The contrasting fortunes of Envista and Smiledirectclub

Two dental companies go public inside a week, with very different results.

The spinout of Danaher’s dental business, under the name Envista, via a flotation on the NYSE on Wednesday raised less than half as much as the Nasdaq IPO of another dental company, Smiledirectclub, six days earlier.

But Smiledirectclub, which seeks to compete with the clear tooth aligner market leader, Align Technology, had a shocker on its first day on the market, losing 28% of its value. It has recovered somewhat since, but Envista seems to have come out the winner.

The deals are the two largest medtech IPOs to happen this year, with Envista’s $598m raise just pipping Medacta’s $588m back in April (Few medtechs go public, but those that do, do nicely, July 12, 2019). Smiledirectclub’s $1.3bn offering, however, is the largest since Siemens Healthineers spun off from its parent in 2018.

LARGEST MEDTECH IPOS EVER
Date	Company	Focus	Amount raised ($m)	Offering price	Stock exchange
Mar 16, 2018	Siemens Healthineers	Imaging	5,125	€28	Frankfurt
Oct 26, 2016	Convatec	Wound care; hospital supply	1,948	£2.25	London
Sep 12, 2019	Smiledirectclub	Dental	1,300	$23	Nasdaq
Sep 18, 2019	Envista	Dental	589	$22	NYSE
Apr 4, 2019	Medacta	Orthopaedics	588	SFr104	Six Swiss

Danaher announced its intention to spin off its dental business in March 2018, in the belief that both the dental unit and the rest of its business, which is focused on in vitro diagnostics, would do better independently of each other.

Envista encompasses Danaher’s various former dental subsidiaries, including Nobel Biocare, which makes dental implants and patient-specific prosthetics, Kavo Kerr, which produces dentists’ drills and other tools, and Ormco. Ormco, like Smiledirectclub and Align, makes clear tooth aligners.

The unit that is now Envista had revenues of nearly $2.8bn in 2018, and its management hopes the spin-out will be freer to form partnerships and do other deals. That said, it is only semi-detached: Danaher retains an 83% stake.

A clear disappointment

Envista priced its IPO towards the lower end of its preannounced range, but has accumulated value since. The reverse is true of Smiledirectclub. The group was confident enough to go out at at a 12% premium to its range, but the performance on its first day was little short of alarming.

The crash in its stock has reanimated the questions surrounding loss-making “disruptive” start-ups that were prompted by Uber’s 7% first-day crash in May, and bolstered by the news that Wework’s parent company has delayed its IPO after potential investors suggested it was overvalued.

At least Smiledirectclub’s shares have ticked up since, though they are still down 19% from the float price.

Smiledirectclub sells its 3D-printed “invisible” braces directly to customers, cutting out the orthodontist and instead assessing its customers’ teeth via online check-ups. This permits lower prices – the most popular brand of transparent teeth straighteners, Align Technology’s Invisalign, costs around $3,000-8,000 whereas Smiledirectclub can come in at less than $2,000.

Smiledirectclub made a loss of $75m last year despite booking revenues of $423m. Align Technology turned a profit of $400m.

BATTLE OF THE DENTAL IPOS
Date	Company	Amount raised ($m)	Offering price	Stock Exchange	Discount/ premium	Share price change to Sep 19
Sep 12	Smiledirectclub	1,300	$23	Nasdaq	12%	(19%)
Sep 18	Envista	589	$22	NYSE	(2%)	27%

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