DEXCOM INC (Form: 10-Q, Received: 11/04/2015 18:29:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-51222

DEXCOM, INC.

(Exact name of Registrant as specified in its charter)




Delaware		33-0857544
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6340 Sequence Drive San Diego, California		92121
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, including area code: (858) 200-0200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):



Large Accelerated Filer	ý		Accelerated Filer	o

Non-Accelerated Filer	o	(Do not check if a smaller reporting company)	Smaller Reporting Company	o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of November 2, 2015 , 81,294,938 shares of the Registrant’s common stock were outstanding.

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DexCom, Inc.

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		Page Number
PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2015 (unaudited) and December 31, 2014	3
	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2015 and 2014	4
	Consolidated Statements of Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2015 and 2014	5
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and 2014	6
	Notes to Consolidated Financial Statements (unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	28
ITEM 4.	Controls and Procedures	28
PART II OTHER INFORMATION		29
ITEM 1.	Legal Proceedings	29
ITEM 1A.	Risk Factors	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
ITEM 3.	Defaults Upon Senior Securities	48
ITEM 4.	Mine Safety Disclosures	48
ITEM 5.	Other Information	48
ITEM 6.	Exhibits	48
SIGNATURES		50

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DexCom, Inc.

Consolidated Balance Sheets

(In millions—except par value data)



	September 30, 2015			December 31, 2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	85.3		$	71.8
Short-term marketable securities, available-for-sale	28.0			11.8
Accounts receivable, net	55.8			42.4
Inventory	30.6			16.0
Prepaid and other current assets	4.0			3.9
Total current assets	203.7			145.9
Restricted cash	—			1.0
Property and equipment, net	46.6			31.2
Intangible assets, net	2.4			2.7
Goodwill	3.7			3.2
Other assets	0.3			0.6
Total assets	$	256.7		$	184.6
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	34.3		$	20.4
Accrued payroll and related expenses	20.4			17.2
Current portion of long-term debt	2.5			2.3
Current portion of deferred revenue	1.6			0.7
Total current liabilities	58.8			40.6
Other liabilities	4.2			1.5
Long-term debt, net of current portion	0.4			2.3
Total liabilities	63.4			44.4
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0 shares authorized; no shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	—			—
Common stock, $0.001 par value, 100.0 authorized; 81.5 and 81.3 issued and outstanding, respectively, at September 30, 2015; and 77.6 and 77.3 shares issued and outstanding, respectively, at December 31, 2014	0.1			0.1
Additional paid-in capital	750.4			638.0
Accumulated other comprehensive loss	(0.3		)	(0.1		)
Accumulated deficit	(556.9		)	(497.8		)
Total stockholders’ equity	193.3			140.2
Total liabilities and stockholders’ equity	$	256.7		$	184.6

See accompanying notes

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DexCom, Inc.

Consolidated Statements of Operations

(In millions—except per share data)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Product revenue	$	104.2		$	67.9		$	269.9		$	172.8
Development grant and other revenue	1.0			1.1			1.3			2.1
Total revenue	105.2			69.0			271.2			174.9
Product cost of sales	30.5			21.8			84.0			57.4
Development and other cost of sales	—			—			—			0.6
Total cost of sales	30.5			21.8			84.0			58.0
Gross profit	74.7			47.2			187.2			116.9
Operating expenses
Research and development	64.8			18.5			109.0			47.8
Selling, general and administrative	52.3			33.7			136.9			92.2
Total operating expenses	117.1			52.2			245.9			140.0
Operating loss	(42.4		)	(5.0		)	(58.7		)	(23.1		)
Interest expense	(0.1		)	(0.2		)	(0.4		)	(0.6		)
Net loss	$	(42.5	)	$	(5.2	)	$	(59.1	)	$	(23.7	)
Basic net loss per share	$	(0.53	)	$	(0.07	)	$	(0.75	)	$	(0.32	)
Shares used to compute basic net loss per share	80.5			75.8			79.2			74.7
Diluted net loss per share	$	(0.53	)	$	(0.08	)	$	(0.75	)	$	(0.33	)
Shares used to compute diluted net loss per share	80.5			76.1			79.2			75.0

See accompanying notes

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DexCom, Inc.

Consolidated Statements of Comprehensive Loss

(In millions)

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net loss	$	(42.5	)	$	(5.2	)	$	(59.1	)	$	(23.7	)
Unrealized gain (loss) on short-term available-for-sale marketable securities	—			—			—			—
Foreign currency translation loss	—			0.1			(0.2		)	—
Comprehensive loss	$	(42.5	)	$	(5.1	)	$	(59.3	)	$	(23.7	)

See accompanying notes

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DexCom, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)



	Nine Months Ended
	September 30,
	2015			2014
Operating activities
Net loss	$	(59.1	)	$	(23.7	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	7.7			6.0
Share-based compensation	59.2			35.7
Non-cash research and development charge through issuance of common stock	36.5			—
Accretion and amortization related to marketable securities, net	0.3			0.1
Amortization of debt issuance costs	0.2			0.3
Change in fair value of contingent consideration	—			(0.7		)
Loss on disposal of equipment	0.3			—
Changes in operating assets and liabilities:
Accounts receivable, net	(13.4		)	(5.3		)
Inventory	(14.6		)	(5.3		)
Prepaid and other assets	—			0.7
Restricted cash	1.0			—
Accounts payable and accrued liabilities	12.8			6.1
Accrued payroll and related expenses	3.1			1.7
Deferred revenue	0.9			(0.1		)
Deferred rent and other liabilities	2.8			(0.3		)
Net cash provided by operating activities	37.7			15.2
Investing activities
Purchase of available-for-sale marketable securities	(35.4		)	(10.3		)
Proceeds from the maturity of available-for-sale marketable securities	18.8			9.8
Purchase of property and equipment	(21.7		)	(11.6		)
Acquisitions, net of cash acquired	(0.5		)	—
Net cash used in investing activities	(38.8		)	(12.1		)
Financing activities
Net proceeds from issuance of common stock	16.3			18.5
Repayment of long-term debt	(1.7		)	(1.6		)
Net cash provided by financing activities	14.6			16.9
Increase in cash and cash equivalents	13.5			20.0
Cash and cash equivalents, beginning of period	71.8			43.2
Cash and cash equivalents, end of period	$	85.3		$	63.2

See accompanying notes

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DexCom, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization and Business

DexCom, Inc. is a medical device company focused on the design, development and commercialization of continuous glucose monitoring (“CGM”) systems for ambulatory use by people with diabetes and by healthcare providers in the hospital for the treatment of people with and without diabetes. Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “DexCom” refer to DexCom, Inc. and its subsidiaries.

Basis of Presentation

We have incurred operating losses since our inception and have an accumulated deficit of $556.9 million at September 30, 2015 . As of September 30, 2015 , we had available cash, cash equivalents and marketable securities totaling $113.3 million and working capital of $144.9 million . Our ability to transition to, and maintain, profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure. If events or circumstances occur such that we do not meet our operating plan as expected, we may be required to reduce planned increases in compensation expenses and other operating expenses needed to support the growth of our business which could have an adverse impact on our ability to achieve our intended business objectives. We believe our working capital resources will be sufficient to fund our operations through at least September 30, 2016 .

We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 . These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto for the year ended December 31, 2014 included in the Annual Report on Form 10-K filed by us with the Securities and Exchange Commission on February 25, 2015.

Principles of Consolidation

The consolidated financial statements include the accounts of DexCom and our wholly owned subsidiaries, DexCom AB and SweetSpot Diabetes Care, Inc. (“SweetSpot”) . All significant intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting

An operating segment is identified as a component of a business that has discrete financial information available, and one for which the chief operating decision maker must decide the level of resource allocation. In addition, the guidance for segment reporting indicates certain quantitative thresholds. The operations of SweetSpot , our subsidiary, does not meet the definition of an operating segment and are currently not material, but may become material in the future.

We currently consider our operations to be, and manage our business globally within, one reportable segment, which is consistent with how our President and Chief Executive Officer, who is our chief operating decision maker, reviews our business, makes investment and resource allocation decisions and assesses operating performance.

We sell our products through a direct sales force in the United States and through distribution arrangements in the United States, Canada, Australia, New Zealand, and in portions of Europe, Asia, the Middle East, Latin America and Africa. DexCom, Inc. is domiciled in the United States.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Significant estimates include excess or obsolete inventories, valuation of inventory, warranty accruals, employee bonus, clinical trial expenses, allowance for bad debt, refunds and rebates, including pharmacy rebates and share-based compensation expense.

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Share-Based Compensation

Share-based compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized, for awards that are ultimately expected to vest, primarily on a straight-line basis over the requisite service period of the individual grants, which typically equals the vesting period.

The fair value of our Restricted Stock Units (“RSUs”) is based on the market price of our common stock on the date of grant. We estimate the fair value of stock options granted and stock purchase rights under our Employee Stock Purchase Plan (“ESPP”) using the Black-Scholes-Merton ("BSM") option-pricing model. Inherent in this model are assumptions related to our expected stock price volatility over the expected term of the awards, risk-free interest rate and any expected dividends. We determine our expected stock price volatility based on our historical stock price volatility over the most recent period equivalent to the expected life of the award. We determine the expected life of an award by considering various relevant factors, including the vesting period and contractual term of the award, our employees’ historical exercise patterns and length of service and employee characteristics. For stock purchase rights under our ESPP , the expected life is equal to the current offering period. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of our employee stock options and stock purchase plan. As we have not paid any cash dividends since our inception and do not anticipate paying dividends in the foreseeable future, we assume a dividend yield of zero.

We are also required to estimate at grant the likelihood that the award will ultimately vest (the “pre-vesting forfeiture rate”), and to revise the estimate, if necessary, in future periods if the actual forfeiture rate differs. We determine the pre-vesting forfeiture rate of an award based on our historical pre-vesting award forfeiture experience, giving consideration to company-specific events impacting historical pre-vesting award forfeiture experience that are unlikely to occur in the future as well as anticipated future events that may impact forfeiture rates. We use our historical data to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

We recorded $22.6 million and $59.2 million in share-based compensation expense during the three and nine months ended September 30, 2015 , respectively, compared to $13.8 million and $35.7 million during the three and nine months ended September 30, 2014 respectively. At September 30, 2015 , unrecognized estimated compensation costs related to unvested stock options and restricted stock units totaled $166.2 million and is expected to be recognized through 2019.

Revenue Recognition

We sell our durable systems and disposable units through a direct sales force in the United States and through distribution arrangements in the United States, Canada, Australia, New Zealand, and in portions of Europe, Asia, the Middle East, Latin America and Africa. Components are individually priced and can be purchased separately or together. We receive payment directly from customers who use our products, as well as from distributors, organizations and third-party payors. Our durable system includes a reusable transmitter, a receiver, a power cord and a USB cable. Disposable sensors for use with the durable system are sold separately in packages of four. We provide free of charge software and mobile applications for use with our durable systems and disposable sensors. The initial durable system price is generally not dependent upon the purchase of any amount of disposable sensors.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Revenue on product sales is generally recognized upon shipment, which is when title and the risk of loss have been transferred to the customer and there are no other post shipment obligations. With respect to customers who directly pay for products, the products are generally paid for at the time of shipment using a customer’s credit card and do not include customer acceptance provisions. We recognize revenue from contracted insurance payors based on the contracted rate. For non-contracted insurance payors, we obtain prior authorization from the payor and recognize revenue based on the estimated collectible amount and historical experience. We also receive a prescription or statement of medical necessity and, for insurance reimbursement customers, an assignment of benefits prior to shipment.

We provide a “ 30 -day money back guarantee” program whereby customers who purchase a durable system and a package of four disposable sensors may return the durable system for any reason within thirty days of purchase and receive a full refund of the purchase price of the durable system. We accrue for estimated returns, refunds and rebates, including pharmacy rebates, by reducing revenues and establishing a liability account at the time of shipment based on historical experience. Returns have historically been immaterial.

We have entered into distribution agreements with Byram Healthcare and its subsidiaries ("Byram") , RGH Enterprises, Inc. (“Edgepark”) and other distributors that allow the distributors to sell our durable systems and disposable units. We have contracts with certain distributors who stock our products, and we refer to these distributors as Stocking Distributors , whereby the Stocking Distributors fulfill orders for our product from their inventory. We also have contracts with certain distributors that do not stock our products, but rather products are shipped directly to the customer by us on behalf of our distributor, and we

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refer to these distributors as Drop-Ship Distributors . Revenue is recognized based on contracted prices and invoices are either paid by check following the issuance of a purchase order or letter of credit, or they are paid by wire at the time of placing the order. Terms of distributor orders are generally Freight on Board (“FOB”) shipping point (or Free Carrier (“FCA”) shipping point for international orders). Distributors do not have rights of return per their distribution agreement outside of our standard warranty. The distributors typically have a limited time frame to notify us of any missing, damaged, defective or non-conforming products. For any such products, we shall either, at our option, replace the portion of defective or non-conforming product at no additional cost to the distributor or cancel the order and refund any portion of the price paid to us at that time for the sale in question.

We have had collaborative license and development arrangements with strategic partners for the development and commercialization of products utilizing our technologies. The terms of these agreements typically include the license of certain intellectual property rights and the provision of multiple deliverables by us (for example, research and development services, product prototypes and products for use in clinical trials) in exchange for consideration to us of some combination of non-refundable license fees, funding of research and development activities, payments based upon achievement of development milestones and royalties in the form of a designated percentage of product sales or profits. With the exception of royalties, these types of consideration are classified as development grant and other revenue in our consolidated statements of operations and are generally recognized over the service period except for substantive milestone payments, which are generally recognized when the milestone is achieved. In determining whether each milestone is substantive, we considered whether the consideration earned by achieving the milestone should (i) be commensurate with either (a) our performance to achieve the milestone or (b) the enhancement of value of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) relate solely to past performance and (iii) be reasonable relative to all deliverables and payment terms in the arrangement. We recognize royalties in the period in which we obtain the royalty report, which is necessary to determine the amount of royalties we are entitled to receive.

Non-refundable license fees are recognized as revenue when we have a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and we have no further performance obligations under the license agreement. Multiple element arrangements, such as license, development and other multiple element service arrangements are analyzed to determine how the arrangement consideration should be allocated among the separate units of accounting, or whether they must be accounted for as a single unit of accounting.

For transactions containing multiple element arrangements, we consider deliverables as separate units of accounting and recognize deliverables as revenue upon delivery only if (i) the deliverable has standalone value and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is probable and substantially controlled by us. We allocate consideration to the separate units of accounting using the relative selling price method, in which allocation of consideration is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”), or if VSOE and TPE are not available, management’s best estimate of a standalone selling price for elements.

We use judgment in estimating the value allocable to the deliverables in a transaction based on our estimate of the fair value or relative selling price attributable to the related deliverables and the consideration from such transactions is typically recognized as product revenue or development grant and other revenue. For arrangements that are accounted for as a single unit of accounting, total payments under the arrangement are recognized as revenue on a straight-line basis over the period we expect to complete our performance obligations. We review the estimated period of our performance obligations on a periodic basis and update the recognition period as appropriate. The cumulative amount of revenue earned is limited to the cumulative amount of payments we are entitled to as of the period ending date.

If we cannot reasonably estimate when our performance obligation either ceases or becomes inconsequential, then revenue is deferred until we can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance. Deferred revenue amounts are classified as current liabilities to the extent that revenue is expected to be recognized within one year.

Significant management judgment is required in determining the level of effort required under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement.

Warranty Accrual

Estimated warranty costs associated with a product are recorded at the time of shipment. We estimate future warranty costs by analyzing historical warranty experience for the timing and amount of returned product, and these estimates are evaluated on at least a quarterly basis to determine the continued appropriateness of such assumptions.

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Foreign Currency

The financial statements of our non-U.S. subsidiary, whose functional currency is the Swedish Krona, are translated into U.S. dollars for financial reporting purposes. Assets and liabilities are translated at period-end exchange rates, and revenue and expense transactions are translated at average exchange rates for the period. Cumulative translation adjustments are recognized as part of comprehensive income and are included in accumulated other comprehensive loss in the consolidated balance sheet. Gains and losses on transactions denominated in other than the functional currency are reflected in operations. To date the results of operations of this subsidiary and related translation adjustments have not been material in our consolidated results.

Comprehensive Loss

We report all components of comprehensive loss, including net loss, in the consolidated financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss, including unrealized gains and losses on marketable securities and foreign currency translation adjustments, are reported, net of their related tax effect, to arrive at comprehensive loss.

Inventory

Inventory is valued at the lower of cost or market value on a part-by-part basis that approximates first in, first out. We make adjustments to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete and potential scrapped inventories. Factors influencing these adjustments include inventories on hand and on order compared to estimated future usage and sales for existing and new products, as well as judgments regarding quality control testing data, and assumptions about the likelihood of scrap and obsolescence. Once written down the adjustments are considered permanent and are not reversed until the related inventory is sold or disposed. We recorded charges of approximately $2.0 million in cost of goods sold for the nine months ended September 30, 2015 related to excess and obsolete inventory due to the approval and launch of our DexCom G4 PLATINUM with Share System.

Our products require customized products and components that currently are available from a limited number of sources. We purchase certain components and materials from single sources due to quality considerations, costs or constraints resulting from regulatory requirements.

Marketable Securities

We have classified our marketable securities with remaining maturity at purchase of more than three months and remaining maturities of one year or less as short-term available-for-sale marketable securities. Marketable securities with remaining maturities of greater than one year are also classified as short-term available-for-sale marketable securities as such marketable securities represent the investment of cash that is available for current operations. We carry our marketable securities at fair value with unrealized gains and losses, if any, reported as a separate component of stockholders' equity and included in comprehensive loss. Realized gains and losses are calculated using the specific identification method and recorded as interest income. We invest in various types of securities, including debt securities in government-sponsored entities, corporate debt securities, U.S. Treasury securities and commercial paper. We do not generally intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

Fair Value Measurements

The fair value hierarchy described by the authoritative guidance for fair value measurements is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value and include the following:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We carry our marketable securities at fair value. The carrying amounts of financial instruments, such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, are carried at cost, which approximate the related fair values due to the short-term maturities of these instruments. For additional detail see Note 6 “Fair Value Measurements.”

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Property and Equipment

Property and equipment is stated at cost and depreciated over the estimated useful lives of the assets, generally three years for computer equipment, four years for machinery and equipment, and five years for furniture and fixtures, using the straight-line method. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful lives of the assets or the remaining lease term.

Goodwill and Intangible Assets

Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. The change in the carrying value of goodwill during the nine months ended September 30, 2015 resulted from an acquisition of a small privately held engineering consulting company with 10 full time employees to complement our research and development activities, which closed in April 2015.

Our identifiable intangible assets are comprised of acquired core technologies, customer relationships, covenants not-to-compete, in-process research and development and trade names. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.

We test goodwill and intangible assets with indefinite lives for impairment on an annual basis. Also, between annual tests we test for impairment if events and circumstances indicate it is more likely than not that the fair value is less than the carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business and an adverse action or assessment by a regulator.

Recent Accounting Guidance

In May 2014, the Financial Accounting Standards Board ("FASB") issued authoritative guidance for Revenue from Contracts with Customers, to supersede nearly all existing revenue recognition guidance under U.S. GAAP . The core principle of the guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five step process to achieve this core principle and it is possible when the five step process is applied, more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The updated standard permits the use of either the retrospective or cumulative effect transition method and is effective for us in our first quarter of fiscal 2018. Early adoption is not permitted. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

In July 2015, the FASB issued guidance to change the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. The guidance requires that inventory accounted for under the first-in, first-out (FIFO) or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for us beginning in the first quarter of fiscal 2018. Earlier application is permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the effect this guidance will have on our consolidated financial statements.

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2. Net Loss Per Common Share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, outstanding options and unvested RSUs settleable in shares of common stock are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following table sets forth the computation of basic and diluted net loss per share (in millions, except per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator for basic and diluted net loss per share:
Net loss for basic	$	(42.5	)	$	(5.2	)	$	(59.1	)	$	(23.7	)
Impact of income related to mark-to-market on contingent consideration obligation settleable in shares	—			(0.9		)	—			(0.7		)
Net loss for diluted	$	(42.5	)	$	(6.1	)	$	(59.1	)	$	(24.4	)

Denominator for basic and diluted net loss per share:
Weighted average common shares outstanding for basic	80.5			75.8			79.2			74.7
Dilutive potential common stock outstanding:
Contingently issuable shares related to contingent consideration obligation settleable in shares	—			0.3			—			0.3
Weighted average common shares outstanding for diluted	80.5			76.1			79.2			75.0
Basic net loss per share	$	(0.53	)	$	(0.07	)	$	(0.75	)	$	(0.32	)
Diluted net loss per share	$	(0.53	)	$	(0.08	)	$	(0.75	)	$	(0.33	)

Historical outstanding anti-dilutive securities not included in diluted net loss per share attributable to common stockholders calculation (in millions):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Options outstanding to purchase common stock	1.6	3.8	1.6	3.8
Unvested restricted stock units	4.2	4.3	4.2	4.3
Total	5.8	8.1	5.8	8.1

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3. Financial Statement Details (in millions)

Short- Term Marketable Securities, Available-for-Sale

Short-term Marketable securities, consisting solely of debt securities, were as follows:



	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
U.S. government agencies	$	22.1	$	—	$	—	$	22.1
Corporate debt	4.4		—		—		4.4
Commercial paper	1.5		—		—		1.5
Total	$	28.0	$	—	$	—	$	28.0



	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Market Value
U.S. government agencies	$	9.1	$	—	$	—	$	9.1
Corporate debt	2.3		—		—		2.3
Commercial paper	0.4		—		—		0.4
Total	$	11.8	$	—	$	—	$	11.8

Inventory



	September 30, 2015		December 31, 2014
Raw materials	$	10.7	$	7.6
Work-in-process	2.5		1.0
Finished goods	17.4		7.4
Total	$	30.6	$	16.0

Accounts Payable and Accrued Liabilities



	September 30, 2015		December 31, 2014
Accounts payable trade	$	16.7	$	9.9
Accrued tax, audit, and legal fees	2.5		1.6
Clinical trials	0.4		0.4
Accrued other including warranty	14.7		8.5
Total	$	34.3	$	20.4

Accrued Warranty

Warranty costs are reflected in the consolidated statements of operations as product cost of sales. A reconciliation of our accrued warranty costs for the three and nine months ended September 30, 2015 and 2014 were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Beginning balance	$	1.2		$	0.9		$	1.3		$	0.9
Charges to costs and expenses	1.9			1.6			4.9			3.8
Costs incurred	(1.8		)	(1.3		)	(4.9		)	(3.5		)
Ending balance	$	1.3		$	1.2		$	1.3		$	1.2

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4. Commitments and Contingencies

Long-Term Debt

In November 2012, we entered into a loan and security agreement (the “Loan Agreement”) that provides for (i) a $15.0 million revolving line of credit and (ii) a total term loan of up to $20.0 million (the "Term Loan"), in both cases, to be used for general corporate purposes. The borrowings under the Loan Agreement are collateralized by a first priority security interest in substantially all of our assets with a negative pledge on our intellectual property.

The revolving line of credit is an interest-only financing that bears an interest rate equal to the prime rate plus 0.5% and requires repayment of principal at the maturity date of November 2015. Under the revolving line of credit, available funds, which were up to $15.0 million as of September 30, 2015 can be drawn at any time, and repaid funds can be redrawn. No amounts have been drawn against the revolving line of credit.

In accordance with the Loan Agreement , $7.0 million was advanced under the Term Loan at the funding date in November 2012 and up to $13.0 million in additional funds was available upon our request until September 30, 2013 (the "Draw Period"). In August 2013, the Loan Agreement was amended to change the Draw Period for the additional funds under the Term Loan to January 1, 2014 through March 31, 2014. We did not borrow any additional funds and the Draw Period expired unused. The Term Loan bears a fixed interest rate equal to the three-year treasury rate at the time of advance plus 6.94% and requires payment of interest only for the first year and amortized payments of interest and principal thereafter through the maturity date of November 2016 .

The aggregate debt issuance costs and fees incurred with respect to the issuance of the Loan Agreement were $1.1 million . These costs have been capitalized as debt issuance costs on our consolidated balance sheet as other assets. Fees related to the revolving line of credit are being amortized through the maturity date of November 2015. Issuance costs and fees related to the term loan are being amortized through the maturity date of November 2016 using the effective interest method. As of September 30, 2015 , the remaining unamortized issuance costs and fees totaled $0.1 million . Principal repayment obligations under the Loan Agreement as of September 30, 2015 were as follows (in millions):



Fiscal Year Ending
Remainder of 2015	$	0.6
2016	2.3
Total	$	2.9

Leases

In April 2006, we entered into an office lease agreement for facilities located in San Diego, California. In August 2010, we entered into a First Amendment to Office Lease (the “First Lease Amendment”) with Kilroy Realty, L.P. (the “Landlord”) with respect to facilities in the buildings at 6340 Sequence Drive and 6310 Sequence Drive, each in San Diego, California, and on October 1, 2014, we entered into a Second Amendment to Office Lease (the “Second Lease Amendment”), which added the building at 6290 Sequence Drive in San Diego, California to our lease and extended the lease term related to the buildings at 6340 Sequence Drive, 6310 Sequence Drive, and 6290 Sequence Drive, each in San Diego, California.

Under the Second Lease Amendment, we will continue to lease approximately 129,000 square feet in the current locations at 6340 Sequence Drive and 6310 Sequence Drive, and leased an additional 45,000 square feet at 6290 Sequence Drive, for a total of approximately 174,000 square feet of space. We also retain the right and obligation to lease an additional 45,000 square feet in the 6290 Sequence Drive location (the “Additional Space”), of which we leased approximately 15,000 square feet on April 1, 2015, and have agreed to lease the remaining 30,000 square feet beginning on October 1, 2015. The amended lease term extends through March 2022 and we have an option to renew the lease upon the expiration of the initial term for two additional five -year terms by giving notice to the Landlord prior to the end of the initial term of the lease and any extension period, if applicable. Provided we are not in default under the Second Lease Amendment and the Second Lease Amendment is still in effect, we generally have the right to terminate the lease starting at the 55 ^th month of the Second Lease Amendment. In September 2015, we received $1.8 million of tenant improvement allowance associated with the Second Lease Amendment, which was recorded as a deferred rent obligation and will be amortized over the term of the lease and reflected as a reduction to rent expense. Leasehold improvements associated with the tenant improvement allowance are included in Property and equipment, net in our consolidated balance sheet.

These facility leases have annual rental increases ranging from approximately 2.5% to 4% . The difference between the straight-line expense over the term of the lease and actual amounts paid are recorded as deferred rent. We have also entered into

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other operating lease agreements, primarily for office and warehouse space, that expire at various times through September 2017.

Rental obligations, excluding real estate taxes, operating costs, and tenant improvement allowances, under all lease agreements as of September 30, 2015 were as follows (in millions):



Fiscal Year Ending
Remainder of 2015	$	1.2
2016	4.7
2017	4.3
2018	5.2
2019	5.3
Thereafter	11.9
Total	$	32.6

Total rent expense for the three and nine months ended September 30, 2015 was $1.4 million and $4.2 million , respectively, compared to $0.8 million and $2.3 million , respectively, for the same periods of 2014 .

Litigation

From time to time, we are subject to various claims and suits arising out of the ordinary course of business, including commercial and employment related matters. In addition, from time to time, we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters. We do not expect that the resolution of these matters would, or will, have a material adverse effect or material impact on our consolidated financial position.

Purchase Commitments

We are party to various purchase arrangements related to our manufacturing and development activities including materials used in our CGM systems. As of September 30, 2015 , we had purchase commitments with vendors totaling $43.2 million due within one year. There are no material purchase commitments due beyond one year.

