PODD US Equity☆

Item 1A. Risk Factors

Risks Related to Our Business and Industry

We currently rely on sales of the Omnipod System, and tailored versions of the Omnipod System in our drug delivery product line, to generate nearly all our revenue.

Our main product is the Omnipod System, from which we expect to continue to derive nearly all our revenue. Accordingly, our ability to continue to generate revenue is highly reliant on our ability to market and sell the Omnipod System and to retain consumers who currently use the product. Our sales of the Omnipod System may be negatively impacted by many factors, including:

•the failure of the Omnipod System to achieve and maintain wide acceptance among opinion leaders in the diabetes treatment community, insulin-prescribing physicians, third-party payors and people with insulin-dependent diabetes;

•manufacturing problems or capacity constraints;

•actual or perceived quality problems;

•reductions in reimbursement rates or coverage policies relating to the Omnipod System by third-party payors;

•claims that any portion of the Omnipod System infringes on intellectual property rights of others;

•adverse regulatory or legal actions relating to the Omnipod System;

•damage, destruction or loss of any of the facilities where our products are manufactured or stored or of the equipment therein or failure to successfully open or expand new facilities;

•the inability of users to continue paying for our products;

•attrition rates of consumers who cease using the Omnipod System;

•competitive pricing; and

•results of clinical studies relating to the Omnipod System or our competitors’ products.

If any of these events occurs, our ability to generate revenue could be significantly reduced, which would adversely affect our business, financial condition and results of operations.

If we fail to expand and maintain an effective sales force or successfully develop our relationships with intermediaries, our business, prospects and brand may be materially and adversely affected.

In addition to promoting, marketing and selling the Omnipod System through our own direct sales force, we also utilize domestic and international intermediaries to distribute our product to end-users. We need to expand our distribution network to maintain and grow our business and revenue.We cannot assure you that we will be able to successfully develop our relationships with third-party intermediaries. If we fail to do so, our sales could fail to grow or could decline, and our ability to grow our business could be adversely affected. Intermediaries that are in the business of selling other medical products may not devote a sufficient level of resources and the support required to generate awareness of our products and grow or maintain product sales. If our intermediaries are unwilling or unable to market and sell our products, or if they do not perform to our expectations, we could experience delayed or reduced market acceptance and sales of our products, which would adversely affect our business, financial condition and results of operations.

Our ability to grow our revenue depends in part on our retaining a high percentage of our customers.

A key to driving our revenue growth is the retention of a high percentage of our customers. We have developed retention programs aimed at both healthcare professionals and consumers, which include appeals assistance, ongoing customer communications, newsletters, support, training and an automatic re-order program for certain customers. We have had a satisfactory customer retention rate; however, we cannot assure you that we will maintain this retention rate in the future. Current uncertainty in global economic conditions, competition, higher levels of unemployment, changes in insurance reimbursement levels and negative financial news may negatively affect product demand. If demand for our products fluctuates as a result of economic conditions or otherwise, our ability to attract and retain customers could be harmed. The failure to retain a high percentage of our customers could negatively impact our revenue growth and may have a material adverse effect on our business, financial condition and results of operations.

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If we do not effectively manage our growth, our business resources may become strained and we may not be able to deliver the Omnipod System in a timely manner, which could harm our results of operations.

As we continue to expand our sales, we expect to continue to increase our manufacturing capacity, our personnel and the scope of our sales and marketing efforts. This growth, as well as any other growth that we may experience in the future, will provide challenges to our organization and may strain our management and operations resources. In order to manage future growth, we will be required to improve existing, and implement new, sales and marketing efforts and distribution channels. The form and function of our enterprise information technology systems will need to change and be improved upon as our business needs change. We will need to manage our supply chain effectively, including the continued development of our manufacturing and our relationships with our contract manufacturers and other suppliers. We may also need to partner with additional third-party suppliers to manufacture certain components of the Omnipod System and install additional manufacturing lines. A transition to new suppliers may result in additional costs or delays. We may misjudge the amount of time or resources that will be required to effectively manage any anticipated or unanticipated growth in our business or we may not be able to manufacture sufficient inventory, or attract, hire and retain sufficient personnel to meet our needs. If we cannot scale our business appropriately, maintain control over expenses or otherwise adapt to anticipated and unanticipated growth, our business resources may become strained, we may not be able to deliver the Omnipod System in a timely manner and our results of operations may be adversely affected.

Failure to secure or retain adequate coverage or reimbursement for our products by third-party payors could adversely affect our business, financial condition and results of operations.

We expect that sales of the Omnipod System will be limited unless a substantial portion of the sales price of the Omnipod System is paid for by third-party payors, including private insurance companies, health maintenance organizations, preferred provider organizations, federal and state government healthcare agencies and other managed care providers. In the United States, we currently have contracts establishing reimbursement for the Omnipod System with national and regional third-party payors that provide reimbursement in all 50 states. While we anticipate entering into additional contracts with other third-party payors, we cannot assure you that our efforts will be successful. In addition, these contracts can generally be terminated by the third-party payor without cause. Healthcare market initiatives in the United States may also lead third-party payors to decline or reduce reimbursement for the Omnipod System. Moreover, compliance with administrative procedures or requirements of third-party payors may result in delays in processing approvals by those payors for consumers to obtain coverage for the use of the Omnipod System. Coverage decisions and rates of reimbursement increasingly require clinical evidence showing an improvement in user outcomes. Generating this clinical evidence requires substantial time and investment and there is no guarantee of a desired outcome.

We are an approved Medicare supplier and CMS has issued guidance clarifying that Medicare Part D Plan Sponsors may provide coverage for products such as the Omnipod System under the Medicare Part D prescription drug program. As a result, we must negotiate with third-party payors in order to provide our product through the pharmacy channel in the United States to users who are covered under Medicare Part D. Compliance with administrative procedures or requirements of these third-party payors may result in delays in processing approvals by those payors for consumers to obtain Medicare Part D coverage for the use of the Omnipod System. Medicaid coverage decisions are made by the governing authorities in each state. As the Medicaid coverage process and stakeholders are unique to each state, the timeline to gain coverage in each state may vary.

In the United States, we began selling Omnipod DASH in 2019, primarily through the pharmacy channel, which required negotiation of new or amended agreements with our intermediaries and payors. The availability of Omnipod DASH may be limited or restricted if we are unable to maintain these agreements and sustain an adequate level of reimbursement under these agreements. As we expand our Omnipod System sales and marketing efforts outside of the United States, we face additional risks associated with obtaining and maintaining reimbursement from foreign health care payment systems on a timely basis or at all. Failure to secure or retain adequate coverage or reimbursement for the Omnipod System by third-party payors could have a material adverse effect on our business, financial condition and results of operations.

Healthcare reform laws could adversely affect our revenue and financial condition.

During the past several years, the U.S. healthcare industry has been subject to an increase in governmental regulation at both the federal and state levels. Efforts to control healthcare costs, including limiting access to care, alternative delivery models and changes in the methods used to determine reimbursement scenarios and rates, are ongoing at the federal and state government levels.

The ACA and related healthcare reform laws, regulations and initiatives have significantly increased regulation of managed care plans and decreased reimbursement to Medicare managed care. Some of these initiatives purport to, among other things, require that health plan members have greater access to drugs not included on a plan’s formulary. Moreover, to alleviate budget shortfalls, states have reduced or frozen payments to Medicaid managed care plans. We cannot accurately predict the complete

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impact of these healthcare reform initiatives, but they could lead to a decreased demand for our products and other outcomes that could adversely impact our business and financial results.

Some of the provisions of the ACA have yet to be fully implemented, and certain provisions have been subject to judicial and Congressional challenges. In addition, there have been efforts to repeal or replace certain aspects of the ACA and to alter the implementation of the ACA and related laws. For example, the Tax Cuts and Jobs Act that was signed into law on December 22, 2017 eliminated the shared responsibility payment for individuals who fail to maintain minimum essential coverage, commonly referred to as the “individual mandate”. Further, the Bipartisan Budget Act of 2018 among other things, amended the Medicare statute to reduce the coverage gap in most Medicare drug plans, commonly known as the “donut hole,” by raising the manufacturer discount under the Medicare Part D coverage gap discount program to 70%. It is unclear how the ACA and its implementation, as well as efforts to repeal or replace, or invalidate, the ACA, or portions thereof, will affect our business. Additional legislative changes, regulatory changes, and judicial challenges related to the ACA remain possible. It is possible that the ACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have an adverse effect on our industry and on our ability to maintain or increase sales of any of our products.

Risks Related to Product Development, Market Access and Competition

We face competition from numerous competitors, many of whom have far greater resources than we have, and, as a result, we may not be able to compete effectively.

The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. The Omnipod System competes with several existing insulin delivery devices as well as other methods for the treatment of diabetes. Medtronic has been the market leader for many years in the United States. Other suppliers we compete with include Tandem in the United States and Roche and Ypsomed outside the United States.In addition to the established insulin pump competitors, several companies are working to develop and market new insulin “patch” pumps and other methods for the treatment of diabetes. These companies are at various stages of development and the number of such companies continuously changes as they enter or exit the market on an ongoing basis.

Many of our competitors are large, well-capitalized companies with more resources than we have. These companies may have competitive advantages over us, including:

•significantly greater name recognition;

•different and more complete reimbursement profiles;

•established relations with healthcare professionals, customers and third-party payors;

•larger and more established distribution networks;

•greater experience in conducting research and development, clinical trials, manufacturing, marketing and obtaining regulatory approval; and

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

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

We also compete with MDI therapy, including smart pens, which is substantially less expensive than pump therapy. While we believe that pump therapy, in general, and the Omnipod System, in particular, have significant competitive and clinical advantages over traditional MDI therapy, improvements in the effectiveness of MDI therapy may result in fewer people with insulin-dependent diabetes converting from MDI therapy to pump therapy than we expect and may result in negative price pressure.

Our current competitors or other companies may at any time develop additional products for the treatment of diabetes. If an existing or future competitor develops a product that competes with or is superior to the Omnipod System, our revenue may decline. In addition, some of our competitors may compete by changing their pricing model or by lowering the price of their insulin delivery systems or ancillary supplies. If these competitors’ products were to gain acceptance by healthcare professionals, people with insulin-dependent diabetes or third-party payors, we could experience pricing pressure. If prices were to fall, our results of operations could be materially adversely impacted.

Technological breakthroughs in diabetes monitoring, treatment or prevention could render the Omnipod System obsolete.

