What changed in this filing

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Item 1A. Risk Factors

2021-11-03 compared with 2021-08-04 · 46 added, 30 removed, 916 unchanged (8% of the section changed)

75 unchanged sentences

Since our inception in January 2006, we have incurred a significant net loss.

As of June 30, 2021, we had an accumulated deficit of $651.2 million.

As of September 30, 2021, we had an accumulated deficit of $645.4 million.

To date, we have funded our operations primarily through cash collected from product sales, private and public offerings of our equity securities, and debt financing.

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For the years ended December 31, 2020 and 2019, our gross profit was $260.5 million and $194.2 million, respectively.

Although we have achieved a positive overall gross margin and have substantially reduced our operating loss, we still operate at a net loss on an annual basis and expect that we may continue to do so for the foreseeable future.

Although we have achieved a positive overall gross margin and generated net income for the first time for the nine month period ended September 30, 2021, we may still operate at a net loss from time to time due to fluctuations in our business.

To implement our business strategy and achieve consistent profitability, we need to, among other things, increase sales of our products and the gross profit associated with those sales, maintain an appropriate customer service, training and support infrastructure, fund ongoing R&D activities, create additional efficiencies in our manufacturing processes while adding to our capacity, and obtain regulatory clearance or approval to commercialize our products currently under development both domestically and internationally.

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Public health threats and other highly communicable diseases and outbreaks could adversely impact our operations, the operations of our customers, suppliers, distributors and other business partners, as well as the healthcare system in general.

For example, the COVID-19 global pandemic, which is currently affecting numerous countries throughout the world, resulted in a rapid and sustained rise in unemployment rates and decreases in global economic activity.

While economic activity in the United States began to increase during the second quarter of 2021, the overall scope of the COVID-19 global pandemic and its impacts continue to fluctuate, and in some instances worsen, in various regions worldwide.

The overall negative impact from the COVID-19 global pandemic is difficult to estimate;

however, we anticipate that our sales and operating results will continue to be adversely impacted in future periods and subject to unpredictable variability even if travel and social distancing restrictions are lifted.

In addition, the rise in unemployment and decreases in economic activity in various regions worldwide due to the COVID-19 global pandemic may negatively impact the affordability of our products for certain customers, which could reduce demand for our products.

Further, certain development activities originally planned to occur during 2020, such as human factors studies associated with our product development efforts and activities to support the manufacturing scale-up for new products, were modified or delayed due to impacts of the COVID-19 global pandemic, which has impacted our development timelines and regulatory strategies and also could have a negative impact on our product commercialization efforts and the future demand for our products.

For example, the COVID-19 global pandemic resulted in a rapid and sustained rise in unemployment rates and decreases in global economic activity.

While we observed some increase in economic activity in the United States beginning in the second quarter of 2021, the overall scope of the COVID-19 global pandemic and its impacts continue to fluctuate, and in some instances worsen, in various regions worldwide.

Although the overall negative impact from the COVID-19 global pandemic on our business is difficult to estimate, we anticipate that our sales and operating results will continue to be adversely impacted in future periods and subject to unpredictable variability notwithstanding relaxed travel and social distancing restrictions.

Further, certain development activities, such as human factors studies associated with our product development efforts, activities to support the manufacturing scale-up for new products and the recruitment of participants in ongoing clinical studies, were modified or delayed due to impacts of the COVID-19 global pandemic, which has impacted our development timelines and regulatory strategies and also could have a negative impact on our product commercialization efforts and the future demand for our products.

The COVID-19 global pandemic, or other similar outbreaks or epidemics, may have an adverse effect on the overall productivity of our workforce, and we expect to continue to take appropriate measures to protect the health and safety of our employees and our business partners and reduce the risk of disruptions to our operations.

For example, we continue to restrict employee travel and limit visitors to our facilities, and many of our employees who are able to perform their job function outside of our facilities remain in a remote work environment.

For example, we continue to limit employee travel and visitors to our facilities, and many of our employees who are able to perform their job function outside of our facilities remain in a remote work environment.

