Written by / Chen Chang
Edited by / Yang Jie
Following dental implants, the public may usher in "dose-organization freedom".
On October 19, the Shaanxi Provincial Public Resources Trading Center issued an inter-provincial alliance procurement notice for orthodontic brackets. Three major products in the field of orthodontics, bracket , bracketless invisible braces, and buccal tubes will be included in the centralized procurement. The scope of the centralized procurement includes 15 provinces including Shaanxi, Shanxi, Inner Mongolia, Liaoning, Heilongjiang, Anhui, Henan, etc.
brackets, invisible braces without brackets, and buccal tubes are all common consumables in orthodontics. Among them, brackets are often used in metal braces (commonly known as steel teeth) and ceramic braces in traditional orthodontic therapy; bracketless invisible braces are made of transparent elastic materials, also known as invisible braces; buccal tubes are metal tubes welded on the buccal side of dental orthodontic belt rings.
According to the current market price, metal braces and ceramic braces range from several thousand yuan to tens of thousands of yuan. The average price of invisible braces costs 20,000 to 30,000 yuan, and the highest price can reach 80,000 yuan. The centralized procurement notice shows that the minimum effective drop in brackets, bracketless correctors and buccal tubes is 30%. Therefore, the document is regarded as a "price correction" to the orthodontic industry.
In recent years, tooth plastic surgery is no longer a need for "niche to become beautiful". Among young people, together with driver's license test and myopia surgery, it is also known as the "high-frequency summer program" of the student group. Among consumables, invisible braces are being used by more and more doctors and patients because they are comfortable and beautiful to wear.
According to public data, China's invisible correction market has become the second largest market in the world in 2019. Its market size increased from US$200 million in 2015 to US$1.5 billion in 2020, with an annual compound growth rate of 44.4%, and is expected to reach US$11.9 billion in 2030. The number of domestic invisible orthodontic cases has also increased from 58,000 in 2015 to 335,500 in 2020, with an annual compound growth rate of 42%, and is expected to reach 3.8 million in 2030. The pioneer of
Invisible orthodontic technology is American Aiqi Technology. It launched the world's first invisible brace "Invisible and Mimi" in 1999 and entered the Chinese market in 2011. Two years later, the domestic manufacturer Era Angel was established, and China has its own brand of invisible braces.
More than ten years have passed, and Invisal and Angel of Times firmly occupy 80% of the market. In 2021, the Angel of Times knocked on the door to the capital market and became the highly-watched "first stock of invisible orthodontics". Although it is about small teeth, invisible orthodontic companies have a large ability to make money, with a gross profit margin of up to 70%.
This centralized procurement signal is released, and the era of "spread profit" of tooth is over, which also makes the industry pay attention to the impact of this on the future performance of leading companies.
Picture/Visual China
The highest is 80,000, expensive orthodontic
In recent years, the demand for orthodontics in China is increasing. According to the data of the "2020 Oral Medical White Paper", problems related to "appearance aesthetics" such as not white enough, uneven teeth, and smiles related to "gums, uneven teeth, and laughing lines) have replaced dental health problems such as wisdom teeth and tooth decay , which has troubled most consumers. With the awakening of aesthetic awareness, consumers' awareness of dental aesthetics has increased, and about 58.2% of people said they would try dental aesthetic medical services if conditions permit.
According to statistics from Zhuoshi Consulting, the number of orthodontic cases increased from 1.6 million in 2015 to 3.1 million in 2020, and is expected to reach 9.5 million in 2030. Due to the "supply in short supply" of orthodontic doctors, many general dentists have switched to orthodontic business.
90s girl Sun Yu is also troubled by the beauty of teeth.Not long ago, she used the weekend to go to an offline dental clinic for treatment and completed a series of processes such as oral examinations, filming, doctors' face-to-face consultations, and formulating correction plans. When choosing braces, the staff told her, "Imported braces cost about 40,000 yuan; domestic ones are 10,000 yuan cheaper, and the price is about 30,000 yuan." But in terms of effect, the difference between the two is not particularly large, "the direct feeling is that the imported products are more resilience and permeability."
Finally, for the sake of her wallet, she chose relatively cheap domestic invisible braces.
In the public's impression, any diagnosis and treatment involving oral problems is expensive. For example, a dental implant, the treatment cost can range from 6,000 yuan to 20,000 yuan, while invisible braces such as orthodontics are even higher.
According to many dentists, the price of orthodontic treatment can generally range from 5,000 yuan to 80,000 yuan. This price will be affected by many factors, such as personal teeth condition, difficulty in orthodontics, choice of braces, etc.
