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Item 1A. Risk Factors

2024-02-21 compared with 2023-02-22 · 422 added, 326 removed, 552 unchanged (58% of the section changed)

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Certain statements below are forward-looking statements.

For additional information, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report.

Summary of Risk Factors

Below is a summary of material factors that make an investment in our securities speculative or risky.

Importantly, this summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found below, after this summary.

Risks Related to Our Business and Industry

• We have incurred significant operating losses since inception and may not achieve sustained profitability.

• We rely on sales of insulin pump products to generate a significant portion of our revenue, and any factors that negatively impact sales of these products may adversely affect us.

• Our ability to maintain and grow our revenue depends in part on attracting and retaining customers.

• Our or our business partners’ failure to successfully compete may negatively affect our financial condition.

• Competitive products or technologies may render our products obsolete or less desirable.

• Failure of our products to achieve market acceptance could negatively impact our business and operating results.

• Failure to secure or retain adequate coverage or reimbursement for our products by third-party payors could adversely affect our business.

• Concerns regarding the safety or efficacy of our products could limit sales.

• If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

• Our failure to successfully complete clinical trials and development-stage testing could prevent us from obtaining regulatory approvals for or commercializing our products.

• We depend on a limited number of third-party suppliers for certain components and products.

• Our inability to attract or retain key personnel could adversely affect our ability to execute our business strategy.

Risks Related to Our International Operations

• Commercializing our products internationally may result in a variety of risks associated with international operations that could materially adversely affect our business.

• Failure to obtain regulatory authorization in foreign jurisdictions will prevent us from marketing our products internationally.

• Our sales and profits are subject to decline in response to foreign currency exchange rate fluctuation.

Risks Related to Macroeconomic Conditions and External Factors

• Uncertainty in current global economic and political conditions could adversely affect our ability to predict product demand and impact our financial results.

• Public health threats, such as the COVID-19 global pandemic, could materially impact our operations and the global economy.

• Climate change or other extreme weather conditions and related regulations may have a long-term impact on our business.

Risks Related to Our Future Financings and Financial Results

• We may need to raise additional funds in the future and funds may not be available on commercially reasonable terms.

• Our operating results may fluctuate significantly from quarter to quarter.

Risks Related to Privacy and Security

• A security breach or disruption to our information technology systems could damage our relationships, expose us to litigation or regulatory proceedings, or harm our reputation.

• Our violation of privacy or security laws could subject us to penalties and harm our reputation or business.

Risks Related to Legal and Intellectual Property

• Our ability to comprehensively protect our intellectual property and proprietary technology is uncertain.

• Patent litigation is not uncommon in the medical device industry, and we may be subject to such litigation.

• We may be subject to damages resulting from claims that we have wrongfully used or disclosed patient health information, personal information, or trade secrets, or are in breach of non-competition or non-solicitation agreements.

Risks Related to Our Regulatory Environment

• Our products and operations are subject to extensive governmental regulation, and failure to comply with requirements could cause our business to suffer.

• New products or modifications to our existing products may require new regulatory approvals, or require us to cease marketing or recall modified products.

• A recall or suspension of our products could have a significant negative impact on us.

General Risks

• The price of our common stock may continue to fluctuate significantly.

• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

• We may fail to maintain an effective system of internal control over financial reporting.

Risks Related to Our Indebtedness

• We have incurred a significant amount of indebtedness and the agreements governing such indebtedness may restrict our financial flexibility and affect our ability to operate our business.

• Our 1.50% Convertible Senior Notes due 2025 could adversely affect our financial condition.

• We may not have sufficient cash flow from our business to service the Notes.

• We may take actions which could limit our ability to make payments on the Notes.

For additional information, see “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Annual Report and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report.

Risks Related to Our Business and Our Industry

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We have devoted substantially all of our resources to the design, development and commercialization of our products, the scaling of our manufacturing and business operations, and the research and development of our current products and products under development.

We began commercial sales of our first product, t:slim, in August 2012 and our current flagship pump platform, t:slim X2, in October 2016.

The t:slim X2 insulin pump now represents 100% of new pump shipments.

Until the third quarter of 2018 we were selling our products only in the United States and have since launched our products in select international geographies.

Since the first quarter of 2013, we have been able to manufacture and sell our insulin pump products at a cost and in volumes sufficient to allow us to achieve a positive overall gross margin.

For the years ended December 31, 2021 and 2020, our gross profit was $376.2 million and $260.5 million, respectively.

Although we have achieved a positive overall gross margin and generated net income on an annual basis for the first time for the year ended December 31, 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 in the United States and the more than 25 countries outside the United States in which our insulin pump is available.

For the years ended December 31, 2023 and 2022, our gross profits were $367.7 million and $413.0 million, respectively.

Although we have achieved a positive overall gross margin during the years ended December 31, 2023 and 2022, we had net losses from operations of $222.6 million and $94.6 million, respectively, and we may continue to incur losses in the future.

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 research and development (R&D) activities, create additional efficiencies in our manufacturing processes while adding to our capacity, and obtain regulatory clearance, certification or approval to commercialize our products currently under development both in the United States and the more than 25 countries outside the United States in which our insulin pumps are available.

We expect our expenses will continue to increase as we pursue these objectives and make investments in our business.

Additional increases in our expenses without commensurate increases in sales could significantly increase our operating losses.

The extent of our future operating losses and the timing of our profitability are highly uncertain in light of a number of factors, including the timing of the launch of new products and product features by us and our competitors, market acceptance of our products and competitive products by people with insulin-dependent diabetes, their caregivers and healthcare providers, the timing of regulatory approval of our products and the products of our competitors, the actual efficiencies gained in our manufacturing processes, general economic conditions, and the scope and duration of the impacts caused by the COVID-19 global pandemic.

The extent of our future operating losses and the timing of our profitability are highly uncertain in light of a number of factors, including the timing of the launch of new products and product features by us and our competitors, market acceptance of our products and competing products by people with insulin-dependent diabetes, their caregivers and healthcare providers, the timing of regulatory clearance, certification, or approval of our products and the products of our competitors, the actual efficiencies gained in our manufacturing processes, and general economic conditions.

Any additional operating losses will have an adverse effect on our stockholders’ equity, and we cannot assure you that we will be able to sustain profitability.

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We generate nearly all of our revenue from the sale of t:slim X2 insulin pumps and the related insulin cartridges and infusion sets.

In addition, we recently launched our Tandem Mobi insulin pump.

Sales of these products may be negatively impacted by many factors, including:

• market acceptance of the insulin pumps and related products manufactured and sold by our key competitors, including Medtronic;

• market acceptance of the insulin pumps and related products manufactured and sold by our key competitors, including Insulet, Medtronic, and Ypsomed;

• the potential that breakthroughs for the monitoring, treatment or prevention of diabetes may render our insulin pumps obsolete or less desirable;

• adverse regulatory or legal actions relating to our products, or similar products or technologies of our competitors;

• failure of our Tandem Device Updater to accurately and timely provide customers with remote access to new product features and functionality as anticipated, or our failure to obtain regulatory approval for any such updates;

• changes in reimbursement rates or policies relating to insulin pumps or similar products or technologies by third-party payors;

• competitive pricing and attrition rates of consumers who cease using our products;

• our inability to enter into contracts with third-party payors on a timely basis and on acceptable terms;

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Sales of our products may also be adversely impacted if the CGM products that are compatible with our pumps are not viewed as superior to competing CGM products in markets where our products are sold, or if the price of these products is not competitive with similar products available in the market.

Because we currently rely on sales of our t:slim X2 insulin pump and related products to generate a significant majority of our revenue, any factors that negatively impact sales of these products (or negatively impact the products or components integrated with these products), or result in sales of these products increasing at a lower rate than expected, could adversely affect our business, financial condition and operating results.

We believe the COVID-19 global pandemic has had, and that it may continue to have, an adverse impact on sales of our products.

Because we currently rely on sales of our t:slim X2 insulin pump, and expect to rely on sales of our Tandem

Mobi insulin pump, and related products to generate a significant majority of our revenue, any factors that negatively impact sales of these products (or negatively impact the products or components integrated with these products) could adversely affect our business, financial condition and operating results.

Furthermore, any disruption in our supply chain could negatively impact our ability to manufacture or otherwise supply sufficient product quantities to meet current customer demand, or any unexpected increase in demand, which could also have the effect of magnifying the negative impact of any of the factors described above.

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These and other economic factors could have a material adverse effect on our business, financial condition, and results of operations.

Public health threats, such as the COVID-19 global pandemic, have had and could continue to have a material adverse effect on our operations, the operations of our business partners, and the global economy as a whole.

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.

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, our sales and operating results have been adversely impacted, and we anticipate that they will continue to be impacted and subject to unpredictable variability in future periods.

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 and continues to impact 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.

We temporarily increased our staffing in certain operations in order to mitigate potential risks associated with increases in unplanned employee absences or illness.

Our adoption of these preventive measures has resulted in incremental costs that have negatively impacted our gross margin, and could impact future periods.

In addition, for the duration of the COVID-19 global pandemic, some of our employees may be required to continue to operate within a remote work environment for extended periods of time due to illness, travel restrictions, government-imposed orders, school closures or for other reasons, any of which could result in reduced productivity of our workforce.

As the COVID-19 global pandemic improves, we anticipate adapting to a hybrid work model, and we may experience additional costs as our employees return to work, or as we respond to general labor shortages and heightened competition for employees with specialized skills.

In addition to the foregoing impacts, disruptions from the COVID-19 global pandemic, or other similar outbreaks or epidemics, could result in delays in or the suspension of our manufacturing operations, research and product development activities, regulatory work streams, clinical development programs and other important commercial functions.

In particular, if we or our third-party manufacturers are required to delay or suspend our manufacturing operations, we may encounter severe product shortages, which would adversely affect our results of operations and harm our reputation.

We are also dependent upon our third-party suppliers for many of our product components and for our manufacturing-related equipment, and the COVID-19 global pandemic has and could continue to have a material adverse impact on the operations of one or more of our suppliers.

These adverse impacts on our suppliers could prevent them from delivering products to us or supporting our requirements for manufacturing-related equipment on a timely basis, or at all.

Additionally, we have been and may continue to be negatively impacted by global shortages of semiconductors and copper, which could limit our insulin pump manufacturing capacity.

If we continue to experience these or similar manufacturing challenges, or if these challenges worsen in the future, it could increase our manufacturing costs, disrupt our manufacturing operations, negatively impact our product sales and harm our reputation.

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.

A key to maintaining and growing our revenue is the retention of a high percentage of our customers due to the potentially significant revenue generated from ongoing purchases of disposable infusion sets, insulin cartridges and other supplies.

A key to maintaining and growing our revenue is the retention of a high percentage of our customers due to the potentially significant revenue generated from ongoing purchases of single-use infusion sets, insulin cartridges and other supplies.

In addition, our pumps are designed and tested to remain effective for at least four years and a customer may consider purchasing another product from us when the time comes to replace the pump.

We have developed retention programs aimed at our customers, their caregivers and healthcare providers, which include training specific to our products, ongoing support by our sales and clinical employees, and technical support and customer service.

Demand for our products from our existing customers could decline or could fail to increase as anticipated or projected as a result of a number of factors, including the introduction of competitive products, breakthroughs for the monitoring, treatment or prevention of diabetes, changes in reimbursement rates or policies, manufacturing problems, perceived safety or reliability issues with our products or components or the products of our competitors, the failure to secure regulatory clearance or approvals for products or product features in a timely manner or at all, product development or commercialization delays, the impacts and disruptions caused by the COVID-19 global pandemic, or for other reasons.

Further, the COVID-19 global pandemic has resulted in substantial restrictions on our engagement efforts with customers and healthcare providers, including the cancellation or postponement of company-sponsored educational events, as well as third-party conferences, trade shows and similar events.

The impact continues even as some third-party conferences, trade shows and events are being held remotely from time to time, which restricts our engagement with customers and healthcare providers.

In addition, varying COVID-19 case rates can limit our in-person access to healthcare provider offices and also result in staffing shortages in the practices we serve.

Collectively, these restrictions have negatively impacted, and are likely to continue negatively impacting, our ability to promote our new products and features to customers and healthcare providers, which could adversely impact our product sales and customer retention rates, as well as the strength of our brand.

We have developed retention programs, including our Tandem Choice Program, aimed at our customers, their caregivers and healthcare providers, which include discounts, training specific to our products, ongoing support by our sales and clinical employees, and technical support and customer service.

