SmileDirectClub is going public. The company filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO), seeking to raise up to $100 million according to its S-1 filed on Friday.
Yet to be determined are the number of shares to be offered or the price range for the proposed offering.
With an infusion of $380 million in a funding round last fall, the company reached a valuation of $3.2 billion. That funding is in addition to Align Technology’s 2016 investment of $46.7 million and another $12.8 million in 2017 which gives the company a 19% ownership stake in SmileDirectClub.
In 2018, SmileDirectClub reported revenues of $432.2 million, a significant increase over the $147 million the company reported in 2017.
A number of state dental organizations and the American Association of Orthodontics have filed complaints against the company, alleging violations of statutes and regulations governing the practice of dentistry. In addition, the American Dental Association filed a complaint last month with the FTC and FDA against SmileDirect Club. In its S-1 filing, the company directly addresses these issues as potential risk factors to its business.
“A number of dental and orthodontic professionals believe that clear aligners are appropriate for only a limited percentage of their patients. National and state dental associations have issued statements discouraging use of orthodontics using a teledentistry platform. Increased market acceptance of our remote clear aligner treatment may depend, in part, upon the recommendations of dental and orthodontic professionals and associations, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics, and price compared to competing products.
“Furthermore, our ability to conduct business in each state is dependent, in part, upon that particular state’s treatment of remote healthcare and that state dental board’s regulation of the practice of dentistry, each which are subject to changing political, regulatory, and other influences. There is a risk that state authorities may find that our contractual relationships with our doctors violate laws and regulations prohibiting the corporate practice of dentistry, which generally bar the practice of dentistry by entities. Two state dental boards have established new rules or interpreted existing rules in a manner that purports to limit or restrict our ability to conduct our business as currently conducted. The Georgia Board of Dentistry passed a new rule that requires a licensed dentist to be present when 3D oral images are taken by a dental assistant, and the Board of Dental Examiners of Alabama has interpreted existing rules to require “direct supervision” (meaning the dentist must be physically present somewhere in the building) for the taking of digital oral images. In both Georgia and Alabama, we have filed lawsuits in Federal court against the dental boards and their individual members alleging, among other things, violations of the Sherman Act. In addition, a national orthodontic association has met with various dental boards across the country in an effort to advocate for new rules and regulations that could have the effect of interfering with our business model. Although, none of these efforts have resulted in rules and regulations being passed to date, it is possible that the rules and regulations governing the practice of dentistry and orthodontics in one or more states may change or be interpreted in a manner unfavorable to our business. If adverse regulations are adopted or any such claims are successful, and we were unable to adapt our business model accordingly, our operations in such states would be disrupted, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, a national dental association recently filed a citizen petition with FDA alleging that our manufacturing is in violation of ‘prescription only’ requirements,” the company writes in its S-1 filing.
