One Becton Road
Technology is transforming BD and the way we do business as never before. From high-value diagnostic tools based on genetic markers to breakthroughs in safety-engineered devices for health care workers to novel ways of delivering medicine to the body, technology is broadening our opportunities for revenue growth, competitive advantage and--in keeping with our larger aspiration--helping us help all people live healthy lives.
Becton, Dickinson & Company manufactures and markets medical supplies and devices and diagnostic systems for use by healthcare professionals, medical research institutions, and the general public. The company's operations are arranged into three business segments: Medical Systems, Biosciences, and Preanalytical Solutions. The Medical Systems unit holds the number one market positions worldwide in hypodermic needles and syringes, insulin delivery syringes, I.V. catheters, and prefillable drug delivery systems. Products produced by the Biosciences unit include cellular analysis systems, infectious disease diagnostic kits and tests, and automated blood culturing systems. The Preanalytical Solutions unit focuses on products and services for the collection and management of specimens. With operations in the United States and numerous countries around the world, Becton, Dickinson derives nearly half of its revenue from its international business activities.
First 50 Years: Steady, Conservative Growth
The company was founded in 1897 by two salesmen, Maxwell W. Becton and Fairleigh S. Dickinson, as a partnership first to sell medical thermometers and syringes (imported from Europe) and then to manufacture them. Expansion into new product lines in the early years came via acquisitions. In 1904 the partnership acquired Philadelphia Surgical Company and Wigmore Company, both of which were makers of surgical, dental, and veterinary instruments. The manufacture of medical bags was added the following year through the purchase of Comstock Bag Company. One year later, Becton, Dickinson & Company was incorporated in the state of New Jersey and built a manufacturing plant in East Rutherford, New Jersey, for the production of thermometers, syringes, and hypodermic needles.
Even with the company's new plant, Becton, Dickinson continued to rely on European suppliers for some of the products it sold, mainly because of the higher quality of the imports versus those made domestically. Along these lines, the acquisition of New York-based Surgical Supply Import Company in 1913 was completed to gain the company's network of high-quality foreign suppliers. The purchase also helped broaden Becton, Dickinson's product line through such Surgical Supply products as the Asepto bulb syringe.
During World War I, Becton, Dickinson's import supplies were, in large part, cut off, propelling the company deeper into manufacturing its own products. In the midst of the war, the president of Surgical Supply, Oscar O.R. Schwidetzky, who stayed with Becton, Dickinson following the acquisition, developed a new American-made cotton elastic bandage. In 1918 the company conducted a contest among physicians to name the new bandage, out of which emerged the ACE bandage, 'ACE' being an acronym for 'All Cotton Elastic.' Meantime, the slow but steady growth of Becton, Dickinson was evidenced by the company reaching the milestone of $1 million in sales in 1917, two decades after the founding.
Throughout the early decades, the family-run business built a reputation as a maker and marketer of products superior to those of its competitors. Through its product development--and acquisitions--the company kept pace with the latest advances in medical technology and standards. Such was the case with the 1921 purchase of Physicians Specialty Company, which was headed by Andrew W. 'Doc' Fleischer, who like Schwidetzky took a position with Becton, Dickinson following the merger. Fleischer had developed the mercurial sphygmomanometer (an instrument for measuring blood pressure) as well as the binaural stethoscope. In 1924 Becton, Dickinson began making syringes designed specifically for insulin injection, marking the company's first foray into the diabetes care sector. The following year Fairleigh Dickinson received a patent for the Luer-Lok tip, a locking collar that more securely attached a hypodermic needle to a syringe, thereby making injections safer, less painful, and more accurate.
Through the difficult years of the Great Depression, the company's workers retained their jobs by agreeing to a series of voluntary pay cuts. A key development in the World War II years came in 1943 with the acquisition of Multifit, which had been founded by Joseph J. Kleiner eight years earlier. Kleiner had developed a syringe system with interchangeable barrels and plungers. Kleiner's product had a number of advantages, including reduced labor costs, reduced breakage because it was made from a very strong kind of glass, and enhanced convenience for its users. Kleiner also brought to Becton, Dickinson another key concept he was developing called the Evacutainer. Patented in 1949, the Evacutainer used a vacuum system, a needle, and a test tube to draw blood from patients. The device was later renamed the Vacutainer tube, and marked Becton, Dickinson's entry into the burgeoning field of diagnostic medicine. Also in 1949 the company's first manufacturing facility located outside New Jersey was established in Columbus, Nebraska. Overall revenues reached $16 million by 1950.
