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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2014
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¨
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TRANSITION REPORTING PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
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04-3523891
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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600 Technology Park Drive, Suite 200
Billerica, Massachusetts
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01821
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 Par Value Per Share
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The NASDAQ Stock Market, LLC
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Preferred Stock Purchase Rights
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The NASDAQ Stock Market, LLC
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Title of Class
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Shares Outstanding
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Common Stock, $0.001 Par Value Per Share
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56,447,961
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Preferred Stock Purchase Rights
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—
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Page
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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•
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Type 1 diabetes is characterized by the body’s nearly complete inability to produce insulin. It is frequently diagnosed during childhood or adolescence. Individuals with Type 1 diabetes require daily insulin therapy, typically administered via injections or continuous infusion through pump therapy, to survive.
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Type 2 diabetes, the more common form of diabetes, is characterized by the body’s inability to either properly utilize insulin or produce enough insulin. Historically, Type 2 diabetes has occurred in later adulthood, but its incidence is increasing among the younger population, due primarily to increasing childhood obesity. Initially, many people with Type 2 diabetes attempt to manage their diabetes with improvements in diet, exercise and/or oral medications. As their diabetes advances, some patients progress to multiple drug therapy, which often includes insulin therapy. Guidelines, including those published by the American Diabetes Association in 2014, suggest more aggressive treatment for people with Type 2 diabetes, including the early adoption of insulin therapy and more frequent testing. It is now becoming more accepted for insulin therapy to be started earlier in people with Type 2 diabetes, and, in some cases, as part of the initial treatment.
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Discreet, two-part design.
Unlike conventional insulin pumps, the OmniPod System consists of just two discreet, easy-to-use devices that communicate wirelessly: the OmniPod, a small, lightweight, disposable insulin infusion device worn beneath clothing that integrates an infusion set, automated cannula insertion, insulin reservoir, drive mechanism and batteries; and the PDM, a handheld device much like a personal digital assistant that wirelessly programs the OmniPod with insulin delivery instructions, assists the patient with diabetes management and integrates a blood glucose meter. The OmniPod will operate up to 72 hours (but no more than 80 hours) after it is first activated. We believe our innovative patented design enables people with insulin-dependent diabetes to experience all of the lifestyle benefits and clinical superiority of CSII therapy in a more discreet and convenient manner than possible with conventional insulin pumps.
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No tubing.
The OmniPod System’s innovative, proprietary design dramatically reduces the size of the insulin delivery mechanism, thereby eliminating the need for the external tubing required by conventional pumps. As a result of this design, the OmniPod can be worn discreetly beneath clothing and patients can move, dress, bathe, sleep and exercise without the encumbrance of the up to 42 inches of tubing required by conventional insulin pumps. In addition to untethering people with insulin-dependent diabetes, the OmniPod System’s lack of tubing eliminates interruptions in insulin delivery resulting from kinking, leaking or disconnecting, which leads to more consistent delivery of insulin.
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Virtually pain-free automated cannula insertion.
The OmniPod is the only CSII therapy device to feature a fully automated, hands-free cannula insertion system. This virtually pain-free insertion system features the world’s fastest insertion and the smallest-gauge introducer needle available for insulin infusion systems. Cannula insertion is activated wirelessly using the PDM, so the patient never sees or handles an introducer needle, which we believe promotes consistent insertion, reduces patient anxiety and increases the number of insertion sites available to patients. We believe that the OmniPod’s proprietary insertion system is a significant differentiating factor for people with insulin-dependent diabetes who are frustrated with the painful and cumbersome manual insertions required with existing conventional pumps or frequent injections required by MDI therapy.
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Easy to train, learn and use.
We have designed the OmniPod System to fit within the normal daily routines of patients. The OmniPod System requires the fewest steps to start insulin delivery of all CSII therapies on the market by automating much of the process. In addition, the OmniPod System consists of just two devices, as opposed to up to seven for conventional insulin pumps. As a result, the OmniPod System is easy for patients to use, which reduces the training burden on healthcare professionals. We believe that the OmniPod System’s overall ease of use makes it very attractive to those people with insulin-dependent diabetes. We also believe that the OmniPod System’s ease of use and substantially lower training burden helps to redefine which diabetes patients are appropriate for CSII therapy, enabling healthcare professionals to prescribe CSII therapy to a broader pool of patients.
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Low up-front cost.
The OmniPod System’s unique patented design and proprietary manufacturing process have enabled us to provide CSII therapy at a relatively low up-front investment compared to conventional insulin pumps. While the ongoing cost of OmniPods is greater than the ongoing costs of supplies for conventional insulin pumps, we believe that our pricing model reduces the risk of investing in CSII therapy for third-party payors and makes CSII therapy much more accessible for people with insulin-dependent diabetes.
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the basic architecture of the OmniPod System;
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the OmniPod shape memory alloy drive system;
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the OmniPod System cannula insertion system; and
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various novel aspects of the OmniPod System and potential future generations of OmniPod Systems.
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significantly greater name recognition;
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established relations with healthcare professionals, customers and third-party payors;
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larger and more established sales forces and distribution networks;
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greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory approval for products; and
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greater financial and human resources for product development, sales and marketing and patent litigation.
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510(k) Clearance
. To obtain 510(k) clearance for any of our potential future devices (or for certain modifications to devices that have previously received 510(k) clearance), we must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device or a pre-amendment device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a PMA application. The FDA’s 510(k) clearance pathway generally takes from three to twelve months from the date the application is completed, but can take significantly longer. After a medical device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a significant change in its intended use, requires a new 510(k) clearance.
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PMA.
Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device or device in commercial distribution before May 28, 1976 for which PMAs have not been required, generally require a PMA before they can be commercially distributed. A PMA application must be supported by extensive data, including technical, pre-clinical, clinical trials, manufacturing and labeling to demonstrate the safety and effectiveness of the device to the FDA’s satisfaction. After a PMA application is complete, the FDA begins an in-depth review of the submitted information, which generally takes between one and three years, but may take significantly longer. After any pre-market approval, a new pre-market approval application or application supplement may be required in the event of modifications to the device, its labeling, intended use or indication or its manufacturing process. In addition, any PMA approval may be conditioned upon the manufacturer conducting post-market surveillance and testing.
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establishment registration and device listing;
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quality system regulation, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
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labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses, and other requirements related to promotional activities;
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medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;
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corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the Federal Food, Drug and Cosmetic Act that may present a risk to health; and
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post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
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referral of a person;
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furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental programs; or
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purchase, lease, or order of, or the arrangement or recommendation of the purchasing, leasing, or ordering of any item or service reimbursable under Medicare, Medicaid or other governmental programs.
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the failure of the OmniPod System to achieve and maintain wide acceptance among opinion leaders in the diabetes treatment community, insulin-prescribing physicians, third-party payors and people with insulin-dependent diabetes;
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manufacturing problems;
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actual or perceived quality problems;
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changes in reimbursement rates or policies relating to the OmniPod System by third-party payors;
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claims that any portion of the OmniPod System infringes on patent rights or other intellectual property rights owned by other parties;
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adverse regulatory or legal actions relating to the OmniPod System;
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damage, destruction or loss of any of the facilities where our products are manufactured or of the equipment therein;
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conversion of patient referrals to actual sales of the OmniPod System;
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collection of receivables from our customers;
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attrition rates of customers who cease using the OmniPod System;
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competitive pricing and related factors; and
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results of clinical studies relating to the OmniPod System or our competitors’ products.
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revenue generated by sales of our current products and any other future products that we may develop;
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costs associated with adding further manufacturing capacity;
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costs associated with expanding our sales and marketing efforts in the United States and internationally;
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expenses we incur in manufacturing and selling the OmniPod System;
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costs of developing new products or technologies and enhancements to the OmniPod System;
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the cost of obtaining and maintaining FDA approval or clearance of our current or future products;
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costs associated with any expansion;
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the cost of complying with regulatory requirements;
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costs associated with capital expenditures;
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costs associated with litigation; and
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the number and timing of any acquisitions or other strategic transactions.
