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Sirona Inks Distribution Agreement

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Dental technology leader Sirona Dental Systems, Inc. (SIRO) recently announced the expansion of its exclusive distribution agreement with Patterson Companies, Inc. (PDCO).

Following the amendments, Patterson Companies has become the exclusive U.S. distribution partner for all Sirona products with immediate effect. Patterson Dental, the largest business unit of Patterson Companies, will be the specialty distributor for Sirona.

The agreement provides Patterson Companies with the exclusive U.S. distribution rights for all products manufactured by Sirona. The other distribution dealers associated with Sirona as of June 1, 2012 will continue to receive equipment only until September 1, 2012. However, these dealers can order spare parts for Sirona products for an indefinite time.

Management at Sirona asserts that the expansion of its exclusive distribution agreement with Patterson will improve the company’s marketing management by strengthening its go-to-market strategy. The main focus of this perennial agreement is to expand its presence in the U.S. market and thereby increase revenues. Management also believes that the company is well poised for continued growth in the long run, given its worldwide sales and service infrastructure.

Sirona posted revenues of $231.9 million (up 8% year over year) in the second quarter of fiscal 2012. Revenue in the U.S. increased 4.9% whereas revenues outside the U.S. were up 9.2% (up 13.7% in constant currency terms). The outside revenue growth was boosted by strong sales, specifically in the Asia Pacific.

Sirona is well placed in the international market with Henry Schein, Inc. (HSIC) being its principally largest distributor and core partner in Europe. Henry Schein is a global supplier of healthcare products and services to healthcare practitioners based in offices. It operates in the medical, dental and veterinary verticals. Henry Schein is also Sirona’s major partner in Canada.

Sirona is a leading innovator and manufacturer of dentistry products. The company directly competes with DENTSPLY International Inc. (XRAY).

Sirona currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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