For our field-based sales and clinical employees, we initially discontinued all in-person activities and began utilizing technology to remotely engage healthcare providers and customers.

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If we experience these or similar manufacturing challenges in the future, it could have a negative impact on product sales and harm our reputation.

Further spread or escalation of the COVID-19 global pandemic, a resurgence of the pandemic in the United States, or even the threat or perception that this could occur, or any protracted duration of decreased economic activity, could have a material adverse impact on our business, operations and financial results and could negatively impact or disrupt our plans to have employees return to our facilities.

The full extent of the impact of the COVID-19 global pandemic on our business and operations is highly uncertain and subject to change, and will continue to depend on a number of factors, including the scope and duration of the pandemic and any resulting changes to general economic conditions in the countries in which we operate and sell our products.

Further spread or escalation of the COVID-19 global pandemic, a resurgence of the pandemic in the United States, or even the threat or perception that this could occur, or any protracted duration of decreased economic activity or increase in inflation, could have a material adverse impact on our business, operations and financial results and could negatively impact or disrupt our plans to have employees return to our facilities.

Our ability to maintain and grow our revenue depends in part on retaining a high percentage of our customer base.*

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In addition, the vast majority of our existing customers are individuals with type 1 diabetes, and we have limited experience marketing and selling our products to customers with type 2 diabetes.

In addition, due to the current COVID-19 global pandemic, starting in March 2020 we temporarily discontinued in-person activities for our field-based sales and clinical employees and are utilizing technology to remotely engage healthcare providers and customers.

In addition, due to the current COVID-19 global pandemic, starting in the first quarter of 2020 we temporarily discontinued in-person activities for our field-based sales and clinical employees and are utilizing technology to remotely engage healthcare providers and customers.

While we have authorized limited in-person activities to resume, many restrictions persist that have been imposed by state and local governmental authorities or expert agencies, as well as by the health systems and professional organizations with which we interact.

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Further, we may not achieve anticipated improvements in manufacturing efficiency as we undertake actions to expand our manufacturing capacity.

We are also subject to other general market and economic conditions that may increase our expenses, including unpredictable variability in commodity prices, wage increases and inflation.

If we are unable to effectively manage our overall costs while increasing our production volumes and lowering our per-unit costs, we may not be able to achieve or sustain profitability, which would have an adverse impact on our business, financial condition and operating results.

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Additionally, at various times our cartridge inventory was below our targeted stocking levels.

We have acquired finished goods and raw material inventory for our products in order to meet targeted stocking levels in the near-term.

Currently, we do not anticipate a significant disruption in our ability to manufacture insulin pumps and cartridges, nor do we anticipate our third-party manufacturers will be unable to provide sufficient quantities to meet product demand, however we continue to monitor factors that could negatively impact our longer-term supply chain, such as global shortages of semiconductors and copper that are needed to manufacture our insulin pumps and accessories.

We have finished goods and raw material inventory for our insulin pumps in order to meet near-term demand;

however, our inventory of certain pump and cartridge components are currently below our targeted stocking levels.

Currently, we do not anticipate a significant disruption in our ability to manufacture insulin pumps and cartridges, nor do we anticipate our third-party manufacturers will be unable to provide sufficient quantities of raw materials and components to meet product demand in the near-term, however we continue to monitor factors that could negatively impact our medium- and longer-term supply chain, such as global shortages of semiconductors and copper that are needed to manufacture our insulin pumps and accessories and custom components for our insulin pumps and cartridges where we rely on a limited number of qualified suppliers.

If we experience these or similar manufacturing challenges in the future, it could have a negative impact on product sales and harm our reputation.

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We generally use a small number of suppliers for our components and products, some of which are located outside the United States, including in China, Mexico and Costa Rica.

Depending on a limited number of suppliers exposes us to risks, including limited control over costs such as tariffs, availability, quality and delivery schedules.

Depending on a limited number of suppliers exposes us to risks, including limited control over costs, including tariffs, availability, quality and delivery schedules.

