Drägerwerk AG

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Drägerwerk AG

Moislinger Allee 53-55
Lübeck, D-23542
Germany
Telephone: ( + 49) 0451 882 0
Fax: ( + 49)04518822080
Web site: http://www.draeger.com

Public Company
Incorporated: 1889 as Dräger und Gerling yEmployees: 9,687
Sales: EUR 1.69 billion ($2.09 billion) (2005)
Stock Exchanges: Dusseldorf Frankfurt
Ticker Symbol: DRW3
NAIC: 339113 Surgical Appliance and Supplies Manufacturing; 339112 Surgical and Medical Instrument Manufacturing

Drägerwerk AG (alternatively, Draegerwerk) is a holding company for two businesses specialized in the production of medical and safety equipment for a variety of industries. The company operates through two core divisions. Dräger Medical develops and produces advanced medical equipment, specialized in ventilation and respiratory systems and monitoring devices. Since 2003, Dräger Medical has operated as a 65-35 joint venture between Dräger and Siemens, combining both companies' medical equipment technologies and worldwide distribution networks. Dräger Medical is also the largest part of Drägerwerk, accounting for two-thirds of the company's revenues of EUR 1.7 billion ($2.1 billion) in 2005. Dräger Safety applies the company's ventilation and monitoring expertise to the safety market, providing personal protection equipment, gas monitoring and detection devices, and related equipment. Both divisions are among the world leaders in their respective markets, and are supported by a globally operating network of 12 production subsidiaries in Germany, the United States, China, South Africa, and England, as well as sales subsidiaries in nearly 50 countries reaching more than 190 countries worldwide. International sales represent more than 80 percent of the Lübeck, Germany-based company. Listed on the Dusseldorf and Frankfurt stock exchanges, Drägerwerk nonetheless remains under the control of the founding family, led by fifth-generation Chairman and CEO Stefan Dräger.

SAFETY EXPERTS

Drägerwerk was founded by J. Heinrich Dräger, a watchmaker, and his associate, Carl Adolf Gerling, in Lübeck, Germany, in 1889. The company began experimenting with gas valves, which led to the development of its first patented device, a pressure reduction system known as the Lubeca Valve used for tapping beer. The valve proved a defining milestone for the company, which began focusing on a means of controlling and regulating compressed gasses. By the late 1890s, the company had introduced the Dräger Oxygen Unit, which played an important role in the future of medical science; this device was accompanied by a gas pressure indicator, the Finimeter.

Heinrich Dräger was joined by son Bernhard, and in 1902 the company adopted the new name of Drägerwerk Heinrich & Bernhard. Just two year later, the company joined with noted surgeon Otto Roth and produced the world's first modern anesthetic delivery system. The company soon extended its expertise in breathing systems to the safety market, launching the Pulmotor emergency resuscitator. This led the company to expand to the United States, where it founded its first subsidiary in 1907. There, Dräger-outfitted miner rescue teams soon became popularly known as "Drägermen."

Bernhard Dräger took over as head of the company in 1914 and led it through a new era of innovation and growth. Into World War I, the company earned a number of new patents, and continued to produce revolutionary equipment, such as a the world's first diving simulator capable of descending 200 meters below the surface of the ocean. During World War I, the company supported the German war effort with breathing masks, portable anesthesia systems, and the like. The company also continued to develop its anesthesia delivery systems, and in 1925 introduced the first system featuring a carbon dioxide absorber and recycler. In 1928, the next generation of the Dräger family took the company's lead. Born in 1898, Heinrich Dräger remained at the head of the company for nearly 60 years, until his death in 1986.

During the 1930s, the company expanded into gas analysis and monitoring, introducing the Dräger gas detector tubes. Into the outbreak of World War II, the company developed new gas masks and breathing apparatus, and again supported the German military effort through its development of the "counter-lung," used to help submarine crews escape from the vessels. The company was also hired to provide the air conditioning and ventilation system for Adolf Hitler's underground bunkers.

