Why is Assembly Automation Critical in Scaling Disposable Insulin Patch Pump Manufacturing?

When Medtronic announced the now-aborted acquisition of EOFlow, a Korean insulin pump company, the Medtronic CEO emphasized the critical value of EOFlow's assembly automation investment.

Insulet's (NASDAQ:PODD) evolution is a lesson. The company's first disposable Onipod was cleared by the FDA in 2003. The company launched the Pod in 2005. In 2007, the company raised over $100M in an IPO, turned on automated assembly at Flextronics, and reduced R&D expenses. Limited by manual assembly steps before scaling automation, Inulet was in dire straits. In 2010, Insulet agreed with Ypsomed AG that Ypsomed would distribute the Omnipod to several European countries. In 2018, Insulet paid Ypsomed approximately $50M to exit the relationship. Flextronics' move to automation at scale enabled Insulet to grow.

Several insulin patch pump developments divide a Pod into at least two components. The partitioning is not done to reduce the size of a wearable patch—it is done to reduce the cost of electronics and some of the articulating parts into a semi-durable module.

Insulet's adoption of automation nearly two decades ago represents a barrier to would-be disposable patch pump attempts.

Insulet achieved profitability nearly two decades after the first Omnipod prototype was demonstrated.

Investors evaluating patch pump stories should consider what aspects of the future product will be assembled in volume. If, for example, the startup intends to operate with a MEMS module in the fluid path, every step in the assembly process should be studied concerning automated assembly.