Postwar Expansion into a Fortune 500 Company
Throughout its first 50 years Becton, Dickinson was a conservatively managed, family-run business. The enterprise entered the affluent postwar years with a solid market share in medical supplies and was well prepared for a major expansion. The company recognized that its traditional approach to business would not be appropriate for the future. Therefore, in 1948, the sons of the founders, Henry P. Becton and Fairleigh Dickinson, Jr.--both astute businessmen&mdashsumed managerial control of the company.
With Dickinson as chief executive officer and Becton serving in a variety of other capacities during the 1950s, Becton, Dickinson gradually expanded its product line. By 1964, more than 8,000 products were being manufactured by Becton, Dickinson, including a broad line of medical supplies of superior diagnostic accuracy. The company divided its business into four operating divisions--medical health, laboratory, animal research and testing, and overseas sales. In the course of an acquisition program, Becton, Dickinson purchased Carworth Inc., the leading producer of laboratory mice; Canton, Ohio-based Wilson Rubber Company, maker of rubber gloves for surgical, industrial, and household use (acquired in 1954); the Bard-Parker Company, manufacturer of surgical blades and scalpels (1956); and several specialized research laboratories. Increasingly, Becton, Dickinson's strongest growth was experienced in the market for disposable items, with the company becoming a leader in this burgeoning area. The 1955 acquisition of Baltimore Biological Laboratories (BBL) was particularly important in this regard as BBL was already making sterile, one-use blood donor kits for the American Red Cross (with Becton, Dickinson acting as distributor). By 1964, such products as disposable syringes and needles accounted for 60 percent of the company's $70 million in sales.
The new management team also was noted for its attention to international expansion. The first such move came in 1951 with the acquisition of the company's Canadian distributor to create Becton Dickinson Canada, Ltd., its first wholly owned subsidiary and foreign operation. The following year Becton, Dickinson acquired the Mexican firm MAPAD S.A. de C.V., maker of syringes, needles, and clinical thermometers, and established a manufacturing plant in Le Pont-de-Claix, France. The Brazilian market was next on the expansion list and Becton, Dickinson began supplying syringes in that country in 1956 and eventually became the number one medical supply company there. In 1963 Becton, Dickinson constructed a disposable syringe plant in Drogheda, Ireland.
The company's need for massive amounts of funding to pay for the conversion from reusable products to sterile disposable products led to a 1962 initial public offering of stock at $25 per share. The following year Becton, Dickinson stock began trading on the New York Stock Exchange. By 1966 the company's rapid rate of growth had landed it on the Fortune 500 list for the first time.
Early 1970s: New FDA Regulation and New Management
During the 1970s, Becton, Dickinson continued to make gains in the medical supplies business, despite increasingly difficult market conditions. The world oil crisis of 1973--74 caused a reduction in petrochemical feedstocks, which, in turn, made medical raw materials difficult to obtain. In addition, the Food and Drug Administration (FDA) planned to adopt the same strict certification standards for diagnostic equipment as it had applied to pharmaceuticals. This would delay the commercial introduction of new products and, with technological advances, expose them to higher rates of obsolescence. Although these conditions lessened Wall Street's interest in companies in the medical industry, Becton, Dickinson remained highly optimistic. With sales figures doubling every five years and with 19 percent of all sales derived overseas, Dickinson declared to shareholders that the company did not fear the impending device regulation, but instead was helping the FDA to formulate its new regulations.
When the FDA's Medical Device Act was enacted, Becton, Dickinson found, to some dismay, that 85 percent of its products were subject to the new regulation. Wesley J. Howe, who succeeded Dickinson as president and chief executive officer in 1974, was confident that the company's products would be able to meet all the new FDA requirements; to be sure, he hired a team of legal and technical experts to guarantee standardization.
Despite growing regulation, the early years of Howe's direction were marked by a continuity of policies; Howe was hand-picked by Dickinson and dedicated to the same conservative style of management. To increase efficiency, Howe automated and integrated more of the company's facilities and reduced his staff by 13 percent. To increase his influence, he also replaced 14 of the company's 17 division presidents.
Howe's leadership was proving highly effective. In one area, Becton, Dickinson's marketing approach was particularly effective: targeting insulin users through doctors, diabetes associations, camps, pharmacies, and pharmacy schools. With control of almost 100 percent of the insulin syringe market, Becton, Dickinson saw its sales increase to $456 million in 1975.
