Kyocera Corporation and Kobe Steel Collaborate to Form #1 Japanese Orthopedics Company
BY ROBIN R. YOUNG CFA, MAY 3, 2004
Ranking, respectively #1 and #2 among Japanese orthopedics companies - but lagging behind American and UK firms (who hold, we estimate, the top 5 positions in the Japanese market) - the medical products businesses of Kyocera and Kobe Steel have decided to join forces in an effort to garner increased market share in Japan and other markets.
The new company, tentatively named Japan Medical Materials Corporation (JMM), will be capitalized at between 2 and 3 billion Yen (approximately $20-25 million dollars) and will generate, we estimate, approximately $140 million in annual revenues. That would represent approximately 20% of the $680 million Japanese orthopedic market. Kyocera will own 77% and Kobe 23% of the new entity.
Two aspects of this new combination caught our attention.
- The new combination will integrate material and processing technologies for both ceramics and titanium alloys. Kyocera, in particular, has unique and extensive ceramic fabrication capabilities.
- There has been significant demand from Japanese medical institutions for large joint prosthetics that more closely match the body types and lifestyles of the Japanese people.
Clearly, as in the United States and Europe, an aging population sets these markets up for extended periods of demand growth that is well in excess of population growth. On the strength of both demographic trends and the synergies of the combination, new management of JMM is predicting that it will double sales in the coming 4 years from a current 15 billion Yen (approximately $140 million) to 30 billion Yen. The new company has 400 employees and will be based in Osaka, Japan. Date of incorporation has been set for September 1/2004.