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we are not a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than ours;
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we may not be able to obtain an adequate supply in a timely manner or on commercially reasonable terms;
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our suppliers, especially new suppliers, may make errors in manufacturing that could negatively affect the efficacy or safety of the OmniPod System or cause delays in shipment;
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we may have difficulty locating and qualifying alternative suppliers for our sole-source supplies;
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switching components may require product redesign and submission to the FDA of a new 510(k);
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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 products to us in a timely manner;
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the occurrence of a fire, natural disaster or other catastrophe, impacting one or more of our suppliers, may affect their ability to deliver products to us in a timely manner; and
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our suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
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political instability and adverse economic conditions;
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trade protection measures, such as tariff increases, and import and export licensing and control requirements;
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potentially negative consequences from changes in tax laws;
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difficulty in staffing and managing widespread operations;
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difficulties associated with foreign legal systems including increased costs associated with enforcing contractual obligations in foreign jurisdictions;
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changes in foreign currency exchange rates;
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differing protection of intellectual property;
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unexpected changes in regulatory requirements;
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failure to fulfill foreign regulatory requirements on a timely basis or at all to market the OmniPod System or other future products;
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availability of, and changes in, reimbursement within prevailing foreign health care payment systems;
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adapting to the differing laws and regulations, business and clinical practices, and patient preferences in foreign markets;
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difficulties in managing foreign relationships and operations, including any relationships that we establish with foreign partners, distributors or sales or marketing agents; and
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difficulty in collecting accounts receivable and longer collection periods.
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significantly greater name recognition;
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established relations with healthcare professionals, customers and third-party payors;
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larger and more established distribution networks;
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greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory approval; and
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greater financial and human resources for product development, sales and marketing and patent litigation.
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our identification of drug delivery opportunities appropriate for a modified OmniPod;
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our achievement of satisfactory development and pricing terms with the pharmaceutical companies that sell such drugs;
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our development of appropriate modifications to our OmniPods to address the needs and parameters required for the respective drug-delivery opportunities;
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manufacturing issues relating to the modified OmniPod;
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long lead-times associated with the development, regulatory approvals and ramp up applicable to the use of modified OmniPods for the delivery of such drugs;
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relatively small number of modified OmniPods needed to address each drug-delivery opportunity;
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uncertainties regarding the market acceptance of both such drugs and the modified OmniPods as appropriate delivery devices;
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uncertainties relating to the success of the pharmaceutical companies in marketing and selling such drugs as well as the modified OmniPods as the appropriate delivery devices;
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intense competition in the drug-delivery industry, including from competitors which have substantially greater resources than we do;
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maintaining appropriate gross margins for non-insulin drug delivery products; and
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regulatory requirements and reimbursement rates associated with such drugs.
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the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may take longer than we expect to result in issued patents;
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the claims of any patents that are issued may not provide meaningful protection;
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we may not be able to develop additional proprietary technologies that are patentable; and
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other companies may design around technologies we have patented, licensed or developed.
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the agreements may be breached;
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we may have inadequate remedies for any breach;
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trade secrets and other proprietary information could be disclosed to our competitors; or
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others may independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technologies.
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assert claims of infringement;
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enforce our patents;
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protect our trade secrets or know-how; or
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determine the enforceability, scope and validity of the proprietary rights of others.
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
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customer notification, or orders for repair, replacement or refunds;
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voluntary or mandatory recall or seizure of our current or future products;
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administrative detention by the FDA of medical devices believed to be adulterated or misbranded;
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imposing operating restrictions, suspension or shutdown of production;
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refusing our requests for 510(k) clearance or pre-market approval of new products, new intended uses or modifications to the OmniPod System;
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rescinding 510(k) clearance or suspending or withdrawing pre-market approvals that have already been granted; and
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criminal prosecution.
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delays in shipping due to capacity constraints;
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practices of health insurance companies and other third-party payors with respect to reimbursement for our current or future products;
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market acceptance of the OmniPod System;
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our ability to manufacture the OmniPod efficiently;
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timing of regulatory approvals and clearances;
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new product introductions;
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competition; and
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timing of research and development expenditures.
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the inability to complete the acquisition or investment;
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disruption of our ongoing businesses and diversion of management attention;
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difficulties in integrating the acquired entities, products or technologies;
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risks associated with acquiring intellectual property;
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difficulties in operating the acquired business profitably;
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the inability to achieve anticipated synergies, cost savings or growth;
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potential loss of key employees, particularly those of the acquired business;
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difficulties in transitioning and maintaining key customer, distributor and supplier relationships;
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risks associated with entering markets in which we have no or limited prior experience; and
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unanticipated costs.
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dilutive issuances of equity securities, which may be sold at a discount to market price;
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the use of significant amounts of cash;
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the incurrence of debt;
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the assumption of significant liabilities;
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increased operating costs or reduced earnings;
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financing obtained on unfavorable terms;
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large one-time expenses; and
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the creation of certain intangible assets, including goodwill, the write-down of which in future periods may result in significant charges to earnings.
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failure to maintain and increase production capacity and reduce per unit production costs;
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changes in the availability of third-party reimbursement in the United States or other countries;
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volume and timing of orders for the OmniPod System;
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developments in administrative proceedings or litigation related to intellectual property rights;
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issuance of patents to us or our competitors;
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the announcement of new products or product enhancements by us or our competitors;
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the announcement of technological or medical innovations in the treatment or diagnosis of diabetes;
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changes in governmental regulations or in the status of our regulatory approvals or applications;
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developments in our industry;
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publication of clinical studies relating to the OmniPod System or a competitor’s product;
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quarterly variations in our or our competitors’ results of operations;
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changes in earnings estimates or recommendations by securities analysts; and
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general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
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authorize the issuance of preferred stock which can be created and issued by the board of directors without prior stockholder approval, with rights senior to those of our common stock;
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provide for a classified board of directors, with each director serving a staggered three-year term;
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prohibit our stockholders from filling board vacancies, calling special stockholder meetings or taking action by written consent;
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provide for the removal of a director only with cause and by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of our directors; and
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require advance written notice of stockholder proposals and director nominations.
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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High
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Low
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||||
Fiscal Year 2013
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||||
First Quarter
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$
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25.86
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$
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21.02
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Second Quarter
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$
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31.69
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$
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24.57
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Third Quarter
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$
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37.75
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$
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30.64
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Fourth Quarter
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$
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39.86
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$
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34.70
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Fiscal Year 2014
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First Quarter
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$
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50.18
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$
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35.83
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Second Quarter
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$
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49.07
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$
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31.69
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Third Quarter
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$
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41.11
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$
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32.94
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Fourth Quarter
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$
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47.51
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$
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36.75
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12/09
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12/10
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12/11
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12/12
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12/13
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12/14
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||||||||||||
Insulet Corporation
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$
|
100.00
|
|
$
|
108.54
|
|
$
|
131.86
|
|
$
|
148.60
|
|
$
|
259.80
|
|
$
|
322.55
|
|
NASDAQ Composite
|
100.00
|
|
117.61
|
|
118.70
|
|
139.00
|
|
196.83
|
|
223.74
|
|
||||||
NASDAQ Health Care
|
100.00
|
|
108.80
|
|
117.92
|
|
150.69
|
|
236.28
|
|
301.69
|
|
Plan Category
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Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
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Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
|
|
|
||||
Equity compensation plans approved by security holders (1)
|
2,019,875
|
|
|
$
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14.93
|
|
|
2,596,092
|
|
|
|
Equity compensation plans not approved by security holders (2)
|
574,406
|
|
|
$
|
34.32
|
|
|
—
|
|
|
|
Total (4)
|
2,594,281
|
|
|
$
|
19.22
|
|
|
2,596,092
|
|
|
(3)
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(1)
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Includes our Amended and Restated 2007 Stock Option and Incentive Plan and our 2000 Stock Option and Incentive Plan. Outstanding restricted stock units convert to common stock without the payment of consideration. As of December 31, 2014, 728,430 restricted stock units were outstanding. The weighted-average exercise price of outstanding options as of such date issued under these Plans (excluding restricted stock units) was $23.35.