Moreover, in some cases we do not have long-standing relationships with our manufacturers and may not be able to convince suppliers to continue to make components available to us unless there is demand for such components from their other customers.

As a result, there is a risk that certain components could be discontinued and no longer available to us.

As a result, there is a risk that certain components could be discontinued and no longer available to us at acceptable prices, or at all.

We have in the past been, and we may in the future be, required to make significant “last time” purchases of component inventories that are being discontinued by the manufacturer to ensure supply continuity.

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In addition to the risks regarding information technology systems and processing of sensitive information, our insulin pumps and other products rely on software, some of which is developed by third-party service providers, that could contain unanticipated vulnerabilities, which could make our products subject to computer viruses, cyber-attacks, or failures.

These risks significantly increased when we received FDA clearance of our Tandem Device Updater, which enables customers to remotely update software on their insulin pumps and may be higher following the launch of our new mobile application in the second half of 2020.

These risks significantly increased when we commenced use of our Tandem Device Updater, which enables customers to remotely update software on their insulin pumps and may be higher following the launch of our new mobile application in the second half of 2020.

We may also face new risks relating to our information technology systems as we continue to commercialize our products outside of the United States and are subject to additional regulations relating to the use and protection of personal information and as we launch new mobile applications or new features to our existing applications.

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Our success will depend on our ability to retain our current management and key employees, and to attract and retain qualified personnel in the future.

Competition for senior management and key employees in our industry is intense and we cannot guarantee that we will be able to retain our personnel or attract new, qualified personnel.

Each member of senior management, as well as our key employees may terminate employment without notice and without cause or good reason.

Competition for senior management and key employees in our industry is intense and over the past year we have also experienced general labor shortages in various areas of our business.

We cannot guarantee that we will be able to retain our personnel or attract new, qualified personnel.

In addition, we may need to increase employee wages and benefits in order to attract and retain our personnel, which would increase our expenses.

The loss of the services of certain members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives, or divert management’s attention to seeking qualified replacements, and any general labor shortages could also negatively impact our ability to expand and scale functions that are needed to support the ongoing development of our products and the future growth of our business.

Each member of senior management, as well as the vast majority of our employees may terminate employment without notice and without cause or good reason.

The members of our senior management are not subject to non-competition agreements.

29 unchanged sentences

Potential and completed acquisitions and investments involve numerous risks, including:

• problems assimilating the acquired products or technologies;

• problems assimilating, maintaining or operating the acquired products or technologies;

• issues maintaining uniform standards, procedures, controls and policies;

3 unchanged sentences

• increased legal and accounting costs relating to the acquisitions or to comply with regulatory requirements or other compliance matters.

We may experience one or more of these risks in connection with our acquisition of Sugarmate, which was completed in 2020.

We have experienced and may continue to experience one or more of these risks in connection with our acquisition of Sugarmate, which was completed in 2020.

For example, as a result of an unanticipated update to Dexcom’s data systems, Sugarmate users outside the United States are currently unable to receive Dexcom CGM data in the Sugarmate app.

We do not anticipate the connection will be restored in 2021.

We anticipate that this disruption also will extend to Sugarmate app users in the United States, and we are currently evaluating the expected duration of this disruption.

There can be no assurance that either of these service disruptions will be resolved timely or at all.

These service disruptions, or other problems utilizing the mobile app or other assets acquired from Sugarmate, could adversely affect our ability to realize the expected benefits from the Sugarmate acquisition.

Further, it is possible that we could experience a loss of Sugarmate customers or reputational harm arising from this service outage or similar events, which could adversely affect our business, results of operations, and financial condition.

We do not know if we will be able to identify future acquisitions or investments we deem suitable, whether we will be able to successfully complete any such acquisitions or investments on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies into our business.

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We may need or otherwise determine to raise additional funds in the future and if we are unable to raise additional funds when necessary or desirable, we may not be able to achieve our strategic objectives.*

At June 30, 2021, we had $545.3 million in cash, cash equivalents and short-term investments.

