Fujifilm initiates ambitious strategy to become comprehensive healthcare company

International Hospital speaks to Masaharu Fukumoto, Senior Vice President Fujifilm Medical Systems Europe about the company’s recent acquisition of Hitachi Healthcare’s diagnostic imaging business, the restructuring of the company and the way forward.

International Hospital: Fujifilm completed the acquisition of Hitachi’s diagnostic imaging-related business on March 31 this year for €1.3 billion. If we take a step back prior to the acquisition, what was the attraction of the Hitachi business and why did Fujifilm want to buy it?

Masaharu Fukumoto: Fujifilm made the decision to acquire Hitachi Healthcare’s diagnostic imaging business as it plays a strategic role in Fujifilm’s plan to become an even more comprehensive healthcare company providing solutions. With the addition of CT, MRI, ultrasound, healthcare IT and other technologies, we will be able to create an even wider product line-up than ever before. Uniting the products and professionals of both companies will strengthen our collective ability to positively impact healthcare. In addition, this acquisition sets the company up for a competitive advantage in the medical device market as we will be able to leverage the sales and distribution channels of both Fujifilm and Fujifilm Healthcare.

IH: Following the acquisition, Fujifilm Holdings announced a company-wide reorganization. Can you explain briefly the new organisational structure and why the holding company decided to do this?

MF: This year, on April 15, FUJIFILM Holdings Corporation launched a new medium-term management plan, VISION2023, covering the three-year period from fiscal year ending March 2022 to fiscal year 2023. VISION2023 calls for investments totalling 1.2 trillion yen (about US$ 10.95 billion) over the three-year period to accelerate business growth with a focus on healthcare and highly functional materials. In detail, VISION 2023 has reorganised our businesses into four segments: Healthcare (Medical Systems, Life Science and Bio contract development and manufacturing [CDMO]), Materials (Electric Materials, Display Materials and other highly functional materials), Business Innovation (Office Solutions and Business Solutions) and Imaging. To accelerate the success of the reorganisation, we focused on four priority objectives, namely, (1) strengthening business portfolio management, (2) strengthening cash flow management, (3) entering new markets for further growth, and (4) creating stronger integrated business synergies through segment M&A.

IH: Fujifilm Holdings is clearly putting more emphasis on the healthcare side of the business – announcing that it will be one of the company’s key pillars of growth. Why is this?

MF: In FY2017, Fujifilm drew up the CSR plan, Sustainable Value Plan 2030 (SVP2030), setting out long-term goals to be achieved by the target year of FY2030. The SVP2030 sets out goals for four priority areas, namely “Environment,” “Health,” “Daily Life” and “Work Style,” as well as “Supply Chain” and “Governance,” which provides the base for business activities, from the perspective of “solving social issues through business activities” and “considering society and the environment in business processes” to contribute to establishing a sustainable society. The VISION2023 serves as a concrete action plan for realizing goals listed in the SVP2030, with a strong focus on “Health”.

More concretely, nowadays we are helping to fight Covid-19 and various other diseases and infections by using diagnostic imaging equipment, endoscopes, in vitro diagnostics and AI. For example, by using our 3D image analysis software for CT image data, it is possible to determine the exact location, shape and volume of the lesion, which can be used for surgical simulation. The company will use its soft endoscope technology to strengthen the field of rigid endoscopes and expand into the field of minimally invasive treatment. In addition to this, we are strengthening our efforts in biopharmaceutical medicine and regenerative medicine as our life science business. In particular, the biopharmaceutical CDMO business is growing.

VISION2023 has the primary objectives of accelerating business growth in healthcare and highly functional materials and building a more resilient business platform to facilitate sustainable growth.

IH: Following the acquisition, Fujifilm now has a much stronger portfolio of products in the company’s new Medical System’s division – that is medical diagnostics devices. With Vision2023 the company plans to ambitiously increase turnover by 2023. How will the company do this? Which global markets do you consider to have the most growth potential?

MF: We have a high market share in Japan, and our goal is to increase our market share in Europe, the US and Asia. In the short term, we will focus on cross-selling, taking full advantage of the sales channels that both Fujifilm and Fujifilm Healthcare have developed. Then, we will focus on human resources development, actively recruiting and assigning strong talent from within and outside the company to strengthen our sales and service systems in each country globally. Finally, the two companies not only have limited product overlap, but also a great deal of unique technology. By combining these technologies with exceptional image processing, 3D analysis and endoscopes, we will create new solutions and diagnostic value, and help solve medical problems, thus achieving growth.

IH: And in Europe, specifically, how does the company plan to expand its business?

MF: In the past, Fujifilm’s main areas of activity were radiology, endoscopy, and point of care with FUJIFILM Sonosite. Now with FUJIFILM Healthcare, the company’s activities have expanded to include surgery, cardiology, gynaecology and urology, etc. The Digital Healthcare Seminar in May and the FUJIFILM Healthcare Digital Event in July were attended and viewed by many customers and prospects. It is encouraging that more customers than expected attended and watched the events. We will intensify the usage of digital technologies to connect with our different communities.