Demand for our products from our existing customers could decline or could fail to increase as anticipated or projected as a result of a number of factors, including the introduction of competing products, breakthroughs for the monitoring, treatment or prevention of diabetes, changes in reimbursement rates or policies, manufacturing problems, perceived safety or reliability issues with our products or components or the products of our competitors, the failure to secure regulatory clearance, certification, or approvals for products or product features in a timely manner or at all, product development or commercialization delays, the impacts and disruption from health epidemics or pandemics, international conflicts, or for other reasons.

The failure to retain a high percentage of our customers and increase sales to these customers consistent with our forecasts would have a material adverse effect on our business, financial condition and operating results.

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The medical device industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products, treatment techniques or technologies, as well as other activities of industry participants.

We believe our products compete, and will continue to compete, directly with a number of traditional insulin pumps, as well as other methods for the treatment of diabetes, including multiple daily injection (MDI) therapy.

Our primary competitors are major medical device companies that are publicly traded companies or divisions or subsidiaries of publicly traded companies, including Insulet and Medtronic.

In addition, Becton Dickinson and Company recently completed the spin off its diabetes care business as a separate publicly-traded company, Embecta.

To continue to compete effectively, we must continue to create, invest in or acquire advanced technology, incorporate this technology into our proprietary products, obtain regulatory clearance, certification, or approvals in a timely manner, and manufacture and successfully market our products.

Given these factors, we cannot guarantee that we will be able to compete effectively or continue our level of success.

Our primary competitors are major medical device companies, primarily Insulet, Medtronic, and Ypsomed.

There are also a number of other companies developing and marketing their own insulin delivery systems and/or related software applications, including insulin pumps and Bluetooth-enabled insulin pens to support MDI therapy.

While these industry changes are significant, it is difficult to know how they will impact our business or the competitive landscape in which we operate.

Our key competitors, most notably Medtronic, enjoy several competitive advantages over us, including:

Our primary competitors may enjoy several competitive advantages over us, including:

• greater financial and human resources for sales and marketing, product development, customer service and clinical resources;

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• more experience in conducting R&D, manufacturing, clinical trials, and obtaining regulatory approval or clearance.

In some instances, our competitors offer products that include features that we do not currently offer.

For instance, Insulet offers an insulin pump with a tubeless delivery system that does not utilize an infusion set and Medtronic is selling a connected insulin pen delivery device.

Additionally, Medtronic offers an infusion set that can be worn for up to seven days.

In addition, the competitive environment in which we operate has resulted and may continue to result in competitive pressures on our manufacturers, suppliers, distributors, collaboration partners and other business constituents.

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There can be no assurance that our collaborations with Dexcom and Abbott will be successful or that we will not experience delays, business disputes, or other unanticipated challenges.

Competitive pressures within our industry, as well as the impacts and disruptions associated with the COVID-19 global pandemic, could negatively impact the financial condition of our business partners and impact their ability to fulfill contractual obligations to us, which could negatively impact our product sales, result in delays in obtaining regulatory approvals for new products, harm our reputation, and result in harm to our financial condition and operating results.

Competitive pressures within our industry could negatively impact the financial condition of our business partners and impact their ability to fulfill contractual obligations to us, which could negatively impact our product sales, result in delays in obtaining regulatory clearances, certifications, or approvals for new products, harm our reputation, and result in harm to our financial condition and operating results.

For these and other reasons, we may not be able to compete successfully against our current or potential future competitors, which could have a material adverse impact on our financial condition and operating results.

Competitive products or other technological developments and breakthroughs for the monitoring, treatment or prevention of diabetes may render our products obsolete or less desirable.

Competing products, therapeutic techniques or other technological developments and breakthroughs for the monitoring, treatment or prevention of diabetes may render our products obsolete or less desirable.

Our ability to grow our business and achieve our strategic objectives will depend, among other things, on our ability to develop and commercialize products for the treatment of diabetes that offer distinct features and functionality, are easy-to-use, provide superior treatment outcomes, receive adequate coverage and reimbursement from third-party payors, and are otherwise more appealing than available alternatives.

Our primary competitors, as well as a number of other companies and medical researchers are pursuing new delivery devices, delivery technologies, sensing technologies, treatment techniques, procedures, drugs and other therapies for the monitoring, treatment and prevention of diabetes.

Our primary competitors, as well as a number of other companies and medical researchers are pursuing new delivery devices, delivery technologies, therapeutic techniques, sensing technologies, treatment techniques, procedures, drugs and other therapies for the monitoring, treatment and prevention of diabetes.

Any breakthroughs in diabetes monitoring, treatment or prevention could reduce the potential market for our products or render our products obsolete altogether, which would significantly reduce our sales or cause our sales to grow at a slower rate than we currently expect.

In addition, even the perception that new products may be introduced, or that technological or treatment advancements could occur, could cause consumers to delay the purchase of our products.

Because the insulin-dependent diabetes market is large and growing, we anticipate companies will continue to dedicate significant resources to developing competitive products and technologies.

The introduction by competitors of products that are or claim to be superior to our products may create market confusion that may make it difficult to differentiate the benefits of our products over competitive products.

Because the insulin-dependent diabetes market is large and growing, we anticipate companies will continue to dedicate significant resources to developing competing products and technologies.

In addition, some of our competitors employ aggressive pricing strategies, including the use of discounts, rebates, low-cost product upgrades or other financial incentives that could adversely affect sales of our products.

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If, in the future, consumers cease to view our products as contemporary or convenient as compared to then-existing consumer technology, our products may become less desirable.

The failure of our insulin pump and related products to achieve and maintain market acceptance could result in us achieving sales below our expectations, which would cause our business, financial condition and operating results to be materially and adversely affected.

Our current business and growth strategy is highly dependent on our insulin pump and related products achieving and maintaining market acceptance.

In order for us to sell our products to people with insulin-dependent diabetes, we must convince them, their caregivers and healthcare providers that our products are an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative diabetes monitoring, treatment or prevention methodologies.

Market acceptance and adoption of our products depends on educating people with diabetes, as well as their caregivers and healthcare providers, about the distinct features, ease-of-use, beneficial treatment outcomes, and other perceived benefits of our products as compared to competitive products.

The failure of our insulin pumps and related products to achieve and maintain market acceptance could result in us achieving sales below our expectations, which would cause our business, financial condition and operating results to be materially and adversely affected.

Our current business and growth strategy is highly dependent on our insulin pumps and related products achieving and maintaining market acceptance.

For us to sell our products to people with insulin-dependent diabetes, we must demonstrate to them, their caregivers and healthcare providers that our products are an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative diabetes monitoring, treatment or prevention methodologies.

If we are not successful in convincing existing and potential customers of the benefits of our products, or if we are not able to achieve the support of caregivers and healthcare providers for our products, our sales may decline or we may achieve sales below our expectations.

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• the failure of our products to achieve and maintain wide acceptance among people with insulin-dependent diabetes, their caregivers, healthcare providers, third-party payors and key opinion leaders in the diabetes treatment community;

• lack of evidence supporting the safety, ease-of-use or other perceived benefits of our products over competitive products or other currently available insulin treatment methodologies;

• lack of evidence supporting the safety, effectiveness, ease-of-use or other perceived benefits of our products over competing products or other currently available insulin treatment methodologies;

• perceived risks or uncertainties associated with the use of our products, or components thereof, or of similar products or technologies of our competitors;

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It is also possible that consumers interested in purchasing any of our future products currently under development may delay the purchase of one of our current products.

We anticipate that customers may continue to delay their purchasing decisions, or physicians may continue to pause prescriptions of our products, as a result of the COVID-19 global pandemic or unfavorable changes in general economic conditions.

If our insulin pump products do not achieve and maintain widespread market acceptance, we may fail to achieve sales consistent with our projections, in which case our business, financial condition and operating results could be materially and adversely affected.

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We currently have contracts establishing reimbursement for our insulin pump products with a number of national and regional third-party payors in the United States.

While we may enter into additional contracts both in the United States and the more than 25 countries outside the United States in which our insulin pump is available through third-party payors, and add coverage for future products under our current agreements, we cannot guarantee that we will succeed in doing so or that the reimbursement contracts that we are able to negotiate will enable us to sell our products on a profitable basis.

While we may enter into additional contracts both in the United States and the more than 25 countries outside the United States in which our insulin pumps are available through third-party payors, and add coverage for future products under our current agreements, we cannot guarantee that we will succeed in doing so or that the reimbursement contracts that we are able to negotiate will enable us to sell our products on a profitable basis.

In particular, we have limited experience securing reimbursement in international markets other than Canada, as that process is managed by local distributors.

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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 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.

The scope and duration of these restrictions on our field-based employees remains highly uncertain, and it is difficult to predict the extent of any adverse impacts on the demand for our products resulting from these restrictions.

Our financial condition and operating results are and will continue to be highly dependent on our ability to adequately promote, market and sell our insulin pump and related products, and the ability of our diabetes educators to train new customers on the use of our products.

If our sales and marketing representatives or diabetes educators continue to be restricted in their ability to interact with healthcare providers and customers, our sales could decrease or may not increase at levels that are in line with our forecasts.

If our sales and marketing representatives or diabetes educators are restricted in their ability to interact with healthcare professionals and customers, our sales could decrease or may not increase at levels that are in line with our forecasts.

If we are unable to maintain our existing sales, marketing, clinical and customer service infrastructure, we may fail to increase our sales to meet our forecasts.

A key element of our business strategy involves our sales, marketing, clinical and customer service personnel driving adoption of our products.

We have significantly increased the number of sales, marketing, clinical and customer service personnel employed by us since we commenced commercial sales.

We have significantly increased the number of sales, marketing, clinical and customer service personnel employed by us since we began commercial sales.

However, we have faced considerable challenges in growing and managing these resources, including with respect to recruiting, training and assimilation of sales territories and new clinical training staff.

We expect to continue to face significant challenges as we seek to further increase the number of our sales, clinical and customer service personnel in order to optimize the coverage of our existing sales territories, as well as expand the number and scope of our existing sales territories.

We expect to continue to face significant challenges as we seek to further increase the number of our sales, clinical and customer service personnel to optimize the coverage of our existing sales territories, as well as expand the number and scope of our existing sales territories.

These challenges may be even greater in connection with our commercial expansion outside of the United States, where we have limited experience.

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Similarly, if we are not able to recruit and retain a network of diabetes educators and customer service personnel, we may not be able to successfully train and service new customers, which could delay new sales and harm our reputation.

These risks may be greater now than in the past due to current general labor shortages in the United States.

We expect the oversight of our sales, marketing, clinical and customer service personnel will continue to place significant burdens on our management team, which may be compounded as we manage remote employees during the COVID-19 global pandemic and as we work towards returning personnel to our facilities.

These risks may be greater in the event of general labor shortages in the United States.

If we are unable to retain our personnel in line with our strategic plans, we may not be able to effectively commercialize our existing products or products under development, or enhance the strength of our brand, either of which could result in the failure of our sales to increase in line with our projections or cause sales to decline.

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Our dependence upon independent distributors could also increase if customers prefer to purchase all of their diabetes supplies through a single source, instead of purchasing pump-related products through us and other diabetes supplies through other suppliers.

None of our independent distributors in the United States have been required to sell our products exclusively and each of them may freely sell the products of our competitors.

If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

For the year ended December 31, 2022, our two largest independent distributors in the United States collectively comprised approximately 20% of our worldwide sales, and our three largest independent distributors outside of the United States collectively comprised approximately 50% of our total sales outside the United States.

None of our independent distributors in the United States have been required to sell our products exclusively and each of them may freely sell the products of our competitors.

As a result, our independent distributors may not devote a sufficient level of resources and the support required to generate awareness of our products and grow or maintain product sales at the levels we expect, which may negatively affect our sales.

For the year ended December 31, 2023, two independent distributors each accounted for more than 10% of our worldwide sales.

If any of our key independent distributors were to cease to distribute our products or reduce their promotion of our products as compared to the products of our competitors, our sales could be adversely affected.

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Additionally, to the extent we enter into additional arrangements with independent distributors to perform sales, marketing or distribution services, the terms of the arrangements could result in our product margins being lower than if we directly marketed and sold our products.

If the third parties on which we increasingly rely to assist us with our current and anticipated pre-clinical development or clinical trials do not perform as expected, we may not be able to obtain regulatory clearance or approval or commercialize our products.

