Orange County’s dental industry has its bite back.
Leaders in the area’s varied and sizeable dental community are bullish on a recovery now underway that they believe will push the industry—hammered in the early stages of the pandemic—to even greater heights.
OC’s cluster of dental businesses—ranging from established dental support organizations, device makers, and software firms to upstart 3D printing companies and publicly traded conglomerates—are seeing new revenue-generating potential as dentists embrace emerging technologies and consumers place more attention on health and well-being.
“The industry is stronger than it was pre-COVID,” according to Stephen Thorne, chief executive of the country’s third-largest dental support organization, Pacific Dental Services. The Irvine-based firm has over 800 affiliated offices across 24 states. It builds and manages office practices for dentists, taking care of just about everything except the actual dentistry.
“The dental industry has proven to be impressively resilient,” added Amir Aghdaei, president and chief executive of Brea’s Envista Holdings Corp. (NYSE: NVST), a maker of dental consumables, equipment and services provider, with a nearly $7 billion valuation, in a recent call with analysts.
“Having adjusted to the new operating model, including a stronger focus and infection prevention protocols, dentists are now more confident in the long-term prospects of their business,” said Aghdaei, whose company was profiled in the June 14 print edition of the Business Journal.
It’s been a wild ride for the industry over the past year and a half.
The American dental industry was valued around $150 billion and projected to have a 3% compound annual growth rate over the next five years as of 2019, Thorne said.
Then, the industry was expected to fall to as much as $52 billion in 2020 as dental offices experienced mandated closures across the country.
Now, new research shows a return to more growth than ever before, with the industry projected to have a 4.4% compound annual growth rate over the next five years.
Here and on page 47 are snapshots at how a handful of OC’s more notable dental companies are plotting for the remainder of 2021 and beyond.
Sonendo: Software Saves the Day
For Sonendo Inc., a Laguna Hills dental device maker that was the fastest-growing midsized private company in OC for two years in a row pre-pandemic—it reported two-year revenue growth of 814% to $38.4 million for the year ended June 30, 2019—software boosted its business in 2020.
The company, best known for its GentleWave root canal system, is the parent of San Diego-based TDO Software, the leading endodontics practice management software, according to Chief Executive Bjarne Bergheim.
The company’s software offering helped offset lost revenue from its device business in 2020, said Bergheim, whose firm raised $85 million in funding at the start of 2020.
In the end, revenue was flat last year. However, Sonendo believes it is already returning to growth mode at a much faster rate than other dental equipment providers due to the technological and safety advantages of GentleWave, which uses a combination of a liquid solution and acoustic energies to clean a tooth’s root canal system, Bergheim said.
GentleWave is a closed-loop system that prevents particles from becoming aerosolized and spreading disease, and it comes with single-use disposable instruments so patients don’t share components with others, he said.
Furthermore, Sonendo’s system has a 97% success rate of removing all infected tissue, while most root canal procedures have a success rate between 70% and 80%, according to Bergheim.
“We’re changing root canal therapy in a big way,” Bergheim said, noting the company expects to release a new procedure instrument this year.
Today, Sonendo has placed about 700 systems in dental offices and surpassed over half a million root canal procedures performed on its system.
Pacific Dental: Focus on Overall Health
The pandemic drew attention to the mouth-body connection, a point that is likely to lead to new innovations and greater use of digital technologies such as cameras and 3D printing, according to Pacific Dental Services CEO Stephen Thorne.
For example, one research study showed people with advanced periodontal disease were nine times more likely to die from COVID-19, he said. Beyond the coronavirus, research has also proven links between periodontal disease and cardiovascular disease and diabetes.
“More people are coming in because they want to get their teeth cleaned, they want their oral health taken care of, because they know it affects the rest of the body,” Thorne told the Business Journal.
As a result, Pacific Dental Services is back to growth and expects to exceed $2 billion in annual sales this year, Thorne said.
