Dive Brief:

• Dentists surveyed by investment firm Baird reported a drop in dental patient volumes, leading the analysts to predict businesses such as Align Technology and Dentsply may struggle to beat expectations in the near term.

• The poll, details of which were shared with investors Tuesday, found patient volumes fell by 0.7% in September, the steepest decline seen in two years. Other data points add to the impression that spending trends are at a low point.

• Seasonality may have played a role in the drop but the analysts think that only partly explains the trend, noting that other sources suggest end-market demand has been stagnant since late last year.

Dive Insight:

The survey captured the views of 157 dentists in the U.S., most of whom work in general practice, to build a picture of demand for dental technologies and consumables. The analysts think the results may have implications for companies including medical supply distributor Henry Schein, 3D scanner player Align Technology and dental product manufacturers Dentsply and Envista.

The top-line finding of the September survey is that patient volumes fell year over year in recent months, implying demand for dental consumables has also declined. Baird last saw such a steep drop in September 2017. The fact that the last two big declines came in September adds to the impression that seasonality is a factor, potentially because the month feels quiet after the back-to-school rush seen in August. However, Baird thinks other factors are in play.

"We’ve clearly heard in our ongoing checks that domestic dental end market demand hasn’t been great in recent months," the analysts wrote in a note to investors. "We believe a reasonable conclusion is that domestic dental end-market demand softened a bit late last year relative to levels we were seeing throughout most of 2017 and 2018, and these sluggish end market trends have fairy consistently continued throughout all of 2019 thus far."

Other questions posed in the survey tried to shed light on whether dentists are likely to invest in new technology over the next five years. Digital impression scanners and 3D printers are the technologies dentists are most likely to buy in the coming years. The likelihood of dentists buying such equipment has remained consistent across the surveys run in 2019.

The Baird analysts expressed surprise at the consistency of the results. Align Technology, Dentsply and 3Shape introduced digital impression technologies earlier this year but their availability is yet to translate into an uptick in buying intentions. 

"We believe the faster speed and greater accuracy of these systems will eventually drive even greater uptake of [digital impression] systems across the industry over the next few years. But at least relative to earlier this year, we are seeing little evidence that new technologies in this space are driving greater near-term purchase intent," the analysts wrote.