As our clinical infrastructure expands, we expect to increasingly rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct some of our current and anticipated pre-clinical investigations and clinical trials.

If we are not able to reach mutually acceptable agreements with these third parties on a timely basis, these third parties do not successfully carry out their commitments or regulatory obligations or meet expected deadlines, or the quality or accuracy of the data they obtain is compromised due to the failure to adhere to agreed-upon clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected.

We are increasingly dependent on clinical investigators and clinical sites to enroll participants in our current and anticipated clinical trials and human factors studies, and the failure to successfully complete those trials and studies could prevent us from obtaining regulatory approvals for or commercializing our products.

If we are not able to reach mutually acceptable agreements with these third parties on a timely basis, these third parties do not successfully carry out their commitments or regulatory obligations or meet expected deadlines, or the quality or accuracy of the data they obtain is compromised due to the failure to adhere to agreed-upon clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance, certification, or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected.

We are dependent on clinical investigators and clinical sites to enroll participants in our current and anticipated clinical trials and human factors studies, and the failure to successfully complete those trials and studies could prevent us from obtaining regulatory clearances, certifications, or approvals for or commercializing our products.

As part of our product development efforts, we expect to increasingly rely on clinical investigators and clinical sites to enroll participants in our clinical trials or users in our human factors testing and other third parties to manage such trials and testing and to perform related data collection and analysis.

However, we may not be able to control the amount and timing of resources that clinical sites may devote to our clinical trials or other studies.

If these clinical investigators and clinical sites fail to enroll a sufficient number of patients, fail to ensure compliance by patients with clinical protocols, or fail to comply with regulatory requirements, we may be unable to successfully complete our clinical trials or other studies, which could prevent us from obtaining regulatory approvals for our products and commercializing our products, which would have an adverse impact on our business.

If these clinical investigators and clinical sites fail to enroll a sufficient number of patients, fail to ensure compliance by patients with clinical protocols, or fail to comply with regulatory requirements, we may be unable to successfully complete our clinical trials or other studies, which could prevent us from obtaining regulatory clearances, certifications, or approvals for our products and commercializing our products, which would have an adverse impact on our business.

If important assumptions about the potential market for our products are inaccurate, or if we have failed to understand what people with insulin-dependent diabetes are seeking in an insulin pump, our business and operating results may be adversely affected.

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However, each of these assumptions may prove to be inaccurate and limited sources exist to compare treatment alternatives and obtain reliable market data.

The actual incidence of diabetes, and the actual demand for our products or competitive products, could differ materially from our projections if our assumptions are incorrect.

The actual incidence of diabetes, and the actual demand for our products or competing products, could differ materially from our projections if our assumptions are incorrect.

In addition, our strategy of focusing exclusively on the insulin-dependent diabetes market may limit our ability to increase sales or achieve profitability.

Another key element of our business strategy is utilizing market research to understand what people with diabetes are seeking to improve in their diabetes therapy management.

Another key element of our business strategy is using market research to understand what people with diabetes are seeking to improve in their diabetes therapy management.

This strategy underlies our entire product design, marketing and customer support approach and is the basis on which we developed our current products and are pursuing the development of new products.

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We operate in a competitive and rapidly evolving market.

Important industry changes, such as the FDA approval and launch of new products by our competitors, as well as changes specific to our business, such as the timing of our launch of new products currently in development, increasing reliance on digital health products and connected devices, and our potential expansion of commercial sales in international markets, combine to make it more difficult for us to predict our future sales and operating results, as well as our expected timeframe to achieve profitability.

The significant uncertainty resulting from the COVID-19 global pandemic has made, and may continue to make, it more difficult for us to accurately forecast our financial results and achieve sustained profitability.

Important industry changes, such as FDA approval and the launch of new products by our competitors, as well as changes specific to our business, such as the timing of our launch of new products currently in development, increasing reliance on digital health products and connected devices, and our potential expansion of commercial sales in international markets, combine to make it more difficult for us to predict our future sales and operating results, as well as our expected timeframe to achieve profitability.

In assessing our business prospects, you should consider these factors as well as the various risks and difficulties frequently encountered by companies in competitive and rapidly evolving markets, particularly those companies that manufacture and sell medical devices.

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• manage cybersecurity and other technological risks associated with our expanding portfolio of digital health products, and align these products to a dynamic threat landscape;

• obtain and maintain regulatory clearance or approval to enhance our existing products and commercialize proposed products;

• obtain and maintain regulatory clearance, certification, or approval to enhance our existing products and commercialize proposed products;

• perform clinical trials and other studies with respect to our existing products and proposed products;

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Recently released versions of our pump may not incur warranty costs in a manner similar to previously released pumps and the launch of our mobile app also may result in unanticipated changes in historical trends.

In response to the COVID-19 global pandemic, we have taken steps to prioritize the health and safety of our employees and customers, while working to maintain a continuous supply of products, training and customer support.

For example, we have implemented preventative safety measures for our employees involved in production and fulfillment operations as well as for any field-based employees.

For employees in other functions, we have adopted measures designed to help employees remain effective in a work-from-home environment and we are implementing safety measures and protocols as employees transition back into our facilities.

We also temporarily increased our staffing in certain operations in order to mitigate potential risks associated with increases in unplanned employee absences or illness.

In addition, due to shortages of specific components, we have had to qualify alternative components or source components from alternative distributors.

Each of these measures has resulted in unanticipated expenses that will negatively impact our gross margin and may adversely impact our ability to achieve profitability.

We may also incur additional incremental expenses to help us support our ongoing operations during a period of unpredictable variability in the demand for our products, including throughout the duration of the COVID-19 pandemic.

If we are unable to increase our production volumes while sustaining or reducing our overall cost of sales, including through arrangements such as volume purchase discounts, negotiation of pricing and cost reductions with our suppliers, more efficient training programs for customers, improved warranty performance or fluctuations in warranty estimates, it will be difficult to reduce our per-unit costs and our ability to achieve profitability will be constrained.

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• quality or reliability defects in product components that we source from third-party suppliers;

• our inability to secure product components in a timely manner due to shipping delays at ports of entry or exit, the impact of the COVID-19 global pandemic, or other issues, in sufficient quantities and on commercially reasonable terms;

• our inability to secure product components in a timely manner due to shipping delays at ports of entry or exit, the impact of natural disasters, global conflicts, health pandemics or other issues, in sufficient quantities and on commercially reasonable terms;

• difficulty identifying and qualifying alternative suppliers for components in a timely manner;

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We may also increase our utilization of third parties to perform contracted manufacturing services for us, and we may need to acquire additional custom designed equipment to support the expansion of our manufacturing capacity.

In addition, although we expect some of our products under development to share product features and components with our current products, manufacturing of these products may require modification of our production lines, hiring of specialized employees, identification of new suppliers for specific components, qualifying and implementing additional equipment and procedures, obtaining new regulatory approvals, or developing new manufacturing technologies.

In addition, although we expect some of our products under development to share product features and components with our current products, manufacturing of these products may require modification of our production lines, hiring of specialized employees, identification of new suppliers for specific components, qualifying and implementing additional equipment and procedures, obtaining new regulatory clearances, certifications, or approvals, or developing new manufacturing technologies.

Ultimately, it may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these products commercially viable.

In response to the COVID-19 global pandemic, in early 2020 we initiated discussions with our key suppliers regarding their abilities to fulfill existing orders and we have continued to regularly assess their capacity.

At various times, our primary infusion set manufacturer experienced certain inventory constraints which resulted in us requesting some customers to accept substitutions of similar products to prevent delays in order fulfillment.

Additionally, at various times our cartridge inventory was below our targeted stocking levels and our inventory of certain pump and cartridge components are currently below our targeted stocking levels.

We continue to monitor factors that could negatively impact our supply chain, such as 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 continue to experience these or similar manufacturing challenges, or if these challenges worsen in the future, it could have a negative impact on product sales and harm our reputation.

If we and our suppliers fail to increase our production capacity to meet consumer demand while also maintaining product quality standards, obtaining and maintaining regulatory approvals, and efficiently managing costs, our sales and operating margins could be negatively impacted, which would have an adverse impact on our financial condition and operating results.

We depend on a limited number of third-party suppliers for certain components and products, and the loss of any of these suppliers, their inability to provide us with an adequate supply of components or products, or our ability to adequately forecast customer demand, could harm our business.

We currently rely, and expect to continue to rely, on third-party suppliers to supply components of our current products and our potential future products, including our disposable insulin cartridges.

If we and our suppliers fail to increase our production capacity to meet consumer demand while also maintaining product quality standards, obtaining and maintaining regulatory clearances, certifications, or approvals, and efficiently managing costs, our sales and operating margins could be negatively impacted, which would have an adverse impact on our financial condition and operating results.

We depend on a limited number of third-party suppliers for certain components and products, and the loss of any of these suppliers, their inability to provide us with an adequate supply of components or products, or our inability to adequately forecast customer demand, could harm our business.

We currently rely, and expect to continue to rely, on third-party suppliers to supply components of our current products and our potential future products, including our single-use insulin cartridges.

For example, we rely on plastic injection molding companies to provide plastic molded components, electronic manufacturing suppliers to provide electronic assemblies, and machining companies to provide machined mechanical components.

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In addition, our suppliers may encounter problems that limit their ability to manufacture components or products for us, including financial difficulties, damage to their manufacturing equipment or facilities, inability to obtain raw materials or other components, or problems with their own suppliers.

For instance, we are currently subject to allocation limits for certain semiconductor components.

As a result, our ability to purchase adequate quantities of our components or products may be limited.

If we fail to obtain sufficient quantities of high-quality components to meet demand on a timely basis, we could lose customer orders, our reputation may be harmed, and our business could suffer.

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Because of factors such as the proprietary nature of our products, our quality control standards and applicable regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components.

These risks associated with the procurement of critical components from a limited number of suppliers may be increased as a result of the COVID-19 global pandemic.

Failure of any of our suppliers to deliver products at the level our business requires could harm our reputation and limit our ability to meet our sales projections, which could have a material adverse effect on our business, financial condition and operating results.

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We expect it will be particularly difficult to accurately forecast demand during the global pandemic and even for some time while travel and social-distancing restrictions are lifted.

We may also have difficulty obtaining components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of our suppliers to comply with regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures or civil penalties.

Such a failure by our suppliers could also require us to cease using the components, seek alternative components or technologies, and modify our products to incorporate alternative components or technologies, which could necessitate additional regulatory approvals.

We may also have difficulty obtaining components from other suppliers that are acceptable to the FDA or other regulatory authorities, or Notified Bodies, and the failure of our suppliers to comply with regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination or interruption of distribution, operating restrictions, product seizures, delays in obtaining approval or clearance of future products, suspension or withdrawal of approvals, clearances, or certification, fines, civil penalties, or criminal prosecution.

Any disruption of this nature, or any increased expenses associated with any such disruption, could negatively impact our ability to manufacture our products on a timely basis, in sufficient quantities, or at all, which could harm our commercialization efforts and have a material adverse impact on our operating results.

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In addition, the majority of our inventories of component supplies and finished goods is stored at two facilities in San Diego.

Over the past two years we substantially expanded various quality and customer and technical support activities in Boise, Idaho.

We take precautions to safeguard our facilities and data infrastructure, including by acquiring insurance, employing back-up generators, adopting health and safety protocols, implementing cybersecurity protections, and utilizing off-site storage of computer data.

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Further, additional increases in demand for our products may require that we further expand our business operations, which may require that we obtain additional facilities, make additional investments in capital equipment or increase our utilization of third-party contract manufacturing.

If we do not enhance our product portfolio to meet the demands of our market, we may fail to effectively compete, which may impede our ability to become profitable.

In order to increase our sales and market share in the insulin-dependent diabetes market, we must enhance and broaden our product portfolio in response to the evolving demands of people with insulin-dependent diabetes, their caregivers and healthcare providers, as well as competitive pressures and technologies.

We may not be successful in developing, obtaining regulatory approval for, or marketing our proposed products when anticipated, or at all.

In addition, notwithstanding our market research efforts, our future products may not be accepted by people with insulin-dependent diabetes, their caregivers, healthcare providers or third-party payors.