Late 1970s: Boardroom Intrigue and Takeover Bids
This success, however, was greatly compromised in the boardroom by Fairleigh Dickinson, who, despite having relinquished his posts voluntarily, continued to demand managerial control. At the heart of the matter was a conflict between family members determined to maintain control and board members who favored control by a more professional corporate elite. Although Howe remained above this conflict, several other important managers did not; ultimately, Dickinson would order Howe to fire them. In 1977, four board members resigned. With morale an increasingly serious problem, Howe asserted his position. Four new, 'unprejudiced' board members were named to the board and Dickinson was relegated to the ceremonial post of chairman. But the power struggle was not over.
Dickinson was asked to approach the Salomon Brothers investment banking firm and initiate a study on a company Howe wanted Becton, Dickinson to acquire. When completed, the study warned of numerous problems with the takeover. Howe maintained that Dickinson had sabotaged the study and, when the situation proved unresolvable, ordered Dickinson removed from the payroll.
Dickinson then resorted to another strategy. With 4.5 percent of the company's stock, Dickinson authorized Salomon Brothers to line up additional investors to lead a takeover of Becton, Dickinson. A Salomon agent named Kenneth Lipper approached several companies, including Avon, American Home Products, Monsanto, and Squibb, in an effort to set up a takeover. Becton, Dickinson's attorneys warned Lipper that his action was illegal. Rather than call off the search for buyers, Lipper challenged the attorneys to stop him in court--cognizant that a well-publicized court battle would only gain more attention for his cause.
On January 16, 1978, before Lipper could be stopped, Becton, Dickinson learned that the Philadelphia-based Sun Oil Company had acquired 34 percent of its stock. The transaction lasted only 15 minutes and involved 6.5 million shares at a purchase price of $45 each--well above the trading price of $33. Sun created a special subsidiary called LHIW (for 'Let's Hope It Works') to manage the shares until a controlling majority of shares could be acquired.
The takeover had severe consequences. Like Becton, Dickinson, Sun had just emerged from an important battle against founding family interests. H. Robert Sharbaugh, CEO of Sun, came into strong disagreement over the takeover with the founding Pew family and was eventually forced out of the company. Becton, Dickinson, in the meantime, learned that Sun's purchase had been conducted off the trading floor, in violation of numerous laws. Finally, three Becton, Dickinson shareholders sued Fairleigh Dickinson, complaining that they had been excluded from Sun's tender offer.
The New York Stock Exchange refused to file charges against Salomon and instead turned the matter over to the Securities and Exchange Commission (SEC). At this point, Sun decided to dispose of its interest in Becton, Dickinson and offered to indemnify Salomon against any liabilities resulting from court action. The legality of the takeover was no longer in question. Instead, the question concerned the manner in which Sun should dispose of its Becton, Dickinson shares. With Sun no longer in pursuit of Becton, Dickinson, the only clear beneficiaries of the takeover were the lawyers left to pick up the pieces.
Ironically, Sun and Becton, Dickinson had a common interest in the divestiture. If the 34 percent share were placed on the market in one parcel, share prices would plummet and Sun would lose millions. Becton, Dickinson, on the other hand, opposed summary disposal because large blocks of its shares could fall under the control of still other hostile acquisitors. An agreement was finally reached in December 1979, under which Sun would distribute a 25-year debenture convertible into Becton, Dickinson shares. The unprecedented agreement ensured both a gradual spinoff of Becton, Dickinson shares and the maintenance of stable share prices. Although the agreement was said to have cost Sun extremely large sums of money, Sun was satisfied with the arrangement.
Fairleigh Dickinson continued to seek injunctive relief from the SEC and remained under attack from Becton, Dickinson shareholders demanding the return of the $15 million profit from the original Sun tender offer. Sun's board at this time was nervously awaiting the response of its shareholders to the costly defense of Salomon Brothers. Around this time, American Home Products made a brief and uncharacteristic hostile bid for 2.5 percent of Becton, Dickinson--by comparison with Sun, a minor incident. Ironically, Sun's debenture scheme prevented any company from gaining greater control of Becton, Dickinson.
