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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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33-0857544
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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6340 Sequence Drive
San Diego, California
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92121
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(Address of Principal Executive Offices)
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(Zip Code)
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Large Accelerated Filer
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ý
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Accelerated Filer
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o
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Non-Accelerated Filer
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o
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(Do not check if a smaller reporting company)
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Smaller Reporting Company
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o
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Page
Number
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PART I FINANCIAL INFORMATION
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ITEM 1.
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Financial Statements
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ITEM 2.
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ITEM 3.
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ITEM 4.
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ITEM 1.
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ITEM 1A.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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ITEM 5.
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ITEM 6.
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March 31, 2013
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December 31, 2012
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(Unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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18.9
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$
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8.1
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Short-term marketable securities, available-for-sale
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26.4
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40.6
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Accounts receivable, net
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16.3
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19.5
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Inventory
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7.5
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7.4
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Prepaid and other current assets
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2.2
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2.0
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Total current assets
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71.3
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77.6
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Property and equipment, net
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18.3
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18.9
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Restricted cash
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1.0
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1.0
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Intangible assets, net
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4.0
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4.2
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Goodwill
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3.2
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3.2
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Other assets
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1.0
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1.1
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Total assets
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$
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98.8
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$
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106.0
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Liabilities and stockholders’ equity
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Current liabilities:
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Accounts payable and accrued liabilities
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$
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7.5
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$
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8.7
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Accrued payroll and related expenses
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7.2
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9.2
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Current portion of long-term debt
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0.7
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0.2
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Current portion of deferred revenue
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0.8
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1.4
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Total current liabilities
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16.2
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19.5
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Other liabilities
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2.7
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2.1
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Long-term debt, net of current portion
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6.3
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6.8
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Long-term portion of deferred revenue
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—
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0.6
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Total liabilities
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25.2
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29.0
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Commitments and contingencies (Note 4)
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Stockholders’ equity:
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Preferred stock, $0.001 par value, 5.0 shares authorized; no shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
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—
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—
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Common stock, $0.001 par value, 100.0 authorized; 70.9 and 70.7 issued and outstanding, respectively, at March 31, 2013; and 69.7 and 69.5 shares issued and outstanding, respectively, at December 31, 2012
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0.1
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0.1
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Additional paid-in capital
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530.3
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522.6
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Accumulated other comprehensive loss
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(0.1
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)
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(0.1
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)
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Accumulated deficit
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(456.7
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)
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(445.6
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)
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Total stockholders’ equity
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73.6
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77.0
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Total liabilities and stockholders’ equity
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$
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98.8
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$
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106.0
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Three Months Ended
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March 31,
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2013
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2012
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Product revenue
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$
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27.8
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$
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18.6
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Development grant and other revenue
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1.8
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1.5
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Total revenue
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29.6
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20.1
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Product cost of sales
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12.4
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9.6
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Development and other cost of sales
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0.7
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1.1
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Total cost of sales
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13.1
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10.7
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Gross profit
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16.5
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9.4
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Operating expenses
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Research and development
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9.3
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9.4
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Selling, general and administrative
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18.1
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15.4
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Total operating expenses
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27.4
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24.8
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Operating loss
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(10.9
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)
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(15.4
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Interest and other income
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—
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—
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Interest expense
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(0.2
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—
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Loss before income taxes
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(11.1
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(15.4
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Income tax expense (benefit)
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—
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(1.3
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Net loss
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$
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(11.1
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$
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(14.1
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)
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Basic and diluted net loss per share
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$
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(0.16
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$
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(0.21
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)
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Shares used to compute basic and diluted net loss per share
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69.8
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67.8
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Three Months Ended
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March 31,
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2013
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2012
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Net loss
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$
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(11.1
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$
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(14.1
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Unrealized gain (loss) on short-term available-for-sale marketable securities
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—
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—
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Foreign currency translation gain (loss)
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—
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—
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Comprehensive loss
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$
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(11.1
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$
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(14.1
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Three Months Ended
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March 31,
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2013
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2012
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Operating activities
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Net loss
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$
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(11.1
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$
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(14.1
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Adjustments to reconcile net loss to cash used in operating activities:
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Depreciation and amortization
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1.8
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1.2
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Share-based compensation
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5.0
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4.1
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Accretion and amortization related to investments, net
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0.1
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0.3
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Release of valuation allowance against deferred tax assets
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—
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(1.3
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Change in fair value of contingent consideration
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0.3
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0.1
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Changes in operating assets and liabilities:
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Accounts receivable
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3.2
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—
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Inventory
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(0.1
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0.1
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Prepaid and other assets
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(0.1
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(0.2
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Restricted cash
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—
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(0.1
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Accounts payable and accrued liabilities
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(0.5
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(0.6
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Accrued payroll and related expenses
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(2.0
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)
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(0.6
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Deferred revenue
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(1.1
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0.8
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Deferred rent and other liabilities
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—
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0.1