The success of any proposed product offerings will depend on numerous factors, including our ability to:

• identify the product features and functionality that people with insulin-dependent diabetes, their caregivers and healthcare providers are seeking in an insulin pump, and successfully incorporate those features into our products;

• develop and introduce products in sufficient quantities and in a timely manner;

• offer products at a price that is competitive with other products then available;

• work with third-party payors to obtain reimbursement for our products;

• adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties;

• demonstrate the safety and efficacy of proposed products;

• obtain the necessary regulatory approvals for proposed products on a timely basis.

If we fail to generate demand by continuing to develop products that incorporate features and functionality requested by people with insulin-dependent diabetes, their caregivers or healthcare providers, or if we do not obtain regulatory clearance or approval for proposed products in time to meet market demand, we may be unable to compete and may fail to generate sales sufficient to achieve or maintain profitability.

We have in the past experienced, and may in the future experience, delays in various phases of product development and commercialization, including during research and development, manufacturing, limited release testing, marketing and customer education efforts.

We have also recently experienced delays in the regulatory review and approval process, including due to the impacts of the current global pandemic.

Any delays in our anticipated regulatory submissions or approvals, or subsequent product launches, may significantly impede our ability to successfully compete in our markets.

In particular, such delays could cause customers to delay or forego purchases of our products, or to purchase our competitors’ products.

Even if we are able to successfully develop proposed products when anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by changing consumer preferences or the introduction by our competitors of products embodying new technologies or features, or alternative methods for the treatment of diabetes.

Any concerns regarding the safety and efficacy of our products could limit sales and cause unforeseen negative effects to our business prospects and financial results.

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We remain subject to regulatory and product liability risks, and these and other factors could slow the adoption of our products and result in our sales being lower than anticipated.

In addition, future studies or clinical experience may indicate that treatment with our products is not superior to treatment with competitive products.

In addition, future studies or clinical experience may indicate that treatment with our products is not superior to treatment with competing products.

Such results could slow the adoption of our products and significantly reduce our sales, which could prevent us from achieving our forecasted sales targets or achieving or sustaining profitability.

If the results of clinical studies or other experience, such as our monitoring or investigation of customer complaints, indicate that our products may cause or create an unacceptable risk of unexpected or serious complications or other unforeseen negative effects, we could be required to inform our customers of these risks or complications or, in more serious circumstances, we could be subject to mandatory product recalls, suspension or withdrawal of FDA clearance or approval, which could result in significant legal liability, harm to our reputation, and a decline in our product sales.

If the results of clinical studies or other experience, such as our monitoring or investigation of customer complaints, indicate that our products may cause or create an unacceptable risk of unexpected or serious complications or other unforeseen negative effects, we could be required to inform our customers of these risks or complications or, in more serious circumstances, we could be subject to mandatory product recalls, suspension or withdrawal of clearance, certification, or approval from regulatory authorities or Notified Bodies, product recalls or seizure, operating restrictions, interruption of production, fines, civil penalties and criminal prosecution which could result in significant legal liability, harm to our reputation, and a decline in our product sales.

Any alleged illness or injury associated with any of our products or product recalls may negatively impact our financial results and business prospects depending on a number of factors, including the scope and seriousness of the problem, degree of publicity, reaction of our customers and healthcare professionals, competitive response, and consumer perceptions generally.

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Under certain circumstances, these agreements may be terminated by either party without cause or on short notice.

Our current agreements with Dexcom do not grant us rights to integrate future generations of Dexcom CGM technology, other than G7 CGM devices, with any of our current or future products.

Our current agreements with Dexcom do not grant us rights to integrate future generations of Dexcom CGM technology, beyond G7 CGM devices, with any of our current or future products.

Termination of any of our agreements with Dexcom would require us to redesign certain current products and products under development, and attempt to integrate an alternative CGM system into our insulin pump systems, which would require significant development and regulatory activities that could result in an interruption or substantial delay in the availability of the product to our customers.

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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.

In our industry, it is common to attract and retain executive talent and other employees with compensation packages that include a significant equity component.

We have issued, and may continue to issue, additional equity incentives that we believe will enhance our ability to retain our current key employees and attract the necessary additional executive talent.

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.

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As certain jobs and employers increasingly operate remotely, competition for talent may change in ways that cannot be fully predicted at this time.

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

Moreover, we may need to increase employee wages, equity incentives, and benefits to attract and retain our personnel, which would increase our expenses.

It may be difficult to continue to incentivize employees with meaningful equity incentives while limiting the use of the share reserve under our current long-term incentive plans.

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.

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Accordingly, the adverse effect resulting from the loss of certain members of senior management could be compounded by our inability to prevent them from competing with us.

We depend upon key employees in a competitive market, and if we are unable to provide meaningful equity incentives to retain key personnel, it could adversely affect our ability to execute our business strategy.

We are highly dependent upon the members of our management team, as well as other key employees.

In our industry, it is common to attract and retain executive talent and other employees with compensation packages that include a significant equity component.

It may be more difficult to continue to incentivize employees during a period of rapid growth in our overall headcount while limiting the utilization of the share reserve under our current stock incentive plans.

However, even if we issue significant additional equity incentives, there can be no assurance that we will be able to attract and retain key executive talent.

A loss of any of our key personnel, or our inability to hire new personnel, may have a material adverse effect on our ability to execute our business strategy.

We began commercialization of our products outside of the United States, which may result in a variety of risks associated with international operations that could materially adversely affect our business.

During 2018, we began commercialization of the t:slim X2 insulin pump in select geographies outside of the United States.

We have limited experience commercializing our products outside of the United States and expect that we will be subject to additional risks related to international business markets, including:

• different regulatory requirements for product approvals in foreign countries;

• differing U.S.

and foreign medical device import and export rules;

• more restrictive privacy laws relating to personal information of end-users and employees, including GDPR and other EU member state directives;

• reduced protection for our intellectual property rights in foreign countries;

• unexpected changes in tariffs, trade barriers and regulatory requirements;

• different reimbursement systems;

• economic weakness, including inflation, or political instability in particular foreign economies and markets;

• compliance with tax, employment, immigration and labor laws for employees living or traveling abroad or with U.S.

regulations that would apply to activities in such foreign jurisdictions, such as the Foreign Corrupt Practices Act;

• foreign taxes, including withholding of payroll taxes;

• foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

• business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, or incidence of disease, including as a result of the COVID-19 global pandemic.

In addition, entry into international markets may require significant financial resources, impose additional demands on our manufacturing, quality, regulatory, customer support and other general and administrative personnel, and could divert management’s attention from managing our core business.

We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets.

If we are unable to expand internationally, manage the complexity of our global operations successfully or if we incur unanticipated expenses, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be materially and adversely impacted.

We may seek to grow our business through acquisitions of products or technologies, or investments in businesses, and the failure to successfully manage these acquisitions or investments, or the failure to integrate them with our existing business, could have a material adverse effect on our business, financial condition and operating results.

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

• unanticipated costs, impairment charges or write-offs associated with acquisitions or investments;

• unanticipated costs, liabilities, impairment charges or write-offs associated with acquisitions or investments;

• diversion of management’s attention from our existing business;

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

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 update to Dexcom’s data systems in October 2021, Sugarmate users in all geographies were unable to receive Dexcom CGM data in the Sugarmate app.

Connections for users in the United States were restored in December 2021 and in June 2022 for users in all geographies except Australia and New Zealand, though we continue to work towards restoring service for users in those geographies.

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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Our sales in the approximately 25 countries in which our products are offered outside the United States, which accounted for approximately 26% of our total sales during 2023, are accompanied by certain financial and other risks related to international business markets, including:

• local product preferences and differing regulatory requirements for product approvals;

• local product preferences and differing regulatory requirements for product clearances, certifications, or approvals;

• differing U.S.

and foreign medical device import and export rules;

• more restrictive privacy laws relating to personal information of end-users and employees, including GDPR and other E.U.

member state directives;

• more restrictive privacy and security laws relating to personal information of end-users and employees, including GDPR and other E.U.

Member State national legislation;

• reduced protection for our intellectual property rights in certain countries outside the U.S.

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• economic weakness, including inflation and workforce instability, and political instability in foreign economies and markets;

• compliance with tax, employment, immigration and labor laws, such as the Foreign Corrupt Practices Act;

• compliance with tax, employment, immigration and labor laws, such as the Foreign Corrupt Practices Act and comparable foreign legislation;

• difficulties associated with foreign legal systems, including increased costs associated with enforcing contractual obligations in foreign jurisdictions;

• political instability and actual or anticipated military or political conflicts;

• difficulties in managing international relationships, including any relationships that we establish with foreign partners, distributors, or sales or marketing agents;

• foreign taxes, including withholding of payroll taxes;

• different reimbursement systems;

• foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country.

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Failure to obtain any required regulatory authorization in foreign jurisdictions will prevent us from marketing our products in international markets.

We sell our products in approximately 25 countries outside the United States and may seek to commence commercial sales of our products in additional geographies in the future.

Failure to obtain any required regulatory authorization, clearance or certification in foreign jurisdictions will prevent us from marketing our products in international markets.

We sell our products in approximately 25 countries outside the United States and may seek to begin commercial sales of our products in additional geographies in the future.

As we continue to expand our operations outside of the United States and launch new products, we are increasingly subject to additional regulatory and legal requirements in the international markets.

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We have limited experience complying with applicable laws and regulations in international markets generally, and in particular when we enter new markets, and if we are not able to comply with any such requirements, our international expansion and business could be significantly harmed.

Failure to comply with the U.S.

Foreign Corrupt Practices Act and similar worldwide anti-bribery laws could materially adversely affect our business and result in civil and/or criminal sanctions.

The FCPA, the U.K.

Bribery Act, and similar anti-bribery laws enacted in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.

Because of the predominance of government-sponsored healthcare systems around the world, most of our customer relationships outside of the United States are with governmental entities and are therefore subject to such anti-bribery laws.

Because we do business in the U.K., the U.K.

Bribery Act also extends to our interaction with public and private sector entities and persons outside the U.K., including in the United States.

Our policies mandate compliance with these anti-bribery laws.

We operate in parts of the world that have experienced governmental corruption to some degree, and in certain circumstances strict compliance with anti-bribery laws may conflict with local customs and practices.

Despite our training and compliance programs, our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents.

Violations of anti-bribery laws, or allegations of such violations, could disrupt our business and have a material adverse effect on our results of operations, financial condition, and cash flows.

Because our business is global our sales and profits may fluctuate or decline in response to changes in foreign currency exchange rates or other international risks.

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These and other economic factors could have a material adverse effect on our business, financial condition, and results of operations.

In October 2023, Hamas initiated an attack against Israel, provoking a state of war and the risk of a larger regional conflict.

While we cannot predict the broader consequences, these conflicts and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may disrupt sales through our local distributor in Israel.

Public health threats, epidemics, or pandemics could have a material adverse effect on our operations, the operations of our business partners, and the global economy as a whole.

For example, the COVID-19 global pandemic has impacted our sales and operating results, and we anticipate that they will continue to be impacted and subject to unpredictable variability in future periods.

Further, certain development activities, such as human factors studies associated with our product development efforts and activities supporting 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 pandemic, which impacted our development timelines and regulatory strategies.

For example, certain development activities, such as human factors studies associated with our product development efforts and activities supporting the manufacturing scale-up for new products and the recruitment of participants in ongoing clinical studies, may be modified or delayed due to impacts of public health threats, which could our development timelines and regulatory strategies.

These delays could have a negative impact on our product commercialization efforts and the future demand for our products.

In addition to the foregoing impacts, disruptions from outbreaks or epidemics, could result in delays in or the suspension of our manufacturing operations, research and product development activities, regulatory work streams, clinical development programs and other important commercial functions.

We are also dependent upon our third-party suppliers for many of our product components and for our manufacturing-related equipment, and the incidence of disease could have a material adverse impact on the operations of our suppliers, which could prevent them from timely delivering products to us or supporting our requirements for manufacturing-related equipment.

Additionally, we have been and may continue to be negatively impacted by global shortages of semiconductors and copper, which could limit our insulin pump manufacturing capacity.

The full extent of the impact of the COVID-19 global pandemic or potential future public health threats on our business and operations is 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.

The full extent of the impact of potential future public health threats on our business and operations is 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.

Climate change or other extreme weather conditions and related regulations may have a long-term impact on our business.

Climate-related events, including the increasing frequency of extreme weather events and their impact on the U.S., Mexico, Canada, and other major regions’ critical infrastructure along with potential related regulations, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers.

