Angelalign Technology Inc. officially listed in Hong Kong today, opening up 131 per cent to HK $400m, while the offering price was HK $173a share. At one point, intraday gains rose to 180%.

At present, the invisible orthodontic market forms an obvious duopoly pattern, with the combined market share of the two major participants reaching 82.4%, of which Angelalign Technology Inc. 's market share is about 41%, ranking second, slightly lower than Yinshimei, which ranks first.

Angelalign Technology Inc. 's competitor "Yin Shimei" is derived from the brand of Arley Technology, a listed company in the United States. Since going public in 2001, the company's share price has risen 50-fold from a peak of $13 at IPO to $647, and the latest share price has fallen back to $600, valuing PE at about 24 times.

Can Angelalign Technology Inc. replicate the 50 times myth of "hidden beauty"?

We have done some research before, for your reference on the occasion of the company's IPO.

Oral Family and Hillhouse Capital

1. Pay for technology

In the 1990s, Arley Technology Company of the United States took the lead in developing the technology of replacing alloy orthodontics with transparent braces. Compared with traditional steel braces, transparent braces are comfortable, convenient and beautiful. This technology immediately occupied the market in the United States and successfully landed on Nasdaq in 2001.

The success of the American market inspired Yan Yongnian, professor of the Department of Mechanics of Tsinghua University at that time, and Wang Bangkang, dean of the School of Stomatology, Capital Medical University. Yan Yongnian is known as "the first person in 3D printing in China". When he was over 60, he and Wang Bangkang began to work together to develop bracket-free invisible orthodontic technology, but there was a shortage of funds two years later.

The news was learned by Li Shijun, Li Huamin's father.

As the founder of Nanning Angel Oral Disease Prevention Hospital and the veteran who once participated in the establishment of the China Dental Prevention Foundation, Li Shijun was very optimistic about the commercial prospect of the invisible orthodontic market, so he immediately decided to buy out this technology with 2 million yuan. and invested 5 million yuan with Yan and Wang to establish Beijing Angelalign Technology Inc. Biotechnology Co., Ltd.

One side pays the money, the other gives the technology, and the two sides each own 50% of the equity. With the support of Li Shijun and Li Huamin, research and development can continue.

From 2003 to 2006, Angelalign Technology Inc. always struggled in experiment, research and development, clinical trials and so on. It was not until the summer of 2006 that Angelalign Technology Inc. finally obtained the Medical device Registration Certificate and officially launched the first invisible orthodontic product.

2. Go south in despair

But for the Chinese market at that time, the invisible orthodontic technology was too fashionable, Angelalign Technology Inc. was also too strange, and the market promotion continued to be blocked. On the other hand, there was still a high investment in technological research and development, and the start-up funds ran out quickly, so Li Huamin began to take money from her father's dental hospital to keep it running.

Angelalign Technology Inc. became a bottomless pit of the times, technical backbone Yan, Wang and others withdrew one after another, and Li Huamin inherited her father's career and began to take power.

At the most desperate time in 2008, Li Huamin even mortgaged his house in order to pay his employees. After that, Angelalign Technology Inc. 's R & D center moved to Wuxi and the operation center moved to Shanghai.

After going south, Angelalign Technology Inc. finally got the attention of capital. From 2009 to 2012, Angelalign Technology Inc. won two rounds of venture capital worth a total of US $20 million and successfully survived the crisis.

But in 2015, Angelalign Technology Inc. still could not make ends meet. When Li Huamin was discouraged, Feng Dai, who happened to have invested in medical and health care in Warbug Pincus for 11 years, wanted to start his own business and look for a career that could develop for a long time. Warbug Pincus is the institution that invested 17 million US dollars in Angelalign Technology Inc. in 2012.

As a result, Feng Dai began to accompany Angelalign Technology Inc. with his optimism and love for oral medicine.

3. Pine and cypress invest in the owner and get a new life.

In 2015, Feng Dai received an investment from Hillhouse Capital and set up pine and cypress investment, which focuses on oral industry investment. It is said that Feng Dai and Zhang Lei made friends at an early age, so it is not surprising that they can find consensus on oral investment.

After setting up his own door, Feng Dai bought all shares of Angelalign Technology Inc. with US $63.94 million, and Angelalign Technology Inc. 's thirst for funds was finally resolved.

Since then, in order to motivate the founding team and employees, Songbai Investment has transferred a total of 32.21% of the shares to Li Huamin and Angelalign Technology Inc. 's employee shareholding platform.