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Net cash used in operating activities
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(4.5
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(10.2
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Investing activities
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Purchase of available-for-sale marketable securities
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(4.9
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(26.6
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Proceeds from the maturity of available-for-sale marketable securities
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18.9
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40.6
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Purchase of property and equipment
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(1.4
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(2.3
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Net cash provided by investing activities
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12.6
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11.7
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Financing activities
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Net proceeds from issuance of common stock
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2.7
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1.1
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Net cash provided by financing activities
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2.7
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1.1
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Effect of exchange rate changes on cash and cash equivalents
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—
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—
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Increase in cash and cash equivalents
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10.8
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2.6
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Cash and cash equivalents, beginning of period
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8.1
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2.5
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Cash and cash equivalents, ending of period
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$
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18.9
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$
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5.1
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Supplemental disclosure of non-cash transactions
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Issuance of common stock in connection with acquisition and contingent consideration
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$
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—
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$
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6.1
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Three Months Ended
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||||||
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March 31,
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||||||
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2013
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2012
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Fair value measurement at the beginning of period
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$
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1.7
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$
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—
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Contingent consideration recorded upon acquisition
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—
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2.2
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Changes in fair value measurement included in operating expenses
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0.3
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—
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Fair value measurement at end of period
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$
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2.0
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$
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2.2
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Three Months Ended
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||||
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March 31,
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2013
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2012
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Options outstanding to purchase common stock
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7.0
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7.7
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Unvested restricted stock units
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4.0
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3.2
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Total
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11.0
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10.9
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March 31, 2013
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Amortized
Cost
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Gross
Unrealized
Gains
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Gross
Unrealized
Losses
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Estimated
Market
Value
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U.S. government agencies
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$
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21.6
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$
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—
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$
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—
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$
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21.6
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Corporate debt
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4.8
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—
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—
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4.8
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Total
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$
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26.4
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$
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—
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$
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—
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$
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26.4
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December 31, 2012
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Amortized
Cost
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Gross
Unrealized
Gains
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Gross
Unrealized
Losses
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Estimated
Market
Value
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U.S. government agencies
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$
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31.8
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$
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—
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$
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—
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$
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31.8
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Commercial paper
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0.8
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—
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—
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0.8
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Corporate debt
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8.0
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—
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—
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8.0
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Total
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$
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40.6
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$
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—
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$
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—
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$
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40.6
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March 31, 2013
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December 31, 2012
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Raw materials
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$
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2.9
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$
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2.5
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Work-in-process
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0.6
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0.4
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Finished goods
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4.0
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4.5
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Total
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$
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7.5
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$
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7.4
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March 31, 2013
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December 31, 2012
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Accounts payable trade
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$
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2.2
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$
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3.9
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Accrued tax, audit, and legal fees
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0.9
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0.7
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Clinical trials
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—
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0.1
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Accrued other including warranty
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3.5
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2.8
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Acquisition-related liabilities
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0.9
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1.2
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Total
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$
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7.5
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$
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8.7
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Three Months Ended
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||||||
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March 31,
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||||||
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2013
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2012
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Beginning balance
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$
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0.3
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$
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0.3
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Charges to costs and expenses
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0.5
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0.5
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Costs incurred
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(0.6
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)
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(0.5
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)
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Ending balance
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$
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0.2
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$
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0.3
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Fiscal Year Ending
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Remainder of 2013
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$
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0.2
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2014
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2.2
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2015
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2.3
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2016
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2.3
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Total
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$
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7.0
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Fiscal Year Ending
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Remainder of 2013
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$
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1.9
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2014
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2.7
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2015
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2.7
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2016
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2.6
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Total
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$
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9.9
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Market value of DexCom common stock issued on the Closing
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$
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3.9
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Fair value of contingent consideration
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2.2
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Total purchase price
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$
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6.1
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Estimated Fair Value
(in millions)
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Estimated Useful Life in Months
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Net assumed liabilities
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$
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(1.8
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)
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Developed technology
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3.2
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109
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In-process research and development
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0.2
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51
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Trademarks and trade names
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0.1
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|
|
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Customer-related intangible
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0.6
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|
70
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Covenants not-to-compete
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0.6
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|
|
70
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Goodwill
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3.2
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Total purchase price allocation
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$
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6.1
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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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•
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an improved sensor wire design that allows more scalable manufacturing,
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•
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a new transmitter design that offers improved communication range with the receiver which allows for improved data capture, and
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•
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additional user interface and algorithm enhancements that are intended to make the user experience more customizable and to make its glucose monitoring function more accurate especially in the hypoglycemic range.
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•
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the revenue generated by sales of our approved products and other future products;
|
•
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the expenses we incur in manufacturing, developing, selling and marketing our products;
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•
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the quality levels of our products and services;
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•
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the third-party reimbursement of our products for our customers;
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•
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our ability to efficiently scale our manufacturing operations to meet demand for our current and any future products;
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•
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the costs, timing and risks of delays of additional regulatory approvals;
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•
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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, including, but not limited to, defending the patent infringement lawsuit filed against us by Abbott;
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•
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the rate of progress and cost of our clinical trials and other development activities;
|
•
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the success of our research and development efforts;
|
•
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the emergence of competing or complementary technological developments;
|
•
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the terms and timing of any collaborative, licensing and other arrangements that we may establish; and
|
•
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the acquisition of businesses, products and technologies.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4.
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CONTROLS AND PROCEDURES
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ITEM 1.
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LEGAL PROCEEDINGS
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ITEM 1A.
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RISK FACTORS
|
•
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the recent approval to sell our G4 system in the European Union, Australia, New Zealand and the countries in Asia and Latin America in June 2012 and approval for our G4 PLATINUM system in the United States in October 2012 means that we have limited experience selling our new G4 systems;
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•
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widespread market acceptance of our products by physicians and people with diabetes will largely depend on our ability to demonstrate their relative safety, efficacy, reliability, cost-effectiveness and ease of use;
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•
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the limited size of our sales force and our relative inexperience in marketing, selling and distributing our products;
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•
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we may not have sufficient financial or other resources to adequately expand the commercialization efforts for our products;
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•
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our FDA and other regulatory submissions may be delayed, or approved with limited product labeling;
|
•
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we may not be able to manufacture our products in commercial quantities or at an acceptable cost;
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•
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people with diabetes do not generally receive broad reimbursement from third-party payors for their purchase of our products since many payors require that a policy holder meet specific medical criteria to qualify for reimbursement, which may reduce widespread use of our products;
|
•
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the uncertainties associated with establishing and qualifying new manufacturing facilities;
|
•
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our systems are not labeled as a replacement for the information that is obtained from single-point finger stick devices;
|
•
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people with diabetes will need to incur the costs of our systems in addition to single-point finger stick devices;
|
•
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the relative immaturity of the continuous glucose monitoring market internationally, and the general absence of international reimbursement of continuous glucose monitoring devices by third-party payors and government healthcare providers outside the United States;
|
•
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the introduction and market acceptance of competing products and technologies;
|
•
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our inability to obtain sufficient quantities of supplies at appropriate quality levels from our single-source and other key suppliers;
|
•
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our inability to manufacture products that perform in accordance with expectations of consumers; and
|
•
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rapid technological change may make our technology and our products obsolete.
|
•
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the revenue generated by sales of our products and other future products;
|
•
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the costs, timing and risks of delay of additional regulatory approvals;
|
•
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the expenses we incur in manufacturing, developing, selling and marketing our products;
|
•
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our ability to scale our manufacturing operations to meet demand for our current and any future products;
|
•
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the costs to produce our continuous glucose monitoring systems;
|
•
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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
|
•
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the rate of progress and cost of our clinical trials and other development activities;
|
•
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the success of our research and development efforts;
|
•
|
the emergence of competing or complementary technological developments;
|
•
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the terms and timing of any collaborative, licensing and other arrangements that we may establish; and
|
•
|
the acquisition of businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.
|
•
|
recruit and retain adequate numbers of effective and experienced sales personnel;
|
•
|
effectively train our sales personnel in the benefits and risks of our products;
|
•
|
establish and maintain successful sales, marketing and education programs that educate endocrinologists, physicians and diabetes educators so they can appropriately inform their patients about our products; and
|
•
|
manage geographically disbursed sales and marketing operations.
|
•
|
the systems may not be deemed by the FDA to be substantially equivalent to appropriate predicate devices;
|
•
|
the systems may not satisfy the FDA's safety or efficacy requirements;
|
•
|
the data from pre-clinical studies and clinical trials may be insufficient to support approval;
|
•
|
the manufacturing process or facilities used may not meet applicable requirements; and
|
•
|
changes in FDA approval policies or adoption of new regulations may require additional data.
|
•
|
the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;
|
•
|
patients do not enroll in clinical trials at the rate we expect;
|
•
|
patients do not comply with trial protocols;
|
•
|
patient follow-up does not occur at the rate we expect;
|
•
|
patients experience adverse side effects;
|
•
|
patients die during a clinical trial, even though their death may not be related to our products;
|
•
|
institutional review boards (“IRBs”) and third-party clinical investigators may delay or reject our trial protocol;
|
•
|
third-party clinical investigators decline to participate in a trial or do not perform a trial on our anticipated schedule or consistent with the investigator agreements, clinical trial protocol, good clinical practices or other FDA or IRB requirements;
|
•
|
the company or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans;
|
•
|
third-party clinical investigators have significant financial interests related to the company or study that FDA deems to make the study results unreliable, or the company or investigators fail to disclose such interests;
|
•
|
regulatory inspections of our clinical trials or manufacturing facilities may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials;
|
•
|
changes in governmental regulations, policies or administrative actions;
|
•
|
the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or efficacy; and
|
•
|
the FDA concludes that our trial design is inadequate to demonstrate safety and efficacy.
|
•
|
billing for services;
|
•
|
financial relationships with physicians and other referral sources;
|
•
|
inducements and courtesies given to physicians and other health care providers and patients;
|
•
|
labeling products;
|
•
|
quality of medical equipment and services;
|
•
|
confidentiality, maintenance and security issues associated with medical records and individually identifiable health information;
|
•
|
medical device reporting;
|
•
|
anti-kickback:
|
•
|
any scheme to defraud any healthcare benefit program;
|
•
|
false claims; and
|
•
|
professional licensure.
|
•
|
we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms;
|
•
|
our products are technologically complex and it is difficult to develop alternative supply sources;
|
•
|
we are not a major customer of many of our suppliers, and these suppliers may therefore give other customers' needs higher priority than ours;
|
•
|
our suppliers may make errors in manufacturing components that could negatively affect the efficacy or safety of our products or cause delays in shipment of our products;
|
•
|
we may have difficulty locating and qualifying alternative suppliers for our single-source supplies;
|
•
|
switching components may require product redesign and submission to the FDA of a PMA supplement or possibly a separate PMA, either of which could significantly delay production;
|
•
|
our suppliers manufacture products for a range of customers, and fluctuations in demand for the products these suppliers manufacture for others may affect their ability to deliver components to us in a timely manner;
|
•
|
our suppliers may make obsolete components that are critical to our products; and
|
•
|
our suppliers may encounter financial hardships unrelated to our demand for components, including those related to changes in global economic conditions, which could inhibit their ability to fulfill our orders and meet our requirements.
|
•
|
warning letters or untitled letters that require corrective action;
|
•
|
delays in approving or refusal to approve our continuous glucose monitoring systems;
|
•
|
fines and civil penalties;
|
•
|
unanticipated expenditures;
|
•
|
FDA refusal to issue certificates to foreign governments needed to export our products for sale in other countries;
|
•
|
suspension or withdrawal of approval by the FDA or other regulatory bodies;
|
•
|
product recall or seizure;
|
•
|
interruption of production;
|
•
|
operating restrictions;
|
•
|
injunctions; and
|
•
|
criminal prosecution.
|
•
|
significantly greater name recognition;
|
•
|
established relations with healthcare professionals, customers and third-party payors;
|
•
|
established distribution networks;
|
•
|
additional lines of products, and the ability to offer rebates or bundle products to offer higher discounts or incentives to gain a competitive advantage;
|
•
|
greater experience in conducting research and development, manufacturing, clinical trials, obtaining regulatory approval for products and marketing approved products; and
|
•
|
greater financial and human resources for product development, sales and marketing, and patent litigation.
|
•
|
securities analyst coverage or lack of coverage of our common stock or changes in their estimates of our financial performance;
|
•
|
variations in quarterly operating results;
|
•
|
future sales of our common stock by our stockholders;
|
•
|
investor perception of us and our industry;
|
•
|
announcements by us or our competitors of significant agreements, acquisitions or capital commitments;
|
•
|
changes in market valuation or earnings of our competitors;
|
•
|
general economic conditions;
|
•
|
regulatory actions;
|
•
|
legislation and political conditions; and
|
•
|
terrorist acts.
|
•
|
our inability to manufacture an adequate supply of product at appropriate quality levels and acceptable costs;
|
•
|
possible delays in our research and development programs or in the completion of any clinical trials;
|
•
|
a lack of acceptance of our products in the marketplace by physicians and people with diabetes;
|
•
|
the inability of customers to receive reimbursements from third-party payors;
|
•
|
failures to comply with regulatory requirements, which could lead to withdrawal of products from the market;
|
•
|
our failure to continue the commercialization of any of our continuous glucose monitoring systems;
|
•
|
inadequate financial and other resources; and
|
•
|
global economic conditions.
|
•
|
our Board of Directors may, without stockholder approval, issue shares of preferred stock with special voting or economic rights;
|
•
|
our stockholders do not have cumulative voting rights and, therefore, each of our directors can only be elected by holders of a majority of our outstanding common stock;
|
•
|
a special meeting of stockholders may only be called by a majority of our Board of Directors, the Chairman of our Board of Directors, or our Chief Executive Officer;
|
•
|
our stockholders may not take action by written consent;
|
•
|
our Board of Directors is divided into three classes, only one of which is elected each year; and
|
•
|
we require advance notice for nominations for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|||||||||||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
|
|
File
No.
|
|
|
Date of
First
Filing
|
|
|
Exhibit
Number
|
|
|
Provided
Herewith
|
|
|
|
|
|
|
|
|
||||||||||||
10.27
|
|
|
Amendment Number Two to Non-Exclusive Distribution Agreement between RGH Enterprises, Inc. and DexCom, Inc. dated March 28, 2013*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.01
|
|
|
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
X
|
|
|
|
|
|
|
|
||||||||||||
31.02
|
|
|
Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
X
|
|
|
|
|
|
|
|
||||||||||||
32.01
|
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).**
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
X
|
|
|
|
|
|
|
|
||||||||||||
32.02
|
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).**
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
X
|
|
|
|
|
|
|
|
||||||||||||
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and were filed separately with the Securities and Exchange Commission.
|
|
**
|
This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that DexCom specifically incorporates it by reference.
|
|
|
|
|
|
|
|
DEXCOM, INC.
(Registrant)
|
||
|
|
|
||
Dated: May 1, 2013
|
|
By:
|
|
/s/ T
ERRANCE
H. G
REGG
|
|
|
|
|
Terrance H. Gregg,
Chief Executive Officer
|
|
|
|
||
Dated: May 1, 2013
|
|
By:
|
|
/s/ J
ESS
R
OPER
|
|
|
|
|
Jess Roper,
Chief Financial Officer
|
Product
|
Description
|
Transfer Price*
|
STS-7K-041
|
SEVEN Sensors (package of four (4))
|
$[*****]
|
Product
|
Description
|
Transfer Price*
|
STS-GL-041
|
Dexcom G4 Platinum Sensor Kit (package of four (4))
|
$[*****]
|
STK-GL-001
|
Dexcom G4 Platinum Receiver Kit – BLK
|
$[*****]
|
STK-GL-PNK
|
Dexcom G4 Platinum Receiver Kit – PNK
|
$[*****]
|
STK-GL-BLU
|
Dexcom G4 Platinum Receiver Kit – BLU
|
$[*****]
|
STS-GL-003
|
Dexcom G4 Transmitter Kit
|
$[*****]
|
5.
|
SCHEDULE 3
. Schedule 3 is amended and restated in its entirety as follows:
|
Required Reporting Frequency:
|
Weekly
|
Delivery method:
|
Dexcom controlled secure file transfer protocol site specific to the distributor
|
|
|
|
Field
|
Format
|
Comments
|
Customer ID Number
|
Text
|
A unique identifying number for each customer
|
Physician First Name
|
Text
|
|
Physician Last Name
|
Text
|
|
Physician ZIP Code
|
Text
|
53-character; text so leading zeros are included; no Zip + 4 numbers
|
Physician NPI
|
Text
|
|
Insurance Name
|
Text
|
|
Dexcom Item Number
|
Text
|
|
Item Quantity
|
Text
|
Unit quantity - e.g. 1 box of sensors is '1', and not the number of individual sensors included
|
Date of Shipment
|
Text
|
MM/DD/YYYY
|
|
|
|
Shipper
|
Text
|
Dexcom or Distributor, where distributor provides tracings including shipments from both locations
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
SCOPE
|
1.1
|
This Quality Agreement (the “Quality Agreement”) is incorporated within the Distribution Agreement dated April 30, 2008, as amended on March 29, 2011, between Distributor and Company pertaining to the distribution and sale of Products. Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the Agreement.
|
1.2
|
This Quality Agreement shall be effective on the Effective Date and shall remain in effect until the Agreement expires, is terminated or the Quality Agreement is modified.
|
1.3
|
The obligations of Distributor under this Quality Agreement shall be equivalent to those imposed on distributors of disposable Class III medical devices.
|
2.0
|
DEFINITIONS / ACRONYMS
|
2.1
|
“Applicable Documents”: Documents used to develop a specific document (i.e. standards, regulations) and documents referenced in the text of the specific document.
|
2.2
|
"Government Agency" means any body which has the authority to act on behalf of the government of the Union or State to ensure that the requirements of all laws applicable to the Products and Distributor are carried out and adhered to in the State.
|
2.3
|
"Customer Complaint" means any written, electronic or oral communication that alleges deficiencies related to the identity, quality, durability, reliability, safety or performance of a medical device that has been placed on the market.
|
2.4
|
“CGM”: Continuous Glucose Monitoring.
|
2.5
|
“Correction” means repair, modification, adjustment, relabeling, destruction, or inspection (including patient monitoring) of a product without its physical removal to some other location.