The diabetes treatment market is subject to rapid technological change and product innovation. The Omnipod System is based on our proprietary technology, but a number of companies, medical researchers and pharmaceutical companies are pursuing

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new delivery devices, delivery technologies, sensing technologies, procedures, drugs and other therapeutics for the monitoring, treatment and/or prevention of insulin-dependent diabetes. For example, FDA approval of a commercially viable “closed-loop” or “hybrid closed-loop” system that combines continuous “real-time” glucose sensing or monitoring and automatic continuous subcutaneous insulin infusion in a manner that delivers appropriate amounts of insulin on a timely basis with reduced user direction could have a material adverse effect on our revenue and future profitability. Medtronic commercially launched a “hybrid closed-loop” system in 2017, andin 2020 Tandem launched an AID system, which could negatively impact our business. In addition, the National Institutes of Health and other supporters of diabetes research are continually seeking ways to prevent, cure or improve the treatment of diabetes. Any technological breakthroughs in diabetes monitoring, treatment or prevention could render the Omnipod System obsolete, which would have a material adverse effect on our business, financial condition and results of operations.

Our own new product development initiatives may prove to be ineffective or not commercially successful.

We have ongoing initiatives to develop products to improve the treatment of Type 1 and Type 2 diabetes. We may be unable to effectively introduce and market new products or may fail to keep pace with advances in technology. The healthcare industry is characterized by continuous technological change, resulting in changing consumer preferences and requirements. The success of our business depends on our ability to introduce new products and adapt to these changing technologies and consumer demands. To compete in the marketplace, we must make substantial investments in new product development whether internally or externally through licensing or acquisitions. Even if we can develop, manufacture and obtain regulatory and reimbursement approvals for our new products, the success of those products depends on market acceptance. Market acceptance for our new products could be affected by several factors, including the availability of alternative products from our competitors, the price of our products, the timing of our market entry, and our ability to market and distribute our products effectively. Our failure to introduce new and innovative products in a timely manner could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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

We rely on third parties, such as contract research organizations, medical institutions, clinical investigators, contract laboratories and other third parties to conduct some of our clinical trials and pre-clinical investigations. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the quality or accuracy of the data they obtain is compromised due to failure to adhere to our 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 approval for, or successfully commercialize, our products on a timely basis, or at all, and our business and operating results may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.

Future market or clinical studies may be unfavorable to the Omnipod System and its efficacy, which could hinder our sales efforts and have a material adverse effect on our business, results of operations, financial condition and cash flows.

To help improve, market and sell the Omnipod System, we have sponsored, and expect to continue to sponsor market studies to assess various aspects of the Omnipod System’s functionality and its relative efficacy. The data obtained from the studies may be unfavorable to the Omnipod System or may be inadequate to support satisfactory conclusions. In addition, in the future we may sponsor clinical trials to assess certain aspects of the efficacy of the Omnipod System. If future clinical trials fail to support the efficacy of our current or future products, our sales may be adversely affected and we may lose an opportunity to secure clinical preference from prescribing clinicians, which may have a material adverse effect on our business, financial condition and results of operations.

In addition, future clinical studies or other articles regarding our existing products or any competing products may be published that either support a claim, or are perceived to support a claim, that a competitor’s product is clinically more effective or easier to use than the Omnipod System or that the Omnipod System is not as effective or easy to use as we claim. Additionally, diabetes associations, healthcare providers that focus on diabetes, or other organizations that may be viewed as authoritative could endorse products or methods that compete with the Omnipod System or otherwise announce positions that are unfavorable to the Omnipod System. Any of these events may negatively affect our sales efforts and result in decreased revenue.

We may be unable to adequately protect our intellectual property rights.

Our success depends in part on our ability to maintain the proprietary nature of our technologies. We rely on a combination of patents, trade secrets, copyright and trademark laws, confidentiality, non-disclosure and assignment of invention agreements

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and other contractual provisions and technical measures to protect our intellectual property rights. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated.

Our ability to compete depends in part on our continued ability to develop or acquire commercially valuable patent rights and to protect those rights adequately. We may not be able to develop additional proprietary technologies that are patentable. Further, we cannot ensure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain circumstances outside the United States. For example, we may not be able to protect our intellectual property rights effectively in China, where we rely on third-party contract manufacturers to produce our product. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Our efforts to safeguard our unpatented and unregistered intellectual property rights, including requiring employees, consultants and other third parties to sign confidentiality, non-disclosure or assignment of invention agreements, may not be successful. The agreements may be breached and trade secrets and other proprietary information could be disclosed to our competitors. Further, we may have inadequate remedies for any breach. In addition, others may independently develop substantially equivalent or superior proprietary information and techniques or gain access to our trade secrets or disclose such technologies. If we are unable to sufficiently protect our intellectual property rights and our intellectual property is disclosed or misappropriated, our competitiveness could be impaired, which would limit our growth and future revenue.

To protect our intellectual property, we may need to assert claims of infringement against third parties. Any lawsuits that we initiate could be expensive, take significant time and divert management’s attention from other business concerns. The outcome of litigation to enforce our intellectual property rights is highly unpredictable. A court could determine that some or all of our asserted intellectual property rights are not infringed, or are invalid or unenforceable. Additionally, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Claims that our current or future products infringe or misappropriate the proprietary rights of others could adversely affect our ability to sell those products and cause us to incur additional costs.

Substantial litigation over intellectual property rights exists in the medical device industry. We have settled infringement suits in the past and as disclosed in Note 13 to the consolidated financial statements included in Item 8, we are currently subject to patent infringement litigation with Roche Diabetes Care, Inc. In addition, we expect that we could be increasingly subject to third-party infringement claims as our revenue increases, the number of competitors grows and the functionality of products and technology in different industry segments overlaps. Third parties may currently have, or may eventually be issued, patents on which our current or future products or technologies may infringe. Any of these third parties might make a claim of infringement against us.

Such litigation, regardless of its outcome, could result in the expenditure of significant financial resources and the diversion of management’s time and resources. In addition, such litigation could cause negative publicity, adversely affect prospective users, cause product shipment delays, limit or prohibit us from manufacturing, marketing or selling our current or future products, require us to develop non-infringing technology, make substantial payments to third parties or enter into royalty or license agreements, which may not be available on acceptable terms or at all. If a successful claim of infringement were made against us and we could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, our revenue could decrease substantially, and we could be exposed to significant liability. A court could enter orders that temporarily, preliminarily or permanently enjoin our customers from using our products or us from manufacturing, selling, or importing our products, or could enter an order mandating that we undertake certain remedial activities.

Risks Related to Economic Conditions and Operating Internationally

Our financial condition and results of operations have been and may to continue to be adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption in the markets we sell our products into and operate in and negatively impacted business and healthcare activity globally. The pandemic and preventative measures taken to contain or mitigate the outbreak, have caused, and are continuing to cause, business slowdown or shutdown in affected areas and disruption in the financial markets globally. This has led to a significant increase in unemployment and a loss of employee-sponsored insurance coverage for many people in the United States. As a result, consumers may reduce their spending, new orders for our Omnipod System may decline and our customer attrition rate may increase, which could have a material adverse effect on our business, sales, financial condition and results of operations.

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The COVID-19 pandemic also has the potential to significantly impact our supply chain if the manufacturing plants that produce our products or product components, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers, including third parties that sterilize our products, are disrupted, temporarily closed or experience worker shortages for a sustained period of time. Although China, where we manufacture a significant portion of our product, has experienced a recovery and we are currently producing at pre-COVID-19 levels, should China suffer a COVID-19 relapse, it could hinder our ability to produce product and have a material adverse effect on our business and results of operations.

As a result of the COVID-19 pandemic, we have transitioned to a remote work environment for those employees who can perform their job function outside of our facilities. The remote work environment has increased risks associated with our information technology systems and networks, including cyber-attacks, computer viruses, disruptions, or shutdowns that could result in a failure to protect our information technology systems and data integrity.

The further spread of COVID-19, and the requirements to take action to help limit the spread of the illness, may impact our ability to carry out our business as usual. For example, the COVID-19 pandemic may divert healthcare resources away from the conduct of clinical trials and interrupt the operations of the FDA and comparable foreign regulatory agencies, which could delay product approval timelines, including for our Omnipod 5.

Our financial condition or results of operations may be adversely affected by international business risks.

We sell the Omnipod System in Europe, Canada and the Middle East. Our operations outside of the United States are subject to risks that are inherent in conducting business under non-U.S. laws, regulations and customs. Sales outside the United States made up approximately one third of our revenues in 2020 and we expect non-U.S. sales to contribute significantly to our future growth. If the U.S. dollar strengthens in relation to the currencies of other countries where we sell our products, such as the euro, our U.S. dollar reported revenue and income will decrease. Changes in the relative values of currencies occur regularly and, in some instances, may have a significant effect on our operating results. We also rely on third-party suppliers located outside the United States. For example, a significant portion of our Omnipod Systems are manufactured at third-party contract manufacturer facilities in China.

Our efforts to introduce or expand our current or future products in foreign markets may not be successful, in which case we may have expended significant resources without realizing the expected benefit. Ultimately, the investment required for expansion into foreign markets could exceed the results of operations generated from this expansion.

In addition to the risks discussed elsewhere in this Item 1A, other risks associated with doing business internationally, include:

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

•trade protection measures, such as tariff increases, and import and export licensing and control requirements;

•negative consequences from changes in or interpretations of tax laws;

•difficulty in establishing, staffing and managing non-U.S. operations;

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

•changes in regulatory requirements;

•adapting to the differing laws and regulations, business and clinical practices, and consumer preferences in foreign markets;

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

•difficulty in collecting accounts receivable and longer collection periods.

In addition, in January 2020, the U.K. withdrew from the European Union, commonly referred to as “Brexit”. The effects of Brexit will depend on the terms of the U.K.’s future relationship with the European Union. Although it is unknown what those terms will be, it is possible that there could be greater restrictions on imports and exports and on the movement of people between the U.K. and European Union countries, and increased regulatory complexities.

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 non-U.S. 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 U.S. Our policies mandate compliance with these anti-bribery laws. We operate

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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.

Risks Related to Supply Chain, Operations and Third-Party Arrangements

Our Omnipod System inventory is produced and maintained in a limited number of locations.

Our manufacturing of the Omnipod System is conducted in three locations, at our U.S. manufacturing facility in Massachusetts and on manufacturing lines owned by us at two facilities located in China, which are operated by third-party contract manufacturers. Political or financial instability, currency fluctuations, the outbreak of pandemics such as the COVID-19, labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could slow or disrupt port activities and affect foreign trade are beyond our control and could materially disrupt our supply of product from China, increase our costs, and/or adversely affect our results of operations. Further, following the COVID-19 pandemic there may be increased pressure for U.S. medical device companies to reduce dependency on China for their supply chain. In addition, substantially all our U.S. Omnipod System inventory is held at a single location in Massachusetts and our European Omnipod System inventory is maintained by a third-party logistics entity primarily in a single location in the Netherlands. We take precautions to ensure that our third-party contract manufacturers and logistics entity safeguard our assets, including insurance, health and safety protocols, and off-site storage of computer data. However, a natural or other disaster, such as a fire or flood, could cause substantial delays in our operations, damage or destroy our manufacturing equipment and/or inventory and cause us to incur additional expenses. The insurance we maintain may not be adequate to cover our losses in any particular case. With or without insurance, damage to our facility, manufacturing equipment, inventory or other property or to any of our suppliers, may have a material adverse effect on our business, financial condition and results of operations.