At September 30, 2021, we had $595.0 million in cash, cash equivalents and short-term investments.

Our management expects the continued growth of our business, including the expansion of our customer service infrastructure to support our growing base of customers, our plans to expand commercial sales of our products outside of the United States, the growth of our manufacturing and warehousing operations, increasing the size of our facility footprint due to increases in headcount and additional R&D activities, will continue to increase our expenses.

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We rely primarily on patent, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements, to protect our proprietary technologies.

As of June 30, 2021, our patent portfolio consisted of approximately 110 issued U.S.

As of September 30, 2021, our patent portfolio consisted of approximately 113 issued U.S.

patents and 79 pending U.S.

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Additionally, the FDA and other regulatory authorities have broad enforcement powers, and regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, delays by the FDA or other regulators in granting clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators.

Since our inception we have been audited or inspected by various regulatory authorities on numerous occasions.

We also regularly respond to routine inquiries from regulatory authorities.

In some instances these audits, inspections and inquiries result in findings that require us to take corrective actions, which could include changes to our internal policies, procedures or operations, revisions to our product labeling, issuances of customer notifications or the initiation of product recalls, any of which could result in product liability claims and lawsuits.

Since mid-2021 we have completed several audits and inspections, some of which include findings that require us to take one or more corrective actions.

Our failure to appropriately respond to these findings and take corrective actions, or our failure to comply with applicable regulations for any other reason, could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, delays by the FDA or other regulators in granting clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators.

Any of these sanctions could result in higher than anticipated costs, lower than anticipated sales, and diversion of management time and resources, any of which could have a material adverse effect on our reputation, business, financial condition and operating results.

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Further, the FDA’s ongoing review of and potential changes to the 510(k) program may make it more difficult for us to modify our previously cleared products, either by imposing stricter requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or by applying more onerous review criteria to such submissions.

If we or our third-party suppliers, contract manufacturers and service providers fail to comply with the FDA’s good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.*

If we or our third-party suppliers, contract manufacturers and service providers fail to comply with good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.*

We and our third-party suppliers, contract manufacturers and service providers are required to comply with the FDA’s Quality System Regulation (QSR), which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.

The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities which may occur at any time.

We also are subject to similar requirements by regulatory authorities in other geographies.

The FDA and other regulatory bodies routinely audit our compliance with the QSR and equivalent international requirements through periodic announced and unannounced inspections of manufacturing and other facilities which may occur at any time.

We cannot assure you that our facilities or our contract manufacturer or third-party suppliers’ facilities would pass any quality system inspection or audit.

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There can be no assurance that the TGA will not reimpose the suspension of our pump product sales or impose other regulatory restrictions in the future.

Any regulatory challenges we encounter could have a negative impact on our product sales and harm our reputation.

In addition, other regulatory bodies may take similar actions against us, and any regulatory challenges we encounter could have a negative impact on our product sales and harm our reputation.

Any corrective actions we take in response to this action or future matters with the TGA or other regulatory bodies, whether voluntary or involuntary, will require the dedication of our time and capital, may distract management from operating our business, may harm our reputation and financial results or could result in additional regulatory scrutiny in other geographies.

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• regulatory approval of our products or the products of our competitors, or the failure to obtain such approvals on the projected timeline or at all;

• the announcement of a product recall, suspension or other safety notice associated with our products or the products of our competitors, or other similar regulatory enforcement actions;

• the inclusion or removal of our stock from one or more market indexes;

• speculative trading practices of market participants;

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

10.1 Lease Agreement by and between Kilroy Realty, L.P., and Tandem Diabetes Care, Inc.

101.INS XBRL Instance Document.

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Tandem Diabetes Care, Inc.

August 4, 2021 By:

November 3, 2021 By:

President and Chief Executive Officer

1 unchanged sentence

Principal Executive Officer)

August 4, 2021 By:

November 3, 2021 By:

Executive Vice President, Chief Financial Officer and Treasurer

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors