The technology group has great ambitions in the healthcare market.
(Photo: mauritius images / Askar Karimullin / Alamy / Alamy Stock Photos)
Dusseldorf Photographic film was once the largest business of the Japanese conglomerate Fujifilm, since last year this has been the health sector for the first time. President and CEO Teiichi Goto announced in an interview with the Handelsblatt that the healthcare business will continue to expand significantly over the next few years. “In 2030, the healthcare sector is expected to account for around half of Fujifilm’s sales,” Goto said.
Fujifilm is thus positioning itself in markets in which well-known German and European companies are also active. In imaging diagnostics, for example, the Japanese compete with heavyweights such as the Dax company Siemens Healthineers and the Dutch Philips group.
In the past financial year, the healthcare business contributed around 32 percent to sales of 2.5 trillion yen (around 19 billion euros), but already accounted for around 38 percent of the operating profit of almost 230 billion yen (around 1.76 billion euros).
In 2030, Fujifilm plans total sales of 3.5 trillion yen and a doubling of the healthcare business to 1.7 trillion yen. “Medical technology and biotech contract manufacturing will be our growth drivers,” says Goto. “This is also the focus of our investments.”
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The reorientation of Fujifilm is considered a successful example of the change in companies whose traditional business has largely collapsed. The Japanese managed to use the technology and experience from the photo business for new applications.
Custom production of biotechnological products
This was evident, for example, in the contract production of biotechnological products for the pharmaceutical industry. Fujifilm ventured into this business area because the group could benefit from the know-how from the technologically demanding production process of photographic film, explains Goto. The coating of the films with a collagen emulsion, i.e. proteins like those found in human skin, is basically a biomedical manufacturing technique.
Fujifilm operates four biopharmaceutical production facilities worldwide, in which the company produces antibody drugs and vaccines, among other things, as a contract manufacturer for large pharmaceutical companies.
The Japanese group is now investing the equivalent of almost 1.4 billion euros in the expansion of the production facilities in Hillerod, Denmark, which the company acquired from the US company Biogen in 2019. Among other things, Eli Lilly’s Covid-19 antibody is also produced there. Overall, Fujifilm has invested around 6.7 billion euros in the expansion of biotech contract production in recent years, around four billion of them in Europe. Thanks in part to the increased demand in the corona pandemic, sales in the division rose by 32 percent to the equivalent of around 1.15 billion euros (150 billion yen) in the past financial year.
Market research firm Modor Intelligence forecasts annual sales growth of 11.5 percent for biopharmaceutical contract manufacturing through 2027. Fujifilm boss Goto has similar expectations: “We see great potential in the field of biopharmaceutical contract production. There is a trend among the large internationally active pharmaceutical companies to outsource production to a greater extent,” he says.
In addition, the CEO, who has been in office since June last year, also wants to expand the production of cell lines and starting materials for the production of gene and cell therapies. This area is considered a major future market in the pharmaceutical industry. Gene therapies are intended to treat hereditary diseases, for example, by replacing defective components of the genetic material.
Acquisition of Hitachi
In medical technology, Fujifilm strengthened its position last year with the purchase of Hitachi’s imaging diagnostics portfolio. With the purchase for the equivalent of 1.3 billion euros, Fujifilm added computer and magnetic resonance imaging to its portfolio, among other things.
As a result, Fujifilm’s medical technology division has grown by more than 50 percent to 533.8 billion yen, but at the equivalent of around four billion euros it is still well behind the imaging diagnostics business of Philips (8.6 billion euros) and Siemens Healthineers (9, 8 billion euros).
Fujifilm itself has been present in medical technology with X-ray devices for more than 80 years, later ultrasound devices and endoscopes were added to the product range. Since the turn of the millennium, Fujifilm has also achieved a leading position in the area of pacs, which are digital systems for processing, managing and archiving medical images and data.
CEO Goto sees a better opportunity to sell complementary products and services in the expanded product range offered by the Hitachi portfolio. Cross-selling is the keyword. The 63-year-old believes that the need for hospitals to get solutions from a single source is increasing. He expects additional growth opportunities from the expansion of digitally supported diagnostics. Among other things, Fujifilm has developed a software platform supported by artificial intelligence.
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For example, algorithms are trained using the images from the Pacs system in order to support radiologists, cardiologists and other medical specialists with diagnostics. According to Goto, the sales of the medical technology division are expected to grow to 700 billion yen (around 5.4 billion euros) by 2026, which corresponds to annual sales growth of between five and six percent.
Technology forces change
The advance of digital technology had forced Fujifilm to make a fundamental change from the turn of the millennium. In 2000, the business with color films and the like still accounted for 60 percent of sales and two-thirds of profits, but ten years later the market was virtually destroyed: global demand for photo films had collapsed to less than a fifth of the 2000 level.
With the expansion of its own portfolio for everything to do with digital photography and digital printing, but also acquisitions in many business areas and, last but not least, tough austerity measures and job cuts, the company fought its way out of the crisis under the leadership of long-time CEO Shigetaka Komori. Today the product range extends from Fujifilm to cameras, printers, screen materials, semiconductors and storage media to medical technology, pharmaceutical products and cell lines.
The healthcare sector also played an important role for Fujifilm because of its sustainable growth prospects, emphasizes Goto. A strategy that other technology and conglomerates are also pursuing: The Korean company Samsung, for example, founded a contract manufacturer for the production of biopharmaceuticals under the name Samsung Biologics in 2011, which achieved sales of more than one billion euros last year. And camera manufacturer Canon bought Toshiba’s medical technology division for 5.3 billion euros in 2016 in order to expand its position in medical technology. Fujifilm also bid for the Toshiba division at the time.
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