If we are unable to obtain sufficient components or raw materials on a timely basis or if we experience manufacturing difficulties, including not effectively managing the start-up of new manufacturing lines, our business may be harmed.

The manufacture of our product requires the timely delivery of sufficient amounts of quality components and materials. We acquire our components and materials from many suppliers in various countries. We work closely with our suppliers to ensure the continuity of supply, but we cannot guarantee these efforts will always be successful. Further, while efforts are made to diversify our sources of components and materials, in certain instances we acquire components and materials from a sole supplier. In addition, due to the stringent regulations and requirements of the FDA and other similar non-U.S. regulatory agencies regarding the manufacture of our products, we may not be able to quickly establish additional or replacement sources for some components or materials. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could hinder our ability to manufacture our products in a timely or cost-effective manner, and have a material adverse effect on our business and results of operations.

The manufacture of our product is highly exacting and complex, due in part to strict regulatory requirements. Problems in the manufacturing process, including equipment malfunction, failure to follow specific protocols and procedures, defective raw materials and environmental factors, could lead to launch delays, product shortage, unanticipated costs, lost revenues and damage to our reputation. A failure to identify and address manufacturing problems prior to the release of products to our customers may also result in a quality or safety issue. Significant manufacturing problems or inability to obtain key components and materials could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, as we commence operation of new manufacturing lines, we could experience quality issues and unexpected operational delays that decrease our gross margins and cause a shortage of product supply.

We are dependent upon third-party suppliers, making us vulnerable to supply problems and price fluctuations.

We rely on suppliers who manufacture the components for and perform assembly of the Pods and PDMs. In addition, two third-party contract manufacturers in China perform assembly and supply a significant portion of all finished Omnipod Systems. We do not have long-term supply agreements with all our suppliers, and, in many cases, we, or our contract manufacturers, make purchases based on individual purchase orders. In some cases, our agreements with suppliers can be terminated by either party upon short notice. Additionally, our suppliers may encounter problems during manufacturing for a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction, component part supply constraints and environmental factors, any of which could delay or impede their ability to meet our demand. Our reliance on these third-party suppliers also subjects us to other risks that could harm our business, including:

•we are not a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than ours;

•we may not be able to obtain an adequate supply in a timely manner or on commercially reasonable terms;

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•our suppliers may make errors in manufacturing that could negatively affect the safety or efficacy of our products, cause delays in shipment or negatively affect our reputation;

•we may have difficulty locating and qualifying alternative suppliers for our sole-source supplies;

•switching components may require product redesign and submission to the FDA of a new 510(k);

•our suppliers manufacture products for a range of customers, and fluctuations in demand for the products these suppliers manufacture for others may affect their ability to deliver products to us in a timely manner;

•thefts of our trade secrets and intellectual property could occur with the third-party supply process;

•the occurrence of a fire, natural disaster or other catastrophe, impacting one or more of our suppliers, may affect their ability to deliver products to us in a timely manner;

•our suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements, and

•our suppliers may fail to comply with conflict minerals, anti-slavery or other applicable laws, thus impairing our ability to source materials.

We may not be able to quickly establish additional or alternative suppliers, particularly for our sole-source suppliers, in part because of the FDA approval process and because of the custom nature of various parts. An interruption or delay in obtaining products from our third-party suppliers, or our inability to obtain products from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders or switch to competing products.

We rely on agreements or licenses to intellectual property or other rights in order to sell our current product and commercialize new products.

We rely on agreements or licenses to intellectual property or other rights in order to sell our current product and commercialize new products. If we cannot retain or obtain these agreements, licenses, or other rights, we may not be able to sell, develop or commercialize our products. For example, our rights to incorporate the FreeStyle blood glucose meter into the Omnipod are governed by a license agreement with Abbott. In addition, we have a commercial agreement with Dexcom that allows us to launch Omnipod 5 with integration to Dexcom’s CGM and have a development agreement with Abbott to integrate Abbott’s CGM into Omnipod 5. The loss of any of these rights could impair the functionality of the Omnipod or prevent us from selling our products without significant development and regulatory activities that may not be completed in time to prevent an interruption in the availability of the Omnipod to consumers. This could result in a material adverse effect on our business, financial condition and results of operations.

We also have a partnership with Glooko that allows the Omnipod System to connect with Glooko’s cloud-based diabetes data management system so that users and healthcare providers can monitor user data, including insulin delivery trends and blood glucose levels. Our agreement with Glooko expires in December 2025. If this agreement is not renewed in the future, our business could be materially adversely impacted.

Our non-insulin drug delivery product line faces challenges which, if not met, may impair its future success.

Our non-insulin drug delivery product line involves the development, manufacture and sale of a modified Omnipod System for delivery of a specific drug other than insulin. Most of our commercialized drug delivery revenue consists of sales of a customized version of our product for use in Amgen’s Neulasta Onpro kit. The marketing and sales initiatives driving this product line differ markedly from those on which we rely for our sales of Omnipod Systems to treat diabetes since the non-insulin drug delivery devices depend on marketing and sales to pharmaceutical companies, not to users and clinicians. We expect that the future results of our non-insulin drug delivery product line will face several challenges, including:

•our identification of drug delivery opportunities for a modified Omnipod System;

•our achievement of satisfactory development and pricing terms with the pharmaceutical companies that sell such drugs;

•our development of appropriate modifications to our Omnipod System technology to address the needs and parameters required for the respective drug-delivery opportunities;

•manufacturing issues relating to the modified Omnipod System;

•long lead-times associated with the development, regulatory approvals and ramp up applicable to the use of modified Omnipod Systems for the delivery of such drugs;

•relatively small number of modified Omnipod Systems needed to address each drug-delivery opportunity;

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•uncertainties regarding the market acceptance of such drugs and the modified Omnipod System as appropriate delivery device;

•uncertainties relating to the success of the pharmaceutical companies in marketing and selling such drugs as well as the modified Omnipod Systems as the appropriate delivery devices;

•intense competition in the drug-delivery industry, including from competitors which have substantially greater resources;

•demand for non-insulin drugs, including the impact of generics and biosimilars;

•maintaining appropriate gross margins; and

•regulatory requirements and reimbursement rates associated with such drugs.

If we are unsuccessful in overcoming one or more of these challenges, or if our agreement with Amgen is terminated, our financial results could be materially and adversely impacted.

Risks Related to Government Regulation and Litigation

We are subject to extensive government regulation, which could restrict the sales and marketing of our products and could cause us to incur significant costs.

Our medical device products and operations are subject to extensive regulation by the FDA and various other federal, state, local and foreign government authorities. Government regulation of medical devices is meant to assure their safety and effectiveness, and includes regulation of, among other things:

•design, development and manufacturing;

•testing, labeling, content and language of instructions for use and storage;

•clinical trials;

•regulatory clearances and approvals including premarket clearance and approval;

•product safety;

•advertising and promotion;

•marketing, sales and distribution;

•conformity assessment procedures;

•product traceability and record keeping procedures;

•product complaints, complaint reporting, recalls and field safety corrective actions;

•post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;

•post-market studies; and

•product import and export.

Before a new medical device, or a significant modification of a medical device, including a new use of or claim for an existing product, can be marketed in the United States, it must first receive either 510(k) clearance or PMA from the FDA, unless an exemption applies. In December 2012, we received 510(k) clearance for our Omnipod. We have since obtained clearance for modified versions of this device, including Omnipod DASH, which was cleared by the FDA in 2018 to be used as an integrated insulin pump in an interoperable AID system. We may be required to obtain a new 510(k) clearance or PMA for significant further post-market modifications to the Omnipod System. Obtaining 510(k) clearance or PMA for medical devices can be expensive and lengthy, and entail significant user fees. Further, we may not be able to obtain additional 510(k) clearances or PMAs for new products or for modifications to, or additional indications for, the Omnipod System in a timely fashion or at all. Delays in obtaining future clearances could adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn could harm our revenue and future profitability.

We also are subject to numerous post-marketing regulatory requirements, which include quality system regulations related to the manufacture of our devices, labeling regulations and medical device reporting regulations. The last of these regulations requires us to report to the FDA if our devices cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury if the malfunction recurred. If we fail to comply with present or future regulatory requirements that are applicable to us, we may be subject to enforcement action by the FDA, which may include any of the following sanctions:

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•untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

•customer notification, or orders for repair, replacement or refunds;

•voluntary or mandatory recall or seizure of our current or future products;

•administrative detention by the FDA of medical devices believed to be adulterated or misbranded;

•operating restrictions, suspension or shutdown of production;

•refusing our requests for 510(k) clearance or PMA of new products, new intended uses or modifications to the Omnipod System;

•rescinding 510(k) clearance or suspending or withdrawing PMAs that have already been granted; and

•criminal prosecution.

The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions that may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis. The FDA is in the process of reviewing the 510(k) approval process and criteria and has announced initiatives to improve the current pre- and post-market regulatory processes and requirements associated with infusion pumps and other home use medical devices. As part of this effort, the FDA is reviewing the adverse event reporting and recall processes for insulin pumps. Any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market and distribute existing products.

The Omnipod is also sold in Canada and certain countries in Europe and the Middle East. As a result, we are required to comply with additional foreign regulatory requirements. As we expand our sales efforts internationally, we may need to obtain additional foreign approval certifications. Failure to fulfill foreign regulatory requirements on a timely basis or at all could adversely affect our ability to grow our business.

If we, our contract manufacturers or our component suppliers fail to comply with the FDA’s quality system regulations, the manufacturing and distribution of our devices could be interrupted, and our sales and operating results could suffer.

We, our contract manufacturers and our component suppliers are required to comply with the FDA’s QSR, which is a complex regulatory framework that covers the procedures and documentation of the design, testing, production, control, quality assurance, sterilization, labeling, packaging, storage, shipping and servicing of our devices. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic, sometimes unannounced, inspections by the FDA. We cannot assure you that our facilities or our contract manufacturers’ or component suppliers’ facilities would pass any future quality system inspection. If our or any of our contract manufacturers’ or component suppliers’ facilities fails a quality system inspection, the manufacturing or distribution of our devices could be interrupted, and our operations disrupted. Failure to take adequate and timely corrective action in response to an adverse quality system inspection could force a suspension or shutdown of our labeling operations or the manufacturing operations of our contract manufacturers, or a recall of our devices.

