BIOLASE: GROWING THROUGH INNOVATION IN DENTISTRY
BIOLASE, Inc. (NASDAQ: BIOL) is a medical device company that develops, manufactures, markets and sells laser systems in dentistry and medicine. The Company’s innovative products provide cutting-edge technology at competitive prices to deliver superior results for dentists and patients.
BIOLASE, Inc. (NASDAQ: BIOL)
Market Cap: $610.56M; Current Share Price: $5.85
Data by YCharts
The Company and its Products
BIOLASE’s proprietary systems allow dentists, periodontists, endodontists, pediatric dentists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. The laser systems are designed to provide clinically superior results for many dental procedures than those achieved with drills, scalpels, and other conventional instruments. Potential patient benefits include less pain, fewer shots, faster healing, decreased fear and anxiety, and fewer appointments.
The Company offers two categories of laser system products: Waterlase (all-tissue) systems and diode (soft-tissue) systems. Its flagship brand, Waterlase, uses a patented water and laser energy combination. It is FDA cleared for over 80 clinical indications to perform most procedures currently performed using drills, scalpels, and other traditional dental instruments for cutting soft and hard tissue.
For example, Waterlase safely debrides implants without damaging or significantly affecting surface temperature and is an effective, safe solution for preserving sick implants. In addition, Waterlase disinfects root canals more efficiently than traditional chemical methods. The Company offers diode laser systems for soft tissue, pain therapy, and cosmetic procedures, including teeth whitening.
The Company also manufactures and sells consumable products and accessories for its laser systems. The Waterlase and diode systems use disposable laser tips of differing sizes and shapes depending on the procedure being performed. BIOLASE also markets flexible fibers and hand pieces that dental practitioners replace at some point after initially purchasing laser systems. For the Epic line of diode laser systems, BIOLASE sells teeth whitening gel kits.
From 1998 through December 31, 2022, BIOLASE sold over 45,500 laser systems in over 80 countries worldwide. Since 1998, the Company has been the leading global innovator, manufacturer, and marketer of dental laser systems.
We’ll discuss key elements that make the Company an exciting watch.
- Significant Growth Opportunity
An estimated one-third of the worldwide population avoids going to the dentist because of “dental anxiety or fear,” according to DentaVox. Such anxiety causes dental conditions, such as gum disease, to go under-diagnosed, under-treated, and under-managed. Due to the limitations associated with traditional and alternative dental instruments, there is a significant market opportunity for all-tissue dental laser systems that provide superior clinical outcomes, reduce the need to use anesthesia, help minimize trauma, pain, and discomfort associated with dental procedures, and increase patient acceptance for treatment protocols.
The American Academy of Periodontology estimates that over 60 million people in the U.S. alone have periodontitis, an advanced stage of gum disease, and studies indicate a link between periodontitis and other health conditions such as heart disease, diabetes, and stroke.
As of 2021, according to the American Dental Association, there were approximately 202,000 professionally active dentists in the U.S. In 2022, a study published by Grandview Research estimated the global dental equipment market to be $10.6 billion and projected to grow at a compound annual rate of 6.2% through 2030. Factors cited contributing to the growth include rising demand for dental procedures, the prevalence of dental disorders, a rising senior population, and demand for preventive, restorative, and surgical services.
The study also highlighted that dental laser equipment is expected to be the fastest-growing segment over the forecast period. All-tissue laser systems seem to have penetrated only 7-8% of U.S. dental practices and less than 2% worldwide. Therefore, BIOLASE can benefit from a market opportunity of more than $50 billion, as shown below.
To dental professionals, BIOLASE’s products offer benefits such as an expanded range of procedures, increased information and efficiency, greater case acceptance and patient-reported outcomes, improved clinical outcomes, and fewer aerosols. To patients, benefits offered include comfort, convenience and efficiency, and reduced trauma.
Due to these reasons, BIOLASE seems more popular than its industry peers and is poised to take advantage of the upcoming opportunity.
- Dependable Growth Strategy
The Company has an effective growth strategy that includes the following elements:
In addition to a field sales force in the U.S., the Company uses various independent distributors to sell and support products throughout Canada, Europe, the Middle East, Latin America, and Asia-Pacific regions.
- Generating revenue through OEM partnerships. In addition to the new partnership with EdgeEndo, the Company continues to explore potential collaborations to bring proprietary laser technologies with expanded FDA-cleared indications for other medical applications in the future.
- Robust Financials
Besides the above, BIOLASE is also working towards improving its product quality, strengthening and defending technology leadership by protecting intellectual property rights, creating value through innovation, and leveraging existing technologies into adjacent medical applications.
Because of the above comprehensive growth strategy, BIOLASE will likely expand significantly.
For Q1 FY23, BIOLASE reported net revenue of $10.5 million, an increase of 3% compared to $10.2 million for Q1 FY22, marking the ninth consecutive quarter of YoY growth.
The Company increased international laser sales by 22% YoY. It achieved a record quarter in consumable sales, with U.S. consumable sales rising 19% YoY, driven by increased procedures using BIOLASE laser systems.
Approximately 58% of U.S. Waterlase sales came from new customers and about 33% from dental specialists, indicating increased adoption of the Company’s industry-leading laser.
The gross margin for Q1 FY23 was 32% compared to 47% for Q1 FY22. The decrease in gross profit is primarily due to supply chain issues that required the Company to change to new suppliers and the effect of an increase in the percentage of revenue generated outside the U.S., where margins are lower than the U.S. business.
However, BIOLASE anticipates second-quarter net revenue to grow at least 25% YoY.
For FY22, the Company reported net revenue of $48.5 million, an increase of 24% compared to $39.2 million for FY21.
During the period, U.S. laser sales increased by 39% YoY, and the Company generated increased adoption of its industry-leading laser, with approximately 84% of U.S. Waterlase sales for the full-year 2022 coming from new customers.
The gross margin for FY22 was 33% compared to 42% for FY21. Adjusted EBITDA for FY22 was a loss of $20.1 million, or $2.91 per share.
However, for FY23, BIOLASE expects gross margins to improve significantly in 2023 due to increased sales volume and pricing increases, lower trunk fiber costs, and other manufacturing cost savings. All of this would position the Company to achieve positive adjusted EBITDA for the entire year of 2023.
Moreover, the Company expects revenue growth of at least 25%.
So far, BIOLASE has demonstrated strong growth in revenues. There has been a rising demand for the Company’s lasers, and the team’s sales conversion rate is nearly 50%.
The markets have shown a positive reaction to the Waterlase Exclusive Trial Program. This initiative, along with the emphasis on education and training for endodontists, periodontists, pediatric dentists, and dental hygienists, has caused increased adoption of the Company’s laser technology in the U.S.
Because of the Company’s groundbreaking technology, marketing efforts, and the benefits offered to dentists and patients, it seems that BIOLASE’s products will continue to grow in popularity, leading the Company to the heights of success.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://www.sec.gov/ix?doc=/Archives/edgar/data/811240/000095017023021323/biol-20230331.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/811240/000095017023010364/biol-20221231.htm