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Henry Schein's 3 Investments to Fortify Dental Implant Arm

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In a bid to strengthen its foothold in the high-potential dental market, Henry Schein (HSIC - Free Report) is currently focusing on new strategic developments within that niche space. Last week, the company made three new acquisitions to advance its dental implant business.

Buyouts at a Glance

First in the lot is the acquisition of Intra-Lock. U.S.-based Intra-Lock is a provider of dental restoration solutions including proprietary surface, connection plus biomaterial and small diameter implant technologies. The company is known for its OSSEAN surface structure, used to increase host-to-implant biocompatibility and biomechanical response.

Next is the integration of a majority interest in Medentis Medical. This is a a dental implant manufacturer based in Germany. The company sells its products in more than 40 countries.This will help Henry Schein expand into the inexpensive segment of the dental implant market.

Last is the consolidation of a bulk stake in Pro-Cam Implants B.V. This company is CAMLOG's exclusive distributor in the Netherlands.  In the future, Pro-Cam Implants will also represent the BioHorizons implant lines and biomaterial portfolio. Per Henry Schein, this acquisition will fortify the company’s geographic footprint in Europe.

Intra-Lock, Medentis Medical and Pro-Cam Implants together are expected to complement Henry Schein's existing implant-based tooth replacement solutions line. This should also strengthen the company’s international presence in the dental implant space.

All these acquisitions collectively represent the company’s annual sales of approximately $45 million. The transactions will bear a neutral impact on 2018 earnings per share and are expected to be accretive to the portfolio thereafter. Financial terms of the same were not disclosed.

Developments Within Dental Domain

Henry Schein’s strategy to extend digital dentistry globally is encouraging. Last reported quarter, global Dental sales were up 8.4% year over year. The company banks on digital dentistry, which is part of its strategic plan. Henry Schein is busy promoting digital workflows for general dentistry as well as dental specialties. Per management, the company’s solid performance can be attributed to the company’s continued focus on offering a diversified portfolio and value-added services along with a favorable end market.

In July 2018, Henry Schein announced the completion of the earlier-announced joint venture with Internet Brands, a KKR portfolio company, in an attempt to fortify its Dental business. The companies have named the joint venture, Henry Schein One. This newly formed JV will combine Henry Schein Practice Solutions' products and services with the dental businesses of Internet Brands. Annual synergies between $20 million and $30 million are anticipated to be realized by the end of the third year of the joint venture initiation.

In a major breakthrough within its dental business, in May 2018, Henry Schein entered the rapidly growing market of orthodontic aligners with its proprietary SLX Clear Aligner System. Management seems to be encouraged by the positive feedback for the product from the Key Opinion Leaders and other market participants. Henry Schein plans to increase the availability of the same in the United States during the remaining half of 2018, followed by a global launch in 2019.

Market Potential

In the dental industry, a rise in oral healthcare expenditures is predicted as population aged 45 years and above, grows. Moreover, Henry Schein is upbeat about the likely increase in dental insurance coverage along with lower insurance reimbursement rates, thereby leading to a greater need for new technologies. We believe, this will boost demand for Henry Schein’s products and services.

Moreover, per a Transparency Market Research report, global dental practice management software market is projected to witness a CAGR of 11% between 2017 and 2025. Considering huge potential of the market, we believe that the latest development is a strategic fit and will help Henry Schein cash in on the bountiful opportunities in the market.

Share Price Movements

Over the past six months, shares of Henry Schein have outperformed the industry. The stock has rallied 16.4%, outperforming the industry’s rise of 1.9%. We believe, this latest development will help drive investors’ confidence in the stock and reverse the downtrend.

Zacks Rank & Key Picks

Henry Schein currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are Intuitive Surgical (ISRG - Free Report) , Amedisys, Inc. (AMED - Free Report) and Masimo Corp. (MASI - Free Report) .

Intuitive Surgical’s expected long-term earnings growth rate is 14.7%. The stock currently carries a Zacks Rank #2 (Buy).

Amedisys’ projected long-term earnings growth rate is 19.4%. The stock sports a Zacks Rank #1 (Strong Buy) at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s estimated long-term earnings growth rate is 14.8%. The stock currently has a Zacks Rank of 2.

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