If we, or our manufacturers, fail to adhere to QSR requirements, this could delay production of our products and lead to fines, difficulties in obtaining regulatory clearances, recalls, enforcement actions, including injunctive relief or consent decrees, or other consequences, which could have a material adverse effect on our financial condition or results of operations.

Malfunction of our products could lead to recalls or safety alerts and have a significant adverse impact on us.

Medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. Any such adverse event involving our products could result in voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Adverse events involving our products have been reported to us in the past, and we cannot guarantee that they will not occur in the future. Any corrective action, whether voluntary or involuntary, such as our voluntary Medical Device Correction issued in February 2020, may require the dedication of our time and capital, could distract management from operating our business and potentially harm our reputation and financial results.

The FDA and similar governmental bodies in other countries have the authority to require the recall of our products if we or our contract manufacturers fail to comply with relevant regulations pertaining to manufacturing practices, labeling, advertising or promotional activities, or if new information is obtained concerning the safety or efficacy of these products. A government-mandated recall could occur if the FDA finds that there is a reasonable probability that the device would cause serious, adverse

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health consequences or death. A voluntary recall by us could occur as a result of any material deficiency in a device, such as manufacturing defects, labeling deficiencies, packaging defects or other failures to comply with applicable regulations.

Recalls of any of our products would divert managerial and financial resources and could have an adverse effect on our reputation, results of operations and financial condition, and impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear other costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.

We may be subject to enforcement action if we engage in improper marketing or promotion of our products.

Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of unapproved, or off-label, use. Doctors may prescribe our products off-label, as the FDA does not restrict or regulate a doctor’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, 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 fine or 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 off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged, and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA or another regulatory agency could disagree with our characterization of certain statements and conclude that we have engaged in off-label promotion. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could divert management’s attention, result in substantial damage awards against us, and harm our reputation.

If we were found to be noncompliant with state DME licensure rules, we could lose our licensure in that state, which could prohibit us from selling our current or future products directly to consumers in that state.

Several states require that DME providers be licensed in order to sell products to customers in that state. Certain of these states require, among other things, that DME providers maintain an in-state location. Although we believe we are in compliance with all applicable state regulations regarding licensure requirements, if we were found to be noncompliant, we could lose our licensure in that state, which could prohibit us from selling our current or future products directly to consumers in that state.

The medical device industry is heavily regulated. If we fail to comply with all applicable laws and government regulations, we could be subject to substantial penalties and/or be excluded from participation in government programs.

Our relationships with customers and third-party payors are subject to broadly applicable fraud and abuse and other health care laws and regulations that may constrain our sales, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs and certain customer and product support programs, we may have with hospitals, physicians, customers or other potential purchasers of medical devices. These laws include, among others, the federal healthcare Anti-Kickback Statute, the federal civil False Claims Act, other federal health care false statement and fraud statutes, the Open Payments program, the Civil Monetary Penalties Law, and analogous fraud and abuse and transparency laws in most states, as described in “Item 1—Business—Government Regulation”.

We conduct various marketing and product training activities that involve making payments to healthcare providers and entities. While we believe and make every effort to ensure that our business arrangements with third parties and other activities and programs comply with all applicable laws, these laws are complex and our activities may be found not to be compliant with one of these laws, which may result in significant civil, criminal and/or administrative penalties, fines, damages, and exclusion from participation in federal health care programs. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to, and thus could have a material adverse effect on our business, financial condition and results of operations. Our compliance with Medicare and Medicaid regulations may be reviewed by federal or state agencies, including the OIG, CMS, and the Department of Justice, or may be subject to whistleblower lawsuits under federal and state false claims laws. To ensure compliance with Medicare, Medicaid and other regulations, government agencies conduct periodic audits of us to ensure compliance with various supplier standards and billing requirements.

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Risks Related to Privacy and Security

We are subject to complex and evolving laws and regulations regarding privacy and data protection, many of which are subject to change and uncertain interpretation, which could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad relating to privacy and data protection, data security, data retention and deletion, personal information, electronic contracts and other communications. The introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. For example, data privacy laws at the federal and state levels protect the confidentiality of certain health information and restrict the use and disclosure of that protected information. In particular, the U.S. privacy rules under HIPAA protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. In the state of California, the CCPA, which provides certain privacy rights and consumer protection for residents of the state became effective in 2020, and the CPRA, which amends and expands the CCPA, will take effect in 2023. These consumer rights include the right to know what personal information is collected, the right to know whether the data is sold or disclosed and to whom, the right to request a company to delete the personal information collected, the right to opt-out of the sale of personal information and the right to non-discrimination in terms of price or service when a consumer exercises a privacy right. California and other states’ laws apply more broadly and now or in the future may reach data we hold that relates to employees and health care providers, not just customers. In addition, data security protection laws passed by the federal government and many states require notification to data subjects, including customers and others, when there is a security breach of personal data. If we fail to comply with these regulations, we could be subject to civil sanctions, including fines and penalties for noncompliance.

In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States. Data localization laws in some countries generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. We could be subject to audits in Europe and around the world, particularly in the areas of consumer and data protection, as we continue to grow and expand our operations. Legislators and regulators may make legal and regulatory changes, or interpret and apply existing laws, in ways that make our products less useful to users, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These changes or increased costs could negatively impact our business and results of operations in material ways. For example, the GDPR imposes requirements in the European Economic Area relating to, among other things, consent to process personal data of individuals, the information provided to individuals regarding the processing of their personal data, the security and confidentiality of personal data, notifications in the event of data breaches and use of third party processors. If we fail to comply with these standards, we could be subject to criminal penalties and civil sanctions, including significant fines and penalties.

We rely on the proper function, availability and security of our product and information technology systems and a cyber-attack or other breach or disruption of our product or these systems could have a material adverse effect on our business and results of operations.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The form and function of such systems may change over time as our business needs change. The nature of our business involves the receipt and storage of personal and financial information regarding our customers. We use our information technology systems to manage or support a variety of business processes and activities, including sales, shipping, billing, customer service, procurement and supply chain, manufacturing and accounts payable. In addition, we use enterprise information technology systems to record, process, and summarize transactions and other financial information and results of operations for internal reporting purposes and to comply with financial reporting, legal, and tax regulatory requirements. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Any failure by us to maintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions, disruptions or shutdowns, could result in the unauthorized access to customer data and personally identifiable information, theft of intellectual property or other misappropriation of assets or the loss of key data and information, or otherwise compromise our confidential or proprietary information and disrupt our operations. Additionally, the FDA has warned that insulin pumps may have cybersecurity vulnerabilities and could be manipulated by hackers, causing danger to diabetes patients. If our product is breached or our information technology systems are breached or suffer severe damage, disruption or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may be materially and adversely affected.

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Failure to maintain the privacy and security of our customer, third-party payor, employee, supplier or Company information could result in substantial costs and/or subject us to litigation, enforcement actions and reputational damage.

Our business, like that of most medical device manufacturers, involves the receipt, storage and transmission of customer information and payment and reimbursement information, as well as confidential information about third-party payors, our employees, our suppliers and our Company. Our information systems are vulnerable to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deceiving our employees or third-party service providers. Hardware, software or applications we develop or obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information and device security. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. We have implemented and regularly review and update processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, the ever-evolving threats mean we must continually evaluate and adapt our systems and processes, and our efforts may not be adequate to safeguard against all data security breaches, misuse of data or sabotage of our systems. Any future significant compromise or breach of our data security, whether external or internal, or misuse of customer, third-party payor, employee, supplier or Company data, could result in significant costs, lost sales, fines, lawsuits and damage to our reputation. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs.

Risks Related to Our Debt

We may not be able to generate sufficient cash flow from operations to service our debt, which is substantial.

As of December 31, 2020, we had debt of $1.3 billion, including $1.2 billion aggregate principal amount of Convertible Senior Notes, which mature between 2024 and 2026. Our ability to make scheduled payments or to refinance the Convertible Senior Notes or other debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot guarantee that we will maintain a level of cash flows from operating activities sufficient to permit us to repay the principal or service our interest. If our cash flows and capital resources are insufficient to fund these obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness, including the outstanding Convertible Senior Notes. We cannot assure you that we would be able to take any of these actions, that these actions would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our future debt agreements.

Conversion of any of our Convertible Senior Notes may dilute the ownership interest of existing stockholders or depress our stock price.

The conversion of some or all our Convertible Senior Notes may dilute the ownership interests of existing stockholders. Any sales in the public market of any of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the anticipated conversion of the Convertible Senior Notes into a combination of cash and shares of our common stock could depress the price of our common stock.

Our ability to use net operating loss carryforwards may be subject to limitation.

Section 382 of the U.S. Internal Revenue Code imposes an annual limit on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership or equity structure. Our ability to use net operating losses may be limited by prior changes in our ownership and may be further limited by the issuance of common stock in connection with the conversion of our Convertible Senior Notes, or by the consummation of other transactions. As a result, if we earn net taxable income, our ability to use net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liabilities for us.

General Risks

Our success will depend on our ability to attract and retain personnel.

Over the last several years, we have made significant changes to our senior management team and to many other positions throughout the Company. We believe we will benefit substantially from the leadership and performance of these new and promoted employees. Our success will depend on our ability to retain our employees and to attract and retain additional qualified personnel in the future. In addition, it is important to the success of the Company that the transition of new and promoted employees and executives be largely seamless. Competition for senior management personnel, and other highly

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skilled personnel is intense and there can be no assurances that we will be able to retain our personnel. The loss of the services of members of our senior management, and other highly skilled personnel could prevent or delay the implementation and completion of our objectives or divert management’s attention to seeking qualified replacements.

Additionally, the sale and after-sale support of the Omnipod System is logistically complex, requiring us to maintain an extensive infrastructure of field sales personnel, diabetes educators, customer support, insurance specialists, and billing and collections personnel. We face considerable challenges in recruiting, training, managing, motivating and retaining these employees, including managing geographically dispersed teams. If we fail to maintain and grow an adequate pool of trained and motivated personnel, our reputation could suffer, and our financial position could be adversely affected.

Acquisitions or investments in new businesses, products or technologies could disrupt our business.

If we are presented with appropriate opportunities, we may pursue acquisitions or investments in complementary businesses, products or technologies. We may not complete the transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the expected benefits of any acquisition or investment. Even if we are successful in making an acquisition, the products and technologies that we acquire may not be successful or may require significantly greater resources and investments than we originally anticipated. We could also experience negative effects on our results of operations and financial condition from acquisition-related charges, amortization of intangible assets and asset impairment charges if the acquisitions are not as successful as we originally anticipate. We will likely face risks, uncertainties and disruptions associated with the integration process, including difficulties in the integration of the operations of any acquired company, integration of acquired technology with our products, and the potential loss of key employees, customers, distributors or suppliers of the acquired businesses. Integration of an acquired business also may require management resources that otherwise would be available for development of our existing business. If an acquired business fails to operate as anticipated or cannot be successfully integrated into our existing business, our stock price, business, financial condition and results of operations could be materially and adversely affected. Furthermore, we may have to incur debt or issue equity to pay for any future acquisitions or investments, the issuance of which could be dilutive to our existing stockholders.