NEW PRODUCTS IN THE
POSTWAR ERA

Following the war, Dräger returned its attention to the civilian market, producing breathing and ventilation systems and gas detection devices for various markets. The medical field remained a company focus, and in the late 1940s, the company developed new centralized gas supply systems for hospitals. In 1951, the company also introduced one of the first incubator systems for premature infants, featuring a heated cot. Heat therapy then became an important product category for the company. Drägerwerk also produced one of the world's first alcohol breath-testing devices. Introduced in 1953, the "Alcotest" device provided an accurate indication of the level of alcohol in a subject's bloodstream. By the end of the 1960s, the company's respiratory technology had reached a new level, when it introduced a 300-bar compressed air breathing system.

In 1970, Dräger adopted a new corporate structure, becoming a limited liability company called Drägerwerk Aktiengesellschaft Lübeck. This led to the company's first public issue of preference shares in 1976, and to its full-fledged stock offering in 1979. The company also issued profit-sharing certificates to its employees; these were added to the group's listing in 1983.

In the meantime, Dräger had taken steps to ensure a steady stream of innovations among its product line. As part of this effort, Dräger added a new dedicated research and development unit, opened in 1975, to provide centralized support to the group's diversified operations in the defense, medical, electronics, and safety fields. This effort led, among others, to the development of the Titan deep-sea diving simulator in 1984. The Titan not only simulated ocean depths of up to 1,500 meters, it could also be used for manned, underwater welding projects to depths of 600 meters below the surface. Another Dräger product, a biorack filter system, was adapted for use aboard Spacelab in 1985. Leading the company by then was Christian Dräger, who had joined his father in the family business in 1961.

Dräger's long record of work in the electronics industry, starting from the mid-1940s, led the company to adopt a new technological base in the 1980s. In 1988, the company made the leap from mechanics to electronics, building a new generation of workstation-based respiration and ventilation equipment. By 1989, the company had debuted its revolutionary "Cicero" anesthesia workstation to the global market. This device was one of the first to deploy automatic controls by incorporating monitoring and data analysis functions. The company continued to extend its technologies, and by 1995 had launched its "Evita" ventilator system, which established a new level of long-term ventilation capability, allowing doctors to wean patients from mechanical breathing systems.

COMPANY PERSPECTIVES

Dräger—Technology for Life. Our products monitor, support and protect vital human functions, creating better and safer conditions for our health and the environment.

The company also developed a number of innovative products for the safety sector during the 1980s and 1990s. These included the Type 720 PF suit providing chemical protection, and a mobile gas detection and measuring device, the Multiwarn, introduced in the late 1980s, and the Dräger Man PSS 100/500 compressed air breathing system, launched in 1998. The following year, the company debuted its "Dolphin" rebreather.

By then, the company had restructured its operations, spinning off its growing safety component into a separate, independently run subsidiary, Dräger Safety. The company's restructuring continued into 1997, when Drägerwerk was formally established as a holding company for its two primary divisions, Dräger Medical and Dräger Safety, as well as its smaller Aerospace division. Also in 1997, Theo Dräger took over the lead of the company. The following year, the company regrouped its division devoted to manufacturing parts and sub-assemblies under the new name of Dräger Pro Tech. In the meantime, Dräger had also developed its industrial operations, in part through the creation in 1991 of a joint venture with the USA's Tescom, creating Dräger Tescom GmbH. In 2000, however, Dräger exited that partnership, which then became known as Tescom Europe.

MANUFACTURING FOCUS IN THE
NEW CENTURY

This exit came as part of a renewed restructuring effort as Dräger moved to refocus itself around its core businesses in the Medical and Safety sectors. The company shed a number of businesses as part of its restructuring, including Dräger Pro Tech, and parts of its medical technologies operations, such as its U.K.-based subsidiary Medical Products Limited, sold to Penlon Ltd. in 2002. In that year, the company also sold Dräger Electronics, hit hard by the slump in the global IT and electronics markets. Next to go was that group's Aerospace Division, sold to Cobham for nearly EUR 30 million in 2003.

