Dental Diagnostics Firm Seeks to Open Wider Markets Abroad

It makes sense that a manufacturer of state-of-the-art dental equipment would want to meet customers face to face, tooth to tooth.

So the decision by Dental/Medical Diagnostic Systems of Westlake Village to switch some of its overseas sales strategy from a third-party distributor to direct sales is hardly shocking. It does, however, set the company apart from others in the field.

In late February, Dental/Medical Diagnostic Systems purchased two of its key international distributors, Midas Ltd. of the United Kingdom and Ralph Mueller Distributors of Germany. As a result, the manufacturer began this month to market its products through its own sales force to dentists in those two regions.

“The industry is highly competitive, but not highly competitive with direct sales organizations,” said Robert Gurevitch, company chairman and chief executive.

“Most of the revenues created in the dental industry are created through standard distribution,” Gurevitch said. “But there are major international markets where we believe that the same type of direct marketing approach we do in the U.S. would get a strong response from the dental community [abroad].”

Dental/Medical Diagnostic Systems acquired Midas Ltd. in exchange for 50,000 shares of common stock and Ralph Mueller Distributors in exchange for 100,000 shares of common stock. Last week the stock was trading at 8 1/4.

“We use distributors in every country in Europe; I believe we’re in 36 countries throughout the world,” Gurevitch said. “We’re focusing basically on three of those markets to direct market in Europe.”

In addition to Germany and the U.K., there are plans to switch to direct marketing in France by the end of this year. Since the company’s founding in October 1996, Gurevitch said, the strategy has been to one day move to direct marketing. It was a matter of developing a large enough product line to make it worth the additional costs of advertising, he said.

The company’s product line includes the TeliCam system, a camera that takes pictures inside a patient’s mouth and produces a magnified image on a color monitor. The company also manufactures the Apollo 95E, a machine that speeds up the tooth whitening process and allows for faster curing of composite material used for fillings. The company is working on a digital dental X-ray system that should be available by late summer.

Dental/Medical Diagnostic Systems reported a net loss of $1.8 million on revenues of $19.2 million for 1998, compared to a net loss of $2 million on revenues of $16.1 million in 1997. Gurevitch attributed the increased revenue to sales of the Apollo 95E and the bonding material, sealants and other products sold with it.

“We introduced the Apollo 95E in Europe in March of 1998 and received FDA approval in August of 1998 to introduce it in the U.S.,” he said. “We’re [selling] about a thousand a month.”

Gurevitch said the recent addition of the Apollo 95E and the potential the company sees for increased sales in international markets inspired the shift in marketing strategy.

“When you distribute a product through standard, normal distribution worldwide, you are one product out of a thousand that a distributor carries,” Gurevitch said. “The attention to your product is limited to the amount of products a salesperson might be talking about that day.”