For example, a portion of our office facilities located in San Diego are in an area that is prone to flooding, which has occasionally caused temporary disruptions to our business operations and our third-party contract manufacturers are located in regions subject to natural disasters, including earthquakes, hurricanes, floods, fires and other catastrophic events.

For example, our third-party contract manufacturers are located in regions subject to natural disasters, including earthquakes, hurricanes, floods, fires and other catastrophic events.

We strive to partner with organizations that mitigate their business risks associated with climate change.

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While these dangers currently have a low-assessed risk of disrupting our normal business operations, they pose a potential long-term impact on our business.

Although it is difficult to predict and adequately prepare to meet the challenges to our business posed by climate change, if new laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations as well as adverse impacts on raw material sourcing, manufacturing operations and the distribution of our products.

Risks Related to Our Future Financings and Financial Results

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• expenses associated with developing and commercializing our proposed products or technologies, including capital expenditures we make to maintain or enhance our manufacturing operations and distribution capabilities;

• the cost of obtaining and maintaining regulatory clearance or approval for our products and our manufacturing facilities, and of ongoing compliance with other legal and regulatory requirements;

• the cost of obtaining and maintaining regulatory clearance, certification, or approval for our products and our manufacturing facilities, and of ongoing compliance with other legal and regulatory requirements;

• expenses we incur in connection with current or future litigation or governmental investigations;

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Our operating results may fluctuate significantly from quarter to quarter.

There has been and may continue to be meaningful variability in our operating results from quarter to quarter, as well as within each quarter, especially around the time of anticipated new product launches or regulatory approvals by us or our competitors, and as a result of the commercial launch of our products in geographies outside of the United States.

There has been and may continue to be meaningful variability in our operating results from quarter to quarter, as well as within each quarter, especially around the time of anticipated new product launches or regulatory clearances, certifications, or approvals by us or our competitors, and as a result of the commercial launch of our products in geographies outside of the United States.

Our operating results, and the variability of these operating results, will be affected by numerous factors, including:

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• acceptance of our products by people with insulin-dependent diabetes, their caregivers, healthcare providers and third-party payors;

• the pricing of our products and competitive products, including the use of discounts, rebates or other financial incentives by us or our competitors;

• the pricing of our products and competing products, including the use of discounts, rebates or other financial incentives by us or our competitors;

• the effect of third-party coverage and reimbursement policies;

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• the ability of our suppliers to timely provide us with an adequate supply of components that meet our requirements for product quality and reliability;

• regulatory clearance or approvals, or adverse regulatory or legal actions, affecting our products or those of our competitors;

• regulatory clearances, certifications, or approvals, or adverse regulatory or legal actions, affecting our products or those of our competitors;

• the timing of revenue and expense recognition associated with our product sales pursuant to applicable accounting standards.

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Risks Related to Privacy and Security

A security breach or other significant disruption to our information technology systems, or failures of our pumps’ software to perform as we anticipate, could materially disrupt our operations or compromise sensitive information relating to our customers, suppliers, employees or other individuals, which could damage our relationships, expose us to litigation or regulatory proceedings, or harm our reputation.

The efficient operation of our business depends on our information technology and communication systems, as well as those of our suppliers, contract manufacturers, distributors and other third-party business partners.

We rely on such systems to effectively store, process and transit proprietary sales and marketing data, accounting and financial functions, manufacturing and quality records, inventory management, product development tasks, research and development data, customer service and technical support functions.

These systems are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, malware, ransomware or other destructive software, cyber-attacks, power losses, and computer system or data network failures.

Should any of those risks occur, it could adversely impact the availability, confidentiality and integrity of information assets contained in those systems.

Our business also involves the storage and transmission of a substantial amount of confidential, personal, or other sensitive information, including health information and other personal information relating to our customers, the personal information of our employees and other individuals, and our proprietary, financial, operational or strategic information.

Should any of the foregoing risks occur, it could also result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of such sensitive information, which could lead to significant reputational or competitive harm, litigation involving us or our business partners, regulatory proceedings, or substantial liabilities, fines, penalties or expenses.

As a result, we strive to maintain and regularly update reasonable security measures, and to respond quickly and effectively if and when data security incidents do occur.

Like many businesses, we are subject to numerous data privacy and security risks, including threats arising from computer viruses or hackers, cyber-attacks and ransomware attacks, as well as the risk that one or more of our employees may fail to comply, whether knowingly or accidentally, with established security measures, or with internal policies relating to the use, storage or transmission of confidential or sensitive information.

We are unable to predict the direct or indirect impact of any such incidents to our business.

Further, many of our third-party service providers are subject to similar risks.

Whether or not our security measures and those of our third-party service providers are ultimately successful, our expenditures on those measures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives.

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 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.

These risks may have further increased in the second half of 2022 when we enabled users to control insulin boluses through the mobile app.

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.

As this is a rapidly evolving area, compliance with any future requirements, regulations, and evolving threat models may require the investment of additional resources in the form of capital, personnel or technology.

The failure of our or our service providers’ information technology systems or our pumps’ software or other mobile applications to perform as we anticipate, or our failure to effectively identify, investigate and mitigate potential threats through ongoing maintenance and enhancement of software applications, information technology systems and privacy policies and controls, could disrupt our entire operation or adversely affect our software products.

For example, we market our Tandem Device Updater as having the unique capability to deploy software updates to our pumps, which may allow customers remote access to new and enhanced features.

The failure of our Tandem Device Updater to provide software updates as we anticipate, including as a result of our inability to secure and maintain necessary regulatory approvals, the inability of our pumps to properly receive software updates, errors or viruses embedded within the software being transmitted, or the failure of our customers to properly utilize the system to complete the update, could result in decreased sales, increased warranty costs, and harm to our reputation, any of which could have a material adverse effect on our business, financial condition and operating results.

We may be subject to stringent and evolving U.S.

and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

litigation (including class claims) and mass arbitration demands;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse business consequences.

In the ordinary course of business, we process personal data.

Our data processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal data privacy and security policies, and contractual requirements.

There are a number of laws in the United States governing the privacy and security of personal data, including data breach notification laws, data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws at the federal and state levels (e.g., wiretapping laws).

For example, the U.S.

Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), imposes specific requirements relating to the privacy of protected health information.

As another example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM”) and the Telephone Consumer Protection Act of 1991 (“TCPA”) impose specific requirements on communications with customers.

For example, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.

TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to 1,500 U.S.

Dollars per violation imposed through private litigation or by state authorities.

In recent years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive data privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.

As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to provide our products and services.

These state laws also allow for statutory fines for noncompliance.

For example, as per the California Consumer Privacy Act of 2018 (CCPA), as amended by the California Privacy Rights Act of 2020 (CPRA) (collectively, “CCPA”), noncompliance may carry fines of up to 7,500 U.S.

Dollars per violation;

the CCPA also allows private litigants affected by certain data breaches to recover significant statutory damages.

While these laws generally exempt some data processed in the context of clinical trials and data governed by HIPAA, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers.

Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s General Data Protection Regulation (“UK GDPR”) (collectively, “GDPR”), and Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) or the applicable provincial alternatives, impose strict requirements for processing personal data.

For example, under the GDPR, companies may face temporary or definitive bans on personal data processing and other corrective actions;

fines of up to 20 million Euros under the EU GDPR / 17.5 million Pounds Sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

In Canada, PIPEDA and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations.

Additionally, regulators are increasingly scrutinizing companies that process children’s data.

Numerous laws, regulations, and legally-binding codes, such as the Children’s Online Privacy Protection Act (“COPPA”), California’s Age Appropriate Design Code (effective in July 2024), the CCPA, other U.S.

state comprehensive data privacy laws, the GDPR, and the UK Age Appropriate Design Code, impose various obligations on companies that process children data, including requiring certain consents to process such data and extending certain rights to children and their parents with respect to that personal data.

Some of these obligations have wide ranging applications, including for services that do not intentionally target child users (defined in some circumstances as a user under the age of 18 years old).

These laws may be, or in some cases have already been, subject to legal challenges and changing interpretations, which may further complicate our efforts to comply with these laws.

Our employees and personnel use Artificial Intelligence (“AI”) technologies (including generative AI) to perform their work.

The use and disclosure of personal data in AI technologies is subject to various data privacy laws and other data privacy obligations.

Governments have passed and are likely to pass additional laws regulating generative AI.

Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits.

If we are unable to use AI, it could make our business less efficient and result in competitive disadvantages.

The development and use of AI/Machine Learning (“ML”) technologies present various data privacy risks that may impact our business.

AI/ML are subject to data privacy laws, as well as increasing regulation and scrutiny.

Several jurisdictions around the globe, including the European Union and certain U.S.

states, have proposed or enacted, or are considering, laws governing the development and use of AI/ML.

For example, European regulators have proposed a stringent AI regulation, and we expect other jurisdictions will adopt similar laws.

Additionally, certain data privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision-making, which may prove to be incompatible with our desired uses of AI/ML.

These obligations may make it harder for us to conduct our business using AI/ML, require us to change our business practices and/or retrain our AI/ML, prevent or limit our use of AI/ML, or lead to regulatory fines or penalties.

For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated data privacy and consumer protection laws.

If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.

We may be subject to new laws governing the privacy of consumer health data.

For example, Washington’s My Health My Data Act (“MHMD”) broadly defines consumer health data, places restrictions on processing such data (including imposing stringent requirements for consent), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law.

Other states are considering and may adopt similar laws.

Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.

For example, some of our data processing practices may be challenged under wiretapping laws, if we obtain consumer information from third parties through various methods, including chatbot and session replay providers, or via third-party marketing pixels.

These practices may be subject to increased challenges by class action plaintiffs.

Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries.

Europe and other jurisdictions have enacted laws requiring certain data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (EEA) and the UK have significantly restricted the transfer of personal data to the United States and other countries whose data privacy laws it deems inadequate.

Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant organizations based in the United States who self-certify and participate in the Framework), these mechanisms are subject to legal challenges.

If these legal challenges change or invalidate these transfer mechanisms, there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful mechanism for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer obligations.

Additionally, in May 2023, the Irish Data Protection Commission determined that a major social media company’s use of the standard contractual clauses to transfer personal data from Europe to the United States was insufficient and levied a 1.2 billion Euro fine against the company and prohibited the company from transferring EU personal data to the United States.

Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.

These practices may be subject to increased challenges by class action plaintiffs.

Our inability or failure to obtain consent for these practices could result in adverse consequences, including class action litigation and mass arbitration demands.

In addition to data privacy laws, we are contractually subject to industry standards adopted by industry groups.

For example, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”).

The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.

Noncompliance with PCI-DSS can result in penalties ranging from 5,000 to 100,000 U.S.

Dollars per month by credit card companies, litigation, damage to our reputation, and revenue losses.

We are also bound by other contractual obligations related to data privacy, including those imposed by our payors and business partners, including obligations to comply with applicable data privacy laws.

Our failure to comply with our contractual obligations may result in a loss of revenue, loss of existing and future business opportunities, and payment of financial damages to the other parties involved.

We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy are quickly changing, becoming increasingly stringent, and creating uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

In addition, these obligations may require us to change our business model.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy obligations.

Moreover, despite our efforts, our employees and personnel or third parties on whom we rely, may fail to comply with such obligations, which could negatively impact our business operations.

In addition, a shift in consumers’ data privacy expectations or other social, economic or political developments could impact the regulatory enforcement of these obligations, which could increase the cost of and complicate our compliance with applicable obligations.

If we or the third parties on whom we rely fail, or are perceived to have failed to address or comply with applicable data privacy obligations, we could face significant consequences, including but not limited to:

government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);

litigation (including class-action claims) and mass arbitration demands;

additional reporting requirements and/or oversight;

bans on processing of personal data;

orders to destroy or not use personal data;

and imprisonment of company officials.

In particular, plaintiffs have become increasingly more active in bringing data privacy-related claims against companies, including class claims and mass arbitration demands.

Some of these claims allow for the recovery of statutory damages on a per violation basis;

if viable, these claims carry the potential for monumental statutory damages, depending on the volume of personal data and the number of violations.

Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:

loss of customers;

interruptions or stoppages in our business operations (including, as relevant, clinical trials);

inability to process personal data or to operate in certain jurisdictions;

limited ability to develop or commercialize our products;

expenditure of time and resources to defend any claim or inquiry;

adverse publicity;

or substantial changes to our business model or operations.

If our information technology systems or those third parties upon which we rely, our data, or our software are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

harm to our reputation;

loss of revenue or profits;

loss of customers or sales;

and other adverse consequences.

