April 13, 2009
The global recession has been a real kick in the teeth for makers of dental implants, and the market appears unlikely to brighten in the near term.
The dental devices are expensive, are generally not covered by insurers and can be bypassed in favor of cheaper, if less durable, tooth replacements. As a result, with the road to economic recovery looking long and rocky, the near-term outlook is equally unsteady for the $3 billion dental-implant market.
"It's hard to believe this market isn't going to be down somewhere in the 5% to 10% range in the next year," said Jeff Johnson, an analyst with Robert W. Baird.
Possible catalysts for the industry are new products and an expanded pool of trained specialists, but the sector will have to wait for improved consumer confidence to lead the way.
The top makers of dental implants are both from Switzerland: Straumann Holding AG (STMN.EB) and Nobel Biocare AG (NOBN.VX). Other big manufacturers include Zimmer Holdings Inc. (ZMH), privately held Biomet Inc. and Dentsply International Inc. (XRAY).
The devices in question are tiny metal posts that are drilled into bone where a tooth should be, then later covered with parts called abutments and crowns to create a sturdy and natural-looking fake tooth.
The costs range from about $3,000 to replace one tooth to $50,000 or so for a mouthful, estimated David Cochran, president of the American Academy of Periodontology. The permanence of the implants may make them more appealing than dentures, crowns or bridges, but the price tag and lack of insurance coverage also creates a wallet-denting hurdle for patients beset by layoffs and other financial constraints.
"I think cost has always been a problem," said Cochran, who also chairs the Department of Periodontics at the University of Texas Health Science Center at San Antonio.
These attributes put dental implants on the front lines when the economy turned sour - analyst Johnson said the market has been decelerating for several quarters now. The implant market is very similar to the market for laser-vision correction, where high costs and the option to stick with glasses has decimated procedure rates and injured service providers LCA-Vision Inc. (LCAV) and TLC Vision Corp. (TLCV).
Among companies making dental implants, privately held Biomet put recent market conditions on display last week when it released sales results for its fiscal quarter than ran through February. Global sales dropped 10% from a year ago, excluding the impact of foreign currency rates, and U.S. sales fell by the same rate.
The company said the soft results, which pressured its overall sales, were due to "the weak economy and the elective nature of dental implant treatment." Bigger rival Zimmer, where dental implants represent a small portion of its business, also has noted weakness in the market.
Shares of the sector's Swiss heavyweights dipped on the heels of Biomet's sales report, even though Bernstein Research thought investors were overlooking signs of quarter-by-quarter improvement in Biomet's business.
Straumann Chief Executive Gilbert Achermann told Dow Jones Newswires that his company expects the dental-implants market to show a slight recovery in 2010. Bank Sarasin cut its rating on Straumann last week - to reduce from neutral - because of the market's outlook.
Nobel Biocare Chief Executive Domenico Scala said recently that the outlook for the market this year was still hard to judge.
Millennium Research Group, which does market research on medical devices, believes the dental-implant market will start to recover next year if an economic recovery also takes root. Market growth will be stimulated by enhanced offerings such as minimally invasive procedures that shorten treatments, plus a growing roster of general practitioners who place the implants, the firm said.
Senior Analyst Poonam Jassi said the U.S. market today is worth about $750 million to $800 million in annual sales. MRG forecasts the domestic market will expand to exceed $1 billion by 2013, indicating plenty of room for growth once consumer confidence improves.
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