Insulet (PODD) 10-K risk factor changes: FY2016 vs FY2015

We have based these forward-looking statements largely on our current expectations and projections [added: about future events and financial trends that we believe may affect our business, results of operations and financial condition.]

For the year ended December 31, [removed: 2015,] [added: 2016,] our operating loss was [removed: $60.8] [added: $10.7] million.

Our net losses for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] were [removed: $73.5] [added: $28.9] million, [removed: $51.5] [added: $73.5] million and [removed: $45.0] [added: $51.5] million, respectively.

As of December 31, [removed: 2015,] [added: 2016,] we had an accumulated deficit of [removed: $651.5] [added: $680.4] million.

| • | our ability to manufacture the [removed: OmniPod] [added: Omnipod System] efficiently; |

| • | manufacturing [removed: problems;] [added: problems or capacity constraints;] |

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

Our ability to achieve profitability from a current net loss level will depend on our ability to sustain or reduce the per unit cost of producing the [removed: OmniPod] [added: Omnipod System] by increasing customer orders, increasing manufacturing volume and productivity and reducing raw material and overhead costs per [removed: OmniPod.][added: unit.]

To achieve profitability, we need to, among other things, sustain or reduce the per unit cost of the [removed: OmniPod.][added: Omnipod System.]

Each [removed: OmniPod] [added: Omnipod System] contains limited amounts of precious metals, the costs of which have fluctuated over the recent past.

[removed: Further deterioration of economic conditions, such as a] [added: A] U.S. or global recession, could negatively impact our current and prospective customers, adversely affect the financial ability of health insurers to pay claims, adversely impact our expenses and ability to obtain financing of our operations, cause delays or other problems with key suppliers and increase the risk of counterparty failures.

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 [removed: on-going] [added: ongoing] at the federal and state government levels.

It is difficult at this time to [removed: determine,] [added: determine] whether a comparative effectiveness analysis impacting our business will be done, and assuming one is, what impact that analysis will have on the [removed: OmniPod] [added: Omnipod] System or our future financial results.

Beginning in 2013, sales of certain medical devices became subject to a 2.3% federal excise [removed: tax.][added: tax, subject to a two-year suspension of the tax in 2016 and 2017.]

However, if it is subsequently determined that sales of one or more of our products are subject to this excise tax, these tax obligations could materially adversely affect our financial [removed: results, although that would not occur until 2018 because of recent federal legislation that suspended the tax for two years.][added: results.]

We believe that our current [added: cash,] cash [added: equivalents] and [removed: cash equivalents,] [added: short-term investments,] together with the cash to be generated from expected product sales, will be sufficient to meet our projected operating requirements through at least the end of [removed: 2016.][added: 2017.]

[removed: In June 2014 we issued $201.3 million of 2% Convertible Senior Notes which will mature in 2019 and we] [added: We] may need to raise additional debt or equity financing to repay [removed: these Notes.][added: our outstanding convertible notes.]

We rely on a number of suppliers who manufacture the components [added: for and perform assembly] of the [removed: OmniPods] [added: Omnipods] and PDMs.

For example, we rely on Phillips Medisize Corporation to manufacture and supply several injection molded components of the [removed: OmniPod] [added: Omnipod] and [removed: Freescale Semiconductor, Inc.] [added: we rely on NXP USA] to manufacture and supply [removed: the] [added: an] application specific integrated [removed: circuit that is incorporated into the OmniPod.][added: circuit.]

We do not have long-term supply agreements with most of our suppliers, and, in many cases, [removed: we make] [added: we, or Flex on] our [added: behalf, make] purchases on [removed: a] [added: the basis of individual] purchase [removed: order basis.][added: orders.]

| • | our [removed: suppliers, especially new suppliers,] [added: suppliers] may make errors in manufacturing that could negatively affect the efficacy or safety of the [removed: OmniPod] [added: Omnipod] System or cause delays in shipment; |

Since the [removed: OmniPod] [added: Omnipod] System is not currently covered or reimbursed by [removed: Medicare,] [added: Medicare as durable medical equipment or as a prosthetic device,] we [removed: are] [added: would] not [added: be] directly affected by this [removed: pilot] program.

[removed: However, in the event this pilot program is geographically expanded, is extended beyond 2016, and results in a reduction in the amount reimbursed by CMS for conventional insulin pumps, then this] [added: This] may negatively impact our ability to negotiate future pricing with private payors comparing the price of the [removed: OmniPod] [added: Omnipod] System to conventional insulin pumps.

Ypsomed is our exclusive distributor of the [removed: OmniPod] [added: Omnipod] System through [added: June] 2018 in multiple countries [added: in Europe] including [added: France,] Germany, the United Kingdom, the Netherlands, Switzerland, Austria, Italy, Norway, and Sweden.

Our agreement with Ypsomed also covers [removed: France, China,] [added: China] and a number of other countries.

In addition to the [removed: OmniPod] [added: Omnipod] System, Ypsomed also markets and sells a suite of other products for the treatment of diabetes and has [removed: announced its intention to introduce] [added: introduced] and [removed: sell] [added: sells] its own branded conventional insulin pump.

Our efforts to introduce [added: or expand] our current or future products [removed: into] [added: in] foreign markets may not be successful, in which case we may have expended significant resources without realizing the expected benefit.

For example, currently all of our [removed: OmniPods] [added: Omnipod Systems] are manufactured at a facility in China operated by [removed: Flextronics.][added: Flex.]

However, existing Medicare [added: and broad Medicaid] coverage for CSII therapy is based on conventional insulin pumps.

We have been in the process for several years of seeking appropriate Medicare [added: and broad Medicaid] coverage for the [removed: OmniPod] [added: Omnipod] System.

No assurance can be provided that we will ever secure Medicare [added: and broad Medicaid] coverage of the [removed: OmniPod] [added: Omnipod] System.

We face competition from numerous competitors, [removed: most] [added: many] of whom have far greater resources than we have, which may make it more difficult for us to achieve significant market penetration and which may allow them to develop additional products for the treatment of diabetes that compete with the [removed: OmniPod] [added: Omnipod] System.

Medtronic MiniMed, a division of [removed: Medtronic] [added: Medtronic,] has been the market leader for many years and has the majority share of the conventional insulin pump market in the United States.

Also, Ypsomed has [removed: announced its intention to introduce] [added: introduced] and [removed: sell] [added: sells] its own branded conventional insulin pump.

MDI therapy has been made more effective by the introduction of long-acting insulin analogs that can be used in combination with [removed: easy to use] bolus devices such as pens or nasal inhalants.

[removed: Moreover, the] [added: The] nature of our business involves the receipt and storage of personal and financial information regarding our patients.

For example, FDA approval of a commercially viable “closed-loop” [added: 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 [removed: without] [added: with reduced] patient direction could have a material adverse effect on our revenue and future profitability.

[added: Any technological breakthroughs in diabetes monitoring, treatment or prevention] could render the [removed: OmniPod] [added: Omnipod] System obsolete, which would have a material adverse effect on our business, financial condition and results of operations.

We also have [removed: on-going] [added: ongoing] initiatives to develop products to improve the treatment of Type 1 diabetes and to treat patients with highly insulin resistant Type 2 diabetes.

Termination of this agreement could require us to either remove the blood glucose meter from PDMs to be sold in the future, which [removed: would] [added: could] impair the functionality of the [removed: OmniPod] [added: Omnipod] System, or attempt to incorporate an alternative blood glucose meter into the PDM, either of which would require significant development and regulatory activities that might not be completed in time to prevent an interruption in the availability of the [removed: OmniPod] [added: Omnipod] System to our customers, which could have a material adverse effect on our business, financial condition and results of operations.

Legislative and regulatory changes to the Affordable Care Act remain possible and appear likely in the 115th United States Congress and under the Trump Administration.

We expect that the Affordable Care Act, 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 generally and on our ability to maintain or increase sales of any of our products and achieve profitability

In June 2014 we issued and sold $201.3 million in principal amount of 2% Convertible Senior Notes due in 2019 ("2% Notes").

In September 2016, we issued and sold $345 million in principal amount of 1.25% Convertible Senior Notes due in 2021 ("1.25% Notes").

In connection with the issuance of the $345 million in 1.25% Convertible Senior Notes, we repurchased $134.2 million of our outstanding 2% Convertible Senior Notes.

In September 2016, we issued and sold $345 million in principal amount of 1.25% Convertible Senior Notes due in 2021.

In connection with the issuance of the $345 million of 1.25% Convertible Senior Notes, we repurchased $134.2 million of our outstanding 2% Convertible Senior Notes.

In addition, a subsidiary of Flex in China performs assembly and supplies all finished Omnipod Systems.

CMS has announced that it will establish a competitive bidding program nationwide for conventional insulin pumps effective January 1, 2019.

However, should this program commence in 2019 on a nationwide basis in 2019 as announced, it is expected that there would be a reduction in the amount reimbursed by CMS for conventional insulin pumps.

These companies are at various stages of development and the number of such companies continuously change as they enter or exit the market on an ongoing basis.

The form and function of such systems may change over time as our business needs change.

Medtronic has developed a "hybrid closed-loop" system with FDA-approval and has announced an anticipated commercial launch in 2017, which could negatively impact our business.

We have since obtained clearance for modified versions of this device.

We expect that some of our future products will require PMA approval.

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.

While those changes are still being implemented by FDA, this serves as an example of the rapidly changing regulatory environment in which we operate.

This ins

pection also resulted in four inspectional observations.

Our facility was again re-inspected in October 2016 and this FDA inspection focused on corrections to previous FDA inspections and resulted in one inspectional observation.

In January 2017, the FDA officially closed the FDA inspection that was conducted in October 2016.

For example, under the FDA’s medical device reporting, or MDR, regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.

Repeated product malfunctions may result in a voluntary or involuntary product recall.

In general, if we decide to make a change to our product, we are responsible for determining whether to classify the change as a recall.

It is possible that the FDA could disagree with our initial classification.

In general if any change or group of changes to a device addresses a violation of the Federal Food, Drug, and Cosmetic Act, that change would generally constitute a medical device recall and require submission of a recall report to the FDA.

In January 2017, the FDA officially terminated this field action.

injury.

These laws include the Federal Anti-Kickback Statute, the Federal 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 greater detail in the section above entitled “Government Regulation”.

While we believe and make every effort to ensure that our business arrangements with third parties and other activities 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.

Revenue for customers comprising more than 10% of total revenue were as follows:

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| | | Twelve Months Ended December 31, | | | | |

| | | 2016 | | 2015 | | 2014 |

| Amgen, Inc. | | 17% | | 10% | | * |

| Ypsomed Distribution AG | | 16% | | 12% | | 19% |

| RGH Enterprises, Inc. | | 10% | | 13% | | 14% |

* Customer represents less than 10% of revenue for the period.

about future events and financial trends that we believe may affect our business, results of operations and financial condition.

While the U.S. economy appears to be improving at a moderate pace, the worldwide economy remains sluggish.

There may in the future be additional changes in government policy, including additional modifications to the healthcare laws, which could increase our cost of doing business and negatively impact our ability to sell our products and achieve profitability.

In addition, a subsidiary of Flextronics in China provides the supply of complete OmniPods.

CMS has established through 2016 a pilot competitive bidding program in limited areas that includes conventional insulin pumps.

Ypsomed’s introduction of the OmniPod System in certain countries has been delayed due to a number of factors.

Future delays would likely result in reduced purchases by Ypsomed, which could adversely affect our revenue.

These companies are at various stages of development.

The companies working in this area of which we are aware include Medtronic, Johnson & Johnson, Valeritas Inc., Cellnovo Limited, VinCentra, Debiotech S.A., Becton Dickinson and Co., Enable Injections, Sensile Medical and Unilife.

Medtronic has developed such an FDA-approved product combining continuous glucose sensing and CSII therapy, which could negatively impact our business.

Any technological breakthroughs in diabetes monitoring, treatment or prevention

For example, we are aware of certain patents and patent applications owned by our competitors that cover different aspects of insulin infusion and the related devices.

For example, in 2011, the FDA announced a plan of action to modernize and improve the FDA's premarket review of medical devices, and has implemented, and continues to implement, reforms intended to streamline the premarket review process.

This inspection also resulted in four inspectional observations (FDA Form 483).

risk to health and have not otherwise been reported under the MDR regulations.

The federal anti-kickback statute and several similar state laws, prohibit payments that are intended to induce physicians or others either to refer patients or to acquire or arrange for or recommend the acquisition of healthcare products or services and impose civil and criminal penalties for noncompliance that can be substantial.

We participate in federal and state programs such as Medicare and Medicaid, under which we are subject to numerous state and federal laws and regulations overseeing reimbursement and intended to prevent fraud and abuse.

Medicare and Medicaid regulations are complex and may require management’s interpretation.

In the year ended December 31, 2015, two customers represented 11% and 10% of total revenue, respectively.

