Align: Selling Innovation to Late Adopters

Align Technology emerged from an unlikely source-two second-year Stanford business students with no previous start-up experience. These entrepreneurs were able to sign on major venture backers in a field which has never before attracted much interest from medical device investors: orthodontics. The founders' idea was that, by using advanced product design and manufacturing processes, the company could produce the Invisalign system of removable, clear plastic dental appliances that, for certain orthodontic patients, particularly adults-a large untapped market--could take the place of traditional metal braces. The challenge for the new company: to tap into a fragmented physician market not accustomed to new technology, moreover with a consumer-preferred device.

Consumers gravitated towards Align's innovative orthodontic product in greater numbers than did doctors. The company's new strategy is designed to convince physicians largely unaccustomed to new technology that change can be good.

By Stephen Levin

• Dentistry and orthodontics have been largely untouched by significant recent product development, and thus have not attracted much interest from medical device venture investors.

• Align Technology emerged from an unlikely source—two second-year Stanford business students with no previous start-up experience who were able to attract major venture backers.

• The founders' idea was that, by using advanced product design and manufacturing processes, the company could produce the Invisalign system of removable, clear plastic dental appliances that, for certain orthodontic patients, particularly adults—a large untapped market--could take the place of traditional metal braces.

• The company's founders invested heavily in direct-to-consumer marketing that resulted in patients favoring the product before many doctors were familiar with it. After a successful IPO, Align's channel problems, along with other missteps, drove the company's stock down to the one-dollar range.

• A new management team has restructured the company and implemented a more focused strategy. For Align, traditional braces are now no longer the enemy. Instead, the company promotes Invisalign as another tool in the orthodontists' and dentists' armamentarium, an approach that appears to be capturing support among customer groups not known for embracing new technology.

While dentists and orthodontists are among the medical specialists that patients visit most regularly, those areas are largely avoided by medical device venture investors. Dentistry as a whole has not seen significant technology innovation over the years, and as a result, these doctors are generally not quick to embrace new developments.

So when Kelsey Wirth and Zia Chishti went up and down Sand Hill Road in Palo Alto, CA in late 1996 and early 1997, it wasn't that surprising that VC after VC decided not to invest in their idea for a new orthodontic device company (aimed largely at the adult market) called Align Technology Inc. Wirth's and Chishti's business plan outlined a strategy for drawing on other industries' use of sophisticated product design and manufacturing techniques to produce, in what they called the Invisalign system, a series of clear plastic Aligners that could be used to treat malocclusion (the misalignment of teeth) instead of traditional metal orthodontic braces. The fact that both Wirth and Chishti were second-year Stanford business students at the time, and that neither had any previous start-up or health care experience made it even less surprising that so many VCs passed on this opportunity.

The shocker came when Wirth and Chishti visited Kleiner Perkins Caufield & Byers, and partner Joseph S. Lacob decided almost immediately to invest in their idea. "Fifteen minutes into their presentation I knew that I wanted to invest in Align. They were shocked," Lacob recalls. The company was formed in March 1997 with Wirth and Chishti at the helm. In spite of top management's inexperience, Align successfully went public in 2001, raising $126 million at a time when device IPOs were rare. [See Deal]

It wasn't entirely smooth sailing for the young entrepreneurs, however. The company suffered some setbacks along the way. Align took longer than expected to launch its product and also suffered because of geopolitical forces that affected their overseas operations. But perhaps Align's biggest challenge was in approaching its prospective customers, a very difficult channel to sell into, and the company temporarily drifted off course. The cumulative effect was that Align's stock price dropped to its nadir of $1.26 in November 2002.

Since then, the restructuring implemented by the Santa Clara, CA-based company's new management team, headed by Thomas M. Prescott who replaced Zia Chishti as president and CEO in March 2002 (Kelsey Wirth remains a board member), has Align's stock just north of $20 at press time. This is in large part due to a more focused strategy. Instead of clashing with traditional metal braces as the enemy, Align now positions the Invisalign system as simply another tool for orthodontists and dentists to use--one that carries the advantage of being patient-friendly. The early results indicate that Align's new approach to this channel is paying off handsomely.