The company's restructuring effort had forced the company into deep losses in 2000 and 2001. However, the streamlined operation quickly restored its profitability in the early 2000s. Dräger had also begun an acquisition program to beef up its core operations, buying PLMS Ltd., based in Plymouth England, which specialized in "open path technology," based on infrared gas detection, in 2000. That purchase, through Dräger Safety, was complemented by the purchase of ABC Opleidingen, based in Antwerp, Belgium, which provided safety technology services to the Port of Antwerp. Still another Dräger Safety acquisition brought the company ACE Svenljuna, a Swedish manufacturer of disposable filters.

Drägerwerk also focused on strengthening its medical division, which remained its largest area of operation. In 2002, the company agreed to merge Dräger Medical with the acute care division of Siemens. The merger, which created a new company called Dräger Medical, was completed in 2003. Drägerwerk remained the controlling partner of the joint venture, with a 65 percent stake.

KEY DATES

1889:: J. Heinrich Dräger and Carl Adolf Gerling set up shop in Lübeck and patent Lubeca Valve used for tapping beer.
1902:: Company changes name to Drägerwerk Heinrich & Bernhard.
1904:: Company unveils world's first modern anesthetic delivery system.
1928:: Heinrich Dräger becomes third generation to lead company, a position he holds until his death in 1986.
1951:: Drägerwerk introduces first incubator system for premature infants.
1970:: Company reincorporates as limited liability company called Drägerwerk Aktiengesellschaft Lübeck.
1979:: Drägerwerk goes public on Frankfurt stock exchange.
1989:: Cicero anesthesia workstation is introduced.
1995:: Evita ventilator system is launched.
1997:: Drägerwerk is restructured as a holding company, and creates independent subsidiary Dräger Safety.
2000:: Company launches new restructuring to streamline around core of Safety and Medical products manufacturing division.
2003:: Company continues restructuring; sells Aerospace division to Cobham group.
2004:: Company forms 65-35 joint venture Dräger Medical with Siemens; acquires Air Shield incubator manufacturing operation from Hill-Rom.
2005:: Stefan Dräger becomes fifth generation of family to lead the company.

Dräger Medical began its own growth drive into the mid-2000s. The company targeted the neonatal market, reaching an agreement with Hillenbrand Industries Inc. to buy Air Shields, part of its Hill-Rom Co. subsidiary. Air Shields, based in Pennsylvania, specialized in developing and manufacturing incubators for premature infants. That acquisition was completed in 2004.

Dräger Safety also targeted growth through acquisition. In 2004, the division acquired South Africa's Zenith Safety Products, based in King William's Town, adding its manufacturing capacity there. The new subsidiary specialized in the production of breathing masks for the South African and other African markets.

The fifth generation of the Dräger family took over the leadership of the company, when Stefan Dräger, aged 42, became chairman and CEO in 2005. By then, the company, which had been seeking a location for a new Dräger Medical headquarters, had confirmed its commitment to the city of Lübeck, which had been home to Drägerwerk innovations for more than 100 years.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

ACE Protection AB (Sweden); Carbamed (Switzerland); Dräger Medizinskaja Technika ooo (Russia); Dräger Medical AG & Co. KG; Dräger Medical Holding GmbH; Dräger Medical Romania SRL; Dräger Medizin System Technik GmbH; Dräger Polska Sp.zo.o; Dräger Safety AG & Co. KGaA; Dräger Safety Romania SRL; Dräger TGM GmbH; FIMMUS Grundstücks-Vermietungs GmbH; I + D-Gesellschaft für Organisationsentwicklung und Beratung im Gesundheitsund Sozialwesen mbH; IMH International Medical Holding GmbH; Objekt Finkenberg KG; OPTIO Grundstücks-Verwaltungsgesellschaft mbH & Co. KG.

PRINCIPAL DIVISIONS

Dräger Medical; Dräger Safety.

PRINCIPAL COMPETITORS

Pfizer Inc.; Johnson & Johnson; Kimberly-Clark Corp.; United States Surgical Corp.; Medtronic Inc.; Baxter International Inc.; Artema Medical AB; Siemens Medical Systems Inc.; Lohmann GmbH and Company KG; Armor Holdings Inc.; Getinge AB; Respironics Inc.