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(2)
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Consists of the following inducement grants made to certain executive officers upon their initial hire by us: two inducement grants of 180,000 shares of non-qualified stock option awards made to each of Brian Roberts and Peter Devlin (60,000 of which were exercised during the year ended December 31, 2014, 100,000 of which were exercised during the year ended December 31, 2013, 110,000 of which were exercised during the year ended December 31, 2012 and 60,000 of which were exercised during the year ended December 31, 2011) upon being hired by us in March 2009 and August 2009, respectively; one inducement grant of 499,468 shares of non-qualified stock option awards made to Patrick J. Sullivan upon being hired by us in September 2014; and one inducement grant of 26,756 non-qualified stock options and 18,182 restricted stock units made to Brad Thomas upon being hired by us in November 2014. These non-qualified stock option awards and restricted stock units were granted outside of our Amended and Restated 2007 Stock Option and Incentive Plan in compliance with Nasdaq Listing Rule 5635.
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(3)
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The maximum number of shares of our common stock that remain available for future issuance under our 2007 Stock Option and Incentive Plan as of December 31, 2014 is 2,596,092 shares.
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(4)
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As of December 31, 2014, 746,612 restricted stock units were outstanding. The weighted-average exercise price of outstanding options as of such date issued as inducement grants (excluding restricted stock units) was $26.99.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011 (4)
|
|
2010
|
||||||||||
|
(In thousands, except share and per share data)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
288,720
|
|
|
$
|
247,084
|
|
|
$
|
211,369
|
|
|
$
|
152,255
|
|
|
$
|
96,966
|
|
Cost of revenue
|
145,432
|
|
|
134,683
|
|
|
119,033
|
|
|
85,543
|
|
|
53,240
|
|
|||||
Gross profit
|
143,288
|
|
|
112,401
|
|
|
92,336
|
|
|
66,712
|
|
|
43,726
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Research and development
|
27,900
|
|
|
21,765
|
|
|
24,359
|
|
|
21,863
|
|
|
16,566
|
|
|||||
General and administrative
|
66,841
|
|
|
64,077
|
|
|
51,240
|
|
|
44,083
|
|
|
26,667
|
|
|||||
Sales and marketing
|
60,844
|
|
|
55,694
|
|
|
52,708
|
|
|
43,233
|
|
|
34,695
|
|
|||||
Restructuring and impairment of assets (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,431
|
|
|||||
Total operating expenses
|
155,585
|
|
|
141,536
|
|
|
128,307
|
|
|
109,179
|
|
|
82,359
|
|
|||||
Operating loss
|
(12,297
|
)
|
|
(29,135
|
)
|
|
(35,971
|
)
|
|
(42,467
|
)
|
|
(38,633
|
)
|
|||||
Interest and other expense, net
|
(39,061
|
)
|
|
(15,739
|
)
|
|
(15,684
|
)
|
|
(14,576
|
)
|
|
(22,526
|
)
|
|||||
Income tax benefit (expense)
|
(142
|
)
|
|
(100
|
)
|
|
(212
|
)
|
|
11,212
|
|
|
—
|
|
|||||
Net loss
|
$
|
(51,500
|
)
|
|
$
|
(44,974
|
)
|
|
$
|
(51,867
|
)
|
|
$
|
(45,831
|
)
|
|
$
|
(61,159
|
)
|
Net loss per share basic and diluted
|
$
|
(0.93
|
)
|
|
$
|
(0.83
|
)
|
|
$
|
(1.08
|
)
|
|
$
|
(0.98
|
)
|
|
$
|
(1.54
|
)
|
Weighted-average number of shares used in calculating net loss per share (2)
|
55,628,542
|
|
|
54,010,887
|
|
|
47,924,324
|
|
|
46,689,880
|
|
|
39,607,899
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
As of December 31,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011 (4)
|
|
2010
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
151,193
|
|
|
$
|
149,727
|
|
|
$
|
57,293
|
|
|
$
|
93,955
|
|
|
$
|
113,274
|
|
Working capital
|
$
|
163,900
|
|
|
$
|
155,824
|
|
|
$
|
61,650
|
|
|
$
|
104,640
|
|
|
$
|
123,507
|
|
Total assets
|
$
|
302,156
|
|
|
$
|
287,955
|
|
|
$
|
198,059
|
|
|
$
|
221,322
|
|
|
$
|
156,233
|
|
Current portion of long-term debt and capital lease obligations
|
$
|
3,380
|
|
|
$
|
2,637
|
|
|
$
|
14,429
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-term debt and capital lease obligations(3)
|
$
|
171,257
|
|
|
$
|
119,041
|
|
|
$
|
103,730
|
|
|
$
|
108,540
|
|
|
$
|
69,433
|
|
Other long-term liabilities
|
$
|
2,774
|
|
|
$
|
1,943
|
|
|
$
|
1,867
|
|
|
$
|
2,052
|
|
|
$
|
1,619
|
|
Total stockholders’ equity
|
$
|
83,829
|
|
|
$
|
124,597
|
|
|
$
|
44,176
|
|
|
$
|
82,735
|
|
|
$
|
66,231
|
|
(1)
|
In the year ended December 31, 2010, we recorded a $4.4 million non-cash charge related to the write-down of certain manufacturing equipment which had no future use
|
(2)
|
In December 2010, we sold 3.5 million shares of common stock to the public. In June 2011, we issued 1.2 million shares in connection with the acquisition of Neighborhood Diabetes. In January 2013, we sold 4.7 million shares of common stock to the public. In July 2014, we issued 0.3 million shares of common stock in connection with the repurchase of the 3.75% Senior Convertible Notes. See Footnote 13 to our consolidated financial statements included in this Annual Report on Form 10-K.
|
(3)
|
In June 2008, we sold $85.0 million principal amount of 5.375% Convertible Senior Notes due June 2013 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In March 2009, we entered into a Facility Agreement of up to $60 million with certain institutional accredited investors (the “Facility Agreement”). We repaid all amounts outstanding under the Facility Agreement in December 2010. In June 2011, we issued $143.8 million of 3.75% Convertible Notes due June 2016 and repurchased $70 million in principal of the 5.375% Notes. In June 2014, we issued $201.3 million of 2% Convertible Notes due June 2019 and repurchased $114.9 million in 3.75% Notes. In July 2014, the remaining principal balance of the 3.75% Notes were converted and the principal was settled in cash. In 2013 and 2014 we acquired $9.0 million and $1.5 million, respectively, of manufacturing equipment under capital leases. See Footnotes 4 and 5 to our consolidated financial statements included in this Annual Report on Form 10-K.