1980s: Restructuring and a Refocusing on the Core
The first order of business after this debacle, according to Howe, was to position Becton, Dickinson for future growth. With company profits rising, Howe arranged to reinvest cash on hand into new projects. He reorganized the company into 42 units so that each division's performance could be more accurately scrutinized. Unprofitable operations, such as a computer parts manufacturer, were either sold or closed down. Older products were reassessed and, in some cases, improved; for instance, insulin syringes were redesigned for more accurate dosages. Foreign sales were stepped up, and, despite a negative effect on earnings, an expansion of the product line was carried out. Whereas some new products were added by takeovers, others, such as the balloon catheter, were developed internally.
The expansion had been justified to ensure future viability, but by 1983 bad investments had cost the company $75 million--$23 million alone from a failed immunoassay instrument division. Bad planning caused production stoppages and cost overruns. Howe then came under criticism for failing to invest heavily enough in research and development. With remedial measures in place, the company's financial condition had improved greatly by 1985. That year the company declared an $88 million profit on sales of $1.44 billion. Much of this turnaround, however, came from nonoperating profits resulting from the sale of unprofitable divisions and a reduction in overhead. Howe instituted a new strategy involving slower growth rates and raised productivity. To balance this more modest business plan, Howe allocated a 5.1 percent share of revenue to research and development, particularly for more cost-effective new products, and purchased a 12 percent share of a company that manufactured equipment for synthesizing DNA.
In the late 1980s, Becton faced increased competition on the domestic front, but continued to maintain its estimated 70 percent to 80 percent share of the needle and syringe market. This period also was marked by the company's move into a new corporate headquarters in Franklin Lakes, New Jersey, and a transition in leadership. In 1987 Raymond V. Gilmartin was named president of the company, then added the CEO title in 1989, with Howe remaining chairman. Gilmartin had joined Becton, Dickinson in 1976 as vice-president of corporate planning.
1990s: International Expansion and Acquisitions
Sales increased from $1.71 billion in 1988 to $2.47 billion in 1993 as Becton, Dickinson moved into many new global markets and accelerated new proprietary product introductions. The firm focused expansion efforts on Latin America, the Asia-Pacific region, and Europe. By 1993, international sales contributed 44 percent of annual sales. Howe, who was credited by Robert Teitelman of Financial World with reenergizing Becton, Dickinson, retired that year and was supplanted as chairman by Gilmartin.
Becton, Dickinson introduced new drug delivery and blood handling products in the early 1990s that helped reduce healthcare workers' exposure to acquired immune deficiency syndrome (AIDS) and hepatitis. Some of the company's newest diagnostic tests helped researchers and physicians determine when to begin drug therapy for cancer and AIDS patients. In 1993 the firm moved its PRECISE brand pregnancy test from the professional to the over-the-counter market. Becton, Dickinson's investment of 5.6 percent of its 1993 revenues represented a continuing accent on new product introductions.
As criticism of high healthcare costs accelerated in the early 1990s, the wisdom of Howe's shift to more cost-effective new product introductions became evident. Becton, Dickinson positioned its diagnostic tests as accurate, fast ways to reduce healthcare costs by speeding diagnosis and treatment.
In mid-1994 Gilmartin left the company to take the top position at pharmaceutical giant Merck & Co., Inc. Tapped as his successor was Clateo Castellini, who was head of the company's medical unit and had joined Becton, Dickinson in 1978.
Under Castellini, who was born in Italy and had extensive international experience, the company actively expanded its overseas operations in the middle to late 1990s. Despite the economic turmoil in the region during much of this period, the Asia-Pacific region was the object of much of this growth. In 1995 the company entered into a joint venture in China to produce medical products for the Chinese and other markets. That same year Becton, Dickinson set up a subsidiary in India to construct a manufacturing plant. When it finally opened in 1999, it boasted an annual capacity of more than one billion disposable needles and syringes, making it one of the largest facilities of its kind in Asia. In 1998 Becton Dickinson acquired Boin Medica Co., Ltd., the largest medical supply company in South Korea. The company also began expanding in Latin America, outside of its two strongholds, Mexico and Brazil.
Flush with annual free cash flow of $350 million, Becton, Dickinson earmarked some of the money to buy back shares of its stock to improve earnings per share. The company also made a number of acquisitions, particularly in the late 1990s--a period of consolidation in healthcare across the board, from hospitals to insurance providers to pharmaceutical firms to medical product makers. In 1997 Becton, Dickinson spent $217.4 million on two major acquisitions: PharMingen Inc., a privately held maker of reagents for biomedical research with annual revenues of $30 million; and Difco Laboratories Incorporated, a manufacturer of media and supplies for microbiology labs with sales of $82 million. Six more acquisitions were completed in 1998, the most significant of which was the purchase of the Medical Devices Division of the BOC Group for about $457 million. Among the ten purchases completed in 1999 were Clontech Laboratories, Inc., maker of genetic tests; Biometric Imaging Inc., producer of cell analysis systems for clinical applications; and Transduction Laboratories, manufacturer of reagents for cell biology research.