5. Development and Other Agreements

Collaboration with Google Life Sciences

On August 10, 2015, we entered into a Collaboration and License Agreement (the “ GLS Collaboration Agreement ”) with Google Life Sciences LLC (“ GLS ”). Pursuant to the GLS Collaboration Agreement , we and GLS have agreed to jointly develop a series of next-generation continuous glucose monitoring products. The GLS Collaboration Agreement provides us with an exclusive license to use certain intellectual property of GLS related to the development, manufacture and commercialization of the products contemplated under the GLS Collaboration Agreement . The GLS Collaboration Agreement provides for the establishment of a joint steering committee, joint development committee and joint commercialization committee to oversee and coordinate the parties’ activities under the collaboration. We and GLS have agreed to make committee decisions by consensus.

The terms of GLS Collaboration Agreement required that we pay an upfront fee of $35.0 million in either cash or shares of our common stock at our sole election, with the number of shares calculated based on the volume weighted average trading price during a period of twenty consecutive trading days ending prior to the date of the GLS Collaboration Agreement . In addition, we will pay GLS up to $65.0 million in additional milestones upon achievement of various development and regulatory objectives, which payments may be paid in cash or shares of our common stock at our sole election, calculated based on the volume weighted average trading price during a period of twenty consecutive trading days ending on the trading day prior to the date on which the applicable objective has been achieved.

On August 27, 2015, we filed a Registration Statement on Form S-3 with the SEC and issued 404,591 shares of our common stock to GLS in connection with the $ 35.0 million upfront payment. We recorded $36.5 million in research and development expense in our consolidated statement of operations for the three and nine months ended September 30, 2015 related to the issuance of the 404,591 shares of our common stock, based on our stock price of $90.29 per share as of the date of GLS Collaboration Agreement .

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In addition, GLS is eligible to receive tiered royalty payments associated with the commercialization of the products contemplated under the GLS Collaboration Agreement , which are subject to regulatory approval. Unless we attain annual product sales subject to the GLS Collaboration Agreement in excess of $750 million , there will be no royalty paid by us to GLS . Above this range, and upon marketing approval of the initial product contemplated by the GLS Collaboration Agreement , or upon commercialization of any other DexCom product that incorporates GLS intellectual property, we will pay to GLS a royalty percentage starting in the high single digits and declining to the mid-single digits based on our annual aggregate product sales.

The GLS Collaboration Agreement shall be terminable by either party (a) upon uncured material breach of the GLS Collaboration Agreement by the other party, (b) if the second product contemplated by the GLS Collaboration Agreement has not been submitted to the FDA for approval by a specified date and (c) if the annual net sales for the products developed with GLS under the GLS Collaboration Agreement are less than a specified aggregate dollar amount. Additionally, we have the right to terminate the GLS Collaboration Agreement upon the expiration of the last to expire patent that covers a product developed under the GLS Collaboration Agreement .

Edwards Lifesciences LLC

On November 10, 2008, we entered into a Collaboration Agreement with Edwards Lifesciences LLC (“Edwards”) . The Collaboration Agreement was amended by the parties on May 5, 2009 (as amended, the “Collaboration Agreement”). In accordance with the Collaboration Agreement, the parties also entered into a Manufacturing and Supply Agreement and Quality Agreement, each dated as of November 10, 2008 (the “Manufacturing and Supply Agreement” and “Quality Agreement,” respectively). Pursuant to the Collaboration Agreement, the parties agreed to develop jointly and to market an in-hospital automatic blood glucose monitoring system ("In-Hospital Product"). On September 3, 2015, we and Edwards entered into a Restatement of License, Termination of Collaboration & Release Agreement (the “Restated Agreement”) terminating each of the Manufacturing and Supply Agreement and Quality Agreement, and amending in part the Collaboration Agreement. Pursuant to the Restated Agreement, we and Edwards agreed to a mutual release of claims, including any activities related to further development obligations or milestone payments. In addition, the Restated Agreement provides Edwards with a fully paid-up, royalty-free license to use certain of our intellectual property solely in the field of blood-based glucose monitoring within the hospital environment. Under the Restated Agreement, we reserve the right to market and sell our interstitial continuous glucose monitoring technology in all settings, including within the hospital market. No payments are required by either party in connection with the Restated Agreement.

Tandem Diabetes Care, Inc.

On February 1, 2012, we entered into a non-exclusive Development and Commercialization Agreement (the “Tandem Agreement”) with Tandem Diabetes Care, Inc. (“Tandem”) to integrate a future generation of our continuous glucose monitoring technology with Tandem ’s t:slim ^™ insulin delivery system in the United States. On January 4, 2013, the Tandem Agreement was amended to allow for the integration of our G4 PLATINUM systems with Tandem 's t:slim insulin delivery system in the United States.

We received an initial payment of $1.0 million as a result of the execution of the Tandem Agreement , which was fully recognized in development grant and other revenue as of December 31, 2014. In July 2014, we received an additional $1.0 million milestone payment related to the regulatory submission by Tandem of their CGM enabled insulin pump. We recorded $1.0 million and $1.2 million during the three and nine months ended September 30, 2014 , respectively, in development grant and other revenue related to this initial consideration received and the July 2014 milestone payment.

In September 2015, we received the final $1.0 million milestone payment related to the regulatory approval of Tandem 's CGM enabled insulin pump, which was recognized in development grant and other revenue for the three and nine months ended September 30, 2015 . Under the terms of the Tandem Agreement , we are entitled to receive up to $1.0 million to offset certain development, clinical and regulatory expenses. Each of the milestones related to the Tandem Agreement is considered to be substantive.

In September 2015, the Tandem Agreement was amended to eliminate Tandem’s obligation to pay DexCom a royalty of $100 for each Tandem t:slim G4 integrated pump system sold and instead to reallocate $100 for each Tandem t:slim G4 integrated pump system to incremental marketing activities for such pump systems, or marketing activities to support other jointly funded development projects.

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The Leona M. and Harry B Helmsley Charitable Trust

In July 2013, we were awarded a $4.0 million grant (the "Helmsley Grant") from the Leona M. and Harry B. Helmsley Charitable Trust (the "Helmsley Trust") to accelerate the development of the sixth generation of our advanced glucose-sensing technologies (the " Gen 6 Sensor "). The funding is milestone-based and is contingent upon our meeting specific development milestones related to the development of the Gen 6 Sensor over a period of several years. Upon successful commercialization of our Gen 6 Sensor , we are obligated to either (1) make royalty payments based on a percentage of product sales of up to $2.0 million per year for four years, or (2) at our sole election, make a one-time $6.0 million royalty payment. The Helmsley Grant funds will offset research and development expense as incurred and earned. During 2013, $0.5 million of the Helmsley Grant was received and $0.5 million was earned. During 2014, $2.5 million of the Helmsley Grant was received and $2.5 million was earned. During the three months ended September 30, 2015 we did not receive or earn any funds from the Helmsley Trust. During the nine months ended September 30, 2015 , $1.0 million of the Helmsley Grant was received and $1.0 million was earned. As of September 30, 2015 , we have received the full $4.0 million grant funds from the Helmsley Trust.

6. Fair Value Measurements

We base the fair value of our Level 1 financial instruments that are in active markets using quoted market prices for identical instruments.

We obtain the fair value of our Level 2 financial instruments, which are not in active markets, from a primary professional pricing source using quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Fair value obtained from this professional pricing source can also be based on pricing models whereby all significant observable inputs, including maturity dates, issue dates, settlement date, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers or other market related data, are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.

We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values of our Level 2 marketable securities portfolio balance provided by our investment managers.

The following table represents our fair value hierarchy for our financial assets (cash equivalents and marketable securities) measured at fair value on a recurring basis as of September 30, 2015 (in millions):



	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	—	$	33.1	$	—	$	33.1
Marketable securities, available for sale
U.S. government agencies	—		22.1		—		22.1
Corporate debt	—		4.4		—		4.4
Commercial paper	—		1.5		—		1.5
Total marketable securities, available for sale	$	—	$	28.0	$	—	$	28.0

The following table represents our fair value hierarchy for our financial assets (cash equivalents, marketable securities and restricted cash) measured at fair value on a recurring basis as of December 31, 2014 (in millions):



	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
Cash equivalents	$	—	$	54.3	$	—	$	54.3
Marketable securities, available for sale
U.S. government agencies	—		9.1		—		9.1
Corporate debt	—		2.3		—		2.3
Commercial paper	—		0.4		—		0.4
Total marketable securities, available for sale	$	—	$	11.8	$	—	$	11.8
Restricted cash	$	1.0	$	—	$	—	$	1.0

Our restricted cash balance as of December 31, 2014 included certificates of deposit.

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There were no transfers between Level 1 and Level 2 securities during three and nine months ended September 30, 2015 and 2014 .


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document, including the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements that are not purely historical regarding DexCom's or its management's intentions, beliefs, expectations and strategies for the future. These forward-looking statements fall within the meaning of the federal securities laws that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “potential” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements are made as of the date of this report, deal with future events, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in those forward looking statements. The risks and uncertainties that could cause actual results to differ materially are more fully described under “Risk Factors” and elsewhere in this report and in our Form 10-K for the period ended December 31, 2014, as filed with the SEC on February 25, 2015, and our other reports filed with the SEC. We assume no obligation to update any of the forward-looking statements after the date of this report or to conform these forward-looking statements to actual results.

Overview

We are a medical device company primarily focused on the design, development and commercialization of continuous glucose monitoring systems (“CGM”) for ambulatory use by people with diabetes and for use by healthcare providers for the treatment of people with and without diabetes. Unless the context requires otherwise, the terms "we," "us," "our," the "company," or "DexCom" refer to DexCom, Inc. and its subsidiaries.

Background

From inception to 2006, we devoted substantially all of our resources to start-up activities, raising capital and research and development, including product design, testing, manufacturing and clinical trials. Since 2006, we have devoted considerable resources to the commercialization of our ambulatory continuous glucose monitoring systems, including the SEVEN PLUS, G4 PLATINUM and G5 Mobile, as well as the continued research and clinical development of our technology platform.

The International Diabetes Federation (“IDF”) estimates that in 2014, 387 million people around the world had diabetes, and the Centers for Disease Control (“CDC”) estimates that in 2012, diabetes affected 29.1 million people in the United States, of which 8.1 million were undiagnosed. IDF estimates that by 2035, the worldwide incidence of people suffering from diabetes will reach 592 million. According to the CDC 's National Vital Statistics Reports for 2010, diabetes was the seventh leading cause of death by disease in the United States. According to the Congressional Diabetes Caucus, diabetes is the leading cause of kidney failure, adult-onset blindness, lower-limb amputations, and significant cause of heart disease and stroke, high blood pressure and nerve damage. According to the IDF , there were an estimated 4.9 million deaths attributable to diabetes globally in 2014. The American Diabetes Association (“ADA”) Fast Facts, revised in July 2014, states that diabetes is the primary cause of death for more than 69,000 Americans each year, and contributes to the death of more than 234,000 Americans annually. According to an article published in The New England Journal of Medicine in November 2014, excess mortality for people with diabetes younger than 30 years of age is largely explained by acute complications of diabetes.

According to the CDC 2011 National Diabetes Fact Sheet, in the United States, another individual is diagnosed with diabetes every 17 seconds. As reported by the Congressional Diabetes Caucus website as of August 6, 2014, each day approximately 5,082 people are diagnosed with diabetes, and about 1.7 million people 20 years or older were diagnosed in 2012. In addition to those newly diagnosed, the Congressional Diabetes Caucus website reports that every 24 hours there are: 238 amputations in people with diabetes, 120 people who enter end-stage kidney disease programs, and 48 people who go blind.

According to the ADA , one in every five healthcare dollars was spent on treating diabetes in 2012, and the direct medical costs and indirect expenditures attributable to diabetes in the United States were an estimated $245 billion, an increase of $71 billion, or approximately 41%, since 2007. Of the $245 billion in overall expenses, the ADA estimated that approximately $176 billion were direct costs associated with diabetes care, chronic complications and excess general medical costs, and $69 billion were indirect medical costs. The ADA also found that average medical expenditures among people with diagnosed diabetes were 2.3 times higher than for people without diabetes in 2012. According to the IDF , expenditures attributable to diabetes were

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an estimated $612 billion globally in 2014. The IDF estimates that expenditures attributable to diabetes will grow to $678 billion globally by 2035.

We believe continuous glucose monitoring has the potential to enable more people with diabetes to achieve and sustain tight glycemic control. The Diabetes Control and Complications Trial demonstrated that improving blood glucose control lowers the risk of developing diabetes-related complications by up to 50%. The study also demonstrated that people with Type 1 diabetes achieved sustained benefits with intensive management. Yet, according to an article published in the Journal of the American Medical Association in 2004, less than 50% of diabetes patients were meeting ADA standards for glucose control (A1c), and only 37% of people with diabetes were achieving their glycemic targets. According to an article published in The New England Journal of Medicine in November 2014, in two national registries, only 13% to 15% of people with diabetes met treatment guidelines for good glycemic control, and more than 20% had very poor glycemic control. The CDC estimated that as of 2006, 63.4% of all adults with diabetes were monitoring their blood glucose levels on a daily basis, and that 86.7% of insulin-requiring patients with diabetes monitored daily.

Various clinical studies also demonstrate the benefits of continuous glucose monitoring and that continuous glucose monitoring is equally effective in patients who administer insulin through multiple daily injections or through use of continuous subcutaneous insulin infusion pumps. Results of a Juvenile Diabetes Research Foundation study published in the New England Journal of Medicine in 2008, and the extension phase of the study, published in Diabetes Care in 2009, demonstrated that continuous glucose monitoring improved A1c levels and reduced incidence of hypoglycemia for patients over the age of 25 and for all patients of all ages who utilized continuous glucose monitoring regularly.

Our initial target market in the United States consists of the estimated 30% of people with Type 1 diabetes who utilize insulin pump therapy and the estimated 50% of people with Type 1 diabetes who utilize multiple daily insulin injections. Our broader target market in the United States consists of our initial target market plus an estimated 20% of people with Type 1 diabetes using conventional insulin therapy and the estimated 27% of people with Type 2 diabetes who require insulin. Although our initial focus was within the United States, we have expanded our operations to include Canada, Australia, New Zealand, and portions of Europe, Asia, the Middle East, Latin America and Africa.

Products

Ambulatory Product Line: SEVEN ^® PLUS, DexCom G4 ^® , DexCom G4 ^® PLATINUM, DexCom Share ^TM System and DexCom G5 ^® Mobile

We received approval from the FDA and commercialized our first product in 2006. In 2007, we received approval and began commercializing our second generation system, the DexCom SEVEN. In 2009 we received approval and began commercializing our third generation system, the DexCom SEVEN PLUS. We no longer market or provide support for the DexCom SEVEN or SEVEN PLUS systems. On June 14, 2012, we received Conformité Européenne Marking (“CE Mark”) approval for our fourth generation continuous glucose monitoring system, the DexCom G4 system, enabling commercialization of the DexCom G4 system in the European Union, Australia, New Zealand and the countries in Asia and Latin America that recognize the CE Mark . The DexCom G4 system was approved for use by adults at home and in healthcare facilities. On October 5, 2012, we received approval from the FDA for the DexCom G4 PLATINUM, which is designed for up to seven days of continuous use by adults with diabetes, and we began commercializing this product in the United States in the fourth quarter of 2012. On February 14, 2013, we received CE Mark approval for a pediatric indication for our DexCom G4 system, enabling us to market and sell this system in the European Union, Australia, New Zealand and the countries in Asia and Latin America that recognize the CE Mark to persons two years old and older who have diabetes (hereinafter referred to as the "Pediatric Indication") , and we initiated a limited commercial launch in the second quarter of 2013. In connection with our receipt of CE Mark approval for the Pediatric Indication , we changed the name of the DexCom G4 system to the DexCom G4 PLATINUM system. On February 3, 2014, we received approval from the FDA for a Pediatric Indication for the DexCom G4 PLATINUM system in the United States. On June 3, 2014, we received approval from the FDA for an expanded indication for the DexCom G4 PLATINUM for professional use. This expanded indication allows healthcare professionals to purchase the DexCom G4 PLATINUM system for use with multiple patients. Healthcare professionals can use the insights gained from a DexCom G4 PLATINUM professional session to adjust therapy and to educate and motivate patients to modify their behavior after viewing the effects that specific foods, exercise, stress, and medications have on their glucose levels. On January 23, 2015, we received approval from the FDA for the DexCom G4 PLATINUM with Share, which is designed for up to seven days of continuous use, and we began commercializing this product in the United States in the first quarter of 2015. The DexCom G4 PLATINUM with Share remote monitoring system uses a secure wireless connection between a patient's receiver and an app on the patient's iPhone ^® , iPod touch ^® , or iPad ^® mobile digital device to transmit glucose information to apps on the mobile devices of up to five designated recipients, or "followers," who can remotely monitor a patient's glucose information and receive alert notifications anywhere they have an Internet or cellular connection. Unless the context requires otherwise, the term "G4 PLATINUM" shall refer to the DexCom G4 and DexCom G4 PLATINUM systems (and all associated indications of use for such systems,

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including without limitation, associated DexCom Share System functionalities) that are commercialized by us in and outside of the United States.

As compared to the SEVEN PLUS, the G4 PLATINUM offers:


•	an improved sensor wire design that allows more scalable manufacturing,


•	a smaller, sleeker receiver that is capable of displaying data in color,


•	a new transmitter design that offers improved communication range with the receiver which allows for improved data capture,


•	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,


•	the ability to market and sell to an expanded customer population due to the approval by the FDA of, and our obtaining a CE Mark for, a Pediatric Indication , and


•	DexCom Share remote monitoring capabilities.

DexCom SHARE ^TM

On October 17, 2014, we received approval from the FDA for the DexCom SHARE remote monitoring system. DexCom SHARE enables users of our G4 PLATINUM System to have their sensor glucose information remotely monitored by their family or friends. To use DexCom SHARE, the G4 PLATINUM user docks their G4 PLATINUM Receiver in the DexCom SHARE Cradle and their sensor glucose information is wirelessly transmitted to, and viewed by, such patient’s friends or family through the DexCom SHARE mobile application. DexCom SHARE provides secondary notifications to individuals designated by a G4 PLATINUM System user and does not replace real time continuous glucose monitoring or standard home blood glucose monitoring.

On January 23, 2015, the FDA approved a version of the G4 PLATINUM Receiver that includes the DexCom Share System. The G4 PLATINUM Receiver with Share remote monitoring system uses a secure wireless connection via Bluetooth Low Energy ("BLE") between a patient's receiver and a mobile application on the patient's iPhone, iPod touch, or iPad mobile digital device to transmit glucose information to mobile applications on the mobile devices of up to five designated recipients, or "followers," without the need to use the DexCom SHARE Cradle component. The mobile applications that comprise the DexCom Share System were classified by the FDA as Class II, exempt, due to the fact that these mobile applications were secondary displays of the associated G4 PLATINUM Receiver. With the mobile applications classified as Class II, exempt, DexCom must comply with certain general and special controls required by the FDA but does not need prior FDA approval to commercialize changes to the DexCom Share System. We began commercialization of the G4 PLATINUM with Share in the first quarter of 2015 and discontinued the DexCom SHARE Cradle. Effective April 24, 2015, our DexCom Share System also supports the Apple Watch ^TM , allowing the Apple Watch to utilize DexCom Share System functionality. Effective June 2, 2015, the mobile application for the Share System followers became available for Android devices.

DexCom G5 Mobile

On August 19, 2015, we received approval from the FDA for the DexCom G5 Mobile Continuous Glucose Monitoring System (the "G5 Mobile"). The G5 Mobile is designed to allow our transmitter to run the algorithm that has historically operated on the receiver, and to communicate directly to a patient's iPhone, iPod touch, or iPad mobile digital device to utilize DexCom Share System functionality. The G5 Mobile transmitter has a labeled useful life of three months.

We previously received CE Mark approval for, and in September, 2015, we launched the G5 Mobile in certain countries in Europe. In the countries and regions outside of the United States that recognize the CE Mark, the G5 Mobile does not require confirmatory finger sticks when making treatment decisions, although a minimum of two finger sticks a day remain necessary for calibration of the G5 Mobile.

Data from the G5 Mobile can be integrated with DexCom CLARITY ^TM , our next generation cloud-based reporting software, for personalized, easy-to-understand analysis of trends that may improve diabetes management.

Except with respect to the foregoing, the G5 Mobile is equivalent to the G4 PLATINUM System in technical and regulatory respects.

In-Hospital Product Line: GlucoClear ^®

To address the in-hospital critical care patient population, on November 10, 2008 we entered into a “Manufacturing and Supply Agreement,” a “Quality Agreement,” and a “Collaboration Agreement,” with Edwards to develop jointly and market a specific glucose monitoring product platform for the in-hospital critical care market. On October 30, 2009, the first generation

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blood-based in-vivo automated glucose monitoring system, which was branded the GlucoClear, received CE Mark approval for use by healthcare providers in the hospital. In January 2013, Edwards received CE Mark approval for the second generation system. In 2014, Edwards announced that it was likely to cease the commercialization of the GlucoClear system. On September 3, 2015, we and Edwards entered into a Restatement of License, Termination of Collaboration & Release Agreement (the “Restated Agreement”), terminating each of the “Manufacturing and Supply Agreement” and “Quality Agreement,” and amending in part the “Collaboration Agreement.” Pursuant to the Restated Agreement, DexCom and Edwards agreed to a mutual release of claims, including any activities related to further development obligations or milestone payments. In addition, the Restated Agreement provides Edwards with a fully paid-up, royalty-free license to use certain of DexCom’s intellectual property solely in the field of blood-based glucose monitoring within the hospital environment. Under the Restated Agreement, DexCom reserves the right to market and sell its interstitial continuous glucose monitoring technology in all settings, including within the hospital market. No payments are required by either party in connection with the Restated Agreement.

SweetSpot

Through our acquisition of SweetSpot in 2012, we have a software platform that enables our customers to aggregate and analyze data from certain diabetes devices and to share it with their healthcare providers. In November 2011, SweetSpot received 510(k) clearance from the FDA to market to clinics its initial cloud based data management service, which helps healthcare providers and patients see, understand and use blood glucose meter data to diagnose and manage diabetes. SweetSpot has also developed a data transfer service that is registered with the FDA as a Medical Device Data System . This data transfer service allows researchers to control the transfer of data from certain diabetes devices to research tools and databases according to their own research workflows.

Sensor Augmented Insulin Pumps

We are leveraging our technology platform to enhance the capabilities of our current products and to develop additional continuous glucose monitoring products. In 2008 and 2015 we entered into a development agreement with Animas Corporation (“Animas”) , a subsidiary of Johnson & Johnson, and in 2012 and 2015 we entered into development agreements with Tandem . The purpose of each of these development relationships is to integrate our technology into the insulin pump product offerings of the respective partner, enabling the partner's insulin pump to receive glucose readings from our transmitter and display this information on the pump's screen. The initial Animas insulin pump product augmented with our sensor technology has been branded the Vibe ^® , and received CE Mark approval in May 2011, which allows Animas to market the Vibe in the countries that recognize CE Mark approvals. In December 2014, Animas received FDA approval for the VIBE system in the United States and began commercializing this product in the first quarter of 2015. On September 9, 2015 Tandem announced it had received FDA approval of its t:slim G4™ Insulin Pump, a touch-screen pump that is integrated with our G4 PLATINUM system and is indicated for use by people 12 years of age or older who use insulin. Tandem began commercializing this product on September 23, 2015.

Future Products

We plan to develop future generations of technologies focused on improved performance and convenience and that will enable intelligent insulin administration. Over the longer term, we plan to develop networked platforms with open architecture, connectivity and transmitters capable of communicating with other devices and software systems. Our product development timelines are highly dependent on our ability to achieve clinical endpoints and regulatory and legal requirements and to overcome technology challenges, and our product development timelines may be delayed due to extended regulatory approval timelines, scheduling issues with patients and investigators, requests from institutional review boards, sensor performance and manufacturing supply constraints, among other factors. In addition, support of these clinical trials requires significant resources from employees involved in the production of our products, including research and development, manufacturing, quality assurance, and clinical and regulatory personnel. Even if our development and clinical trial efforts are successful, the FDA may not approve our products, and even if approved, we may not achieve acceptance in the marketplace by physicians and people with diabetes.

On August 10, 2015, we entered into a Collaboration and License Agreement (the “GLS Collaboration Agreement”) with Google Life Sciences LLC (“GLS”). Pursuant to the GLS Collaboration Agreement, we and GLS have agreed to jointly develop a series of next-generation continuous glucose monitoring products. The GLS Collaboration Agreement provides us with an exclusive license to use certain intellectual property of GLS related to the development, manufacture and commercialization of the products contemplated under the GLS Collaboration Agreement. The GLS Collaboration Agreement provides for the establishment of a joint steering committee, joint development committee and joint commercialization committee to oversee and coordinate the parties’ activities under the collaboration. We and GLS have agreed to make committee decisions by consensus.

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Commercial Operations

We have built a direct sales organization in the United States to call on endocrinologists, physicians and diabetes educators who can educate and influence patient adoption of continuous glucose monitoring. The approval by the FDA of a Pediatric Indication for our G4 PLATINUM system in February 2014 allows our sales organization to call on pediatric endocrinologists and pediatricians who can educate and influence adoption of continuous glucose monitoring by parents who have children aged two years or older with diabetes. We believe that focusing efforts on these participants is important given the instrumental role they each play in the decision-making process for diabetes therapy. To complement our direct sales efforts, we have entered into U.S. and international distribution arrangements that allow distributors to sell our products. We believe our direct, highly specialized and focused sales organization and our domestic and international distribution agreements are sufficient for us to support our sales efforts for at least the next twelve months.

As a medical device company, reimbursement from Medicare and private third-party healthcare payors is an important element of our success. Although the Centers for Medicare and Medicaid (“CMS”) released 2008 Alpha-Numeric Healthcare Common Procedure Coding System (“HCPCS”) codes applicable to each of the three components of our continuous glucose monitoring systems, to date, our approved products are not reimbursed by virtue of a national coverage decision by Medicare. It is not known when, if ever, Medicare will adopt a national coverage decision with respect to continuous glucose monitoring devices. Until any such coverage decision is adopted by Medicare, reimbursement of our products will generally be limited to those customers covered by third-party payors that have adopted coverage policies for continuous glucose monitoring devices that include our products. As of November 4, 2015 , the seven largest private third-party payors, in terms of the number of covered lives, have issued coverage policies for the category of continuous glucose monitoring devices. In addition, we have negotiated contracted rates with all seven of those third-party payors for the purchase of our G4 PLATINUM and G5 Mobile systems by their members. Many of these coverage policies reimburse for our products under durable medical equipment benefits, are restrictive in nature and require the patient to comply with extensive documentation and other requirements to demonstrate medical necessity under the policy. In addition, customers who are insured by payors that do not offer coverage for our devices will have to bear the financial cost of the products. We currently employ in-house reimbursement expertise to assist customers in obtaining reimbursement from private third-party payors. We also maintain a field-based reimbursement team charged with calling on third-party private payors to obtain coverage decisions and contracts. We have had formal meetings and have increased our efforts to create and liberalize coverage policies with third-party payors, including obtaining reimbursement for our products under pharmacy benefits, and expect to continue to do so in fiscal 2015. However, unless government and other third-party payors provide adequate coverage and reimbursement for our products, people with diabetes may not use them on a widespread basis.

We currently manufacture our products at our headquarters in San Diego, California. At September 30, 2015 , these facilities had more than 8,000 square feet of laboratory space and approximately 18,000 square feet of controlled environment rooms. In July 2012, the FDA completed an inspection of our facilities, and did not identify any observations or require any other types of corrective action. During a routine FDA post-approval facility inspection ending on November 7, 2013, the FDA issued a Form 483 with several observations regarding DexCom Medical Device Reporting (“MDR”) procedures and complaint reportability determinations. DexCom responded to the observations on November 26, 2013. On March 14, 2014, we received the 2014 Warning Letter from the FDA related to administrative deficiencies in filing MDR s. On April 2, 2014, we responded to the 2014 Warning Letter. On April 16, 2015, the FDA initiated an on-site inspection intended to both close out the 2014 Warning Letter and conduct our normal biennial quality system inspection. The FDA completed its inspection with no observations. On May 21, 2015, the FDA issued a letter closing the 2014 Warning Letter.

