Global Dental Implants Leaders Still Expecting a Slow Year

Summary:

Last week, the two leading dental implants companies, Straumann and Nobel Biocare, reported disappointing profit results, as the economic slowdown hit the implant market.

Full Article:

These are not the best of times for the leading dental implant companies, Straumann and Nobel Biocare.

Last week, Straumann reported a sharp drop in profits due to asset writedowns from previous acquisitions for which it now seems the company vastly overpaid. In addition, Straumann announed a 3% global workforce reduction initiated in January 2009. Furthermore, the company stated that, "As the credit crunch spread, dental labs became increasingly hesitant to invest in capital goods, making it challenging to maintain scanner sales growth towards the end of the year."

Overall, Straumann expects a slow 2009. As they project, "Uncertainty in the global economy and historically weak consumer sentiment make it difficult to guide for the year ahead. From Straumann’s perspective, the market for implant, restorative and regenerative dentistry is not expected to grow in 2009."

As for Nobel, the situation appears to be slightly worse. The company's sales actually decreased by 4% year-over-year, with sales in key European and North American markets decreasing by over 6%. This sales slowdown hurt margins and has forced the company to follow Straumann in taking immediate action to reduce costs.

Domenico Scala, the CEO state: "For 2009 we expect the economic environment to remain challenging. Our priorities are to build on the success of NobelActive, to launch NobelProcera and accelerate our initiated cost reduction measures...Visibility remains low and does not allow management to provide reliable quantitative guidance for the time being."

Overall, our impression is that both Nobel and Straumann have seen their best days and this recession will prove to be a turning point in implant dentistry. With the vast majority of innovation in implant dentistry coming from smaller and more nimble start-ups, it will becoming increasingly difficult for Straumann and Nobel to return to above-market growth even when the economy turns. In fact, as can been seen from past moves by both companies, high-priced acquisitions remain a top strategic priority, a clear signal that organic growth opportunities are getting scarcer as competitive pressures increase.