|
(4)
|
On June 1, 2011, we completed the acquisition of Neighborhood Holdings, Inc. and its wholly-owned subsidiaries (collectively, “Neighborhood Diabetes”), a leading durable medical equipment distributor, specializing in direct to consumer sales of diabetes supplies for an aggregate purchase price of approximately $37.9 million in cash and $24.4 million in common stock. Neighborhood Diabetes supplies its customers with blood glucose testing supplies, insulin pumps, pump supplies, pharmaceuticals, and other products for the management and treatment of diabetes.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2014
|
|
2013
|
|
% Change
|
|
2013
|
|
2012
|
|
% Change
|
||||||||
|
(Dollar amounts in thousands)
|
||||||||||||||||||
Revenue
|
$
|
288,720
|
|
|
$
|
247,084
|
|
|
17%
|
|
$
|
247,084
|
|
|
$
|
211,369
|
|
|
17%
|
Cost of revenue
|
145,432
|
|
|
134,683
|
|
|
8%
|
|
134,683
|
|
|
119,033
|
|
|
13%
|
||||
Gross profit
|
143,288
|
|
|
112,401
|
|
|
27%
|
|
112,401
|
|
|
92,336
|
|
|
22%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
27,900
|
|
|
21,765
|
|
|
28%
|
|
21,765
|
|
|
24,359
|
|
|
(11)%
|
||||
General and administrative
|
66,841
|
|
|
64,077
|
|
|
4%
|
|
64,077
|
|
|
51,240
|
|
|
25%
|
||||
Sales and marketing
|
60,844
|
|
|
55,694
|
|
|
9%
|
|
55,694
|
|
|
52,708
|
|
|
6%
|
||||
Total operating expenses
|
155,585
|
|
|
141,536
|
|
|
10%
|
|
141,536
|
|
|
128,307
|
|
|
10%
|
||||
Operating loss
|
(12,297
|
)
|
|
(29,135
|
)
|
|
(58)%
|
|
(29,135
|
)
|
|
(35,971
|
)
|
|
(19)%
|
||||
Interest and other expense, net
|
(39,061
|
)
|
|
(15,739
|
)
|
|
148%
|
|
(15,739
|
)
|
|
(15,684
|
)
|
|
—%
|
||||
Income tax expense
|
(142
|
)
|
|
(100
|
)
|
|
42%
|
|
(100
|
)
|
|
(212
|
)
|
|
(53)%
|
||||
Net loss
|
$
|
(51,500
|
)
|
|
$
|
(44,974
|
)
|
|
15%
|
|
$
|
(44,974
|
)
|
|
$
|
(51,867
|
)
|
|
(13)%
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
Principal amount of the 3.75% Convertible Senior Notes
|
$
|
—
|
|
|
$
|
143,750
|
|
Principal amount of the 2% Convertible Senior Notes
|
201,250
|
|
|
—
|
|
||
Unamortized discount
|
(32,256
|
)
|
|
(30,099
|
)
|
||
Long-term debt, net of discount
|
$
|
168,994
|
|
|
$
|
113,651
|
|
Deferred financing costs, net
|
$
|
4,974
|
|
|
$
|
1,414
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Contractual coupon interest
|
$
|
4,657
|
|
|
$
|
5,704
|
|
|
$
|
6,197
|
|
Accretion of debt discount
|
8,007
|
|
|
10,492
|
|
|
9,619
|
|
|||
Loss on debt extinguishment
|
23,203
|
|
|
325
|
|
|
—
|
|
|||
Amortization of deferred financing costs
|
895
|
|
|
590
|
|
|
593
|
|
|||
Total interest and other expense
|
$
|
36,762
|
|
|
$
|
17,111
|
|
|
$
|
16,409
|
|
|
As of December 31,
|
|||||
|
2014
|
2013
|
||||
Manufacturing equipment
|
$
|
7,984
|
|
$
|
6,510
|
|
Less: Accumulated amortization
|
(1,885
|
)
|
(582
|
)
|
||
Total
|
$
|
6,099
|
|
$
|
5,928
|
|
Year Ending
December 31,
|
Minimum Lease Payments
|
||
2015
|
$
|
4,068
|
|
2016
|
2,408
|
|
|
Total future minimum lease payments
|
6,476
|
|
|
Interest expense
|
(833
|
)
|
|
Total capital lease obligations
|
$
|
5,643
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Cash provided by (used in) operating activities
|
$
|
8,920
|
|
|
$
|
3,348
|
|
|
$
|
(29,059
|
)
|
Net loss
|
$
|
(51,500
|
)
|
|
$
|
(44,974
|
)
|
|
$
|
(51,867
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Cash used in investing activities
|
$
|
(11,486
|
)
|
|
$
|
(7,307
|
)
|
|
$
|
(10,991
|
)
|
Cash provided by financing activities
|
$
|
4,032
|
|
|
$
|
96,393
|
|
|
$
|
3,388
|
|
|
Payments Due in
|
||||||||||||||||||||||||||
Contractual Obligations
|
Total
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Later
|
||||||||||||||
Operating lease obligations
|
$
|
17,257
|
|
|
$
|
2,226
|
|
|
$
|
2,196
|
|
|
$
|
2,284
|
|
|
$
|
2,290
|
|
|
$
|
2,181
|
|
|
$
|
6,080
|
|
Capital lease obligations (1)
|
6,476
|
|
|
4,068
|
|
|
2,408
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Long-term debt obligations (2)
|
219,195
|
|
|
4,025
|
|
|
4,025
|
|
|
4,025
|
|
|
4,025
|
|
|
203,095
|
|
|
—
|
|
|||||||
Purchase obligations for production components
|
1,745
|
|
|
1,745
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Purchase obligations for capital expenditures
|
3,494
|
|
|
3,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total contractual obligations
|
$
|
248,167
|
|
|
$
|
15,558
|
|
|
$
|
8,629
|
|
|
$
|
6,309
|
|
|
$
|
6,315
|
|
|
$
|
205,276
|
|
|
$
|
6,080
|
|
(1)
|
The effective interest rate on the capital lease obligations is 17%. We have included future payments of interest on the capital lease in our obligations.
|
(2)
|
The interest rate on the convertible debt is 2% per annum. We have included future payments of interest on the long-term debt in our obligations.
|
•
|
The evidence of an arrangement generally consists of a physician order form, a patient information form and, if applicable, third-party insurance approval for sales directly to patients or a purchase order for sales to a third-party distributor.
|
•
|
Transfer of title and risk and rewards of ownership are passed to the patient or third-party distributor upon shipment of the products.
|
•
|
The selling prices for all sales are fixed and agreed with the patient or third-party distributor, and if applicable, the patient’s third-party insurance provider(s) prior to shipment and are based on established list prices or, in the case of certain third-party insurers, contractually agreed upon prices. Provisions for discounts and rebates to customers are established as a reduction to revenue in the same period the related sales are recorded.
|
Current
|
$
|
61
|
|
Deferred
|
81
|
|
|
Total income tax expense
|
$
|
142
|
|
•
|
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
|
•
|
Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence.
|
•
|
Income approach, which is based on the present value of the future stream of net cash flows.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
INSULET CORPORATION
|
(Registrant)
|
|
/s/ Patrick J. Sullivan
|
Patrick J. Sullivan
|
President and Chief Executive Officer
|
|
/s/ Allison Dorval
|
Allison Dorval
|
Chief Financial Officer
|
Signature
|
|
Title
|
/s/ Patrick J. Sullivan
|
|
President, Chief Executive Officer and Director
|
Patrick J. Sullivan
|
|
(Principal Executive Officer)
|
|
|
|
/s/ Allison Dorval
|
|
Chief Financial Officer
|
Allison Dorval
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ Sally Crawford
|
|
|
Sally Crawford
|
|
Director
|
|
|
|
/s/ John Fallon, M.D.
|
|
|
John Fallon, M.D.
|
|
Director
|
|
|
|
/s/ Charles Liamos
|
|
|
Charles Liamos
|
|
Director
|
|
|
|
Signature
|
|
Title
|
/s/ Timothy J. Scannell
|
|
|
Timothy J. Scannell
|
|
Director
|
|
|
|
/s/ Steven Sobieski
|
|
|
Steven Sobieski
|
|
Director
|
|
|
|
/s/ Regina Sommer
|
|
|
Regina Sommer
|
|
Director
|
|
|
|
/s/ Joseph Zakrzewski
|
|
|
Joseph Zakrzewski
|
|
Director
|
Number
|
Description
|
|
|
2.1(18)
|
Merger Agreement by and among Insulet Corporation, Nectar Acquisition I Corporation, a Delaware corporation and wholly owned subsidiary of Insulet Corporation, and Neighborhood Holdings, Inc., a Delaware corporation, and its subsidiaries dated as of June 1, 2011
|
|
|
3.1(4)
|
Eighth Amended and Restated Certificate of Incorporation of the Registrant
|
|
|
3.2(4)
|
Amended and Restated By-laws of the Registrant
|
|
|
4.1(4)
|
Specimen Stock Certificate
|
|
|
4.3(7)
|
Registration Rights Agreement, dated as of June 16, 2008, among Insulet Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
|
|
|
4.4(9)
|
Certificate of Designations, Preferences and Rights of a Series of Preferred Stock of Insulet Corporation classifying and designating the Series A Junior Participating Cumulative Preferred Stock
|
|
|
4.5(9)
|
Shareholder Rights Agreement, dated as of November 14, 2008, between Insulet Corporation and Registrar and Transfer Company, as Rights Agent
|
|
|
4.6(10)
|
Form of Warrant to purchase shares of common stock of Insulet Corporation
|
|
|
4.7(11)
|
Amendment, dated September 25, 2009, to Shareholder Rights Agreement, dated as of November 14, 2008, between Insulet Corporation and Computershare Trust Company, As Rights Agent
|
|
|
4.8(19)
|
Indenture, dated as of June 29, 2011, between Insulet Corporation and Wells Fargo Bank National Association, as Trustee
|
|
|
4.9(19)
|
Form of 3.75% Convertible Senior Note due 2016
|
|
|
4.10(27)
|
Indenture, dated as of June 9, 2014, between Insulet Corporation and Wells Fargo Bank, National Association, as Trustee
|
|
|
4.11(27)
|
Form of 2.00% Convertible Senior Notes due 2019 (included in Exhibit 33.3)
|
|
|
10.1(2)+
|
Development and License Agreement between TheraSense, Inc. and Insulet Corporation, dated January 23, 2002
|
|
|
10.2(3)
|
Lease between William J. Callahan and Insulet Corporation, dated July 15, 2004
|
|
|
10.3(1)
|
Insulet Corporation 2000 Stock Option and Incentive Plan
|
|
|
10.4(31)
|
Form of Non-Qualified Stock Option Agreement for Company Employees under the Second Amended and Restated 2007 Stock Option and Incentive Plan
|
|
|
10.5(31)
|
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Second Amended and Restated 2007 Stock Option and Incentive Plan
|
|
|
10.6(31)
|
Form of Time Vesting Restricted Stock Unit Agreement for Employees under the Second Amended and Restated 2007 Stock Option and Incentive Plan
|
|
|
10.7(31)
|
Form of Incentive Stock Option Agreement under the Second Amended and Restated 2007 Stock Option and Incentive Plan
|
|
|
10.8(1)
|
Employment Agreement between Duane DeSisto and Insulet Corporation, dated May 4, 2005
|
|
|
10.9(1)
|
Employment Agreement between Ruthann DePietro and Insulet Corporation, dated February 8, 2006
|
|
|
10.10(3)
|
Form of Employee Non-Competition and Non-Solicitation Agreement by and between Insulet Corporation and each of its executive officers
|
|
|
10.11(5)+
|
Master Supply Agreement between Insulet Corporation and Flextronic Marketing (L) Ltd., dated January 3, 2007
|
|
|
10.12(5)+
|
Addendum to Master Supply Agreement between Insulet Corporation and Flextronic Marketing (L) Ltd., dated October 4, 2007
|
*
|
This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
|
|
|
+
|
Confidential treatment granted as to certain portions of this exhibit.