In the year ended December 31, 2014, two customers represented 15% and 11% of total revenue, respectively.

In the year ended December 31, 2013, one customer represented 13% of total revenue.

We recently made significant changes to our senior management team.

Future sales of shares of our common stock in the public market, or the perception that such sales may occur, may depress our stock price.

We have been a public company since May 2007.

Since becoming a public company, the average daily trading volume of our common stock on The NASDAQ Global Market has been approximately 400,000 shares.

In addition to our outstanding shares of common stock, we issued $201.3 million of 2% Convertible Senior Notes in June 2014.

A substantial number of shares of our common stock could potentially be issued upon the conversion of these Convertible Senior Notes.

The issuance of substantial amounts of common stock underlying the Convertible Senior Notes, or the perception that such issuance may occur, could adversely affect the market price of our common stock.

We sell the [removed: OmniPod] [added: Omnipod] System [removed: and other diabetes management supplies] in the United States through direct sales to customers or through our distribution partners.

In July 2015, we executed an asset purchase agreement with [removed: GSK] [added: GlaxoSmithKline (GSK)] whereby we acquired assets associated with the Canadian distribution of our products and we assumed the distribution, sales, marketing, training and support activities for the [removed: OmniPod] [added: Omnipod] system in Canada.

Additional information regarding this acquisition is provided in note [removed: 3] [added: 4] to the consolidated financial statements included under Item 8 of this Form 10-K.

In addition to using the Pod for insulin delivery, we also partner with global pharmaceutical and biotechnology companies to tailor the [removed: OmniPod] [added: Omnipod System] technology platform for the delivery of subcutaneous drugs across multiple therapeutic areas.

Additional information regarding the sale of [removed: our] Neighborhood Diabetes [removed: business] is provided in note [removed: 18] [added: 3] to the consolidated financial statements included under Item 8 of this Form 10-K.

[removed: 2015] [added: 2016] Revenue Results:

| • | Total revenue of [removed: $324.2] [added: $367.0] million |

| ◦ | U.S. [removed: OmniPod] [added: Omnipod] revenue of [removed: $186.8] [added: $229.8] million |

| ◦ | International [removed: OmniPod] [added: Omnipod] revenue of [removed: $40.3] [added: $71.9] million |

| ◦ | Drug Delivery revenue of [removed: $34.0] [added: $65.3] million |

[removed: Our] [added: We expect our] efforts in [removed: 2016 will be focused] [added: 2017 to focus] primarily on the expansion of our customer base in the United States and [removed: internationally and] [added: internationally,] increasing our [removed: profitability.][added: gross profit and product development.]

Achieving these objectives is expected to require additional investments in certain personnel and initiatives, as well as enhancements to our [removed: manufacturing] [added: supply chain operation capacity,] efficiency and effectiveness.

We believe that we will continue to incur net losses in the near term in order to achieve these [removed: objectives.]

Our revenue also includes [removed: (i)] sales [removed: through Neighborhood Diabetes] of [removed: other diabetes related products including blood glucose testing supplies, traditional insulin pumps, pump supplies and other pharmaceuticals to customers and third-party distributors who resell the product to customers and (ii) sales of] devices based on the [removed: OmniPod] [added: Omnipod System] technology platform to global pharmaceutical and biotechnology companies for the delivery of subcutaneous drugs across multiple therapeutic areas.

Sales and marketing expenses consist primarily of personnel costs within our sales, marketing, reimbursement support, customer care and training functions, sales commissions paid to our sales [removed: representatives and] [added: representatives,] costs associated with [added: promotional activities and] participation in [removed: medical conferences, physician symposia and promotional activities.][added: industry trade shows.]

This section discusses our consolidated results of operations for [removed: 2015] [added: 2016] compared to [removed: 2014,] [added: 2015,] as well as [removed: 2014] [added: 2015] compared to [removed: 2013,] [added: 2014,] and should be read in conjunction with the consolidated financial statements and accompanying notes included under Item 8 of this Form 10-K.

| (In Thousands) | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | $ Change | | | | % Change | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | $ Change | | | | % Change | |

| Research and development | [removed: 43,208] [added: 55,710] | | | | [removed: 27,900] [added: 43,208] | | | | [removed: 15,308] [added: 12,502] | | | | [removed: 55] [added: 29] | % | | [removed: 27,900] [added: 43,208] | | | | [removed: 21,765] [added: 27,900] | | | | [removed: 6,135] [added: 15,308] | | | | [removed: 28] [added: 55] | % |

| Net loss | $ | [removed: (73,520] [added: (28,879] | ) | | $ | [removed: (51,500] [added: (73,520] | ) | | $ | [removed: 22,020] [added: (44,641] | [added: )] | | [removed: 43] [added: 61] | % | | $ | [removed: (51,500] [added: (73,520] | ) | | $ | [removed: (44,974] [added: (51,500] | ) | | $ | [removed: 6,526] [added: (22,020] | [added: )] | | [removed: 15] [added: 43] | % |

Our total revenue increased to [removed: $324.2] [added: $263.9] million, up [removed: $35.5] [added: $32.6] million, or [removed: 12%,] [added: 14%,] in [removed: the year ended 2015] [added: 2015,] compared to [removed: the year ended] 2014, [removed: primarily] led by growth in [added: our] U.S. [removed: OmniPod] [added: Omnipod] revenue and our on-body injection device for drug delivery, offset by lower international [removed: OmniPod] [added: Omnipod] revenue.

Our U.S. [removed: OmniPod] [added: Omnipod] revenue increased to [removed: $186.8] [added: $189.6] million, up [removed: $13.2] [added: $13.7] million, or 8%, [removed: reflecting] [added: due to] growth in our installed base of [removed: OmniPod users,] [added: Omnipod users] offset in part by unfavorable distributor ordering patterns and a reduction in royalty revenues of $3.2 million.

Our drug delivery revenue increased to $34.0 million, up $28.6 [removed: million,] [added: million] due to strong growth in demand for our on-body injection device following regulatory approval in December 2014.

For [removed: the year ending December 31, 2016] [added: 2017] we expect strong revenue growth [removed: in our continuing operations from] [added: across] all of our product lines as we continue our expansion in the [removed: United States] [added: U.S.] and internationally.

Cost of revenue increased [removed: $30.6 million] [added: to $130.6 million, up $26.4 million, or 25%,] in [removed: the year ended] 2015 compared to [removed: the same period in 2014 primarily] [added: 2014,] due to an increase in sales volumes, as well as $11.5 million of costs directly and indirectly attributable to a voluntary Field Safety Notification that we initiated in November 2015 after identifying certain lots of [removed: OmniPod] [added: Omnipod] product which had a slight increase in the reported cases in which the needle mechanism failed to deploy or there was a delay in the deployment of the needle mechanism.

The product manufactured in this condition was contained prior to distribution and [removed: will] [added: was] ultimately [removed: be] scrapped.

[removed: The decrease] [added: Gross margin decreased to 50.5%, down approximately 4.5 points in 2015 compared to 2014,] primarily [removed: resulted from] [added: due to] approximately $11.5 million of costs directly and indirectly attributable to the voluntary field safety notification.

[removed: Research and development expenses increased $15.3 million to $43.2 million for] [added: Net cash used in investing activities in] the year ended December 31, [removed: 2015,] [added: 2015 was $15.3 million] compared to [removed: $27.9] [added: $11.5] million [removed: for] [added: in] the same period [removed: in] [added: of] 2014.

[removed: The increase was the result of] [added: Research and development] expenses [added: increased to $43.2 million, up $15.3 million, or 55%, in 2015 compared to 2014, due to expenses] related to our development projects, including a new PDM, the use of concentrated insulin for patients with higher insulin-resistance and investment in our artificial pancreas program, as well as expenses related to software development costs of $10.5 million.

[removed: For the year ending December 31, 2016, we expect overall research] [added: Research] and development [removed: spending] [added: expenses increased] to [removed: increase] [added: $55.7 million, up $12.5 million, or 29%, in 2016 compared to 2015, primarily] due to [removed: the development efforts on] [added: an increase in expenses related to] our [removed: on-going projects] [added: development projects,] including [added: our] mobile application [removed: development, integration] [added: development which involves interaction] with continuous glucose monitoring technology, [added: artificial pancreas program,] development efforts with Eli Lilly and Company for the use of concentrated [removed: insulin, our artificial pancreas program, and the continued investment to support the use our technology as a delivery platform] [added: insulin] for [added: patients with higher insulin-resistance and] other [removed: pharmaceuticals.][added: Omnipod product improvement initiatives.]

[removed: The increase was mainly the result of] [added: Sales and marketing expenses increased to $78.4 million, up $27.9 million, or 55%, for 2015 compared to 2014, primarily due to] a [removed: $19.9] [added: $19.5] million increase in employee related expenses associated with the expansion of our sales force and customer support personnel.

Additionally, there was a [removed: $7.3] [added: $6.9] million increase in costs associated with marketing campaigns, new market opportunities and other strategic [removed: initiatives as we continue to expand awareness of the OmniPod System and our on-body injection devices for drug delivery.][added: initiatives.]

General and administrative expenses increased [removed: $10.5 million] to [removed: $77.4 million] [added: $60.4 million, up $2.8 million, or 5%,] for [removed: the year ended December 31, 2015,] [added: 2015] compared to [removed: $66.8 million for the same period in] 2014, mainly the result of [removed: the $9.1 million impairment charge associated with our Neighborhood Diabetes business, a $2.0 million] [added: an] increase [added: of $1.7 million] in [removed: expenses associated with claims] [added: audit, professional services] and [removed: settlements,] [added: consulting fees] and an increase of [removed: $1.8] [added: $1.6] million in technology [removed: and] license fees and [removed: technology] consulting services.

This increase was [added: partially] offset by a decrease in legal fees of approximately [removed: $7.4 million] [added: $6.2 million, mainly] related to the Becton, Dickinson and Company litigation settlement in 2014.

For [removed: the year ending December 31, 2016,] [added: 2017,] we expect overall general and administrative expenses to increase as compared to [removed: 2015] [added: 2016] as we continue to grow the business and make investments in our operating structure to support this continued growth.

Interest and Other [removed: Expense,] [added: Income (Loss),] Net

[removed: Interest and other expense,] [added: Our] net [added: cash used in operating activities] was [removed: $12.5] [added: $12.6] million for the year ended December 31, [removed: 2015,] [added: 2015] compared to [removed: $39.1] [added: net cash provided by operating activities of $8.9] million [removed: for] [added: in] the [removed: year ended December 31,] [added: same period of] 2014.

[removed: The significant changes in interest] [added: Interest] and other [removed: expense,] [added: income (loss),] net [removed: was primarily related] [added: decreased] to [added: $12.7 million, down $26.4 million, or 68% for 2015 compared to 2014, due to] the loss from extinguishment of long-term debt of $23.2 million in 2014 as well as the change in interest rate on our long-term debt to 2% in [removed: mid 2014] [added: mid-2014] from 3.75%.

In [removed: the years ended December 31,] 2015 and [removed: 2014 Income] [added: 2014, income] tax expense was [removed: $0.3] [added: $0.2] million and $0.1 million, respectively.

Income tax expense is comprised of a current [added: portion for 2015] and [added: 2014 and] deferred [removed: portion.][added: portion for 2015.]

