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OC Dental Industry Plots Return to Growth

Orange County’s dental industry, still trying to recoup from the pandemic, is planning on better days this year.

The Business Journal’s second annual list of dental companies showed an 8.6% year-over-year drop in OC employee count to 5,312.

The biggest decline was 31% to 1,207 at No. 2 Irvine-based Pacific Dental Services, which also saw its companywide employee count fall 6.4% to 11,888.

“The pandemic has impacted our total workforce,” Chief Executive Stephen Thorne told the Business Journal. “Additionally, it has been a challenge to bring people back given the various regulatory mandates.”

In the first months of the pandemic in 2020, only about 5% of dental practices were open, he estimated, saying he initially expected his company’s sales to fall to $1 billion in 2020.

“Pacific Dental Services had a remarkable rebound in the second half of last year, and despite the pandemic, revenue was down only 1% from 2019,” Thorne said. “Overall, the industry is returning to growth and expected to have a 4.4% compounded annual growth rate over the next five years.”

Pacific Dental builds and manages office practices for dentists, taking care of just about everything except the actual dentistry. The company, which is known as a dental support organization, or DSO, is on track to generate $2 billion this year, Thorne said.

The biggest revenue jump on the list was 56% to $1 billion at Irvine-based Smile Brands Inc., which is also a DSO. Smile Brands supports nearly 700 affiliated practices across 30 states, up from 440 offices in 18 states at the end of 2019. It grew through the late-2020 acquisition of DSO competitor Midwest Dental.

Varied Businesses

OC’s sector of dental-focused business is a varied collection of makers of implants and braces, dental support organizations, software firms servicing dental practices, as well as dentistry-focused device maker.

Companywide, their employee count rose almost 1% to 135,715.

The six companies that reported revenue collectively saw a 2.7% decline to $5.2 billion.

No. 3 Envista Holdings Corp. (NYSE: NVST) saw the biggest decline on a dollar basis, 17% to $2.3 billion.

Things are looking much better this year for Envista, which reported 30% sales growth to $709.2 million in the first quarter; it’s scheduled to report second-quarter results on Aug. 3

“We are off to a great start in 2021,” Envista Chief Executive Amir Aghdaei said in a statement on the first-quarter results.

“A robust recovery in the dental market combined with strong execution and our continuous improvement culture drove broad-based strength across our portfolio.”

The Brea-based provider, which serves over 1 million dentists in 150 countries, was originally formed as a subsidiary of Danaher Corp. in 2018. This week’s list includes three Envista units: Ormco and Nobel Biocare Systems that make specialty products while KaVo Kerr makes equipment and consumables.

Root Canal Day

No. 6 Sonendo Inc. kept it’s OC employee count flat at 127, even though its 2020 revenue fell 33% to $23.4 million.

It’s a reversal in fortunes for the 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. At the beginning of 2020, it had raised $85 million in funding.

The company, best known for its GentleWave root canal system, is also the parent of San Diego-based TDO Software, the leading endodontics practice management software,  business that helped offset lost revenue from its device business in 2020, according to Chief Executive Bjarne Bergheim.

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 told the Business Journal in June.

“We’re changing root canal therapy in a big way,” Bergheim said, noting the company expects to release a new procedure instrument this year.

To stay positive during the pandemic, in May it issued a press release to celebrate “National Root Canal Appreciation Day.”

“We are proud to have completed over 600,000 GentleWave Procedures, i.e., over 600,000 patients whose pain and infection was resolved, and natural teeth saved by endodontists,” Bergheim said in the statement.

Newcomer

No. 15 on the list, Virtual Dental Care Inc. is the owner of the Teledentix-branded platform, which provides video dentistry.

Richard Lee, who built the platform, was the founder of Newport Beach-based DSO No. 11 Planet DDS in 2003.

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. 

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.
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