According to the prospectus, before Angelalign Technology Inc. IPO, Songbai Investment held 67.12% of Angelalign Technology Inc. 's shares and was the company's controlling shareholder. Among them, Feng Dai is the managing director of Songbai Investment Group and chairman of the board of directors of Angelalign Technology Inc. Group, while Li Huamin serves as the CEO of the company and indirectly holds 15.87% of the company.

After the acquisition of Angelalign Technology Inc., Feng Dai made a comprehensive layout in the upper and lower reaches of the oral industrial chain through pine and cypress investment, including upstream implants, biological regeneration, intraoral scanners, clinic management software and distribution services in the middle reaches, and dental hospitals and clinics downstream.

Angelalign Technology Inc., relying on the advantages of shareholders' investment in the whole industry chain, quickly entered the lower reaches of the industry and finally achieved the largest orthodontic leader in China.

The fast-growing oral invisible orthodontic track has been monopolized by a duopoly.

1. The "Silver Tooth" business has exceeded 100 billion yuan, which is still significantly lower than that of the United States.

"Golden Eye, Silver teeth and Bronze Bones" can be said to be the three swordsmen invested in the medical and health track. Ophthalmology, dentistry and orthopaedics are regarded as the only good business.

According to the Burning knowledge Consulting report, China's dental care market has grown from US $13.2 billion in 2015 to US $24.6 billion in 2019, with an annual compound growth rate of 16.9%, and is expected to reach US $75.2 billion by 2030, with an estimated annual compound growth rate of about 10.7%.

Although the Chinese dental service market is large, compared with the American market, the exploitable potential is still huge.

The US dental care market was nine times that of China in 2015, shrank to 5.1 times in 2020, and is expected to shrink further to 2.2 times in 2030, according to Burning knowledge Consulting. In terms of cost per treatment, the average cost per patient in the United States was $695.9 in 2015, which is 7.4 times that of China. The gap has narrowed to five times in 2020 and is expected to continue to narrow to 2.8 times in 2030.

2. the orthodontic market is growing rapidly, and the prevalence rate is high in China, but the penetration rate of invisible orthodontics is still much lower than that in the United States.

The market for dental care services includes dental restoration and aesthetics, orthodontics and other dental services, of which the first two are the largest, accounting for 45.7% and 39.4% of the market for dental care services, respectively.

The so-called orthodontics refers to the diagnosis, prevention and correction of malocclusion under dentistry. Orthodontic treatment refers to the continuous exertion of gentle external force on the teeth in a specific direction to make the teeth move to the best position.

There are two methods of orthodontic treatment, including traditional orthodontic therapy and invisible orthodontic therapy. The traditional therapy uses metal braces, lingual appliance, ceramic braces and so on. There are many limitations of traditional therapy, in addition to ugly, but also cause oral discomfort, oral hygiene, need to adjust and replace the bow wire time-consuming and so on.

Stealth orthodontic therapy uses custom-made invisible removable appliance, which is more beautiful, more comfortable, removable and reduces the time of revising. At the same time, this scheme is more friendly to dentists and easy to use.

Measured by retail sales, China's orthodontic market has grown from $3.4 billion in 2020 to $7.9 billion in 2020, with a compound growth rate of 18.1%. It is expected to reach $29.6 billion in 2030 and is expected to grow by 14.2% in 2015-2030.

With the continuous improvement of people's oral health, aesthetic awareness and affordability, since the introduction of invisible orthodontic devices in China around 2010, the orthodontic market has been significantly stimulated and ushered in a stage of rapid development.

Among them, the global market for invisible orthodontics grew from US $4 billion in 2015 to US $12.2 billion in 2020, with a compound growth rate exceeding the overall orthodontic market growth of 25.3%, and the market is expected to increase to US $46.2 billion in 2030. Among them, China's invisible orthodontic market became the second largest market in the world in 2019, with a compound growth rate of 44.4% from US $200m in 2020 to US $1.5 billion in 2020. The market is expected to reach US $11.9 billion in 2030 and 23.1% in 2019-2030.

From a case point of view, the number of invisible orthodontic cases in China increased from 47800 in 2015 to 335500 in 2020, with a compound growth rate of 47.7%. The market is expected to reach 3.8 million cases in 2030, with a compound growth rate of 27.6%.