Additional information regarding [removed: income tax expenses] [added: our debt issuances] is provided in note [removed: 16] [added: 7] to the consolidated financial statements included under Item 8 of this Form 10-K.

| • | Strengthened leadership team with appointment of key executives across the Company. |

| • | Evidence demonstrating Omnipod's improved glycemic control and quality of life published in the Journal of Diabetes Technology & Therapeutics and the Journal of Diabetes Science and Technology. |

| • | Completed private placement of $345.0 million in principal amount of 1.25% Convertible Senior Notes due in 2021 and the repurchase of $134.2 million in principal amount of the existing 2.00% Convertible Senior Notes due in 2019. |

| • | Divested Neighborhood Diabetes medical supplies distribution business to focus on growth opportunities in insulin and drug delivery. |

| • | Expanded development partnership with Eli Lilly and Company for Omnipod delivery of Humalog 200 concentrated insulin, in addition to the Company's already-existing partnership for Humalog U500. |

| • | Partnered with Joslin Diabetes Center to implement a unique training certification for Insulet's clinical team. |

objectives.

| Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| U.S. Omnipod | $ | 229,785 | | | $ | 189,604 | | | $ | 40,181 | | | 21 | % | | $ | 189,604 | | | $ | 175,950 | | | $ | 13,654 | | | 8 | % |

| International Omnipod | 71,889 | | | | 40,339 | | | | 31,550 | | | | 78 | % | | 40,339 | | | | 50,025 | | | | (9,686 | | ) | | (19 | )% |

| Drug Delivery | 65,315 | | | | 33,950 | | | | 31,365 | | | | 92 | % | | 33,950 | | | | 5,346 | | | | 28,604 | | | | 535 | % |

| Total Revenue | 366,989 | | | | 263,893 | | | | 103,096 | | | | 39 | % | | 263,893 | | | | 231,321 | | | | 32,572 | | | | 14 | % |

| Cost of revenue | 155,903 | | | | 130,622 | | | | 25,281 | | | | 19 | % | | 130,622 | | | | 104,195 | | | | 26,427 | | | | 25 | % |

| Gross profit | 211,086 | | | | 133,271 | | | | 77,815 | | | | 58 | % | | 133,271 | | | | 127,126 | | | | 6,145 | | | | 5 | % |

| Gross margin | 57.5 | | % | | 50.5 | | % | | | | | | 7 | | | 50.5 | | % | | 55.0 | | % | | | | | | \-4.5 | |

| Sales and marketing | 94,483 | | | | 78,407 | | | | 16,076 | | | | 21 | % | | 78,407 | | | | 50,552 | | | | 27,855 | | | | 55 | % |

| General and administrative | 71,597 | | | | 60,392 | | | | 11,205 | | | | 19 | % | | 60,392 | | | | 57,548 | | | | 2,844 | | | | 5 | % |

| Total operating expenses | 221,790 | | | | 182,007 | | | | 39,783 | | | | 22 | % | | 182,007 | | | | 136,000 | | | | 46,007 | | | | 34 | % |

| Operating loss | (10,704 | | ) | | (48,736 | | ) | | (38,032 | | ) | | (78 | )% | | (48,736 | | ) | | (8,874 | | ) | | 39,862 | | | | 449 | % |

| Interest and other income (loss), net | (16,114 | | ) | | (12,654 | | ) | | (3,460 | | ) | | (27 | )% | | (12,654 | | ) | | (39,006 | | ) | | 26,352 | | | | (68 | )% |

| Loss from continuing operations before income taxes | (26,818 | | ) | | (61,390 | | ) | | (34,572 | | ) | | (56 | )% | | (61,390 | | ) | | (47,880 | | ) | | 13,510 | | | | 28 | % |

| Income tax expense | 392 | | | | 212 | | | | 180 | | | | 85 | % | | 212 | | | | 60 | | | | 152 | | | | 253 | % |

| Net loss from continuing operations | (27,210 | | ) | | (61,602 | | ) | | (34,392 | | ) | | (56 | )% | | (61,602 | | ) | | (47,940 | | ) | | 13,662 | | | | 28 | % |

| Loss from discontinued operations, net of tax | (1,669 | | ) | | (11,918 | | ) | | (10,249 | | ) | | (86 | )% | | (11,918 | | ) | | (3,560 | | ) | | 8,358 | | | | 235 | % |

Our total revenue increased to $367.0 million, up $103.1 million, or 39%, in 2016 compared to 2015, primarily due to strong growth in our U.S. Omnipod revenue, International Omnipod revenue and our on-body injection device for drug delivery.

Our U.S. Omnipod revenue increased to $229.8 million, up $40.2 million, or 21%, primarily due to growth in our installed base of Omnipod users which was greatly driven by the expansion in 2015 and 2016 of our sales force and customer support personnel and strategic initiatives introduced in mid-2015 to expand awareness of the Omnipod System.

The results for 2015 were also partially impacted by unfavorable distributor ordering patterns in the first quarter of 2015 which stabilized thereafter.

Our International Omnipod revenue increased to $71.9 million, up $31.6 million, or 78%, primarily due to growth in distributor sales from continued adoption in existing markets and to a lesser extent from entry into new markets.

The results for 2015 included lower International Omnipod sales which partially resulted from unfavorable distributor ordering patterns in the first and second quarters of 2015 which stabilized thereafter.

Our drug delivery revenue increased to $65.3 million, up $31.4 million, or 92%, due to strong growth in demand for our primary drug delivery device following regulatory approval in December 2014.

We expect strong growth of approximately 20% in our worldwide Omnipod installed base.

Cost of revenue increased to $155.9 million, up $25.3 million, or 19%, in 2016 compared to 2015, primarily due to an increase in sales volumes, partially offset by $11.5 million of costs incurred during 2015 that were considered non-recurring in nature, along with supply chain operation efficiency and effectiveness improvements made in 2016.

Gross margin increased to 57.5%, up approximately 7 points, in 2016 compared to 2015, primarily due to $11.5 million of costs incurred in 2015 that were considered non-recurring in nature, along with supply chain operation efficiency and effectiveness improvements made in 2016.

For 2017, we expect gross margin to increase primarily from improvements to our supply chain operation efficiency and effectiveness as demonstrated in 2016.

For 2017, we expect overall research and development spending to increase due to the development efforts on our ongoing projects described above.

Sales and marketing expenses increased to $94.5 million, up $16.1 million, or 21%, for 2016, compared to 2015, primarily due to an increase of $16.0 million in personnel-related expenses, including increased incentive compensation costs resulting from growth in the business, as well as costs associated with the expansion in 2015 of our sales force and customer support personnel.

We expect sales and marketing expenses in 2017 to increase due to the expansion of our sales force and customer support personnel.

General and administrative expenses increased to $71.6 million, up $11.2 million, or 19%, for 2016, compared to 2015.

This increase includes a charge of $6.1 million related to in-process internally developed software recorded in the fourth quarter of 2016 due to a change in our longer-term enterprise resource planning (“ERP”) system requirements.

In addition, the increase was also due to a $4.6 million increase that was primarily attributable to personnel-related costs on higher incentive compensation associated with growth in our business, as well as additional staff to support our growth expectations and fees paid for external consultants.

| • | Exceeded expectation within our Drug Delivery business with initial launch of the OmniPod technology for use with Amgen's Neulasta product and expanded the pipeline to six development agreements. |

| • | Sold our Neighborhood Diabetes business in February 2016 to focus on faster growing innovative products. |

| • | Signed development agreement with Eli Lilly and Company for OmniPod delivery of U200 concentrated insulin, significantly expanding OmniPod's addressable market for Type 1 and Type 2 diabetes. |

| • | Signed development agreement with algorithm partner for OmniPod Artificial Pancreas. |

| ◦ | Neighborhood Diabetes revenue of $63.1 million. |

In June 2011, we entered into a development agreement with a U.S. based pharmaceutical company (the "Development Agreement”).

Under the Development Agreement, we were required to perform design, development, regulatory, and other services to support the pharmaceutical company as it worked to obtain regulatory approval to use our drug delivery technology as a delivery method for its pharmaceutical.

The pharmaceutical company received regulatory approval in December 2014 and now purchases product from us for use with its pharmaceutical under a supply agreement.

| Revenue | $ | 324,225 | | | $ | 288,720 | | | $ | 35,505 | | | 12 | % | | $ | 288,720 | | | $ | 247,084 | | | $ | 41,636 | | | 17 | % |

| Cost of revenue | 176,071 | | | | 145,432 | | | | 30,639 | | | | 21 | % | | 145,432 | | | | 134,683 | | | | 10,749 | | | | 8 | % |

| Gross profit | 148,154 | | | | 143,288 | | | | 4,866 | | | | 3 | % | | 143,288 | | | | 112,401 | | | | 30,887 | | | | 27 | % |

| Gross margin | 45.7 | | % | | 49.6 | | % | | | | | | | | | 49.6 | | % | | 45.5 | | % | | | | | | | |

| Sales and marketing | 88,352 | | | | 60,844 | | | | 27,508 | | | | 45 | % | | 60,844 | | | | 55,694 | | | | 5,150 | | | | 9 | % |

| General and administrative | 77,359 | | | | 66,841 | | | | 10,518 | | | | 16 | % | | 66,841 | | | | 64,077 | | | | 2,764 | | | | 4 | % |

| Total operating expenses | 208,919 | | | | 155,585 | | | | 53,334 | | | | 34 | % | | 155,585 | | | | 141,536 | | | | 14,049 | | | | 10 | % |

| Operating loss | (60,765 | | ) | | (12,297 | | ) | | 48,468 | | | | 394 | % | | (12,297 | | ) | | (29,135 | | ) | | (16,838 | | ) | | (58 | )% |

| Interest and other expense, net | (12,464 | | ) | | (39,061 | | ) | | (26,597 | | ) | | (68 | )% | | (39,061 | | ) | | (15,739 | | ) | | 23,322 | | | | 148 | % |

| Income tax expense | (291 | | ) | | (142 | | ) | | 149 | | | | 105 | % | | (142 | | ) | | (100 | | ) | | 42 | | | | 42 | % |

Our Neighborhood Diabetes revenue increased to $63.1 million, up $3.4 million, or 6%, reflecting growth in patient demand.

As we increase commercial sales with our drug delivery partners, we expect that the revenue from our on-body injection devices will be a higher relative percentage of our overall growth.

In the fourth quarter of 2015, we continued to see strong growth of approximately 20% in U.S. OmniPod new patient starts and expect this pattern to continue.

New patient starts is an early indicator of future growth in our recurring revenue model rather than an explanation of growth for a given quarterly period.

Increased revenue is dependent upon the success of our sales efforts, our customer retention and our ability to produce our products in sufficient volumes as our patient base grows and is subject to other risks and uncertainties.

Beginning in the first quarter of 2016, Neighborhood Diabetes will be reported as discontinued operations, and not included in revenue, as a result of the sale in February 2016.

Gross margin in the year ended 2015 decreased by approximately 4 points compared to the same period in 2014.

For the year ending December 31, 2016, we expect gross margin to increase primarily from enhancements to our manufacturing efficiency and effectiveness, a favorable product mix primarily driven by the sale of our Neighborhood Diabetes business.

Sales and marketing expenses increased $27.5 million to $88.4 million for the year ended December 31, 2015, compared to $60.8 million for the same period in 2014.

We expect sales and marketing expenses in the year ending December 31, 2016 to increase as we see the full-year impact of the 2015 commercial team expansion and invest in initiatives that will enhance awareness, customer satisfaction and drive increased adoption of the OmniPod System as well as increased adoption of our technology as a delivery platform for other pharmaceuticals.

Additionally, there was an increase in shipping costs of $1.0 million, an increase of $0.8 million in audit, professional services and consulting fees and an increase in employee related expenses of $0.8 million.

The current portion primarily related to state and foreign taxes and the deferred portion primarily related to federal and state tax amounts.

Total revenue increased $41.6 million in the year ended 2014 compared to the same period in 2013, primarily the result of an increase in U.S. and international OmniPod revenue, partially offset by lower revenue from Neighborhood Diabetes.

Our U.S. OmniPod revenue increased to $173.6 million, up $22.2 million, or 15%, reflecting growth in our installed base of OmniPod users.

Our international OmniPod revenue increased to $50.0 million, up $25.5 million, reflecting increased installed base as well as increased stock of on hand inventory from our international distributor during 2014.

Our Neighborhood Diabetes revenue decreased to $59.7 million, down $4.1 million, or 6%, reflecting a reduction in revenue related to certain mail-order diabetic testing supplies such as blood glucose testing strips and lancets to Medicare beneficiaries that we were no longer eligible to service under the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies ("DMEPOS") Competitive Bidding Program, which took effect on July 1, 2013.

In the year ended December 31, 2014, cost of revenue increased $10.7 million compared to the same period in 2013 primarily due to higher sales volumes in the United States and internationally.

These increases were partially offset by lower per-unit costs of the OmniPod System resulting from cost savings on raw materials, volume discounts from our suppliers and increased absorption of manufacturing overhead driven by increased production volumes.

Gross margin in the year ended 2014 increased by approximately 4 points compared to the same period in 2013 due to efficiencies in the manufacturing process.

Research and development expenses increased $6.1 million to $27.9 million for the year ended December 31, 2014, compared to $21.8 million for the same period in 2013.

The increase was primarily the result of expenses related to our development projects and included a $3.3 million increase in employee related expenses.

Additionally, we incurred a $2.0 million increase in consulting and temporary labor related to our development projects and a $0.5 million increase in supplies and consumables.

Our financial instruments consist of cash, cash equivalents, [added: short-term investments,] accounts receivable, accounts payable, accrued [removed: expenses] [added: expenses, debt] and long-term obligations.

To minimize our exposure to an adverse shift in interest rates, we invest mainly in [added: short-term investments and] cash equivalents.

As the interest rates are fixed, changes in interest rates do not affect the value of our [removed: debt or capital lease obligations.][added: debt.]

We are [added: primarily] exposed to currency exchange rate fluctuations related to our subsidiary [removed: operations] [added: operation] in [removed: Canada and Singapore.][added: Canada.]

As of December 31, 2016, we had outstanding debt recorded on our consolidated balance sheet of $332.8 million, net of our deferred financing costs and unamortized debt discount totaling $79.3 million, related to our 2% and 1.25% Notes.

The majority of our sales outside of the U.S. are transacted in U.S. dollars and are not subject to material foreign currency fluctuations.