We may need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.

Our capital requirements will depend on many factors, including:

•revenue generated by sales of our current products and any other future products that we may develop;

•costs associated with capital expenditures, including adding additional manufacturing capacity;

•costs associated with any expansion, including expanding our sales and marketing efforts globally;

•expenses we incur in manufacturing and selling our products;

•costs of developing new products or technologies and enhancements to our products;

•costs of complying with regulatory requirements, including obtaining and maintaining FDA approval or clearance of our current or future products;

•costs associated with litigation; and

•the number and timing of any acquisitions or other strategic transactions.

We may in the future seek additional funds from public and private stock offerings, borrowings under credit lines or other sources, and we may need to raise additional debt or equity financing to repay our outstanding Senior Convertible Notes. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies or grant licenses on terms that are not favorable to us.

Our ability to raise additional capital may be adversely impacted by current economic conditions, including any sustained disruption to the credit and financial markets from the COVID-19 pandemic. If the macro-economic disruption continues for pro-longed periods, we may need to raise additional capital and capital may not be available on acceptable terms, or at all. We cannot predict when the macro-economic disruption stemming from COVID-19 will ebb or when the economy will return to pre-COVID-19 levels, if at all.

If we are unable to raise additional capital due to these or other factors, we may need to further manage our operational expenses, including potentially curtailing planned product development activities. In addition, we may not be able to execute our business plan, take advantage of future opportunities or respond to competitive pressures or unanticipated customer requirements. If any of these events occur, it could adversely affect our business, financial condition and results of operations.

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The price of our common stock may be volatile.

The market price of our common stock is affected by a number of factors, including:

•failure to maintain and increase production capacity and reduce per unit production costs;

•changes in the availability of third-party reimbursement in the United States or other countries;

•volume and timing of orders for our products;

•developments in administrative proceedings or litigation related to intellectual property rights;

•issuance of patents to us or our competitors;

•the announcement of new products or product enhancements by us or our competitors;

•the announcement of technological or medical innovations in the treatment or diagnosis of diabetes;

•changes in governmental regulations or in the status of our regulatory approvals or applications;

•publication of clinical studies relating to our products or a competitor’s product;

•quarterly variations in our or our competitors’ results of operations;

•changes in earnings estimates or recommendations by securities analysts; and

•general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

At times, the fluctuations in the market price of our common stock have been unrelated or disproportionate to our operating performance. In particular, the U.S. equity markets have at times experienced significant price and volume fluctuations that have affected the market prices of equity securities of many technology companies. Broad market and industry factors such as these could materially and adversely affect the market price of our stock, regardless of our actual operating performance.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We own a 350,000 square foot facility in Acton, MA, which houses both our headquarters and our U.S. manufacturing. As of December 31, 2020, we leased a total of 15 facilities in 7 countries consisting of approximately 225,000 square feet of office, research and development and warehousing space and other related facilities, primarily in North America and Europe.

Item 3. Legal Proceedings

The information required by this Item is provided under “Legal Proceedings” in Note 13 to the consolidated financial statements included in Item 8 of this Form 10-K and is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

MARKET FOR REGISTRANT’S COMMON EQUITY

Our common stock is listed on The NASDAQ Global Market (“NASDAQ”) under the trading symbol PODD.

As of February 18, 2021, there were 8 registered holders of record of our common stock.

Performance Graph

The following graph shows the cumulative total return on $100 invested in each of our common stock, the NASDAQ Composite Index and the NASDAQ Health Care Index for the five-year period beginning on December 31, 2015, and ending on December 31, 2020, assuming reinvestment of all dividends. The historical stock price performance on the graph below is not necessarily indicative of future stock price performance.

The material in this performance graph shall not be deemed to be filed with the SEC and is not incorporated by reference in any filing of Insulet Corporation under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, whether made on, before or after the date of this filing and irrespective of any general incorporation language in such filing.

Dividends

We currently intend to retain any earnings to finance research and development and the operation and expansion of our business and do not anticipate paying any cash dividends for the foreseeable future.

Issuer Purchases of Equity Securities

None.

Item 6. Selected Financial Data

Consistent with the amendments to Regulation S-K, we are not required to disclose information previously required by this item.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included in this annual report. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs, which are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed under the headings “Risk Factors” and “Forward-Looking Statements.”

Overview

We are primarily engaged in the development, manufacture and sale of our proprietary Omnipod System, a continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod device that is worn on the body for up to three days at a time; and its wireless companion, the handheld PDM. The Omnipod System, which features discreet and easy-to-use devices, communicates wirelessly, provides for virtually pain-free automated cannula insertion and eliminates the need for traditional MDI therapy or the use of traditional pump and tubing. We believe that the Omnipod System’s unique proprietary design and features allow people with insulin-dependent diabetes to manage their diabetes with unprecedented freedom, comfort, convenience and ease.

In addition to the diabetes market space, we have partnered with pharmaceutical and biotechnology companies to tailor the Omnipod System technology platform for the delivery of subcutaneous drugs across other therapeutic areas. Most of our drug delivery revenue currently consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s white blood cell booster to help reduce the risk of infection after intense chemotherapy.

Our mission is to improve the lives of people with diabetes. To assist in achieving this mission, we are focused on the following key strategic imperatives:

•driving access and awareness;

•delivering consumer-focused innovation;

•expanding our global addressable market; and

•driving operational excellence.

Our long-term financial objective is to sustain profitable growth. To achieve this goal, our efforts are focused on the launch of Omnipod 5, powered by HorizonTM (“Omnipod 5”), our AID system. We completed the first phase of our Omnipod 5 pivotal trial in October. We also recently completed our Omnipod 5 clinical study of pediatric users ages two to six years old and are planning for an expanded indication by the end of 2021. In addition, we have begun enrolling individuals with Type 2 diabetes in an Omnipod 5 feasibility study. Based on the results of the feasibility work, we plan to conduct additional studies with the goal to further expand Omnipod 5’s indications.

During 2020, we began producing salable product on our second highly automated manufacturing line in the U.S. and secured a second contract manufacturer in China, which increased our capacity and redundancy. Additionally, in order to support our continued growth and the expected launch of Omnipod 5 in the first half of 2021, we recently installed a third highly automated manufacturing line in the U.S. on which salable product is expected in 2021.

In 2020, we completed the roll out of Omnipod DASH, our digital mobile Omnipod platform, in the countries we serve in Europe. In January 2021, we completed our full commercial launch of Omnipod DASH internationally with our roll out in Canada. The majority of our global customers start on Omnipod DASH. We expect the introduction of Omnipod DASH throughout our international markets to be a growth driver as we increase our presence within our existing markets and enter into new countries over the long term.

In 2020, we entered five new countries in Western Europe and the Middle East to expand the commercial sale of Omnipod and our global footprint. While this expansion into additional countries did not have a material impact on our 2020 revenues, it is expected to contribute to our long-term growth.

We are continuing to expand internationally in a targeted and strategic manner. In the first quarter of 2021, we expanded into Turkey and we expect to launch Omnipod DASH in Australia in 2021. Additionally, we are working on our strategy to enter larger markets, such as Asia Pacific and Latin America.

Finally, we plan to continue our product development efforts and expand awareness of and access to our products. Achieving the above strategic imperatives is expected to require additional investments in certain initiatives and personnel, as well as enhancements to our supply chain operation capacity, efficiency and effectiveness.

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Results of Operations

The discussion of our results of operations for 2018 has been omitted from this Form 10-K but can be found in Item 7. Management’s Discussion and Analysis and Results of Operations in our Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange Commission on February 26, 2020.

Comparison of the Years Ended December 31, 2020 and December 31, 2019

Revenue

Years Ended December 31,

(In millions) 2020 2019 % Change Currency Impact Constant Currency(1)

(1) Constant currency revenue growth is a non-GAAP financial measure which should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. See “Management’s Use of Non-GAAP Measures.”

Total revenue for 2020 increased $166.2 million, or 22.5%, to $904.4 million, compared with $738.2 million in 2019. Constant currency revenue growth of 21.9% was primarily driven by higher volume and, to a lesser extent, favorable sales channel mix. The COVID-19 pandemic negatively impacted global new customer starts throughout 2020, largely beginning in the second quarter. We expect our revenues in 2021 to continue to be impacted by the global pandemic's effect on both 2020 and 2021 new customer starts, particularly in our international markets.

U.S. Omnipod

U.S. Omnipod revenue for 2020 increased $106.5 million, or 25.3%, to $526.9 million, compared with $420.4 million in 2019. This increase was primarily due to higher volumes driven by growing our customer base and, to a lesser extent, an increase due to growth through the pharmacy channel, where Pods have a higher average selling price due in part to the fact that we offer the PDM for no charge. In 2021, we expect strong Omnipod revenue growth driven by continued market penetration and volume growth of Omnipod DASH, primarily in the pharmacy channel. We expect this revenue growth to be partially offset by the impact of lower new customer starts in 2020 stemming from COVID-19.

International Omnipod

International Omnipod revenue for 2020 increased $54.9 million, or 21.7%, to $308.0 million, compared with $253.1 million in 2019. Excluding the 1.8% favorable impact of currency exchange, the remaining 19.9% increase was primarily due to higher volumes as we continue to expand awareness and access to the Omnipod. Similar to in the U.S., in 2021, we expect higher International Omnipod revenue due to continued volume growth and market penetration aided by the full launch of Omnipod DASH throughout our international markets and our virtual training capabilities. We expect this revenue growth to be partially offset by the impact of lower new customer starts in 2020 stemming from COVID-19 and continued lockdowns in Europe.

Drug Delivery

Drug Delivery revenue for 2020 increased $4.8 million, or 7.4%, to $69.5 million, compared with $64.7 million in 2019. This increase was primarily due to increased demand for Amgen’s Neulasta® Onpro® kit which includes our pods. In 2021, we expect Drug Delivery revenue to decline or grow slightly dependent upon forecasted demand.