For perspective, the company aimed to grow 25% to $2 billion in 2020 before the pandemic hit. It took a $250 million hit in the second quarter of 2020 alone and adjusted its goal to about $1 billion. The company didn’t fare as poorly as expected and ended the year with 1% decline, Thorne said.
With $1.6 billion in 2020 revenue, the company ranked No. 11 among OC’s largest private companies last year, according to last week’s Business Journal list.
In addition, as part of its push to more closely align dentists and medical professionals, Pacific Dental Services is investing about $120 million in the “first true electronic health and dental record,” Thorne said.
The software project, for which a timeline was not revealed, will allow physicians and dentists to view patient records on one platform, in turn increasing the chances of preventing and detecting diseases early on.
Teledentix: More to Virtual Care than Zoom
Teledenistry quickly became a need amid virtual operations—but there’s a lot more that goes into building a strong business than access to a web camera, according to Richard Lee.
Lee founded Newport Beach-based dental support organization software provider Planet DDS in 2003. He exited the business as chief executive in 2015 and started devoting more of his time to improving oral health for children through Healthy Smiles for Kids of Orange County.
It was his philanthropic work to reach underserved communities, in large part, that led to the idea for Irvine-based Teledentix, one of the first teledentistry platforms that launched in 2017, Lee said.
The Teledentix-branded platform is owned by Virtual Dental Care Inc.
Teledentix differs from the competition in that it’s “not just a Zoom,” Lee said.
“We have communication, collaboration and outreach tools,” he said. “We’ve stitched everything together in a meaningful, seamless way to provide continual services from preventative steps to education to treatment.”
The company, which works with a variety of dental support organizations, mobile dental providers and nonprofits, saw double-digit growth last year as the world went virtual, Lee said.
Teledentix averages about 4,000 to 10,000 video sessions and about 5,000 online appointments every month. It reaches about 30 enterprise organizations through its clients and estimates it serves the largest number of mobile dental companies that serve enterprise businesses in the U.S.
For example, one of its clients is OnSite Dental, a San Clemente-based mobile clinic provider that works with Facebook and LinkedIn.
The pandemic demonstrated that “teledentistry is becoming part of overall offerings to patients,” Lee said.
Teledentix has also gained traction around its records-sharing module, which allows organizations to share dental records and medical records for whole-patient care, among other software features.
Desktop Health: Targeting an Unmet Need
For Newport Beach-based Desktop Health, a newly formed 3D printing company created after its publicly traded parent company’s $300 million acquisition of Michigan-based EnvisionTec early this year, the focus on digital technologies in dentistry makes it the perfect health sector to target.
The company last month launched its first product, Flexcera Smile, which are prosthetic dentures made from resin and 3D fabrication.
It’s a product that targets “a need that has not been met in the dental space before,” and was created with 60 dental leaders informing the whole experience, Chief Executive Michael Mazen Jafar told the Business Journal.
Jafar, who spent more than two decades with Allergan, before serving as chief marketing and commercial officer for local aesthetics competitor Evolus, said the dental sector is the best place to start as a health-focused 3D printing company because it is “ahead of traditional healthcare in terms of digitization.”
Yet, there’s plenty of room to grow. Jafar estimated that only about 25% of the digital dentistry sector has been penetrated, leaving many opportunities on the table.
Desktop Health set up its headquarters in Newport Beach earlier this year. It plans to scale to about 40 employees by year’s end.
Its Burlington, Mass.-based parent company, Desktop Metal (NYSE: DM), has about 250 employees touching its healthcare-focused divisions. The $3.3 billion-valued parent company is contributing about $100 million in research and development and additional acquisition funds that Desktop Health could deploy, Jafar said.
“We’re well capitalized to explore our ideas, and within two years we’ll have a nice portfolio of technologies. We’re looking to acquire companies in material science [or with] ingenuity around scanning or translating technologies,” he said.