|
(1)
|
Incorporated by reference to Amendment No. 2 to our Registration Statement on Form S-1 (File No. 333-140694) filed April 25, 2007
|
(2)
|
Incorporated by reference to Amendment No. 3 to our Registration Statement on Form S-1 (File No. 333-140694) filed May 8, 2007
|
(3)
|
Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-140694) filed February 14, 2007
|
(4)
|
Incorporated by reference to our Registration Statement on Form S-8 (No. 333-144636) filed July 17, 2007
|
(5)
|
Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-146810) filed October 19, 2007
|
(6)
|
Incorporated by reference to our Current Report on Form 8-K, filed March 5, 2008
|
(7)
|
Incorporated by reference to our Current Report on Form 8-K, filed June 20, 2008
|
(8)
|
Incorporated by reference to our Definitive Proxy Statement on Form DEF14A, filed April 2, 2012
|
(9)
|
Incorporated by reference to our Form 8-A, filed November 20, 2008
|
(10)
|
Incorporated by reference to our Current Report on Form 8-K, filed March 16, 2009
|
(11)
|
Incorporated by reference to our Current Report on Form 8-A/A, filed September 28, 2009
|
(12)
|
Incorporated by reference to our Current Report on Form 8-K, filed March 5, 2009
|
(13)
|
Incorporated by reference to our Current Report on Form 8-K, filed September 28, 2009
|
(14)
|
Incorporated by reference to our Annual Report on Form 10-K, filed March 9, 2010
|
(15)
|
Incorporated by reference to our Current Report on Form 8-K, filed June 21, 2010
|
(16)
|
Incorporated by reference to our Quarterly Report on Form 10-Q/A, filed November 19, 2010
|
(17)
|
Incorporated by reference to our Quarterly Report on Form 10-Q/A, filed November 19, 2010
|
(18)
|
Incorporated by reference to our Current Report on Form 8-K, filed June 7, 2011
|
(19)
|
Incorporated by reference to our Current Report on Form 8-K, filed July 5, 2011
|
(20)
|
Incorporated by reference to our Annual Report on Form 10-K, filed March 10, 2011
|
(21)
|
Incorporated by reference to our Current Report on Form 8-K, filed January 10, 2011
|
(22)
|
Incorporated by reference to our Quarterly Report on Form 10-Q, filed May 9, 2012
|
(23)
|
Incorporated by reference to our Quarterly Report on Form 10-Q, filed August 8, 2012
|
(24)
|
Incorporated by reference to our Quarterly Report on Form 10-Q, filed November 7, 2013
|
(25)
|
Incorporated by reference to our Registration Statement on Form S-3, filed June 22, 2011
|
(26)
|
Incorporated by reference to our Current Report on Form 8-K, filed June 6, 2014
|
(27)
|
Incorporated by reference to our Current Report on Form 8-K, filed June 12, 2014
|
(28)
|
Incorporated by reference to our Quarterly Report on Form 10-Q, filed August 7, 2014
|
(29)
|
Incorporated by reference to our Current Report on Form 8-K, filed September 16, 2014
|
(30)
|
Incorporated by reference to our Current Report on Form 8-K, filed November 5, 2014
|
(31)
|
Incorporated by reference to our Quarterly Report on Form 10-Q, filed November 5, 2014
|
(32)
|
Incorporated by reference to our Annual Report on Form 10-K, filed February 28, 2014
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
||
Supporting Financial Statement Schedule:
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands, except share and per share data)
|
||||||||||
Revenue
|
$
|
288,720
|
|
|
$
|
247,084
|
|
|
$
|
211,369
|
|
Cost of revenue
|
145,432
|
|
|
134,683
|
|
|
119,033
|
|
|||
Gross profit
|
143,288
|
|
|
112,401
|
|
|
92,336
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Research and development
|
27,900
|
|
|
21,765
|
|
|
24,359
|
|
|||
General and administrative
|
66,841
|
|
|
64,077
|
|
|
51,240
|
|
|||
Sales and marketing
|
60,844
|
|
|
55,694
|
|
|
52,708
|
|
|||
Total operating expenses
|
155,585
|
|
|
141,536
|
|
|
128,307
|
|
|||
Operating loss
|
(12,297
|
)
|
|
(29,135
|
)
|
|
(35,971
|
)
|
|||
Interest income
|
129
|
|
|
124
|
|
|
110
|
|
|||
Interest expense
|
(14,687
|
)
|
|
(16,889
|
)
|
|
(15,794
|
)
|
|||
Other income (expense), net
|
(1,300
|
)
|
|
1,351
|
|
|
—
|
|
|||
Loss on extinguishment of long-term debt
|
(23,203
|
)
|
|
(325
|
)
|
|
—
|
|
|||
Interest and other expense, net
|
(39,061
|
)
|
|
(15,739
|
)
|
|
(15,684
|
)
|
|||
Loss before income taxes
|
(51,358
|
)
|
|
(44,874
|
)
|
|
(51,655
|
)
|
|||
Income tax expense
|
(142
|
)
|
|
(100
|
)
|
|
(212
|
)
|
|||
Net loss
|
$
|
(51,500
|
)
|
|
$
|
(44,974
|
)
|
|
$
|
(51,867
|
)
|
Net loss per share basic and diluted
|
$
|
(0.93
|
)
|
|
$
|
(0.83
|
)
|
|
$
|
(1.08
|
)
|
Weighted-average number of shares used in calculating net loss per share
|
55,628,542
|
|
|
54,010,887
|
|
|
47,924,324
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Stockholders’
Equity
|
|||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||
Balance at December 31, 2011
|
47,504,131
|
|
|
$
|
48
|
|
|
$
|
512,371
|
|
|
$
|
(429,684
|
)
|
|
$
|
82,735
|
|
Exercise of options to purchase common stock
|
676,819
|
|
|
—
|
|
|
4,592
|
|
|
—
|
|
|
4,592
|
|
||||
Issuance for employee stock purchase plan
|
18,346
|
|
|
—
|
|
|
392
|
|
|
—
|
|
|
392
|
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
9,862
|
|
|
—
|
|
|
9,862
|
|
||||
Restricted stock units vested, net of shares withheld for taxes
|
159,767
|
|
|
—
|
|
|
(1,538
|
)
|
|
—
|
|
|
(1,538
|
)
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(51,867
|
)
|
|
(51,867
|
)
|
||||
Balance at December 31, 2012
|
48,359,063
|
|
|
$
|
48
|
|
|
$
|
525,679
|
|
|
$
|
(481,551
|
)
|
|
$
|
44,176
|
|
Exercise of options to purchase common stock
|
872,073
|
|
|
1
|
|
|
9,460
|
|
|
—
|
|
|
9,461
|
|
||||
Issuance for employee stock purchase plan
