Align Faces Class Action Lawsuit

Align Technology, Inc. (ALGN - Analyst Report) faces another lawsuit after settling a long-pending litigation with Ormco Corporation, a subsidiary of Danaher Corporation (DHR - Analyst Report).

The new litigation is concerned with the company's operations way back in the third quarter of 2007. The class action lawsuit was filed by the Law Offices of Howard G. Smith, on behalf of the company's investors, who purchased the company's common stock between Jan 30, 2007 and Oct 24, 2007, inclusive.

The complaint charges Align and its CEO of violating federal securities laws. The complaint alleges that throughout the above-mentioned period, also known as the Class period, the defendants knew or irresponsibly disregarded and failed to disclose that the company had shifted the focus of its sales force to clearing backlog, resulting in a decline in the number of new case starts. Align admitted its mistakes in its third quarter 2007 conference call on Oct 24, 2007.

The new litigation will increase Align's legal expenses and will hurt its bottom-line.

Align Technology is engaged in the design, manufacture, and marketing of Invisalign, a proprietary system for treating malocclusion, or crooked teeth. Invisalign is approved for the treatment of all types of crooked teeth in patients with mature dentition or fully erupted molars.

The orthodontics market is very competitive, and Align competes directly with companies like Ormco Orthodontics and Dentsply International Inc. (XRAY - Analyst Report). Ormco manufactures and distributes a product similar to Invisalign.

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