As of December 31, 2015, we had outstanding debt recorded on our consolidated balance sheet of $201.3 million related to our 2% Notes and $5.8 million related to capital lease obligations.

We are primarily engaged in the development, manufacturing and sale of our proprietary [removed: OmniPod] [added: Omnipod®] Insulin Management System (the [removed: “OmniPod] [added: “Omnipod] System”), an innovative, discreet and easy-to-use continuous insulin delivery system for people with insulin-dependent diabetes.

We sell the [removed: OmniPod] [added: Omnipod] System [removed: and other diabetes management supplies] in the United States through direct sales to customers or through our distribution partners.

Additional information regarding [removed: this acquisition] [added: the sale of Neighborhood Diabetes] is provided in note 3 to the consolidated financial statements included under Item 8 of this Form 10-K.

In addition to using the [removed: OmniPod®] [added: Omnipod] for insulin delivery, we also partner with global pharmaceutical and biotechnology companies to tailor the [removed: OmniPod] [added: Omnipod System] technology platform for the delivery of subcutaneous drugs across multiple therapeutic areas.

The information on our website is not part of this Annual Report on Form 10-K for the year ended December 31, [removed: 2015.][added: 2016.]

| • | Type 2 diabetes, the more common form of diabetes, is characterized by the body’s inability to either properly utilize insulin or produce enough insulin. Historically, Type 2 diabetes has occurred in later adulthood, but its incidence is increasing among the younger population, due primarily to increasing childhood obesity. Initially, many people with Type 2 diabetes attempt to manage their diabetes with improvements in diet, exercise and/or oral medications. As their diabetes advances, some patients progress to multiple drug therapy, which often includes insulin therapy. [removed: Guidelines, including those published by the American Diabetes Association in 2014, suggest more aggressive treatment for people with Type 2 diabetes, including the early adoption of insulin therapy and more frequent testing. It is now becoming more accepted for insulin therapy to be started earlier in people with Type 2 diabetes, and, in some cases, as part of the initial treatment.] |

In addition to [removed: using] the [removed: Pod for insulin delivery] [added: diabetes market space,] we have [removed: also] partnered with multiple pharmaceutical and biotechnology companies that utilize a customized form of the [removed: OmniPod system] [added: Omnipod System] to deliver a drug over a specified interval of time, at a certain administered volume.

The [added: Omnipod] System's innovative design and features allows people with insulin-dependent diabetes to live their life, and manage their diabetes, with unprecedented freedom, comfort, convenience, and ease.

[removed: ][added: ]

[removed: ][added: ]

The [removed: OmniPod] [added: Omnipod] System is a discreet two part design, the [removed: OmniPod (Pod)] [added: Omnipod device ("Omnipod" or "Pod")] and the PDM, that eliminates the need for the external tubing required with conventional pumps.

| • | The Pod is a small, lightweight, self-adhesive device that the patient fills with insulin and [removed: wear] [added: wears] directly on the body. The Pod delivers precise, personalized doses of insulin into the body through a small flexible tube (called a cannula), based on instructions that the patient programs into the Pod's wireless companion, the PDM. |

[removed: In addition, the OmniPod] [added: The Omnipod] System consists of just two devices, as opposed to up to seven for conventional insulin pumps.

Our current research and development efforts are primarily focused on the development of mobile applications for the [removed: OmniPod, including a Bluetooth-enabled PDM, integration with continuous glucose monitoring technology, an artificial pancreas platform, and development to support the use of concentrated insulin for Type I and Type II patients with higher insulin-requirements.][added: Omnipod System, including:]

In addition to insulin delivery, we continue to work with multiple pharmaceutical and biotechnology companies on alternative uses for our [removed: OmniPod] [added: Omnipod] System technology [removed: to use our technology] as a delivery platform for a range of different pharmaceuticals.

We are currently producing [removed: the OmniPod] [added: our devices] on varying degrees of semi-automated manufacturing lines at a facility in China, operated by a subsidiary of [added: Flex Ltd. (formerly] Flextronics International [removed: Ltd. (“Flextronics”).][added: Ltd.) (“Flex”).]

We purchase [removed: OmniPods] [added: our devices] pursuant to our agreement with [removed: Flextronics.][added: Flex.]

[removed: It] [added: The contract] may be terminated by either party upon compliance with certain advance written notice provisions that are intended to provide the parties with sufficient time to make alternative arrangements.

We [removed: seek] [added: continue] to [added: invest in our supply chain operations to] increase manufacturing capacity and reduce the per-unit production cost for the [removed: OmniPod.][added: Omnipod System.]

[removed: All] [added: Our] outside vendors produce the components to our specifications and they are audited periodically by our Quality Assurance Department to ensure conformity with the specifications, policies and procedures for the [removed: OmniPods.][added: Omnipod System.]

Our Quality Assurance Department also inspects and tests the [removed: OmniPods] [added: Omnipod System] at various steps in the manufacturing cycle to facilitate compliance with our stringent specifications.

Processes utilized in the manufacture, test and release of the [removed: OmniPod] [added: Omnipod System] have been verified and validated as required by the U.S. Federal Food and Drug Administration ("FDA") and other regulatory bodies.

As a medical device manufacturer and distributor, our manufacturing facilities and the facilities of our suppliers [removed: and sterilizer] are subject to periodic inspection by the FDA, our notified body and certain corresponding state agencies.

As of December 31, [removed: 2015,] [added: 2016,] we had obtained [removed: 15] [added: 23] issued United States [removed: patents,] [added: patents with expiration dates ranging from 2020 through 2034,] and had [removed: 10] [added: 32] additional pending United States patent applications.

| • | communication features between system [removed: components;] [added: components for the Omnipod System and next generation products;] |

| • | software for controlling the [removed: OmniPod System;] [added: Omnipod System] and [added: next generation products; and] |

| • | various novel aspects of the [removed: OmniPod System and] [added: Omnipod System,] potential future generations of [removed: OmniPod Systems.] [added: Omnipod Systems, and other mechanisms for the delivery of pharmaceuticals.] |

We have registered various trademarks associated with our business, including INSULET, [removed: OMNIPOD] [added: OMNIPOD, DASH] and the OMNIPOD design with the United States Patent and Trademark Office on the Principal Register and in other appropriate jurisdictions.

Independent distributors [removed: can] represent [removed: as much as] [added: approximately] 40% of our total [removed: sales] [added: revenue] in the United States.

We [removed: have been distributing] [added: sell] the [removed: OmniPod] [added: Omnipod] System in certain countries in [removed: Europe,] [added: Europe] through [added: our independent distributor,] Ypsomed Distribution AG [removed: ("Ypsomed"), since 2010.][added: ("Ypsomed").]

We have a uniform sales and marketing approach, aligned across patients, physicians and providers, to capitalize on the unique benefits of our [removed: OmniPod] [added: Omnipod System] technology.

Medtronic MiniMed, a division of [removed: Medtronic] [added: Medtronic,] has historically held the majority share of the conventional insulin pump market in the United States.

| • | 510(k) Clearance. To obtain 510(k) clearance for any of our potential future devices (or for certain modifications to devices that have previously received 510(k) clearance), we must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device or a pre-amendment device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a PMA application. The FDA’s 510(k) clearance pathway generally takes from three to twelve months from the date the application is completed, but can take significantly longer. After a medical device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a significant change in its intended use, requires a new 510(k) clearance or, depending on the modification, could require a PMA application. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. [removed: As further described below, as part of an inspection conducted by the FDA in December of 2015, we agreed to submit a 510(k) for modifications previously made to the OmniPod System. In addition, we also agreed to submit a 510(k) associated with the field action described below that we initiated in October 2015.] |

[removed: With respect to corrections and removals, in] [added: In] July 2015 we implemented a field removal of certain lots [added: of our product] due to the possibility that some [removed: OmniPod] [added: Omnipod] Systems had a higher rate of failure than [removed: its] [added: our] current manufacturing standards.

In September 2015, as part of our product quality monitoring process, we identified that certain lots of the [removed: OmniPod®] [added: Omnipod System] had a slight increase (1% - 2%) in the reported cases in which the Pod’s cannula failed to deploy.

Our facility located at 600 Technology Park Drive, Suite 200, Billerica, MA 01821 was inspected by the FDA [removed: between March 11, 2015 and] [added: in] March [removed: 27,] 2015, which resulted in four inspectional observations (FDA Form 483) and a subsequent Warning Letter dated June 5, 2015.

We have completed all of the commitments from the [added: FDA] Form 483 and Warning Letter [removed: responses, but have not yet received notification that the FDA has closed the Warning Letter.][added: responses.]

[removed: More recently, our] [added: Our] facility located in Billerica, MA was re-inspected by the FDA [removed: between] [added: in] November [removed: 30, 2015 and] [added: to] December [removed: 11,] 2015.

This inspection also resulted in four inspectional [removed: observations (FDA Form 483).][added: observations.]

We responded to [removed: the most recent] [added: these] inspectional observations on December 31, 2015.

In 2016 there were three publications in peer-reviewed, scientific journals demonstrating the clinical and quality of life benefits associated with use of the Omnipod System.

Two publications reported results of a retrospective study of patients with Type 1 and Type 2 diabetes.

The study demonstrated clinically meaningful and statistically significant improvements in HbA1c (an important measure of blood glucose control), reduction in total daily dose of insulin and reduction in the frequency and severity of self-reported hypoglycemic episodes after three months of Omnipod System use compared to previous treatment with either multiple daily injections or traditional tubed insulin pumps.

The third publication reported results of a second study that surveyed current adult Omnipod System users of which the majority reported positive changes in quality of life including perceived control over their diabetes, reduced diabetes distress, improved overall well-being and sense of hypoglycemic safety since initiating treatment with the Omnipod System.

In addition, the majority of patients also reported significant improvement in glycemic control with more than one-third reporting a decrease in severe hypoglycemic episodes.

| • | Omnipod Dash Insulin Management System. Development of a secured Bluetooth Low Energy enabled Pod and PDM with a touch screen color user interface supported by web application and smart phone connectivity. |

| • | Omnipod Horizon Automated Glucose Control. Development of a hybrid closed loop control system that will utilize the Dash mobile platform. Our Pod will communicate with a continuous glucose monitor and help control insulin delivery utilizing an algorithm located on the Pod. |

| • | Concentrated Insulin Delivery. Development to support the use of concentrated insulins for Type 1 and Type 2 patients with higher insulin-requirements, utilizing the same form factor as our existing Pod. |

The current term of the agreement expires in September 2021 and is subject to an automatic renewal thereafter, unless otherwise canceled by the parties under the contract terms.

As part of our investment strategy, in 2016 we announced our plan to establish a highly automated manufacturing operation in the United States and expect to begin production through this operation in 2019.

In December 2016, we entered into an agreement to purchase property for the planned facility in Acton, Massachusetts for a total purchase price of $9.3 million.

Of the total purchase price, $0.5 million was paid as of December 31, 2016 and the remaining $8.8 million was subsequently paid upon closing in February 2017.

The new U.S. operation is intended to provide manufacturing redundancy and additional production capacity to support growth and new product launches.

The new operation will enable further improvements of manufacturing reliability and the lowering of production costs.

Our exclusive distribution agreement with Ypsomed expires in mid-2018.

These companies are at various stages of development and the number of such companies continuously change as they enter or exit the market on an ongoing basis.

We have obtained 510(k) clearance for the Omnipod System and expect that PMA approval will be needed for some of our future products.

We may be required to obtain a new 510(k) clearance or pre-market approval for significant post-market modifications to the Omnipod System.

We cannot assure you that our facilities or our contract manufacturer or component suppliers’ facilities would pass any future quality system inspection.

Our facility was again re-inspected in October 2016 and this FDA inspection focused on corrections to previous FDA inspections and resulted in one inspectional observation.

In January 2017, the FDA officially closed the FDA inspection that was conducted in October 2016.

In January 2017, the FDA officially terminated this field action.

| | |

| --- | --- |

| • | the referral of an individual; |

| | |

| --- | --- |

| | |

| --- | --- |

The Federal Anti-Kickback Statute has been interpreted to apply to arrangements between drug and medical device manufacturers and suppliers on one hand and prescribers, purchasers and formulary managers on the other,

and liability may be established without a person or entity having actual knowledge of the statute or specific intent to violate it.

In addition, claims resulting from a violation of the Federal Anti-Kickback Statute constitute false or fraudulent claims for purposes of the Federal False Claims Act, which is addressed below.

Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common business practices from prosecution and administrative sanctions, and we have structured our arrangements with diabetes educators and other business practices to comply with these exemptions and safe harbors whenever possible, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration that may be perceived as inducing the prescription, purchase, or recommendation of the Omnipod System may be subject to scrutiny under the law.