|
12,970
|
|
|
—
|
|
|
445
|
|
|
—
|
|
|
445
|
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
12,616
|
|
|
—
|
|
|
12,616
|
|
||||
Restricted stock units vested, net of shares withheld for taxes
|
217,281
|
|
|
—
|
|
|
(3,265
|
)
|
|
—
|
|
|
(3,265
|
)
|
||||
Issuance of common stock, net of offering costs of $5.0 million
|
4,715,000
|
|
|
5
|
|
|
92,807
|
|
|
—
|
|
|
92,812
|
|
||||
Exercise of warrants to purchase common stock
|
47,392
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuance of common stock pursuant to conversion of debt
|
646,645
|
|
|
1
|
|
|
13,325
|
|
|
—
|
|
|
13,326
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,974
|
)
|
|
(44,974
|
)
|
||||
Balance at December 31, 2013
|
54,870,424
|
|
|
$
|
55
|
|
|
$
|
651,067
|
|
|
$
|
(526,525
|
)
|
|
$
|
124,597
|
|
Exercise of options to purchase common stock
|
754,522
|
|
|
1
|
|
|
11,090
|
|
|
—
|
|
|
11,091
|
|
||||
Issuance for employee stock purchase plan
|
13,620
|
|
|
—
|
|
|
583
|
|
|
—
|
|
|
583
|
|
||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
22,432
|
|
|
—
|
|
|
22,432
|
|
||||
Restricted stock units vested, net of shares withheld for taxes
|
311,921
|
|
|
—
|
|
|
(8,665
|
)
|
|
—
|
|
|
(8,665
|
)
|
||||
Net impact of conversion of 3.75% Notes
|
—
|
|
|
—
|
|
|
(61,728
|
)
|
|
—
|
|
|
(61,728
|
)
|
||||
Allocation to equity for conversion feature on 2% Notes, net of issuance costs
|
—
|
|
|
—
|
|
|
34,455
|
|
|
—
|
|
|
34,455
|
|
||||
Issuance of common stock pursuant to conversion of debt
|
348,535
|
|
|
|
|
12,564
|
|
|
—
|
|
|
12,564
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(51,500
|
)
|
|
$
|
(51,500
|
)
|
|||
Balance at December 31, 2014
|
56,299,022
|
|
|
$
|
56
|
|
|
$
|
661,798
|
|
|
$
|
(578,025
|
)
|
|
$
|
83,829
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net loss
|
$
|
(51,500
|
)
|
|
$
|
(44,974
|
)
|
|
$
|
(51,867
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
|
|
|
|
|
|
||||||
Depreciation and amortization
|
12,223
|
|
|
11,806
|
|
|
11,030
|
|
|||
Non-cash interest and other expense
|
10,253
|
|
|
9,731
|
|
|
10,212
|
|
|||
Stock-based compensation expense
|
22,519
|
|
|
12,683
|
|
|
9,920
|
|
|||
Loss on extinguishment of long-term debt
|
23,203
|
|
|
325
|
|
|
—
|
|
|||
Provision for bad debts
|
3,254
|
|
|
4,741
|
|
|
3,409
|
|
|||
Impairment and other charges
|
—
|
|
|
2,511
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(10,069
|
)
|
|
(4,514
|
)
|
|
(13,513
|
)
|
|||
Inventories
|
(3,635
|
)
|
|
5,403
|
|
|
(3,029
|
)
|
|||
Deferred revenue
|
654
|
|
|
(4,545
|
)
|
|
2,863
|
|
|||
Prepaid expenses and other assets
|
662
|
|
|
(320
|
)
|
|
(898
|
)
|
|||
Accounts payable, accrued expenses and other current liabilities
|
525
|
|
|
10,425
|
|
|
2,999
|
|
|||
Other long-term liabilities
|
831
|
|
|
76
|
|
|
(185
|
)
|
|||
Net cash provided by (used in) operating activities
|
8,920
|
|
|
3,348
|
|
|
(29,059
|
)
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
(11,486
|
)
|
|
(7,307
|
)
|
|
(10,991
|
)
|
|||
Net cash used in investing activities
|
(11,486
|
)
|
|
(7,307
|
)
|
|
(10,991
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Principal payments of capital lease obligations
|
(3,858
|
)
|
|
(994
|
)
|
|
—
|
|
|||
Proceeds from issuance of long-term debt, net of issuance costs
|
194,490
|
|
|
—
|
|
|
—
|
|
|||
Repayment of long-term debt
|
(189,521
|
)
|
|
(2,000
|
)
|
|
—
|
|
|||
Proceeds from issuance of common stock, net of offering costs
|
11,586
|
|
|
102,652
|
|
|
4,927
|
|
|||
Payment of withholding taxes in connection with vesting of restricted stock units
|
(8,665
|
)
|
|
(3,265
|
)
|
|
(1,539
|
)
|
|||
Net cash provided by financing activities
|
4,032
|
|
|
96,393
|
|
|
3,388
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
1,466
|
|
|
92,434
|
|
|
(36,662
|
)
|
|||
Cash and cash equivalents, beginning of year
|
149,727
|
|
|
57,293
|
|
|
93,955
|
|
|||
Cash and cash equivalents, end of year
|
$
|
151,193
|
|
|
$
|
149,727
|
|
|
$
|
57,293
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
4,567
|
|
|
$
|
5,704
|
|
|
$
|
6,197
|
|
Cash paid for taxes
|
$
|
124
|
|
|
$
|
321
|
|
|
$
|
11
|
|
Non-cash financing activities
|
|
|
|
|
|
||||||
Allocation to equity for conversion feature for the 2% Notes
|
$
|
35,638
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock issued in exchange for Senior Convertible Notes
|
$
|
12,564
|
|
|
$
|
13,000
|
|
|
$
|
—
|
|
Purchases of property and equipment under capital lease
|
$
|
1,474
|
|
|
$
|
9,021
|
|
|
$
|
—
|
|
•
|
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
|
•
|
Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence.
|
•
|
Income approach, which is based on the present value of the future stream of net cash flows.
|
•
|
The evidence of an arrangement generally consists of a physician order form, a patient information form and, if applicable, third-party insurance approval for sales directly to patients or a purchase order for sales to a third-party distributor.
|
•
|
Transfer of title and risk and rewards of ownership are passed to the patient or third-party distributor upon shipment of the products.
|
•
|
The selling prices for all sales are fixed and agreed with the patient or third-party distributor and, if applicable, the patient’s third-party insurance provider(s) prior to shipment and are based on established list prices or, in the case of certain third-party insurers, contractually agreed upon prices. Provisions for discounts and rebates to customers are established as a reduction to revenue in the same period the related sales are recorded.
