Align Technology Inc, San Jose, Calif, recently announced a supply agreement with SmileDirectClub, Nashville, Tenn, to manufacture non-Invisalign clear aligners for SmileDirectClub’s doctor-directed, at-home program. SmileDirectClub aligners will include up to 20 stages without attachments or interproximal reduction (IPR), and will be manufactured by Align per SmileDirectClub’s specifications for minor tooth movement.

The Invisalign brand and system of clear aligners will continue to be available exclusively for in-office treatment with Invisalign-trained orthodontists and general dentists.

Starting October 2016, Align will become SmileDirectClub’s exclusive third-party supplier for its minor tooth movement aligner program. Specifically, Align will provide a case setup through SmileDirectClub’s SMILECHECK viewer portal, and, upon review and approval by a participating licensed orthodontist or general dentist in SmileDirectClub’s network, Align will manufacture clear aligners and ship them directly to SmileDirectClub.

Under the agreement, the companies will create a new Invisalign doctor referral program similar to the Invisalign Doc Locator, which will systematically refer the approximately 30% of SmileDirectClub’s SMILECHECK case assessments that are too complex for their minor tooth movement product, to Invisalign providers in the patient’s local area.

As part of the transaction, Align acquired a 17% stake in SmileDirectClub for $46.7 million and gained a seat on SmileDirectClub’s board of directors. As a result of Align’s equity holding in SmileDirectClub, Align is required to account for this investment under the equity method of accounting. Thus, Align will include a proportional share of SmileDirectClub’s earnings or losses in its financial statements beginning July 25, 2016. Align’s financial results will reflect two components: 1) commencing in October when Align begins to supply aligners, the sale of aligners to SmileDirectClub and the income therefrom under the supply agreement will be reported in its Clear Aligner business segment, and 2) in Q3’16, Align’s portion of SmileDirectClub’s reported profits and/or losses will be included in its operating expenses. Align expects the transaction to be incremental to both its topline growth and earnings in 2017.