Sony: A Surprising New Competitor in Health Care

Sony is best known for consumer electronics, but investors shouldn’t ignore the Japanese tech giant’s growing footprint in the health care market.

Apr 7, 2014 at 6:30PM

Sony (NYSE:SNE) isn't a company most investors normally associate with the health care industry. The Japanese conglomerate is certainly well-known for consumer electronics, but it also has a surprising strategy to expand into health care. Let's take a look at some surprising strategies that could eventually make Sony a major player in medical devices and personalized medicine.

A growing player in the medical device market
Sony quietly entered the health care market in 2010 through several key acquisitions and partnerships.

In February 2010, Sony acquired iCyt Mission Technology, a producer of flow cytometers, which are used to sort cells, detect biomarkers, and engineer proteins. Sony's Digital Audio Disc Corporation (DADC) then collaborated with at least three life science companies -- RainDance, Quanterix, and Caliper -- to invest in microfluidics, a liquid-handling technology used in DNA chips and lab-on-a-chips. In 2011, it acquired Micronics, a developer of point-of-care diagnostic technologies, which holds a large number of microfluidics patents.


A biochip (lab-on-a-chip), a common application for microfluidics technology. Source: Wikimedia Commons.

None of those acquisitions made much sense until September 2012, when Sony took an 11% stake in Olympus (NASDAQOTH:OCPNY) for its medical imaging technologies. At the time of the investment, Olympus held a 70% global market share in endoscopes, which are used to peer inside the human body during medical procedures. The joint venture, known as Sony Olympus Medical Solutions, formally started in April 2013.

The battle between Sony and Samsung shifts to medical imaging devices
Sony Olympus Medical Solutions is developing medical imaging devices using Sony's 4K technology to capture moving images four times sharper than traditional HD video from within the body. Sony set a firm goal for its medical business: annual sales of 200 billion yen, or about $1.9 billion, by the end of fiscal 2020.

The fledgling medical business will grow within Sony's Imaging Solutions and Products business -- which generated 730.4 billion yen (approximately $7.1 billion) in fiscal 2013 -- and eventually evolve into a new core business segment. Sony's Imaging business, which consists of its cameras and image sensors, accounted for 10.7% of its top line in 2013.

Sony's sudden interest in medical devices runs parallel to tech giant Samsung's (NASDAQOTH:SSNLF) recent investments in the industry. Between 2010 and 2013, Samsung acquired Medison (ultrasonic medical devices), Nexus (cardiovascular test kits), and NeuroLogica (medical imaging). It combined all of those technologies and launched GEO, its own line of digital radiology and in-vitro diagnostic equipment, last March. Samsung is more ambitious than Sony -- it claims it will be one of the world's largest medical equipment companies by 2020, generating $10 billion in annual revenue from its medical device business alone.

To put Sony and Samsung's 2020 medical sales targets in perspective, GE's health care segment, one of the largest medical device companies in the world, generated $18.2 billion in revenue in fiscal 2013.

Why did Sony need all of that microfluidics tech?
However, imaging devices are only part of Sony's plan for expanding its medical business. In January, Sony signed a partnership with life sciences giant Illumina (NASDAQ:ILMN) and Japanese medical portal M3 to launch a genome information platform in Japan.

The platform, known as P5, will be a genome analysis service for medical and research institutions across Japan, with a long-term goal of creating personalized medicine and health care services. All of the microfluidics technologies Sony has been acquiring over the past few years, which can be used for a wide variety of diagnostic purposes, now come into play. On April 1, Sony DADC announced another microfluidics deal with Trinean to produce microfluidic disposables, which are used to store and analyze droplet-sized biological samples.

Illumina recently broke the "human genome sound barrier" by launching a system that could sequence the entire human genome for $1,000 -- a steep drop from the cost of $250,000 a decade earlier. Sony and M3 will establish the company, and Illumina will act as a minority investor.

When we put all these pieces together -- the high-end imaging devices, the genome tests, the medical portal system, and Illumina's involvement -- we get a much more ambitious health care project than Samsung's GEO.

The Foolish takeaway
In conclusion, Sony's new ventures into health care are exciting, but they aren't big enough yet to offset the importance of its game, mobile, and home entertainment businesses -- which together accounted for 54% of its top line last quarter. However, Sony is clearly serious about evolving into a major contender in the medical devices and diagnostics market, and these new products and services should be closely watched.

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology behind it is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.

Leo Sun owns shares of Facebook. The Motley Fool recommends Facebook and Illumina. The Motley Fool owns shares of Facebook, General Electric Company, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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