Sybron Dental Specialties Inc. has something to brag about on the eve of its fifth anniversary as a public company: Its shares were up nearly 20% for the year last week.
The maker of dental products, which recently moved its headquarters from Orange to Newport Beach, spun off from Sybron International Corp. in 2000.
Sybron’s former parent, once a Milwaukee-based maker of medical laboratory gear, changed its name to Apogent Technologies Inc. and now is based in New Hampshire.
As of last week, Sybron counted a market value of $1.6 billion. The company makes braces, filling materials and other dental products.
“In many ways, the company is a play on some of the faster-growing niche markets of dentistry such as endodontics, dental implants and orthodontics,” said Lehman Brothers analysts Lawrence Marsh and Steven Postal in a report initiating coverage on Sybron.
Sybron has about 5% of the market for dental products, according to the analysts. The company is the third-largest dental supplier in the industry after Dentsply Inc. of York, Pa., and Irvine-based 3M ESPE Dental Products Co., a 3M Co.
Dentsply’s shares were down slightly for the year as of last week.
Sybron has two main units: Kerr Dental, which makes restorative dental materials and instruments used in root canals, and Ormco, which produces orthodontic supplies such as bracket braces, bands, crowns and elastics.
In specialty products, such as braces, implants and instruments for root canals, Sybron has about 15% of the market, according to Marsh and Postal.
“Nearly half the company’s profits come from its specialty segment and the contribution has been increased over the past five to 10 years,” the analysts wrote. “The company has No. 1 market share in the orthodontics market.”
“Certainly the specialty areas have become more important to us,” said Floyd Pickrell, Sybron’s chief executive. “Generally speaking, some of the specialty areas are faster-growing areas in dentistry.”
Still, Pickrell said he doesn’t see the company leaving the market for general dentistry products.
“The largest space that we play in is the general dental space, our professional dental, and I don’t see that changing,” he said.
Sybron’s challenge is holding its own against bigger rivals, according to analysts.
The company has been able to compete by being “innovative with new products,” Pickrell said.
“We obviously have a long tradition of doing that, and we think it’s part of our culture,” he said. “But if we stumble there, it would impact our ability to grow.”
Sybron’s research and development spending has been running at $11 million to $13 million, or 2% of sales, said Bernard Pitz, Sybron’s chief financial officer.
Demand for dentistry is growing as baby boomers are keeping their teeth longer, according to analysts. Dental plans also are growing, as is interest in cosmetic dentistry, they said.
Sybron could be more aggressive with acquisitions, thanks to a lightened debt load, Marsh and Postal wrote.
As of June 30, the company had $233.5 million in total debt, down from $375.5 million five years ago at the time of the spinoff.
“When we spun, our parent was very satisfied that we would be able to reduce debt quite rapidly,” Pickrell said. “Obviously that has come to pass.”
The company is looking at a number of possible acquisitions, Pitz said.
Sybron has “a full-time person who’s doing nothing but going out there and looking for potential candidates,” Pitz said.
The company got into the dental implants market by way of its 2004 buy of Germany’s Oraltronics Dental Implant Technology.
“The dental implant market is another noteworthy opportunity for Sybron, because it is growing about 15% annually in the U.S.,” wrote Ross Taylor, a medical technology analyst with CL King & Associates, a brokerage based in Albany, N.Y.
In his report, Taylor said that dental implant profitability should grow with sales.
“We also think Sybron may pursue additional dental implant company acquisitions to further expand its product line, sales force or geographic presence,” Taylor said.
