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.

Biochip

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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers