It might have raised a few eyebrows — and, perhaps, prompted some hometown concerns — when Japanese conglomerate Fujifilm Holdings Corp. bought Madison stem cell company Cellular Dynamics International (CDI) last April for $307 million.
Founded by UW-Madison’s renowned stem cell pioneer James Thomson in 2004, CDI has been inking powerful deals and gradually adding staff as it has set about to become the premier source for stem cells in the world.
In a meeting with the Wisconsin State Journal this week, Kazuyoshi Hirao, CDI’s new chairman and CEO, and Chris Parker, executive vice president and chief business officer, said the company, at 525 Science Drive, will stay in Madison and will continue to grow here.
Fujifilm chairman and CEO Shigetaka Komori came to Madison in late October and met with Gov. Scott Walker, James Thomson, and leaders of the Wisconsin Alumni Research Foundation and of the Morgridge Institute for Research, a privately funded organization paired with the publicly funded Wisconsin Institutes for Discovery at 330 N. Orchard St.
Komori “has a strong commitment to Madison and affection for the people here,” Parker said.
Cellular Dynamics manufactures mass quantities of stem cells using adult tissue or blood samples, reverting them into their embryonic form so they can be reprogrammed into such things as heart, liver or nerve cells. Researchers use the cells to test for toxic substances and scientists test them as potential treatments for all sorts of diseases.
Among CDI’s recent achievements: In September, CDI and its partners opened what they called the world’s largest public stem cell bank in California. In November, Swiss pharmaceutical giant Roche signed a contract with CDI that could bring the Madison company more than $80 million in payments over several years.
Hirao, a native of Nagoya, Japan, joined Fujifilm in 1984 and has worked in several of its divisions in Japan and the Netherlands.
His move to Madison four months ago to lead CDI is the second time Hirao has lived in the U.S., and specifically, Madison. He came here in 1989 to earn a master’s degree in business administration from UW. But he didn’t get to know Madison well because he spent semester breaks driving all over the U.S. in his Subaru, visiting all 48 contiguous states.
“I tried to understand, region by region, what kinds of differences they have,” Hirao said.
Parker joined Cellular Dynamics in 2007; he was employee No. 12.
James Thomson is no longer employed by the company.
QUESTION: Kaz, what have your other professional experiences been with Fujifilm?
Kaz Hirao (KH): I worked in management at a Fujifilm factory in the Netherlands. The factory made film, photographic paper and plates for large-scale printing. I was assistant to the president for part of that time, and then manager of sales operations.
In 1998, I was transferred to the Fujifilm headquarters in Tokyo and managed several projects involving software and supply chain management. I also got involved in planning mergers and acquisitions in the semiconductor division. When Fujifilm purchased the microelectronics division of Arch Chemicals (of Norwalk, Connecticut) in 2004, I dealt with some of the finances and visited Arch’s locations in the U.S. and Europe. For me, it was a very important step, to learn how to deal with American people and European people.
In 2010, I moved to the industrial products division and headed a group that conducted non-destructive testing, using X-rays for quality control to make sure there were no flaws in manufacturing or welding processes. We created a product that was better than that of the competition, which was GE.
Now, our X-ray system for quality control is very much accepted in the marketplace.
Chris Parker (CP): It’s not surprising that in the film business, there were only two major manufacturers of film. It’s very hard to make, and there’s an art to it. Fujifilm was not going to be another Kodak, though. While Kodak focused on film, Fujifilm diversified.
Fujifilm looks at technology to see how it can be applied in other ways. Now, the company wants to apply its technology to regenerative medicine. They believe CDI is the leader in this field. Mr. Komori thinks the future of Fujijilm is in the health care business. He thinks this technology (stem cells) can change the world.
Q: I think the biggest concern people in Madison have is: Will CDI stay in Madison under the new ownership?
KH: Mr. Komori says the people in Madison are very great. He has commented that he wants to invest in the growth of the company here. Madison has very great connections for this kind of business with the University of Wisconsin and with government. Those three pieces collaborating is very strong. Our policy is to not change the culture of this company and to have a collaboration that will create synergies between Fujifilm and CDI.
Q: What kind of synergies can there be?
KH: CDI has very great expertise in biology and iPS cells (induced pluripotent stem cells), and protocols to make differentiated cells. Fujifilm has technology for high-volume process engineering and imaging technology.
CP: Fujifilm can apply large-scale manufacturing practices to the process here, too.
Fujifilm believes regenerative medicine (using stem cells to treat diseases) will be a $50 billion market by 2025. Manufacturing will have to ramp up with it. We will have to look at leveraging other technologies to scale the business.
The concept is that some day, we’ll each have our own iPS cells made and banked. So that when you need heart cells after a heart attack or you have eye damage from age-related macular degeneration, you pull your own cells out of the stem cell bank. Or you can use them to test drugs for toxicity before you take them.
We’re envisioning replacing existing cells that will stay in the body and not be sloughed off later.
Q: Before CDI was purchased, it was a publicly traded company for nearly two years. Before that, the company was backed by venture capitalists who invested $70 million in the business. Are there advantages to being owned by Fujifilm?
CP: Yes, several advantages. They’ve given us a much longer runway. As a venture-based company, thinking about 2025 doesn’t happen.
At Fujifilm, they have a lot of focus and technology to help us achieve our goals. They have, in addition to more capital available, the expertise and infrastructure. In theory, through the public stock market, we probably could have gotten that, but it would have taken a lot longer. But they do have high expectations.
KH: We have a very aggressive target: 60 percent growth in revenue each year, for the next five years. We want our cells to be used for drug research and screening and for cell therapy — treating diseases.
CP: CDI already has three cell therapy programs going — for age-related macular degeneration; Parkinson’s disease; and to replace scarred heart muscle after a heart attack — all using our iPS-derived cells. We anticipate being profitable by the end of 2017.
CDI has 160 employees, about 120 of them in Madison. We expect to hire another 15 to 20 by the end of 2016, at least 10 of them in Madison.
KH: We are trying to change the model. Current drug testing is performed, mostly, using animal cells. By 2019, we want the majority of drug testing to use iPS cells instead.
Once the market is created, there will be a big jump in sales. That’s why Fujijilm has great expectations for this.
Q: Is there anything else Fujifilm brings to the table?
KH: Trust is a huge part of Fujifilm — producing quality products that have to work well, every time. Innovation is also very important.
CP: After the earthquake and tsunami in Japan in 2011, Fujifilm did huge outreach to the people affected. They developed a method of restoring photos from saltwater damage, and they helped a large number of people to restore their photographs.
On another level, here at CDI, we were very pleased that Fujifilm kept our company’s green color scheme. Green means growth, renewal, rejuvenation and life. That’s part and parcel of choosing green for CDI’s colors.