Align to Resolve Warning Letter Issue - Analyst Blog

Align Technology (ALGN) received a warning letter from the US Food and Drug Administration (FDA) on November 18 requesting additional documentation over and above its response provided earlier related to the inspection of its corporate headquarters in California (between June and August). The FDA had issued Form 483 notice containing four observations subsequent to the inspection.

Additional information sought by the agency is related to Align's corrective actions in complaint handling and medical device reporting procedures related to the inspection.

Earlier, on August 26 and November 8, Align had updated the FDA regarding the corrective actions it had undertaken to address the issues. Thereafter, on November 22, Align had submitted a written response to the warning letter that included copies of documentation requested by the FDA.

In a meeting with the FDA, Align wants to ensure that its response (on November 22) has addressed the issues contained in the warning letter. The company is trying hard to resolve the issue quickly.

Align manufactures and markets the Invisalignsystem, a proprietary method for treating malocclusion, or misalignment of teeth. The system corrects malocclusion using some nearly invisible and removable appliances that help gently move the tooth to a desired final position. We hope that the issues with the FDA are resolved so that its manufacturing operations are not affected.

Banking on its core product, Invisalign, Align has established itself as a strong player in the dental market. The Invisalign system significantly reduces the limitations of conventional orthodontic treatment (braces) with respect to aesthetic issues and oral hygiene.

Align reported strong third quarter results based on robust growth of its Invisalign system. Most of the company's key business metrics improved during the quarter. We are encouraged by the company's performance in the teenage segment, a market which holds immense potential.

However, we remain concerned about the tough competitive landscape with players like Danaher Corporation (DHR) and Dentsply International (XRAY). Competition has resulted in continuous decline in prices over the past few quarters, but the latest quarter. We also remain concerned about the economic uncertainty as the dental procedures, being elective in nature, often get deferred.

 
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