A Big Market Cures Many Ills

What convinced Joe Lacob to have Kleiner Perkins invest in Align was the large and virtually untapped market the company was going after, and that was what ultimately convinced his partners to go along on the deal, notwithstanding the founders' inexperience. "It wasn't really a hard sell because people saw that the adult orthodontic market was a big opportunity that really hadn't been touched by major innovation," he says.

Another point in Align's favor was the innovative approach that Wirth and Chishti had developed. "I was intrigued by the fact that they were presenting a completely new way to do something in orthodontics, which made this potentially very exciting as a seed investment," Lacob explains, adding, "And the fact that the technology had some sizzle to it increased our interest." Kleiner Perkins provided Align with the company's first investment--$3 million--and remained committed, not only investing in each of the company's four pre-IPO rounds (all of which were done at nice step-ups in valuation), but also putting money into an $18 million PIPE financing that Align did in 2002. [See Deal]

Bracing for Treatment

The idea for the Invisalign system was borne from experience; not business experience, but personal experience with orthodontic appliances. Zia Chishti wore braces while he was at Stanford and was convinced there had to be a more comfortable, patient-friendly way to treat malocclusion. Malocclusion is among the most commonly occurring dental conditions, affecting more than 200 million Americans, nearly three-quarters of the US population. Of that group, nearly two million people annually choose orthodontic treatment, generating revenues of roughly $7 billion. Most of these patients seek treatment for cosmetic reasons, although malocclusion can also contribute to tooth decay, tooth loss, gum disease, jaw joint pain, and headaches.

A large part of the reason why such a small number of affected patients elect treatment is because traditional orthodontic appliances, what we commonly call braces (which include both brackets and metal wires), are uncomfortable and most people don't like how they look with conventional braces. That's true even with recent innovations that use ceramic, tooth-colored brackets or that bond brackets to the inside, or lingual surfaces, of the patient's teeth.

Another major factor discouraging patients from seeking treatment is that most orthodontic therapy, particularly for cosmetic reasons, is generally only covered in small part, if at all, by insurers. (Many insurers have lifetime maximums of up to $2,500 per employee or dependent.) That said, many patients combine their insurance with flexible spending accounts to finance this kind of procedure. The average course of treatment runs anywhere from 12 to 24 months, at an average cost that typically ranges from $3,000 to $5,000, depending on the difficulty of the case. The biggest cost variable is the amount of direct involvement by the dental professional (the orthodontist or dentist), so-called chair time, which is driven by the complexity of the case and the types of appliances used.

An orthodontic case generally starts with the dental professional creating a treatment plan that sets out the course of care based on impressions made of the patient's teeth. He or she usually then bonds brackets to the patient's teeth with cement and attaches what is called an archwire to the brackets. The braces are then adjusted roughly every six weeks in order to exert sufficient force to achieve the desired tooth movement.

While braces are generally effective in correcting most malocclusions, they carry with them numerous disadvantages that are so significant that less than one-half of one percent of American adults with malocclusion choose to get braces each year. Cosmetic concerns arise not just from the appliances themselves, but braces can also permanently discolor teeth.

Orthodontic appliances are also uncomfortable. Braces are sharp and bulky, and can abrade and irritate the interior surfaces of the mouth. Also, each time a patient gets his or her braces adjusted during a doctor's visit, root and gum soreness typically results for several days.

Braces can also compromise oral hygiene by making it more difficult for patients to brush and floss their teeth. This can contribute to tooth decay and periodontal damage. In addition, the sustained high levels of force associated with conventional treatment can result in root resorption, which is a shortening of tooth roots that can produce periodontal problems.

Finally, orthodontists and dentists currently lack effective means to model the movement of teeth over a course of treatment; they can't precisely predict the direction or distance of expected tooth movement between patient visits. This means they must rely heavily on personal experience and judgment to project a treatment plan. It's also difficult to achieve tooth-by-tooth precision, since adjusting a wire affects a whole series of teeth, which may lead to unwanted movement for an individual tooth. These disadvantages lead to an overall lack of predictability about the term of the treatment, which of course makes it difficult for physicians to manage patients' expectations.

Align designed Invisalign to address the huge unmet clinical need for an orthodontic system capable of resolving patients' aesthetic and comfort concerns. But no less important are the advantages for physicians, which are essential to drive adoption, and which was the area where the company initially fell short. These advances center around Align's view that their treatment is more effective, predictable, and profitable, the last because it would require less chair time.

Avoiding the Chair

Based in part on Zia Chishti's experience with braces and his computer background, Align's co-founders set out to find a way to use new technology to produce a different kind of orthodontic appliance--a series of clear, removable devices that would be more comfortable and would help reduce the amount of time that patients would need to spend in physicians' offices. The challenge would be to cost-effectively manufacture these precision, custom devices, and to provide physicians with a way of reviewing and modifying their treatment plans before manufacture.

Currently, most removable orthodontic appliances, such as retainers, are manually made from plaster reference models. Chishti and Wirth conceived of a series of custom-made, removable appliances for each patient. This posed a significant manufacturing challenge, because appliances would have to be made to high levels of three-dimensional accuracy and in large quantities. To attempt to manually produce the appliances that Align's co-founders envisioned would be prohibitively expensive and moreover it would be difficult to maintain the required consistency and accuracy.

Chishti and Wirth started looking to other industries and came across stereolithography apparatus (SLA), which is used in a variety of other areas that move from CADCAM computer modeling to rapid prototyping. Align developed a method for using SLA technology to create its reference models. But instead of just using this approach to quickly produce individual product prototypes, Align employs this technology, along with advanced CT scanning technology, to manufacture the Aligners. The company claims it is the first in the orthodontic industry to bring on-demand digital manufacturing to commercial production.

The Aligners are custom-manufactured, clear, removable appliances that provide orthodontic treatment when worn in a prescribed series. Each appliance covers a patient's teeth and is barely discernible. Aligners are generally worn in pairs, over the upper and lower dental arches, for two-week periods, after which the patient discards the worn appliances and replaces them with the next pair in the series. After the treatment is complete, the patient may either use the last Aligner as a temporary retainer or get a conventional retainer.

Tom Prescott explains that an orthodontic case using the Invisalign system begins in much the same way as a conventional case. The doctor takes X-rays, digital photographs, and wax and PVS (polyvinyl-siloxane) impressions of the patient's teeth (or arches, more specifically), and sends this information, along with a treatment planning form/prescription, to Align in Santa Clara. The company then compiles the patient information into a digital record, including initial 3-D models of the patient's dentition made using CT scanning. These computer models provide not only the basis for manufacturing the Invisalign appliances, but they're also used to simulate a treatment plan that the treating physician can review and modify on-line, a part of the product called ClinCheck.

In order to compose the ClinCheck simulation, Align uses CT impression scanning to collect all the images necessary. CT scanning captures a series of digital radiographs and the images are electronically processed to generate a detailed three-dimensional reproduction. CT scanning is the fourth generation of technology that Align has used to acquire 3-D images, and the company finds it superior in both speed and accuracy to lasers. The 3-D model created by the CT scanner is transmitted to Align's facility in Costa Rica, where the company has 350 employees dedicated to turning these models into ClinCheck treatment plans for the doctors to review, modify, and approve.

Each customized, three-dimensional treatment plan simulates required tooth movement in a series of two-week increments, with the goal of achieving the treatment objectives specified in the prescription. Doctors review the ClinCheck simulation and either approve or modify it as necessary. Upon physician sign-off, the Aligners are then manufactured to those approved specifications, with each stage of treatment being converted into a physical model using SLA technology at Align's Santa Clara facility—resulting in a series of plastic resin models from which the actual Aligner appliances will be made. By eliminating the plaster models, Align found that direct impression scanning and automated aligner fabrication significantly improved manufacturing time and accuracy, says Prescott. Models are then shipped to a manufacturing partner in Juarez, Mexico, where the Aligners are produced, packaged, and shipped out. The average case requires 22 Aligner stages and involves nearly one year of treatment time.

Now You See It, Now You Don't

Unlike the market for pediatric orthodontics, no one drags adults to the orthodontist for a better smile. Align knew that, in targeting the adult market, these are patients who would elect orthodontic therapy largely for cosmetic reasons, and would therefore be less tolerant of the discomfort and inconveniences that accompany conventional braces.

Align believes Invisalign increases patient comfort by replacing the standard six-week adjustment cycle of traditional braces with two-week increments. Aligners are thus designed to move teeth more gently and, because of their custom fit, are less intrusive than braces.

Of primary concern to its physician customers, however, are clinical benefits, and Align's new management has placed a high priority on communicating these advantages to doctors. For one thing, since patients can remove Aligners for eating, brushing, and flossing, Invisalign has the potential to reduce tooth decay and periodontal damage during treatment.

Prescott contends that, for orthodontists and dentists, ClinCheck provides the ability to visualize likely treatment outcomes and reduce unintended and unnecessary tooth movements. This can reduce overall treatment times, and result in a reduction of the incidence of root resorption. Invisalign also eliminates the need for dental professionals to spend chair-time manipulating wires and brackets, and thereby can reduce both the frequency and length of patient visits and increase patient throughput.

In addition to enabling doctors to achieve higher patient volumes, Prescott also argues that Invisalign has the potential to expand the orthodontic patient base. "Because of the system's advantages, we believe this will attract patients who would not otherwise seek orthodontic treatment," he says.

Once Align's founders assembled the sophisticated product development and manufacturing processes to produce the Invisalign system, it took a while to get things running smoothly. "The first year, it didn't work at all; the first patients we tried it on didn't show positive results," recalls Joe Lacob.

Trouble Crossing the Channel

It took the company about a year to get to the point where they could produce products that were consistently effective in patients. Align received 510(k) clearance for the product in September 1998, and began US sales in July of 1999.

Although Align's FDA clearance permits the company to market Invisalign to treat patients with any type of malocclusion, Align restricts the use of the product to adults and adolescents with mature dentition, which means that the adult molars are in place and development of the jaws are essentially complete. This typically includes girls over 12 years of age and boys older than 14. Among people who annually begin orthodontic treatment (so-called patient starts), this comprises a 1.1 million patient population made up largely of simple Class I "crowding" cases, as well as some more complex Class II and III cases. (In those more complex cases, Invisalign may be utilized in combination with braces, or with clear brackets for a more aesthetic alternative. This so-called "combination" treatment appears to be increasing in popularity.) This existing market already offers a sufficiently large patient population to begin with, according to Prescott, without any expansion of the patient base.

Indeed, the large potential market opportunity was a major reason investors backed Align, on the private side, where Domain Partners joined Kleiner Perkins as a significant venture investor, and in the public markets, when, in 2001, Align was one of the few device companies able to go public. Yet, ironically, investors' optimism wasn't shared by Align's prospective customers, who from the outset were cautious in endorsing Invisalign.

Joe Lacob recalls that, when he was doing his due diligence on Align, "every single orthodontist I spoke to said the company's technology wouldn't work, or if it did work, it will only apply to 5% of patients and therefore isn't worth investing in." As to why he ignored that advice, Lacob explains, "I went against the grain because I knew that orthodontists aren't used to new technology and they weren't going to accept it blindly or easily."

The reluctance of orthodontists and dentists to adopt new technology wasn't Align's only problem in reaching these customers. The company's channel problems went deeper because of the unique relationship between the two specialties. General practice (GP) dentists are the gatekeepers and the primary source of patient referrals for orthodontists, and each orthodontist typically maintains working relationships with a dozen or so dentists. Indeed, Tom Prescott points out that nearly 75% of patients referred to orthodontists by GP dentists elect to initiate orthodontic treatment, a much higher percentage than patients who come to an orthodontist from any other source. Thus, the orthodontist is dependent upon the dentist for an important part of his or her new patient referrals.