|
|
Fair Value Measurements
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash Equivalents - Money Market Funds
|
$
|
123,141
|
|
|
$
|
123,141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Fair Value Measurements
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash Equivalents - Money Market Funds
|
$
|
128,308
|
|
|
$
|
128,308
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other Asset - Call feature on 3.75% Notes
|
$
|
1,351
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,351
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Carrying
Value
|
|
Estimated Fair
Value
|
|
Carrying
Value |
|
Estimated Fair
Value |
||||||||
2% Convertible Senior Notes
|
$
|
168,994
|
|
|
$
|
237,475
|
|
|
$
|
—
|
|
|
$
|
—
|
|
3.75% Convertible Senior Notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
113,651
|
|
|
$
|
211,370
|
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
Principal amount of the 3.75% Convertible Senior Notes
|
$
|
—
|
|
|
$
|
143,750
|
|
Principal amount of the 2% Convertible Senior Notes
|
201,250
|
|
|
—
|
|
||
Unamortized discount
|
(32,256
|
)
|
|
(30,099
|
)
|
||
Long-term debt, net of discount
|
$
|
168,994
|
|
|
$
|
113,651
|
|
Deferred financing costs, net
|
$
|
4,974
|
|
|
$
|
1,414
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Contractual coupon interest
|
$
|
4,657
|
|
|
$
|
5,704
|
|
|
$
|
6,197
|
|
Accretion of debt discount
|
8,007
|
|
|
10,492
|
|
|
9,619
|
|
|||
Loss on debt extinguishment
|
23,203
|
|
|
325
|
|
|
—
|
|
|||
Amortization of deferred financing costs
|
895
|
|
|
590
|
|
|
593
|
|
|||
Total interest and other expense
|
$
|
36,762
|
|
|
$
|
17,111
|
|
|
$
|
16,409
|
|
|
As of December 31,
|
|||||
|
2014
|
2013
|
||||
Manufacturing equipment
|
$
|
7,984
|
|
$
|
6,510
|
|
Less: Accumulated amortization
|
(1,885
|
)
|
(582
|
)
|
||
Total
|
$
|
6,099
|
|
$
|
5,928
|
|
Year Ending
December 31,
|
Minimum Lease Payments
|
||
2015
|
$
|
4,068
|
|
2016
|
2,408
|
|
|
Total future minimum lease payments
|
6,476
|
|
|
Interest expense
|
(833
|
)
|
|
Total capital lease obligations
|
$
|
5,643
|
|
|
Year Ended December 31,
|
|||||||
|
2014
|
|
2013
|
|
2012
|
|||
5.375% Convertible Senior Notes
|
—
|
|
|
—
|
|
|
702,701
|
|
3.75% Convertible Senior Notes
|
—
|
|
|
5,487,642
|
|
|
5,487,642
|
|
2% Convertible Senior Notes
|
4,327,257
|
|
|
—
|
|
|
—
|
|
Unvested restricted stock units
|
746,612
|
|
|
1,011,893
|
|
|
825,068
|
|
Outstanding options
|
1,847,669
|
|
|
1,828,613
|
|
|
2,502,190
|
|
Outstanding warrants
|
—
|
|
|
—
|
|
|
62,752
|
|
Total dilutive common shares
|
6,921,538
|
|
|
8,328,148
|
|
|
9,580,353
|
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
Trade receivables
|
$
|
45,719
|
|
|
$
|
40,200
|
|
Allowance for doubtful accounts
|
(5,837
|
)
|
|
(7,133
|
)
|
||
Total accounts receivable
|
$
|
39,882
|
|
|
$
|
33,067
|
|
|
Estimated
Useful Life
(Years)
|
|
As of
December 31,
|
||||||
|
2014
|
|
2013
|
||||||
Machinery and equipment
|
2-5
|
|
$
|
35,690
|
|
|
$
|
48,814
|
|
Lab equipment
|
2-3
|
|
1,585
|
|
|
1,481
|
|
||
Computers
|
3
|
|
4,511
|
|
|
3,796
|
|
||
Software
|
3
|
|
5,618
|
|
|
4,813
|
|
||
Office furniture and fixtures
|
3-5
|
|
1,253
|
|
|
2,048
|
|
||
Leasehold improvement
|
*
|
|
826
|
|
|
2,971
|
|
||
Construction in process
|
—
|
|
10,502
|
|
|
2,895
|
|
||
Total property and equipment
|
|
|
$
|
59,985
|
|
|
$
|
66,818
|
|
Less: accumulated depreciation
|
|
|
(22,916
|
)
|
|
(34,462
|
)
|
||
Total property and equipment
|
|
|
$
|
37,069
|
|
|
$
|
32,356
|
|
|
As of December 31,
|
||||||||||||||||||||||
|
2014
|
|
2013
|
||||||||||||||||||||
|
Cost
|
|
Accumulated
Amortization
|
|
NBV
|
|
Cost
|
|
Accumulated
Amortization
|
|
NBV
|
||||||||||||
Customer relationships
|
$
|
30,100
|
|
|
$
|
(18,167
|
)
|
|
$
|
11,933
|
|
|
$
|
30,100
|
|
|
$
|
(14,378
|
)
|
|
$
|
15,722
|
|
Tradename
|
2,800
|
|
|
(669
|
)
|
|
2,131
|
|
|
2,800
|
|
|
(482
|
)
|
|
2,318
|
|
||||||
Total intangible assets
|
$
|
32,900
|
|
|
$
|
(18,836
|
)
|
|
$
|
14,064
|
|
|
$
|
32,900
|
|
|
$
|
(14,860
|
)
|
|
$
|
18,040
|
|
|
Amortization Expense
|
||||||||||
Year Ending December 31,
|
Customer
Relationships
|
|
Tradename
|
|
Total
|
||||||
2015
|
$
|
3,064
|
|
|
$
|
187
|
|
|
$
|
3,251
|
|
2016
|
2,478
|
|
|
187
|
|
|
2,665
|
|
|||
2017
|
2,003
|
|
|
187
|
|
|
2,190
|
|
|||
2018
|
1,619
|
|
|
187
|
|
|
1,806
|
|
|||
2019
|
1,309
|
|
|
187
|
|
|
1,496
|
|
|||
Thereafter
|
1,460
|
|
|
1,196
|
|
|
2,656
|
|
|||
Total
|
$
|
11,933
|
|
|
$
|
2,131
|
|
|
$
|
14,064
|
|
|
As of
December 31,
|
||||||
|
2014
|
|
2013
|
||||
Employee compensation and related items
|
$
|
10,243
|
|
|
$
|
6,887
|
|
Professional and consulting services
|
4,373
|
|
|
2,437
|
|
||
Sales and use tax
|
3,843
|
|
|
3,928
|
|
||
Supplier charges
|
1,852
|
|
|
1,850
|
|
||
Interest
|
168
|
|
|
225
|
|
||
Warranty
|
981
|
|
|
1,173
|
|
||
Training
|
770
|
|
|
717
|
|
||
Other
|
2,473
|
|
|
2,261
|
|
||
Total accrued expenses and other current liabilities
|
$
|
24,703
|
|
|
$
|
19,478
|
|
|
Year Ended
December 31,
|
||||||
|
2014
|
|
2013
|
||||
Balance at the beginning of year
|
$
|
3,090
|
|
|
$
|
1,992
|
|
Warranty expense
|
1,665
|
|
|
4,065
|
|
||
Warranty claims settled
|
(2,141
|
)
|
|
(2,967
|
)
|
||
Balance at the end of the year
|
$
|
2,614
|
|
|
$
|
3,090
|
|
|
|
|
|
||||
|
As of
|
||||||
|
December 31, 2014
|
|
December 31, 2013
|
||||
Composition of balance:
|
|
|
|
||||
Short-term
|
$
|
981
|
|
|
$
|
1,173
|
|
Long-term
|
1,633
|
|
|
1,917
|
|
||
Total warranty balance
|
$
|
2,614
|
|
|
$
|
3,090
|
|
|
|
||
Year Ending December 31,
|
Minimum
Lease Payments
|
||
2015
|
$
|
2,226
|
|
2016
|
2,196
|
|
|
2017
|
2,284
|
|
|
2018
|
2,290
|
|
|
2019
|
2,181
|
|
|
Thereafter
|
6,080
|
|
|
Total
|
$
|
17,257
|
|
|
Number of
Options(#)
|
|
Weighted
Average
Exercise
Price($)
|
|
Aggregate
Intrinsic
Value($)
|
|
|
||||||
|
|
|
(In thousands)
|
|
|
||||||||
Balance, December 31, 2013
|
1,828,613
|
|
|
$
|
16.46
|
|
|
|
|
|
|||
Granted
|
838,846
|
|
|
38.97
|
|
|
|
|
|
||||
Exercised
|
(754,522
|
)
|
|
14.69
|
|
|
$
|
20,418
|
|
|
(1
|
)
|
|
Canceled
|
(65,268
|
)
|
|
28.22
|
|
|
|
|
|
||||
Balance, December 31, 2014
|
1,847,669
|
|
|
$
|
26.99
|
|
|
$
|
35,361
|
|
|
|
|
Vested, December 31, 2014
|
927,900
|
|
|
$
|
19.59
|
|
|
$
|
24,597
|
|
|
(2
|
)
|
Vested and expected to vest, December 31, 2014 (3)
|
1,754,359
|
|
|
|
|
$
|
34,437
|
|
|
(2
|
)
|
(1)
|
The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock as of the date of exercise and the exercise price of the underlying options. The aggregate intrinsic value of options exercised in the years ended
December 31, 2014
,
2013
and
2012
, was
$20.4 million
,
$17.8 million
and
$9.0 million
, respectively.