IH: Is Fujifilm Healthcare looking at other potential acquisitions to support this growth?

MF: Our motto is “Never Stop” and we are always ready to face the next challenge. We will continue to actively consider acquisitions that are essential for our further growth.

IH: With the purchase of Hitachi’s medical diagnostics business, Fujifilm acquired Hitachi’s CT, MRI, and ultrasound offerings to add to its own digital radiography, PACS, point-of-care ultrasound, endoscopy, and in vitro diagnostics technologies. This provides the opportunity for Fujifilm to apply its proprietary AI for image processing to these newly acquired imaging devices. Can you tell us a bit more about this, some of the potential challenges involved, and what sort of timeline we’re looking at to the point where we could see these products sold in the market along with image-processing AI?

MF: Due to the wide variety of diseases, it is difficult for a single company to cover all of them, not only in terms of development but also in terms of handling regulatory affairs. On the other hand, AI vendors that are strong in various diseases have also emerged. While continuing to strengthen in-house development, we have developed an AI platform that can be connected to a variety of AI and develop a total AI solution by combining a variety of AI. The AI platform is currently being introduced at test sites in Europe, and we will gradually expand the number of sites where it will be introduced.

IH: Fujifilm’s AI technology is clearly a key asset that can give added value to these newly acquired products. What other unique qualities / assets does Fujifilm possess that can add value to the acquisition?

MF: We have 3D analysis software as post processing after image acquisition. In addition to conventional mammography, we believe that we can offer a new value proposition in breast cancer screening by combining ultrasound and mammography.

IH: Beside the acquisition of Hitachi’s medical imaging products, in what other ways will the acquisition strengthen Fujifilm’s position in the market? For example, will the company be able to offer improved after sales service? Is it expanding its R&D?

MF: Yes, this is very important point. We are discussing and planning the one-stop customer support and after sales service to improve the value of our customer service. With its integration, we will jointly participate in more events and exhibitions with better product line up and one-stop solution. On the global side, we can improve the efficiency of production, logistics and all SCM, and procurement to improve our production cost and quality of materials. And of course, I am expecting progress on the collaboration of R&D of the two companies.

IH: Will Hitachi medical imaging products be rebranded?

MF: Yes, all of the Hitachi Medical System products will be rebranded by FUJIFILM Healthcare. And the logo of all of the products will be “FUJIFILM”. We have already started the production of ex-Hitachi Medical System products with the FUJIFILM brand logo, and it will be completed on a stock turn basis.

IH: Following the company’s reorganisation, the healthcare division was split into a Medical System’s division and a new Life Sciences division. What is the Life Sciences division and how big of a sector is this within the company?

MF: The Life Sciences Strategy Headquarters will plan and promote a comprehensive, integrated strategy including portfolio management, M&A, alliances and R&D to generate additional synergies and new business within its field of activity. In addition to the Bio CDMO Division and the Pharmaceutical Products Division, the Life Sciences Business Division will be newly established to enhance drug development support activities by integrating activities related to iPS cells, cell culture media and reagents, which are currently separated into the Regenerative Medicine Business Division and the Fine Chemical Business Division. The existing Life Science Products Division, which focuses on cosmetics and supplements, will be renamed to the Consumer Healthcare Business Division.

This reorganisation will strengthen the Life Sciences business with a customer focus. We intend to become a leader within the Life Sciences industry, offering the value of the end-to-end solution as a company that strongly supports the creation of precision medicine.

A large part of Life Science is the Bio CDMO business. Its sales for the fiscal year ended March 2021 were over 100 billion yen (about US$ 913 million), up 70% from the previous fiscal year, and the company is aiming to raise sales to 200 billion yen by the fiscal year ending March 2025, and to grow at an annual rate of 20% thereafter

IH: Looking specifically at the company’s medical diagnostic products, what are the company’s biggest selling products? Which of the other products do you see as having good potential for growth and why?

MF: We can say that digital X-ray systems, including mobile X-ray systems, are the largest segment, followed by ultrasound and endoscopy products.

My current focus is on the new ultra-portable digital X-ray systems “X-Air” and the portable ultrasound systems, “iViz wireless”. X-Air and our digital detector have created the new segmentation of ultra-portable X-ray systems, which is why it has been selected by the United Nations Stop TB programme globally. This is just one of several applications. During the COVID-19 pandemic, we saw how centralised hospitalisation increased the risk of infection spreading. Our ultra-compact and cost-effective X-ray and ultrasound solutions with AI diagnostic assistance can contribute to the various diagnosis in places other than the hospital, such as the patient’s home. In Europe, we are testing the instrument in these areas.