In the ordinary course of business, the efficient operation of our business depends on our information technology and communication systems, as well as those of our suppliers, contract manufacturers, distributors and other third-party business partners.

We and the third parties upon which we rely collect, receive, store, process, use, generate, disclose, make accessible, protect, secure, dispose of, share, and transmit confidential, personal, or other sensitive data, including health information, proprietary sales and marketing data, accounting and financial information, manufacturing and quality records, inventory management data, product development tasks, research and development data, customer service and technical support information.

These systems and the underlying data are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, malware, ransomware or other destructive software, cyber-attacks, social-engineering attacks (including phishing and deep fakes, which may be increasingly more difficult to identify as fake), malicious code, denial-of-service attacks, credential harvesting, supply chain attacks, power losses, and computer system, data network failures, and other similar threats.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.

Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

During times of war and other major conflicts, we, and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could significantly disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

Our systems, those of the third parties upon which we rely, and the underlying data are vulnerable to damage or interruption from a number of causes, including earthquakes, fires, floods and other natural disasters, terrorist attacks.

We and the third parties upon which we rely are also subject to a variety of evolving threats, including but not limited to, social-engineering attacks (including phishing and deep fakes, which may be increasingly more difficult to identify as fake), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, supply chain attacks, personnel misconduct or error, ransomware attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, and other similar threats.

Notably, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, impact our ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds.

Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

In addition, our insulin pumps and other products rely on software and hardware, some of which is developed by third-party service providers, that could contain vulnerabilities.

We take steps to detect and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely), but we may not be able to detect, mitigate, and remediate such vulnerabilities on a timely basis or at all, including because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.

Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities.

Our risks may increase significantly due to the use of mobile and cloud-based applications in our medical devices.

For example, while use of our Tandem Device Updater gives us the ability to quickly recover from certain risks and/or vulnerabilities, the use of mobile applications enables third parties to store their information on mobile devices that we do not control.

Vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats and risks could cause a security incident or other interruption that could result in the unauthorized, unlawful or accidental disclosure, access, acquisition, modification, destruction, loss, alteration, or encryption of our sensitive information or our information technology systems or those of the third parties upon whom we rely.

A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform/products/services.

Furthermore, many of the third parties upon whom we rely are subject to similar risks.

We rely on third parties and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions and systems.

Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.

If the third parties upon whom we rely experience a security incident or other interruption, we could experience adverse consequences.

While we may be entitled to damages if these third parties fail to satisfy their privacy- or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such an award.

In addition, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

Moreover, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees use network connections, computers and devices outside our premises or network, including working at home, while in transit, and in public locations.

Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We may expend significant resources or modify our business activities to try to protect against security incidents.

Whether or not our security measures and those of the third parties upon whom we rely are ultimately successful, our expenditures on those measures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives.

Certain data privacy and security obligations may require us to implement and maintain reasonable or specific security measures or industry standards to protect our information technology systems and sensitive information.

Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.

Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.

If we (or a third party upon whom we rely) experience a security incident (such as the phishing attack we experienced in 2020) or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

additional reporting requirements and/or oversight;

restrictions on processing sensitive information (including personal data);

litigation (including class claims) and mass arbitration demands;

indemnification obligations;

negative publicity;

reputational harm;

monetary fund diversions;

diversion of management attention;

interruptions in our operations (including availability of data);

financial loss;

and other similar harms.

Security incidents and attendant consequences may cause or prevent customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.

Whether a cybersecurity incident is reportable to our investors may not be straightforward, may take considerable time to determine, and may be subject to change as the investigation of the incident progresses, including changes that may significantly alter any initial disclosure that we provide.

Moreover, experiencing a material cybersecurity incident and any mandatory disclosures could lead to negative publicity, loss of investor, partner or customer confidence in the effectiveness of our cybersecurity measures, diversion of management’s attention, governmental investigations, lawsuits, and the expenditure of significant capital and other resources.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

The failure of our or our service providers’ third parties’ information technology systems or our pumps’ software or other mobile or cloud applications to perform as we anticipate, or our failure to effectively identify, investigate and mitigate potential threats through ongoing maintenance and enhancement of software applications, information technology systems and privacy policies and controls, could disrupt our entire operation or adversely affect our software products or ability to provide our products and services.

For example, we market our Tandem Device Updater as having the unique capability to deploy software updates to our pumps, which allows customers remote access to new and enhanced features.

The failure of our Tandem Device Updater to provide software updates as we anticipate, including as a result of our inability to secure and maintain necessary regulatory approvals, the inability of our pumps to properly receive software updates, or errors, vulnerabilities or viruses embedded within the software being transmitted, or the failure of our customers to properly use the system to complete the update, could result in decreased sales, increased warranty costs, and harm to our reputation, any of which could have a material adverse effect on our business, financial condition and operating results.

Our sensitive information could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ (or other third parties upon whom we rely) use of generative artificial intelligence (“AI”) or machine learning (“ML”) technologies (collectively, “AI/ML” technologies).

Any sensitive information (including confidential, competitive, proprietary, or personal data) that we input into a third-party generative AI platform could be leaked or disclosed to others, including if sensitive information is used to train the third parties’ AI model.

Additionally, where AI/ML technologies ingests personal data and makes connections using such data, those technologies may reveal other personal or sensitive information generated by the model.

Moreover, AI models may create flawed, incomplete, or inaccurate outputs, some of which may appear correct.

This may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons” the AI with bad inputs or logic), or if the logic of the AI is flawed (a so-called “hallucination”).

We may use AI/ML outputs to make certain decisions.

Due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.

If such AI-based outputs are deemed to be biased, we could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liability.

We experienced a breach of our information technology systems in January 2020.

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On February 8, 2023, the plaintiffs asked the court to dismiss their remaining two claims with prejudice, which terminated the case at the Superior Court.

The plaintiffs have to decide whether to appeal the Court’s decision granting our motion for summary adjudication.

The risks posed by this lawsuit and any future related matters include civil monetary damages, attorney fees and costs, other legal penalties, reputational damage, loss of goodwill, and competitive harm.

It is possible that our legal expenses and defense costs, alone or together with any monetary damages, may exceed the limits of any applicable insurance coverage that we carry.

If we are found to have violated laws concerning the privacy and security of patient health information or other personal information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.

There are a number of laws in the United States and outside the United States protecting the privacy and security of personal information.

These laws include the U.S.

Health Insurance Portability and Accountability Act of 1996 (HIPAA) and related regulations, U.S.

state laws (such as the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), Canada’s Personal Information and Electronic Documents Act (PIPEDA) or the applicable provincial alternatives, the EU’s General Data Protection Regulation (GDPR), EU member states directives, or similar applicable laws.

These laws place limits on how we may collect, use, transfer, share and store medical information and other personal information, and they impose obligations to protect that information against unauthorized access, use, loss, and disclosure.

The lawsuit described above alleges violations of some of these laws.

If we, or any of our service providers who have access to the personal data for which we are responsible, are found to be in violation of the privacy or security requirements of HIPAA, CCPA, CPRA, PIPEDA, GDPR, or applicable foreign, U.S.

state and Canadian provincial laws, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and operating results.

In addition, entities operating in the healthcare industry have increasingly become targets for hackers.

Although we use a variety of measures to secure the data that we control, even compliant entities can experience security breaches or have inadvertent failures despite employing reasonable practices and safeguards.

We may also face new risks relating to data privacy and security as the United States, individual U.S.

states or Canadian provinces, E.U.

member states, and other international jurisdictions adopt or implement new data privacy and security laws and regulations as we continue to commercialize our products worldwide.

On March 7, 2023, the plaintiffs filed a notice of appeal of the Court’s order granting the Company’s motion for summary adjudication.

On August 15, 2023, the parties reached a settlement and on August 21, 2023, the Court issued an order dismissing the appeal.

The risks posed by any future similar matters include civil monetary damages, attorney fees and costs, other legal penalties, reputational damage, loss of goodwill, and competitive harm.

Risks Related to Legal and Intellectual Property

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Our success will depend in part on not infringing the patents or violating the other proprietary rights of third parties.

Significant litigation regarding patent rights exists in our industry.

While we review third party patents in advance of product launches to try to identify and avoid any infringement concerns, the large number of patents, the rapid rate of new patent issuances, and the complexity of the technology involved mean that there can be no assurance that all potentially relevant patents are identified or that our products do not infringe existing patents or patents that may be granted in the future.

As such, there is a risk that third parties may assert patent infringement claims against us.

Despite our efforts to avoid infringement and to resolve any claims that may arise, litigation may be necessary to defend against these claims, which could result in substantial costs and diversion of resources and may have a material adverse effect on our business, financial condition, and results of operations.

Our competitors in both the United States and markets outside of United States may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our current products or products under development.

The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

From time to time, we may receive communications from third parties alleging our infringement of their intellectual property rights or offering a license to their intellectual property relating to products that we are currently developing could require us to do one or more of the following:

• stop selling current products, developing new products or using technology that allegedly infringes third-party intellectual property;

• attempt to obtain a license to intellectual property from the third parties, which may not be available on reasonable terms or at all

• try to obtain a license to intellectual property from the third parties, which may not be available on reasonable terms or at all;

• try to re-design our products around third-party intellectual property;

• incur significant royalty payments and legal expenses;

• pay substantial damages to the party whose intellectual property rights we are allegedly infringing.

For example, in November 2023, at the Unified Patent Court (the “UPC”), we filed a revocation action and an action for a declaration of non-infringement of EP Patent No.

2 196 231 B1 (the “’231 patent”) against Roche Diabetes Care GmbH.

While Roche contends that Tandem’s t:slim X2 pump infringes the ‘231 patent, we contend that our t:slim X2 pump does not practice the ‘231 patent.

Furthermore, we contend that the claims of the ‘231 patent are invalid over the prior art.

In January 2024, F.

Hoffman-La Roche AG and Roche Diabetes Care GmbH (collectively, “Roche”), filed an infringement action at the UPC against multiple defendants including Tandem Diabetes Care, Inc.

and Tandem Diabetes Care Europe B.V.

Roche alleges our t:slim X2 insulin pump, and the offering, marketing, using, importing, possessing, and supplying of such devices, infringe EP Patent No.

1 970 677 B1 (the “‘677 patent”).

Roche seeks, among other things, damages and other monetary relief, costs and expenses of the legal proceedings, and an order to cease and desist the allegedly infringing activities.

As the UPC is a new court system that came into effect in 2023, enforcement and litigation under the UPC is new and we cannot accurately predict the outcome of such proceedings.

If any of our dosing devices is found to infringe Roche’s patents and Roche’s patents are also found to be valid, we could be required to redesign our technology or obtain a license from Roche to continue importing, marketing and selling our dosing devices in certain countries in Europe.

However, we may not be successful in the redesign of our technology or able to obtain any such license on commercially reasonable terms or at all.

We also could be forced, including by court order, to cease importing, marketing and selling certain of our products in certain countries in Europe that are found to be infringing until the patents expire.

Even if we were ultimately to prevail, litigation with Roche could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

We cannot reasonably estimate the final outcome, including any potential liability or any range of potential future charges associated with litigation.

We do not maintain insurance to cover the expense or any liability that may arise from an intellectual property dispute.

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Our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively in the United States by governmental authorities, principally the FDA and corresponding state regulatory agencies.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state regulatory agencies in the United States, foreign regulatory authorities, and Notified Bodies in the EU.

The regulations are very complex and are subject to rapid change and varying interpretations.

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The FDA and other U.S.

governmental agencies and international regulatory authorities regulate numerous elements of our business, including:

governmental agencies and foreign regulatory authorities regulate numerous elements of our business, including:

• product design and development;

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• establishment registration and product listing;

• labeling and storage;

• labeling, packaging and storage;

• marketing, manufacturing, sales and distribution;

• pre-market clearance or approval;

• import and export;

• pre-market clearance, certification, or approval;

• servicing and post-market surveillance;

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Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the Food, Drug and Cosmetic Act (510(k) or approval of a pre-market approval (PMA) application from the FDA, unless an exemption from pre-market review applies.