Operating Expenses

Years Ended December 31,

(In millions) Amount Percent of Revenue Amount Percent of Revenue

Selling, general and administrative expenses $ 384.0 42.5 % $ 298.0 40.4 %

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Cost of Revenue

Cost of revenue for 2020 increased $64.2 million, or 24.9%, to $322.1 million, compared with $257.9 million in 2019. Gross margin was 64.4% in 2020, compared with 65.1% in 2019. The 70 basis point decrease in gross margin was primarily due to start-up costs and inefficiencies driven by the addition of the second line at our U.S. manufacturing facility, as well as two months of higher depreciation expense for under-utilized plant capacity, recruiting and screening expenses, expedited shipping costs and manufacturing incentives totaling $8.5 million, primarily associated with our contract manufacturer in China as a result of COVID-19. This decrease was partially offset by higher average selling price due to growth in the U.S. pharmacy channel. We expect gross margin for 2021 to increase to 67% to 70%, which reflects expected revenue growth both in the U.S. and internationally, including in the pharmacy channel, and the benefits of continued improvements in manufacturing and supply chain operations.

Research and Development

Research and development expenses for 2020 increased $14.5 million, or 11.0%, to $146.8 million, compared with $132.3 million in 2019. This increase was primarily due to year-over-year headcount additions as we focus on driving innovation, particularly Omnipod 5, partially offset by reduced spend on Omnipod DASH, which was launched in the prior year period. We expect research and development spending in 2021 to increase compared with 2020 as we continue to invest in advancing our innovation and clinical pipeline.

Selling, General and Administrative

Selling, general and administrative expenses for 2020 increased $86.0 million, or 28.9%, to $384.0 million, compared with $298.0 million in 2019. This increase was primarily attributable to investments in customer support and other initiatives to support our growth, including year-over-year headcount additions, mainly sales and customer service personnel, $18.8 million increase in advertising expense driven by the pilot of our direct-to-consumer advertising campaign and online advertising, $14.6 million of cumulative amortization expense related to the resolution of a purchase price contingency associated with the acquisition of customer relationships from a former European distributor on July 1, 2018, as well as $4.8 million of stock-based compensation expense from a company-wide 20th anniversary equity grant, a significant portion of which vested immediately. These increases were partially offset by a $9.7 million decrease in travel and entertainment expenses due to reduced activity resulting from COVID-19. We expect selling, general and administrative expenses to increase in 2021 compared with 2020 due to expansion of our U.S. sales force and customer support personnel, investments to expand market acceptance and access for Omnipod 5, including direct-to-consumer advertising, and investments in our operating structure to facilitate operational efficiencies and continued growth.

Non-Operating Items

Interest Expense, Net

Interest expense, net for 2020 increased $17.4 million, or 62.8%, to $45.1 million, compared with $27.7 million in 2019. This increase was primarily due to a $9.6 million increase in non-cash interest expense resulting from the net impact of the issuance of $800.0 million of 0.375% convertible notes and the repayment of $402.5 million principal amount of 1.25% convertible notes, a $3.9 million decrease in capitalized interest, primarily due to U.S. manufacturing line 2 being placed in service in the first quarter of 2020, and a $3.9 million decrease in interest income due to lower market rates and a shift in a portion of our investment portfolio to more liquid investments.

Loss on Extinguishment of Debt

During 2019, we incurred an $8.7 million loss on extinguishment of debt related to the repurchase of our 1.25% Notes.

Other Income, Net

Other income, net for 2020 increased $2.4 million, to $3.3 million, compared with $0.9 million in 2019. This increase was primarily driven by unrealized foreign currency gains due to the change in exchange rates, partially offset by a $1.8 million insurance recovery for damaged inventory in excess of our cost received during the year ended December 31, 2019.

Income Tax Expense

Income tax expense was $2.9 million on pre-tax income of $9.7 million and $14.5 million for both 2020 and 2019, respectively. Our effective tax rate was 29.6% and 19.8% for 2020 and 2019, respectively. The increase in our effective tax rate primarily resulted from a decrease to pre-tax income in the U.S., which has a valuation allowance. See Note 18 to the consolidated financial statements for additional information on our income tax expense.

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Adjusted EBITDA

The table below presents reconciliations of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”):

Years Ended December 31,

Interest expense, net 45.1 27.7

Income tax expense 2.9 2.9

Depreciation and amortization(1) 55.4 27.9

Stock-based compensation(2) 35.9 28.7

Loss on extinguishment of debt — 8.7

(1) The year ended December 31, 2020 includes $14.6 million of cumulative amortization expense associated with customer relationships that were acquired on July 1, 2018. For more information see Note 13 to the consolidated financial statements.

(2) The year ended December 31, 2020 includes $7.3 million of stock-based compensation expense related to a company-wide 20th anniversary equity grant, a significant portion of which immediately vested.

Non-GAAP Financial Measures

Management uses the following non-GAAP financial measures:

Constant currency revenue growth represents the change in revenue between current and prior year periods using a constant currency, the exchange rate in effect during the applicable prior year period. We present constant currency revenue growth because we believe it provides meaningful information regarding our results on a consistent and comparable basis. Management uses this non-GAAP financial measure, in addition to financial measures in accordance with GAAP, to evaluate our operating results. It is also one of the performance metrics that determines management incentive compensation.

Adjusted EBITDA represents net income (loss) plus net interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation and other significant unusual items, as applicable. We present Adjusted EBITDA because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, and other interested parties as a measure of our comparative operating performance from period to period. Adjusted EBITDA is a commonly used measure in determining business value and we use it internally to report results.

These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. In addition, the above definitions may differ from similarly titled measures used by others. Non-GAAP financial measures exclude the effect of items that increase or decrease our reported results of operations; accordingly, we strongly encourage investors to review our consolidated financial statements in their entirety.

Liquidity and Capital Resources

As of December 31, 2020, we had $907.2 million in cash and cash equivalents and $40.4 million of investments in marketable securities. We believe that our current liquidity will be sufficient to meet our projected operating, investing and debt service requirements for at least the next twelve months.

Convertible Debt

To finance our operations and global expansion, we have periodically issued convertible senior notes, which are convertible into our common stock. As of December 31, 2020, the following notes were outstanding:

(1) Per $1,000 face value of notes.

In connection with the issuance of the 0.375% Convertible Senior Notes, we purchased capped call options (“Capped Calls”) on our common stock. By entering into the Capped Calls, we expect to reduce the potential dilution to our common stock (or, in

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the event the conversion is settled in cash, to provide a source of cash to settle a portion of our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the Convertible Senior Notes. The Capped Calls have an initial strike price of $335.90 per share and cover 3.5 million shares of our common stock.

Additional information regarding our debt is provided in Note 12 to the consolidated financial statements.

Summary of Cash Flows

Years Ended December 31,

Cash provided by (used in):

Operating activities $ 84.0 $ 98.4

Investing activities 14.0 (73.6)

Effect of exchange rate changes on cash 4.8 1.5

Net increase in cash and cash equivalents $ 708.3 $ 99.8

Operating Activities

Net cash provided by operating activities of $84.0 million in 2020 was primarily attributable to net income, as adjusted for depreciation and amortization, non-cash interest, and stock-based compensation, and a $63.4 million working capital cash outflow. The working capital outflow was driven by a $50.5 million increase in inventories, a $32.2 million increase in prepaid expenses and other assets and a $15.6 million increase in accounts receivable, partially offset by a $27.8 million increase in accrued expenses and other liabilities, primarily driven by manufacturing operations costs associated with the addition of our new contract manufacturer, as well as an increase in pharmacy rebates due to growth in the pharmacy channel. The increase in inventories was primarily driven by a planned inventory build associated with the further roll out of Omnipod DASH and an increase in work in progress inventory due to additional capacity from our new contract manufacturer. The increase in prepaid expenses and other assets was primarily driven by an increase in software licenses due to head count additions, and an increase in software-as-a-service to support our strategic initiatives. The increase in accounts receivable was primarily driven by revenue growth.

Net cash provided by operating activities of $98.4 million in 2019 was primarily attributable to net income, as adjusted for non-cash interest, stock-based compensation, depreciation and amortization, partially offset by a $19.7 million working capital cash outflow. The working capital outflow was driven by a $30.2 million increase in inventories and a $22.0 million increase in prepaid expenses and other assets, offset by a $25.6 million increase in accounts payable and a $17.7 million increase in accrued expenses and other liabilities, primarily driven by timing of payments. The increase in inventories was primarily due to an increase in raw materials and finished goods related to the startup of our U.S. manufacturing plant and an increase in work-in-process to support demand for our product. The increase in prepaid expenses and other assets was primarily driven by an increase in operating lease assets resulting from new leases entered into during the year and an increase in deferred commissions.

Investing Activities

Net cash provided by investing activities was $14.0 million in 2020, compared with net cash used in investing activities of $73.6 million in 2019.

Capital Spending—Capital expenditures were $129.0 million in 2020 and primarily related to equipment to increase our manufacturing capacity. Capital expenditures were $163.7 million in 2019 and primarily related to the construction of our manufacturing and corporate headquarters facility in Acton, Massachusetts. We expect capital expenditures for 2021 to increase compared with 2020 as we continue to expand manufacturing capacity to support our growth and the launch of Omnipod 5. We expect to fund our capital expenditures using a combination of existing cash and investments as well as cash generated from operations.

Purchases and Sales of Investments—During 2020, net sales of marketable securities were $180.5 million, compared with net purchases of marketable securities of $97.3 million for 2019. The increase in net sales of marketable securities was driven by a shift in a portion of our investment portfolio to investments that are classified as cash equivalents in order to satisfy future cash needs.

Acquisition of Intangible Assets—In 2020, following the resolution of a purchase price contingency associated with our 2018 acquisition of customer relationships from a former European distributor, we paid the distributor an additional $36.2 million for a total purchase price of $41.2 million. We had previously paid the distributor $3.8 million in 2019 and the remainder in 2018.

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Financing Activities

Net cash provided by financing activities was $605.5 million in 2020, compared with $73.5 million in 2019.

Issuance of Common Stock—In 2020, we sold 2.4 million common shares for $478.7 million in an underwritten registered offering. Net proceeds from the offering were $477.5 million. The proceeds provide us with additional liquidity to mitigate risk and allow us to continue investing in the growth of our business and our strategic initiatives.

Debt Issuance and Repayment—In 2020, we received proceeds of $70.0 million upon entering into a mortgage of our Acton facility. Additionally, we received proceeds of $60.0 million upon entering into two equipment financing transactions. Refer to Note 12 to our consolidated financial statements for additional information regarding these transactions.

Option Exercises and Payment of Taxes for Restricted Stock Net Settlements—Total proceeds from option exercises decreased 20.9 million to $25.7 million in 2020, compared with $46.6 million in 2019. This decrease was primarily driven by less option exercises in 2020 from the retirement of our former CEO in the prior year period. Payments for taxes related to net restricted and performance stock unit settlements increased $21.2 million to $29.8 million in 2020, compared with $8.6 million in 2019. The increase in payments for taxes related to restricted stock net settlements was driven by increased vesting of restricted shares in 2020, compared with 2019, including the immediate vesting of a significant portion of a company-wide 20th anniversary equity grant in the fourth quarter 2020.