The proportion of the invisible orthodontic market in the overall orthodontic market has increased from 5.9% in 2015 to 19.0%, and is expected to reach 40.2% in 2030.

The overall prevalence of malocclusion in China and the United States is 74% and 73% respectively, which is slightly higher than that in the United States by 1%, butThe domestic prevalence rate of complex cases (secondary and third poles) is 49%, compared with 23% in the United States.In contrast to the prevalence rate is the cure rate.Only 11% of the 3.1 million cases treated in China in 2020 used invisible orthodontics, while 31.9% of the 4.4 million cases treated in the United States used invisible orthodontics.

At present, the domestic permeability of invisible orthodontics is far from enough.

3. The duopoly pattern of invisible orthodontics.

In the field of invisible orthodontic solutionsAt present, a significant duopoly pattern has been formed.

According to the reached case calculation, the combined market share of the two major market participants is as high as 82.4%, of which Angelalign Technology Inc. 's market share is about 41%, ranking second, slightly lower than Yinshimei, which ranks first.

In terms of revenue scale, the revenue of Angelalign Technology Inc. Technology Company in 2020 was 817 million yuan, almost all of which came from Chinese mainland; the total income of Yinshimei's company was 16.129 billion yuan, of which 1.304 billion yuan came from Chinese mainland. Although the number of cases reached in China is close, there is still a gap between Angelalign Technology Inc. and Yin Shimei in terms of income.

As a long-term treatment scheme, invisible orthodontics generally takes about 0.8-2 years. Changing the treatment plan and brand will cause treatment delay and cost problems to users, so consumers are usually more cautious when choosing products. This characteristic brings a lot of pressure to the entry of new brands in the field of invisible orthodontics, so the industry Matthew effect is significant, and the head enterprises often have higher profits in addition to high market share.

"Amy" in dentistry with a gross profit margin of more than 70%.

Relying on years of technical ability, Angelalign Technology Inc. currently has four invisible orthodontic products on the market, including Angelalign Technology Inc. Standard, Angelalign Technology Inc. Champion Edition, Angelalign Technology Inc. Children's Edition and COMFOS.

Among them, the standard version contributes the main revenue, but with the passage of time, the proportion of champion version and COMFOS cases is increasing year by year.

According to the prospectus, the average selling price of the company's products was 8400 yuan in 2018, 7500 yuan in 2019 and 7700 yuan in 2020, while sales increased year by year, from 77700 to 137600 in 2020.

At the same time, from 2018 to 2020, the company's operating income increased from 489 million yuan to 817 million yuan, and net profit from 58.2 million yuan to 151 million yuan. Among them, in 2020, when the revenue increased by 26.47% over the same period last year, the company's net profit increased by 122.1% year-on-year.

Behind the rapid growth of net profit is the company's ability to make money.

1. Excellent cost-side control

From 2018 to 2020, Angelalign Technology Inc. 's gross profit margin was 63.8%, 64.6% and 70.4% respectively, and the gross profit margin is rising year by year.

Competitor Yinshimei's gross profit margin in 2020 was 71.3%, 1 percentage point higher than Angelalign Technology Inc..

Although the 70% + gross margin is not uncommon compared with Emmett, which has a gross profit margin of more than 90%, it is indeed a profiteering track compared to other tracks.

The diagnosis and treatment process of invisible orthodontics is usually as follows: the patient goes to a public hospital or dental clinic, the dentist scans the whole tooth with an oral laser scanner, and then uploads the data to the orthodontic platform, which designs the teeth through the AI algorithm, works out a customized treatment plan, and prints out the invisible orthodontic appliance in 3D, and finally the dentist guides the patient to wear it after getting the transparent braces.

Therefore, the digital operating system and 3D printing behind the product are the key to the treatment.According to the prospectus, 50% of the company's cost composition is the cost of raw materials and consumables, and the rest is staff costs, production costs, depreciation and so on.

At present, the company uses 3D printing technology in the production process. With the expansion of revenue scale and the reduction of the unit rental cost of 3D printer and the application of automatic production line, not only the cost of consumables is reduced, but also the cost of staff is relatively saved.

2. Have the right to price the product

In addition to the cost side relying on the level of automation control, the pricing power of the product is another reason for the high gross profit margin.

Although the price of rival YSM products is not disclosed in official channels (the price required for each case varies), according to data from dentists and netizens, the reference price for imported YSM usually ranges from 40,000 yuan to 60,000 yuan.