However, many drug and medical device manufacturers have been investigated or subject to lawsuits by whistleblowers and have reached substantial financial settlements with the federal government under the False Claims Act for a variety of alleged improper marketing activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; or causing submission of false claims by providing inaccurate coding or billing information to actual or prospective purchasers, and our business practices could be subject to scrutiny and enforcement under the Federal False Claims Act.

We also may be subject to other federal false claim laws, including federal criminal statutes that prohibit making a false statement to the federal government.

Federal Health Care Fraud Statutes.

We are also subject to a federal health care fraud statute that, among other things, imposes criminal and civil liability for executing a scheme to defraud any health care benefit program including non-governmental programs, and prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false or fraudulent statement or representation, or making or using any false writing or document with knowledge that it contains a materially false or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.

Legislative changes to the ACA remain possible and appear likely in the 115th United States Congress and under the Trump Administration, which could include changes that adversely affect our business.

The Physician Payments Sunshine Act, which is being implemented as the Open Payments program, requires manufacturers of drugs and devices for which Medicare or Medicaid payment is available to track and publicly report many types of payments made and items of value provided to physicians and teaching hospitals.

Moreover, several states have imposed similar or more restrictive requirements, including requirements to disclose payments to HCPs, restrictions on marketing and other expenditures, and requirements to adopt a code of conduct or compliance program with specific elements.

In July 2015, we executed an asset purchase agreement with GlaxoSmithKline ("GSK") whereby we acquired assets associated with the Canadian distribution of our products and we assumed the distribution, sales, marketing, training and support activities for the OmniPod system in Canada.

Additional information regarding the sale of Neighborhood Diabetes is provided in note 18 to the consolidated financial statements included under Item 8 of this Form 10-K.

The OmniPod Delivery System is an automated drug delivery platform.

The OmniPod System requires the fewest steps to start insulin delivery of all CSII therapies on the market by automating much of the process.

Under the agreement, Flextronics agrees to supply us with OmniPods at a price reflective of the forecast that we provide pursuant to the agreement.

The current term of the agreement expires in December 2017 and is subject to automatic renewal for one-year successive terms subsequently.

We continue to invest in our manufacturing capacity in order to meet our expected 2016 demand and beyond for the OmniPod.

In Canada, we had historically sold our product through an independent distributor, however we acquired that business in July 2015.

For the year ending December 31, 2015 the percentage of our total consolidated revenue from direct sales and independent distributors was as follows:


These companies are at various stages of development.

The companies working in this area of which we are aware include Medtronic, Johnson & Johnson, Valeritas Inc., Cellnovo Limited, VinCentra, Debiotech S.A., Becton Dickinson and Co., Enable Injections, Sensile Medical and Unilife.

We have obtained 510(k) clearance for the OmniPod System.

In Canada, we had historically sold our product through a distributor, however as a result of our acquisition in July 2015, we now sell the OmniPod System direct.

| • | referral of a person; |

Although we believe that these arrangements do not violate the law, regulatory authorities may determine otherwise, especially as enforcement of this law historically has been a high priority for the federal government.

We believe that our arrangements comply with the requirements of the Federal Civil Monetary Penalties Law.

The Physician Payments Sunshine Act (“Sunshine Act”) seeks to increase the transparency of relationships between medical device, pharmaceutical and other companies and healthcare professionals (“HCPs”).

Under the Sunshine Act, we are required to track and publicly report many types of payments made and items of value provided to HCPs.

Moreover, several states have imposed similar or more restrictive requirements.

In addition, we have adopted policies and codes of conduct regarding our interactions with HCPs.

The information required by this Item is provided under "Legal Proceedings" in note [removed: 13] [added: 15] to the consolidated financial statements included under Item 8 of this Form 10-K, and is incorporated herein by reference.

10-K 1 [removed: podd-2015x12x31_10xk.htm] [added: podd-2016x12x31_10xk.htm] 10-K

| | For the fiscal year ended December 31, [removed: 2015] [added: 2016] |

The aggregate market value of the common stock held by non-affiliates of the registrant computed by reference to the last reported sale price of the Common Stock as reported on The NASDAQ Global Market on June 30, [removed: 2015] [added: 2016] was approximately [removed: $1.8] [added: $1.7] billion.

The number of shares outstanding of each of the registrant’s classes of common stock as of February [removed: 25, 2016:][added: 21, 2017:]

| Common Stock, $0.001 Par Value Per Share | | [removed: 57,015,489] [added: 57,651,012] |

The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, [removed: 2015.][added: 2016.]

| Item 1 | [removed: [Business](#sE636C6ED5795F84DEB21F20E7F50265A)] [added: [Business](#s4C682F8352FA535CBC598F9C2F43A4CA)] | [removed: [3](#sE636C6ED5795F84DEB21F20E7F50265A)] [added: [3](#s4C682F8352FA535CBC598F9C2F43A4CA)] |

| Item 1A | [Risk [removed: Factors](#s2d33ca74b40a4809a6b21fd61debd8e8)] [added: Factors](#s17526602CACB5D5E9F1C1CDDABD16387)] | [removed: [13](#s2d33ca74b40a4809a6b21fd61debd8e8)] [added: [14](#s17526602CACB5D5E9F1C1CDDABD16387)] |

| Item 1B | [Unresolved Staff [removed: Comments](#sebb3598445534be6bdfdae94b34ebc1f)] [added: Comments](#s001A9733D1FB59E38B91483AAC94BE72)] | [removed: [33](#sebb3598445534be6bdfdae94b34ebc1f)] [added: [34](#s001A9733D1FB59E38B91483AAC94BE72)] |

| Item 2 | [removed: [Properties](#s083ac989f87241ffbb9024587f8f382d)] [added: [Properties](#s935B223B7CF35EE5A172B977585A8952)] | [removed: [33](#s083ac989f87241ffbb9024587f8f382d)] [added: [34](#s935B223B7CF35EE5A172B977585A8952)] |

| Item 3 | [Legal [removed: Proceedings](#s0aabcb56cb384000ace3a190b51998e7)] [added: Proceedings](#s7A2E47BB4AD65DFFB0AE2EFDC1EA6072)] | [removed: [33](#s0aabcb56cb384000ace3a190b51998e7)] [added: [35](#s7A2E47BB4AD65DFFB0AE2EFDC1EA6072)] |

| Item 4 | [Mine Safety [removed: Disclosures](#sD81C169002741DC5C006F20E86FDDDAB)] [added: Disclosures](#s13B7E37B6A505C8C9051170F8ED500E7)] | [removed: [33](#sD81C169002741DC5C006F20E86FDDDAB)] [added: [35](#s13B7E37B6A505C8C9051170F8ED500E7)] |

| Item 5 | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s303eb1ff927d4f149debc4a44fb0d3fd)] [added: Securities](#s2EE179A0FB39527E90ACF9644AB26FFC)] | [removed: [34](#s303eb1ff927d4f149debc4a44fb0d3fd)] [added: [36](#s2EE179A0FB39527E90ACF9644AB26FFC)] |

| Item 6 | [Selected Financial [removed: Data](#sddc3015425ee4b9e955e37a5d786c089)] [added: Data](#sA183A9D79399598087482ADF501DB67F)] | [removed: [36](#sddc3015425ee4b9e955e37a5d786c089)] [added: [37](#sA183A9D79399598087482ADF501DB67F)] |

| Item 7 | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sDC1CE4501BBFD07D81F2F20E8487A61A)] [added: Operations](#s69A06B81B1A853668210AB9BCBDE0FBB)] | [removed: [37](#sDC1CE4501BBFD07D81F2F20E8487A61A)] [added: [39](#s69A06B81B1A853668210AB9BCBDE0FBB)] |

| Item 7A | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s7C5AFD78AD86021057DFF20E85D498B3)] [added: Risk](#s8CF5339213C351BEB804F81B6F36B2BC)] | [removed: [45](#s7C5AFD78AD86021057DFF20E85D498B3)] [added: [47](#s8CF5339213C351BEB804F81B6F36B2BC)] |

| Item 8 | [Financial Statements and Supplementary [removed: Data](#s42c51f1cf9c54e76907fdcee6389bce5)] [added: Data](#sEDD9E8D31FEB5717BB8760A1314F523A)] | [removed: [45](#s42c51f1cf9c54e76907fdcee6389bce5)] [added: [47](#sEDD9E8D31FEB5717BB8760A1314F523A)] |

| Item 9 | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sb44f9a7ce46f4f488060b2256060518b)] [added: Disclosure](#s8698E4F5A1CE501B8C7C874377C08DEA)] | [removed: [77](#sb44f9a7ce46f4f488060b2256060518b)] [added: [86](#s8698E4F5A1CE501B8C7C874377C08DEA)] |

| Item 9A | [Controls and [removed: Procedures](#s64F37393103190BEC6FBF20E8604FF4D)] [added: Procedures](#sEC1FF687C6B35105B0A9940D4E16F70A)] | [removed: [77](#s64F37393103190BEC6FBF20E8604FF4D)] [added: [86](#sEC1FF687C6B35105B0A9940D4E16F70A)] |

| Item 9B | [Other [removed: Information](#sC01678ABDC1646447B3AF20E87234234)] [added: Information](#s74D8FAC697755707A95306F8E3DDF4D0)] | [removed: [79](#sC01678ABDC1646447B3AF20E87234234)] [added: [88](#s74D8FAC697755707A95306F8E3DDF4D0)] |

| Item 10 | [Directors, Executive Officers and Corporate [removed: Governance](#s72AC1709D85BA93B1A5FF20E86585C15)] [added: Governance](#s654D6B0CE81A578686BB61821EC45244)] | [removed: [79](#s72AC1709D85BA93B1A5FF20E86585C15)] [added: [88](#s654D6B0CE81A578686BB61821EC45244)] |

| Item 11 | [Executive [removed: Compensation](#s3AFF72471821B135ECC8F20E867CF17B)] [added: Compensation](#sD87F9E25226F5E83B4B591CF281B0D40)] | [removed: [79](#s3AFF72471821B135ECC8F20E867CF17B)] [added: [88](#sD87F9E25226F5E83B4B591CF281B0D40)] |

| Item 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s20C2A530A6BEBC90520BF20E86AB99CF)] [added: Matters](#s862D8B8621F05D14984939892B7D5F1F)] | [removed: [79](#s20C2A530A6BEBC90520BF20E86AB99CF)] [added: [88](#s862D8B8621F05D14984939892B7D5F1F)] |

| Item 13 | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s0F57021B6A3A2F3C523FF20E86CEB874)] [added: Independence](#sB64011FEF0AD56648DA63F14EABCDBC9)] | [removed: [80](#s0F57021B6A3A2F3C523FF20E86CEB874)] [added: [88](#sB64011FEF0AD56648DA63F14EABCDBC9)] |

| Item 14 | [Principal Accounting Fees and [removed: Services](#s7AAD31C6AB6CBE696E4EF20E8752FD59)] [added: Services](#sEDA9E7BBD1185D77AE52728FAE9D7BB7)] | [removed: [80](#s7AAD31C6AB6CBE696E4EF20E8752FD59)] [added: [88](#sEDA9E7BBD1185D77AE52728FAE9D7BB7)] |

| Item 15 | [Exhibits, Financial Statement [removed: Schedules](#s3f30d72ef73d48c9803d001198b95e15)] [added: Schedules](#s0B78A13633E2564286DB189679D7E6EA)] | [removed: [81](#s3f30d72ef73d48c9803d001198b95e15)] [added: [89](#s0B78A13633E2564286DB189679D7E6EA)] |

| | [EXHIBIT [removed: INDEX](#s25cc253880d5412a869561e3377d7856)] [added: INDEX](#s849FF51A2AE75324AC439DEE0D5963DD)] | [removed: [83](#s25cc253880d5412a869561e3377d7856)] [added: [91](#s849FF51A2AE75324AC439DEE0D5963DD)] |

| [PART I](#s38B5EB51B34C588AADF690E37DB654DF) | | |

| [PART II](#s9ED07E5E607A542B949DF4B881C49D8B) | | |

| [PART II](#s9ED07E5E607A542B949DF4B881C49D8B)I | | |

| [PART I](#s9ED07E5E607A542B949DF4B881C49D8B)V | | |

| Item 16 | Form 10-K Summary | [89](#s13c20fbeba614f6eab445463e9f9a1b5) |

| | [SIGNATURES](#s1F67D22824375CD49D92C736D15F29E0) | [89](#s1F67D22824375CD49D92C736D15F29E0) |

INSULET CORPORATION

| [PART I](#sF754F8213E65DFA44E65F20E7F2FF06F) | | |

| [PART II](#sEAEC9573AC147B07528BF20E862851F6) | | |

| [PART II](#sEAEC9573AC147B07528BF20E862851F6)I | | |

| [PART I](#sEAEC9573AC147B07528BF20E862851F6)V | | |

| | [SIGNATURES](#s92799ACD39B52EED8336F20E87765559) | [81](#s92799ACD39B52EED8336F20E87765559) |

We lease a total of approximately [removed: 120,000] [added: 133,000] square feet of office space, laboratory, warehousing and other related facilities.

