Fujifilm Buys Merck Biotech Supply Unit, Accelerates Medical Industry Push

Fujifilm Holdings Corp. will buy two units of Merck & Co. that make biopharmaceuticals as it targets growth in the health-care industry to make up for declining sales in cameras and film.

The Tokyo-based maker of imaging equipment and digital cameras will acquire laboratories in the U.S. and U.K. for 40 billion yen ($490 million), Nikkei English News reported today without saying where it got the pricing information. Toshihiro Matsumoto, a Fujifilm spokesman, confirmed the purchase by phone today, without giving a price.

Fujifilm plans to triple sales in health care in the next decade as the market for supplying biologic vaccines and drugs is expected to increase by 15 percent a year, it said. The deal comes as sales from its imaging solutions, which includes color films and digital cameras, fell 16 percent last fiscal year as more consumers use smartphones for taking photos.

“Fujifilm is planting seeds in health care for future growth as its existing digital cameras and film material businesses are dwindling,” said Kogo Horie, an equities analyst at Daiwa Securities Group Inc. in Tokyo. “The purchase makes sense.”

Stronger Yen

The company will buy BioManufacturing Network Diosynth RTP LLC of Research Triangle Park, North Carolina, and MSD Biologics (U.K.) Ltd., based in Billingham, England. The deal for the units, which generate about 13 billion yen in sales a year, should be completed by early April, Matsumoto said.

The units of Merck, the second-largest drugmaker in the U.S., include manufacturing facilities for biologic products used in vaccines and drugs based on human proteins.

The yen has strengthened 14 percent against the dollar in the past year, making it easier for Japanese companies to purchase overseas assets. They announced 495 overseas acquisitions valued at a combined $25.8 billion in the past 12 months, according to data compiled by Bloomberg.

This is the fifth acquisition announced by Fujifilm in the past year, according to data compiled by Bloomberg. The list includes the $47.2 million purchase of Japan Tissue Engineering Co. in August.

Triple Sales

Fujifilm, which makes equipment for medical scans, had a loss of 38.4 billion yen in the year ended March 31 on structural reforms to cut costs, the company said in April. Sales dropped 10 percent to 2.18 trillion yen in the period on weaker demand, and as the stronger yen pared the value of overseas revenue, it said.

Sales from imaging solutions fell 16 percent to 345.5 billion yen in the year ended March 31. Fujifilm generated 263.9 billion yen from medical systems and life sciences in the period, a 2 percent decrease from a year earlier.

Fujifilm aims to more than triple sales from its health- care unit to 1 trillion yen by 2019. The company bought drugmaker Toyama Chemical in February 2008 and established a generic-drug joint venture with Mitsubishi Corp. last year.

“This will be one of the core businesses along with digital cameras and liquid-crystal material,” said Kazuyoshi Saito, an equities analyst at Cosmo Securities Co. in Tokyo. “This will be positive for its earnings in the long run.”

Schering-Plough Deal

Fujifilm rose 0.1 percent to 2,860 yen as of the 3 p.m. close in Tokyo trading. The benchmark Nikkei 225 Stock Average rose 0.9. Merck advanced 0.5 percent to $32.19 in New York Stock Exchange composite trading on Feb. 25 before the announcement was made.

Merck, based in Whitehouse Station, New Jersey, acquired Diosynth as part of its $49 billion purchase of Schering-Plough Corp. in November 2009, Ian McConnell, a Merck spokesman, said in a telephone interview. The company bought MSD Biologics the following month.

Merck’s “commitment to developing biologics and biosimilar products remains unchanged,” McConnell said. The company’s “decision to sell the Merck BioManufacturing Network is part of its ongoing effort to focus on core competencies.”

Biologic products include antibodies that are part of the immune system’s response to the infections. Laboratory-produced versions have been created to mute overactive immune systems, seen in diseases such as rheumatoid arthritis and Crohn’s disease.

To contact the reporters on this story: Tom Randall in New York at trandall6@bloomberg.net; Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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