Memorandum

Bloomberg reports Medtronic Guardian Sensor 3 manufacturing shortage, due to higher than expected MiniMed 670G demand – July 20, 2017

According to a Bloomberg article that interviews Medtronic CFO Karen Parkhill, the company is experiencing a manufacturing shortage for the new Guardian Sensor 3. The piece cites higher than expected demand for the MiniMed 670G hybrid closed loop, which Ms. Parkhill’s daughter actually uses. This does not come as a surprise, given the continued very deliberate rollout of the MiniMed 670G as part of the Priority Access Program – Dr. Fran Kaufman said at Keystone last week that ~1,000 patients are on the device, implying only a couple hundred additional systems have been shipped beyond the ~750-person Customer Training Phase. We confirmed this sensor shortage with Medtronic a few weeks ago (see our June 23 Closer Look), though at the time, it was positioned as “global” and expected to normalize this month. Based on this article, it seems like the high demand is continuing to outstrip supply. Strategically, Guardian Sensor 3 is critical for Medtronic to get right, as it’s the gating factor (and driver) of 670G’s success, and the key piece of its upcoming standalone Guardian Connect to compete with Dexcom and Abbott (remains under FDA review, as far as we know). Medtronic has been transitioning to more of a CGM strategy in its diabetes business, though the move obviously brings new manufacturing challenges relative to making pumps – reaching scale with strong reliability are the name of the game, something Abbott and Dexcom can attest to. We’ll look to hear more in the August call…

  • Medtronic sent us the following statement about the shortage: "We are experiencing strong demand for our products globally, which is being driven by several factors including increased sensor utilization due to enhancements we’ve introduced resulting in improved performance, increased CGM coverage by health systems outside of the U.S. including Germany and Australia, strong adoption of our sensor augmented insulin pump therapies as well as broader general awareness around the benefits of pump therapy and CGM. Additionally, earlier-than-expected FDA approval for our MiniMed 670G system generated increased demand much sooner than we anticipated and before we were able to implement expansion plans for our manufacturing lines, which were based on a longer approval timeline. Some of these factors we expected – others we could not have predicted with precision given historical trends. For example, it is difficult to fully predict the timing of regulatory approvals and CGM reimbursement. In Europe alone, these factors contributed to a 45% increase in demand last year, which is simply unprecedented. As soon as we became aware of the increased demand, we immediately worked to increase our manufacturing capacity with new and expanded lines as well as additional shifts that are operating around the clock. Unfortunately, ramping up  production particularly for sensors isn’t something that can be executed quickly due to the complexity of the components involved and the regulatory certifications required of the manufacturing process. We are actively working to ensure we can meet the needs of all patients who rely on our therapies as quickly as possible."

-- by Adam Brown and Kelly Close