Investors in medical device companies spend most of their diligence time on clinical differentiation, reimbursement and market size. Manufacturing gets less attention, yet a company with strong clinical data and FDA clearance can still stall if it cannot make its product at volume, at the cost its model assumes, under a quality system that holds up to inspection. Design transfers that slip, costs of goods that do not fall and quality systems that strain at commercial volume are all visible in diligence to someone who asks.
This article sets out ten manufacturing questions for device investors and what a good answer looks like.
Where the Margin Story Breaks
Manufacturing is a regulatory function as well as an operational one. Since February 2, 2026, device manufacturers have been subject to FDA's Quality Management System Regulation (21 CFR Part 820), which incorporates ISO 13485:2016 by reference. Quality system failures can lead to inspection observations, warning letters and recalls, and in serious cases to consent decrees that restrict production.
Manufacturing is also where the margin story can break. A target gross margin assumes that cost of goods falls as volume grows, and that assumption often rests on process changes, tooling, automation or new suppliers that have not yet been validated.
The Scale Trap (Illustrative)
A hypothetical example: a startup validates manufacturing at 100 units a month with a contract manufacturer, and its revenue model assumes 10,000 units a month by year 3. If the prototype process relied on manual assembly, specialized fixturing and operator-dependent inspection, the quote for commercial volume can come back well above the model's unit cost, and a redesign for manufacturability adds time and consumes capital meant for launch. That is the gap diligence should test: the cost-of-goods line in the pitch deck against the cost-of-goods evidence from production.
The 10 Manufacturing Questions
1. Single-Source Suppliers: Which Critical Components Have a Backup?
Identify components with only one approved supplier. FDA's quality system requirements call for suppliers to be evaluated and controlled, but they do not require a second source; the business risk is what happens if the only supplier stops. Replacing a critical component usually means new verification and validation, possibly new biocompatibility testing for patient-contacting materials, and an assessment of whether the change needs a new regulatory submission.
Red flag: several critical components single-sourced from small, thinly capitalized suppliers, with no plan to qualify alternatives. The clinical dimension matters too: if the component is a patient-contacting material or a sensor that drives clinical performance, a disruption is a patient-safety issue as well as a revenue issue.
2. Cost-of-Goods Trajectory: What Is the Path to Target Gross Margin?
Companies usually present a target cost of goods at scale. The more useful document is the transition plan: cost of goods at each volume step the model assumes, and what drives each reduction. If the path depends on custom tooling, new suppliers or design changes that have not been validated, some of which may need regulatory assessment, the margin in the model carries material risk.
3. Design Transfer: Is the Design Manufacturable at Scale?
Prototype designs often assume manual assembly, hand adjustment and tolerance stacks that do not hold at volume. ISO 13485:2016 requires design transfer to be documented and production processes to be validated where their output cannot be fully verified, and process capability studies are a common way to show that a process is stable. The question is whether that work has been done or sits on the roadmap for after clearance.
Design transfer after clearance puts the company in a risky window: the device is on the market before production has been proven at commercial scale. From a clinical view, design or process changes at scale can introduce variation that affects device performance or biocompatibility, and that may surface only through complaints and adverse event reports.
4. Quality System Maturity: Where Does It Stand Today?
Early-stage companies often run a startup-grade quality system: informal change control, loose document management and little statistical process control. Under the QMSR, that is a liability waiting for an inspection, and acquirers read quality system maturity as a proxy for execution discipline.
A mature system typically shows documented change control with impact assessments, process monitoring, supplier evaluation and audits, and a corrective and preventive action (CAPA) process with effectiveness checks. Third-party ISO 13485 certification is useful evidence, though it is separate from FDA compliance. Weak quality systems also carry a clinical cost, because production problems can show up as complaints and adverse events that erode physician confidence.
5. Contract Manufacturer Lock-In: Who Controls Manufacturing?
Many early-stage companies outsource manufacturing to contract manufacturers (CMs), often for good reasons. The structure matters. Red flags:
- Designs or tooling owned by the CM: the CM controls critical IP (intellectual property), so a price dispute or a need to move can leave the company trapped.
- Single-CM dependence: a capacity constraint or financial failure at the CM stops production.
- Vague quality agreements: the CM is not contractually bound to specific quality system standards or process controls.
- No audit rights: the company cannot verify that validated procedures are followed.
A stronger structure has clear company ownership of design files and tooling, a quality agreement with defined responsibilities, audit rights, and a documented plan for transferring production if needed.
6. Scale-Up: What Happens Between Pilot and Commercial Volume?
Pilot-scale and commercial-scale manufacturing are different problems. Risks include:
- Bottlenecks in manual assembly steps that were not visible at small scale
- Quality variation as the number of operators grows
- Supplier strain when single suppliers must absorb much higher demand
- Facility constraints: space for inventory, staging and rework
A company should have a documented scale-up plan with pilot runs at increasing volumes, process capability data at production volumes and contingency supply agreements.
7. Inspection Readiness: Is the Quality System Ready for FDA?
FDA inspections of device manufacturers focus on areas such as design controls, risk management, supplier controls, change control and corrective and preventive action. For PMA devices, FDA typically inspects manufacturing before approval; for 510(k) devices there is usually no inspection before clearance, and the manufacturer should be ready for a quality system inspection at any time afterward. A company that has never been inspected carries unknown risk, and a mock inspection or third-party audit is a practical way to find gaps early.
8. Manufacturing Setup and Regulatory Status: Do They Match?
Device classification follows the device's intended use and risk, not where or how it is made, but manufacturing still has to support the regulatory plan. A sterile device needs validated sterilization and packaging, and the submission must address them. Foreign establishments that make devices for the US market must register with FDA and list their devices, and their US agent helps FDA schedule inspections. A mismatch between the manufacturing setup and the regulatory plan can delay clearance or create compliance problems after launch.
9. Traceability and Labeling: Are Downstream Requirements Costed?
Some requirements add manufacturing and labeling cost. FDA's unique device identification rule requires the label and package of most devices to bear a UDI (21 CFR 801.20), and hospital customers may expect traceability data in their supply systems. Separately, if the health economics model assumes a cost structure that only works with low-cost overseas manufacturing, a forced change in the supply chain can undo the margin.
10. Risk Allocation: Who Bears Scaling, Quality and Regulatory Risk?
This is often buried in legal terms, but it matters: if manufacturing underperforms, who pays? If a contract manufacturer fails a quality audit, does the CM remediate or does the company bear recall costs? If scale-up takes longer than projected, who funds operations? These allocations should be explicit in CM agreements and investment documents.
How Vantage Reads Manufacturing Readiness
Manufacturing and quality questions in a Vantage full report are reviewed by Aswini Ravinutala, BME, a biomedical engineer with 10+ years in medical devices: manufacturing, quality and reliability engineering at St. Jude Medical and Masimo, and operations engineering and management at Axonics through its 2024 acquisition by Boston Scientific. Aswini is currently R&D Manager at Spiro Medical. The review looks at quality system maturity and regulatory alignment, supply chain redundancy and contract manufacturer structure, the realism of the cost-of-goods trajectory, and the manufacturing team's experience scaling similar devices, with each factual claim cited to its source.
Red Flag Combination
A high-risk profile: no quality system aligned with ISO 13485, a single contract manufacturer with no redundancy, cost-of-goods projections that depend on unvalidated manufacturing changes, and manufacturing leadership whose experience is only in non-regulated industries.
The Bottom Line
Manufacturing risk is often invisible until it is expensive. If quality systems, supply chain redundancy and design for manufacturability are not in place by the time a company reaches commercial scale, remediation can consume years of runway. Asking these ten questions before investing, and expecting substantive answers, is how investors find that out early.
References
- FDA. "Quality Management System Regulation (QMSR)." fda.gov
- International Organization for Standardization. "ISO 13485:2016 Medical devices - Quality management systems." iso.org
- FDA. "Premarket Approval (PMA)." fda.gov
- 21 CFR 807.40, establishment registration and device listing for foreign establishments. law.cornell.edu
- 21 CFR Part 801, Subpart B, labeling requirements for unique device identification. ecfr.gov
Concerned About Manufacturing Readiness?
Vantage full reports are reviewed by a physician and a biomedical engineer, including manufacturing and quality questions. If you have a portfolio company approaching scale or a target in active diligence, start with a free 20-minute call.