Yet, GP dentists are permitted to perform orthodontics, and estimates are that dentists perform as much as 30% of all the orthodontic work done in the US. Some of that is the product of necessity, i.e., a rural area where a GP dentist is more accessible than an orthodontist. But it is driven more by the politics of dentistry; namely that GP dentists comprise 81% of the profession in the US, while orthodontists make up only less than 6%. The result is that GP dentists dominate state dental boards, and while an orthodontist must complete up to three years of additional post-graduate work following dental school, the fact is that dental school generally includes basic work in orthodontics, enough so that dentists are allowed to practice orthodontics if they so choose. Thus, at least to some extent, that makes dentists and orthodontists competitors for some of the same patients.

Align initially wanted to market Invisalign only to orthodontists, mostly at their request, but the threat of a dentists' class action lawsuit caused the company to begin selling to both customer groups. This spurred greater sensitivity on the part of orthodontists, driven to no small extent by concern about maintaining their livelihood. The average orthodontist may make around $300,000 a year, while the average GP dentist's income is closer to the $125,000 range. Orthodontists became understandably concerned about losing patients and income, particularly because the dentists control the referrals.

Align exacerbated this natural tension between dentists and orthodontists when, not long after the company went public, it launched a $30 million direct-to-consumer (DTC) advertising campaign promoting Invisalign in major media outlets, including prime-time network television. The problem was that the channel wasn't ready, and in the process, Align found out the hard way what a double-edged sword DTC advertising can be for medical products companies.

Jamming the Channel

In one sense, Align's DTC campaign was a success in that it created consumer awareness and it drove large numbers of patients into orthodontists' offices asking about these new clear, plastic, removable appliances that they'd just seen advertised on television. The problem was that the company had not done its homework with dental professionals to ensure that they were on board with the product, so that they would be receptive to these patients' inquiries. Doctors of any stripe don't like to be told by patients what type of treatment to administer, and orthodontists are no different.

"The way the company came blasting in offended some orthodontists, and certain competitors encouraged others to do a bait-and-switch," explains Tom Prescott. The latter situation would arise when an orthodontist or staff member would respond correctly to a patient's telephone inquiry asking whether the doctor was a certified Invisalign provider, but when the patient would come to the office, the doctor would find an excuse as to why that patient was not a candidate for the product.

While acknowledging that there were problems with the DTC campaign that may have been the result of the company's inexperienced management, Joe Lacob believes the program also had value. "That was a real gut-check decision because all of the other investors asked, ‘What are you thinking?', but I went with my instinct to trust Zia Chishti's entrepreneurial spirit on this decision," he says. Lacob agrees that the DTC promotion was "money inefficiently spent," but also contends that, if Chishti did not recognize the need to "drive consumer demand into the orthodontists' offices, the orthodontists would probably have been less motivated to consider Invisalign."

The result, in Lacob's view, is that, although the campaign was inefficient, "it got the Invisalign ball rolling." He contends that the clinical results started getting better from increased usage, and that some orthodontists realized they could deliver good patient results and increase their incomes by using the product. "In this case, it was the right thing to do because we were dealing with a medical specialty that is slow to adopt new technology, and I don't think any data would have driven them to use this product aggressively. Perhaps I wouldn't recommend this strategy in another market, but in this case, it was the right thing to do," he says.

Lacob credits the start-up orientation of the company's founders with energizing this and other early efforts. He doesn't dispute the fact that Align made missteps along the way, some of which probably can be attributed to inexperienced leadership, noting, "They definitely had trouble with execution." But Lacob is quick to point out that the founders' approach also had advantages. "Sometimes you have an instinct that, despite someone's inexperience and the fact that they make some mistakes, they have other skills that a more experienced manager wouldn't have, and that was the case with Align. I don't think an experienced CEO would have had the right entrepreneurial instincts to do some of the things that the company's founders did, including the DTC campaign," he concludes.