There are technical challenges to increasing manufacturing capacity, including FDA qualification of new manufacturing facilities, equipment design and automation, material procurement, problems with production yields, and quality control and assurance. We have focused significant effort on continual improvement programs in our manufacturing operations intended to improve quality, yields and throughput. We have made progress in manufacturing to enable us to supply adequate amounts of product to support our commercialization efforts, however we cannot guarantee that supply will not be constrained going forward. Additionally, the production of our continuous glucose monitoring systems must occur in a highly controlled and clean environment to minimize particles and other yield- and quality-limiting contaminants. Developing commercial-scale manufacturing facilities has and will continue to require the investment of substantial additional funds and the hiring and retaining of additional management, quality assurance, quality control and technical personnel who have the necessary manufacturing experience. Manufacturing is subject to numerous risks and uncertainties described in detail in “Risk Factors” below.

We manufacture our G4 PLATINUM and G5 Mobile systems with certain components supplied by outside vendors and other components that we manufacture internally. Key components that we manufacture internally include our wire-based sensors for the G4 PLATINUM and G5 Mobile systems. The remaining components and assemblies are purchased from outside vendors. We then assemble, test, package and ship the finished G4 PLATINUM and G5 Mobile systems, which include a reusable transmitter, a receiver, disposable sensors and our mobile applications including functionality related to the DexCom Share System.

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Product revenues are generated from the sale of durable continuous glucose monitoring systems (receivers and transmitters) and disposable sensors through a direct sales force in the United States as well as through distribution arrangements in the United States, Canada, Australia, New Zealand, and in portions of Europe, Asia, the Middle East, Latin America and Africa. The sensor is inserted by the user and is intended to be used continuously for up to seven days, after which it may be replaced with a new disposable sensor. Our transmitter is reusable until it reaches the end of its battery life.

The receiver is reusable. As we establish an installed base of customers using our products, we expect to generate an increasing portion of our revenues through recurring sales of our disposable sensors. We recognize product revenue generally upon shipment and our sales terms provide for customer payment at the time of order, payment due within negotiated contractual terms with insurance payors, or with the issuance of a purchase order or letter of credit for certain distributors and institutions.

As of September 30, 2015 , we had an accumulated deficit of $556.9 million . We expect our losses to continue as we proceed with our commercialization and research and development activities. We have financed our operations primarily through offerings of equity securities and debt. In November 2012, we entered into our Loan Agreement that provides for (i) a $15.0 million revolving line of credit and (ii) initially provided a total term loan of up to $20.0 million (the “Term Loan”). In accordance with the Loan Agreement , $7.0 million was advanced under the Term Loan at the funding date in November 2012, and up to $13.0 million in additional funds was initially available upon our request from June 1, 2013 to September 30, 2013 (the "Draw Period"). In August 2013, the Loan Agreement was amended to change the Draw Period for the additional funds under the Term Loan to January 1, 2014 through March 31, 2014. We did not borrow any additional funds and the Draw Period expired unused. There is currently $15.0 million available under the Loan Agreement . In July 2013, we were awarded a $4.0 million grant from the Helmsley Trust to accelerate the development of our Gen 6 Sensor . As of September 30, 2015 , we have received the full $4.0 million grant funds from the Helmsley Trust.

Financial Operations

Revenue

We sell our durable systems and disposable units through a direct sales force in the United States and through distribution arrangements in the United States, Canada, Australia, New Zealand, and in portions of Europe, Asia, the Middle East, Latin America and Africa. We have contracts with Stocking Distributors and Drop-Ship Distributors . We expect that revenues we generate from the sales of our products will fluctuate from quarter to quarter. Between 2008 and 2012, we entered into joint development and collaboration agreements with Animas and Tandem , as well as other third parties under agreements that have since expired or been terminated, under which we recognized development grant and other revenue received pursuant to each agreement ratably over the term of the development period. We recognize development milestones associated with each agreement as revenue upon achievement of each milestone if the milestone is considered substantive.

Cost of Sales

Product cost of sales includes direct labor and materials costs related to each product sold or produced, including assembly, test labor and scrap, as well as factory overhead supporting our manufacturing operations. Factory overhead includes facilities, material procurement and control, manufacturing engineering, quality assurance, supervision and management. These costs are primarily salary, fringe benefits, share-based compensation, facility expense, supplies and purchased services. A portion of our costs are currently fixed due to our moderate level of production volumes compared to our potential capacity. All of our manufacturing costs are included in product cost of sales. Development and other cost of sales consists primarily of salaries, fringe benefits, facility expense, and supplies directly attributable to our development or service contracts.

Research and Development

Our research and development expenses primarily consist of engineering and research expenses related to our continuous glucose monitoring technology, clinical trials, regulatory expenses, quality assurance programs, materials and products for clinical trials. Research and development expenses are primarily related to employee compensation, including salary, fringe benefits, share-based compensation, and temporary employee expenses. We also incur significant expenses to operate our clinical trials including clinical site reimbursement, clinical trial product and associated travel expenses. Our research and development expenses also include fees for design services, contractors and development materials.

Selling, General and Administrative

Our selling, general and administrative expenses primarily consist of salary, fringe benefits and share-based compensation for our executive, financial, sales, marketing and administrative functions. Other significant expenses include trade show expenses, sales samples, insurance, professional fees for our outside legal counsel and independent auditors, litigation expenses, patent application expenses and consulting expenses.

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Results of Operations

Quarter Ended September 30, 2015 Compared to September 30, 2014

Revenue, Cost of Sales and Gross Profit

Product revenues increased $36.3 million to $104.2 million for the three months ended September 30, 2015 compared to $67.9 million for the three months ended September 30, 2014 based primarily on increased sales volume of our disposable sensors due to the continued growth of our installed base of customers using our G4 PLATINUM and G5 Mobile systems and durable systems to both new and existing customers. Revenue attributable to our disposable sensors and durable systems was approximately 70% and 30%, respectively, of total product revenue, for each of the three months ended September 30, 2015 and 2014 . There were no sales of the SEVEN PLUS during the three months ended September 30, 2015 . Sales of the SEVEN PLUS represented less than 1% of our revenues for the three months ended September 30, 2014 . In conjunction with the FDA approval and launch of the G5 Mobile during the third quarter of 2015, the product gross profit for the three months ended September 30, 2015 included a revenue deferral of $0.8 million and additional cost of goods sold of $0.6 million related to an upgrade program.

Product cost of sales increased $8.7 million to $30.5 million for the three months ended September 30, 2015 compared to $21.8 million for the three months ended September 30, 2014 , primarily due to increased sales volume. The product gross profit increased $27.6 million to $73.7 million for the three months ended September 30, 2015 compared to $46.1 million for the same period in 2014 , primarily due to increased revenue.

Revenue from products shipped to our Drop-Ship Distributors ’ customers was $9.3 million , or 9% , of our total revenues for the three months ended September 30, 2015 compared to $6.5 million , or 9% , of our total revenues for the three months ended September 30, 2014 . Revenue from products shipped to Stocking Distributors was $68.1 million , or 65% , of our total revenues for the three months ended September 30, 2015 compared to $40.0 million , or 58% , of our total revenues for the three months ended September 30, 2014 .

Development grant and other revenues were $1.0 million and $1.1 million for the three months ended September 30, 2015 and 2014 , respectively, primarily attributable to milestone payments related to our development agreement with Tandem. We did not incur any development and other cost of sales during the three months ended September 30, 2015 and 2014 .

Research and Development. Research and development expense increased $46.3 million to $64.8 million for the three months ended September 30, 2015 compared to $18.5 million for the three months ended September 30, 2014 . The increase was primarily due to the upfront fee related to GLS Collaboration Agreement , as well as additional headcount and costs to support development of future products. Significant elements of the increase in research and development costs included $36.5 million in non-cash expense associated with the issuance of 404,591 shares in August 2015 related to the GLS Collaboration Agreement , $3.3 million in additional share-based compensation driven by higher grant date fair value of awards as a result of our increasing stock price, and $2.0 million in additional salaries, bonus and payroll related costs.

Selling, General and Administrative. Selling, general and administrative expense increased $18.6 million to $52.3 million for the three months ended September 30, 2015 compared to $33.7 million for the three months ended September 30, 2014 . The increase was primarily due to higher headcount related selling costs and marketing costs to support revenue growth and the continued commercialization of our products. Significant elements of the increase in selling, general, and administrative expenses included $4.6 million in additional share-based compensation costs driven by higher grant date fair value of awards as a result of our increasing stock price, $3.6 million in additional salaries, bonus, and payroll related costs, and $3.3 million in additional marketing costs.

Interest Expense. Interest expense was $0.1 million for the three months ended September 30, 2015 compared to $0.2 million for the three months ended September 30, 2014 and is related to our Loan Agreement.

Nine Months Ended September 30, 2015 Compared to September 30, 2014

Revenue, Cost of Sales and Gross Profit

Product revenues increased $97.1 million to $269.9 million for the nine months ended September 30, 2015 compared to $172.8 million for the nine months ended September 30, 2014 based primarily on increased sales volume of our disposable sensors due to the continued growth of our installed base of customers using our G4 PLATINUM and G5 Mobile systems and durable systems to both new and existing customers. Revenue attributable to our disposable sensors and durable systems was approximately 70% and 30%, respectively, of total product revenue, for each of the nine months ended September 30, 2015 and 2014 . There were no sales of the SEVEN PLUS during the nine months ended September 30, 2015 . Sales of the SEVEN PLUS represented less than 1% of our revenues for the nine months ended September 30, 2014 .

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Product cost of sales increased $26.6 million to $84.0 million for the nine months ended September 30, 2015 compared to $57.4 million for the nine months ended September 30, 2014 primarily due to increased sales volume. The product gross profit of $185.9 million for the nine months ended September 30, 2015 increased $70.5 million compared to $115.4 million for the same period in 2014 , primarily due to increased revenue. In conjunction with the FDA approval and launch of the G4 PLATINUM with Share during the first quarter of 2015, the product gross profit for the nine months ended September 30, 2015 included $2.7 million in additional cost of goods sold, primarily related to $2.0 million in excess and obsolete inventory and free product delivered as part of our upgrade program. In conjunction with the FDA approval and launch of the G5 Mobile during the third quarter of 2015, the product gross profit for the nine months ended September 30, 2015 included a revenue deferral of $0.8 million and additional cost of goods sold of $0.6 million related to an upgrade program.

Revenue from products shipped to our Drop-Ship Distributors ’ customers was $26.3 million , or 10% , of our total revenues for the nine months ended September 30, 2015 compared to $19.9 million , or 11% , of our total revenues for the nine months ended September 30, 2014 . Revenue from products shipped to Stocking Distributors was $169.5 million , or 63% , of our total revenues for the nine months ended September 30, 2015 compared to $98.6 million , or 56% , of our total revenues for the nine months ended September 30, 2014 .

Development grant and other revenues decreased $0.8 million to $1.3 million for the nine months ended September 30, 2015 compared to $2.1 million for the nine months ended September 30, 2014 . We did not incur any development and other cost of sales during the nine months ended September 30, 2015 . Development and other cost of sales was $0.6 million during the nine months ended September 30, 2014 . The decrease in development grant and other revenues during the nine months ended September 30, 2015 was primarily due to the completion of development activities with Edwards . The decrease in costs associated with development was primarily due to fewer development obligations during the period with respect to our collaboration and development arrangements.

Research and Development. Research and development expense increased $61.2 million to $109.0 million for the nine months ended September 30, 2015 , compared to $47.8 million for the nine months ended September 30, 2014 . The increase was primarily due to the upfront fee related to GLS Collaboration Agreement , as well as additional headcount and costs to support development of future products. Significant elements of the increase in research and development costs included $36.5 in non-cash expense associated with the issuance of 404,591 shares in August 2015 related to the GLS Collaboration Agreement , $8.4 million in additional share-based compensation driven by higher grant date fair value of awards as a result of our increasing stock price, and $8.1 million in additional salaries, bonus and payroll related costs.

Selling, General and Administrative. Selling, general and administrative expense increased $44.7 million to $136.9 million for the nine months ended September 30, 2015 , compared to $92.2 million for the nine months ended September 30, 2014 . The increase was primarily due to higher headcount related selling costs and marketing costs to support revenue growth and the continued commercialization of our products. Significant elements of the increase in selling, general, and administrative expenses included $12.7 million in additional share-based compensation costs driven by higher grant date fair value of awards as a result of our increasing stock price, $10.6 million in additional salaries, bonus, and payroll related costs, $6.2 million in additional marketing costs, and $2.2 million in additional facilities costs.

Interest Expense. Interest expense was $0.4 million for the nine months ended September 30, 2015 compared to $0.6 million for the nine months ended September 30, 2014 and is related to our Loan Agreement.

Liquidity and Capital Resources

We have incurred losses since our inception in May 1999. As of September 30, 2015 , we had an accumulated deficit of $556.9 million and had working capital of $144.9 million . Our cash, cash equivalents and marketable securities totaled $113.3 million . To date, we have funded our operations primarily through offerings of equity securities and debt, and the sales of our products.

In July 2013, we were awarded the Helmsley Grant from the Helmsley Trust to accelerate the development of our Gen 6 Sensor . The funding was milestone based and was contingent upon our meeting specific development milestones related to the Gen 6 Sensor over a period of several years. All such milestones have now been met. Upon the successful commercialization of the Gen 6 Sensor , we are obligated to either (1) make royalty payments of up to $2.0 million per year for four years, or (2) at our sole election, make a one-time $6.0 million royalty payment. As of September 30, 2015 , we have received the full $4.0 million of the Helmsley Grant funds.

Cash Flow Summary

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(In millions)	Nine Months Ended September 30,						Change
	2015			2014
Net cash provided by operating activities	$	37.7		$	15.2		$	22.5
Net cash used in investing activities	$	(38.8	)	$	(12.1	)	$	(26.7	)
Net cash provided by financing activities	$	14.6		$	16.9		$	(2.3	)

Net Cash Provided by Operating Activities . The increase in cash provided by operations was primarily due to $62.8 million in higher non-cash charges primarily comprised of non-cash expense associated with the issuance of 404,591 shares in August 2015 related to the GLS Collaboration Agreement , share-based compensation, partially offset by an additional $4.9 million cash outflow from changes in operating assets and liabilities. The main drivers in the change in operating assets and liabilities included increases in accounts receivable, inventory and accounts payable and accrued liabilities, all as a result of our growth.

Net Cash Used in Investing Activities. The change in cash used in investing activities was primarily due to a $25.1 million increase in cash used to purchase marketable securities, and by the use of $21.7 million to purchase equipment to support manufacturing improvements and information technology infrastructure for the nine months ended September 30, 2015 , compared to $11.6 million to purchase equipment for the nine months ended September 30, 2014 , partially offset by a $9.0 million increase in proceeds from the maturity of marketable securities.

Net Cash Provided by Financing Activities . The decrease in cash provided by financing activities was due to $2.2 million decrease in proceeds from the issuance of common stock pursuant to the exercise of then-outstanding stock options for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 .

Operating Capital and Capital Expenditure Requirements

We anticipate that we will continue to incur net losses as we incur expenses and expand the commercialization of our approved products, develop additional continuous glucose monitoring products, and expand our marketing, manufacturing and corporate infrastructure.

We believe that our cash, cash equivalents, marketable securities balances, and projected cash contributions from our commercial operations will be sufficient to meet our anticipated cash requirements with respect to the continued scale-up of our commercialization activities, research and development activities, including clinical trials, the expansion of our marketing, manufacturing and corporate infrastructure, and to meet our other anticipated cash needs through at least September 30, 2016 . If our available cash, cash equivalents and marketable securities are insufficient to satisfy our liquidity requirements, or if we develop additional products or new markets for our existing products, we may seek to sell additional equity or debt securities or obtain an additional credit facility. The sale of additional equity and debt securities may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all. Additionally, we cannot guarantee that we will be successful in obtaining additional cash contributions from future partnership arrangements. Our ability to transition to, and maintain profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure. If events or circumstances occur such that we do not meet our operating plan as expected, or if we are unable to obtain additional financing, we may be required to reduce planned increases in compensation related expenses or other operating expenses related to research, development, and commercialization activities, which could have an adverse impact on our ability to achieve our intended business objectives.

Because of the numerous risks and uncertainties associated with the development of continuous glucose monitoring technologies, we are unable to estimate the exact amounts of capital outlays and operating expenditures associated with our current and anticipated clinical trials. Our future funding requirements will depend on many factors, including, but not limited to:


•	the revenue generated by sales of our approved products and other future products;


•	the expenses we incur in manufacturing, developing, selling and marketing our products;


•	the quality levels of our products and services;


•	the third-party reimbursement of our products for our customers;


•	our ability to efficiently scale our manufacturing operations to meet demand for our current and any future products;


•	the costs, timing and risks of delays of additional regulatory approvals;

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•	the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;


•	the rate of progress and cost of our clinical trials and other development activities;


•	the success of our research and development efforts;


•	the emergence of competing or complementary technological developments;


•	the terms and timing of any collaborative, licensing and other arrangements that we may establish; and


•	the acquisition of businesses, products and technologies and our ability to integrate and manage any acquired businesses, products and technologies, including without limitation, SweetSpot .

Contractual Obligations

We are party to various purchase arrangements related to components used in manufacturing and research and development activities. As of September 30, 2015 , we had firm purchase commitments with certain vendors totaling approximately $43.2 million due within one year. There are no material purchase commitments due beyond one year.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet activities.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with U.S. GAAP . The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Our accounting policies and estimates which are most critical to a full understanding and evaluation of our reported financial results are described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There were no material changes to our critical accounting policies during the nine months ended September 30, 2015 .

Recent Accounting Guidance

In May 2014, the FASB issued authoritative guidance for Revenue from Contracts with Customers, to supersede nearly all existing revenue recognition guidance under U.S. GAAP . The core principle of the guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five step process to achieve this core principle and it is possible when the five step process is applied, more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The updated standard permits the use of either the retrospective or cumulative effect transition method and is effective for us in our first quarter of fiscal 2018. Early adoption is not permitted. We have not yet selected a transition method and we are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments in a variety of securities, including money market funds, U.S. Treasury debt and corporate debt securities. Due to the short-term nature of our investments, we believe that we have no material exposure to interest rate risk.

Foreign Currency Risk

We have only limited business transactions in foreign currencies. We do not currently engage in hedging or similar transactions to reduce our foreign currency risks. We believe we have no material exposure to risk from changes in foreign currency exchange rates at this time. We will continue to monitor and evaluate our internal processes relating to foreign currency exchange, including the potential use of hedging strategies.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 require public companies to maintain “disclosure controls and procedures,” which are defined to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and timely communicated to management, including our Chief Executive Officer and Chief Financial Officer, recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures. Based on their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective for this purpose.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Limitation on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART II OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

We are subject to additional various claims, complaints and legal actions that arise from time to time in the normal course of business. In addition, from time to time, we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters. Other than as described above, we do not believe we are party to any currently pending legal proceedings, the outcome of which could have a material adverse effect on our operations or financial position. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.


ITEM 1A.	RISK FACTORS

Factors that May Affect our Financial Condition and Results of Operations

Risks Related to Our Business

We have incurred losses since inception and anticipate that we will incur continued losses in the future.

We have incurred net losses in each year since our inception in May 1999, including a net loss of $59.1 million for the nine months ended September 30, 2015 . As of September 30, 2015 , we had an accumulated deficit of $556.9 million . We have financed our operations primarily through private and public offerings of equity securities and debt, and the sales of our products. We have devoted substantial resources to:


•	research and development relating to our continuous glucose monitoring systems;


•	sales and marketing and manufacturing expenses associated with the commercialization of our G4 PLATINUM and G5 Mobile systems; and


•	expansion of our workforce.

We expect our research and development expenses to increase in connection with our clinical trials and other development activities related to our products, including our next generation sensors, transmitters and sensor augmented insulin pump and other collaborations. We also expect that our general and administrative expenses will continue to increase due to the additional operational and regulatory burdens applicable to public healthcare and medical device companies. As a result, we expect we may continue to incur operating losses in the future. These losses, among other things, have had and will continue to have an adverse effect on our stockholders' equity.

If we are unable to continue the development of an adequate sales and marketing organization, or if our direct sales organization is not successful, we may have difficulty achieving market awareness and selling our products.

To achieve commercial success for the G4 PLATINUM and G5 Mobile systems and our future products, we must continue to develop and grow our sales and marketing organization and enter into partnerships or other arrangements to market and sell our products. Developing and managing a direct sales organization is a difficult, expensive and time consuming process. To be successful we must:


•	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.

We currently employ a direct sales force to market our products in the United States. In the United States, our sales force calls directly on healthcare providers and people with diabetes throughout the country to initiate sales of our products. Our sales organization competes with the experienced, larger and well-funded marketing and sales operations of our competitors. We may not be able to successfully manage our dispersed sales force, or increase our product sales at acceptable rates.

We have also entered into distribution arrangements to leverage existing distributors already engaged in the diabetes marketplace. Our U.S. distribution partnerships are focused on accessing underrepresented regions and, in some instances, third-party payors that contract exclusively with distributors. Our European and other international distribution partners call directly on healthcare providers to market and sell our products in Canada, Europe, Australia, New Zealand, Asia, the Middle East, Latin America and Africa. Because of the competition for their services, we may be unable to partner with or retain

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additional qualified distributors. Further, we may not be able to enter into agreements with distributors on commercially reasonable terms, if at all.

We may require additional funding to continue the commercialization of our G4 PLATINUM and G5 Mobile systems, or the development and commercialization of our future generation and other continuous glucose monitoring systems, including our sensor augmented insulin pump systems developed in collaboration with Animas and Tandem and our collaboration with Google Life Sciences.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts on commercializing our products, including growth of our manufacturing capacity, and on research and development, including conducting clinical trials for our next generation ambulatory continuous glucose monitoring sensors and systems. For the nine months ended September 30, 2015 , we generated $37.7 million in net cash from operating activities, compared to $15.2 million for the same period in 2014 , and as of September 30, 2015 , we had working capital of $144.9 million which included $113.3 million in cash, cash equivalents and short-term marketable securities. We expect that our cash generated by operations will increase in each of the next several years, and, although we have the ability to borrow up to an additional $15.0 million pursuant to the Loan Agreement we entered into with Silicon Valley Bank and Oxford Finance in November 2012, we may need additional funds to continue the commercialization of our current products and to develop and commercialize our next generation sensors and systems. Additional financing may not be available on a timely basis on terms acceptable to us, or at all. Any additional financing may be dilutive to stockholders or may require us to grant a lender a security interest in our assets. The amount of funding we may need will depend on many factors, including:


•	the revenue generated by sales of our products and other future products;


•	the costs, timing and risks of delay of additional regulatory approvals;


•	the expenses we incur in manufacturing, developing, selling and marketing our products;


•	our ability to scale our manufacturing operations to meet demand for our current and any future products;


•	the costs to produce our continuous glucose monitoring systems;


•	the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;


•	the rate of progress and cost of our clinical trials and other development activities;


•	the success of our research and development efforts;


•	the emergence of competing or complementary technological developments;


•	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.

If adequate funds are not available, we may not be able to commercialize our products at the rate we desire and we may have to delay development or commercialization of our other products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. We also may have to reduce sales, marketing, customer support or other resources devoted to our products. Any of these factors could harm our financial condition.

If we are unable to establish adequate sales, marketing and distribution capabilities or enter into and maintain arrangements with third parties to sell, market and distribute our products, our business may be harmed.

We have entered into distribution arrangements to leverage established distributors already engaged in the diabetes marketplace. We have entered into distribution agreements with Byram and Edgepark , pursuant to which we generated approximately 19% and 10% , respectively, of our total revenue during the nine months ended September 30, 2015 . We cannot guarantee that these relationships will continue or that we will be able to maintain this volume of sales from these relationships in the future. A substantial decrease or loss of these sales could have a material adverse effect on our operating performance. Additionally, to the extent that we enter into additional arrangements with third parties to perform sales, marketing, distribution and billing services in the United States, Europe or other countries, our product margins could be lower than if we directly marketed and sold our products. Furthermore, to the extent that we enter into co-promotion or other marketing and sales arrangements with other companies, any revenue received will depend on the skills and efforts of others, and we cannot predict whether these efforts will be successful. In addition, market acceptance of our products by physicians and people with diabetes in Europe or other countries will largely depend on our ability to demonstrate their relative safety, efficacy, reliability, cost-effectiveness and ease of use. If we are unable to do so, we may not be able to generate product revenue from our sales efforts in Europe or other countries. Finally, if we are unable to establish and maintain adequate sales, marketing and distribution capabilities, independently or with others, we may not be able to generate adequate product revenue and may not become profitable.

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Although many third-party payors have adopted some form of coverage policy on continuous glucose monitoring devices, our products do not yet have simple broad-based contractual coverage with most third-party payors and we frequently experience administrative challenges in obtaining reimbursement for our customers. If we are unable to obtain adequately broad reimbursement at acceptable prices for our products or any future products from third-party payors, we will be unable to generate significant revenue.

As a medical device company, reimbursement from Medicare and private third-party healthcare payors is an important element of our success. Although CMS in 2008 released HCPCS codes applicable to each of the three components of our continuous glucose monitoring systems to date, our approved products are not reimbursed by virtue of a national coverage decision by Medicare. It is not known when, if ever, Medicare will adopt a national coverage decision with respect to continuous glucose monitoring devices. Until any such coverage decision is adopted by Medicare, reimbursement of our products will generally be limited to those people with diabetes covered by third-party payors that have adopted policies for continuous glucose monitoring devices allowing for coverage of these devices if certain conditions are met. As of November 4, 2015 , the seven largest private third-party payors, in terms of the number of covered lives, have issued coverage policies for the category of continuous glucose monitoring devices. In addition, we have negotiated contracted rates with all seven of those third-party payors for the purchase of our products by their members. However, people with diabetes without insurance that covers our products will have to bear the financial cost of them. In the United States, people with diabetes using existing single-point finger stick devices are generally reimbursed all or part of the product cost by Medicare or other third-party payors. The commercial success of our products in both domestic and international markets will substantially depend on whether timely and comprehensive third-party reimbursement is widely available for individuals that use them. While many third-party payors have adopted some form of coverage policy on continuous glucose monitoring devices, typically, though not exclusively, under durable medical equipment benefits, those coverage policies frequently require significant medical documentation in order for policy holders to obtain reimbursement, and as a result, we have difficulty improving the efficiency of our customer service group. In addition, Medicare, Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new medical devices, and, as a result, they may not cover or provide adequate payment for our products. In order to obtain additional reimbursement arrangements, including under pharmacy benefits, we may have to agree to a net sales price lower than the net sales price we might charge in other sales channels. Our revenue may be limited by the continuing efforts of government and third-party payors to contain or reduce the costs of healthcare through various increasingly sophisticated means, such as requiring prospective reimbursement and second opinions, purchasing in groups, or redesigning benefits. Furthermore, we are unable to predict what effect the current or any future healthcare reform will have on our business, or the effect these matters will have on our customers. Our dependence on the commercial success of the G4 PLATINUM and G5 Mobile systems makes us particularly susceptible to any cost containment or reduction efforts. Accordingly, unless government and other third-party payors provide adequate coverage and reimbursement for the G4 PLATINUM and G5 Mobile systems, people without coverage who have diabetes may not use our products.

In some foreign markets, pricing and profitability of medical devices are subject to government control. In the United States, we expect that there will continue to be federal and state proposals for similar controls. Also, the trends toward managed healthcare in the United States and proposed legislation intended to reduce the cost of government insurance programs could significantly influence the purchase of healthcare services and products and may result in lower prices for our products or the exclusion of our products from reimbursement programs.

