By now, many of you will have heard of Fujifilm’s USD$307 million purchase of Cellullar Dynamics International (CDI). This may seem like a major entry into the regenerative medicine (RM) space for a company that’s better known for its imaging technologies than something as complex as the cell therapy space.
However, the move seems to fit in with Fujifilm’s penetration into this part of the health-care market, which actually started over five years ago with a minority purchase of J-Tec – Japan Tissue Engineering Company Ltd. – in 2010. Fujifilm later acquired a majority interest in J-Tec to effectively control the subsidiary.
It looks like Fujifilm’s interest in J-Tec was triggered by the complementary technologies between the two organizations: Fujifilm’s expertise in forming physical scaffolds for cells, and J-Tec’s know-how in relation to cell culture. For me, one of the most interesting skills J-Tec has is its ability to culture corneal epithelium, which is useful for modeling drug interactions with the human eye.
You may be wondering why Fujifilm entered the biomaterials market. Surprisingly, at some point during the development of photographic film, the variability in the quality of natural collagen became an issue for making high quality films on a consistent basis. Early patents in this area from Fujifilm and Kodak read like papers from bioscience journals.
CDI fits into the structure of this partnership as a premier platform for growing induced pluripotent stem (iPS) cells. Eric Palmer, at Fierce Pharma Manufacturing, describes the relationship as one where CDI already has some market penetration; for example, it owns the technology platform being used at the California Institute for Regenerative Medicine (CIRM) to produce disease-related iPS banks. The successful use of CDI’s platform and cells at CIRM has presumably had a positive effect on CDI’s reputation and, as of now, also on Fujifilm’s ability to expand into the North American market, where J-Tec doesn’t seem to have a presence.
Others also point out that Fujifilm acquired additional technology to build cell scaffolds through the deal, so there’s some aspect of consolidating technology as part of the purchase. I’d expect that while Fujifilm has, for a long time, been able to produce perfectly flat sheets of film, gaining experience in 3D structures, like a corneal scaffold, is much more challenging.
However, partnership deals aren’t always a mutual point of happiness, as some information suggests that Fujifilm played this one out well as an opportunistic acquirer. Jeff Engel, at Xconomy, has one of the best summaries of the negotiation process leading up to Fujifilm’s purchase. CDI figuratively had its back against a wall and was in dire need of new capital. It was facing a loan deadline and was denied refinancing.
The company desperately needed this acquisition; otherwise, it faced a massive disruption in operations that would render much of the work, the founders contributed, in vain. Fujifilm enters with its USD$4 billion fund for purchasing companies and, after some negotiation, the buyout was hatched.
Going forward, how will the new Fujifilm-CDI combination fit in with the Japanese RM ecosystem? The sector has accelerated its growth ever since changes in Japanese law shortened the time needed for regulatory approval, an essential step in the commercialization process.
With CDI, Fujifilm comes closer to competing with companies like Takeda and Shiseido. Takeda, one of Japan’s largest pharmaceutical companies, has consistently acquired drug companies, investing in Fate Therapeutics (2011) to develop drugs that help the hematopoietic system regenerate, and Juventas for its injectable plasmid DNA that acts as a regenerative stem cell attractant.
Shiseido, on the other hand, is one of the world’s major cosmetics companies, and has been working with Vancouver-based RepliCel to bring regenerative medicine based hair loss treatments to the Asian market. RepliCel’s technology is related to the isolation, growth and transplantation of dermal sheath cup cells from the roots of hair follicles.
Whether Fujifilm’s purchase of CDI provides gains, in the long run, remains to be seen. However, not coincidentally, the buyout works out very well for insider shareholders. In addition to the USD$2.6 million payouts for their stock options already reported, key founders Robert and Thomas Palay will receive USD$11.3 million each for their shares, while CSO James Thompson will get USD$14.4 million – over twice the value of his shares before the deal was announced.
Let there be no doubt that, in some cases, pursuing a career in science can pay off very, very well.
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