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SmileDirectClub and California's Dental Board Continue Their Tiff

By Brian Orelli, PhD - Feb 20, 2020 at 1:43PM

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The stock is falling due to worries that the aligner company could lose customers in California.

The disagreement between the Dental Board of California and SmileDirectClub (SDC 5.30%) continues: Reuters reported Wednesday that the board has been investigating Jeffrey Sulitzer, SmileDirectClub's chief clinical officer, for two years and that he's at risk of losing his license to practice in California.

In a complaint filed with California's Attorney General, the board lists nine causes for discipline, including that Sulitzer was operating offices in California that were controlled by SmileDirectClub, which doesn't have a dental license in the state. Shares of SmileDirectClub closed trading Wednesday down 5.4%.

Woman with a dental aligner

Image source: Getty Images.

After the closing bell, the healthcare company, which sells clear plastic aligners for teeth straightening, released a statement defending Sulitzer. "The baseless claims in the accusation are entirely without merit, and were filed in direct retaliation to SmileDirectClub's efforts to address the Board's prior wrongful conduct in failing to stop its investigator from threatening and intimidating customers and employees at SmileShops in California," it said.

SmileDirectClub and Sulitzer sued the board last year, claiming it was being anti-competitive with its investigation.

The statement hasn't stopped the stock's slide: Shares were down another 3.8% as of 1:40 p.m. EST Thursday.

California isn't the only dental board that has investigated SmileDirectClub's business, which has dentists review digital images of customer's teeth remotely in order to prescribe the dental aligners. But the other boards have come to different conclusions.

Earlier this month, the Florida Board of Dentistry rejected and closed a complaint by the American Association of Orthodontists that had asserted the company was engaging in dentistry in the state. That made Florida the 18th state to reject such complaints against SmileDirectClub.

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