from the U.S. Environmental Protection Agency, confirming their efficacy for disinfection during the pandemic.

Aghdaei commented that it was encouraging that rising cases of COVID-19 in the U.S. had not led to the closure of dental practices for elective procedures or to significant changes in the demand for dental supplies: “We are monitoring the velocity of patients returning to the offices as well as the maximum number of patients each office can see, given the additional time needed for infection prevention protocols,” he explained.

“Clinicians, especially DSO customers, have also been more focused on maximizing patient procedures per visit”
– Amir Aghdaei, president and CEO, Envista

He continued: “While it’s clear these conditions have caused a reduction in the amount of patient appointments available per day, we have started to see doctors take actions to counteract this impact, including extending their hours and using teledentistry to supplement office visits. Clinicians, especially [dental support organization] customers, have also been more focused on maximizing patient procedures per visit. This is a trend that may help counteract revenue recovery versus maximum number of patient visits per day in the near term.”

Aghdaei said that Envista was cautiously optimistic about positive second-quarter sales trends in China, where patient volumes had rebounded to around 80% of what they had been before the pandemic. In North America, the demand for implants, orthodontics and traditional consumables was stronger than the company had anticipated, owing to pent-up demand resulting from delayed procedures. In Western Europe, Aghdaei said that he expected that a combination of pent-up demand and easing restrictions will lead to meaningful improvements in demand in Germany, Austria, France and Scandinavia.

In markets such as India and Brazil, Aghdaei said that climbing cases of COVID-19 and further lockdowns were likely to continue to affect demand.

What is clear from the company’s recent operations is that dentists will continue to need dental consumables and lower-cost equipment, but are less likely to make significant investments in high-cost equipment. Part of Envista’s $100 million in cost-cutting included its exit from the equipment maker Pelton & Crane, and Aghdaei commented: “We believe our portfolio is well positioned for the new normal with more than 85% of revenue from consumables and lower-cost equipment.”