|
(2)
|
The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock as of
December 31, 2014
, and the exercise price of the underlying options.
|
(3)
|
Represents the number of vested options as of
December 31, 2014
, plus the number of unvested options expected to vest as of
December 31, 2014
, based on the unvested options outstanding at
December 31, 2014
, adjusted for the estimated forfeitures.
|
|
Year Ended December 31,
|
||||
|
2014
|
|
2013
|
|
2012
|
Risk-free interest rate
|
0.12% - 1.98%
|
|
0.93% - 1.91%
|
|
0.80% - 1.16%
|
Expected term (in years)
|
1.0 - 6.25
|
|
6.25
|
|
6.25
|
Dividend yield
|
—
|
|
—
|
|
—
|
Expected volatility
|
37% - 63%
|
|
63% - 66%
|
|
67% - 71%
|
|
Number of
Shares (#)
|
|
Weighted
Average
Fair Value ($)
|
|||
Balance, December 31, 2013
|
1,011,893
|
|
|
$
|
22.11
|
|
Granted
|
366,529
|
|
|
43.60
|
|
|
Vested
|
(523,240
|
)
|
|
25.96
|
|
|
Forfeited
|
(108,570
|
)
|
|
27.47
|
|
|
Balance, December 31, 2014
|
746,612
|
|
|
$
|
31.40
|
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Current
|
$
|
61
|
|
|
$
|
16
|
|
|
$
|
121
|
|
Deferred
|
81
|
|
|
84
|
|
|
91
|
|
|||
Total income tax expense
|
$
|
142
|
|
|
$
|
100
|
|
|
$
|
212
|
|
|
Year Ended December 31,
|
||||||
|
2014
|
|
2013
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
161,888
|
|
|
$
|
154,872
|
|
Start up expenditures
|
1,416
|
|
|
1,672
|
|
||
Tax credits
|
6,968
|
|
|
9,841
|
|
||
Provision for bad debts
|
2,174
|
|
|
2,679
|
|
||
Depreciation
|
897
|
|
|
1,675
|
|
||
Other
|
9,777
|
|
|
6,357
|
|
||
Total deferred tax assets
|
$
|
183,120
|
|
|
$
|
177,096
|
|
Deferred tax liabilities:
|
|
|
|
||||
Prepaids
|
$
|
(935
|
)
|
|
$
|
(310
|
)
|
Amortization of acquired intangibles
|
(5,218
|
)
|
|
(6,734
|
)
|
||
Amortization of debt discount
|
(11,947
|
)
|
|
(11,214
|
)
|
||
Goodwill
|
(304
|
)
|
|
(223
|
)
|
||
Other
|
—
|
|
|
(515
|
)
|
||
Total deferred tax liabilities
|
$
|
(18,404
|
)
|
|
$
|
(18,996
|
)
|
Valuation allowance
|
$
|
(165,020
|
)
|
|
$
|
(158,323
|
)
|
Net deferred tax liabilities
|
$
|
(304
|
)
|
|
$
|
(223
|
)
|
|
2014 Quarters ended
|
||||||||||||||
|
December 31
|
|
September 30
|
|
June 30
|
|
March 31
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Revenue
|
$
|
72,561
|
|
|
$
|
74,985
|
|
|
$
|
72,013
|
|
|
$
|
69,161
|
|
Gross profit
|
$
|
36,673
|
|
|
$
|
38,042
|
|
|
$
|
35,765
|
|
|
$
|
32,808
|
|
Net loss
|
$
|
(5,400
|
)
|
|
$
|
(10,845
|
)
|
|
$
|
(29,111
|
)
|
|
$
|
(6,144
|
)
|
Net loss per share
|
$
|
(0.10
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
(0.11
|
)
|
|
2013 Quarters ended
|
||||||||||||||
|
December 31
|
|
September 30
|
|
June 30
|
|
March 31
|
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Revenue
|
$
|
68,533
|
|
|
$
|
61,103
|
|
|
$
|
60,092
|
|
|
$
|
57,356
|
|
Gross profit
|
$
|
33,018
|
|
|
$
|
27,395
|
|
|
$
|
26,833
|
|
|
$
|
25,155
|
|
Net loss
|
$
|
(2,500
|
)
|
|
$
|
(21,290
|
)
|
|
$
|
(10,519
|
)
|
|
$
|
(10,665
|
)
|
Net loss per share
|
$
|
(0.04
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.20
|
)
|
Description
|
Balance at
Beginning of
Period
|
|
Additions
Charged to
Costs and
Expenses
|
|
Deductions
|
|
Balance at
End
of Period
|
||||||||
|
(In thousands)
|
||||||||||||||
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
$
|
7,133
|
|
|
$
|
3,254
|
|
|
$
|
4,550
|
|
|
$
|
5,837
|
|
Deferred tax valuation allowance
|
$
|
158,323
|
|
|
$
|
21,070
|
|
|
$
|
14,373
|
|
|
$
|
165,020
|
|
Year Ended December 31, 2013
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
$
|
6,627
|
|
|
$
|
4,741
|
|
|
$
|
4,235
|
|
|
$
|
7,133
|
|
Deferred tax valuation allowance
|
$
|
145,927
|
|
|
$
|
32,050
|
|
|
$
|
19,654
|
|
|
$
|
158,323
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Allowance for doubtful accounts
|
$
|
7,021
|
|
|
$
|
3,409
|
|
|
$
|
3,803
|
|
|
$
|
6,627
|
|
Deferred tax valuation allowance
|
$
|
129,223
|
|
|
$
|
20,972
|
|
|
$
|
4,268
|
|
|
$
|
145,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print Name
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print Name
|
|
|
|
INSULET COPRORATION
|
|
|
|
|
|
|
|
|
By: Patrick J. Sullivan
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
|
|
|
Grantee Name:
|
|
|
Grantee Acceptance Date:
|
|
|
|
|
|
INSULET COPRORATION
|
|
|
|
|
|
|
|
|
By: Patrick J. Sullivan
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
INSULET COPRORATION
|
|
|
|
|
|
|
|
|
By: Patrick J. Sullivan
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
|
|
|
Optionee Name:
|
|
|
Optionee Acceptance Date:
|
|
|
|
|
|
INSULET COPRORATION
|
|
|
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By: Patrick J. Sullivan
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Title: Chief Executive Officer
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Optionee Name:
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Optionee Acceptance Date:
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INSULET COPRORATION
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By: Patrick J. Sullivan
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Title: Chief Executive Officer
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Grantee Name:
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Grantee Acceptance Date:
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INSULET COPRORATION
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By: Patrick J. Sullivan
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Title: Chief Executive Officer
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Grantee Name:
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Grantee Acceptance Date:
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INSULET COPRORATION
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By: Patrick J. Sullivan
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Title: Chief Executive Officer
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Optionee Name:
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Optionee Acceptance Date:
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Name of Entity
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State/Country of Organization
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Sub-Q Solutions, Inc.
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Delaware
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Insulet MA Securities Corporation
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Massachusetts
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Insulet Singapore Private Limited
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Singapore
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Insulet Canada Corporation
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Canada
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Neighborhood Holdings, Inc.
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Delaware
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Neighborhood Diabetes, Inc.
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Massachusetts
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Shelbourn Chemists, Inc.
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New York
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New York Diabetic Supply Corporation
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New York
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1.
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I have reviewed this Annual Report on Form 10-K of Insulet Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Patrick J. Sullivan
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Patrick J. Sullivan
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President and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Insulet Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Allison Dorval
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Allison Dorval
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Chief Financial Officer
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/s/ Patrick J. Sullivan
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Patrick J. Sullivan
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President and Chief Executive Officer
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/s/ Allison Dorval
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Allison Dorval
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Chief Financial Officer
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