We may never receive approval or clearance from the FDA and other governmental agencies to market our next generation ambulatory system, expanded indications for use of current and future generation ambulatory systems, future SweetSpot software platforms, or any other continuous glucose monitoring system or related component under development.

Our continuous glucose monitoring systems are classified by the FDA as premarket approval, or PMA , medical devices. The PMA process requires us to prove the safety and efficacy of our ambulatory system to the FDA 's satisfaction. This process can be expensive, prolonged and uncertain, requires detailed and comprehensive scientific and human clinical data, and may never result in the FDA granting a PMA . Any future general ambulatory system or expanded indications for use of current and future generation ambulatory systems will require approval of the applicable regulatory authorities. We intend to seek either 510(k) clearances or PMA approvals for certain changes and modifications to SweetSpot 's existing software platform, but cannot predict when, if ever, those changes and modifications will be approved.

The FDA can refuse to grant a 510(k) clearance or delay, limit or deny approval of a PMA application or supplement for many reasons, including:


•	the system may not be deemed by the FDA to be substantially equivalent to appropriate predicate devices;


•	the system 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;

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•	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.

Even if approved or cleared by the FDA or other regulatory agencies, future generations of our ambulatory system, expanded indications for use of current and future generation ambulatory systems, SweetSpot , or any other continuous glucose monitoring system under development, may not be approved or cleared for the indications that are necessary or desirable for successful commercialization. We may not obtain the necessary regulatory approvals or clearances to market these continuous glucose monitoring systems in the United States or outside of the United States. Any delay in, or failure to receive or maintain, approval or clearance for the next generation of our ambulatory system could prevent us from generating revenue from these products or achieving profitability. The uncertain timing of regulatory approvals for future generations of our ambulatory products could subject our current inventory to excess or obsolescence charges, which could have an adverse effect on our operating results.

If we are unable to successfully complete the pre-clinical studies or clinical trials necessary to support additional PMA or 510(k) applications or supplements, we may be unable to commercialize our continuous glucose monitoring systems under development, which could impair our financial position.

To support these and any future additional PMA or 510(k) applications or supplements, we together with our partners, must successfully complete pre-clinical studies, bench-testing, and clinical trials that will demonstrate that the product is safe and effective. Product development, including pre-clinical studies and clinical trials, is a long, expensive and uncertain process and is subject to delays and failure at any stage. Furthermore, the data obtained from the studies and trials may be inadequate to support approval of a PMA or 510(k) application and the FDA may request additional clinical data in support of those applications, which may result in significant additional clinical expenses and may delay product approvals. While we have in the past obtained, and may in the future obtain, an investigational device exemption (“IDE”) prior to commencing clinical trials for our continuous glucose monitoring systems, FDA approval of an IDE application permitting us to conduct testing does not mean that the FDA will consider the data gathered in the trial to be sufficient to support approval of a PMA or 510(k) application or supplement, even if the trial's intended safety and efficacy endpoints are achieved. Additionally, since 2009, the FDA has significantly increased the scrutiny applied to its oversight of companies subject to its regulations, including 510(k) and PMA submissions, by hiring new investigators and increasing the frequency and scope of its inspections of manufacturing facilities. The FDA 's Center for Devices and Radiological Health is contemplating significant changes to the 510(k) process, which could complicate the product approval process for certain of our and our partner’s products, although we cannot predict the effect of such procedural changes and cannot ascertain if such changes will have a substantive impact on the approval of our products or our partners’ products. If we fail to adequately respond to any changes to the 510(k) submission process and associated matters, our business may be adversely impacted.

Unexpected changes to the FDA or foreign regulatory approval processes could also delay or prevent the approval of our products submitted for review. The data contained in our submission, including data drawn from our clinical trials, may not be sufficient to support approval of our products or additional or expanded indications. Medical device company stock prices have declined significantly in certain circumstances where companies have failed to meet expectations in regards to the timing of regulatory approval. If the FDA 's response causes product approval delays, or is not favorable for any of our products, our stock price could decline substantially.

The commencement or completion of any of our clinical trials may be delayed or halted, or be inadequate to support approval of a PMA or 510(k) application or supplement, for numerous reasons, including, but not limited to, the following:


•	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;

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•	DexCom 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 DexCom or the study that the FDA deems to make the study results unreliable, or DexCom 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 applicable to our trial protocols;


•	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.

The results of pre-clinical studies do not necessarily predict future clinical trial results, and prior clinical trial results might not be repeated in subsequent clinical trials. Additionally, the FDA may disagree with our interpretation of the data from our pre-clinical studies and clinical trials, or may find the clinical trial design, conduct or results inadequate to prove safety or efficacy, and may require us to pursue additional pre-clinical studies or clinical trials, which could further delay the approval of our products. If we are unable to demonstrate the safety and efficacy of our products in our clinical trials to the FDA 's satisfaction, we will be unable to obtain regulatory approval to market our products in the United States. In addition, the data we collect from our current clinical trials, our pre-clinical studies and other clinical trials may not be sufficient to support FDA approval, even if our endpoints are met.

We may also conduct clinical studies to demonstrate the relative or comparative effectiveness of continuous glucose monitoring devices for the treatment of diabetes. These types of studies, which often require substantial investment and effort, may not show adequate, or any, clinical benefit for the use of continuous glucose monitoring devices.

We conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could become subject to penalties or be required to make significant changes to our operations.

The healthcare industry generally, and our business specifically, is subject to extensive foreign, federal, state and local laws and regulations, including those relating to:


•	the pricing of our products and services;


•	the distribution of our products and services;


•	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;


•	the characteristics and quality of our products and services;


•	confidentiality, maintenance and security issues associated with medical records and individually identifiable health and other personal information;


•	medical device reporting;


•	prohibitions on kickbacks, also referred to as anti-kickback laws or regulations;


•	any scheme to defraud any healthcare benefit program;


•	physician payment disclosure requirements;


•	personal health information;


•	privacy;


•	data protection;


•	mobile communications;


•	false claims; and


•	professional licensure.

These laws and regulations are extremely complex and, in some cases, still evolving. If our operations are found to violate any of the federal, state or local laws and regulations which govern our activities, we may be subject to litigation, government enforcement actions, the applicable penalty associated with the violation, including civil and criminal penalties,

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damages, fines or curtailment of our operations. The risk of being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's time and attention from the operation of our business.

The FDA , the Office of Inspector General for the Department of Health and Human Services, the Department of Justice, states' attorneys general and other governmental authorities actively enforce the laws and regulations discussed above. In the United States, medical device manufacturers have been the target of numerous government prosecutions and investigations alleging violations of law, including claims asserting impermissible off-label promotion of pharmaceutical products, payments intended to influence the referral of federal or state healthcare business, and submission of false claims for government reimbursement. As part of our compliance program, we have reviewed our sales contracts and marketing materials and practices to reduce the risk of non-compliance with these federal and state laws, and inform employees and marketing representatives of the Anti-Kickback Statute and their obligations thereunder. However, we cannot rule out the possibility that the government or other third parties could interpret these laws differently and challenge our practices under one or more of these laws.

In addition, the laws and regulations impacting or affecting our business may change significantly in the future. Any new laws or regulations may adversely affect our business. A review of our business by courts or regulatory authorities may result in a determination that could adversely affect our operations. Also, the regulatory environment applicable to our business may change in a way that restricts or adversely impacts our operations.

We are not aware of any governmental investigations involving our executives or us. However, any future investigations of our executives, our managers or us could result in significant liabilities or penalties to us, as well as adverse publicity.

If our manufacturing capabilities are insufficient to produce an adequate supply of product at appropriate quality levels, our growth could be limited and our business could be harmed.

We currently have limited resources, facilities and experience in commercially manufacturing sufficient quantities of product to meet expected demand. In the past, we have had difficulty scaling our manufacturing operations to provide a sufficient supply of product to support our commercialization efforts. From time to time, we have also experienced brief periods of backorder and, at times, have had to limit the efforts of our sales force to introduce our products to new customers. We have focused significant effort on continual improvement programs in our manufacturing operations intended to improve quality, yields and throughput. We have made progress in manufacturing to enable us to supply adequate amounts of product to support our commercialization efforts; however, we cannot guaranty that supply will not be constrained in the future. In order to produce our products in the quantities we anticipate will be necessary to meet market demand, we will need to increase our manufacturing capacity by a significant factor over the current level. In addition, we will have to modify our manufacturing design, reliability and process if and when our next generation sensor technologies are approved and commercialized. There are technical challenges to increasing manufacturing capacity, including equipment design and automation, materials procurement, manufacturing site expansion, problems with production yields and quality control and assurance. Developing commercial-scale manufacturing facilities will require the investment of substantial additional funds and the hiring and retention of additional management, quality assurance, quality control and technical personnel who have the necessary manufacturing experience. Also, the scaling of manufacturing capacity is subject to numerous risks and uncertainties, and may lead to variability in product quality or reliability, increased construction timelines, as well as resources required to design, install and maintain manufacturing equipment, among others, all of which can lead to unexpected delays in manufacturing output. In addition, any changes to our manufacturing processes may require FDA submission and approval and our facilities may have to undergo additional inspections by the FDA and corresponding state agencies. We may be unable to adequately maintain, develop and expand our manufacturing process and operations or obtain FDA and state agency approval of our facilities in a timely manner or at all. If we are unable to manufacture a sufficient supply of our current products or any future products for which we may receive approval, maintain control over expenses or otherwise adapt to anticipated growth, or if we underestimate growth, we may not have the capability to satisfy market demand and our business will suffer.

Additionally, the production of our products must occur in a highly controlled and clean environment to minimize particles and other yield- and quality-limiting contaminants. Weaknesses in process control or minute impurities in materials may cause a substantial percentage of defective products. If we are not able to maintain stringent quality controls, or if contamination problems arise, our clinical development and commercialization efforts could be delayed, which would harm our business and our results of operations.

In the future, if our products experience a material defect or error, this could result in loss or delay of revenues, delayed market acceptance, damaged reputation, diversion of development resources, legal claims, increased insurance costs or increased service and warranty costs, any of which could harm our business. Such defects or errors could also prompt us to

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amend certain warning labels or narrow the scope of the use of our products, either of which could hinder our success in the market.

Since our commercial launch in 2006, we have experienced periodic field failures related to our products, including reports of sensor errors, sensor failures, broken sensors, receiver malfunctions and transmitter failures. To comply with the FDA 's medical device reporting requirements, we have filed reports of all such broken or lodged sensors. Although we believe we have taken and are taking appropriate actions aimed at reducing or eliminating field failures, we cannot guaranty that we will not experience additional failures going forward.

Our manufacturing operations depend upon third-party suppliers, making us vulnerable to supply problems and price fluctuations, which could harm our business.

We rely on OnCore Manufacturing Services to manufacture and supply circuit boards for our receiver and transmitter; we rely on ON Semiconductor Corp. to manufacture and supply the application specific integrated circuit that is incorporated into the transmitter; we rely on DSM PTG, Inc. to manufacture certain polymers used to synthesize our polymeric biointerface membranes for our products; and we rely on The Tech Group to supply our injection molded components. Each of these suppliers is a single-source supplier. In some cases, our agreements with these and our other suppliers can be terminated by either party upon short notice. Our contract manufacturers also rely on single-source suppliers to manufacture some of the components used in our products. Our manufacturers and suppliers may encounter problems during manufacturing for a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, failed FDA audit or inspection, equipment malfunction and environmental factors, any of which could delay or impede their ability to meet our demand. If our single-source suppliers shift their manufacturing and assembly sites to other locations, these new sites may require additional FDA approval and inspection. Should any such FDA approval be delayed, or such inspection requires corrective action, our supply of critical components may be constrained or unavailable. Our reliance on these outside manufacturers and suppliers also subjects us to other risks that could harm our business, including:


•	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.

We may not be able to quickly establish additional or replacement suppliers, particularly for our single-source components, in part because of the FDA inspection and approval process and because of the custom nature of various parts we design. Any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competitive products.

Potential long-term complications from our products or other continuous glucose monitoring systems under development may not be revealed by our clinical experience to date.

Based on our experience, complications from use of our products may include sensor errors, sensor failures, broken sensors, lodged sensors or skin irritation under the adhesive dressing of the sensor. Inflammation or redness, swelling, minor infection, and minor bleeding at the sensor insertion site are also possible risks with an individual's use of our products. However, if unanticipated long-term side-effects result from the use of our products or other glucose monitoring systems under development, we could be subject to liability and the adoption of our systems may become more limited. With respect to our G4 PLATINUM and G5 Mobile systems, our clinical trials have been limited to seven days of continuous use. It is possible that the results from our clinical studies and trials may not be indicative of the clinical results obtained when we examine the patients at later dates. We cannot assure you that repeated, long-term use would not result in unanticipated adverse effects, potentially even after the sensor is removed.

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If we or our suppliers or distributors fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with our products, the products could be subject to restrictions or withdrawal from the market.

Any product for which we obtain marketing approval will be subject to continual review and periodic inspections by the FDA and other regulatory bodies, which may include inspection of our manufacturing processes, post-approval clinical data and promotional activities for such product. The FDA 's MDR regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury, or in which our product malfunctioned and, if the malfunction were to recur, it would likely cause or contribute to a death or serious injury. We and our suppliers are also required to comply with the FDA 's Quality System Regulation (“QSR”) and other regulations, which cover the methods and documentation of the design, testing, production, control, selection and oversight of suppliers or contractors, quality assurance, labeling, packaging, storage, complaint handling, shipping and servicing of our products. The FDA enforces the QSR through unannounced inspections. We currently manufacture our products at our headquarters facilities in San Diego, California. In these facilities we have more than 8,000 square feet of laboratory space and approximately 18,000 square feet of controlled environment rooms. During a routine FDA post-approval facility inspection ending on November 7, 2013, the FDA issued a Form 483 with several observations regarding DexCom MDR procedures and complaint reportability determinations. DexCom responded to the observations on November 26, 2013. On March 14, 2014, we received the 2014 Warning Letter from the FDA related to administrative deficiencies in filing MDR s. On April 2, 2014, we responded to the 2014 Warning Letter. On April 16, 2015, the FDA initiated an on-site inspection intended to both close out the 2014 Warning Letter and conduct our normal biennial quality system inspection. The FDA completed its inspection with no observations. On May 21, 2015, the FDA issued a letter closing the 2014 Warning Letter.

Compliance with ongoing regulatory requirements can be complex, expensive and time-consuming. Failure by us or one of our suppliers or distributors to comply with statutes and regulations administered by the FDA , competent authorities and other regulatory bodies, or failure to take adequate response to any observations, could result in, among other things, any of the following actions:


•	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;


•	interruption of the supply of components from our key component suppliers;


•	operating restrictions;


•	injunctions; and


•	criminal prosecution.

If any of these actions were to occur, it would harm our reputation and cause our product sales and profitability to suffer. In addition, we believe events that could be classified as reportable events pursuant to MDR regulations are generally underreported by physicians and users, and any underlying problems could be of a larger magnitude than suggested by the number or types of MDR s filed by us. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements.

Even if regulatory approval or clearance of a product is granted, the approval or clearance may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for costly post-marketing testing or surveillance to monitor the safety or efficacy of the product. Later discovery of previously unknown problems with our products, including software bugs, unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as the QSR , MDR reporting, or other post-market requirements may result in restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties. In addition, our distributors have rights to create marketing materials for their sales of our products, and may not adhere to contractual, legal or regulatory limitations that are imposed on their marketing efforts.

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We are subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from shipping affected products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. We may also be subject to other claims or suits.

We have previously been subject to litigation from third parties alleging patent infringement. Other parties could, in the future, assert infringement or misappropriation claims against us with respect to our current or future products. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of such third parties or others. Our competitors may assert that our continuous glucose monitoring systems or the methods we employ in the use of our systems are covered by U.S. or foreign patents held by them. This risk is exacerbated by the fact that there are numerous issued patents and pending patent applications relating to self-monitored glucose testing systems in the medical technology field. Because patent applications may take years to issue, there may be applications now pending of which we are unaware that may later result in issued patents that our products infringe. There could also be existing patents of which we are unaware that one or more components of our system may inadvertently infringe. As the number of competitors in the market for continuous glucose monitoring systems grows, the possibility of inadvertent patent infringement by us or a patent infringement claim against us increases.

Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain on our financial resources, divert management's attention from our business and harm our reputation. If the relevant patents were upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling our product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain a license on terms acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement. Even if we are able to redesign our products to avoid an infringement claim, we may not receive FDA approval for such changes in a timely manner or at all. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, selling or offering to sell one or more of our products, or could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.

Any adverse determination in litigation or interference proceedings to which we are or may become a party relating to patents could subject us to significant liabilities to third parties or require us to seek licenses from other third parties. Furthermore, if we are found to willfully infringe third-party patents, we could, in addition to other penalties, be required to pay treble damages and/or attorneys' fees for the prevailing party. Although patent and intellectual property disputes in the medical device area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and would likely include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory terms. If we do not obtain necessary licenses, we may not be able to redesign our products to avoid infringement and any redesign may not receive FDA approval in a timely manner if at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, which would have a significant adverse impact on our business.

In addition, from time to time, we are subject to various claims and suits arising out of the ordinary course of business, including commercial or employment related matters. Although individually we do not expect these claims or suits to have a material adverse effect on DexCom, in the aggregate they may divert significant time and resources from our staff.

Our inability to adequately protect our intellectual property could allow our competitors and others to produce products based on our technology, which could substantially impair our ability to compete.

Our success and our ability to compete depend, in part, upon our ability to maintain the proprietary nature of our technologies. We rely on a combination of patent, copyright and trademark law, and trade secrets and nondisclosure agreements to protect our intellectual property. However, such methods may not be adequate to protect us or permit us to gain or maintain a competitive advantage. Our patent applications may not issue as patents in a form that will be advantageous to us, or at all. Our issued patents, and those that may issue in the future, may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products. In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the U.S. Patent and Trademark Office, which may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, in September 2011, the United States enacted sweeping changes to the United States patent system under the Leahy-Smith America Invents Act, including changes that would transition the United States from a “first-to-invent” system to a “first-to-file” system and alter the processes for

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challenging issued patents. These changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

To protect our proprietary rights, we may in the future need to assert claims of infringement against third parties. The outcome of litigation to enforce our intellectual property rights in patents, copyrights, trade secrets or trademarks is highly unpredictable, could result in substantial costs and diversion of resources, and could have a material adverse effect on our financial condition and results of operations regardless of the final outcome of such litigation. In the event of an adverse judgment, a court could hold that some or all of our asserted intellectual property rights are not infringed, invalid or unenforceable, and could award attorney fees.

Despite our efforts to safeguard our unpatented and unregistered intellectual property rights, we may not succeed in doing so or the steps taken by us in this regard may not be adequate to detect or deter misappropriation of our technology or to prevent an unauthorized third party from copying or otherwise obtaining and using our products, technology or other information that we regard as proprietary. In addition, third parties may be able to design around our patents. Furthermore, the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the United States.

We operate in a highly competitive market and face competition from large, well-established medical device manufacturers with significant resources, and, as a result, we may not be able to compete effectively.

The market for glucose monitoring devices is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. In selling the G4 PLATINUM and G5 Mobile systems, we compete directly with Roche Diabetes Care, a division of Roche Diagnostics, LifeScan, Inc., a division of Johnson & Johnson, the MediSense and TheraSense divisions of Abbott Laboratories, and Bayer Corporation, each of which manufactures and markets products for the single-point finger stick device market. Collectively, these companies currently account for substantially all of the worldwide sales of self-monitored glucose testing systems. Several companies are developing or marketing short-term continuous glucose monitoring products that will compete directly with our products. To date, in addition to us, two other companies, Medtronic, Inc. ("Medtronic") and Abbott Diabetes Care, Inc. ("Abbott") , have received approval from the FDA to market, and actively market, continuous glucose monitors. Abbott has discontinued selling its Freestyle Navigator glucose monitoring system in the United States; however, Abbott filed a clinical study for home use of the Navigator II system in the United States and in October 2012, Abbott initiated a limited launch of the Navigator II system in Europe. We believe that Abbott is also conducting clinical studies on a new glucose monitoring platform and has conducted a limited commercial launch of this new system in Europe. We also believe Abbott has submitted a professional use version of this new system to the FDA for review. In addition, we believe that Roche and others, are developing invasive and non-invasive continuous glucose monitoring systems. Also, Medtronic, and other third parties, have developed, or are developing, insulin pumps augmented with continuous glucose monitoring systems that provide, among other things, the ability to suspend insulin administration while the user's glucose levels are low. Most of the companies developing or marketing competing devices are publicly traded or divisions of publicly traded companies, and these companies possess several competitive advantages, including:


•	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;


•	the ability to integrate multiple products to provide additional features beyond continuous glucose monitoring; and


•	greater financial and human resources for product development, sales and marketing, and patent litigation.

As a result, we may not be able to compete effectively against these companies or their products, which may adversely impact our business.

We enter into collaborations with third parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we enter into collaborative arrangements to develop new products and to pursue new markets, such as our agreements with Animas and Tandem , to integrate our continuous glucose monitoring technology into their respective insulin delivery systems, and our agreement with GLS to develop a series of next-generation continuous

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glucose monitoring products. We have also entered into an OUS Commercialization Agreement, as amended, with Animas pursuant to which Animas retains the right to develop and market outside the United States an ambulatory insulin pump that is combined with our continuous glucose monitoring technology which has been branded the Vibe. In May 2011, we, together with Animas , received CE Mark certification for the Vibe, allowing it to be marketed in the countries that recognize CE Mark approval. Animas received FDA approval for the Vibe system in December 2014. On September 9, 2015 Tandem received FDA approval for its sensor augmented insulin delivery system, the t:slim G4™ Insulin Pump.

We also previously entered into collaborative agreements with Insulet and Roche neither of which resulted in the successful development of a commercially viable product nor is anticipated to result in significant additional future revenues.

Many of the companies that we collaborate with are also competitors or potential competitors who may decide to terminate our collaborative arrangement. In the event of such a termination, we may be required to devote additional resources to product development and commercialization, we may need to cancel some development programs and we may face increased competition. Additionally, similar to the agreements with Roche, collaborations may not result in the development of products that achieve commercial success and could be terminated prior to developing any products. Former collaborators may use the experience and insights they develop in the course of their collaborations with us to initiate or accelerate their development of products that compete with our products, which may create competitive disadvantages for us. Accordingly, we cannot assure you that any of our collaborations will result in the successful development of a commercially viable product or result in significant additional future revenues.

In addition, our development timelines are highly dependent on our ability to achieve clinical endpoints and regulatory requirements and to overcome technology challenges, and may be delayed due to scheduling issues with patients and investigators, requests from institutional review boards, product performance and manufacturing supply constraints, among other factors. In addition, support of these clinical trials requires significant resources from employees involved in the production of our products, including research and development, manufacturing, quality assurance, and clinical and regulatory personnel. Even if our development and clinical trial efforts succeed, the FDA may not approve the combined products or may require additional product testing and clinical trials before approving the combined products, which would result in product launch delays and additional expense. If approved by the FDA , the combined products may not achieve acceptance in the marketplace by physicians and people with diabetes.

To date, no continuous glucose monitoring system has received FDA clearance as a replacement for single-point finger stick devices, and our current and future generation products may never be approved for that indication.

Our products do not eliminate the need for single-point finger stick devices and our future products may not be approved for that indication. No precedent for FDA approval of continuous glucose monitoring systems as a replacement for single-point finger stick devices has been established. Accordingly, there is no established study design or agreement regarding performance requirements or measurements in clinical trials for continuous glucose monitoring systems. If any of our competitors were to obtain replacement claim labeling for a continuous glucose monitoring system, our products may fail to compete effectively against that system and our business would suffer.

Technological breakthroughs by us or our competitors could materially impact sales of current or future generations of our products.

The glucose monitoring market is subject to rapid technological change and product innovation. Our products are based on our proprietary technology, but a number of companies and medical researchers are pursuing new technologies for the monitoring of glucose levels. FDA approval of a commercially viable continuous glucose monitor or sensor produced by one of our competitors could significantly reduce market acceptance of our systems. Several of our competitors are in various stages of developing continuous glucose monitors or sensors, including non-invasive and invasive devices, and the FDA has approved several of these competing products. In addition, the National Institutes of Health and other supporters of diabetes research are continually seeking ways to prevent, cure or improve treatment of diabetes. Therefore, our products may be rendered obsolete by technological breakthroughs in diabetes monitoring, treatment, prevention or cure.

In addition, in the periods leading up to the launch of new or upgraded versions of our continuous glucose monitoring products, our customers’ anticipation of the release of those products may cause them to cancel, change or delay current period purchases of our current products, which could have a material adverse effect on our business operations, financial condition and results of operations in current periods.

We face the risk of product liability claims and may not be able to maintain or obtain insurance.

Our business exposes us to the risk of product liability claims that is inherent in the testing, manufacturing and marketing of medical devices, including those which may arise from the misuse (including system hacking or other unauthorized access by third parties to our systems) or malfunction of, or design flaws in, our products. We may be subject to product liability

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claims if our products cause, or merely appear to have caused, an injury. Claims may be made by customers, healthcare providers or others selling our products. The risk of product liability claims may increase if our products obtain approved labeling in the United States that allows for our patients to make diabetes treatment decisions.

Although we have product liability and clinical trial liability insurance that we believe is appropriate, this insurance is subject to deductibles and coverage limitations. Our current product liability insurance may not continue to be available to us on acceptable terms, if at all, and, if available, the coverage may not be adequate to protect us against any future product liability claims. Further, if additional products are approved for marketing, we may seek additional insurance coverage. If we are unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may harm our business. A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

We may be subject to claims against us even if the apparent injury is due to the actions of others or misuse of the device. Our customers, either on their own or following the advice of their physicians, may use our products in a manner not described in the products' labeling and that differs from the manner in which it was used in clinical studies and approved by the FDA . For example, our current systems are designed to be used by an individual continuously for up to seven days, but the individual might be able to circumvent the safeguards designed into the systems and use the products for longer than seven days. Off-label use of products by customers is common, and any such off-label use of our products could subject us to additional liability. The CE Mark for our G5 Mobile system includes an indication that allows patients to make diabetes treatment decisions based on the information generated by such systems, although it still requires finger stick calibrations twice per day. In addition, the FDA or other regulatory agencies may in the future approve similar diabetes treatment indications. We expect that such diabetes treatment indications could expose us to additional liability. These liabilities could prevent or interfere with our product commercialization efforts. Defending a suit, regardless of merit, could be costly, could divert management attention and might result in adverse publicity, which could result in the withdrawal of, or inability to recruit, clinical trial volunteers or result in reduced acceptance of our products in the market.

We may be subject to fines, penalties and injunctions if we are determined to be promoting the use of our products for unapproved off-label uses.

Although we believe our promotional materials and training methods are conducted in compliance with FDA and other regulations, if the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, the FDA could request that we modify our training or promotional materials or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.

If we are found to have violated laws protecting the use and confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.

There are a number of federal and state laws protecting the use and confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. These laws include state medical privacy laws, breach notification laws and federal and state consumer protection laws. The Department of Health and Human Services has promulgated regulations implementing the privacy and electronic security requirements set forth in the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996, as amended by the American Recovery and Reinvestment Act of 2009, or HIPAA . These privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. We are also subject to laws and regulations in foreign countries covering data privacy and other protection of health and employee information that may be more onerous than corresponding U.S. laws, including in particular the laws of Europe. If we are found to be in violation of the privacy rules under HIPAA or other laws, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

The majority of our operations are conducted at four facilities in San Diego, California. Any disruption at these facilities could increase our expenses.