Approximately [removed: 90,000] [added: 100,000] of the total square footage consists of laboratory and office space for our corporate headquarters in Billerica, Massachusetts under leases expiring in [added: November] 2022.

Additionally, we lease approximately [removed: 18,000] [added: 29,000] square feet of warehousing space in Billerica, Massachusetts under a lease expiring in [added: September] 2019.

We lease other facilities in Canada, [removed: Singapore, New York] [added: China, California] and [removed: Florida] [added: Tennessee] containing a total of approximately [removed: 12,000] [added: 4,000] square feet under leases expiring from [removed: July 2016] [added: May 2017] to [removed: July 2019.][added: May 2018.]

In December 2016, we entered into an agreement to purchase property for the planned manufacturing facility in Acton, Massachusetts.

The property includes 195,000 square feet of manufacturing and office space.

| Fiscal Year [removed: 2014] [added: 2016] | | | | | | | |

As of February [removed: 25, 2015,] [added: 21, 2017,] there were approximately [removed: 11] [added: 10] registered holders of record of our common stock.

The chart set forth below shows the value of an investment of $100 on December 31, [removed: 2010] [added: 2011] in each of Insulet Corporation common stock, the NASDAQ Composite Index, and the NASDAQ Health Care Index.

All values assume reinvestment of the pre-tax value of dividends paid by companies included in these indices and are calculated as of December 31, [removed: 2015.][added: 2016.]

[removed: ][added: ]

| | [removed: 2010 | | |] 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | | | [added: 2016 | | |]

| NASDAQ Composite | 100 | | | [removed: 101] [added: 116] | | | [removed: 117] [added: 165] | | | [removed: 166] [added: 189] | | | [removed: 189] [added: 200] | | | [removed: 200] [added: 217] | | |

The following table sets forth information regarding securities authorized for issuance under our equity compensation plans as of December 31, [removed: 2015.][added: 2016.]

| Equity compensation plans [added: not] approved by security [removed: holders(1)] [added: holders(2)] | [removed: 2,929,887] [added: 827,200] | | | $ | [removed: 23.43] [added: 28.54] | | | [removed: 6,152,904] [added: —] | | |

| Equity compensation plans [removed: not] approved by security [removed: holders(2)] [added: holders(1)] | [removed: 881,277] [added: 3,576,322] | | | $ | [removed: 28.87] [added: 24.45] | | | [removed: —] [added: 4,487,991] | | |

As of December 31, [removed: 2015, 655,792] [added: 2016, 860,123] restricted stock units were outstanding.

The weighted-average exercise price of outstanding options as of such date issued under these Plans (excluding restricted stock units) was [removed: $30.19][added: $32.76.]

Sullivan upon being hired by us in September 2014; one inducement grant of 26,756 non-qualified stock options and 18,182 restricted stock units (6,060 [added: and 6,061] of which [removed: were exercised] [added: vested] during the [removed: year] [added: years] ended December 31, [removed: 2015)] [added: 2015 and 2016, respectively)] made to [removed: Brad] [added: Bradley] Thomas upon being hired by us in November 2014; one inducement grant of 79,936 non-qualified stock options and 56,965 restricted stock units [added: (18,988 of which vested during the year ended December 31, 2016)] made to Shacey Petrovic upon being hired by us in February 2015; one inducement grant of 58,852 non-qualified stock options and 43,028 restricted stock units [added: (14,342 of which vested during the year ended December 31, 2016)] made to Michael Levitz upon being hired by us in May 2015; one inducement grant of 29,581 non-qualified stock options and 21,627 restricted stock units [added: (7,209 of which vested during the year ended December 31, 2016)] made to David Colleran upon being hired by us in June 2015; and one inducement grant of 30,511 non-qualified stock options and 22,431 restricted stock units [added: (7,477 of which vested during the year ended December 31, 2016) made] to Michael Spears upon being hired by us in July 2015.

(3) The maximum number of shares of our common stock that remain available for future issuance under our 2007 Stock Option and Incentive Plan as of December 31, [removed: 2015] [added: 2016] is [removed: 6,152,904] [added: 4,487,991] shares.

(4) As of December 31, [removed: 2015, 811,965] [added: 2016, 962,219] restricted stock units were outstanding.

For more information relating to our equity compensation plans, see footnote [removed: 14] [added: 16] to our consolidated financial statements.

We did not repurchase any of our equity securities during the quarter ended December 31, [removed: 2015,] [added: 2016,] nor issue any securities that were not registered under Securities Act.

| First Quarter | $ | 37.54 | | | $ | 24.68 | |

| Second Quarter | $ | 35.15 | | | $ | 26.89 | |

| Third Quarter | $ | 45.07 | | | $ | 30.46 | |

| Fourth Quarter | $ | 40.72 | | | $ | 30.73 | |

| Insulet Corporation | $ | 100 | | $ | 113 | | $ | 197 | | $ | 245 | | $ | 201 | | $ | 200 | |

| NASDAQ Health Care | 100 | | | 124 | | | 193 | | | 246 | | | 257 | | | 212 | | |

| Total(4) | 4,403,522 | | | $ | 25.22 | | | 4,487,991 | | (3) |

| First Quarter | $ | 50.18 | | | $ | 35.83 | |

| Second Quarter | $ | 49.07 | | | $ | 31.69 | |

| Third Quarter | $ | 41.11 | | | $ | 32.94 | |

| Fourth Quarter | $ | 47.51 | | | $ | 36.75 | |

| Insulet Corporation | $ | 100 | | $ | 121 | | $ | 137 | | $ | 239 | | $ | 297 | | $ | 244 | |

| NASDAQ Health Care | 100 | | | 106 | | | 132 | | | 204 | | | 259 | | | 271 | | |

| Total(4) | 3,811,164 | | | $ | 24.69 | | | 6,152,904 | | (3) |

| [added: (In thousands)] | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011(3)] [added: 2012] | | |

| [removed: |] (In thousands, except share and per share data) | [added: 2016] | | | | [added: 2015] | | | | [added: 2014] | | | | [added: 2013] | | | | [added: 2012] | | [added: |]

| Research and development | [removed: 43,208] [added: 55,710] | | | | [removed: 27,900] [added: 43,208] | | | | [removed: 21,765] [added: 27,900] | | | | [removed: 24,359] [added: 21,765] | | | | [removed: 21,863] [added: 24,359] | | |

| Income tax [removed: benefit (expense)] [added: expense (benefit)] | [removed: (291] [added: 392] | | [removed: )] | | [removed: (142] [added: 212] | | [removed: )] | | [removed: (100] [added: 60] | | [removed: )] | | [removed: (212] [added: 22] | | [removed: )] | | [removed: 11,212] [added: (9] | | [added: )] |

| Net loss | $ | [removed: (73,520] [added: (28,879] | ) | | $ | [removed: (51,500] [added: (73,520] | ) | | $ | [removed: (44,974] [added: (51,500] | ) | | $ | [removed: (51,867] [added: (44,974] | ) | | $ | [removed: (45,831] [added: (51,867] | ) |

| Net loss per share basic and [removed: diluted] [added: diluted:] | [removed: $] | [removed: (1.29] | [removed: )] | | [removed: $] | [removed: (0.93] | [removed: )] | | [removed: $] | [removed: (0.83] | [removed: )] | | [removed: $] | [removed: (1.08] | [removed: )] | | [removed: $] | [removed: (0.98] | [removed: )] |

| Weighted-average number of shares used in calculating net loss per [removed: share(1)] [added: share(3)] | [removed: 56,785,646] [added: 57,251,377] | | | | [removed: 55,628,542] [added: 56,785,646] | | | | [removed: 54,010,887] [added: 55,628,542] | | | | [removed: 47,924,324] [added: 54,010,887] | | | | [removed: 46,689,880] [added: 47,924,324] | | |

| Consolidated Balance [removed: Sheet] [added: Sheets] Data: | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents | $ | [removed: 122,672] [added: 137,174] | | | $ | [removed: 151,193] [added: 122,672] | | | $ | [removed: 149,727] [added: 151,193] | | | $ | [removed: 57,293] [added: 149,727] | | | $ | [removed: 93,955] [added: 57,293] | |

| Working capital | $ | [removed: 125,605] [added: 314,263] | | | $ | [removed: 163,900] [added: 125,605] | | | $ | [removed: 155,824] [added: 163,900] | | | $ | [removed: 61,650] [added: 155,824] | | | $ | [removed: 104,640] [added: 61,650] | |

| Total assets | $ | [removed: 275,126] [added: 456,647] | | | $ | [removed: 297,182] [added: 275,126] | | | $ | [removed: 286,541] [added: 297,182] | | | $ | [removed: 196,055] [added: 286,541] | | | $ | [removed: 218,725] [added: 196,055] | |

| Current portion of long-term debt and capital lease obligations | $ | [removed: 5,519] [added: 269] | | | $ | [removed: 3,380] [added: 5,519] | | | $ | [removed: 2,637] [added: 3,380] | | | $ | [removed: 14,429] [added: 2,637] | | | $ | [removed: —] [added: 14,429] | |

| Long-term debt and capital lease [removed: obligations(2)] [added: obligations(5)] | $ | [removed: 171,967] [added: 332,768] | | | $ | [removed: 166,283] [added: 171,967] | | | $ | [removed: 117,627] [added: 166,283] | | | $ | [removed: 101,726] [added: 117,627] | | | $ | [removed: 105,943] [added: 101,726] | |

| Other long-term liabilities | $ | [removed: 3,952] [added: 5,032] | | | $ | [removed: 2,774] [added: 3,952] | | | $ | [removed: 1,943] [added: 2,774] | | | $ | [removed: 1,867] [added: 1,943] | | | $ | [removed: 2,052] [added: 1,867] | |

| Total stockholders’ equity | $ | [removed: 34,051] [added: 63,150] | | | $ | [removed: 83,829] [added: 34,051] | | | $ | [removed: 124,597] [added: 83,829] | | | $ | [removed: 44,176] [added: 124,597] | | | $ | [removed: 82,735] [added: 44,176] | |

| [removed: (1)] [added: (3)] | In [removed: June 2011, we issued 1.2 million shares in connection with the acquisition of Neighborhood Diabetes. In] January 2013, we [added: issued and] sold 4.7 million shares of common stock to the public. In July 2014, we issued 0.3 million shares of common stock in connection with the repurchase of the 3.75% Senior Convertible Notes. See [removed: Footnote 14] [added: note 7] to our consolidated financial statements included in this Annual Report on Form 10-K. |

| [removed: (2)] [added: (5)] | In June 2008, we [added: issued and] sold $85.0 million principal amount of 5.375% Convertible Senior Notes due June [removed: 2013 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.] [added: 2013.] In June 2011, we issued [added: and sold] $143.8 million of 3.75% Convertible Notes due June 2016 and repurchased $70 million in principal of the 5.375% Notes. In June 2014, we issued [added: and sold] $201.3 million of 2% Convertible Notes due June 2019 and repurchased $114.9 million in 3.75% Notes. In July 2014, the remaining principal balance of the 3.75% Notes were converted and the principal was settled in cash. In [added: September 2016, we issued $345.0 million of 1.25% Convertible Notes due September 2021 and repurchased $134.2 million in principal of the 2% Notes. In] 2013 and 2014 we acquired $9.0 million and $1.5 million, respectively, of manufacturing equipment under capital leases. See [removed: Footnotes 5] [added: notes 7] and [removed: 6] [added: 8] to our consolidated financial statements included in this Annual Report on Form 10-K. |

| [removed: (4)] [added: (2)] | Included an impairment charge of [removed: $9.1] [added: $9.0] million [added: in 2015] related to the impairment of the Neighborhood Diabetes asset group. See [removed: Footnote 11] [added: note 13] to our consolidated financial statements included in this Annual Report on Form 10-K. |

| Revenue | $ | 366,989 | | | $ | 263,893 | | | $ | 231,321 | | | $ | 185,139 | | | $ | 148,898 | |

| Cost of revenue | 155,903 | | | | 130,622 | | | | 104,195 | | | | 95,364 | | | | 80,430 | | |

| Gross profit | 211,086 | | | | 133,271 | | | | 127,126 | | | | 89,775 | | | | 68,468 | | |

| Sales and marketing | 94,483 | | | | 78,407 | | | | 50,552 | | | | 45,176 | | | | 40,436 | | |

| General and administrative (1) | 71,597 | | | | 60,392 | | | | 57,548 | | | | 49,509 | | | | 34,642 | | |

| Total operating expenses | 221,790 | | | | 182,007 | | | | 136,000 | | | | 116,450 | | | | 99,437 | | |

| Operating loss | (10,704 | | ) | | (48,736 | | ) | | (8,874 | | ) | | (26,675 | | ) | | (30,969 | | ) |