In the late 1990s Becton, Dickinson was troubled by a spate of lawsuits arising from healthcare workers who had contracted blood-borne diseases using the company's conventional, unguarded needles and syringes. The suits alleged that safer needles had been available for years but Becton, Dickinson had not been promoting their use. For its part, the company said that it had invested more than $100 million into development of safer products, which were available for its customers to purchase, but it was up to the hospitals and medical centers to make the conversion. By decade's end, a shift to safer needles was clearly underway, in part due to government mandates at the state level.
During 1999 Edward J. Ludwig became president and CEO of Becton, Dickinson, with Castellini remaining chairman. The financial results for that year were a disappointment, stemming from weaker-than-expected sales in Europe and emerging markets and from an ailing home healthcare unit, which made such items as ear thermometers and blood pressure monitors. A restructuring was launched in the second half of the year that included the company's exit from the home healthcare sector. In addition, the company reorganized its remaining operations into three business segments: BD Medical Systems, BD Biosciences, and BD Preanalytical Solutions. Becton, Dickinson also began implementing a global brand strategy in which the 'BD' name would appear on all of the company's products, either alone or alongside such well-known brands as ACE, Vacutainer, and Tru-Fit. Becton, Dickinson ambitiously aimed to have its new 'BD' logo 'become as universally recognized worldwide as the Red Cross.' Becton, Dickinson thus headed into the new century with a new identity, a new structure, and a commitment to achieving a quick turnaround during what was certain to be an even more competitive period for medical device companies.
Principal Subsidiaries: BDX INO LLC; Becton Dickinson AcuteCare Holdings, Inc.; Becton Dickinson Asia Pacific Limited (British Virgin Islands); Becton Dickinson B.V. (Netherlands); Becton Dickinson Caribe, Ltd. (Cayman Islands); Becton Dickinson Infusion Therapy Holdings Inc.; Becton Dickinson Infusion Therapy Systems Inc.; Becton Dickinson Korea, Inc.; Becton Dickinson Korea Holding, Inc.; Becton Dickinson Malaysia, Inc.; Becton Dickinson (Mauritius) Limited; Becton Dickinson Medical Devices Co. Ltd., Suzhou (China; 99%); Becton Dickinson Medical Products Pte. Ltd. (Singapore); Becton Dickinson Monoclonal Center, Inc.; Becton Dickinson Overseas Services Ltd.; Becton Dickinson Pen Limited (Ireland); Becton Dickinson Service (Pvt.) Ltd. (Pakistan; 51%); Becton Dickinson Venture LLC; Becton, Dickinson and Company, Ltd. (Ireland); Becton, Dickinson B.V. (Netherlands); Becton Dickinson France, S.A.; Benex Ltd. (Ireland); Biometric Imaging, Inc.; Clontech Laboratories, Inc.; Critical Device Corporation; Collaborative Biomedical Products, Inc.; Difco Laboratories Incorporated; Franklin Lakes Enterprises, L.L.C.; IBD Holdings LLC (50%); Johnston Laboratories, Inc.; MDI Instruments, Inc.; Med-Safe Systems, Inc.; PharMingen; Saf-T-Med Inc.; Staged Diabetes Management L.L.C. (50%).
Principal Operating Units: BD Medical Systems; BD Biosciences; BD Preanalytical Solutions.
Principal Competitors: Abbott Laboratories; ALZA Corporation; American Home Products Corporation; Ballard Medical Products; Baxter International Inc.; Boston Scientific Corporation; Bristol-Myers Squibb Company; C.R. Bard, Inc.; Diagnostic Products Corporation; Isolyser Company, Inc.; Johnson & Johnson; Mallinckrodt Inc.; Maxxim Medical, Inc.; McKesson General Medical; Medical Action Industries Inc.; Medline Industries, Inc.; Novo Nordisk A/S; Pfizer Inc; Teleflex Corporation; Trinity Biotech Plc; United States Surgical Corporation; Vital Signs, Inc.