Canon Inc. plans to inject large funds into biotech-related areas this spring, Nikkei Business has learned. A new venture for Canon, its biotech products could be ready for the marketplace later this year. Canon is working on deoxyribonucleic acid (DNA) chips, a focus of interest for their possible application in genetic diagnostics of cancer, diabetes, and other conditions and diseases. By leveraging its strength in PC printer technology, Canon hopes to mass-produce DNA chips at low costs. It aims to make biotechnology one of its future core activities, with sales reaching the level of 100 billion yen by 2010. DNA chips are the first foray in this direction.

Investing Up To 10 Billion Yen in Mass Production

"Biotechnology will be a key area in the future. You should strive to work out business plans in more detail," said Canon President Fujio Mitarai on December 15, 2004, giving orders to R&D executives in the meeting room at Canon's head office in Shimomaruko, Tokyo. The occasion was a business review committee meeting, presided over by the company president, at which he decided to make a major investment in DNA chips.

According to industry sources, Canon has completed basic research into DNA chips and will soon prepare a detailed business plan delving into the size of the market and profit expectations. When that plan is in place, Canon will transfer DNA chip development to a cutting-edge technology laboratory to be completed in April on a site adjacent to the company's head office. Canon will also spend up to 10 billion yen in preparation for mass production. Sales channels after commercialization are yet to be determined, but the company will probably seek partnerships with pharmaceutical companies.

DNA chips are fabricated by affixing gene fragments to a small glass plate or other substrate. The chips are used to investigate the relationship between genes and diseases, through reactions with patients' blood. Currently, however, applications are limited to research purposes at universities and similar efforts, and they have not yet been extended to medical diagnostics. The challenge has been the prohibitive manufacturing costs, with each chip costing more than 50,000 yen to make.

This is where Canon has a powerful advantage in cost competitiveness, because it is able to directly apply its inkjet printer technology in DNA chip manufacture. Instead of ink, a solution of DNA is used. The DNA fragments are imprinted onto glass plates treated with a special surface coating, enabling gene sequences to be set in precise patterns. Unlike semiconductor micro-fabrication technology, the mainstream technology for DNA chip production today, the Canon method does not require expensive equipment even for large-scale manufacturing.

According to Canon, its proprietary technique offers "excellent performance at low cost."

Toward Tailor-made Medical Treatment

What will inexpensive DNA chips mean to the world of medicine?

Minoru Nishimura, senior researcher at the Japan Research Institute, Ltd., said, "when such chips cost just a few thousand yen each, the market will quickly expand to medical diagnostics."

That is, low-cost production would open the way for tailor-made medical treatment, using DNA chips to read patients' genetic information and administering drugs targeted specifically to the patient. DNA chips would thus be available for everyday diagnostics as well as research purposes.

By 2010, the DNA chip-related market should double to 20 billion yen in Japan and reach hundreds of billions of yen worldwide. Indeed, it will likely comprise an even larger market. With Canon entering this arena, the dominant player Affymetrix, Inc. could see a substantial slide in its share of the global market.

"Biotech will be a key area for Canon in the future," said Senior Managing Director Toshizo Tanaka. The company intends to set up various biotech operations unrelated to DNA chips. Already, it has established a research company, Canon U.S. Life Sciences, Inc., in the United States and is developing biopolymers, a new material using microorganisms, in Japan.

Canon has enjoyed excellent profitability thanks to its large market share in printers, digital cameras, and other IT equipment. However, it is also acutely aware that the business environment can change dramatically in the digital era. Its 100-billion-yen investment in DNA chips, the four laboratories it has established next to its head office and in other locations in Japan, and its stronger focus on research and development, are all indications of concern for the future.

This year Canon will begin mass production of flat-panel SEDs (surface-conduction electron-emitter displays). The company developed SEDs internally, and has spent approximately 200 billion yen in a co-production effort with Toshiba Corp.

Canon is now venturing into biotech. Regarded by its competitors as taking a huge bet in essentially "unknown territory," will Canon's gamble blossom into business that could underpin a framework of success in the future?

(Haruhiko Kudo, Staff Writer, Nikkei Business)