| Interest and other income (loss), net | (16,114 | | ) | | (12,654 | | ) | | (39,006 | | ) | | (15,783 | | ) | | (15,702 | | ) |

| Loss from continuing operations before income taxes | (26,818 | | ) | | (61,390 | | ) | | (47,880 | | ) | | (42,458 | | ) | | (46,671 | | ) |

| Net loss from continuing operations | (27,210 | | ) | | (61,602 | | ) | | (47,940 | | ) | | (42,480 | | ) | | (46,662 | | ) |

| Loss from discontinued operations, net of tax(2) | (1,669 | | ) | | (11,918 | | ) | | (3,560 | | ) | | (2,494 | | ) | | (5,205 | | ) |

| Net loss from continuing operations per share | (0.48 | | ) | | (1.08 | | ) | | (0.86 | | ) | | (0.78 | | ) | | (0.97 | | ) |

| Net loss from discontinued operations per share | (0.03 | | ) | | (0.21 | | ) | | (0.06 | | ) | | (0.05 | | ) | | (0.11 | | ) |

| Short-term investments(4) | $ | 161,396 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |

| (1) | Included a charge of $6.1 million related to in-process internally developed software in 2016. See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. |

| (4) | We invested in short-term investments beginning in 2016. See note 6 to our consolidated financial statements included in this Annual Report on Form 10-K. |

| | |

| --- | --- |

| Revenue | $ | 324,225 | | | $ | 288,720 | | | $ | 247,084 | | | $ | 211,369 | | | $ | 152,255 | |

| Cost of revenue | 176,071 | | | | 145,432 | | | | 134,683 | | | | 119,033 | | | | 85,543 | | |

| Gross profit | 148,154 | | | | 143,288 | | | | 112,401 | | | | 92,336 | | | | 66,712 | | |

| Sales and marketing | 88,352 | | | | 60,844 | | | | 55,694 | | | | 52,708 | | | | 43,233 | | |

| General and administrative(4) | 77,359 | | | | 66,841 | | | | 64,077 | | | | 51,240 | | | | 44,083 | | |

| Total operating expenses | 208,919 | | | | 155,585 | | | | 141,536 | | | | 128,307 | | | | 109,179 | | |

| Operating loss | (60,765 | | ) | | (12,297 | | ) | | (29,135 | | ) | | (35,971 | | ) | | (42,467 | | ) |

| Interest and other expense, net | (12,464 | | ) | | (39,061 | | ) | | (15,739 | | ) | | (15,684 | | ) | | (14,576 | | ) |

| | (In thousands) | | | | | | | | | | | | | | | | | | |

| (3) | On June 1, 2011, we completed the acquisition of Neighborhood Diabetes, a durable medical equipment distributor, specializing in direct to consumer sales of diabetes supplies for an aggregate purchase price of approximately $37.9 million in cash and $24.4 million in common stock. Neighborhood Diabetes supplied its customers with blood glucose testing supplies, insulin pumps, pump supplies, pharmaceuticals, and other products for the management and treatment of diabetes. |

Our financial statements as of December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] and for each of the three years in the period ended December 31, [removed: 2015,] [added: 2016,] and the [removed: Report] [added: Reports] of the Registered Independent Public Accounting [removed: Firm] [added: Firms] are included in this report as listed in the index.

[removed: | [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#sd2ce1d5ded7542e5aac9e9d949d05ea5) | [46](#sd2ce1d5ded7542e5aac9e9d949d05ea5) |][added: Firm]

| [Consolidated Balance Sheets as of December 31, [removed: 2015] [added: 2016] and [removed: 2014](#sA92EA19DF89C974405A8F20E730B4C81)] [added: 2015](#sC8EF266EAE54593AB5F4206C9D854B95)] | [removed: [47](#sA92EA19DF89C974405A8F20E730B4C81)] [added: [50](#sC8EF266EAE54593AB5F4206C9D854B95)] |

| [Consolidated Statements of Operations for the Years ended December 31, [removed: 2015, 2014, 2013](#s9F1194B2001B0B83F38DF20E738F9605)] [added: 2016, 2015 and 2014](#s8E0F1D4183285920A3015181C8BB9A99)] | [removed: [48](#s9F1194B2001B0B83F38DF20E738F9605)] [added: [51](#s8E0F1D4183285920A3015181C8BB9A99)] |

| [Consolidated Statements of Comprehensive Loss for the Years ended December 31, [removed: 2015, 2014, 2013](#s64B9D82455D7C23C1055F20E743BC50C)] [added: 2016, 2015 and 2014](#sED4B57A03ADE5EA79137F9C2036CAA52)] | [removed: [49](#s64B9D82455D7C23C1055F20E743BC50C)] [added: [52](#sED4B57A03ADE5EA79137F9C2036CAA52)] |

| [Consolidated Statements of Stockholders' Equity for the Years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013](#sffa73c5beef34812b62570975d752739)] [added: 2014](#s0A07518D5850562EA37FF8EA94A0820F)] | [removed: [50](#sffa73c5beef34812b62570975d752739)] [added: [53](#s0A07518D5850562EA37FF8EA94A0820F)] |

| [Consolidated Statements of Cash Flows for the Years ended December 31, [removed: 2015, 2014,] [added: 2016, 2015] and [removed: 2013](#s71B1652387826D0922E5F20E74776EF6)] [added: 2014](#s0007896094E35079B1218EE66A3739CE)] | [removed: [51](#s71B1652387826D0922E5F20E74776EF6)] [added: [54](#s0007896094E35079B1218EE66A3739CE)] |

| [Notes to Consolidated Financial [removed: Statements](#s53FA1B3FF90013562C3DF20E804AF297)] [added: Statements](#s692C51F0411C5C3B92A562B03968E0CA)] | [removed: [52](#s53FA1B3FF90013562C3DF20E804AF297)] [added: [55](#s692C51F0411C5C3B92A562B03968E0CA)] |

We have audited the accompanying consolidated balance [removed: sheets] [added: sheet] of Insulet Corporation as of December 31, [removed: 2015 and 2014,] [added: 2015,] and the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the [removed: three] [added: two] years in the period ended December 31, 2015.

Our audits also include the financial statement schedule listed in the Index at Item [removed: 15(a).][added: 15(a) for the years ended December 31, 2015 and 2014.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Insulet Corporation at December 31, [removed: 2015 and 2014,] [added: 2015,] and the consolidated results of its operations and its cash flows for each of the [removed: three] [added: two] years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

[removed: Also,] [added: Also] in our opinion, the related financial statement schedule, when considered in relation to the basic [added: consolidated] financial statements taken as a whole, presents [removed: fairly] [added: fairly,] in all material [removed: respects] [added: respects,] the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), [removed: Insulet Corporation's] [added: the Company’s] internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in [added: the 2013] Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: 2013 framework] [added: (COSO),] and our report dated February [removed: 29, 2016] [added: 27, 2017] expressed an unqualified [removed: opinion thereon.][added: opinion.]

| | December 31, [removed: 2015] [added: 2016] | | | | December 31, [removed: 2014] [added: 2015] | | |

| Cash and cash [removed: equivalents | $] [added: equivalents, beginning of period] | 122,672 | | | [removed: $] | 151,193 | | [added: | | 149,727 | | |]

[removed: |] Accounts [removed: receivable, net | 48,387 | | | | 39,882 | | |][added: Receivable, Net]

[removed: |] Inventories, [removed: net | 14,043 | | | | 13,099 | | |][added: Net]

| Prepaid expenses and other current assets | [removed: 5,659 | | | | 4,022] [added: 1,376] | | |

| Total current assets | [removed: 190,761] [added: 369,960] | | | | [removed: 208,196] [added: 190,761] | | |

| Property and equipment, net | [removed: 41,793] [added: 46,266] | | | | [removed: 37,069] [added: 41,793] | | |

| Intangible assets, net | [removed: 2,721 | | | | 14,064] [added: 1,788] | | |

| Other assets | [removed: 104] [added: 216] | | | | [removed: 317] [added: 76] | | |

| Total assets | $ | [removed: 275,126] [added: 456,647] | | | $ | [removed: 297,182] [added: 275,126] | |

| Accounts payable | $ | [removed: 18,649 | | | $ | 14,659] [added: 3,436] | |

| Accrued expenses and other current liabilities | [removed: 38,627 | | | | 24,703] [added: 1,883] | | |

| Deferred revenue | [removed: 2,361] [added: 1,309] | | | | [removed: 1,554] [added: 2,361] | | |

| Current portion of capital lease obligations | [removed: 5,519] [added: 269] | | | | [removed: 3,380] [added: 5,519] | | |

| Total current liabilities | [removed: 65,156] [added: 55,697] | | | | [removed: 44,296] [added: 65,156] | | |

| Capital lease obligations | [removed: 269] [added: —] | | | | [removed: 2,263] [added: 269] | | |

| Long-term debt, net of discount | [removed: 171,698] [added: 332,768] | | | | [removed: 164,020] [added: 171,698] | | |

| Other long-term liabilities | [removed: 3,952] [added: 5,032] | | | | [removed: 2,774] [added: 3,952] | | |

| Total liabilities | [removed: 241,075] [added: 393,497] | | | | [removed: 213,353] [added: 241,075] | | |

| Commitments and contingencies (Note [removed: 13)] [added: 15)] | | | | | | | |

| Authorized: 5,000,000 shares at December 31, [removed: 2015] [added: 2016] and [removed: 2014.] [added: 2015.] Issued and outstanding: zero shares at December 31, [removed: 2015] [added: 2016] and [removed: 2014.] [added: 2015] | — | | | | — | | |

| Authorized: 100,000,000 shares at December 31, [removed: 2015] [added: 2016] and [removed: 2014.] [added: 2015.] Issued and outstanding: [removed: 56,954,830] [added: 57,457,967] and [removed: 56,299,022] [added: 56,954,830] shares at December 31, [removed: 2015] [added: 2016] and [removed: 2014, respectively.] [added: 2015, respectively] | 57 | | | | [removed: 56] [added: 57] | | |

| Additional paid-in capital | [removed: 686,193] [added: 744,243] | | | | [removed: 661,811] [added: 686,193] | | |

| Accumulated other comprehensive loss | [removed: (654] [added: (726] | | ) | | [removed: (13] [added: (654] | | ) |

| Accumulated deficit | [removed: (651,545] [added: (680,424] | | ) | | [removed: (578,025] [added: (651,545] | | ) |

| Total stockholders’ equity | [removed: 34,051] [added: 63,150] | | | | [removed: 83,829] [added: 34,051] | | |

| Total liabilities and stockholders’ equity | $ | [removed: 275,126] [added: 456,647] | | | $ | [removed: 297,182] [added: 275,126] | |

| [Reports of Independent Registered Public Accounting Firm](#s7704795992CB54469A1E8B264AEEA602)s | [48](#s7704795992CB54469A1E8B264AEEA602) |

Board of Directors and Stockholders

We have audited the accompanying consolidated balance sheet of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2016.

Our audit of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15(a).

These financial statements and financial statement schedule are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Insulet Corporation and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

February 27, 2017

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

Also, in our opinion, the related financial statement schedule for the years ended December 31, 2015 and 2014, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Boston, Massachusetts

(except for the effects of discontinued operations as discussed in Notes 2 and 3 as

to which the date is September 6, 2016)

| Cash and cash equivalents | $ | 137,174 | | | $ | 122,672 | |

| Short-term investments | 161,396 | | | | — | | |

| Accounts receivable, net | 28,803 | | | | 42,530 | | |

| Inventories, net | 35,514 | | | | 12,024 | | |

| Prepaid expenses and other current assets | 7,073 | | | | 4,283 | | |

| Other intangible assets, net | 528 | | | | 933 | | |

| Goodwill | 39,677 | | | | 39,607 | | |

| Long-term assets from discontinued operations | — | | | | 1,956 | | |

| Accounts payable | $ | 13,160 | | | $ | 15,213 | |

| Accrued expenses and other current liabilities | 40,959 | | | | 36,744 | | |

| Current liabilities from discontinued operations | — | | | | 5,319 | | |

| Revenue | $ | 366,989 | | | $ | 263,893 | | | $ | 231,321 | |

| Cost of revenue | 155,903 | | | | 130,622 | | | | 104,195 | | |

| Gross profit | 211,086 | | | | 133,271 | | | | 127,126 | | |

| Sales and marketing | 94,483 | | | | 78,407 | | | | 50,552 | | |

| General and administrative | 71,597 | | | | 60,392 | | | | 57,548 | | |

| Total operating expenses | 221,790 | | | | 182,007 | | | | 136,000 | | |

| Operating loss | (10,704 | | ) | | (48,736 | | ) | | (8,874 | | ) |

| Interest expense | 14,388 | | | | 12,712 | | | | 14,578 | | |

| Interest and other income (loss), net | (16,114 | | ) | | (12,654 | | ) | | (39,006 | | ) |

| Loss from continuing operations before income taxes | (26,818 | | ) | | (61,390 | | ) | | (47,880 | | ) |

| Income tax expense | 392 | | | | 212 | | | | 60 | | |

Insulet Corporation

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for presenting debt issuance costs as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2015-03, ‘‘Simplifying the Presentation of Debt Issuance Costs,’’ effective December 31, 2015.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Goodwill | 39,747 | | | | 37,536 | | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Revenue | | $ | 324,225 | | | $ | 288,720 | | | $ | 247,084 | |

| Cost of revenue | | 176,071 | | | | 145,432 | | | | 134,683 | | |

| Gross profit | | 148,154 | | | | 143,288 | | | | 112,401 | | |

| Sales and marketing | | 88,352 | | | | 60,844 | | | | 55,694 | | |

| General and administrative | | 77,359 | | | | 66,841 | | | | 64,077 | | |

| Total operating expenses | | 208,919 | | | | 155,585 | | | | 141,536 | | |

| Operating loss | | (60,765 | | ) | | (12,297 | | ) | | (29,135 | | ) |

| Loss before income taxes | | (73,229 | | ) | | (51,358 | | ) | | (44,874 | | ) |

| | Shares | | | Amount | | | | | | | | | | | | | | | | | | |

| Balance at December 31, 2012 | 48,359,063 | | | $ | 48 | | | $ | 525,679 | | | $ | (481,551 | ) | | | | | | $ | 44,176 | |

| Issuance of common stock, net of offering costs of $5.0 million | 4,715,000 | | | 5 | | | | 92,807 | | | | — | | | | | | | | 92,812 | | |

| Exercise of warrants to purchase common stock | 47,392 | | | — | | | | — | | | | — | | | | | | | | — | | |

| Issuance of common stock pursuant to conversion of debt | 348,535 | | | | | | | 12,564 | | | | — | | | | | | | | 12,564 | | |

| Foreign currency translation adjustment, net of tax | | | | | | | | | | | | | | | | 6 | | | | 6 | | |

| Foreign currency translation adjustment, net of tax | | | | | | | | | | | | | | | | (641 | | ) | | (641 | | ) |

| Repayment of long-term debt | | — | | | | (189,521 | | ) | | (2,000 | | ) |

| Cash and cash equivalents, end of period | | $ | 122,672 | | | $ | 151,193 | | | $ | 149,727 | |

On July 7, 2015, the Company executed an asset purchase agreement whereby it acquired the Canadian OmniPod distribution operations from GlaxoSmithKline ("GSK").

With the acquisition, the Company assumed all distribution, sales, marketing, training and support activities for the OmniPod system in Canada.

Additional information regarding this acquisition is provided in note 3 to the consolidated financial statements included under Item 8 of this Form 10-K.

Outstanding letters

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of credit, related to security deposits for lease obligations, totaled $1.2 million as of December 31, 2015 and December 31, 2014.

Business Combinations

| Foreign currency adjustment | (192 | | ) | | — | | |

| Ending balance | $ | 39,747 | | | $ | 37,536 | |

International OmniPod revenue accounted for approximately 12%, 17% and 10% in the years ended December 31, 2015, 2014 and 2013, respectively.

These shipping and handling costs are included in general and administrative expenses.

In the year ended December 31, 2015, two customers represented 11% and 10% of total revenue, respectively.

In the year ended December 31, 2014, two customers represented 15% and 11% of total revenue, respectively.

In the year ended December 31, 2013, one customer represented 13% of total revenue.

Based on the Company's current equity practices, the Company does not anticipate that the adoption will have a material impact.

Early adoption is permitted.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, [removed: 2015.][added: 2016.]

Based on the evaluation of our disclosure controls and procedures as of December 31, [removed: 2015,] [added: 2016,] our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

There were no changes in our internal control over financial reporting during the three months ended December 31, [removed: 2015] [added: 2016] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2015.][added: 2016.]

Based on our assessment we believe that, as of December 31, [removed: 2015,] [added: 2016,] our internal control over financial reporting is effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, [removed: 2015] [added: 2016] has been audited by [removed: Ernst & Young] [added: Grant Thornton] LLP, an independent registered public accounting firm, as stated in their report which appears below.

[removed: The] Board of Directors and Stockholders [removed: of]

We have audited [removed: Insulet Corporation’s] [added: the] internal control over financial reporting [added: of Insulet Corporation (a Delaware corporation) and subsidiaries (the “Company”)] as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in [added: the 2013] Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: 2013 framework (the COSO criteria).][added: (COSO).]

[removed: Insulet Corporation’s] [added: The Company’s] management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial [removed: reporting] [added: reporting,] included in the accompanying Management’s Annual [removed: Report] [added: Reporting] on Internal Control over Financial Reporting.

In our opinion, [removed: Insulet Corporation] [added: the Company] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on [added: criteria established in] the [removed: COSO criteria.][added: 2013 Internal Control-Integrated Framework issued by COSO.]

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated [removed: balance sheets as] [added: financial statements] of [removed: December 31, 2015 and 2014, and] the [removed: related consolidated statements] [added: Company as] of [removed: operations, comprehensive loss, stockholders' equity] and [removed: cash flows] for [removed: each of] the [removed: three years in the period] [added: year] ended December 31, [removed: 2015 of Insulet Corporation] [added: 2016,] and our report dated February [removed: 29, 2016] [added: 27, 2017] expressed an unqualified [removed: opinion.][added: opinion on those financial statements.]

/s/ GRANT THORNTON LLP

February 27, 2017

The scope of management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2015 excluded an assessment of the internal control over financial reporting of Insulet Canada.

Insulet Canada is the Company’s wholly owned subsidiary which is comprised of the assets and operations of GSK's Canadian distribution business which was acquired during the current year.

The results of this acquired company are included in our 2015 consolidated financial statements and represent approximately 3% of consolidated total assets as of December 31, 2015 and 2% (for a partial year) of consolidated revenue for Insulet Corporation for the year then ended.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Insulet Canada.

Insulet Canada is included in the 2015 consolidated financial statements of Insulet Corporation and represents approximately 3% of consolidated total assets as of December 31, 2015 and 2% (for a partial year) of consolidated revenue for Insulet Corporation for the year then ended.

Our audit of internal control over financial reporting of Insulet Corporation also did not include an evaluation of the internal control over financial reporting of Insulet Canada.

/s/ Ernst & Young LLP

February 29, 2016

Certain information required by this Item 10 relating to our directors, executive officers and corporate governance is incorporated by reference herein from our proxy statement in connection with our [removed: 2016] [added: 2017] annual meeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission (the “SEC”) not later than 120 days after the close of our year ended December 31, [removed: 2015.][added: 2016.]

Audit Committee Financial Expert

As of December 31, 2015, the audit committee of our board of directors consisted of Steven Sobieski (Chairman), Regina Sommer, Joseph Zakrzewski and Dr. Jessica Hopfield.

In February 2016, David A.

Lemoine joined the board of directors and the audit committee of the board of directors.

Our board of directors has determined that each member of the audit committee is “independent” as that term is defined in the rules of the SEC and the applicable Nasdaq rules.

Our board of directors has determined that Mr. Sobieski, Ms. Sommer, and Mr. Lemoine all qualify as an “audit committee financial expert” as such term is defined in the rules of the SEC.

In making its determination, our board of directors considered the nature and scope of the experiences and responsibilities these members have previously had with reporting companies.

Stockholders should understand that this designation is a disclosure requirement of the SEC related to the experience and understanding of the members of the audit committee with respect to certain accounting and auditing matters.

The designation does not impose upon any duties, obligations or liability upon the members of the audit committee that are greater than are generally imposed on other members of the audit committee and our board of directors and designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the audit committee or the board of directors.

Code of Ethics

We have adopted a “code of ethics,” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934 as amended, that applies to all of our directors and employees worldwide, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

A current copy of the Code of Business Conduct and Ethics is available at the Corporate Governance section of our website at http://www.insulet.com.

A copy of the Code of Business Conduct and Ethics may also be obtained, free of charge, upon a request directed to: 600 Technology Park Drive, Suite 200, Billerica, Massachusetts 01821, Attention: Secretary.

We intend to disclose any amendment to or waiver of a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website available at http://www.insulet.com.

For more corporate governance information, you are invited to access the Corporate Governance section of our website available at http://www.insulet.com.

Certain information required by this Item 11 relating to remuneration of directors and executive officers and other transactions involving management is incorporated by reference herein from our proxy statement in connection with our [removed: 2016] [added: 2017] annual meeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our year ended December 31, [removed: 2015.][added: 2016.]

Certain information required by this Item 12 relating to security ownership of certain beneficial owners and management is incorporated by reference herein from our proxy statement in connection with our [removed: 2016] [added: 2017] annual meeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, [removed: 2015.][added: 2016.]

For information on securities authorized for issuance under equity compensation plans, see the section entitled “Market for Registrant’s Common Equity, Related Stockholders Matters, and Issuer Purchases of Equity Securities “ in Part II, Item [removed: 5.][added: 5, in this Annual Report on Form 10-K.]

in this Annual Report on Form 10-K.

Certain information required by this Item 13 relating to certain relationships and related transactions, and director independence is incorporated by reference herein from our proxy statement in connection with our [removed: 2016] [added: 2017] annual meeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our year ended December 31, [removed: 2015.][added: 2016.]

Certain information required by this Item 14 regarding principal accounting fees and services is set forth under “Principal Accounting Fees and Services” in our proxy statement in connection with our [removed: 2016] [added: 2017] annual meeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our year ended December 31, [removed: 2015.][added: 2016.]

| Consolidated Balance Sheets - Years ended December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] | | |

| Consolidated Statements of Operations - Years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | | |

| Consolidated Statements of Comprehensive Loss - Years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | | |

| Consolidated Statements of Stockholders' Equity - Years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | | |

| Consolidated Statements of Cash Flows - Years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | | |

| | | |

| --- | --- | --- |

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| | |

| --- | --- |

| | INSULET CORPORATION (Registrant) |

| Date: February 29, 2016 | /s/ Patrick J. Sullivan |

| | Patrick J. Sullivan |

| | President and Chief Executive Officer (Principal Executive Officer) |

| Date: February 29, 2016 | /s/ Michael L. Levitz |

| | Michael L. Levitz |

| | Chief Financial Officer (Principal Financial and Accounting Officer) |

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Insulet Corporation, hereby severally constitute and appoint Patrick J.

Sullivan and Michael L.

Levitz, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, on all amendments to this Report, and generally to do all things in our names and on our behalf in such capacities to enable Insulet Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities on February 29, 2016.

| Signature | | Title |

| /s/ Patrick J. Sullivan | | President, Chief Executive Officer and Director |

| Patrick J. Sullivan | | (Principal Executive Officer) |

| /s/ Michael L. Levitz | | Chief Financial Officer |

| Michael L. Levitz | | (Principal Financial and Accounting Officer) |

| /s/ Sally Crawford | | |

| Sally Crawford | | Director |

| /s/ John Fallon, M.D. | | |

| John Fallon, M.D. | | Director |

| /s/ Dr. Jessica Hopfield | | |

| Dr. Jessica Hopfield | | Director |

| /s/ David A. Lemoine | | |

| David Lemoine | | Director |

| /s/ Timothy J. Scannell | | |

| Timothy J. Scannell | | Director |

| /s/ Steven Sobieski | | |

| Steven Sobieski | | Director |

| /s/ Regina Sommer | | |

| Regina Sommer | | Director |

| /s/ Joseph Zakrzewski | | |

| Joseph Zakrzewski | | Director |

EXHIBIT INDEX

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| | |

| --- | --- |

| | |

| | INSULET CORPORATION (Registrant) |

| | |

| February 27, 2017 | /s/ Patrick J. Sullivan |

| | Patrick J. Sullivan |

| | Chief Executive Officer (Principal Executive Officer) |

| | |

| --- | --- |

| | |

| | |

| February 27, 2017 | /s/ Michael L. Levitz |

| | Michael L. Levitz |

| | Chief Financial Officer (Principal Financial and Accounting Officer) |

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Insulet Corporation, hereby severally constitute and appoint Patrick J.

Sullivan and Michael L.

Levitz, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, on all amendments to this Report, and generally to do all things in our names and on our behalf in such capacities to enable Insulet Corporation to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities on February 27, 2017.

| | | |

| --- | --- | --- |

| | | |

| Signature | | Title |

| /s/ Patrick J. Sullivan | | Chief Executive Officer |

| Patrick J. Sullivan | | (Principal Executive Officer) |

| | | |

| /s/ Michael L. Levitz | | Chief Financial Officer |

| Michael L. Levitz | | (Principal Financial and Accounting Officer) |

| | | |

| /s/ Sally Crawford | | |

| Sally Crawford | | Director |

| | | |

| /s/ John Fallon, M.D. | | |

| John Fallon, M.D. | | Director |

| | | |