|
2.6
|
“Document” means any information, either written or stored electronically, including specifications, procedures, standards, methods, instructions, plans, files, forms, notes, reviews, analyses, and reports.
|
2.7
|
“Government Agency” means a federal (e.g. FDA) or state (Health and Human Services Food and Drug Branch) organization that has the power to provide services for conformity assessment on the conditions set out in the Federal Food, Drug, and Cosmetic Act (FD&C Act) and United States Code (U.S.C) as part for the sale of medical device products. This normally means assessing the manufacturers conformity to the essential requirements listed in each directive.
|
2.8
|
“Lot” or “Batch” means one or more components or finished devices that consist of a single type, model, class, size, composition, or software version that are
|
2.9
|
“Label” means a display of written, printed, or graphic matter upon the immediate container of any article. Any word, statement, or other information appearing on the immediate container must also appear “on the outside container or wrapper, if any there be, of the retain package of such article, or is easily legible through the outside container of wrapper.”
|
2.10
|
“Labeling” means any Labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) displaying such article” at any time while a device is held for sale after shipment or delivery for shipment in interstate commerce.
|
2.11
|
“Quality Records” means Documents containing recorded information, regardless of the medium or characteristic, which demonstrate the effectiveness of the quality management system and that provide evidence that products meet regulatory requirements and comply with specified product requirements.
|
2.12
|
“Removal” means the physical removal of a device from its point of use to some other location for repair, modification, adjustment, relabeling, destruction, or inspection.
|
2.13
|
“Stock Recovery” means the correction or removal of a device that has not been marketed or that has not left the direct control of the manufacturer, i.e., the device is located on the premises owned, or under the control of, the manufacturer, and no portion of the lot, model, code, or other relevant unit involved in the corrective or removal action has been released for sale or use.
|
2.14
|
"Recall" means when there is a risk of death or serious deterioration to the state of health, the return of a medical device to the supplier, its modification by the supplier at the site of installation, its exchange or its destruction, in accordance with the instructions contained in the advisory notice.
|
2.15
|
"Medical Device Reporting System" is a system of incident reporting to the Federal Food and Drug Administration (FDA), for all medical devices which are approved for inter-state commerce, where such incidents lead to corrective action relevant to medical devices. Medical Device Reporting Systems maintained by the Distributor shall comply with all applicable laws, the rules and regulations promulgated by the Federal or any State. This system is intended to allow data to be correlated between the FDA and manufactures to improve the protection of health and safety of patients, users and others by reducing the likelihood of the same type of adverse incident being repeated in different places at different times.
|
3.0
|
PROCESS CONTROLS
|
3.1
|
Both parties shall be responsible for all process control activities relative to the Products, including but not limited to, assurance of receipt, identification, traceability, storage, handling, inventory control, contamination control,
|
3.2
|
Both parties shall maintain appropriate documented procedures.
|
3.3
|
Company shall provide evidence that packaging containers maintain the integrity, quality, function, and sterility of the product for the entire shelf life, and not produce toxic residues during storage. Packaging must prevent or indicate the occurrence of tampering.
|
4.0
|
TRAINING AND DOCUMENT CHANGE CONTROL
|
4.1
|
Distributor shall be responsible for managing an effective employee training program and document change control system relative to the receipt, identification, traceability, storage, handling, inventory control, contamination control and complaint handling and trending at the location of Distributor and its third party suppliers.
|
4.2
|
Distributor must train its employees to perform their job function and to this Quality Agreement as required.
|
5.0
|
VALIDATION
|
5.1
|
Distributor shall be responsible for managing qualified processes and systems as required of suppliers (e.g. computer system) by law.
|
5.2
|
Both parties shall be responsible for managing an effective product and process validation system relative to the distribution of the Products at the location of the Distributor and its third party suppliers.
|
5.3
|
Company shall be responsible for managing an effective product and process validation system relative to the manufacture of the Products at the location of the Company and its third party suppliers.
|
6.0
|
DISTRIBUTION AND HANDLING
|
6.1
|
Products shipped by the Distributor must be shipped using documented procedures for the handling, storage, packaging, preservation, and delivery of the Products.
|
6.2
|
Distributor shall deliver Products to its customers using documented procedures for handling, storage, packing, preservation, and delivery of the Products.
|
6.3
|
Disposables must have at least three months of expiration dating left, unless specific variance by lot number has been agreed to by both parties, before being shipped to any end-user customer.
|
6.4
|
The Distributor will not modify any product packaging that it receives from the Company. Shipping containers shall be validated to ensure that the safety and integrity of the Product is maintained during transit, including shipping methods that conform with the Product’s acceptable temperature and humidity ranges.
|
6.5
|
Distributor must maintain storage & handling as follows:
|
Product Name
|
Storage Temperature
|
Humidity
|
Sensor
|
2-25°C (36-77°F)
|
N/A
|
Transmitter
|
0-45°C (32-113°F)
|
Max 95% Relative
|
Receiver
|
0-45°C (32-113°F)
|
10-85% Relative
|
Product Name
|
Storage Temperature
|
Humidity
|
Sensor
|
2-25°C (36-77°F)
|
15-85% Relative
|
Transmitter
|
0-45°C (32-113°F)
|
10-95% Relative
|
Receiver
|
0-45°C (32-113°F)
|
10-95% Relative
|
7.0
|
LOT TRACEABILITY
|
7.1
|
Distributor shall establish and maintain procedures for identifying the Products by suitable means from receipt and during all stages of production and delivery. This shall include procedures to provide full lot traceability for each unit, lot, or batch of finished Products during all stages of production and delivery to the Distributor.
|
7.2
|
Distributor shall establish and maintain procedures to provide traceability to the first consignee.
|
7.3
|
Distributor shall establish and maintain procedures to provide traceability to the end user.
|
7.4
|
Both parties shall use reasonable efforts to assist the other in maintaining respective lot traceability.
|
7.5
|
Both parties are required to track the following information detailed in the table to the end user.
|
8.0
|
Seven Plus Product
|
Product
|
Description
|
Lot traceability Tracking Requirement
|
STK-7U-030
|
SEVEN PLUS System Kit
|
Lot Number identified on the box
|
STS-7K-041
|
SEVEN Sensors (package of one (1) or four (4))
|
Lot Number identified on the box
|
STR-7U- 030
|
SEVEN PLUS Replacement Receiver
|
Lot Number identified on the box
|
STT-7U- 030
|
SEVEN PLUS Replacement Transmitter
|
Lot Number identified on the box
|
9.0
|
G4 Platinum Product
|
Product
|
Description
|
Lot traceability Tracking Requirement
|
STK-GL-001
|
G4 Platinum Receiver Kit – BLK
|
Lot Number identified on the box
|
STK-GL-PNK
|
G4 Platinum Receiver Kit – PNK
|
Lot Number identified on the box
|
STK-GL-BLU
|
G4 Platinum Receiver Kit – BLU
|
Lot Number identified on the box
|
STT-GL-003
|
G4 Transmitter Kit
|
Lot Number identified on the box
|
STR-GL-001
|
G4 Platinum Replacement Receiver Kit - BLK
|
Lot Number identified on the box
|
STR-GL-PNK
|
G4 Platinum Replacement Receiver Kit - PNK
|
Lot Number identified on the box
|
STR-GL-BLU
|
G4 Platinum Replacement Receiver Kit - BLU
|
Lot Number identified on the box
|
STS-GL-011
|
G4 Platinum Sensors Kit (package of one (1))
|
Lot Number identified on the box
|
STS-GL-041
|
G4 Platinum Sensors Kit (package of four (4))
|
Lot Number identified on the box
|
10.0
|
PACKAGING AND LABELING
|
10.1
|
Company shall provide packaging and labeling specifications that call out clear labeling requirements.
|
10.2
|
Company shall ensure that the labels, inserts and accompanying documentation satisfy the requirements of the applicable regulations.
|
10.3
|
Distributor shall not modify the labels, primary or secondary packaging, inserts or accompanying documentation without the written approval of the Company.
|
11.0
|
FINISHED PRODUCT NON-CONFORMANCES
|
11.1
|
Any nonconforming finished product requires written approval from Company’s Quality Assurance before shipment to any Customer by Distributor.
|
12.0
|
COMPLAINT HANDLING AND REPORTING
|
12.1
|
Distributor shall be responsible for the establishment and maintenance of a system for handling all Tier I Complaints pertaining to Products distributed under the Agreement. "Complaint" means any written, electronic, telephone call and/or oral communication that alleges deficiencies related to the identity, quality, durability, reliability, safety, effectiveness, or performance of a device after it is released to distribution. A complaint is any indication of the failure of a device to meet customer or user expectations for quality or to meet performance specifications. A “Tier I Complaint” includes complaints that pertain to the purchase, payment, billing, delivery, packaging and customer service. This system shall include receipt, review, corrective/preventative action and maintenance of files. Distributor will not perform any Tier II Complaint Handling, as defined below.
|
12.2
|
Company shall be responsible for the establishment and maintenance of a system for handling Tier II Complaints pertaining to Products distributed under the Agreement. A “Tier II Complaint” includes complaints that pertain to product functionality, trouble shooting, or adverse events. This system shall include receipt, review, investigation, corrective/preventative action and maintenance of files. It shall also include adverse event reporting to the appropriate governmental authorities as required by regulations in the applicable jurisdictions.
