Align Technology CEO Buying Stock (ALGN)

From Insider Score: The chief executive officer of Align Technology (ALGN) stepped up last week, making his second open market buy of stock in the past seven months. President & CEO Thomas Prescott purchased 10K shares at $7.82 on May 12th, raising his stake in the company to approximately 107K shares.

Prescott has served as ALGN's top executive since March 2002, and he previously bought 10K shares at $6.26 in November 2005. Before that, Prescott had exercised the options on and simultaneously sold about 350K shares from February 2004 to July 2004.

The maker of the Invisalign teeth straightening system, ALGN has the backing of Gordon Gund, the Cleveland-born, Princeton-based billionaire who heads Gund Investment Corporation. The 68-year-old Gund, who is also a director at Corning (GLW) and Kellogg (K), controls an 11.55% stake in ALGN and is represented on the company's board by Warren Thaler, president of Gund Investment Corporation. Gund was last buying ALGN shares in August 2005 at $6.47 to $6.50.

Shares of ALGN are currently trading in the middle of their 52-week range, down from an April 19th high of $9.75, and up from a July 2005, two-year low of $5.63. The stock has traded weakly in recent weeks on the heels of earnings.

For Q1, ALGN reported a net loss of -$4.8M, or -8 cents per share, up from -$1.9M, or -3 cents per share, a year earlier. Revenue fell -5% to $48.9M, exacerbating a 19% rise in operating expenses. The results were actually better than analysts expected, and JMP Securities upgraded ALGN from "market perform" to "market outperform" after earnings, citing the stock's valuation and better-than-expected shipments of Invisalign in Q1.

"The first quarter represented a good start to the year for Align, as case volumes and utilization grew significantly," stated Prescott. "Continuing volume growth and increasing revenues in the face of recent pricing changes and mix shift are central to our business plan this year. As we continue to execute on our strategy and deliver value to our customers, adoption of Invisalign as an important part of their practice will grow."

ALGN's biggest issue at the moment is related to Zia Chisthi, the company's founder and now rival. Chisthi's new company, OrthoClear, began marketing a product similar to Invisalign last May, reportedly undercutting ALGN's pricing by as much as -45% in the process. Lawsuits between the two companies began to fly, and OrthoClear recently received a ruling allowing it to proceed with a suit charging ALGN with unfair competition, slander, breach of contract, libel, and intentional interference with economic advantage (an abuse of process claim was tossed, but OrthoClear can amend the suit to include the charges if it provides more specifics). ALGN was also recently denied a patent in the U.S., and the company's co-founder, Kelsey Wirth, is retiring from the board later this month.