Revision to Nine Months Ended September 30, 2020 Condensed Consolidated Cash Flow Statement

In February 2021, we identified an error in the presentation of certain cash flow activity that impacted several line items within the previously issued Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020. While these items affected cash flows from operating and investing activities, they had no impact on the net increase (decrease) in cash and cash equivalents or net income. We have assessed the materiality of the misstatement in accordance with ASC 250-10, Accounting Changes and Error Corrections, and concluded that this misstatement was not material to our previously issued consolidated financial statements. Accordingly, our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2020 will be corrected prospectively in our Form 10-Q for the quarterly period ended September 30, 2021 as shown below.

(in millions) Previously Reported Adjustment As Adjusted

Prepaid and other assets $ (16.8) $ 4.1 $ (12.7)

Net cash provided by operating activities $ 85.0 $ (18.0) $ 67.0

Acquisition of intangible assets $ (8.3) $ 7.7 $ (0.6)

Net cash provided by investing activities $ 65.3 $ 18.0 $ 83.3

Commitments and Contingencies

Contractual Obligations—A summary of our contractual obligations and commitments for debt, operating lease obligations and other obligations at December 31, 2020 is presented in the following table:

(in millions) Short Term Long Term Total

Operating lease obligations $ 5.6 $ 13.1 $ 18.7

(1)Purchase obligations include commitments for the purchase of Omnipod System components, commitments related to establishing additional manufacturing capabilities and other commitments for purchases of goods or services in the normal course of business. These commitments are derived from purchase orders, supplier contracts and open orders based on projected demand information.

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Legal Proceedings—Roche Diabetes Care, Inc. (“Roche”) filed a patent infringement lawsuit against us and is seeking monetary damages and attorneys’ fees and costs. Since the patent expired in 2019, Roche is not seeking injunctive relief and the lawsuit will have no impact on ongoing sales of our products. We believe that we have meritorious defenses to Roche’s claims and intend to vigorously defend against them. At this time, based on available information regarding this litigation, we are unable to reasonably assess the ultimate outcome of this case or determine an estimate, or range of estimates, of potential losses, which could be material; accordingly, we have excluded this exposure from the contractual obligations table above. Refer to Note 13 to our consolidated financial statements for additional information regarding this matter.

Off-Balance Sheet Arrangements

As of December 31, 2020, we had various outstanding letters of credit and bank guarantees totaling $2.8 million, none of which are individually significant. The Company has restricted cash that serves as collateral for these outstanding letters of credit and bank guarantees that is included in cash and cash equivalents on the consolidated balance sheet.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on the relevant information available at the end of each period.

Revenue Recognition

We recognize revenue when a customer obtains control of the promised products in an amount that reflects the net consideration to which we expect to be entitled. We sell products both direct to consumers and through distributors who resell the products to consumers. Transaction price is typically based on contracted rates less any estimates of claim denials and historical reimbursement experience, guidelines and payor mix, and less estimated variable consideration adjustments including rebates. Recognizing revenue requires us to exercise judgment and use estimates that can have a significant impact on the amount and timing of revenue we report. We exercise significant judgment when we determine the transaction price, including variable consideration adjustments. The amount of variable consideration that is included in the transaction price is included in revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. We estimate reductions to our revenues for rebates paid to distributors in the United States and Canada and pharmacy benefit managers (“PBM”) in the United States. Rebates are based on contractual arrangements, which may vary. Our estimates are based on products sold, historical experience, trends and, as available, channel inventory data. Rebates charged against gross sales amounted to $82.5 million, $59.1 million and $34.1 million in 2020, 2019 and 2018, respectively. Provisions for rebates, sales discounts and returns, are accounted for as a reduction of sales when revenue is recognized and are included within accounts receivable trade or accrued expenses and other current liabilities on our consolidated balance sheets, based upon the recipient of the rebate. If the actual amounts of consideration that we receive differ from our estimates, we would adjust our estimates and that would affect reported revenue in the period that such variances become known.

Our drug delivery product line includes sales of a modified version of the Omnipod to pharmaceutical and biotechnology companies who use our technology as a delivery method for their drugs. Revenue from the drug delivery product was $69.5 million for 2020. Revenue for this product line is recognized as the product is produced. Accounting for drug delivery revenue requires us to select a method to measure progress towards the satisfaction of the performance obligation. This election of the most meaningful measure of progress by which to recognize drug delivery revenue requires the application of judgment. We elected the input method and selected a blend of cost and time to produce as the measure of progress. Accordingly, revenue is recognized over time using a blend of costs incurred to date relative to total estimated costs at completion and time incurred to date relative to total production time to measure progress toward the satisfaction of our performance obligations. We believe that both incurred cost and elapsed time reflect the value generated, which best depicts the transfer of control to the customer. Contract costs include third party costs as well as an allocation of manufacturing overhead. Changes from quarter to quarter in quantity and stage of production of in-process inventory could have a significant quarterly impact on revenue.

Contingencies

We are involved in various legal proceedings that arise in the ordinary course of business as further discussed in Note 13 to our consolidated financial statements, including a patent infringement case with Roche. Accruals recorded for various contingencies including legal proceedings, self-insurance and other claims, are based on judgment, both regarding the probability of losses and range of loss, and, where applicable, include the consideration of opinions of internal and/or external legal counsel. When a range is established but a best estimate cannot be made, we record the minimum loss contingency amount, which could be zero. An estimate is often initially developed substantially earlier than the ultimate loss is known and is reevaluated each accounting period. As information becomes known, additional loss provision is recorded when either a best estimate can be made, or the

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minimum loss amount is increased. When events result in an expectation of a more favorable outcome than previously expected, our best estimate is changed to a lower amount. We record receivables from third-party insurers up to the amount of the related liability when we have determined that existing insurance policies will provide reimbursement. In making this determination, we consider applicable deductibles, policy limits and the historical payment experience of the insurance carriers.

Accounting Standards Issued and Not Yet Adopted as of December 31, 2020

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions in the current guidance regarding the approach for intraperiod tax allocations, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This new guidance also simplifies the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies such things as the accounting for transactions that result in a step up in the tax basis of goodwill. The guidance is effective for us beginning in the first quarter of 2021 with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Debt Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments by eliminating certain separation models. Under ASU 2020-06, a convertible debt instrument will generally be reported as a single liability at its amortized cost with no separate accounting for embedded conversion features. Consequently, the interest rate of convertible debt instruments will be closer to the coupon interest rate. In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance is effective for us beginning in the first quarter of 2022 with early adoption permitted. Early adoption of ASU 2020-06 as of January 1, 2021, would result in an approximate $330 million decrease in additional paid in capital from the derecognition of the bifurcated equity component, $250 million increase in debt from the derecognition of the discount associated with the bifurcated equity component and $80 million decrease to the opening balance of accumulated deficit, representing the cumulative interest expense recognized related to the amortization of the bifurcated conversion option. Additionally, we expect to write-off the related deferred tax liabilities with a corresponding adjustment to the valuation allowance, resulting in no net impact to the cumulative adjustment to retained earnings. Adoption of this standard will have no impact on our diluted earnings per share as we calculate earnings per share using the if-converted method. We are still evaluating whether we will early adopt this guidance.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations and financial condition.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements.

The risk factors discussed in “Risk Factors” could cause our results to differ materially from those expressed in forward-looking statements. In addition, there may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. We expressly disclaim any obligation to update these forward-looking statements other than as required by law.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The primary objectives of our investment strategy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. To minimize our exposure to an adverse shift in interest rates, we invest mainly in cash equivalents and short-term investments in a variety of securities, including money market funds, U.S. Treasury debt and corporate debt securities. Due to the short-term nature of our investments, we believe that we have no material exposure to interest rate risk.

Market Price Sensitive Instruments

As of December 31, 2020, we had outstanding debt related to our convertible senior notes recorded on our consolidated balance sheet of $933.1 million, net of unamortized discount and issuance costs totaling $269.4 million. Changes in the fair value of our outstanding debt, which could be impacted by changes in interest rates, are not recorded in these consolidated financial statements as the debt is accounted for at cost less unamortized discount and issuance costs. The fair value of the debt, which was $2.0 billion as of December 31, 2020, is also impacted by changes in our stock price.

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In order to reduce potential equity dilution, in connection with the issuance of $800.0 million aggregate principal amount of 0.375% Notes, we entered into Capped Calls. We expect the Capped Calls to reduce the potential dilution to our common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of our cash payment obligation) in the event that at the time of conversion our stock price exceeds the conversion price under the 0.375% Notes. The Capped Calls have an initial strike price of $335.90 per share and cover 3.5 million shares of common stock.

Foreign Currency Exchange Risk

Foreign currency risk arises from our investments in subsidiaries owned and operated in non-U.S. countries. Such risk is also a result of transactions with customers in countries outside the United States. Approximately 34% of our revenue was denominated in foreign currencies for the year ended December 31, 2020. As our business in regions outside of the United States continues to increase, we will be increasingly exposed to foreign currency exchange risk related to our foreign operations. The cost of revenue related to revenue generated outside of the United States is primarily denominated in U.S. dollars; however, operating costs related to these revenues are largely denominated in the same respective currencies, thereby partially limiting our transaction risk exposure. Fluctuations in the rate of exchange between the United States dollar and foreign currencies, primarily the Euro, British Pound and Canadian Dollar, could adversely affect our financial results, including our revenues, revenue growth rates, gross margins, income and losses as well as assets and liabilities.

We have intercompany receivables and payables from our foreign subsidiaries that are denominated in foreign currencies, principally the Euro, the British pound and the Canadian dollar. Fluctuations from the beginning to the end of a reporting period result in the revaluation of our foreign currency-denominated intercompany receivables and payables, generating currency translation gains or losses. Net realized and unrealized gains (losses) from foreign currency transactions are included in other income (expense), net in the consolidated statement of income and amounted to a loss of $3.2 million for the year ended December 31, 2020.

Item 8. Financial Statements and Supplementary Data

Our financial statements as of December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020, and the Report of the Registered Independent Public Accounting Firm are included in this report as listed in the index.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm 41

Consolidated Balance Sheets as of December 31, 2020 and 2019 43

Notes to Consolidated Financial Statements 48

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Insulet Corporation

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

Basis for opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that

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are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Drug Delivery

As described in Note 4 to the consolidated financial statements, the Company’s revenue from drug delivery was $69.5 million for the year ended December 31, 2020. Drug delivery revenue is recognized over time based on the Company’s determination of the pattern over which control transfers to the customer. This transfer of control begins during the manufacturing process and continues through the final quality control inspection process until there is complete satisfaction of the performance obligation. We identified drug delivery revenue recognition and the associated unbilled receivable as a critical audit matter.