The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, which may be exacerbated if the FDA or other regulatory authority changes its clearance and approval policies, and we may not be able to obtain these clearances for our proposed products or approvals on a timely basis or at all, including as a result of:

The process of obtaining regulatory clearances, certification, or approvals to market a medical device can be costly and time-consuming, which may be exacerbated if the FDA or other regulatory authorities or Notified Bodies in the EU changes their clearance, certification, and approval policies, and we may not be able to obtain these clearances, certification for our proposed products or approvals on a timely basis or at all, including as a result of:

• our inability to demonstrate that our products are safe and effective for their intended users;

• the data from our pre-clinical studies or clinical trials may be insufficient to support clearance or approval;

• failure of the manufacturing process or facilities we use to meet applicable requirements.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products or achieving profitability.

• the data from our pre-clinical studies or clinical trials may be insufficient to support clearance, certification, or approval;

• the failure of the manufacturing process or facilities we use to meet applicable requirements.

Any delay in, or failure to receive or maintain, clearance, certification, or approval for our products under development could prevent us from generating revenue from these products or achieving profitability.

Further, 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.

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.

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

We also regularly respond to routine inquiries from regulatory authorities and Notified Bodies.

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.

Our failure to appropriately respond to these findings and take corrective action, or 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, product recalls, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators.

Our failure to appropriately respond to these findings and take corrective action, or 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 or criminal penalties, injunctions, warning letters, product recalls, operating restrictions, interruption of production, delays in the introduction of products into the market, refusal of the FDA or other regulatory authorities or Notified Bodies to grant future clearances, certification, or approvals, and the suspension or withdrawal of existing clearances, certifications, or approvals by the FDA, other regulatory authorities or Notified Bodies.

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.

New products or modifications to our existing products may require new 510(k) clearances or PMAs, or may require us to cease marketing or recall the modified products until clearances are obtained.

New products or modifications to our existing products may require new 510(k) clearances, PMAs or certifications, or may require us to cease marketing or recall the modified products until clearances, certifications or approvals are obtained.

Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a PMA.

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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.

For those medical devices sold in the EU and for which we have obtained a CE Certificate of Conformity by a Notified Body, we must notify our Notified Body if significant changes are made to the products or if there are substantial changes to our quality assurance systems affecting those products.

Obtaining variation of existing CE Certificates of Conformity or a new CE Certificate of Conformity can be a time-consuming process, and delays in obtaining required future clearances, certifications or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.

A recall or suspension of our products, or the discovery of serious safety issues with our products, could have a significant negative impact on us.

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Recalls, suspensions or other notices relating to any products that we distribute would divert managerial and financial resources, and have an adverse effect on our reputation, financial condition and operating results.

Further, under the FDA’s Medical Device Reporting regulations and equivalent regulations in other geographies, we are required to maintain appropriate quality systems and report incidents in which our product may have caused or contributed to serious injury or death in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to serious injury or death.

Further, under the FDA’s Medical Device Reporting regulations and equivalent regulations and requirements in other geographies, we are required to maintain appropriate quality systems and report incidents in which our product may have caused or contributed to serious injury or death in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to serious injury or death.

Repeated product malfunctions may result in a voluntary or involuntary product recall or suspension of product sales, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results.

We have initiated product recalls in the past, and our risk of future product recalls may increase as we launch new products or offer new software updates for existing products.

Any adverse event involving any products that we distribute could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action.

For example, the Australian Therapeutic Goods Administration (TGA) temporarily suspended our pump product sales in Australia commencing November 24, 2020, however sales of pump-related supplies were allowed to continue.

Any adverse event involving any products that we distribute could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory authority action, which could include inspection, mandatory recall or other enforcement action.

For example, the Australian Therapeutic Goods Administration (TGA) temporarily suspended our pump product sales in Australia starting November 24, 2020, however sales of pump-related supplies were allowed to continue.

Effective April 1, 2021, following discussions with the TGA, the temporary suspension was lifted for our t:slim X2 with Basal-IQ technology, subject to certain post-market surveillance obligations and other conditions.

We have discontinued sales of earlier generation products in Australia and we only recently commenced offering our Control-IQ technology in Australia.

We discontinued sales of earlier generation products in Australia and we started offering our Control-IQ technology in Australia.

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.

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.

In addition, other regulatory authorities 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 authorities, 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.

In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or effectiveness of our products in the EU.

We must comply with medical device reporting requirements, including the reporting of adverse events and malfunctions related to our products.

Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension, variation or withdrawal of CE Certificates of Conformity, product seizures, injunctions or the imposition of civil or criminal penalties that would adversely affect our business, operating results and prospects.

Our failure to comply with U.S.

federal and state fraud and abuse laws, including anti-kickback laws and other U.S.

federal and state anti-referral laws, could have a material, adverse impact on our business.

federal and state anti-referral laws, or comparable foreign legislation, could have a material, adverse impact on our business.

has numerous federal and state laws pertaining to healthcare fraud and abuse.

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• federal and state false claims laws which prohibit, among other things, persons from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to Medicare, state Medicaid programs, or other third-party payors;

• federal and state physician self-referral laws, such as the Stark Law, which prohibit a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” including a company that furnishes durable medical equipment, with which the physician has a financial relationship unless that financial relationship meets an exception under the applicable law;

• federal and state physician self-referral laws, such as the Stark Law, which prohibit a physician from referring Medicare or Medicaid patients to an entity providing “designated health services,” including a company that furnishes durable medical equipment, with which the physician or their immediate family member has a financial relationship unless that financial relationship meets an exception under the applicable law;

• federal and state laws, such as the Civil Monetary Penalties Law, that prohibit an individual or entity from offering or transferring remuneration to any person eligible for benefits under a federal or state health care program which such individual or entity knows or should know are likely to influence such eligible individual’s choice of provider, practitioner or supplier of any item or service for which payment may be made under federal health care programs such as Medicare and state Medicaid programs;

• federal criminal laws enacted as part of HIPAA that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

• federal disclosure laws, such as the Physician Payments Sunshine Act, which require certain manufacturers, including medical device manufacturers, to submit annual data pertaining to payments or other transfers of value to covered recipients, including physicians;

• the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections;

• federal criminal laws enacted as part of HIPAA that prohibit, among other things, executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

• federal and state disclosure laws, such as the Physician Payments Sunshine Act, which require certain manufacturers, including medical device manufacturers, to submit annual data pertaining to payments or other transfers of value to covered recipients, including physicians and certain other healthcare providers, and teaching hospitals;

• federal and state laws governing the use, disclosure and security of personal information, including protected health information, such as HIPAA and the Health Information Technology for Economic and Clinical Health;

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state law equivalents of each of the above federal laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

Outside the United States, interactions between medical device companies and healthcare professionals are also governed by strict laws, such as national anti-bribery laws of European countries, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct.

Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

Our relationships with healthcare providers and other third parties are subject to scrutiny under these laws.

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Healthcare providers may use our products off-label, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine.

However, if the FDA determines that our promotional materials or training constitutes promotion of an off-label use or the pre-promotion of an unapproved product, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines and criminal penalties.

However, if the FDA or other foreign regulatory authorities determine that our promotional materials or training constitutes promotion of an off-label use or the pre-promotion of an unapproved product, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines and criminal penalties.

It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties.

Although our policy is to refrain from statements that could be considered off-label promotion of our products or pre-promotion of an unapproved product, the FDA or another regulatory agency could disagree and conclude that we have engaged in improper promotional activities.

Although our policy is to refrain from statements that could be considered off-label promotion of our products or pre-promotion of an unapproved product, the FDA or another regulatory authority could disagree and conclude that we have engaged in improper promotional activities.

In addition, the off-label use of our products may increase the risk of product liability claims, which are expensive to defend and could result in substantial damage awards against us and harm our reputation.

Legislative or regulatory healthcare reforms may result in downward pressure on the price of and decrease reimbursement for our products, and uncertainty regarding the healthcare regulatory environment could have a material adverse effect on our business.

The advertising and promotion of medical devices in the EU is subject to the national law of individual EU Member States implementing Directive 93/42 on medical devices, or MDD, Directive 90/385/EEC on active implantable medical devices, or AIMD, and applying Regulation 2017/745 on medical devices, or MDR, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national legislation of individual EU Member States governing the advertising and promotion of medical devices.

EU Member States’ national legislation may also restrict or impose limitations on our ability to advertise our products directly to the general public.

In addition, voluntary EU and national industry Codes of Conduct provide guidelines on the advertising and promotion of our products to the general public and may impose limitations on our promotional activities with healthcare professionals.

Legislative or regulatory healthcare reforms, or other regulatory reforms, may result in downward pressure on the price of and decrease reimbursement for our products, and uncertainty regarding the healthcare regulatory environment could have a material adverse effect on our business.

The sales of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other healthcare-related organizations.

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Reduced reimbursement rates could significantly decrease our revenue, which in turn would place significant downward pressure on our gross margins and impede our ability to become profitable.

Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA 2022”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.

The IRA 2022 also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program.

We cannot predict which, if any, additional healthcare reform proposals will be adopted, when they may be adopted or what impact they may have on the existing regulatory environment, or our ability to operate our business.

Any of these factors could have a material adverse effect on our operating results and financial condition.

In the EU, the MDR became applicable on May 26, 2021, repealing and replacing both the MDD and Directive 90/385/EEC on active implantable medical devices.

The MDR establishes transitional provisions.

However, the changes to the regulatory system implemented in the EU by the MDR include stricter requirements for clinical evidence and pre-market assessment of safety and performance, new classifications to indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality management system assessment procedures and additional requirements for the quality management system, additional requirements for traceability of products and transparency as well a refined responsibility of economic operators.

We are also required to provide clinical data in the form of a clinical evaluation report.

Fulfillment of the obligations imposed by the MDR may cause us to incur substantial costs.

We may be unable to fulfil these obligations, or our Notified Body may consider that we have not adequately demonstrated compliance with our related obligations to merit a CE Certificate of Conformity on the basis of the MDR.

Moreover, in the EU, some EU Member States may, after a medical device is CE marked, require the completion of additional studies that compare the cost-effectiveness of a particular medical device candidate to currently available therapies.

This Health Technology Assessment, or HTA process, which is currently governed by the national laws of the individual EU Member States, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medical device in the national healthcare systems of the individual country is conducted.

The outcome of HTA regarding specific medical device will often influence the pricing and reimbursement status granted to these products by the competent authorities of individual EU Member States.

In December 2021, Regulation No 2021/2282 on HTA, amending Directive 2011/24/EU, was adopted in the EU.

This Regulation, which entered into force in January 2022 and will apply as of January 2025, is intended to boost cooperation among EU Member States in assessing health technologies and providing the basis for cooperation at EU level for joint clinical assessments in these areas.

If the conclusions of these assessments are negative, or compare our products unfavorably with competing products, this may impact our pricing and reimbursement status.

If we are unable to obtain or maintain favorable pricing and reimbursement status in EU Member States for our medical devices or medical devices that we may successfully develop and for which we may obtain certification, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected.

In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to regulatory divergence between the EU and the UK.

On May 26, 2021, the MDR became applicable in the EU.

However, the MDR is not applicable in the UK.

In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the framework set out by the MDD.

The government plans to introduce new legislation governing medical devices with an aim for core aspects of the future regime for medical devices to apply from July 1, 2025.

New legislation has been proposed and is also anticipated for adoption in late 2023 to bring into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime.

These post-market surveillance requirements are expected to apply from mid-2024.

Should the UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the future.

We could therefore, both now and in the future, face significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our business.

Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us.

These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.

Governments outside the United States tend to impose strict price controls, reimbursement approval and rebate policies, which may adversely affect our ability to generate revenue.

In some countries, particularly EU countries and EFTA member states, the pricing, reimbursement and rebates of health products is subject to governmental control, and in such countries, there can be considerable pressure by governments and other stakeholders on prices, as well as reimbursement and rebates.

If reimbursement of our products is unavailable or limited in scope or amount or if pricing or rebates are set at unsatisfactory levels in any such country, our prospects for generating revenue outside of the United States, if any, could be adversely affected and our business could be harmed.

For example, in August 2023, a rebate agreement with the French Comité économique des produits de santé (CEPS) for sales of our t:slim X2 with Control-IQ pump in France went into effect.

The rebate agreement with CEPS provides for specified reimbursements and requires specified rebates be paid, and we are currently in the process of determining the impact and allocation of such reimbursements and rebates under the agreement.

While we currently cannot estimate the amount of such reimbursements and rebates that will be allocable to us, we may ultimately determine that we need to pay all or a portion of the rebates.

Any such rebates that we are required to pay could adversely affect our ability to generate revenue from sales of t:slim X2 with Control-IQ in France.