"Financial World" Weekly learned from staff of several dental institutions in Beijing that invisible orthodontic braces are mainly two brands - Invisale in the United States, which costs 40,000 to 52,000 yuan; the domestic brand Era Angel, which costs about 25,000 to 38,000 yuan.
Some staff said that it is obvious that more and more customers are coming to consult invisible braces. Relatively speaking, the orthodontics is almost completely transparent, which meets the needs of patients who want to correct but have high aesthetic requirements; and it can be removed and worn freely, without affecting the patient's chewing and cleaning of the tooth surface; the short follow-up time and long follow-up interval can save patient time.
At present, China's invisible correction market is highly concentrated, and Yinshimei and the Angel of Times dominate. In 2020, they reached 138,900 and 137,600 cases, respectively, accounting for 41.4% and 41% of the market share, respectively.
Illumina company Aiqi Technology was founded in Silicon Valley, USA in 1997 and entered the Chinese market in 2011. Between 2013 and 2017, Aiqi Technology's annual revenue growth rate in the Chinese market reached 102%.
The Angel of the Times, founded in 2003, entered the capital market in June 2021. In 2020, before listing, the company's annual revenue reached 817 million yuan, of which the invisible correction business contributed 97.9% of the revenue.
Invisible braces with a gross profit of 70%, is it really a huge profit?
The prospectus of the Times Angel shows that the Times Angel has launched four products, including the standard version (now upgraded to the classic version), the champion version, the children's version and COMFOS. In 2020, their ex-factory prices were 7,600 yuan, 9,600 yuan, 8,700 yuan and 5,500 yuan respectively, and the corresponding suggested retail prices were 32,000 yuan, 40,000 yuan, 26,000 yuan and 24,000 yuan.
Since the retail price can increase by 4 times compared with the factory price, invisible braces are also considered by the outside world to be a "profitable" business. In terms of gross profit margin, the comprehensive gross profit margin of Time Angel in 2020 was as high as 70.4%, and the gross profit margin of "Invisible Me" parent company Aiqi Technology was also above 70% during the same period.
Picture/Time Angel Financial Report
But behind the huge profits, Time Angel's net profit margin is relatively low.
Although Time Angel's revenue in 2020 reached 817 million yuan, its net profit was only 151 million yuan; while in 2021, its revenue was 1.271 billion yuan and its net profit was 286 million yuan. At the same time, its net profit margins in the past two years were only 18.5% and 22.5% respectively, which was in sharp contrast with the high gross profit margin. Where did their profits go?
In fact, invisible correction is an industry that relies heavily on channels. "We directly sell most services and products to hospitals and dental clinics. In addition to direct sales, we also use their channel resources to increase sales and market share by holding relevant registered distributors." Times Angel wrote in the prospectus.
The direct sales targets referred to by the angels in the era are hospitals and clinics. In 2020, the revenue from private clinics in its direct sales channels accounted for 64.9%, and the revenue from public hospitals accounted for 1.5%. Private clinics contributed most of the revenue of the Angels of Times.
In order to help the company expand to untapped areas, especially low-tier cities where direct sales are difficult to penetrate, the company is also increasing its investment in distribution channels, and the revenue share of this part has also increased to 33.6% in 2020.
, which also makes the company pay a higher "price" than direct sales. On the basis of the ex-factory price, the Times Angel will give distributors certain discounts and sales rebates. According to its prospectus, from 2018 to 2020, the weighted average discount rates of the company's sales to distributors were 13%, 23.7% and 13%, respectively, and the rebates were 2 million, 4 million and 14.4 million, respectively.
A service staff at the oral organization explained to the weekly magazine "Finance World" that many consumers believe that the orthodontic industry is profitable because they can only see the high prices of terminals, but they are difficult to see other costs, including technology and "people". Take the Angel of Time as an example. The customers it really faces are clinics, not consumers.
At the same time, the clinic also needs to pay the cost of doctor training and introduction, as well as rent, equipment and other expenses.
In the eyes of orthodontic doctors, although invisible braces are not metal braces, they will not reduce the technical requirements. "Metal braces can be adjusted at any time, while invisible braces need to accurately determine the final effect from the beginning. Every adjustment of the review and the production of new braces must be done to this goal, which is more challenging for the doctor's orthodontic concept. Designing and simulating tooth movement plans are the key part of determining the efficacy. Just imagine, if everyone directly buys braces and wears them by themselves, it seems that they only pay the cost of consumables, then how can they know how to correct them?" said an orthodontic doctor.
According to media statistics, in this industry, the cost of polymer plastic sheets accounts for about 20% of the total production cost of invisible braces, while the cost of medical treatment accounts for more than 50% of the cost of orthodontic treatment; in addition, it also includes other expenses such as site rental and operation management of equipment, personnel, and clinics.
is based on this cost structure. Some industry insiders believe that the consumables targeted by centralized procurement are only a small part of, and the impact on the price transmitted to the consumer side is actually limited. However, no matter what, the price reduction of invisible orthodontics has become the general trend.
Picture/Visual China
industry has reduced prices, and the general trend is
It is worth mentioning that before the arrival of centralized procurement, the two giants of invisible orthodontics have also started a price reduction campaign for the B-side on their own.
Era Angel mentioned in its 2021 financial report, "As we have been developing and sinking into emerging markets, the product portfolio and channel structure have changed, and the average selling price of invisible orthopedics has slightly dropped to about 7,300 yuan in 2021." In 2022, Invisible and Medium also launched discount activities with the highest subsidy terminal price of 25,000 yuan in some clinics.
This move is to a certain extent caused by increasingly fierce market competition.
According to Jiajin Securities report, among the people receiving orthodontic treatment, about 31.9% of the people in the United States have adopted invisible orthodontic treatment plans, while only 11.0% of the people in the Chinese market (mainly in first- and second-tier cities) use invisible orthodontic treatment, and the penetration rate of invisible orthodontics is still low. When the market has experienced a stage of doubt and controversy, people are now increasingly accepting invisible correction, and the proportion of the new generation of people using invisible orthodontics will increase, and the penetration rate of the invisible orthodontic market with the attributes of "medical beauty + consumption" is expected to further increase.
Era Angel mentioned in the prospectus that based on retail sales revenue, China expects that the invisible correction market will reach US$46.2 billion in 2030.
is stimulated by broad prospects, and in recent years, more and more new players have squeezed into the track.
For example, the Orthodontic Dental, established in 2004, has become the third brand in China with the third largest market share in invisible correction in 2020. As of 2021, the cumulative design plans have exceeded 500,000, and the annual production of more than 10 million invisible correction devices.In addition, Zhengli Technology, Meiliu, which owns "Moliqi" and "Rusuqi", and Yaling Technology, which has its own brand "Shimeile", have all entered many large chain clinics in China. The "yinxiu" brand is backed by Tongce Medical , with a market value of more than 40 billion yuan, and is also regarded as a potential player in the industry.
The capital market is also optimistic about the younger generation of invisible orthodontics. Yaling Technology announced in July 2021 that it had received a US$20 million Series A financing from Sequoia Capital China Fund; in August 2021, the United States immediately completed a B financing of hundreds of millions of yuan led by Shiyu Capital; Zhengya Dental announced in early 2022 that it had completed a D financing of 500 million yuan.
"Finance World" weekly also found that some startups such as the "Smile Formula" have tried to imitate the "Internetization" model of invisible braces in the United States to reduce costs. This model establishes a relationship between doctors and consumers through the Internet, and combines technologies such as 3D scanning, 3D printing, and cloud computing, to provide consumers with full-process invisible correction services. Its business logic is to bypass "middlemen" and save offline manpower, equipment, stores and other expenses.
Under this model, the United States has already born Smile Direct Club ("SDC") a listed company. The company was founded in 2014. With its low fees and fast efficiency, it was once very popular in the US market with high correction penetration. In 2019, the number of SDC correction cases reached 453,000, and the company followed the trend and went public on Nasdaq .
But this model also has disadvantages, because it is directly facing consumers and loses the recommendations of institutions and doctors. The company needs to personally make efforts to establish a brand reputation among users and gain customers through large-scale marketing. Therefore, it is generally believed in the industry that this model is difficult to operate in the domestic market in the short term. On the one hand, domestic users are not used to and adapted to Internet diagnosis and treatment, and most users are doing orthodontics for the first time, which is more complicated; on the other hand, invisible braces are secondary medical devices in China, and using this model will also have a series of safety and supervision problems.
Overall, the penetration rate of domestic orthodontics, especially invisible orthodontics, is still at a low level. However, in the future, as the concept of invisible correction gradually becomes popular, the market in third- to fifth-tier cities will gradually be opened. After the implementation of centralized procurement, terminal costs can be reduced, and the public's acceptance and consumption willingness will be improved, which is a positive benefit to the industry.
Founder Securities predicts that by 2030, the average customer unit price of invisible orthodontic terminals for the 5-19-year-olds and 20-39-year-olds will be 18,000 yuan and 22,000 yuan respectively.
In the future, the invisible orthodontic industry will develop day by day, and consumers will have more and more choices, and "costs" will no longer be a roadblock.
(At the request of the interviewee, Sun Yu is a pseudonym in the article)