We take precautions to safeguard our facilities, which include manufacturing protocols, insurance, health and safety protocols, and off-site storage of computer data. However, a natural disaster, such as a fire, flood, earthquake, an act of terrorism, cyber attack or other disruptive event could cause substantial delays in our operations, damage or destroy our

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manufacturing equipment, inventory, or records and cause us to incur additional expenses. Earthquakes are of particular significance since our primary manufacturing facilities in California are located in an earthquake-prone area. In the event our existing manufacturing facilities or equipment are affected by man-made or natural disasters, we may be unable to manufacture products for sale or meet customer demands or sales projections. If our manufacturing operations were curtailed or ceased, it would seriously harm our business. The insurance we maintain against fires, floods, earthquakes and other natural disasters and similar events may not be adequate to cover our losses in any particular case.

Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results.

We rely on information technology and telephone networks and systems, including the Internet, to process and transmit sensitive electronic information and to manage or support a variety of business processes and activities, including sales, billing, customer service, procurement and supply chain, manufacturing, and distribution. We use enterprise information technology systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements. Our information technology systems, some of which are managed by third-parties, may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Although we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third party vendor, such measures cannot provide absolute security. If our systems are breached or suffer severe damage, disruption or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may significantly suffer and we may be subject to litigation, government enforcement actions or potential liability. Security breaches could also cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources.

If our efforts to protect the security of information about our patients are unsuccessful, we could become subject to costly government enforcement actions and private litigation and our sales and reputation could suffer.

The nature of our business involves the receipt and storage of information about our patients. We have implemented programs to detect and alert us to data security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to malfeasance by employees, consultants or other service providers to state-sponsored attacks. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past year, cyber-attacks have become more prevalent and much harder to detect and defend against. Our network and storage applications may be vulnerable to cyber-attack, malicious intrusion, malfeasance, loss of data privacy or other significant disruption and may be subject to unauthorized access by hackers, employees, consultants or other service providers. In addition, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud, trickery or other forms of deceiving our employees, contractors and temporary staff. If we experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation. In addition, our patients could further lose confidence in our ability to protect their information, which could cause them to discontinue using our products or purchasing from us altogether.

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Our products may not continue to achieve market acceptance.

We expect that sales of our G4 PLATINUM system, which consists of a handheld receiver, reusable transmitter and disposable sensor, and our G5 Mobile system which consists of a handheld receiver, reusable transmitter, disposable sensors and a smartphone application that securely identifies, receives, deciphers and displays information transmitted by the transmitter, will account for substantially all of our product revenue for the foreseeable future. If and when we receive FDA approval for and begin commercialization of our next generation continuous glucose monitoring systems and sensors, we expect most patients will migrate onto those systems. Notwithstanding our prior experience in selling our products, we might be unable to successfully expand the commercialization of our products on a wide scale for a number of reasons, including:


•	the FDA approval of our G5 Mobile system in the United States in August 2015 and the approval to sell our G5 Mobile system in the countries that recognize our CE Mark means that we have relatively limited experience selling our G5 Mobile system;


•	the approval for a Pediatric Indication of our G5 Mobile system in the United States, and the countries that recognize our CE Mark means that we have limited experience selling and marketing the G5 Mobile system to persons aged two to 17 years or their legal guardians;


•	the approval for a Professional Use Indication of our G4 PLATINUM system in the United States in June 2014 means that we have limited experience selling and marketing the G4 PLATINUM system to healthcare professionals;


•	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;


•	the limited size of our sales force;


•	we may not have sufficient financial or other resources to adequately expand the commercialization efforts for our products;


•	our FDA and other regulatory submissions may be delayed, or approved with limited product labeling;


•	we may not be able to manufacture our products in commercial quantities or at an acceptable cost;


•	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;


•	the uncertainties associated with establishing and qualifying new manufacturing facilities;


•	except for the G5 Mobile under the CE Mark, our systems are not labeled as a replacement for the information that is obtained from single-point finger stick devices;


•	people with diabetes will need to incur the costs of our systems in addition to single-point finger stick devices;


•	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;


•	the introduction and market acceptance of competing products and technologies;


•	our inability to obtain sufficient quantities of supplies at appropriate quality levels from our single-source and other key suppliers;


•	our inability to manufacture products that perform in accordance with expectations of consumers; and


•	rapid technological change may make our technology and our products obsolete.

Our G4 PLATINUM and G5 Mobile systems are more invasive than current self-monitored glucose testing systems, including single-point finger stick devices, and people with diabetes may be unwilling to insert a sensor in their body, especially if their current diabetes management involves no more than two finger sticks per day. Moreover, people with diabetes may not perceive the benefits of continuous glucose monitoring and may be unwilling to change their current treatment regimens. In addition, physicians tend to be slow to change their medical treatment practices because of perceived liability risks arising from the use of new products. Physicians may not recommend or prescribe our products until (i) there is more long-term clinical evidence to convince them to alter their existing treatment methods, (ii) there are additional recommendations from prominent physicians that our products are effective in monitoring glucose levels and (iii) reimbursement or insurance coverage is more widely available. We cannot predict when, if ever, physicians and people with diabetes may adopt more widespread use of continuous glucose monitoring systems, including our systems. If our systems do not achieve an adequate level of acceptance by people with diabetes, physicians and healthcare payors, we may not generate significant product revenue and we may not become profitable.

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Current uncertainty in global economic and political conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that our actual results could differ materially from expectations.

Our operations and performance depend on worldwide economic and political conditions, which have been adversely impacted by continued global economic uncertainty, political instability and military hostilities in multiple geographies, concerns over the downgrade of U.S. sovereign debt and continued sovereign debt, monetary and financial uncertainties in Europe and other foreign countries. These conditions have and may continue to make it difficult for our customers and potential customers to afford our products, and could cause our customers to stop using our products or to use them less frequently. If that were to occur, we may experience a decrease in revenue and our performance may be negatively impacted. In addition, the pressure on consumers to absorb more of their own health care costs has resulted in some cases in higher deductibles and limits on durable medical equipment, which may cause seasonality in purchasing patterns. Furthermore, during economic uncertainty, our customers have experienced job losses and may continue to experience issues gaining timely access to sufficient health insurance or credit, which could result in their unwillingness to purchase products or an impairment of their ability to make timely payments to us. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States, or in our industry. These and other economic factors could have a material adverse effect on our financial condition and operating results.

We depend on clinical investigators and clinical sites to enroll patients in our clinical trials and other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control.

We rely on clinical investigators and clinical sites to enroll patients in our clinical trials and other third parties to manage the trial and to perform related data collection and analysis. However, we may not be able to control the amount and timing of resources that clinical sites may devote to our clinical trials. If these clinical investigators and clinical sites fail to enroll a sufficient number of patients in our clinical trials or fail to ensure compliance by patients with clinical protocols or fail to comply with regulatory requirements, we will be unable to complete these trials, which could prevent us from obtaining regulatory approvals for our products. Our agreements with clinical investigators and clinical sites for clinical testing place substantial responsibilities on these parties and, if these parties fail to perform as expected, our trials could be delayed or terminated. If these clinical investigators, clinical sites or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, or the clinical data may be rejected by the FDA, and we may be unable to obtain regulatory approval for, or successfully commercialize, our products.

Healthcare reforms, changes in healthcare policies and changes to third-party reimbursements for our products may affect demand for our products.

Comprehensive healthcare legislation, signed into law in March 2010, imposes stringent compliance, recordkeeping, and reporting requirements on companies in various sectors of the life sciences industry, with which we may need to comply, and enhanced penalties for non-compliance with the new healthcare regulations. The impact of this legislation remains unclear, and costs of compliance with this legislation, or any future amendments thereto, could result in certain risks and expenses that we may have to assume.

Other political and regulatory influences are also subjecting our industry to significant changes, and we cannot predict whether new regulations will emerge at the federal or state level, or abroad. The U.S. government may in the future consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect reimbursement for healthcare products such as our systems. These policies have included, and may in the future include: basing reimbursement policies and rates on clinical outcomes, the comparative effectiveness and costs of different treatment technologies and modalities; imposing price controls and taxes on medical device providers; and other measures. Future significant changes in the healthcare systems in the United States or elsewhere could also have a negative impact on the demand for our current and future products. These include changes that may reduce reimbursement rates for our products and changes that may be proposed or implemented by the current or future U.S. Presidential administration or Congress.

In addition, the comprehensive healthcare reform legislation included an annual excise tax on the sale of medical devices equal to 2.3% of the price of the device starting on January 1, 2013, which does not include, under Internal Revenue Service (“IRS”) guidance, our existing systems as they are medical devices deemed to be generally purchased by the general public at retail under such legislation. As a result, as of September 30, 2015 , we believed that our current ambulatory products were exempt from the excise tax, except for our G4 PLATINUM system for professional use which is subject to the excise tax. The current tax liability related to our G4 PLATINUM system for professional use is immaterial, but may become material in the future. Notwithstanding our belief, if the IRS were to determine that this tax applies to any of our current or future products,

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our future operating results could be harmed, which in turn could cause the price of our stock to decline. In addition, because of the uncertainty surrounding these issues, the impact of this tax has not been reflected in our forward guidance.

We may be liable for contamination or other harm caused by materials that we handle, and changes in environmental regulations could cause us to incur additional expense.

Our research and development and clinical processes involve the handling of potentially harmful biological materials as well as hazardous materials. We are subject to federal, state and local laws and regulations governing the use, handling, storage and disposal of hazardous and biological materials and we incur expenses relating to compliance with these laws and regulations. If violations of environmental, health and safety laws occur, we could be held liable for damages, penalties and costs of remedial actions. These expenses or this liability could have a significant negative impact on our financial condition. We may violate environmental, health and safety laws in the future as a result of human error, equipment failure or other causes. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations. We are subject to potentially conflicting and changing regulatory agendas of political, business and environmental groups. Changes to or restrictions on permitting requirements or processes, hazardous or biological material storage or handling might require an unplanned capital investment or relocation. Failure to comply with new or existing laws or regulations could harm our business, financial condition and results of operations.

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.

We conduct limited commercial and marketing efforts in Canada, Europe, Australia, New Zealand, the Middle East, Latin America, Asia and Africa with respect to our continuous glucose monitoring systems and may seek to market our products in other regions in the future. Outside the United States, we can market a product only if we receive a marketing authorization and, in some cases, pricing approval, from the appropriate regulatory authorities. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval in addition to other risks. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA . In addition, in order to obtain the approval of our products in certain foreign jurisdictions, we may need to obtain a Certificate to Foreign Government from the FDA . The FDA may refuse to issue a Certificate to Foreign Government in certain instances, including without limitation, during the pendency of any outstanding warning letter. As a result, we may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside the United States on a timely basis, or at all.

Our success will depend on our ability to attract and retain our personnel and our ability to successfully transition from Mr. Gregg to Mr. Sayer as our Chief Executive Officer.

We are highly dependent on our senior management, especially Kevin Sayer, our President and Chief Executive Officer, Steven R. Pacelli, our Executive Vice President of Strategy and Corporate Development, Jorge Valdes, our Executive Vice President and Chief Technical Officer, Andrew K. Balo, our Executive Vice President of Clinical, Regulatory, and Quality, and Richard Doubleday, our Executive Vice President and Chief Commercial Officer. Our success will depend on our ability to retain our current management and to attract and retain qualified personnel in the future, including sales persons, scientists, clinicians, engineers and other highly skilled personnel. Competition for senior management personnel, as well as sales persons, scientists, clinicians and engineers, is intense and we may not be able to retain our personnel. The loss of the services of members of our senior management, scientists, clinicians or engineers could prevent the implementation and completion of our objectives, including the commercialization of our current products and the development and introduction of additional products. The loss of a member of our senior management or our professional staff would require the remaining executive officers to divert immediate and substantial attention to seeking a replacement. Each of our officers may terminate their employment at any time without notice and without cause or good reason. Additionally, volatility or a lack of positive performance in our stock price may adversely affect our ability to retain key employees.

Effective January 1, 2015, Mr. Gregg assumed his new role as our Executive Chairman. In this role, Mr. Gregg remains an employee and continues to lead our external efforts. Mr. Gregg also chairs our Board of Directors as of January 1, 2015. Mr. Sayer assumed the role of Chief Executive Officer effective on January 1, 2015. If we are unable to successfully transition the role of Chief Executive Officer from Mr. Gregg to Mr. Sayer, it could have an adverse impact on our financial condition and operating results.

We expect to continue to expand our operations and grow our research and development, manufacturing, sales and marketing, product development and administrative operations. We expect this expansion to place a significant strain on our management and it will require hiring a significant number of qualified personnel. Accordingly, recruiting and retaining such personnel will be critical to our success. There is intense competition from other companies and research and academic

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institutions for qualified personnel in the areas of our activities. If we fail to identify, attract, retain and motivate these skilled personnel, we may be unable to continue our development and commercialization activities.

We may face risks associated with acquisitions of companies, products and technologies and our business could be harmed if we are unable to address these risks.

If we are presented with appropriate opportunities, we could acquire or make other investments in complementary companies, products or technologies. In March 2012, we acquired SweetSpot . We may not realize the anticipated benefit of the acquisition of SweetSpot or any future acquisition, or the realization of the anticipated benefits may require greater expenditures than anticipated by us. We will likely face risks, uncertainties and disruptions associated with the integration process, including difficulties in the integration of the operations and services of any acquired company, integration of acquired technology with our products, diversion of our management's attention from other business concerns, the potential loss of key employees or customers of the acquired businesses and impairment charges if future acquisitions are not as successful as we originally anticipate. If we fail to successfully integrate other companies, products or technologies that we acquire, our business could be harmed. Furthermore, we may have to incur debt or issue equity securities to pay for any additional future acquisitions or investments, the issuance of which could be dilutive to our existing shareholders. In addition, our operating results may suffer because of acquisition-related costs or amortization expenses or charges relating to acquired intangible assets.

Compliance with regulations relating to public company corporate governance matters and reporting is time consuming and expensive.

Many laws and regulations, notably those adopted in connection with the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new SEC regulations and The NASDAQ Stock Market listing rules, impose obligations on public companies, such as ours, which have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices. Compliance with these laws and regulations, including enhanced new disclosures, has required and will continue to require substantial management time and oversight and the incurrence of significant accounting and legal costs. The effects of new laws and regulations remain unclear and will likely require substantial management time and oversight and require us to incur significant additional accounting and legal costs. Additionally, changes to existing accounting rules or standards, such as the potential requirement that U.S. registrants prepare financial statements in accordance with International Financial Reporting Standards, may adversely impact our reported financial results and business, and may require us to incur greater accounting fees.

If we are unable to successfully maintain effective internal control over financial reporting, investors may lose confidence in our reported financial information and our stock price and our business may be adversely impacted.

As a public company, we are required to maintain internal control over financial reporting and our management is required to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year. If we are not successful in maintaining effective internal control over financial reporting, there could be inaccuracies or omissions in the consolidated financial information we are required to file with the SEC. Additionally, even if there are no inaccuracies or omissions, we will be required to publicly disclose the conclusion of our management that our internal control over financial reporting or disclosure controls and procedures are not effective. These events could cause investors to lose confidence in our reported financial information, adversely impact our stock price, result in increased costs to remediate any deficiencies, attract regulatory scrutiny or lawsuits that could be costly to resolve and distract management’s attention, limit our ability to access the capital markets or cause our stock to be delisted from The NASDAQ Global Select Market or any other securities exchange on which it is then listed.

Valuation of share-based payments, which we are required to perform for purposes of recording compensation expense under authoritative guidance for share-based payment, involves assumptions that are subject to change and difficult to predict.

We record compensation expense in the consolidated statement of operations for share-based payments, such as employee stock options, restricted stock units and employee stock purchase plan shares, using the fair value method. The requirements of the authoritative guidance for share-based payment have and will continue to have a material effect on our future financial results reported under U.S. GAAP and make it difficult for us to accurately predict the impact on our future financial results.

For instance, estimating the fair value of share-based payments is highly dependent on assumptions regarding the future exercise behavior of our employees and changes in our stock price. The actual values realized upon the exercise, expiration, early termination or forfeiture of share-based payments might be significantly different than our estimates of the fair values of those awards as determined at the date of grant. If there are errors in our input assumptions for our valuations models, we may inaccurately calculate actual or estimated compensation expense for share-based payments.

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The authoritative guidance for share-based payment could also adversely impact our ability to provide accurate guidance on our future financial results as assumptions that are used to estimate the fair value of share-based payments are based on estimates and judgments that may differ from period to period. We may also be unable to accurately predict the amount and timing of the recognition of tax benefits associated with share-based payments as they are highly dependent on the exercise behavior of our employees and the price of our stock relative to the exercise price of each outstanding stock option.

For those reasons, among others, the authoritative guidance for share-based payment may create variability and uncertainty in the share-based compensation expense we will record in future periods, which could adversely impact our stock price and increase our expected stock price volatility as compared to prior periods.

Changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue and/or expense fluctuations and affect our reported results of operations.

A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practice have occurred and may occur in the future. The method in which we market and sell our products may have an impact on the manner in which we recognize revenue. In addition, changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. Additionally, changes to existing accounting rules or standards, such as the potential requirement that U.S. registrants prepare financial statements in accordance with International Financial Reporting Standards, may adversely impact our reported financial results and business, and may further require us to incur greater accounting fees.

The SEC ”conflict minerals” rule has caused us to incur additional expenses, could limit the supply and increase the cost of certain metals used in manufacturing our products, and could make us less competitive in our target markets.

We are required to disclose the origin, source and chain of custody of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The requirement mandates companies to obtain sourcing data from suppliers, engage in supply chain due diligence, and file annually with the SEC a specialized disclosure report on Form SD covering the prior calendar year. The rule could limit our ability to source at competitive prices and to secure sufficient quantities of certain minerals used in the manufacture of our products, specifically tantalum, tin, gold and tungsten, as the number of suppliers that provide conflict-free minerals may be limited. In addition, we have incurred, and may continue to incur, material costs associated with complying with the rule, such as costs related to the determination of the origin, source and chain of custody of the minerals used in our products, the adoption of conflict minerals-related governance policies, processes and controls, and possible changes to products or sources of supply as a result of such activities. Within our supply chain, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the data collection and due diligence procedures that we implement, which may harm our reputation. Furthermore, we may encounter challenges in satisfying those customers that require that all of the components of our products be certified as conflict free, and if we cannot satisfy these customers, they may choose a competitor’s products. We continue to investigate the presence of conflict materials within our supply chain.

Risks Related to Our Common Stock

Our stock price is highly volatile and investing in our stock involves a high degree of risk, which could result in substantial losses for investors.

Historically, the market price of our common stock, like the securities of many other medical products companies, fluctuates and could continue to be volatile in the future. From January 1, 2015 through November 2, 2015 , the closing price of our common stock on the NASDAQ Global Select Market was as high as $101.91 per share and as low as $54.21 per share.

The market price of our common stock is influenced by many factors that are beyond our control, including the following:


•	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;

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•	general economic conditions;


•	regulatory actions;


•	legislation and political conditions; and


•	terrorist acts.

Please also refer to the factors described above in this “Risk Factors” section. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated and disproportionate to the operating performance of companies in our industry. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.

Further, securities class action litigation has often been brought against public companies that experience periods of volatility in the market prices of their securities. Securities class action litigation could result in substantial costs and a diversion of our management's attention and resources.

If our financial performance fails to meet the expectations of investors and public market analysts, the market price of our common stock could decline.

Our revenues and operating results may fluctuate significantly from quarter to quarter. We believe that period-to-period comparisons of our operating results may not be meaningful and should not be relied on as an indication of our future performance. If quarterly revenues or operating results fall below the expectations of investors or public market analysts, the trading price of our common stock could decline substantially. Factors that might cause quarterly fluctuations in our operating results include:


•	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;


•	competition;


•	inadequate financial and other resources; and


•	global and political economic conditions, political instability and military hostilities.

Failure to comply with covenants in our loan agreement with Silicon Valley Bank and Oxford Finance LLC could result in our inability to borrow additional funds and adversely impact our business.

We have entered into a loan and security agreement with the Silicon Valley Bank and Oxford Finance LLC to fund our business operations. This loan and security agreement imposes numerous financial and other restrictive covenants on our operations, including covenants relating to our general profitability and our liquidity. As of September 30, 2015 , we were in compliance with the covenants imposed by the loan and security agreement. If we violate these or any other covenants, any outstanding amounts under these agreements could become due and payable prior to their stated maturity dates, each lender could proceed against any collateral in our operating accounts and our ability to borrow funds in the future may be restricted or eliminated. These restrictions may also limit our ability to borrow additional funds and pursue other business opportunities or strategies that we would otherwise consider to be in our best interests.

The issuance of shares by us in the future or sales of shares by our stockholders may cause the market price of our common stock to drop significantly, even if our business is performing well.

This issuance of shares by us in the future or sales of shares by our stockholders may cause the market price of our common stock to decline, perhaps significantly, even if our business is performing well. The market price of our common stock could also decline if there is a perception that sales of our shares are likely to occur in the future. This might also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Also, we may issue securities in connection with future financings and acquisitions, and those shares could dilute the holdings of other stockholders.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable

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future and the terms of our loan and security agreement restrict our ability to declare or pay any dividends. As a result, stockholders may only receive a return on their investment in our common stock if the market price of our common stock increases.

Anti-takeover effects of our charter documents and Delaware law could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

In addition, there are provisions in our certificate of incorporation and bylaws, as well as provisions in the Delaware General Corporation Law, that may discourage, delay or prevent a change of control that might otherwise be beneficial to stockholders. For example:


•	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

Not applicable.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

Not applicable.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

None.


ITEM 6.	EXHIBITS

The following exhibits are filed as a part of this report.

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Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File

No.

Date of

First

Filing

Exhibit

Number

Provided

Herewith

10.33

Collaboration and License Agreement between DexCom Inc., and Google Life Sciences, LLC dated August 10, 2015**

31.01

Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

—

31.02

Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a).

—

32.01

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

—

32.02

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*

—

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




*	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.

**	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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	DEXCOM, INC. (Registrant)

Dated: November 4, 2015	By:	/s/ Kevin R. Sayer
		Kevin R. Sayer, President & Chief Executive Officer (Principal Executive Officer)

Dated: November 4, 2015	By:	/s/ J ESS R OPER
		Jess Roper, Senior Vice President & Chief Financial Officer (Principal Financial and Accounting Officer)

[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS AND ASTERISKS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED INFORMATION.

Exhibit 10.33
EXECUTION COPY

CONFIDENTIAL

COLLABORATION AND LICENSE AGREEMENT

This COLLABORATION AND LICENSE AGREEMENT (the “ Agreement ”) is made as of August 10, 2015 (the “ Effective Date ”) by and between DexCom, Inc., (“ DexCom ”) having its principal place of business at 6340 Sequence Drive, San Diego, California 92121, and Google Life Sciences LLC (“ GLS ”) having its principal place of business at 1600 Amphitheatre Parkway, Mountain View, CA 94043. DexCom and GLS are each referred to herein by name or, individually, as a “ Party ” or, collectively, as “ Parties .”

BACKGROUND

A. GLS has rights to certain proprietary technologies related to electronic devices and assemblies for glucose monitoring, including receiving and transmitting electronic signals in connection therewith.

B. DexCom develops, manufactures and distributes continuous glucose monitoring systems and components of such systems, and has rights to certain proprietary technologies relating to such systems.

C. GLS and DexCom wish to collaboratively develop Products (as defined below) and for DexCom to commercialize such Products, all on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements provided herein below and other consideration, the receipt and sufficiency of which is hereby acknowledged, DexCom and GLS hereby agree as follows:

ARTICLE 1

DEFINITIONS

The following capitalized terms shall have the meanings given in this Article 1 when used in this Agreement:

1.1 “ 510(k) ” means a pre-market notification submitted to the FDA for clearance under Section 510(k) of the FD&C Act, 21 U.S.C. § 360(k), and 21 C.F.R. Part 807, Subpart E.

1.2 “ Accounting Standards ” means, with respect to a Person, U.S. generally accepted accounting principles consistent with Law and commercially reasonable business practices and consistently applied by such Person.

1.3 “ Acquirer ” means a Third Party with whom DexCom enters into a definitive agreement pursuant to which a Change of Control is effected (a “ COC Transaction ”).

1.4 “ Acquirer Product ” means any [***] that is [***] by or on behalf of an Acquirer (a) [***] or (b) [***], provided in that in the case of (b) such [***].

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1.5 “ Additional Product ” means any [***] that the Parties agree to [***] hereunder [***].

1.6 “Adverse Event” means (a) any reportable event (i) as defined in the United States under 21 C.F.R. § 803.3 or (ii) as defined by any other applicable Law in the Territory or (b) any unanticipated adverse event or unanticipated device effects detected during any clinical trial.

1.7 “ Affiliate ” means with respect to either Party, any Person controlling, controlled by or under common control with such Party. For purposes of this Section 1.7 only, “control” means (a) direct or indirect ownership of more than fifty percent (50%) (or, if less than fifty percent (50%), the maximum ownership interest permitted by applicable Law) of the stock or shares having the right to vote for the election of directors of such corporate entity or (b) the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, the following shall not be Affiliates of GLS for purposes of this Agreement: (i) Calico LLC, (ii) all portfolio companies of Google Ventures, Google Capital or any other investment arm of GLS or Google Inc. and (iii) all portfolio companies of GLS or Google Inc. or its subsidiaries in which such entity or entities hold securities primarily for investment purposes.

1.8 “ Annual Net Sales ” means, with respect to a particular calendar year, all Net Sales of all [***] during such calendar year.

1.9 “ Business Day ” means any day other than a Saturday, Sunday or any other day on which commercial banks in the State of California, U.S.A. are authorized or required by Law to remain closed.

1.10 “ Change of Control ” means the merger, consolidation, sale of substantially all of such DexCom’s assets or similar transaction or series of transactions, as a result of which DexCom’s shareholders before such transaction or series of transactions own less than fifty percent (50%) of the total number of voting securities of the surviving entity immediately after such transaction or series of transactions.

1.11 “ Collaboration ” means any and all activities performed by or on behalf of each Party under this Agreement.

1.12 “ Collaboration Patent ” means any Patent that claims Collaboration IP.

1.13 “ Collaboration IP ” means subject matter first conceived by or on behalf of a Party’s employees or Third Parties acting on such Party’s behalf, in each case in the course of activities

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conducted pursuant to the [***] and Commercialization Plan (whether alone or jointly with others).

1.14 “ Commercialization ” means, with respect to a [***] in connection with or support of any of the foregoing. Commercialization also includes activities with respect [***]. “ Commercialize ” and “ Commercializing ” have their correlative meanings.

1.15 “ Commercially Reasonable Efforts ” means, with respect to a Party, the efforts and resources normally applied by such Party to its other programs and products of similar commercial potential at a similar stage in its product life, but no less than a sustained, continued and active commitment of efforts and resources (financial and otherwise) consistent with those normally applied in the medical device industry for novel, high-priority programs and products of similar commercial potential, provided that the determination of efforts and resources applied (or to be applied) by DexCom shall not take into consideration any of the payments made or to be made (including the possibility thereof) by DexCom to GLS under this Agreement. Without limiting the foregoing, Commercially Reasonable Efforts shall require the applicable Party to: (a) promptly assign responsibilities for activities for which it is responsible to specific employee(s) who are held accountable for the progress, monitoring and completion of such activities, (b) set and consistently seek to achieve meaningful objectives for carrying out such activities, and (c) consistently make and implement decisions and allocate the full complement of resources necessary or appropriate to advance progress with respect to and complete such objectives in an expeditious manner.

1.16 “ Continuous Interstitial Glucose Monitoring Product ” means any product or system that (a) [***] and (b) [***]. Notwithstanding the foregoing, a Continuous Interstitial Glucose Monitoring Product excludes systems and components thereof to the extent specific or intended specifically for [***].

1.17 “ Development ” means, with respect to a product, any and all development activities, including, to the extent applicable, use, electrical and mechanical design, chemistry and materials development, software and firmware development, [***] development and scale-up, design and process verification and validation, test method development, biocompatibility and toxicology, quality assurance/quality control development, statistical analysis, primary packaging development, [***] in support of Regulatory Approvals,

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[***] for the purposes of obtaining Regulatory Approvals, and development and implementation of (a) [***], (b) [***] and (c) [***]. “ Develop ” and “ Developed ” have their correlative meaning.

