Hong Kong/Tokyo: During a recent magazine shoot in Japan, Fujifilm Holdings Corp.’s chairman Shigetaka Komori posed in a white lab coat, wielding a test tube in his hand.

Komori is no scientist, but the image embodies the Japanese brand’s shift away from photo-film and to new science and technology markets: Ebola drugs, anti-aging lotions and stem cell research.

Over the last decade, Komori diversified into new businesses as demand for the company’s trademark green photo-film boxes plummeted and archrival Eastman Kodak Co. went bankrupt. Fujifilm this year reported record profit of 119 billion yen ($950 million) and analysts expect a jump of more than 5% by next spring. Last month it announced a 100 billion yen share buyback—its largest ever.

Now, the 75-year-old executive is venturing further into unchartered territory, with plans to spend more than 400 billion yen on acquisitions by 2017, add new product lines and make a more aggressive push into health care. Among the new ideas he is testing: a filter for natural gas purification and stem cells capable of regenerating tissue in the human body.

“I wouldn’t say we’ve won yet," said Komori, who is also chief executive officer. “It’s difficult for any company to declare that because everything is changing so fast. We’re going to keep going."

Regenerative medicine

In an interview on the 12th floor of Fujifilm’s Tokyo headquarters, Komori laid out his ambitions for the next stage of the company’s makeover, which includes plans to double health-care revenue to 1 trillion yen by 2018. A part of that mission, he says, will be driven by regenerative medicine, which uses cells and other methods to repair damaged body organs.

While the science is nascent, Japan’s regulatory climate has just turned more favourable. Prime Minister Shinzo Abe’s government recently eased approval rules, making Japan one of the world’s fastest places to get a regenerative medical product on the market.

In March, Fujifilm agreed to pay $307 million for US- based Cellular Dynamics International Inc., a producer of iPS cells, types of stem cells capable of morphing into any body part. Another Fujifilm unit called Japan Tissue Engineering Co. already has regenerated cartilage and skin products on the market, used by burn victims and others. The hope is that these businesses could someday create cells to help damaged organs like the liver or pancreas grow again.

“Think about it like this: we’re a company that specializes in managing cells," says Yuzo Toda, the chemist Komori has entrusted to lead the push into cosmetics and pharmaceuticals. “We look for game changers, areas which Fuji can win at. Controlling microenvironments? We know that."

Japanese reinvention

Other Japanese tech companies are also trying to reinvent themselves. Walkman inventor Sony Corp. has morphed into a supplier of camera sensors for smartphone makers. Panasonic Corp. has branched off into supplying batteries to Tesla Motors Inc.

Komori’s efforts began a decade ago, when the ascent of digital cameras and smartphones began cannibalizing film sales. That led him to push the company’s engineers and executives to take a long, close look at the technology that helps perfect the dozens of layers and compounds in photographic film. Fujifilm went on to reapply that expertise to new businesses, including skin care and film that holds LCD screens together.

The company made deals, including the acquisition of drugmaker Toyama Chemical Co., maker of an antiviral drug that was used by some Ebola patients last year. Photocopier machines and printers became its largest source of revenue after the slump in film. While these are likely to remain the biggest businesses, Komori sees the newer biotechnology and pharmaceutical operations as future drivers of growth.

Investors have so far applauded the strategic shift, pushing the stock up about 70% over the past year. “I can praise their efforts for revenue diversification with businesses such as regenerative medicine, cosmetic items," said Minoru Matsuno, president of Value Search Asset Management Co., a Tokyo-based investment advisory firm. “For another stage of growth, they need more aggressive acquisitions and strategic alliances."

Lengthy payout

With his investments in unproven new areas, Komori faces risks: the possibility of unsuccessful products and a long wait for any payout.

“The field of regenerative medicine is difficult, but it’s one to look forward to," said Tetsuya Wadaki, an analyst with Nomura Securities.

A lifelong Fujifilm employee who took over as CEO in 2003, Komori has sometimes likened his role to that of a general going into battle. He talks about taking calculated risks, and in his memoir “Innovating Out of Crisis" mentions reading Winston Churchill’s World War II account several times. Yuuki, the Japanese word for courage, is framed on a conference room wall where he receives guests. He speaks regularly to employees—in videos, newsletters and company addresses.

“It’s like in the military," Komori said. “Leaders need to be briefing their men every day on what is going on and what needs to be done, and make sure everyone acts all the way down."


Part of the challenge is to create research teams willing to try new ideas. Scientist Tomoko Tashiro, who had been developing molecules for preserving photographs, came back from maternity leave in 2005 to find that she had been reassigned. She was asked to look into applying the same technology to skin. “It was bewildering at first," Tashiro said. “But soon after I could see how much value we could add."

Collagen is a shared ingredient in both photographic film and human skin. Within two years, Tashiro had helped develop a beauty line called Astalift out of molecules she had been studying to prevent photo printing paper from fading. Now sales from the skin-care brand are more than 10 billion yen, and an updated version of her favourite product—a face serum called Jelly Aquarysta—will be re-launched next month.

Across the world in Tilburg, the Netherlands, Akira Kase, who now heads Fujifilm’s biopharmaceutical initiatives, remembers many brainstorming sessions with Dutch colleagues. A decade later, one of their ideas, a filter for the natural gas purification process to reduce energy costs, will soon come on the market.

Even photo sales which bottomed out in 2011 are beginning to pick up again, driven by the growing popularity of Fujifilm’s instant cameras and printers, which have become ubiquitous at weddings the world over.

“What you’re seeing right now is just the tip of the iceberg," said Toda, who was promoted to executive vice president in June. “We have decades of technology and know-how backing us, and now that we’ve opened up these possibilities: expect much more to come." Bloomberg