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Align Facing Margin Pressure Due to Chinese Price Controls
Dental products firm is the latest in a growing list of medical device companies falling prey to Chinese price demands.
November 5, 2022
Align Technology (ALGN), a maker of transparent teeth aligners, inserted new language in its latest quarterly filing suggesting its prospects in China may soon dim. The company twice inserted the following warning in its latest filing:

“...pricing regulations imposed by governments such as the proposed volume-based procurement regulations in China…”

While Align did not quantify the impact— nor did it provide a timeline regarding when the price controls will hit margins— it’s the latest in a string of medical device companies being tripped up by Chinese volume-based price controls.

In October 2022, Intuitive Surgical (ISRG) warned the Hunan Provincial Healthcare Security Administration implemented what Intuitive calls significant limits on what hospitals can charge patients for surgeries using robotic surgical technology. With China Intuitive’s second largest market in the latest quarter— 42.6% of DaVinci systems placed in the quarter were outside the U.S.— the concern is that price controls will spread to other provinces.

In November 2021, Stryker (SYK) blamed a $105 million impairment charge on Chinese price controls and suggested winning Chinese tender offers made little economic sense. Revenue generated in China accounted for just 2% of Stryker’s revenue, but could be more substantial in the case of Align.

Though Align did not specifically break out Chinese revenue in the latest filing, Other International accounted for 26.1% of sales. The company’s long-lived Chinese assets were 8.5% of the company’s total.
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