General Risks

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• announcements of significant contracts, acquisitions, divestitures or partnerships by us, our competitors or our collaboration partners;

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

• regulatory clearance, certification, or approval of our products or the products of our competitors or collaboration partners, or the failure to obtain such clearances, certifications, or 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;

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• threatened or actual litigation, regulatory proceedings, or government investigations;

• general political or economic conditions, including the impacts and disruptions caused by the COVID-19 global pandemic.

• general political or economic conditions.

In addition, the trading price of our common stock may fluctuate substantially due to other factors, including the numerous risks and uncertainties described in this section.

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Further, our common stock may be susceptible to significant price and volume fluctuations as a result of stock market dynamics, which may impact our common stock without regard to our financial condition or operating performance.

Given the competitiveness of the life sciences and medical device industry, the prices at which our common stock trades may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant.

This volatility could negatively impact our ability to raise additional capital or utilize equity as consideration in any acquisition transactions we may pursue, and could make it more difficult for existing stockholders to sell their shares of the common stock at a price they consider acceptable or at all.

Anti-takeover provisions in our organizational documents and Delaware law may delay or prevent a change of control, which could reduce our stock price and prevent our stockholders from removing our current board of directors.

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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2022, we had accumulated federal and state net operating loss (NOL) carryforwards of approximately $193.1 million, and $255.9 million, respectively.

Of the total federal NOL carryforwards, approximately $95.6 million were generated after January 1, 2018, and therefore do not expire.

The NOL generated after January 1, 2018, is subject to an 80% limitation.

Under current law, federal net operating losses (NOLs) incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to federal tax laws.

As of December 31, 2023, we had accumulated federal and state NOL carryforwards of approximately $168.0 million, and $262.4 million, respectively.

Of the total federal NOL carryforwards, approximately $78.4 million were generated after January 1, 2018, and therefore do not expire under current law but can only be utilized to offset 80% of future taxable income.

The remaining federal NOL carryforwards of $89.6 million will begin to expire in 2033, and state tax loss carryforwards continue to expire.

If there is an “ownership change” with respect to our company, as defined under Section 382 of the Code, the utilization of our NOL and research credit carryforwards may be subject to substantial limitations, which could cause U.S.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change in its equity ownership value over a three-year period, the corporation’s ability to use its pre-change NOL and research credit carryforwards may be subject to substantial limitations, which could cause U.S.

federal income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause NOL carryforwards to expire unused.

We believe we experienced at least one ownership change that significantly reduced our ability to utilize our pre-2018 NOL and research credit carryforwards before they expire.

Additionally, future ownership changes under Section 382 may also limit our ability to fully utilize any remaining tax benefits.

Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.

The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change.

The issuance of additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S.

presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate.

To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.

If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.

Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenses for tax purposes in the year incurred and requires taxpayers to capitalize and subsequently amortize such expenses over five years for research activities conducted in the United States and over 15 years for research activities conducted outside the United States.

Although there have been legislative proposals to repeal or defer the capitalization requirement to later years, there can be no assurance that the provision will be repealed or otherwise modified.

Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation.

Our tax obligations and effective tax rate in the jurisdictions in which we conduct business could increase, including as a result of the base erosion and profit shifting (BEPS) project that is being led by the Organization for Economic Co-operation and Development (OECD), and other initiatives led by the OECD or the European Commission.

For example, the OECD is leading work on proposals, commonly referred to as “BEPS 2.0”, which, if and to the extent implemented, would make important changes to the international tax system.

These proposals are based on two “pillars”, involving the reallocation of taxing rights in respect of certain multinational enterprises above a fixed profit margin to the jurisdictions in which they carry on business (subject to certain revenue threshold rules which we do not currently meet but may meet in the future) (referred to as “Pillar One”) and imposing a minimum effective corporate tax rate on certain multinational enterprises (referred to as “Pillar Two”).

A number of countries in which we conduct business, including through our subsidiaries, such as the Netherlands and Switzerland, have enacted with effect from January 1, 2024, or are in the process of enacting, core elements of the Pillar Two rules.

Based on our current understanding of the minimum revenue thresholds contained in the Pillar Two proposal, we expect that we are likely to fall within the scope of its rules in the short-to-medium term.

The OECD has issued administrative guidance providing transition and safe harbor rules in relation to the implementation of the Pillar Two proposal.

We are monitoring developments and evaluating the potential impacts of these new rules, including on our effective tax rates, and considering our eligibility to qualify for these safe harbor rules.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, which could harm our business and result in a decline in the trading price of our common stock.

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The Notes are our senior unsecured obligations.

In addition, in May 2022, we entered into a revolving line of credit agreement, which provides us with an available principal borrowing amount of $100.0 million (the Line of Credit).

While there are currently no borrowings outstanding under the Line of Credit, we may request advances thereunder and use the proceeds for general corporate purposes.

The Line of Credit is secured by a first priority security interest in substantially all of our assets.

The Notes and the Line of Credit contain certain debt service requirements, and financial and operational covenants, as applicable.

The Notes contain certain debt service requirements.

Pursuant to the Notes, interest is payable in cash semi-annually at a rate of 1.50% per year.

In addition, any future advances under the Line of Credit will bear interest at an annual rate calculated as determined pursuant to the Line of Credit with interest on outstanding advances payable quarterly.

During the term of the Line of Credit, we are also required to maintain compliance with two financial maintenance covenants:

a minimum consolidated interest coverage ratio and a maximum consolidated net leverage ratio.

The Line of Credit also contains customary operating covenants, subject to certain exceptions.

Our failure to comply with certain obligations under the Notes and the Line of Credit, or inability to make required debt service payments, could result in an event of default.

A default, if not cured or waived, could result in acceleration of the

indebtedness, which could have a material adverse effect on our business, financial condition and liquidity.

Our failure to comply with certain obligations under the Notes, or inability to make required debt service payments, could result in an event of default.

A default, if not cured or waived, could result in acceleration of the indebtedness, which could have a material adverse effect on our business, financial condition and liquidity.

Further, if our indebtedness is accelerated, we cannot be certain that cash will be available to pay the indebtedness and we may not have the ability to refinance the indebtedness on terms satisfactory to us or at all.

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• we may be required to dedicate a portion of our current liquidity or cash flow from operations to interest payments, limiting the availability of cash for other purposes;

• the covenants contained in the Line of Credit or future agreements governing indebtedness may limit our ability to borrow additional funds, refinance indebtedness or make certain investments;

• covenants contained in future agreements governing indebtedness may limit our ability to borrow additional funds, refinance indebtedness or make certain investments;

• debt covenants may affect our flexibility in planning for, and reacting to, changes in the economy and our industry;

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• a high level of indebtedness may limit our ability to obtain additional financing in the future or negatively impact the terms on which additional financing may be obtained.

We have indebtedness in the form of convertible senior notes, which could adversely affect our financial condition and our ability to respond to changes in our business.

In May 2020, we completed the offering of $287.5 million principal amount of 1.50% Convertible Senior Notes due 2025 (the Note Offering).

Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any.

In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion, we will be required to make cash payments in respect of the Notes being converted.

Furthermore, the indenture governing the Notes provides that, in the event of an event of default under the Notes, the principal, premium, if any, and interest, if any, may become due prior to the maturity date for the Notes.

There can be no assurance that we will be able to pay these amounts when due, or that we will be able to refinance this indebtedness on acceptable terms or at all.

Servicing the Notes will require a significant amount of cash, and we may not have sufficient cash flow from our business to repay the Notes.

Our ability to make scheduled payments of the principal and interest on the Notes, or to refinance the Notes depends on our future business operations and liquidity, which are subject, to numerous risks and uncertainties, including, market acceptance of our products, regulatory approval for our products, and the competitive environment in which we operate.

Our ability to make scheduled payments of the principal and interest on the Notes, or to refinance the Notes depends on our future business operations and liquidity, which are subject, to numerous risks and uncertainties, including, market acceptance of our products, regulatory clearance, certification, or approval for our products, and the competitive environment in which we operate.

Our business may not generate or sustain a level of cash flow from operations sufficient to service the Notes and any future indebtedness we may incur.

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We may not be able to engage in any of these activities on commercially reasonable terms or at all, which could result in a default under the Notes, or our future indebtedness.

We may incur substantial additional debt or take other actions which could diminish our ability to make payments on the Notes.

We and our subsidiaries are not prevented by the terms of the indenture governing the Notes from incurring additional indebtedness or refinancing our existing indebtedness in the future.

We are similarly not restricted under the terms of the indenture from taking a number of other actions that could have the effect of diminishing our ability to make payments on the Notes when due.

In addition, we may from time to time seek to retire or purchase our outstanding debt, including the Notes, through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise.

Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

The amounts involved in any such transactions, individually or in the aggregate, may be material.

Further, any such purchases or exchanges may result in us acquiring and retiring a substantial amount of such indebtedness, which could impact the trading liquidity of such indebtedness.

An event of default occurred under the indenture governing the Notes.

On or about October 24, 2023, we were notified that additional interest had been accruing on the Notes since May 2021 pursuant to the terms of the indenture, as a result of our failure to timely remove the restrictive legends on the Notes and switch the Notes to an unrestricted CUSIP.

This additional interest accrued at a rate of 0.50% per annum on the outstanding principal amount of the Notes.

The failure to pay these overdue amounts when required constituted an event of default under the indenture.

We paid all overdue amounts related to this matter in November 2023.

Early repayment of the Notes due to an event of default would likely significantly impact our liquidity and financial condition, which could have a material adverse effect on our business.

We may not have sufficient cash or be able to obtain financing to repurchase the Notes upon a fundamental change, or to settle conversions of the Notes.

Holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

Holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion, we will be required to settle all or a portion of our

conversion obligation through the payment of cash, which could adversely affect our liquidity.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes or settle conversions of the Notes.

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Our failure to repurchase Notes at a time when the repurchase is required by the indenture, or to pay any cash payable on future conversions of the Notes as required by the indenture, would constitute an event of default under the indenture.

The conditional conversion feature of the Notes may adversely affect our liquidity.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert the Notes at any time during specified periods at their option.

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

A default under the indenture, or the fundamental change itself, could also lead to a default under agreements governing our existing or future indebtedness.

If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

Conversion of the Notes will, to the extent we deliver shares upon conversion of such Notes, dilute the ownership interest of existing stockholders and may otherwise have a negative impact on the trading price of our common stock.

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In addition, the perception that some or all of the Notes may be converted into shares of our common stock in the future could have a negative impact on the trading price of our common stock.

The fundamental change repurchase feature of the Notes may delay or prevent an otherwise beneficial takeover attempt.

The terms of the Notes require us to repurchase the Notes in the event of a fundamental change.

A takeover of the Company would trigger an option of the holders of the Notes to require us to repurchase the Notes.

In addition, if a make-whole fundamental change (as defined in the indenture governing the Notes) occurs prior to the maturity date of the Notes, we will, in some cases, be required to increase the conversion rate of the Notes for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

These and other provisions set forth in the indenture may have the effect of delaying or preventing a takeover of the Company.

Certain provisions in the indenture governing the Notes may delay or prevent an otherwise beneficial takeover attempt.

Certain provisions in the indenture governing the Notes may make it more difficult or expensive for a third party to acquire us.

For example, the terms of the Notes require us to offer to repurchase the Notes in the event of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Notes in connection with a make-whole fundamental change (as defined in the indenture governing the Notes).

A takeover of the Company may trigger the requirement that we offer to repurchase the Notes and/or increase the conversion rate of the Notes for a holder that elects to convert its Notes, which could make it more costly for a potential acquirer to engage in such takeover.

These and other provisions set forth in the indenture may have the effect of delaying or preventing a takeover of the Company that would otherwise be beneficial to investors.

The Capped Call Transactions may affect the value of the Notes and our common stock.

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The Capped Call Transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes.

This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes, which could affect a Note holder’s ability to convert the Notes.

In addition, if such Capped Call Transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

The potential effect, if any, of any of these transactions and activities on the market price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of our common stock and the value of the Notes and, under certain circumstances, the ability of the Note holders to convert the Notes.

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The option counterparties are financial institutions, and we will be subject to the risk that any or all of them may default under the Capped Call Transactions.

If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings.

If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Call Transaction with such option counterparty.

Our exposure will depend on many factors but, in general, an increase in our exposure will be correlated to an increase in the market price and volatility of our common stock.

In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock.

Unresolved Staff Comments.

Not applicable.

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-K

Item 1A. Risk Factors