1.18 “ DexCom Collaboration Patents ” means any Collaboration Patents solely owned by DexCom.

1.19 “ DexCom Common Stock ” means shares of common stock of DexCom that is registered under the Securities Act of 1933, as amended, freely tradable and free from any contractual restriction on the sale or transfer of such common stock or any holding period, subject to applicable securities laws.

1.20 “ Effective Date ” has the meaning set forth in the Preamble.

1.21 “ FDA ” means the United States Food and Drug Administration, or any successor agency thereto.

1.22 “ Fee-Bearing Product ” means any and all of the following: (a) [***] and (b) [***] in each case that are [***]. Fee-Bearing Products shall exclude [***].

1.23 “ Field ” means the [***], but excluding any such product that (a) [***], (b) [***], and/or (c) [***].

1.24 “ First Product ” means a [***] consisting of (a) [***] (the “[***]”) and (b) [***], in each case (a) and (b) meeting those Specifications established in accordance with Section 3.2.2 therefor and Developed pursuant to the [***] (including any modifications or updates therefor made in accordance with this Agreement).

1.25 “ GLS Collaboration Patents ” means any Collaboration Patents solely owned by GLS.

1.26 “ GLS Know-How ” means any and all Know-How (a) incorporated by GLS into the First Product or Second Product or (b) otherwise used by GLS for its performance of the Development Program (or provided by GLS to DexCom in connection with the Development Program) and

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reasonably necessary for the Development, Manufacture or Commercialization of the First Product or Second Product within the Field in the Territory.

1.27 “ GLS Licensed Patents ” means (a) (i) the Patents listed in Exhibit 1.27-A (the “ [***] ”) and Exhibit 1.27-B (the “ [***] ”), (ii) all Patents that are entitled to claim priority to the foregoing Patents, and (iii) any Patents hereafter issuing on any of the Patents described in clause (i) or (ii) above, (b) GLS Collaboration Patents, (c) GLS’s interest in any and all Joint Collaboration Patents, and (d) any other Patents that are owned or controlled by GLS at any time during the Term that claim or cover the First Product or Second Product.

1.28 “ GLS IP ” means the GLS Licensed Patents and GLS Know-How.

1.29 “ GLS Platform ” means a [***] platform developed by [***], which platform (a) [***] and (b) [***].

1.30 “GLS Trademarks ” means the Trademarks set forth on Exhibit 1.30 or such replacements therefor as may be designated by GLS from time to time.

1.31 “ Joint Collaboration Patent ” any Collaboration Patent jointly owned by GLS and DexCom.

1.32 [***] means [***].

1.33 [***] means [***].

1.34 “ Know-How ” means any proprietary data, results, material(s), technology, and nonpublic information of any type whatsoever, in any tangible or intangible form, including information, techniques, technology, prototypes, practices, trade secrets, software, algorithms, discoveries, developments, inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, chemical, pharmacological, toxicological and clinical test data and results, analytical and quality control results or descriptions, software and algorithms, reports and study reports.

1.35 “ Launch ” means the first bona fide, arm’s length sale of a Product in a country following receipt of Marketing Approval for such Product in such country. “ Launched ” has its correlative meaning.

1.36 “ Law ” means, individually and collectively, any and all laws, ordinances, orders, rules, rulings, directives and regulations of any kind whatsoever of any governmental authority or Regulatory Authority within the applicable jurisdiction.

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1.37 “ Major Market ” means each of [***].

1.38 “Manufacture” means all activities involved in manufacturing, preparing, quality control, testing, packaging and storing any of the products. “ Manufacturing ” has its correlative meaning.

1.39 “ Marketing Approval ” means, with respect to a Product in a particular jurisdiction, all clearances, approvals, licenses, registrations or authorizations necessary for the Commercialization of such Product in such jurisdiction, including only where mandatory for Commercialization of such Product, approval of labeling, price or reimbursement.

1.40 “ Marketing Partner ” means a Third Party to whom DexCom or its Affiliates has granted rights to a [***] and receives compensation based on a percentage of (a) the sale or license of a [***] by such Third Party to its customers or (b) [***] paid to such Third Party.

1.41 “ Net Sales ” means gross amounts invoiced by DexCom or its Affiliates or Marketing Partners (the “ Selling Party ”) with respect to (1) the [***] or (2) [***] less the following: (a) actual bad debts for such [***] (provided that if later collected any amounts previously written off as bad debt shall be included in the calendar quarter received); (b) normal and customary trade, quantity and payment and cash discounts and any other adjustments, including granted on account of price adjustments, billing errors, rejected goods, damaged or defective goods, recalls, returns, rebates, chargeback rebates, reimbursements, commercially reasonable administrative fees paid to payors, distributors or pharmacy benefit managers on a per [***] basis, sales allocated to free of charge [***] as required by Accounting Standards or similar payments granted or given to wholesalers or other distributors, buying groups, health care insurance carriers or other institutions, adjustments arising from consumer discount programs, in each case actually allowed and taken directly by the Third Party customer with respect to sales of such [***]; (c) any payment made by the Selling Party to any government (including any agency or department thereof) in respect of sales of such [***] or with respect to any government-subsidized program or managed care organization; (d) sales taxes or similar taxes, including duties or other governmental charges imposed on the sale of [***] to the Third Party customer (including value added taxes or other governmental charges otherwise measured by the billing amount, but excluding any taxes imposed on or measured by the net income or profits of the Selling Party), to the extent included in the invoice price and not reimbursable, refundable or creditable to the Selling Party; and (e) prepaid freight, insurance and handling fees actually invoiced (to the extent that the Selling Party actually incurs the cost of freight, insurance and handling fees for such [***] and are not reimbursable, refundable or creditable to the Selling Party), in each case as determined from books and records of the Selling Party maintained in accordance with its Accounting Standards. A qualifying amount may be deducted only once regardless of the number of the preceding categories that describe such amount. Only items that are deducted from the Selling Party’s gross sales of the [***], as included in the Selling Party’s published financial statements and which are in accordance with its Accounting Standards, shall be deducted from such gross

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invoiced amounts for purposes of the calculation of Net Sales. In the case of any sale of a [***] which is not invoiced or is delivered before invoice, Net Sales shall be calculated at the time all the revenue recognition criteria are met for such [***], in accordance with the Accounting Standards.

Sales of [***] between or among DexCom, its Affiliates and their Marketing Partners shall be excluded from the computation of Net Sales if such sales are not intended for end use, but Net Sales shall include the subsequent final sales to Third Party customers. If a sale, transfer or other disposition with respect to [***] involves consideration other than cash or is not at arm's length, then the Net Sales from such sale, transfer or other disposition shall be the arm's length fair market value, which generally will mean the Selling Party's average sales price for the calendar quarter in the country where such sale took place.

1.42 “ Non-Product Fee Consideration ” means all cash or cash equivalent (e.g., equity, whether or not publicly traded) consideration received by DexCom or its Affiliates from a Third Party in connection with a grant of the right to Develop, Manufacture or Commercialize any [***], excluding amounts received (a) as royalties or similar amounts paid by such Third Party and measured on the sale of [***]; (b) [***]; (c) except with respect to offerings of DexCom capital stock made primarily for capital raising purposes, for the sale of equity interests in DexCom or its Affiliate to such Third Party, except to the extent the amounts received exceed fair market value of such equity interest (where the fair market value equals: (i) if such selling entity’s capital stock is publicly traded, then the average closing sale price of a share of such capital stock as reported on the stock exchange on which such selling entity’s capital stock is traded for the [***]trading days ending three days before the announcement of the applicable transaction; or (ii) if such selling entity’s capital stock is not publicly traded, then (A) if the capital stock is common stock, the value set forth in the selling entity’s most recent valuation report prepared for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and (B) if the capital stock is preferred stock, then the original issue price set forth in such selling party’s articles of incorporation, certificate of incorporation or similar corporate governance document); (d) as reimbursement by such Third Party for costs incurred by DexCom or its Affiliate with respect to the Prosecution and Maintenance of DexCom Collaboration Patents; or (e) for the supply of the [***] by DexCom or its Affiliates to such Third Party at or below fair market value.

1.43 “[***]” means any claim of the [***].

1.44 “[***]” means any Collaboration IP solely owned by [***] that solely pertains to technology that is an improvement to, update to, future version of or modification of hardware or software developed by [***] for use in the Products (including the [***]).

1.45 “ Patent ” means any of the following, whether existing now or in the future anywhere in the world: (a) any issued patent, including inventor's certificates, substitutions, extensions,

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confirmations, reissues, reexamination, renewal or any like governmental grant for protection of inventions; and (b) any pending application for any of the foregoing, including any continuation, divisional, substitution, continuations-in-part, provisional and converted provisional applications.

1.46 “ Permitted Encumbrances ” means (a) with respect to GLS, (i) any claim, charge, equitable interest, hypothecation, statutory lien, mortgage, pledge, option, license, assignment, restriction, power of sale, retention of title, right of pre-emption, right of first refusal or security interest that cannot reasonably be expected to have a material adverse effect on the rights granted to or privileges of DexCom hereunder and (ii) the [***], as set out at Exhibit 1.46 and (b) with respect to DexCom, any claim, charge, equitable interest, hypothecation, statutory lien, mortgage, pledge, option, license, assignment, restriction, power of sale, retention of title, right of pre-emption, right of first refusal or security interest that cannot reasonably be expected to have a material adverse effect on the rights granted to or privileges of GLS hereunder.

1.47 “ Person ” means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.

1.48 “ PMA ” means a pre-market approval application submitted to the FDA for approval in accordance with 21 U.S.C. § 360(e) and 21 C.F.R. Part 814.

1.49 “ Product ” means the First Product, Second Product and, if agreed by the Parties, the Third Product or any Additional Product.

1.50 “ [***] ” means any claim of [***] and no other subject matter. [***] do not include (a) claims that [***], or (b) claims that relate to [***].

1.51 “ Prosecution and Maintenance ” means, with respect to a Patent, the preparing, filing, prosecuting and maintenance of such Patent, as well as reexaminations, reissues, requests for Patent term extensions and the like with respect to such Patent, together with the conduct of interferences, the defense of post-grant reviews, inter partes reviews, oppositions and other similar proceedings with respect to the particular Patent; and “ Prosecute and Maintain ” shall have the correlative meaning.

1.52 “ Regulatory Approval ” means, with respect to a product in a particular jurisdiction, any Marketing Approval and all clearances, approvals, licenses, registrations or authorizations necessary for the Development or Manufacture of such Product in such jurisdiction.

1.53 “ Regulatory Authority ” means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the Development, Manufacture, Commercialization or other use or exploitation (including the granting of Marketing Approvals) of any Product in any jurisdiction, including the FDA.

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1.54 “ Regulatory Filing ” means any filing, application or submission for Regulatory Approval, and any notification and other correspondence made to or with a Regulatory Authority in connection with a Regulatory Approval, in each case that are necessary or reasonably desirable in Development, Manufacture or Commercialization in a particular country, whether submitted before or after a Marketing Approval in the country, including a PMA, a 510(k), or any other pre-market notification of intent, including any Regulatory Approvals, as well as minutes of any material meetings, telephone conferences or discussions with the relevant Regulatory Authority, in each case with respect to a product.

1.55 “ Second Product ” means [***] (a) [***] and (b) a [***], in each case (a) and (b) meeting those Specifications established in accordance with Section 3.2.2 and Developed pursuant to the [***] (including any modifications or updates therefor made in accordance with this Agreement).

1.56 “[***]” means any and all [***].

1.57 “ Sensor Technology ” means [***] consisting of (a) [***], (b) [***], (c) the [***] and (d) other [***].

1.58 “ Specifications ” means, with respect to a Product or component, written functional, performance, form and configuration specifications, cost objectives and technical designs for such Product or component that are consistent with the technological capabilities of such Product or component and are intended to support the market requirements for such Product, together with the acceptance criteria for such Product.

1.59 “ Territory ” means [***].

1.60 “ Third Party ” means any Person other than DexCom, GLS or their respective Affiliates.

1.61 “ Third Product ” means an [***] (a) [***] and (b) a [***], in each case (a) and (b) meeting those Specifications established in accordance with Section 3.2.2 and Developed pursuant to the [***] (including any modifications or updates therefor made in accordance with this Agreement).

1.62 “ Trademark ” means any trademark, trade name, service mark, service name, brand, domain name, trade dress, logo, slogan or other indicia of origin or ownership, including

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registrations and applications therefor and the goodwill and activities associated with each of the foregoing.

1.63 “ VWAP ” means, with respect to a publicly traded stock and a specified end date, the volume weighted average trading price of such stock during a period of [***]consecutive trading days ending on the specified end date, calculated utilizing “VWAP” in the Bloomberg function VAP.

1.64 Additional Definitions . Each of the following definitions have the meanings defined in the corresponding sections of this Agreement indicated below:



Definitions	Section	Definitions	Section
Alliance Manager	2.1.7	[***]	1.27
Bankruptcy Code	14.12	[***]	11.4.2
Co-Chair	2.1.3	[***]	4.3
COC Transaction	1.3	[***]	4.3
Combination Product	8.3.2	[***]	4.3
Commercial Failure	12.3.2	Indemnify	11.4.1
Commercialization Plan	5.2	Infringing Product	9.4.1
Confidential Information	10.1	Initial [***]	3.2
Covered Products	8.3.4	Initial Notice	3.1.3
Defending Party	9.3	Joint Collaboration IP	9.1.1
[***]	3.2	JSC	2.1.1
Development Program	3.1	Losses	11.4.1
DexCom Deliverable	11.4.3	Milestone Event	8.2.1
DexCom Indemnitees	11.4.1	Milestone Payment	8.2.1
DexCom Collaboration IP	9.1.1	[***]	9.4.3
Dispute	13.1	Prior Agreements	10.4
Distribution Product	4.2	Product Failure	12.3.1
[***]	4.1	[***]	9.4.2
[***]	4.1	Required Party	10.3
Enforcement Action	9.4.4	Selling Party	1.41
Enforcing Party	9.4.4	Senior Executive	2.16
GLS Indemnitees	11.4.3	Term	12.1
GLS Collaboration IP	9.1.1	Third-Party Claim	11.4.1
GLS Deliverable	11.4.1	Third Party IP	8.3.4
[***]	1.61	User Fees	1.41
[***]	1.24	Withdrawal Notice	2.2.3
[***]	1.55	Working Group	2.1.3
[***]	1.27

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1.65 Interpretation . The captions and headings to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement. Unless specified to the contrary, references to Articles, Sections or Exhibits mean the particular Articles, Sections or Exhibits to this Agreement and references to this Agreement include all Exhibits hereto. Unless context otherwise clearly requires, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation;” (b) the word “day” or “year” means a calendar day or year unless otherwise specified; (c) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other communications contemplated under this Agreement; (d) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this Agreement (including any Exhibits); (e) the word “or” shall be construed as the inclusive meaning identified with the phrase “and/or;” (f) provisions that require that a Party, the Parties or the JSC “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise; (g) words of any gender include the other gender; (h) words using the singular or plural number also include the plural or singular number, respectively; (i) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement law, rule or regulation thereof; and (j) neither Party nor its Affiliates shall be deemed to be acting “on behalf of” or “under authority of” the other Party hereunder. This Agreement has been prepared jointly and shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.

ARTICLE 2
GOVERNANCE

2.1 Joint Steering Committee .

2.1.1 Establishment . Promptly after the Effective Date, DexCom and GLS shall establish a [***] steering committee (the “ JSC ”) to oversee, review and coordinate the activities of the Parties under this Agreement.

2.1.2 Responsibilities . The JSC shall be responsible for:

(a) Providing strategic direction to the Parties and coordination of the Parties’ respective activities under the Collaboration, including with respect to matters pertaining to (i) [***] and (ii) the [***], in each case (i) and (ii) consistent with the terms of this Agreement;

(b) Reviewing and approving each [***], in accordance with this Agreement;

(c) Coordinating and monitoring the [***] and each Party’s activities [***], and reviewing and monitoring the progress thereof (including review of protocols for and conduct of clinical trials conducted by or on behalf of DexCom pursuant to the [***]);

(d) Reviewing and approving certain regulatory matters as provided in Article 6 of the Agreement;

(e) Reviewing and determining when [***].

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(f) Reviewing and providing input on each [***] and any material modifications or amendments thereto in accordance with this Agreement;

(g) Reviewing and monitoring the [***] and the activities by or on behalf of DexCom with respect to the [***] and the progress thereof;

(h) Reviewing and monitoring the [***] and the activities by or on behalf of DexCom with respect to the [***] and the progress thereof;

(i) Providing a forum for the Parties to exchange information and facilitate such exchange;

(j) If requested by GLS, facilitate interactions between DexCom and [***] or [***] with respect to the matters described in Article 4;

(k) Providing a forum for resolving matters to be decided by the Parties under this Agreement; and

(l) Performing such other duties as are specifically assigned to the JSC in this Agreement.

2.1.3 Working Groups . The JSC may, from time to time, establish working groups (each, a “ Working Group ”) to perform certain duties of the JSC as expressly delegated by the JSC to such Working Group. Each such Working Group shall (a) be comprised as the JSC determines necessary to fulfill its responsibilities and (b) report into and be subordinate to the JSC. Accordingly, each Working Group shall keep the JSC regularly informed of the activities that it is tasked with overseeing or otherwise carrying out, both through in-person and written reporting as reasonably necessary for the JSC to fulfill its responsibilities with respect thereto.

2.1.4 Membership . The JSC shall be made up of [***]. Any Working Group shall be made up of an equal number of representatives from each of GLS and DexCom. Either Party may replace its respective representatives to the JSC and each Working Group at any time with prior notice to the other Party, subject to the following sentence. Unless otherwise agreed by the Parties, the JSC shall have at least one representative with relevant decision-making authority from each Party such that the JSC is able to effectuate all of its decisions within the scope of its responsibilities. Without limiting the foregoing, each Party shall appoint one of its members to the JSC to co-chair the meetings for the JSC (each, a “ Co-Chair ”). The Co-Chairs for the JSC shall (a) coordinate and prepare the agenda and ensure the orderly conduct of the JSC’s meetings, (b) attend (subject to below) each meeting of the JSC, and (c) prepare and issue minutes of each meeting within ten (10) Business Days thereafter accurately reflecting the discussions and decisions of the JSC. Such minutes from each JSC meeting shall not be finalized until the applicable Co-Chair from each Party has reviewed and confirmed the accuracy of such minutes in writing. The Co-Chairs shall solicit agenda items from the other JSC members and provide an agenda along with appropriate information for such agenda reasonably

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in advance (to the extent possible) of any meeting. It is understood that such agenda shall include all items requested by either Co-Chair for inclusion therein. In the event the Co-Chair or another member of the JSC from either Party is unable to attend or participate in any meeting of the JSC, the Party who designated such Co-Chair or member may designate a substitute Co-Chair or other representative for the meeting.

2.1.5 Meetings . The JSC will meet at least [***], and more or less frequently as the Parties mutually deem appropriate, on such dates, and at such places and times, as provided herein or as the Parties shall agree. Meetings of the JSC may occur [***]; provided, that at least [***] of the JSC meetings per calendar year shall be held in person. [***]. As appropriate, other employee representatives of the Parties may attend JSC meetings as nonvoting observers, but no Third Party personnel may attend unless otherwise agreed by the Parties. Each Party may also call for special meetings to resolve particular matters requested by such Party.

2.1.6 Decision Making . Decisions of the JSC shall be made [***]. Each Party shall work in good faith to [***] act in the general spirit of cooperation (taking into consideration the scope of the JSC’s authority and the principles set forth in Sections 2.2.1 and 2.2.2) and in no event shall either Party unreasonably withhold, condition or delay any approval or other decision of the JSC. In the event a Working Group fails to reach consensus with respect to a particular matter within its authority, then upon request by either Party such matter shall be referred to the JSC for resolution. In the event that the JSC fails to reach consensus with respect to a particular matter within its authority, then either Party may, by notice to the other Party, have such matter referred to [***] for resolution by good faith discussions for a period of at least fifteen (15) Business Days. In the event that [***] are unable to reach agreement with respect to such matter within such fifteen (15) Business Days, then the following shall apply:

(a) DexCom shall have the final decision-making authority with respect to (i) the [***], (ii) DexCom’s [***], and (iii) [***];

(b) GLS shall have the final decision-making authority with respect to (i) the [***]; provided, that [***], and (ii) [***]; and

provided that neither Party may exercise its final decision-making authority in a manner that (i) is inconsistent with the express terms of this Agreement (including Sections 2.2.1

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and 2.2.2) or (ii) would unilaterally impose any additional or different material obligation on the other Party (including the other Party to incur or share any cost).

2.1.7 Alliance Managers . Promptly after the Effective Date, each Party shall appoint an individual to act as alliance manager for that Party (each, an “ Alliance Manager ”). If an Alliance Manager is not a voting member of the JSC, the Alliance Manager shall be permitted to attend meetings of the JSC as a non-voting observer, subject to the confidentiality provisions of Article 10. The Alliance Managers shall be the primary point of contact for the Parties with respect to the activities to be conducted under this Agreement. The name and contact information for the Alliance Managers, as well as any replacement(s) chosen by either Party in their sole discretion from time to time, shall be promptly provided to the other Party in writing.

2.2 Authority; Withdrawal .

2.2.1 General . Notwithstanding the creation of the JSC and any Working Group, each Party shall retain the rights, powers and discretion granted to it hereunder, and neither the JSC nor any Working Group shall be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided herein, or the Parties expressly so agree. Neither the JSC nor any Working Group shall have the power to (i) amend, modify or waive compliance with this Agreement, (ii) to determine whether or not a Party has met its diligence or other obligations under the Agreement, or (iii) to determine whether or not a breach of this Agreement has occurred, and no decision of the JSC or any Working Group shall be in contravention of any terms and conditions of this Agreement.

2.2.2 Guiding Principles . The JSC and each Working Group shall perform its responsibilities under this Agreement based on the principles of based on the principles of prompt and diligent Development and Commercialization of Products for the Field throughout the Territory, consistent with Commercially Reasonable Efforts.

2.2.3 Withdrawal . At any time after the earlier of [***] after the Effective Date and [***], [***] shall have the right to withdraw from participation in the JSC and any or all of the Working Groups upon notice to [***] referencing this Section 2.2.3, which notice shall be effective immediately upon receipt (“ Withdrawal Notice ”). Following the issuance of a Withdrawal Notice and subject to this Section 2.2.3, the Parties will amend the respective decision making and disclosure rights and obligations enumerated in this Agreement in a manner consistent with each of the Parties’ respective decision making and disclosure rights and obligations prior to such withdrawal, in the absence of [***]’s participation through such JSC and/or Working Group(s).

2.3 Day-to-Day Responsibilities . Each Party shall: (a) be responsible for its day-to-day activities hereunder, provided that such activities are consistent with the express terms of this Agreement or the decisions of the JSC within the scope of their authority specified herein (or with respect to activities under the Development Program, are consistent with the Development Plan); and (b) keep the other Party informed as to the progress of such activities as reasonably requested by the other Party and as otherwise determined by the JSC.

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ARTICLE 3
DEVELOPMENT

3.1 General . Subject to oversight and review of the JSC, GLS and DexCom shall conduct a program to Develop the First Product and Second Product on a collaborative basis and in accordance with the [***] (the “ Development Program ”). The Development Program shall be coordinated by the Parties through the JSC. Each Party shall conduct its responsibilities under the Development Program. With respect to the First Product and Second Product: (a) GLS will be responsible (in consultation with DexCom) for [***]; and (b) DexCom will be responsible (in consultation with GLS) for [***]. For Additional Products (if any) and the Third Product, the responsibilities will be as mutually agreed by the Parties consistent with each Party’s expertise and resources. Each Party shall use Commercially Reasonable Efforts to conduct its obligations and achieve the objectives and timelines within the Development Program for the activities assigned to such Party. In accordance with Section 8.10, each Party will bear its own costs in performing its obligations under the Development Program except as otherwise expressly provided herein or otherwise agreed by the Parties.

3.1.1 Third Product .

(a) The Parties may (but shall have no obligation to) mutually agree to include the Third Product in the Development Program, provided that the Parties shall also, at such time, agree on any additional or revised terms and conditions for such inclusion, which additional or revised terms and conditions may include those pertaining to intellectual property and the Parties’ responsibilities, except that unless otherwise agreed by the Parties, DexCom shall not be obligated to [***].

(b) In the event that GLS provides written notice to DexCom of its desire to include the Third Product in the Development Program and the Parties are unable to agree on such additional or revised terms and conditions for such inclusion within sixty (60) days, then notwithstanding the definition of Product in Section 1.49, Product shall exclude the Third Product and nothing in this Agreement shall restrict GLS from Developing, Manufacturing and Commercializing any product or service that integrates or utilizes the [***] on its own or with any Affiliate or Third Party and DexCom shall have no rights with respect to any such product or service.

3.1.2 Additional Products . The Parties may (but shall have no obligation to) mutually agree to include Additional Products in the Development Program, provided that the Parties shall also, at such time, agree on any additional or revised terms and conditions for such inclusion, which additional or revised terms and conditions may include those pertaining to the intellectual

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property, economics, the Parties’ responsibilities or otherwise; however neither Party shall have any liability whatsoever as a result of any failure to agree on any such terms and conditions.

3.1.3 [***].

3.2 [***] . The Development of the Products shall be carried out in accordance with a plan collaboratively developed by personnel appointed by each Party and approved by the JSC (the “ [***] ”), which [***] shall be updated or amended by personnel appointed by each Party at least annually and approved by the JSC. Once approved by the JSC, each updated [***] will become effective and supersede the previous [***] as of the date of such approval.

3.2.1 Initial [***] . The initial timeline for the [***] and Initial Specifications for the First Product, as agreed to by the Parties, are attached hereto as Exhibit 3.2.1 . A complete [***] covering the First Product shall be submitted to the JSC for approval by the Parties [***], and an updated [***] covering the Second Product shall be submitted to the JSC for approval by the Parties [***]. The [***] will be amended to cover the Third Product and Additional Products (if any) only upon the mutual written agreement of the Parties.

3.2.2 Content of the [***] . The [***] will set forth the Development activities to be undertaken by each Party with respect to the Products, including approximate deliverables, resources to be provided to the other Party, and timelines for each such activity. The [***] will include the scope and timing of technology to be transferred by GLS to DexCom to allow DexCom to Manufacture the Products, including updates on improvements to such technology at reasonable intervals. As the JSC mutually agrees upon new, or changes to existing, Specifications for each Product (or component thereof), such Specifications will be attached to or incorporated into the [***]. The Specifications may only be modified by mutual written agreement of the Parties. The [***] will at all times contain terms that reflect the use of Commercially Reasonable Efforts to Develop the Products, to obtain Marketing Approval for the Products, and to Commercialize such Products in a timely manner; provided that the [***] will not include such terms with respect to the Third Product unless the Parties agree to include the Third Product in the Development Program in accordance with Section 3.1.1(a).

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3.3 Resource Commitments . In conducting the activities assigned to it under the Development Program, each Party agrees to use scientific, technical and other personnel who are sufficiently qualified and have the requisite skills to perform such Development activities.

3.4 Reporting . Without limiting any other provisions of this Agreement, each Party shall keep the other reasonably informed through the JSC as to the progress of its activities under the Development Program or otherwise under this Article 3 and provide such reports and information with respect thereto as designated by the JSC or as may be reasonably requested by the other Party. In addition, each Party shall disclose under the coordination of the JSC to the other Party all Collaboration IP first conceived in the course of its performance of the Development Program and required for the other Party to perform the activities assigned to it under the Development Program. Also, each Party shall promptly notify the other Party if it anticipates or there are material deviations from the then-current [***] and shall discuss in good faith and keep such other Party reasonably informed as to any corrective actions that it intends or is taking to address such deviations.

