@guyue999,
My dentist generously spent some time explaining his views to me last week. My notes are below:
He started by saying his comments refer to his experience as an older, non-practice owning dentist only. Obviously his comments only relate to the Australian market.
The clinic I visited is a suburban clinic with 3 dentists, one of whom is the owner.
Purchasing decisions are generally made at practice or (in the case of franchises etc) group level. In this case for example, the clinic owner is the only one visited by sales reps. The reps usually don’t bother to seek out individual dentists.
The exception is that sometimes dentists can request specific products that they find especially satisfactory for particular situations.
There is some risk in changing products but it does happen, particularly when a dentist moves from one practice to another.
Demand for dental services appears to have fallen, anecdotally at least. There is increased pricing pressure and one of the main ways to respond to this is by reducing the cost of consumables.
Dentists at larger clinics and chains are usually provided with sales training and given sales targets to meet.
Younger dentists and the general public prefer non-amalgam products. However:
Amalgam is more idiot-proof to use, wears better and provides a reliable seal with the tooth which prevents corrosion in the area where the filling meets the tooth.
Non-amalgam products vary in performance and don’t last as long as amalgam. Practically all composite fillings leak.
Because of leakage, composite fillings are only suitable for populations with good dental hygiene. 20 years ago they would not have been viable in Australia.
There are certain clinical situations where amalgam is the only viable option so there will always be some demand. The push to decrease amalgam use mainly comes from environmental considerations as amalgam is the main source of mercury in sewage.
As older dentists retire there will be further reduction in the use of amalgam in western countries.
In summary it appears that amalgam will continue to decline and that it is possible to swap dentists from one product to another if there is a significant price advantage. However dentists aren’t swapping from SDI amalgam to SDI aesthetics products. They are quite separately reducing their use of amalgam and choosing to use aesthetic products from whichever supplier is able to provide a decent product for the lowest price, with the exception of a few products where performance overrides price.
Summary:
In general if I look at the revenue growth and margins of SDI’s competitors the picture I get is of fairly stable market shares and margins despite the barriers to entry being quite low. Very large competitors such as Dentsply appear to have an advantage in terms of their much larger R&D spend but this doesn’t appear to be translating into products which are superior enough to displace others on the basis of performance alone. SDI appears to occupy a niche which is sustainable under present levels of competition but could be threatened if the bigger guys decided to cut prices or develop products which are markedly superior.
Other notes:
The antitrust proceedings against Dentsply regarding their synthetic tooth business make for interesting reading regarding the structure of the industry. They can be found on the US DOJ website.
SDI Price at posting:
59.0¢ Sentiment: Buy Disclosure: Held
