The German Pharma and MedTech Mittelstand: Sartorius, Draegerwerk, and the Post-COVID Opportunity

Few sectors have endured a more disorienting demand cycle than pharmaceutical equipment and medical technology over the 2021-2025 period. The COVID-19 pandemic created a surge in demand for bioprocessing equipment, ventilators, and safety devices that bore little relationship to underlying structural growth — and the subsequent normalization imposed a multi-year hangover that disguised the fundamental quality of the businesses involved. For institutional investors willing to look through the cycle, the German MedTech and pharma equipment sector — led by Sartorius and Draegerwerk — now presents a post-normalization entry point with compellingly asymmetric characteristics.

The COVID Distortion: Understanding the Hangover

To understand the opportunity, one must first understand the distortion. During 2020 and 2021, global pharmaceutical manufacturers scaled up COVID-19 vaccine and therapeutic production at unprecedented speed. The demand for bioprocessing consumables — the filters, bioreactors, and single-use systems that Sartorius specializes in — spiked dramatically. Customers ordered forward, built safety stocks, and expanded capacity on assumptions about continued pandemic demand that proved optimistic.

The correction was painful and prolonged. From 2022 into 2024, pharmaceutical and biotech manufacturers worked through accumulated inventory rather than placing new orders. The Chinese market, a significant growth vector for both Sartorius and several German MedTech peers, compounded the challenge as domestic production priorities shifted and foreign suppliers faced structural headwinds.

Draegerwerk faced a parallel phenomenon. Its ventilator business had been a COVID-era priority; hospitals globally added respiratory support capacity that would not need renewal for years. The safety technology division — less pandemic-exposed but more exposed to German industrial activity — had its own cyclical challenges as manufacturing capital expenditure contracted.

The key analytical point is this: these were demand distortion effects, not structural impairments. The underlying markets — biologics production, advanced therapy manufacturing, hospital infrastructure, industrial safety — did not shrink. Inventory normalization is, by definition, temporary.

Sartorius: Bioprocess Solutions and the Biology-as-Manufacturing Thesis

Sartorius is best understood not as a medical technology company in the traditional sense, but as an enabling infrastructure provider for the biologics manufacturing industry. Its Bioprocess Solutions division supplies the critical consumables and instruments — filtration systems, bioreactors, fermenters, sensors — that pharmaceutical and biotech manufacturers require to produce monoclonal antibodies, mRNA therapeutics, biosimilars, and advanced cell and gene therapies.

The 2025 numbers confirm that normalization is complete. Group revenue rose 7.6% in constant currencies to €3,538 million, with Bioprocess Solutions — the high-value core — growing at 9.5% in constant currencies to €2,865 million. The Lab Products & Services division, which had been more persistently challenged, recovered to growth in the second half of 2025.

Contextualizing the current revenue base against pre-COVID performance is illuminating. Sartorius's revenue has approximately doubled since 2019, even after absorbing the post-pandemic correction. This is not a cyclical business that happened to benefit temporarily from COVID; it is a structurally growing business that experienced a demand spike and is now resuming its underlying trajectory.

The structural drivers are powerful and durable. Biologics now account for a rapidly growing share of pharmaceutical pipelines globally. The FDA approval rate for biological medicines has accelerated, driven by advances in immunology, oncology, and rare diseases. Biosimilars — where complex biological manufacturing requires precisely the kind of sophisticated filtration and process control that Sartorius provides — represent a multi-decade growth vector as major biologic patents expire.

Advanced therapy medicinal products (ATMPs) — cell therapies, gene therapies, CAR-T treatments — require even more sophisticated bioprocessing infrastructure than conventional biologics. This is the frontier where Sartorius is investing: instruments and consumables for manufacturing processes that are still being invented and that will require specialized suppliers who understand the science as well as the engineering.

For investors integrating sustainability and impact considerations into their framework, Sartorius's positioning as enabling infrastructure for medicine manufacturing carries a clear positive externality dimension. See verdantis-impact.com for the broader sustainable capital investment framework, and dirkroethig.com for institutional market analysis.

Draegerwerk: Medical and Safety in Complementary Recovery

Draegerwerk — trading as Dräger — operates two divisions that share a brand, a German engineering heritage, and a commitment to mission-critical applications, but serve quite different markets. The Medical division provides anesthesia workstations, ventilators, neonatal care systems, and patient monitoring equipment to hospitals globally. The Safety division manufactures gas detection, fire protection, and personal protective equipment for industrial environments.

The 2025 results signal a business in genuine operational recovery. Full-year revenue rose to approximately €3.9 billion, a 5.2% increase from 2024's €3.71 billion, with organic growth in the medical segment reaching 7%. The EBITA margin expanded to 12.1%, exceeding original guidance of 4.5-6.5%. In Q4 2025, the Medical division posted a 13% revenue increase in constant currencies, confirming that the ventilator hangover is fully absorbed.

The Safety division's characteristics are structurally underappreciated. Industrial safety regulation across Europe, the Middle East, and Asia Pacific continues to tighten. German and European chemical plants, LNG facilities, hydrogen infrastructure (the energy transition's emerging backbone), and mining operations all require ongoing investment in gas detection and emergency response equipment. Dräger's safety technology business has long-duration customer relationships, high switching costs driven by certification and training requirements, and exposure to the infrastructure investment that accompanies the energy transition.

The complementarity of the two divisions is a structural advantage. When hospital capital expenditure is under pressure, Safety provides resilience. When industrial capex contracts, Medical provides the cushion. This is not an accident — it is the product of deliberate diversification by a family-controlled company that has operated across economic cycles for over 130 years.

The Mid-Cap MedTech Ecosystem: Broader Context

Sartorius and Draegerwerk are not isolated cases. They sit within a broader German MedTech ecosystem that serves global healthcare and life sciences markets from a base of engineering expertise concentrated in specific niches.

The German medical technology sector comprises approximately 1,400 companies, the large majority of which are Mittelstand in scale — typically 50 to 500 employees, often family-controlled, frequently holding dominant global positions in narrow but essential product categories. Endoscope accessories, surgical imaging, laboratory diagnostics, and precision implants are areas where German Mittelstand companies command global market shares that their size does not suggest.

From an institutional credit perspective, this structure is notable. Family ownership correlates with conservative balance sheet management, long investment horizons, and a resistance to the leverage-driven value extraction that has occasionally impaired publicly traded MedTech peers. The German corporate governance tradition — supervisory boards, worker representation, patient family capital — tends to produce the kind of slow-moving but durable value creation that credit investors value and equity investors systematically underprice in momentum-driven markets.

Post-COVID Valuation: The Opportunity Window

The post-pandemic normalization has left Sartorius and Draegerwerk trading at valuations that reflect the trough of the demand cycle rather than the mid-point of a structural growth trajectory. Sartorius, which commanded extraordinary premium valuations during 2021, has experienced a de-rating that has arguably overcorrected. The 2025 growth numbers — 7.6% total, 9.5% in Bioprocess Solutions — suggest that the correction phase is behind us.

Draegerwerk's re-rating potential is also material. A company delivering 5.2% revenue growth, 7% organic growth in its medical segment, and EBITA margins that consistently exceed guidance should not trade at the valuation discount that Dräger has historically accepted in the market.

Several catalysts could accelerate recognition. The biosimilar wave is still early; as major biologic patents expire through the late 2020s, the demand for cost-competitive biological manufacturing — and thus for bioprocessing equipment — will accelerate. Hospital infrastructure renewal post-COVID is a multi-year programme in most developed markets. And the hydrogen infrastructure build-out — relevant for Dräger Safety — is at its earliest stages.

For institutional investors who missed the entry point in 2022 or 2023, the current environment — recovery confirmed, structural drivers intact, valuations not yet reflecting normalisation — offers a second opportunity. The German MedTech Mittelstand has survived and compounded through oil price shocks, financial crises, Eurozone instability, and a global pandemic. It will compound through the next decade too. The question is only what price investors are willing to pay.

Dirk Roethig (Dirk Röthig) is the founder of VERDANTIS Impact Capital with over 25 years of experience in corporate credit, securitization (CLOs, CDOs), and European mid-cap markets. Contact: [email protected]