Notwithstanding the debate over the merits of the consumer marketing effort, Align's management issues had begun affecting customer confidence in the company and its product. Investors realized that Align had reached its next stage of corporate development, moving from an R&D company into an entity more focused on commercialization. And with that came the need for a different type of management team, one that had greater experience in basic business skill sets like sales and marketing, and which could impose the type of discipline necessary for a growing company but typically lacking in a start-up.

From Innovation to Execution

Investors pointed to problems with the company's business model, customer base issues, and an excessive dependence on advertising spending as a revenue driver as reasons why Align stumbled following its successful IPO. All of those problems spoke to difficulties in the company's transition to its next stage of development and the need for more experienced management.

Joe Lacob acknowledges that the company probably should have made the management change a year earlier. "All of us in the venture community wait too long to make leadership changes," he says.

Under ideal circumstances, the best candidate to head the company would have been someone with a dental or orthodontics background, who knew the industry, Lacob admits. But since the search didn't turn up anyone with that type of experience, they expanded the search and found Tom Prescott.

Among the factors that led Lacob to favor Prescott was his broad range of experience in small, mid-sized, and large medical device companies. Prescott was president and CEO of electrophysiology company Cardiac Pathways Corp. , and sold the company to Boston Scientific Corp. in 2001 [See Deal]. Prescott's prior experience was with Nellcor Puritan Bennett Inc. (now part of Tyco International Ltd. 's Tyco Healthcare Group ) and with General Electric Co. 's GE Medical Systems . Lacob confirms that a large part of the decision to hire Prescott was based on the recommendation of former Nellcor CEO Ray Larkin, under whom Prescott had worked, and other top medical device executives. "Align was at a point where we were going to transition to a much bigger company, and we wanted someone who could grow the company from $25 million, where it was, to $500 million where we want the company will be, and Tom Prescott has proven to be exactly the guy we were looking for," he says.

Joe Lacob emphasizes the importance in matching the right type of CEO to the right stage company. "Would Tom Prescott have been the right CEO during Align's early years? No, I don't see him as a start-up guy," Lacob explains. "But is he the right CEO to do the job now? Absolutely; he has turned a loose, entrepreneurial company into a strategically-focused machine that executes extremely well."

Prescott concurs with Lacob's assessment. "I don't think I'd make a great employee number one--I'd probably drive everybody crazy since I love being able to focus a company around customers, building the right team, setting up the right processes and systems, and getting them all to intersect," he admits.

Tom Prescott's first reaction when he was approached about the Align job was "You've got to be kidding—orthodontics?" He initially declined because the dental and orthodontic markets were not very clinically intense and had not undergone much in terms of innovation, and one of his driving passions is developing innovative technology into products that can have a positive impact on patients. In addition to technology, other things Prescott was looking for in his next position were a large market space and a compelling opportunity that could attract top-notch people.

When he was approached again, Prescott agreed to go to lunch with a member of the board. "When Align went public with this huge valuation, I remember thinking they'd have a challenge living up to the enormous expectations, but other than that, I didn't really pay much attention to the company at the time. But after our first meeting, I got very interested in what the company could do," he recalls.

During his due diligence, Prescott says he was particularly impressed with the quality of the company's people, including the founders. "They had overcome some enormous technology hurdles," Prescott points out. He also found out that the company had problems with lack of focus, and their operational platform had gotten away from them a bit, in terms of not coordinating spending and various initiatives."

In the course of contacting orthodontists and dentists as part of his due diligence, Prescott found a recurring theme: patients loved Invisalign. He recalls that, "The value proposition for the patient looked solid; the question was what was going on with the doctors and the resistance in the channel?" What he found was that the company wasn't able to consistently deliver its products on time, mistakes occurred with shipping and billing, customer service was spotty, and those types of errors had left many dental professionals frustrated with Align's operations. Prescott says, "The turnaround piece seemed fairly straightforward, and the company appeared to have plenty of room for revenue lift if we did things right, so I decided to look at it in greater detail." Closer inspection, he says, revealed to him exciting but immature technology, great people, and a real need for organization and a more focused strategy. "I thought that if we could cut the burn rate, reshape the company, and fix the channel through improved professional relationships, with such an enormous market potential, this could be something special," he goes on.

Rebuilding the Channel

Prescott's most immediate challenge was to restructure the company, including changing Align's business model and operations. The company's founders were willing to pursue sales wherever they could throughout the world, and had also set up 3-D modeling, ClinCheck preparation, and call centers in Pakistan and the United Arab Emirates (UAE), all of which added significant costs. Prescott decided to put Align's international sales efforts on the back burner and focus on the US market. Also, after September 11, 2001, the geopolitical situation changed, and maintaining operations in Pakistan and the UAE became a greater challenge for Align. Prescott eliminated the company's operations in those two countries and focused Align's overseas ClinCheck operations in Costa Rica, while investing in additional efficiencies for the company's manufacturing partner in Juarez, Mexico. In the process, Prescott also cut Align's work force nearly in half, reducing the size of the company from 1,150 to 650 employees.

But Prescott acknowledges that the most important steps that he and his management team have taken have been to re-establish Align's credibility with orthodontists and dentists. "We lost the respect of our customers for a number of reasons," Prescott admits. "First, in the early days, we did an end-run around the gatekeepers to the consumers. Second, we didn't give the doctors the clinical evidence and support they needed to have confidence in recommending Invisalign. And finally, I don't think the company knew how to communicate with these doctors."

Orthodontics is not a field where product adoption is driven by the kind of evidence-based clinical trials that are critical to specialties like interventional cardiology. But Align is partially funding a series of randomized studies, such as one at the University of Florida 's dental school, which is looking at a variety of clinical endpoints with Invisalign patients. (Dental schools have been slow to integrate the Invisalign system into the teaching process; New York University 's dental school is the only one in the country that currently uses Align's product as part of its curriculum.)

Similarly, orthodontics does not lend itself to the kind of recruiting of thought leaders that drives adoption in other specialties. "In this field, you have to go doctor by doctor, and practice by practice to convince them to use your product, and that's a strategy we're in the process of implementing," Prescott says. "Channel support is our most important job; we have to rededicate ourselves to support these doctors and their offices."

Align created an internal clinical education department to help provide doctors with clinical support. And the company has redesigned the Invisalign certification programs that it hosts throughout the country. These are day-long seminars for orthodontists (almost all of the orthodontists in the US are Invisalign-certified) and two-day programs for general dentists. These seminars are required of practitioners in order to employ the Invisalign system and are currently scheduled for almost every weekend of the year. In total, Align annually holds around 350 educational events including study clubs, workshops, and web-based expert calls. But ultimately, Align's most important channel support effort may turn out to be what David Thrower, the company's VP of global marketing, calls "a cooperative market model" that seeks to work with both orthodontists and dentists to leverage the strength of each customer group.

The Broad and the Deep

Thrower explains that Align has different marketing goals with each of its respective customer specialties that play to each's respective strength. For orthodontists, "our goal is to go very deep and earn our way to a high share of their practices," he says. This is because orthodontists will be able to do the more difficult cases with Invisalign. As noted, malocclusions are divided into three classes according to severity of conditions, with Class I being the least severe and Class III the most difficult. Invisalign is primarily used for Class I cases with some potential Class II applications. Orthodontists are able to handle those more challenging cases, while dentists will generally confine themselves to the more straightforward Class I cases. Thus, Align's marketing efforts for dentists are aimed at a broader group, since there are many more dentists than orthodontists, but not designed to go to the same depth in terms of degree of difficulty. Thrower estimates that the learning curve is the same for each group, approximately 15 to 20 cases.

Another important component of Align's marketing efforts is ensuring that orthodontists and dentists understand the company's claim that using Invisalign can be more productive because the system requires shorter patient visits with less chair time, and provides tools that can boost their practice's productivity and efficiency. Thrower acknowledges that this is not immediately obvious because the Invisalign system is much more expensive for dental professionals than conventional braces, $1,500 vs. $300 on average.

Align is starting to see an increase in cooperation among the competing specialties, Thrower says, although he admits that this cooperative market model is far from being universally accepted. The theory behind this approach is that, by marketing Invisalign to dentists, Align will expand the overall market, the easier cases of which will be done by the dentist and the more difficult patients referred to the orthodontist. They'll each have the opportunity to create satisfied patients and generate incremental revenue for their practices. And while all orthodontic appliance companies sell to both GP dentists and orthodontists, Align's advantage, Thrower suggests, is that Invisalign has the potential to expand the market to patients who would not otherwise seek orthodontic treatment. Similarly, he points out that using Invisalign may be a little less technique-dependent than traditional braces since it doesn't involve brackets and wires, which may encourage more GP dentists to begin using the product in their practices, thereby providing an additional advantage for Align over other orthodontic appliance companies. To date, 155,000 patients have been treated using Invisalign.

Align sells the Invisalign system direct in the US and Europe with sales forces of around 80 in the US and 20 to 30 in Europe, with the European group headquartered in Dusseldorf, Germany. The company also maintains relationships with a few distributors in certain European countries. Ninety-percent of Align's sales are in the US. "We're really a US-based company at the moment that is laying the groundwork to be a global company in the future, whereas previously the company thought it was global but had a hard time effectively servicing customers worldwide," Thrower explains.

The company's previous experience with DTC advertising has not caused it to swear off this approach. "We've learned that DTC is important, but we have to maintain more of a balanced approach to make sure that we're serving the clinicians as well as the consumer. We plan to incorporate consumer marketing into our future plans but in more of an even mix," Thrower notes. Tom Prescott adds that, "The right amount of DTC marketing makes sense when the channel is ready, and the channel is ready when you have credibility with the doctors and you can deliver on your commitments. We're getting close, but we're not there yet."

Personalized Medicine Comes to Devices

Align Technology appears to be back on the promising course that investors charted for the company following its IPO in 2001. Align reported record revenues of $36.5 million for the fourth quarter of 2003, when it also achieved profitability, gross margins of 65-70%, and the company's stock price is near the top of its range. The company's management missteps are in the process of being corrected, and Align has adjusted its marketing strategy to address the interests of its physician customers, not just consumers.

Most importantly, Align has developed an improved understanding of, and hence a better relationship with, what by all accounts is a difficult channel to sell into. Yet, company executives acknowledge that their initial failure to get to know their customers made these doctors appear to be a tougher sell than they really are. "Orthodontists and dentists may be a little more conservative than average when it comes to adopting new technology," Tom Prescott says, "but the real problem was that we didn't do our job right. When clinicians see the good clinical results they can deliver with Invisalign, the appreciative smile of satisfied patients, and the improved business results in their practices, the adoption of our product is a straight-forward process."

Looking ahead, another important element of Align's strategy may transcend the company's particular mission in orthodontic devices and indeed have significant ramifications for the future of the device industry as a whole. "We're the largest mass custom manufacturer on the planet; we've made more than five million Aligners, each one a unique device to enable personalized treatment," boasts Tom Prescott.

Thus, Align is the first example in the medical device industry of this kind of mass customization, where an individual product, tailored for the needs of a particular patient, can be e manufactured quickly and in large quantities. (Kleiner Perkins has invested in a second company that also fits this description, an eyeglass manufacturer called Ophthonix Inc. in San Diego, CA. [See Deal]) Joe Lacob sees this as the advent of personalized medicine in medical devices, borrowing the phrase from diagnostics that use genomics technology. "The mass customization process, using technologies from other industries, can be applied to large volume medical devices, which have been manufactured the same way for decades," he suggests. In this way, Align may also become known for being the first to re-align the way certain medical devices are made in the future.