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Konichiwa: Affymetrix To Go Direct With Wholly-Owned Japan Subsidiary


Some 150 years after Commodore Matthew Perry sailed into Tokyo Bay and declared Japan open to the world for business, Affymetrix is making a declaration of its own. On Jan. 1, 2003, Affymetrix will throw open the doors to its new offices in Tokyo. While much less dramatic than sailing into Tokyo harbor, the move stakes out turf in a key Asian market.

Affymetrix previously had a marketing and distribution agreement with the Japanese unit of UK-based Amersham Biosciences, but will end this agreement to set up a wholly-owned subsidiary to market its products and services, and expand its customer base in Japan.

Now, instead of relying on someone else to market its chips and provide service and support, Affymetrix will hire a team of employees in Japan. Sadashi Suzuki, who joined the company in May, will serve as general manager, Japan. Suzuki is a 1984 graduate of the Kellogg School of Management at Northwestern University. He has 25 years of experience in the pharmaceutical, healthcare, and life sciences industries, the company said. He was formerly director of marketing for Alcon Laboratories (Japan).

Affymetrix already has similar arrangements, wholly-owned subsidiaries, handling sales in the UK, France, Germany, and Singapore. For 2001, business outside Europe and North America accounted for about $38 million of its $194 million in revenues, according to the company’s annual statement.

The company has sold 60 of its GeneChip brand systems, which start at approximately $199,000, in Japan through its arrangement with Amersham. The base price of this system includes its scanner, software, workstation, hybridization oven, and fluidics station.

Japan is one of the largest markets in the world but it lags behind the US and Europe in nurturing a biotechnology industry. Playing catch-up, the Japanese government this year is expected to compile a set of strategic principles for the development of the public and private sector biotechnology industry.

A 1999 government study, provided by the Japanese External Trade Organization in New York, valued Japan’s biotechnology industry at $67 billion with pharmaceuticals by far the leading sector.

Japan is “the cornerstone” of Affymetrix’ international strategy, the company said in a statement. During the company’s second-quarter conference call, CFO Greg Schiffman said its administrative costs would increase to $25 million in the third quarter, primarily due to “the build-out of the European and Asia-Pacific infrastructure.”

Amersham Biosciences will continue to act as Affymetrix’ agent until the end of 2002 as the agreement between the two companies winds down. With Amersham’s purchase of Motorola Life Sciences’ CodeLink high-density microarray business in July, suddenly Amersham appears poised to enter a market dominated by Affymetrix. The agreement to unwind the distribution agreement in Japan, however, predates this development.

While Affymetrix is ending one relationship in Japan, it is still engaged in business with Takara Bio, a spinoff from Takara Shuzo, a company that is the leading supplier of liquors in Japan and also a gene researcher and producer of low-density arrays.

Since 1998, Affymetrix has had an exclusive distribution agreement with Takara Shuzo covering distribution rights for microarray spotting and associated scanning systems in Japan, Taiwan, Korea, and China.

So, while Affymetrix products have been available in Japan, this will be the first time that the company will have its name on the door of an office, and someone for customers to call by name.

That might not be enough, said James Chan, a business consultant in Philadelphia, who warned that doing business in Japan involves a lot more than just opening an office and hiring a local expert.

“The biggest pitfall of non-Japanese managers who try to expand their market in Japan is not to go there and give people face time,” he said. “Business there is built on relationships. The thing that allows people to clinch the sales is having the top manager show up and meet the end customers. You don’t have to speak Japanese, but you must show your face. For whatever reasons, most American executives just can’t do that.”

Business in Japan involves the government, he said, and American managers must include government too.

“To make it big in Japan, you have to cultivate relationships with relevant agencies, there just is no shortcut there,” Chan said.

While Affymetrix will now have its name on the door of a Tokyo office, company officers should know that konichiwa is hello and it’s 11 hours from San Francisco to Tokyo. Direct. No shortcuts.

– MK

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