ARTICLE 4
[***]

4.1 [***]. In furtherance of the foregoing with respect to the Products and/or other [***] (if applicable) and as reasonably requested by [***], DexCom shall (a) consult with [***] in connection with such matters to facilitate [***], (b) cooperate with [***] to allow such Products and/or [***] to [***], including by providing [***] for such Products and/or [***], and (c) create and file [***] with [***], provide [***], including any [***] and/or [***] to allow [***] to [***], including providing consultation to [***] with respect to DexCom’s [***] related to [***]; provided that for jurisdictions where a right to reference [***] is not available to [***], DexCom will provide any [***] within a commercially reasonable time of its receipt of such request from [***] and in a form and in a manner that is acceptable to the respective [***]; provided further that if the applicable

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[***] will not accept submissions directly from DexCom, DexCom will [***] for the purpose of submission to the applicable Regulatory Authority.

4.2 Supply and Distribution . [***], DexCom and [***] shall negotiate in good faith and enter into a distribution agreement pursuant to which DexCom will (a) supply to [***] quantities of Products or other [***] (if applicable pursuant to Section 4.1) (each, a “ Distribution Product ”) for its use in connection with [***] and (b) appoint [***]. Such [***] will include the minimum terms and conditions set forth on Exhibit 4.2 .

4.3 [***]Product Collaboration . It is understood that GLS intends to develop a [***] (the “[***]”) in collaboration with one or more Third Parties (each, a “[***]”) and GLS and its [***] (s) will seek to partner with a continuous glucose monitor company to [***]. The Parties agree that [***]; provided, that, it shall be a condition precedent to [***], which agreement shall provide among other things that: [***], (b) cooperate with [***], and (c) provide [***] with [***].

ARTICLE 5
COMMERCIALIZATION

5.1 General . Subject to the terms and conditions of this Agreement and the oversight of the JSC, as between the Parties, DexCom shall have the exclusive right to Commercialize the Products in the Field in the Territory. DexCom shall [***] be responsible for all Commercialization efforts for the Products in the Field in the Territory, including [***] to support such Commercialization, in accordance with the Commercialization Plan.

5.2 Commercialization Plan . At least twelve (12) months in advance of the Launch of each Product, DexCom shall propose and submit to the JSC an initial plan for the Commercialization of such Product in the Field in the Territory (each, a “ Commercialization Plan ”), which Commercialization Plan shall be updated at least annually. DexCom shall provide each such Commercialization Plan and any material modification or addition thereto to the JSC for its review and comment. The Parties acknowledge that the comments of the JSC with respect to any Commercialization Plan are [***] with respect thereto. Without limiting the foregoing, each such Commercialization Plan shall be consistent with DexCom’s obligations under Sections 5.1 and 5.3.

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5.3 Diligence Obligations .

5.3.1 DexCom shall use Commercially Reasonable Efforts to achieve the objectives and timelines within the Commercialization Plan. Without limiting the foregoing sentence, DexCom agrees to use Commercially Reasonable Efforts (a) to Launch each Product in the Field in the [***] therefor, and then [***], and thereafter (b) to market, promote and sell such Products in the Field in the Territory to [***].

5.3.2 Without limiting DexCom’s obligations under Section 5.3.1, DexCom shall use Commercially Reasonable Efforts to Launch the First Product in the United States within [***] after the Effective Date; provided that if DexCom fails to achieve such Launch within the timeframe specified due to any causes such as unforeseen technical delays, regulatory or clinical process or delays, or delays caused by GLS’s failure to perform its obligations under the [***], in each case to the extent beyond the reasonable control of DexCom, and despite DexCom’s Commercially Reasonable Efforts to achieve such Launch, then DexCom shall not be deemed in default or breach of this Section 5.3.2 and the timeframe for achieving such Launch will be extended by the time of the delay reasonably attributable to the causes that were beyond the reasonable control of DexCom as long as DexCom applies Commercially Reasonable Efforts to achieve such Launch in the United States. Failure by DexCom to Launch the First Product within the foregoing timeframe shall be deemed to be a material breach of this Agreement.

5.4 Trademarks .

5.4.1 Ownership of Marks . DexCom will be responsible for the selection, registration, maintenance and defense of, and will solely own all right, title and interest in, all Trademarks (except the GLS Trademarks) for use in connection with the sale or marketing the Products, as well as all expenses associated therewith.

5.4.2 Branding of Products . DexCom will have the right to implement a branding strategy for the Products, as outlined in the Commercialization Plan; provided, however, that if requested by GLS, and to the extent allowed by the applicable Regulatory Authority, DexCom will include on all labels, packaging, inserts and promotional materials for each Product a designation that each Product incorporates GLS technology, provided that such designation may be subordinate to any Trademark selected by DexCom for a Product and any Trademark used by DexCom; provided that size and placement of the designation shall be consistent with DexCom’s practices with respect other Third Party Trademarks. Such designation will include at least one of the GLS Trademarks as agreed by the Parties.

5.4.3 Use of GLS Trademarks . In advance of each separate use of a GLS Trademark for a Product, DexCom shall notify GLS in writing and obtain GLS’ prior written approval on the final selection, placement, look and feel of the GLS Trademark. DexCom recognizes the reputation of GLS as a provider of high quality products and services and agrees to continue to maintain, and to require its sublicensees to continue to maintain, the same high standard of quality for the Commercialization of the Products. DexCom will not, without GLS’s prior

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written consent, use any other Trademarks of GLS, or Trademarks confusingly similar thereto, in connection with its marketing or promotion of the Products. DexCom acknowledges that it obtains no ownership interest in or to the GLS Trademarks under this Agreement. DexCom will at any time, whether during or after the Term, execute any documents that are reasonably required by GLS to confirm GLS’s ownership of the GLS Trademarks. DexCom agrees that it will do nothing inconsistent with GLS’s ownership of the GLS Trademarks.

5.5 Reporting . Without limiting any other provisions of this Agreement, DexCom shall keep GLS reasonably informed through the JSC as to the progress of its activities with respect to the Commercialization of Products or otherwise under this Article 5 and provide such reports and information with respect thereto as designated by the JSC or as may be reasonably requested by GLS, except as prohibited by Law. In addition, DexCom shall promptly notify GLS if it anticipates or there are material deviations from the then-current Commercialization Plan and shall discuss in good faith and keep GLS reasonably informed as to any corrective actions that it intends or is taking to address such deviations, in all instances except as prohibited by Law.

ARTICLE 6
REGULATORY MATTERS

6.1 General . As between the Parties, [***] shall, [***], be the manufacturer of record with respect thereto and take the lead and be responsible for: (a) conducting any clinical trials or clinical studies required for any Regulatory Filings and/or Regulatory Approvals; (b) filing, obtaining and maintaining Regulatory Filings and Regulatory Approvals for Development, Manufacture and Commercialization in the Field in the Territory; (c) communicating with Regulatory Authorities; (d) preparing and submitting supplements, communications, annual reports, Adverse Event reports, manufacturing changes, supplier designations and all other Regulatory Filings; and (e) all costs and expenses associated with the foregoing. [***] will keep [***] or its designee reasonably informed regarding the status and progress of such activity, including (i) providing [***] or its designee with advance notice of all meetings scheduled with a Regulatory Authority involving a Regulatory Filing; (ii) permitting [***] or its designee to attend, observe, and, if pertinent to [***], participate in any scheduled meeting with a Regulatory Authority involving a Product matter related to a Regulatory Filing (e.g., pre-submission meetings), either in person, by teleconference or by videoconference; (iii) upon request of [***], providing [***] regarding the nature and content of any Regulatory Filing pertinent to a Product and related communications with the Regulatory Authorities, including any [***] regarding the applicable Product, and [***] may review and comment regarding such matters and [***] will consider any comments in good faith; and (iv) providing [***] a copy of each Regulatory Approval for each Product. Notwithstanding the foregoing, [***] shall have the option to take the lead and have responsibility for any regulatory activities required for the performance of [***]’s obligations under the [***].

6.2 Safety Reporting . With respect to any Adverse Event, any safety monitoring and any obligation to report to any Regulatory Authority relating to any safety issue with respect to Products or any component thereof, [***] shall be responsible for, and shall establish (subject

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to the oversight and comment of the JSC as described below) operating procedures to report to the appropriate Regulatory Authority(ies), all such matters in accordance with applicable Law. Such activities and operating procedures by [***] shall include any measures necessary for [***] to fully comply with such Laws and, if necessary, allow [***] to comply with its requirements for Adverse Event reporting under applicable Laws. Such activities and operating procedures, and any material revisions to them, shall be provided to the JSC for review and comment. To the extent requested by [***],[***] shall provide [***] any information or regular updates on Adverse Events, safety monitoring and/or any interaction with Regulatory Authorities relating to safety issues with respect to the Products or any component thereof.

ARTICLE 7
LICENSES AND EXCLUSIVITY

7.1 License To DexCom .

7.1.1 License to Products .

(a) As of the Effective Date, and subject to the terms and conditions of this Agreement, including Section 8.3, GLS hereby grants to DexCom, an [***], sublicensable (subject to Section 7.1.4), [***] license under the GLS IP ([***]) to Develop, Manufacture and Commercialize the Products, in each case solely for applications in the Field in the Territory. DexCom shall have the right to exercise such license through its Affiliates solely for as long as such entity remains an Affiliate of DexCom, and DexCom shall remain responsible for the compliance of such Affiliate with all terms of this Agreement.

(b) As of the date that is [***], and subject to the terms and conditions of this Agreement, including Section 8.3, GLS hereby grants to DexCom, an [***], sublicensable (subject to Section 7.1.4), [***] license under the [***] to Develop, Manufacture and Commercialize the Products, in each case solely for applications in the Field in the Territory. DexCom shall have the right to exercise such license through its Affiliates solely for as long as such entity remains an Affiliate of DexCom, and DexCom shall remain responsible for the compliance of such Affiliate with all terms of this Agreement.

7.1.2 License to GLS Trademarks . Subject to the terms and conditions of this Agreement (including Section 5.4), GLS hereby grants to DexCom a non-exclusive, fully-paid, sublicensable (subject to Section 7.1.4), non-transferable (except as set forth in Section 14.2) license to use the GLS Trademarks solely as required under Section 5.4 in connection with the Commercialization of Products. The ownership and all goodwill accruing to the GLS Trademarks arising directly from use of the GLS Trademarks will vest in and inure to the benefit of GLS.

7.1.3 License to [***] and [***] . GLS hereby grants to DexCom a [***], sublicensable (through multiple tiers), [***] license under any [***] and [***] for all purposes and

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applications. For clarity, to the extent the foregoing license overlaps with the licenses granted in Section 7.1.1, (a) the foregoing license shall not limit the [***] granted to DexCom in such licenses granted under Section 7.1.1 and (b) the [***] nature of the foregoing license does not limit DexCom’s payment obligations under Article 8.

7.1.4 Sublicenses . Subject to the terms and conditions of this Agreement, including Section 8.4, the licenses under Sections 7.1.1 and 7.1.2 include the right to grant and authorize sublicenses within the scope thereof to Third Parties that DexCom, in each case, reasonably believes is capable of and has resources for the Development, Manufacture or Commercialization, as applicable, of the Product within the territory contemplated by such sublicenses, provided that:

(a) Unless otherwise agreed by the Parties, the Development and Commercialization of Products in the Major Markets is to be carried out by DexCom and its Affiliates, and consequently DexCom shall not have the right to sublicense to Third Parties the Development and Commercialization of Products in the Major Markets [***]; provided, however, that DexCom may [***] use Third Party distributors to sell Products consistent with DexCom’s past practices with respect to the sale of its other products, and use Third Party contract research organizations for portions of the Development that DexCom uses in its ordinary course of development. DexCom shall, upon GLS’s reasonable request, promptly provide GLS a list of such distributors and contract research organizations.

(b) Any such sublicense shall be pursuant to a written agreement and a copy of the final executed agreement (together with any amendment thereto) shall be provided by DexCom to GLS within ten (10) Business Days following execution thereof; and

(c) DexCom shall be responsible for the failure by its sublicensees to comply with, and DexCom guarantees the compliance by each of its sublicensees with, the terms of this Agreement including all relevant restrictions, limitations and obligations.

7.2 License to GLS .

7.2.1 License to Perform Development . Subject to the terms and conditions of this Agreement, DexCom hereby grants to GLS [***] sublicensable (subject to Section 7.1.4), [***] license to make, use and otherwise exploit Know-How and Patents controlled by DexCom and its Affiliates to perform its obligations under the [***] or otherwise cooperate with DexCom hereunder.

7.2.2 License to [***] and [***] . DexCom hereby grants to GLS a [***], sublicensable (through multiple tiers), [***] license under any [***] for all purposes and applications (a) outside of the Field during the Term and (b) [***] after the Term. DexCom hereby further grants to GLS a [***], sublicensable (through multiple tiers), [***] license

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under any [***] for all purposes and applications (both inside and outside the Field). For clarity, to the extent the foregoing license overlaps with the license granted in Section 7.2.1, the foregoing license shall not limit the [***] granted to GLS in such license granted under Section 7.2.1.

7.3 No Other Rights . Each Party acknowledges that the rights and licenses granted under this Article 7 and elsewhere in this Agreement are limited to the scope expressly granted. Accordingly, except for the rights expressly granted under this Agreement, no right, title, or interest of any nature whatsoever is granted whether by implication, estoppel, reliance, or otherwise, by either Party to the other Party. All rights with respect to Know-How, Patent, Trademarks or other intellectual property rights that are not specifically granted herein are reserved to the owner thereof.

7.4 Other Licenses . No license to Collaboration IP owned by GLS shall be granted by GLS or its Affiliates to [***] of the foregoing unless GLS (a) [***], and (b) [***]. Notwithstanding the foregoing, any license granted by [***], or any subsidiary of the foregoing under the Collaboration IP shall be subject to the exclusive and non-exclusive rights granted by GLS to DexCom pursuant to this Agreement and the foregoing shall not be construed to allow or authorize any grant of a license under the Collaboration IP that is in conflict with any such exclusive or non-exclusive license granted to DexCom.

7.5 [***] . During the Term, GLS and DexCom will collaborate on [***] the Development of the Products, and DexCom will have [***], in each case subject to Section 3.1.1(b) and in accordance with the terms and conditions of this Agreement. Subject to Section 3.1.1(b), GLS shall not, during the Term, itself utilize [***], except as necessary to fulfill its obligations under this Agreement or to allow any [***]. GLS shall not [***] except solely to the extent necessary to enable other [***].

ARTICLE 8
PAYMENTS

8.1 Upfront Fee . Upon the Effective Date, DexCom shall pay to GLS, in partial consideration of the licenses granted to DexCom hereunder and GLS’s performance of its activities under the Collaboration, an upfront payment in the amount Thirty-Five Million Dollars ($35,000,000), payable in, at DexCom’s sole election, cash or in shares of DexCom Common Stock; provided, that if DexCom elects to pay the upfront payment in shares of DexCom Common Stock, then it shall issue such shares within fifteen (15) Business Days of the Effective Date. To the extent such upfront fee is paid in DexCom Common Stock, the DexCom Common

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Stock must be registered and freely tradable at the time of issuance and shall be valued at the VWAP ending on the trading day prior to the Effective Date and rounded down to the nearest whole share of DexCom Common Stock. Such upfront fee shall be non-refundable and shall not be creditable.

8.2 Milestone Payments .

8.2.1 Milestones . DexCom shall pay to GLS the amounts set forth in the following table (each, a “ Milestone Payment ”) for the first achievement of the corresponding milestone event for the applicable Product (each, a “ Milestone Event ”):



Milestone Event	Milestone Payment
[***]	$[***]
[***]	$[***]

For clarity, it is understood that each Milestone Payment shall be payable only once upon the first achievement of the applicable Milestone Event.

8.2.2 Payment Terms . The Milestone Payments set forth in this Section 8.2 shall each be due to GLS within thirty (30) days of the achievement of the corresponding Milestone Event set forth above and payable in, at DexCom’s sole election, cash or in shares of DexCom Common Stock. To the extent any Milestone Payment is paid in shares of DexCom Common Stock, the DexCom Common Stock must be registered and freely tradable at the time of issuance and shall be valued at the VWAP ending on the trading day prior to date of achievement of the corresponding Milestone Event and rounded down to the nearest whole share of DexCom Common Stock. Such Milestone Payment shall be non-refundable and shall not be creditable.

8.2.3 Notice . DexCom agrees to promptly notify GLS of its achievement of each Milestone Event.

8.3 Product Fee Payments . DexCom shall pay to GLS the applicable product fee rate on Annual Net Sales of [***] in cash (and not shares or other equity of DexCom) as set forth in the table below:

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Annual Net Sales	Product Fee Rate
≤ $750 Million	0%
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

As an example, if Annual Net Sales in a calendar year for [***] is $4.5 Billion, then the product fee payment owed for such calendar year shall be calculated as follows: 0% × ($750 Million) + [***]% × ($[***] - $750 Million) + [***]% × ($[***]) + [***]% × ($[***]) = $0 + $[***].

8.3.1 Acknowledgement . The Parties acknowledge that the product fees payable under this Section 8.3 were bargained for and are an essential element of this Agreement without which the Parties would not have entered into this Agreement and is therefore not severable.

8.3.2 Change in Business Model . The Parties acknowledge as of the Effective Date that DexCom’s and its Affiliates existing business model with respect to [***] is receiving value upon the sale of the [***] to distribution channels or end users or receiving User Fees and not from the provision of services or alternative business models; however, if such business model changes after of the Effective Date in a manner that undermines the economic split from the Commercialization of the [***] established under this Section 8.3 and Section 8.4, then upon request of either Party, the Parties shall negotiate in good faith an alternative, whether mechanism, basis or otherwise, so as to reflect the intentions of the Parties in agreeing the economic split as of the Effective Date. If DexCom Commercializes, directly or indirectly, any [***] that is combined or integrated with any product or service that is not a [***], such as an [***], (“ Combination Product ”), the Parties will mutually agree on the portion of the total amount invoiced with respect to the sale, license or use of such Combination Product that is Net Sales.

8.3.3 Term of Fees . GLS’s right to receive product fees under this Section 8.3 8.3 shall commence on the earlier of (a) [***] and (b) the [***].

8.3.4 Third Party Royalties . If DexCom believes that the GLS Deliverable infringes intellectual property owned or controlled by a Third Party (“ Third Party IP ”), DexCom will consult in good faith with GLS to reach agreement as to whether such Third Party IP covers the [***] and whether to acquire rights to such Third Party IP. Subject to the foregoing, if a Selling Party is required to pay royalties to a Third Party pursuant to a license agreement for rights to such Third Party IP, then DexCom shall have the right to offset [***] percent ([***]%) of such royalty payments actually made by DexCom to such Third Party against the product fee payments owing to GLS under Section 8.3 with respect to sales of [***] covered by such Third Party IP (“ Covered Products ”) for the applicable calendar quarter; provided, however, that DexCom shall not reduce the amount of product fees payable to GLS for Covered Products under Section 8.3 by reason of this Section 8.3.4, to less than [***]

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percent ([***]%) of the product fees that would otherwise have been payable to GLS for Covered Products under Section 8.3 for such calendar quarter.

8.4 [***] . DexCom shall pay to GLS [***] percent ([***]%) of all [***] (at DexCom’s option either in cash or in the same form of consideration received by DexCom).

8.5 Payment/Reports . All payments under Sections 8.3 and 8.4 shall be due and payable within forty-five (45) days of the close of the calendar quarter during which the corresponding Net Sales and/or Non-Product Fee Consideration are recognized. Together with any such payment, DexCom shall deliver a report specifying in the aggregate and on a [***]-by-[***] and country-by-country basis for the applicable quarter: (a) (i) total gross invoiced amount from sales of [***] by DexCom, its Affiliates and Third Parties acting on their behalf or under their authority, (ii) amounts deducted by category (e.g., normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of [***]) from gross invoiced amounts to calculate Net Sales, (iii) Net Sales, and (iv) product fees payable to GLS; and (b) total Non-Product Fee Consideration received by DexCom and its Affiliates and GLS’s share thereof.

8.6 Payment Method; Stock Purchase Agreement . All cash payments due under this Agreement to GLS shall be made by bank wire transfer in immediately available funds to an account designated by GLS. All payments hereunder shall be made in the legal currency of the United States of America, and all references to “$” or “Dollars” shall refer to United States dollars. Except as otherwise provided herein, all payments due to a Party hereunder shall be due and payable within thirty (30) days of an invoice from the other Party. If any withholding taxes, levies or similar taxes is due with respect to such a payment, such amounts shall be payable by DexCom to the applicable taxing authority, including any tax or withholding levied by a foreign taxing authority in respect of the payment or accrual of any product fee.. Each Party agrees to assist the other Party as reasonably requested by the other Party in claiming exemption from or otherwise reducing such deductions or withholdings under any taxation or similar agreement or treaty from time to time in force. Prior to the first issuance of DexCom Common Stock by DexCom to GLS under this Agreement, the Parties shall enter into a mutually agreeable stock purchase agreement setting forth the terms and conditions under which DexCom shall issue such DexCom Common Stock to GLS under this Agreement, which stock purchase agreement shall contain representations and warranties of DexCom and GLS and conditions to the closing of the issuance of such shares of DexCom Common Stock, in each case, which shall be appropriate for a transaction of this nature.

8.7 Inspection of Records . DexCom shall, and shall cause its Affiliates and Third Parties acting on their behalf or under their authority to, keep full and accurate books and records setting forth (a) gross sales of [***], Net Sales of [***], itemized deductions from gross sales taken to calculate Net Sales and amounts payable hereunder to GLS for each such [***]; and (b) Non-Product Fee Consideration received by DexCom and its Affiliates and GLS’s share thereof. DexCom shall permit GLS, by independent qualified public accountants engaged by GLS and reasonably acceptable to DexCom, to examine such books and records at any reasonable time, but not later than three (3) years following the

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rendering of any corresponding reports, accountings and payments pursuant to Section 8.5. Such inspections may be made no more than once each calendar year, at reasonable times and on reasonable prior written notice. The records for any particular calendar quarter shall be subject to no more than one inspection. The accountant shall be obligated to execute a reasonable confidentiality agreement prior to commencing any such inspection. Any inspection conducted under this Section 8.7 shall be at the expense of GLS, unless such inspection reveals any discrepancy of more than [***] past due to GLS, in which case such inspection shall be at the expense of DexCom. Any underpayment shall be paid within fifteen (15) Business Days with interest on the underpayment at the rate specified in Section 8.8 from the date such payment was originally due; and any overpayment may be credited against future payments hereunder without interest or if there will be no future payments by DexCom, then reimbursed within fifteen (15) Business Days. Any disputes arising under this Section 8.7 regarding any discrepancy identified by the accountant shall be subject to resolution under Article 13.

8.8 Late Payment . Any payments or portions thereof due hereunder which are not paid when due shall bear interest at the rate of one and a half percent (1.5%) per month from the payment due date until paid in full. This Section 8.8 shall in no way limit any other remedies available to either Party.

8.9 Currency Conversion . With respect to Net Sales invoiced or Non-Product Fee Consideration received in a currency other than U.S. Dollars, such Net Sales or Non-Product Fee Consideration shall be converted into the U.S. Dollar equivalent in accordance with DexCom’s standard practices used in preparing its audited financial statements for the applicable calendar quarter and DexCom shall provide GLS the basis for such conversion.

8.10 Collaboration Costs . Except as otherwise expressly provided herein or otherwise agreed by the Parties, each Party shall bear all of its own costs and costs of any Third Party acting on its behalf in carrying out those activities assigned to it under the Collaboration.

ARTICLE 9
INTELLECTUAL PROPERTY

9.1 Ownership of Inventions .

9.1.1 General . As between the Parties, all right, title and interest to Collaboration IP first conceived (a) (i) solely by or on behalf of DexCom in the course of activities conducted pursuant to the [***] or Commercialization Plan (“ DexCom Collaboration IP ”) and all intellectual property rights therein shall be solely owned by DexCom, (b) solely by or on behalf of GLS in the course of activities conducted pursuant to the [***] or Commercialization Plan (“ GLS Collaboration IP ”) and all intellectual property rights therein shall be solely owned by GLS and (c) jointly by or on behalf of each Party in the course of activities conducted pursuant to the [***] or Commercialization Plan, excluding any [***] or [***] (“ Joint Collaboration IP ”), and all intellectual property rights therein shall be jointly owned by DexCom and GLS. Subject to the licenses and other rights granted to the other Party herein (including in Article 7), (i) each Party reserves the right to use, practice or otherwise exploit any and all sole inventions (DexCom Collaboration IP with respect to DexCom and GLS Collaboration IP with respect to GLS) and

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Joint Collaboration IP; and (ii) neither Party shall have any obligation to account to the other Party for profits, or to obtain any approval of the other Party to license, assign or otherwise exploit any Joint Collaboration IP or intellectual property with respect thereto, by reason of joint ownership thereof, and each Party hereby waives any right it may have under the applicable Law of any jurisdiction to require any such approval or accounting.

9.1.2 [***] . Each Party agrees to promptly disclose to the other all [***] or [***], as the case may be, first conceived by or on behalf of such Party during the Term.

9.1.3 [***] . Subject to the license granted in Section 7.2.2, GLS hereby assigns to DexCom all of GLS’s right, title, and interest in and to [***], and all intellectual property rights therein. Subject to the license granted in Section 7.1.3, DexCom hereby assigns to GLS all of DexCom’s right, title, and interest in and to [***], and all intellectual property rights therein.

9.1.4 Joint Research Agreement . The Parties hereby acknowledge that this Agreement qualifies as a “joint research agreement” as defined in 35 U.S.C. § 100(h) and agree that the Parties will cooperate to take advantage of the “joint research agreement” provisions of 35 U.S.C. § 102(c), including by the filing of a terminal disclaimer as provided for in Manual of Patent Examining Procedure Section 717.02(c), if reasonably prudent or necessary during the filing and/or prosecution of a patent application that is subject to a license grant or assignment under this Agreement.

9.2 Patent Prosecution .

9.2.1 GLS Patents . As between the Parties, GLS shall have the right to control the Prosecution and Maintenance of the GLS Licensed Patents and Joint Collaboration Patents using counsel of its choice. GLS agrees to: (a) keep DexCom reasonably informed with respect to such activities; and (b) consult in good faith with DexCom regarding such matters, including the abandonment of any claims thereof covering the Products in the Field. If GLS does not want to Prosecute and Maintain any of the Joint Collaboration Patents, then GLS shall give DexCom sufficient notice (i.e. in order to avoid any adverse events such as missing a filing deadline) and DexCom shall have the right to control the Prosecution and Maintenance of such Joint Collaboration Patents.

9.2.2 DexCom Patents . As between the Parties, DexCom shall have the right to control the Prosecution and Maintenance of the DexCom Collaboration Patents using counsel of its choice. DexCom agrees to: (i) keep GLS reasonably informed with respect to such activities; and (ii) consult in good faith with GLS regarding such matters, including the abandonment of any claims thereof covering the Products.

9.3 Defense of Third Party Infringement Claims . If any Product that is Commercialized by DexCom or its Affiliates becomes the subject of a Third Party’s claim or assertion of infringement of a Patent relating to the manufacture, use, sale, offer for sale or importation of such Product, the Party first having notice of the claim or assertion shall promptly notify the other Party, and the Parties shall promptly confer to consider the claim or assertion and the

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appropriate course of action. Except as provided in Section 11.4.4, or by separate written agreement of the Parties, each Party shall have the right to defend itself against a suit that names it as a defendant (the “ Defending Party ”). Except as provided in Section 11.4.4, neither Party shall enter into any settlement of any claim described in this Section 9.3 that adversely affects the other Party’s rights or interests without such other Party’s written consent, which consent shall not be unreasonably conditioned, withheld or delayed. In any event, the other Party shall reasonably assist the Defending Party and cooperate in any such litigation at the Defending Party’s request and expense.