The principal considerations for our determination that this matter is a critical audit matter are as follows:

Accounting for drug delivery revenue requires the Company to select a method to measure progress towards the satisfaction of the performance obligation. This election of the most meaningful measure of progress by which to recognize drug delivery revenue requires the application of significant management judgment. The Company elected the input method and selected a blend of cost and time to produce for measure of progress. Given the nature of the revenue being recognized, additional audit effort including modification of the nature and extent of our procedures beyond that of the Company’s other revenue streams was required.

Our audit procedures included, but were not limited to, the following:

•We tested the design and operating effectiveness of controls relating to Management’s estimate of the measure of progress.

•For the measure of progress, we inspected evidence related to the cost and length of the production cycle.

•For revenue recognized on in-process or finished goods inventory (and the related unbilled receivable), we inspected customer orders, binding customer forecasts, inventory records, and third party shipping documentation.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2016.

Boston, Massachusetts

February 23, 2021

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INSULET CORPORATION

CONSOLIDATED BALANCE SHEETS

As of December 31,

(in millions, except share and per share data) 2020 2019

ASSETS

Current Assets

Cash and cash equivalents $ 907.2 $ 213.7

Accounts receivable trade, net 83.8 69.3

Prepaid expenses and other current assets 63.0 44.6

Long-term investments — 58.4

Property, plant and equipment, net 478.7 399.4

Other intangible assets, net 28.7 13.2

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accrued expenses and other current liabilities 138.1 103.2

Current portion of long-term debt 15.6 —

Commitment and Contingencies (Note 13)

Stockholders’ Equity

Preferred stock, $.001 par value:

Common stock, $.001 par value:

Accumulated other comprehensive income (loss) 5.5 (1.2)

Total stockholders’ equity 603.6 75.9

Total liabilities and stockholders’ equity $ 1,872.9 $ 1,142.9

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31,

(in millions, except share and per share data) 2020 2019 2018

Loss on extinguishment of debt — (8.7) —

Other income (expense), net 3.3 0.9 (0.9)

Income before income taxes 9.7 14.5 5.2

Income tax expense (2.9) (2.9) (1.9)

Net income per share:

Weighted-average number of common shares outstanding (in thousands):

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31,

Other comprehensive income, net of tax

Foreign currency translation adjustment 6.8 0.6 (2.2)

Total other comprehensive income (loss), net of tax 6.7 1.7 (2.4)

Total comprehensive income $ 13.5 $ 13.3 $ 0.9

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in millions) Shares (in thousands) Amount

Exercise of options to purchase common stock 410 — 12.8 — — 12.8

Issuance of shares for employee stock purchase plan 46 — 3.0 — — 3.0

Stock-based compensation — — 37.5 — — 37.5

Net income — — — 3.3 — 3.3

Other comprehensive loss — — — — (2.4) (2.4)

Exercise of options to purchase common stock 1,340 — 46.6 — — 46.6

Issuance of shares for employee stock purchase plan 51 — 4.3 — — 4.3

Stock-based compensation — — 28.7 — — 28.7

Conversion feature of 0.375% Notes, net of issuance costs — — 207.8 — — 207.8

Issuance of shares for debt repayment 1,875 — 299.4 — — 299.4

Purchase of capped call options — — (85.4) — — (85.4)

Other comprehensive income — — — — 1.7 1.7

Exercise of options to purchase common stock 674 — 25.7 — — 25.7

Issuance of shares for employee stock purchase plan 38 — 6.0 — — 6.0

Stock-based compensation — — 35.9 — — 35.9

Net income — — — 6.8 — 6.8

Other comprehensive income — — — — 6.7 6.7

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

Cash flows from operating activities

Loss on extinguishment of convertible debt — 8.7 —

Provision for credit losses 3.3 4.5 3.4

Changes in operating assets and liabilities:

Prepaid expenses and other assets (32.2) (22.0) (19.9)

Accrued expenses and other liabilities 27.8 17.7 25.9

Net cash provided by operating activities 84.0 98.4 35.9

Cash flows from investing activities

Acquisition of intangible assets (37.5) (7.2) (5.0)

Receipts from the maturity or sale of investments 218.4 247.9 169.3

Net cash provided by (used in) investing activities 14.0 (73.6) (184.5)

Cash flows from financing activities

Proceeds from issuance of common stock, net of issuance costs 477.5 — —

Proceeds from mortgage, net of issuance cost 68.3 — —

Proceeds from equipment financing 60.0 — —

Proceeds from issuance of convertible debt, net of issuance cost — 780.2 —

Purchase of capped call options — (85.4) —

Repayment of convertible debt — (663.6) (6.7)

Other (2.2) — —

Net cash provided by (used in) financing activities 605.5 73.5 (8.7)

Effect of exchange rate changes on cash 4.8 1.5 (1.4)

Cash, cash equivalents, and restricted cash, beginning of year 213.7 113.9 272.6

Supplemental cash flow information

Cash paid for interest, net of amount capitalized $ 2.6 $ — $ —

Cash paid for taxes $ 3.0 $ 2.5 $ 0.8

The accompanying notes are an integral part of these consolidated financial statements.

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INSULET CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of the Business

Insulet Corporation (the “Company”) is primarily engaged in the development, manufacture and sale of its proprietary Omnipod System, an innovative, continuous insulin delivery system for people with insulin-dependent diabetes. The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod device (“Pod”) that is worn on the body for up to three days at a time, and its wireless companion, the handheld Personal Diabetes Manager (“PDM”). The Omnipod System, which features two discreet, easy-to-use devices, communicates wirelessly, provides for virtually pain-free automated cannula insertion and eliminates the need for multiple daily injections using syringes or insulin pens or the use of traditional pump and tubing. The Omnipod System consists of two product lines: the Omnipod Insulin Management System (“Omnipod”) and its next generation Omnipod DASHTM Insulin Management System (“Omnipod DASH” or “DASH”). Omnipod DASH features a secure Bluetooth enabled Pod and PDM with a color touch screen user interface supported by smartphone connectivity.

The Company generates most of its revenue from sales of the Omnipod System, which is sold in the U.S., Europe, Canada and the Middle East. The Omnipod System is sold either directly to end-users or indirectly through intermediaries. Intermediaries include independent distributors who resell the Omnipod to end-users and wholesalers who sell the Company’s product to end-users through the pharmacy channel in the United States.

In addition to selling the Omnipod System for insulin delivery, the Company also partners with global pharmaceutical and biotechnology companies to tailor the Omnipod System technology platform for the delivery of subcutaneous drugs across other therapeutic areas. The majority of the Company’s drug delivery revenue consists of sales of pods to Amgen for use in the Neulasta® Onpro® kit, a delivery system for Amgen’s white blood cell booster to help reduce the risk of infection after intense chemotherapy.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements reflect the consolidated operations of Insulet Corporation and its subsidiaries. The consolidated financial statements have been prepared in United States dollars, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Reclassification of Prior Period Amounts

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. A portion of facility costs and certain information technology costs have been allocated from selling, general and administrative to research and development expenses based on square foot and system usage, respectively and certain quality assurance costs were reclassified from research and development expenses to selling, general and administrative expenses. The net impact of these adjustments was a $2.6 million and $4.3 million increase to research and development expenses and decrease to selling, general and administrative expenses for the years ended December 31, 2019andDecember 31, 2018, respectively. There was no change to previously reported operating or net income.

Foreign Currency Translation

For the foreign subsidiaries of the Company, assets and liabilities are translated into U.S. dollars using exchange rates as of the balance sheet date, and income and expenses are translated using the average exchange rates in effect for the related month. The net effect of these translation adjustments is reported in accumulated other comprehensive loss within stockholders’ equity on the consolidated balance sheet. Net realized and unrealized gains (losses) from foreign currency transactions are included in other income (expense), net in the consolidated statement of income and were $3.2 million, $0.6 million and $1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include money market mutual funds, commercial paper and U.S. government and agency bonds that are carried at cost, which approximates their fair value. Restricted cash required to be set aside in connection with

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equipment financings or that serves as collateral for outstanding letters of credit and bank guarantees is included in other assets and cash and cash equivalents on the consolidated balance sheet.

Investments in Marketable Securities

Short-term and long-term investment securities consist of certificates of deposit, commercial paper, U.S. government and agency bonds and corporate bonds. Theses available-for-sale marketable securities are carried at fair value and unrealized gains and losses are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity on the consolidated balance sheet. Investments with a stated maturity date of more than one year from the balance sheet date and that are not expected to be used in current operations are classified as long-term investments on the consolidated balance sheet. The Company reviews investments for other-than-temporary impairment when the fair value of an investment is less than its amortized cost. If an available-for-sale security is other than temporarily impaired, the loss is included in other income (expense), net in the consolidated statement of income.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable consist of amounts due from third-party payors, customers and intermediaries and are presented at amortized cost. The allowance for credit losses reflects an estimate of losses inherent in the Company’s accounts receivable portfolio determined based on historical experience, specific allowances for known troubled accounts and other available evidence. Accounts receivable are written off when management determines they are uncollectible.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:

Direct Customer Receivables—The Company measures expected credit losses on direct customer receivables using an aging methodology. The risk of loss for direct customer receivables is higher than other portfolios. The Company relies on third-party payors to accept and timely process claims and on direct consumers to have the ability to pay. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.

Distributor Receivables—The Company measures expected credit losses on distributor receivables using an individual reserve methodology. The risk of loss in this portfolio is low based on the Company’s historical experience. The estimate of expected credit losses considers payment history as well as credit ratings of the distributors, in addition to current conditions and supportable forecasts.

National Healthcare System Receivables—The Company measures expected credit losses on national healthcare system receivables using an individual reserve methodology. The risk of loss in this portfolio is low based on the Company’s historical experience. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined under the first-in, first-out method. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete or slow-moving based on changes in customer demand, technology developments or other economic factors in order to state inventories at net realizable value. Factors influencing these adjustments include inventories on hand compared to estimated future usage and sales. Work in process is calculated based upon a buildup of cost based on the stage of production. Manufacturing variances attributable to abnormally low production are expensed in the period incurred.

Contract Acquisition Costs

The Company incurs commission costs to obtain a contract related to new customer starts. These costs are capitalized as contract assets in other assets, net of the short-term portion included in prepaid and other current assets. Costs to obtain a contract are amortized as sales and marketing expense on a straight-line basis over the expected period of benefit, which considers future product upgrades for which a commission would be paid. These costs are periodically reviewed for impairment.

Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. When estimating fair value, the Company may use one or all the following approaches:

•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

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•Cost approach, which is based on the cost to acquire or construct comparable assets less an allowance for functional and/or economic obsolescence.

•Income approach, which is based on the present value of the future stream of net cash flows.