According to the prospectus, the suggested retail prices of Angelalign Technology Inc. 's four products during the treatment period are 32000 yuan, 40, 000 yuan, 26000 yuan and 24000 yuan respectively. The scheme of using Angelalign Technology Inc. appliance is generally 10 to 20, 000 yuan cheaper than that of concealed beauty.

Compared with the hidden beauty of imports, Angelalign Technology Inc. has a natural cost advantage. In addition, in the case of a high-consumption track and significantly lower prices, the company has pricing power over its ultra-low-priced products and is able to maintain a high gross margin while maintaining its overall price advantage.

Although the prices of the relatively high-priced standard and championship versions have declined, the prices of Angelalign Technology Inc. 's low-cost products, the children's version and COMFOS targeted at young people, are rising year by year, while maintaining a sharp increase in product sales.

In 2020, the average price of the company's children's version of invisible orthodontic devices increased from 5600 yuan / case last year to 8700 yuan / case, an increase of 55.36%, which was higher than the 37.5% year-on-year increase of COMFOS invisible orthodontic devices, ranking first in the price increase of the company's products in the same period.

Private clinics are the main sales channel, and mastering doctor resources is the key.

According to the prospectus, Angelalign Technology Inc. 's sales expense rate in 2020 was 18%. Together with other administrative expenses, the total expense rate was 37%, but the R & D expense rate was only 11%, which inevitably aroused concerns about the company's core competitiveness. however, we can see the clue by comparing Yinshimei's data.

Both companies have a gross profit margin of about 70% and a net profit rate of about 20% (except for the special tax reasons in 2020). By comparing the expense rate, we can see that the comprehensive expense rate of Yinshimei is also much higher than that of R & D. Angelalign Technology Inc. 's R & D expenditure rate is slightly higher than that of Yinshimei.

Therefore, after the initial successful product research and development, the subsequent investment in research and development does not need to be too high, which is a characteristic of the orthodontic industry.

So, in the field of dentistry, which values brand and quality, how did Angelalign Technology Inc. open up the world?

Since domestic orthodontic treatment is not included in the public insurance plan, self-expense is the only payment option for orthodontic treatment. In the context of self-expense, private clinics have become Angelalign Technology Inc. 's largest client and the main source of income. From 2018 to 2020, the company's sales from private clinics accounted for 80.5%, 67.6% and 64.9%, respectively. Although the proportion is declining year by year, it is still the company's main source of income. Meanwhile, the share of sales in public hospitals has shrunk to 1.5%.

In cooperation with private clinics, on the basis of excellent product quality, maintaining a good relationship of cooperation and mutual trust with doctors is the top priority.

Since 2017, the company has partnered with the Dental Research Service Center of the University of California, Los Angeles to provide orthodontic certification training programs for dentists in digital orthodontics. the number of dentists who have served increased by 73% from 11500 in 2018 to 19900 in 2020.

In addition, the company also cooperates with the China Dental Prevention and treatment Foundation to train orthodontic dentists.

Through cooperation and training mechanisms through various channels, Angelalign Technology Inc. has been able to master doctor resources and form a long-term relationship of cooperation and trust, which may be the most important barrier for the company at present.

Technology is important, but it is even more important to lean against a big tree to enjoy the cool.

As mentioned earlier, Angelalign Technology Inc. 's controlling shareholder is pine and cypress investment, and pine and cypress investment is a professional stomatology investment institution backed by Hillhouse investment.

Pine and cypress invest in a number of other companies in the dental industry, from upstream to downstream, including dental clinics, dental device manufacturers and medical equipment distributors, which will not conflict with Angelalign Technology Inc. 's business. and will provide key resources for Angelalign Technology Inc. 's business.

However, at present, Angelalign Technology Inc. has handed over some of his products to distributors for sale, and gave distributors a big discount at the beginning of the launch of new products. In the past three years, the proportion of income of distributors has gradually increased, and now it has reached 33.6%. The follow-up management of distributors will become a new problem that Angelalign Technology Inc. needs to solve, which needs to be paid more attention to.

As a domestic company, you can still compete with Yinshimei in China, so what if you fight a naval battle?

According to the prospectus, the company currently accounts for 0.5% of sales only through distributors.

Therefore, after the successful listing, whether Angelalign Technology Inc. can reuse the medical resources he has, and achieve a wider range of domestic substitution, go abroad and become an orthodontic brand that really affects the world is a bigger test.