9.4 Enforcement.

9.4.1 Notice . Subject to the provisions of this Section 9.4, in the event that either Party reasonably believes that any GLS Licensed Patent (a) is being infringed by a Third Party or (b) is or will become subject to a declaratory judgment action arising from such infringement, in each case, (a) and (b), which infringement arises from the manufacture, sale, use or import of a product in the Field in the Territory (an “ Infringing Product ”) such Party shall promptly notify the other Party.

9.4.2 Product-Specific Enforcement . DexCom shall have the initial right (but not the obligation), at its expense, to enforce Product-Specific GLS Licensed Patent Claims with respect to such Infringing Products or to defend any declaratory judgment action with respect thereto (each, a “ Product-Specific Enforcement Action ”) in the Territory. Prior to the commencement of any activity by DexCom with respect to a Product-Specific Enforcement Action, (a) DexCom shall provide thirty (30) days advance written notice to GLS and (b) if requested by GLS, DexCom shall consult in good faith with respect to such Product-Specific Enforcement Action and consider in good faith GLS’s input, including to prevent any GLS Licensed Patent to be subject to undue risk of invalidation. DexCom agrees not to settle any Product-Specific Enforcement Action, or intentionally make any admissions or assert any position in such Product-Specific Enforcement Action, in a manner that would materially adversely affect the validity, enforceability or scope of any GLS Licensed Patent in or outside the Territory, without the prior written consent of GLS, which shall not be unreasonably withheld, conditioned or delayed. In the event that DexCom or its designee fails to commence or defend a Product-Specific Enforcement Action with respect to such Infringing Products in the Territory within one hundred twenty (120) days of a request by GLS to do so (or such shorter period as is necessary to bring and maintain such action), GLS or its designee may commence a Product-Specific Enforcement Action with respect to such Infringing Products at its own expense. In such case, GLS agrees not to settle any Product-Specific Enforcement Action, or intentionally make any admissions or assert any position in such Product-Specific Enforcement Action, in a manner that would materially adversely affect DexCom’s rights or interests in Products in the Territory, without the prior written consent of DexCom, which shall not be unreasonably withheld, conditioned or delayed.

9.4.3 Non-Product-Specific Enforcement . As between the Parties, GLS shall have the sole right (but not the obligation), at its expense, to enforce the Non-Product-Specific GLS Licensed Patent Claims or to defend any declaratory judgment action with respect thereto (each, a “ Non-Product-Specific Enforcement Action ”).

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9.4.4 Cooperation . The Party commencing, controlling or defending any action under this Section 9.4 (such Party, the “Enforcing Party ” and such action, an “ Enforcement Action ”) shall keep the other Party reasonably informed of the progress of any such Enforcement Action, and such other Party shall have the right to participate with counsel of its own choice at its own expense. The non-Enforcing Party hereby gives the Enforcing Party the right to name the non-Enforcing Party in any Enforcement Action if required for standing. In any event, the other Party shall reasonably cooperate with the Enforcing Party, including providing information and materials, at the Enforcing Party’s request and expense. The Enforcing Party shall also have the right to control settlement of such Enforcement Action; provided, however, no settlement shall be entered into without the consent of the other Party, which consent not to be unreasonably withheld, conditioned or delayed, if such settlement would materially and adversely affect the interests of the other Party.

9.4.5 Recoveries . Any recovery received as a result of any Enforcement Action to enforce a Patent pursuant to this Section 9.4 shall be used first to reimburse the Parties for the costs and expenses (including attorneys’ and professional fees) incurred in connection with such Enforcement Action (and not previously reimbursed), and the remainder of the recovery shall be shared (a) for any Enforcement Action [***] and (b) for any Enforcement Action [***].

9.5 Patent Marking . DexCom shall mark (or cause to be marked) all Products marketed and sold hereunder will be appropriately marked with the number of any applicable Patents in those countries in which such notices impact recoveries of damages or remedies available with respect to infringements of Patents.

ARTICLE 10
CONFIDENTIALITY

10.1 Confidentiality; Exceptions . Except to the extent expressly authorized by this Agreement or otherwise agreed by the Parties in writing, the Parties agree that the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any confidential or proprietary information or materials furnished to it by the other Party pursuant to this Agreement and the terms and conditions of this Agreement (collectively, “ Confidential Information ”). Notwithstanding the foregoing, Confidential Information shall not be deemed to include information or materials to the extent that it can be established by the receiving Party that such information or material:

10.1.1 was already known to or possessed by the receiving Party, other than under an obligation of confidentiality (except to the extent such obligation has expired or an exception is applicable under the relevant agreement pursuant to which such obligation established), at the time of disclosure;

10.1.2 was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

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10.1.3 became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

10.1.4 was independently developed by the receiving Party without use of or reference to the disclosing Party’s Confidential Information as demonstrated by documented evidence prepared contemporaneously with such independent development; or

10.1.5 was disclosed to the receiving Party on a non-confidential basis by a Third Party having the right to make such non-confidential disclosure.

10.2 Authorized Use and Disclosure . Each Party may use and disclose Confidential Information of the other Party as follows: (a) under appropriate confidentiality provisions substantially equivalent to those in this Agreement in connection with the performance of its obligations or exercise of rights granted to such Party in this Agreement; (b) to the extent such disclosure is reasonably necessary for the Prosecution and Maintenance of Patents (including applications therefor) in accordance with Section 9.2, prosecuting or defending litigation, filing for and conducting preclinical or clinical trials, obtaining and maintaining Regulatory Approvals for Products; (c) in communication with existing and potential acquirers, investors, strategic partners, licensees, distributors, consultants, advisors (including financial advisors, lawyers and accountants) and others on a need to know basis, in each case, under appropriate confidentiality provisions substantially equivalent to those of this Agreement; or (d) to the extent mutually agreed to by the Parties.

10.3 Required Disclosures . Notwithstanding anything to the contrary in this Agreement, each Party may make any disclosures required of it by applicable Law or the rules of a stock exchange upon which a Party’s capital stock is listed, provided that (a) the Party required to make such disclosure (the “ Required Party ”) shall notify the other Party in writing of the proposed content of the required disclosures at least five (5) Business Days prior to the date on which the disclosure is to be made and the non-Required Party shall be entitled to reasonably comment with respect to the form and content of such required disclosure, which the Required Party shall consider in good faith; (b) if so requested by the non-Required Party in the case of disclosures required by applicable Law, the Required Party shall use reasonable efforts to obtain an order protecting to the maximum extent possible the confidentiality of the provisions of this Agreement and the non-Required Party’s Confidential Information as reasonably requested by the non-Required Party; and (c) if the Parties are unable to agree on the form or content of any required disclosure, such disclosure shall be limited to the minimum required as determined by the Required Party in consultation with its legal counsel. Without limiting the foregoing, the Required Party shall provide the non-Required Party with a draft of the proposed redactions to the provisions of this Agreement, together with exhibits or other attachments hereto, to be filed by GLS or DexCom with the Securities and Exchange Commission (or other applicable regulatory body) or as otherwise required by Law, and the non-Required Party shall be entitled to reasonably comment with respect to the content of the redactions, which the Required Party shall consider in good faith.

10.4 Prior Agreements . This Agreement supersedes the Non-binding Term Sheet for Collaboration and License Agreement between DexCom and Google, Inc. dated June 29, 2015,

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and, solely with regard to the subject matter of this Agreement and the information disclosed pursuant hereto, the Non-Disclosure Agreement dated April 6, 2015 between DexCom and Google Inc., acting on its behalf and on behalf of its Affiliates (collectively, the “ Prior Agreements ”). All Confidential Information disclosed by a Party under the Prior Agreements shall be deemed Confidential Information of such disclosing Party under this Agreement and shall be subject to the terms of this Article 10.

10.5 Publications . Each Party shall submit to the other Party any proposed publication or public disclosure containing clinical or scientific results for the Products in the Field at least thirty (30) days in advance to allow that Party to review such proposed publication or disclosure. The reviewing Party will promptly review such proposed publication or disclosure and make any objections or comments that it may have thereto, and the Parties shall discuss the advantages and disadvantages of publishing or disclosing such results. If the Parties are unable to agree on whether to publish or disclose the same, the matter shall be referred to the JSC for resolution. This Section 10.5 shall not be deemed to limit the Parties’ obligations under Section 10.1 above.

10.6 Press Release . Neither Party shall issue any press release or other public statement, whether oral or written, disclosing the existence of this Agreement, the terms hereof or any information relating to this Agreement without the prior written consent of the other Party.

ARTICLE 11
REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION

11.1 General Representations and Warranties . Each Party represents and warrants to the other that:

11.1.1 it is duly organized and validly existing under the Laws of the jurisdiction of its incorporation, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

11.1.2 it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action;

11.1.3 this Agreement is legally binding upon it and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material applicable Law;

11.1.4 except for the Permitted Encumbrances, it has not granted, and shall not grant during the Term, any right to any Third Party which would conflict with the rights granted to the other Party hereunder;

11.1.5 it is not aware of any action, suit or inquiry or investigation instituted by any Person which questions or threatens the validity of this Agreement;

11.1.6 with respect to GLS only

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(a) GLS is the sole owner the Patents listed in Exhibit 1.27-A and has the exclusive right to grant the licenses granted to DexCom hereunder,

(b) [***], GLS [***] the sole owner of the Patents listed in Exhibit 1.27-B and [***] the exclusive right to grant the licenses granted to DexCom hereunder,

(c) other than the GLS IP, there are no Patents owned or controlled by GLS that would be infringed (but for the licenses granted hereunder by GLS to DexCom) by DexCom’s Commercialization of a Product in the Field as contemplated hereunder,

(d) GLS will not assign or transfer any rights in the GLS Licensed Patents in a manner that would cause a license to be granted to a Third Party pursuant to [***], and

(e) none of the agreements identified in Exhibit 1.46 grant any Third Party (i) any exclusive rights with respect to any of the GLS Licensed Patents, (ii) any right to GLS Know-How, (iii) any right to file applications for, prosecute, maintain, enforce or defend any of the GLS Licensed Patents, or (iv) rights necessary to Develop, Manufacture and Commercialize the Products, in each case solely for applications in the Field; and;

11.1.7 it will conduct its obligations under the [***] and Commercialization Plan, including the Development of Products thereunder, using its employees or contractors that are obligated to assign to such Party all rights into any Collaboration IP and associated intellectual property rights and to maintain in confidence all of the other Party’s Confidential Information, and will not use any employee of an Affiliate in the conduct of such [***] and Commercialization Plan unless such employee is under such obligations of assignment and confidentiality.

11.2 Disclaimer of Warranties . EXCEPT AS SET FORTH IN THIS ARTICLE 11, GLS AND DEXCOM EXPRESSLY DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT (INCLUDING THE GLS IP), INCLUDING ANY WARRANTY OF MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

11.3 Limitation of Liability . WITHOUT LIMITING EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 11.4 BELOW, NEITHER PARTY SHALL BE LIABLE TO THE OTHER UNDER THIS AGREEMENT FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, INTERRUPTION OF BUSINESS, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND SUFFERED BY SUCH OTHER PARTY FOR BREACH HEREOF, WHETHER BASED ON CONTRACT OR TORT CLAIMS OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT APPLY TO

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ANY WILLFUL BREACH OF THIS AGREEMENT BY A PARTY OR A BREACH OF A PARTY’S CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 10.

11.4 Indemnification .

11.4.1 Indemnification by GLS . GLS hereby agrees to defend, hold harmless and indemnify (collectively, “ Indemnify ”) DexCom and its Affiliates, and its and their agents, directors, officers and employees (the “ DexCom Indemnitees ”) from and against any liability or expense (including reasonable legal expenses and attorneys’ fees) (collectively, “ Losses ”), excluding royalties payable to Third Parties under Section 8.3.4, resulting from suits, claims, actions and demands, in each case brought by a Third Party (each, a “ Third-Party Claim ”) arising out of (a) a breach of any of GLS’s covenants, representations or warranties hereunder, (b) the gross negligence or willful misconduct or omission of GLS or its Affiliates under this Agreement or (c) actual or alleged infringement of the intellectual property rights of a Third Party by a deliverable of GLS under the Development Plan (“ GLS Deliverable ”), except to the extent that such infringement results from a modification, enhancement or improvement made or implemented by DexCom to the GLS Deliverable, or combination of the GLS Deliverable with materials not furnished by GLS. GLS’s obligation to Indemnify the DexCom Indemnitees pursuant to this Section 11.4.1 shall not apply to the extent that any such Losses arise from the gross negligence or intentional misconduct of any DexCom Indemnitee, arise from any material breach by DexCom of this Agreement; or are Losses for which DexCom is obligated to Indemnify the GLS Indemnitees pursuant to Section 11.4.3.

11.4.2 Indemnification by GLS for Google Patent Infringement Claim . GLS hereby agrees to Indemnify the DexCom Indemnitees from and against any and all Losses resulting from a claim by an Affiliate of GLS that DexCom’s Commercialization of a Product in the Field infringes a Patent owned or controlled by such Affiliate of GLS (“Google Patent Infringement Claim”).

11.4.3 Indemnification by DexCom . DexCom hereby agrees to Indemnify GLS and its Affiliates, and its and their agents, directors, officers and employees (the “ GLS Indemnitees ”) from and against any and all Losses resulting from Third-Party Claims arising out of: (a) a breach of any of DexCom’s covenants, representations or warranties hereunder, (b) the gross negligence or willful misconduct or omission of DexCom or its Affiliates under this Agreement or (c) actual or alleged infringement of the intellectual property rights of a Third Party by a deliverable of DexCom under the Development Plan (“ DexCom Deliverable ”), except to the extent that such infringement results from a modification, enhancement or improvement made or implemented by GLS to the DexCom Deliverable, or combination of the DexCom Deliverable with materials not furnished by DexCom. DexCom’s obligation to Indemnify the GLS Indemnitees pursuant to this Section 11.4.3 shall not apply to the extent that any such Losses arise from the gross negligence or intentional misconduct of any GLS Indemnitee, arise from any material breach by GLS of this Agreement or are Losses for which GLS is obligated to Indemnify the DexCom Indemnitees pursuant to Section 11.4.1.

11.4.4 Procedure . The indemnified Party shall provide the indemnifying Party with prompt notice of the Third-Party Claim or Google Patent Infringement Claim giving rise to the indemnification obligation pursuant to this Section 11.4 and, to be eligible to be Indemnified hereunder, the exclusive ability to defend (with the reasonable cooperation of the indemnified Party) or settle any such claim; provided, however, that the indemnifying Party shall not enter into any settlement that admits fault, wrongdoing or damages without the indemnified Party’s written consent, such consent not to be unreasonably withheld or delayed. The indemnified Party shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party.

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11.5 Insurance . Each Party shall obtain and maintain, during the term of this Agreement and for six (6) years thereafter, comprehensive general liability insurance, including products liability insurance and coverage for clinical trials. Such insurance shall be with reputable and financially secure insurance carriers, or self-insurance in a form and at levels consistent with industry standards based upon such Party’s activities hereunder and indemnification obligations hereunder, and shall name the other Party as an additional insured. Such liability insurance or self-insurance shall be maintained on an occurrence basis to provide such protection after expiration or termination of the policy itself or this Agreement.

ARTICLE 12
TERM AND TERMINATION

12.1 Term . This Agreement shall become effective as of the Effective Date and continue in full force and effect until terminated pursuant to the other provisions of this Article 12 (the “ Term ”).

12.2 Termination for Breach . Either Party may terminate this Agreement in the event the other Party materially breaches this Agreement, and such material breach shall have continued for [***] days after written notice thereof was provided to the breaching Party by the other Party. Any such termination shall become effective at the end of such [***] day period unless the breaching Party has cured any such material breach prior to the expiration of the [***] day period.

12.3 Termination for Product or Commercial Failure .

12.3.1 Either Party shall have the right to terminate this Agreement, if an application for Marketing Approval for the Second Product has not been submitted to the FDA by the [***] of the Effective Date (“ Product Failure ”), provided that if such Product Failure arises from a Party’s material breach of this Agreement (including under Article 6), such Party shall not have a right to terminate this Agreement under this Section 12.3.1 on the basis of such Product Failure; provided, further, that if following such [***] anniversary neither Party has exercised its right to terminate under this Section 12.3.1 and the Second Product subsequently Launches, then the right for a Party to terminate under this Section 12.3.1 shall cease; or

12.3.2 Either Party shall have the right to terminate this Agreement upon written notice to the other Party if, Annual Net Sales of Products for any calendar year beginning [***] after submission of an application for Marketing Approval to the FDA for the Second Product are less than [***] (“ Commercial Failure ”), provided that if a Commercial Failure arises from a Party’s material breach of this

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Agreement, such Party shall not have a right to terminate this Agreement under this Section 12.3.2 on the basis of such Commercial Failure.

12.4 Termination after Expiration of [***] . DexCom shall have the right to terminate this Agreement upon the expiration of the last to expire Patent within (a) the [***] and (b) the Patents claiming or covering [***], in each case of subsection (a) and (b), that claim or cover a Product.

12.5 General Effects of Expiration or Termination .

12.5.1 Accrued Obligations . Expiration or termination of this Agreement for any reason shall not release either Party of any obligation or liability which, at the time of such expiration or termination, has already accrued to the other Party or which is attributable to a period prior to such expiration or termination.

12.5.2 Non-Exclusive Remedy . Notwithstanding anything herein to the contrary, termination of this Agreement by a Party shall be without prejudice to other remedies such Party may have at Law or equity.

12.5.3 General Survival . Sections 7.1.3, 7.2.2, and this Section 12.5, and Article 1, Article 10, Article 13, and Article 14, shall survive expiration or termination of this Agreement for any reason. Except as otherwise provided in this Section 12.5, all rights and obligations of the Parties under this Agreement shall terminate upon expiration or termination of this Agreement for any reason.

12.5.4 Effects of Termination .

(a) In the event of a termination by either Party pursuant to Section 12.2 prior to the Launch of the First Product (or if the First Product is never Launched, then prior to the Launch of the Second Product), or a termination by either Party pursuant to Sections 12.3.1 (if no Product has been Launched under this Agreement) or 12.4, only those rights and obligations set forth in Section 12.5.3 shall survive after the effective date of termination.

(b) In the event of a termination by DexCom pursuant to Section 12.2 after Launch of the First Product (or if the First Product is never Launched, then the Launch of the Second Product), (i) the Term shall continue only for a period of [***] subsequent to the termination date and all of the Parties’ rights and obligations under this Agreement shall continue for such [***]year period, provided that (x) the product fee rates set forth in Section 8.3 shall be reduced by [***]% and (y) [***] year after the termination date, each Party’s obligations under [***] shall terminate, [***] and (ii) after such [***] only those rights and obligations set forth in Section 12.5.3 shall survive.

(c) In the event of a termination by GLS pursuant to Section 12.2 after Launch of the First Product (or if the First Product is never Launched, then the Launch of the Second Product) or by either Party pursuant to Sections 12.3.1 (if a Product has been Launched pursuant to this Agreement) or 12.3.2, (i) the Term shall continue only for a period of [***]

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subsequent to the termination date and all of the Parties’ rights and obligations under this Agreement shall continue for such [***] period, provided that [***] after the termination date (x) the product fee rates set forth in Section 8.3 shall be reduced by [***]% and (y) each Party’s obligations under [***] shall terminate, [***] and (ii) [***].

ARTICLE 13
DISPUTE RESOLUTION

13.1 Dispute Resolution . The Parties agree that any dispute, controversy or claim arising from or in connection with (a) the interpretation, enforcement, termination or invalidity of this Agreement, (b) the failure of the JSC or any Working Group to reach unanimous agreement on any issue within its respective authority under this Agreement, (c) any alleged failure to perform, or breach of, this Agreement, (d) or claim relating to the ownership, scope, validity, enforceability or infringement of any Patent rights covering the manufacture, use or sale of any Product or of any Trademark rights relating to any Product, or (e) any issue relating to the interpretation or application of this Agreement (each, a “ Dispute ”), shall first be resolved through the procedures set forth in this Article 13.

13.2 Jurisdiction; Venue . Other than those Disputes resolved as described in Section 13.3 all Disputes shall be subject to subject to the exclusive jurisdiction and venue of the federal courts within the State of California. Each Party hereto waives and covenants not to assert or plead any objection that such Party might otherwise have to such jurisdiction and venue. Except as set forth herein, each Party hereto hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts.

13.3 JSC Disputes . Disputes as to matters within the authority of the JSC or any Working Group will be resolved as set forth in Section 2.1.6 and shall not otherwise be subject to the provisions of this Article 13; provided that any Dispute as to the application of such Section 2.1.6 shall be subject to the provisions of this Article 13.

ARTICLE 14
MISCELLANEOUS

14.1 Governing Law . This Agreement and any dispute arising from the performance or breach hereof shall be governed by and construed and enforced in accordance with the Law of the State of California, without reference to conflicts of laws principles.

14.2 Assignment . Assignment . This Agreement shall not be assignable by either Party to any Third Party without the written consent of the other Party and any such attempted assignment shall be void. Notwithstanding the foregoing, either Party may assign this Agreement, without the written consent of the other Party, to an Affiliate or to an entity that acquires all or substantially all of the business or assets of such Party to which this Agreement pertains (whether by merger,

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reorganization, acquisition, sale or otherwise), and agrees in writing to be bound by the terms and conditions of this Agreement. No assignment or transfer of this Agreement shall be valid and effective unless and until the assignee/transferee agrees in writing to be bound by the provisions of this Agreement. The terms and conditions of this Agreement shall be binding on and inure to the benefit of the permitted successors and assigns of the Parties. Notwithstanding Section 8.6, in the event any withholding or similar tax is levied by or due to an assignment of this Agreement or any obligation by a Party to an Affiliate or any Third Party, then such Party (itself or its successor) shall bear the full cost of such tax. Except as expressly provided in this Section 14.2, any attempted assignment or transfer of this Agreement shall be null and void.

14.3 Notices . Any notice, request, delivery, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted via electronic mail or by express courier service (signature required) or five (5) days after it was sent by registered letter, return receipt requested (or its equivalent), provided that no postal strike or other disruption is then in effect or comes into effect within two (2) days after such mailing, to the Party to which it is directed at its physical or email address shown below or such other address. Notices sent by electronic means shall be effective upon confirmation of receipt, notices sent by mail or overnight delivery service shall be effective upon receipt, and notices given personally shall be effective when delivered.



If to GLS, addressed to:		Google Life Sciences LLC
		1600 Amphitheatre Parkway
		Mountain View, CA 94043
		Attention: Andy Conrad
		Email: [***]

With a copy to (which shall not constitute notice):		Wilson Sonsini Goodrich & Rosati
		Professional Corporation
		650 Page Mill Road
		Palo Alto, CA 94304-1050
		Attention: Ian B. Edvalson, Esq.
		Email: iedvalson@wsgr.com

If to DexCom, addressed to:		DexCom, Inc.
		6340 Sequence Drive
		San Diego, CA 92121
		Attention: Kevin Sayer, President and Chief Executive Officer
		Email: [***]

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With a copy (which shall not constitute notice) to:		Fenwick & West LLP
		801 California Street
		Mountain View, CA 94041
		Attention: Jake Handy and Michael Brown
		Email: jhandy@fenwick.com and mbrown@fenwick.com

14.4 Waiver . Neither Party may waive or release any of its rights or interests in this Agreement except in writing. The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition. No waiver by either Party of any condition or term in any one or more instances shall be construed as a continuing waiver of such condition or term or of another condition or term.

14.5 Severability . Without limiting the provisions of Section 8.3.1, if any provision hereof should be held invalid, illegal or unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible. Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. If a Party seeks to avoid a provision of this Agreement by asserting that such provision is invalid, illegal or otherwise unenforceable, such action shall be deemed to be a material breach of this Agreement.

14.6 No Third Party Beneficiaries . Except for the rights to indemnification provided for certain Third Parties as specified in Section 11.4, all rights, benefits and remedies under this Agreement are solely intended for the benefit of DexCom and its Affiliates and GLS and its Affiliates, and except for such rights to indemnification expressly provided pursuant to Section 11.4, no Third Party shall have any rights whatsoever to (a) enforce any obligation contained in this Agreement (b) seek a benefit or remedy for any breach of this Agreement, or (c) take any other action relating to this Agreement under any legal theory, including, actions in contract, tort (including but not limited to, negligence, gross negligence and strict liability), or as a defense, setoff or counterclaim to any action or claim brought or made by either Party.

14.7 Entire Agreement/Modification . This Agreement, including its Exhibits, sets forth all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties and supersedes and terminates all prior agreements and understandings between the Parties including the Prior Agreements. No subsequent alteration, amendment,

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change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by the respective authorized officers of the Parties.

14.8 Relationship of the Parties . The Parties agree that the relationship of GLS and DexCom established by this Agreement is that of independent contractors. Furthermore, the Parties agree that this Agreement does not, is not intended to, and shall not be construed to, establish an employment, agency or any other relationship. Except as may be specifically provided herein, neither Party shall have any right, power or authority, nor shall they represent themselves as having any authority to assume, create or incur any expense, liability or obligation, express or implied, on behalf of the other Party, or otherwise act as an agent for the other Party for any purpose.

14.9 Force Majeure . Except with respect to payment of money, neither Party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by earthquake, riot, civil commotion, war, terrorist acts, strike, flood, or governmental acts or restriction or other cause, in each case to the extent beyond the reasonable control of the respective Party. The Party affected by such force majeure will provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and will use Commercially Reasonable Efforts to overcome the difficulties created thereby and to resume performance of its obligations as soon as practicable. If the performance of any such obligation under this Agreement is delayed owing to such a force majeure for any continuous period of more than [***] days, the Parties will consult with respect to an equitable solution.

14.10 Compliance with Laws/Other . Notwithstanding anything to the contrary contained herein, all rights and obligations of GLS and DexCom are subject to prior compliance with, and each Party shall comply with, all applicable Laws, including obtaining all necessary approvals required by the applicable agencies of the governments of the United States and foreign jurisdictions. In addition, each Party shall conduct its activities under the Collaboration in accordance with good scientific and business practices.

14.11 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together, shall constitute one and the same instrument.

14.12 Bankruptcy Matters . All licenses granted under this Agreement are deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “ Bankruptcy Code ”), licenses of rights to “intellectual property” as defined in Section 101 of the Bankruptcy Code. The Parties agree that each Party may fully exercise all of its rights and elections under the Bankruptcy Code.

[The remainder of this page intentionally left blank; the signature page follows.]

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IN WITNESS WHEREOF , the Parties have executed this Agreement in duplicate originals by their duly authorized representatives as of the Effective Date.

GOOGLE LIFE SCIENCES, LLC DEXCOM, INC.

By: /s/ Andrew Conrad By: /s/ Kevin Sayer

Name: Andrew Conrad Name: Kevin Sayer

Title: COO Title: President & CEO

List of Exhibits

Exhibit 1.27-A: [***]

Exhibit 1.27-B: [***]

Exhibit 1.30: GLS Trademarks

Exhibit 1.46: Permitted Encumbrances

Exhibit 3.2.1: Initial Timeline for [***] and Initial Specifications for First Product

Exhibit 4.2: [***] Distribution Agreement Terms

[SIGNATURE PAGE TO COLLABORATION AND LICENSE AGREEMENT)

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EXHIBIT 1.27-A

[***]



Google Case No.	Application Number	Patent Number	Title

[***]

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Google Case No.	Application Number	Patent Number	Title

[***]

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Google Case No.	Application Number	Patent Number	Title

[***]

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EXHIBIT 1.27-B

[***]



Google Case No.	Application Number	Patent Number	Title

[***]

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Google Case No.	Application Number	Patent Number	Title

[***]

-46-

EXHIBIT 1.30

GLS TRADEMARKS

[***]

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EXHIBIT 1.46

PERMITTED ENCUMBRANCES

[***]

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EXHIBIT 3.2.1

INITIAL TIMELINE FOR [***] AND INITIAL SPECIFCATIONS FOR FIRST PRODUCT

[Attached]

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GLS/Dexcom [***] & Timeline: Product 1

[***]

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