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12.3
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Company shall notify Distributor in writing of legal and regulatory matters relating to the Products, including:
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12.3.1
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Any regulatory actions by governmental authorities (e.g., inspection citations, warning letters, or other non-conformance notices).
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12.3.2
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Regulatory enforcement actions such as injunctions or seizures.
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12.3.3
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FDA registration activity (e.g., non-conformance notices, hold points).
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12.3.4
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Complaints received from Customers within the Territory that have not been processed through the Company’s complaint handling system.
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12.3.5
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Adverse incidents relating to customers within the Territory (e.g., MDR’s.).
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12.4
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Distributor shall notify Company in writing of the following:
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12.4.1
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Any serious regulatory action relating to the Products.
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12.4.2
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Tier I Complaints regarding Products or Instruments. Distributor shall code, trend and report monthly all phone call inquiries and Tier I Complaint data pertaining to Products.
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12.4.3
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If an adverse incident is received that may be subject to FDA’s Medical Device Reporting regulation that pertain to Products and Instruments, then Distributor shall notify Company no later than 24 hours following Distributor’s initial receipt of the adverse event.
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12.4.4
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Distributor shall forward all complaints pertaining to Products and Instruments to Company no later than 5 working days following Distributor’s initial receipt of the complaint.
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13.0
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FIELD ACTIONS
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13.1
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The Company will be responsible for the initiation of any recalls or other field actions related to the Products.
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13.2
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Both parties will comply with recalls or general corrective actions, provided such recalls or general corrective actions do not, in the opinion of Company violate or cause Company to violate the laws of any jurisdiction affected by the recalls or corrective action.
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13.3
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If Distributor and Company do not agree on a course of action, Company may initiate field actions related to the Products, but may not use field action to cause Distributor to lose Customers.
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14.0
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AUDITS
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14.1
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Company shall have the right to conduct audits of Distributor’s facilities and operations during normal business hours at its own expense and upon thirty (30) days notice to Distributor in order to assess compliance with all applicable regulations, procedures and this Quality Agreement. Any such audits will be conducted by a national “big four” independent accounting firm (or other independent accounting firm whose audit department is a separate stand alone function of its business and which possesses liability insurance with coverage of at least $3,000,000), subject to such firm’s execution of a confidentiality agreement in form reasonably acceptable to Distributor. Company shall be permitted to conduct one audit per calendar year or more frequently in the instance there exists a material difference between the inventory records of Distributor and Company.
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15.0
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RECORD RETENTION
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15.1
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Both parties shall retain all sales and medical records as required by law.
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15.2
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Prior to any record destruction pertaining to Company Products and Instruments, the Distributor will notify the Company in writing. If the record destruction is not approved the Company will assume responsibility of the records.
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16.0
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REGULATORY AND REGISTRATION ADMINISTRATION
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16.1
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Distributor, at its expense, is responsible for registration responsibilities, and for agreed upon domestic registration costs in accordance with Federal and State regulations. Distributor shall provide sufficient data and information to support domestic registrations.
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16.2
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Company, at its expense, is responsible for registration responsibilities, and for agreed upon registration costs of Products in the Territory. Company shall provide sufficient data and information to support such registrations.
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17.0
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QUALITY SYSTEM COMPLIANCE
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17.1
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Distributor shall establish and maintain a quality system in compliance with Title 21, United States Code of Federal Regulations and other applicable regulations, and governmental laws. Distributor shall also ensure that its contract vendors maintain a quality system in compliance with current Title 21, United States Code of Federal Regulations and other applicable regulations, and governmental laws.
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17.2
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Distributor acknowledges that without registering as an out-of-state home medical device retail facility, an out-of-state home medical device retail facility shall not sell or distribute prescription devices in this state through any person or media other than a wholesaler who is licensed pursuant to Chapter 9 (commencing with Section 4000) of Division 2 of the California Business and Professions Code.
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18.0
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ADDITIONAL DISTRIBUTOR REQUIREMENTS
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18.1
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Distributor agrees to comply with all applicable laws and regulations. Distributor agrees to obtain the necessary licenses to meet its obligations under this agreement.
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18.2
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Records should be accurate, indelible and legible. Entries must be dated and the person performing a documented task must be identified. Records must provide a complete history of the work performed. Products identified in this Quality Agreement are not in conflict with the laws of the importing country.
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Date: May 1, 2013
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By:
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/s/ Terrance H. Gregg
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Terrance H. Gregg
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Chief Executive Officer
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Date: May 1, 2013
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By:
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/s/ Jess Roper
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Jess Roper
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Chief Financial Officer
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/s/ Terrance H. Gregg
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Terrance H. Gregg
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Chief Executive Officer
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/s/ Jess Roper
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Jess Roper
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Chief Financial Officer
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