Insulet (PODD) 10-K risk factor changes: FY2017 vs FY2016

For the year ended December 31, [removed: 2016,] [added: 2017,] our operating loss was [removed: $10.7] [added: $7.4] million.

Our net losses for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] were [removed: $28.9] [added: $26.8] million, [removed: $73.5] [added: $28.9] million and [removed: $51.5] [added: $73.5] million, respectively.

The extent of our future operating losses and the timing of profitability are [removed: highly] uncertain, and we may never achieve or sustain profitability.

As of December 31, [removed: 2016,] [added: 2017,] we had an accumulated deficit of [removed: $680.4] [added: $707.3] million.

| • | write-offs of receivables from [removed: our] customers; |

Healthcare spending in the United [removed: States] [added: States, Canada and Europe] could be negatively affected in the event of a downturn in [removed: the U.S.] economic conditions.

For example, [added: U.S.] patients who have lost their jobs or healthcare coverage may no longer be covered by an employer-sponsored health insurance plan and patients reducing their overall spending may eliminate purchases requiring co-payments.

There are [removed: new] provisions of law that provide for the creation of a new public-private Patient-Centered Outcomes Research Institute tasked with identifying comparative effectiveness research priorities.

[removed: Beginning in 2013, sales] [added: Sales] of certain medical devices [removed: became] [added: are] subject to a 2.3% federal excise tax, subject to a [removed: two-year] suspension [removed: of the tax in 2016 and 2017.][added: through 2019.]

We [removed: believe, based on advice from our tax advisor,] [added: believe] that the sales of our products are exempt from this excise tax.

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 [removed: materially] adversely affect our financial results.

[removed: Legislative and regulatory] [added: Certain] changes to the [removed: Affordable Care Act remain possible and appear likely] [added: ACA have occurred] in the 115th United States Congress and under the Trump Administration.

We expect that the [removed: Affordable Care Act,] [added: ACA,] as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have an adverse effect on our industry generally and on our ability to maintain or increase sales of any of our products and achieve [removed: profitability][added: profitability.]

We believe that our current cash, cash equivalents and short-term [removed: investments,] [added: investments of $440.1 million,] 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: 2017.][added: 2018.]

We may need to raise additional debt or equity financing to repay our outstanding [removed: convertible notes.][added: Senior Convertible Notes.]

We may not be able to generate sufficient cash to service our indebtedness represented by our [removed: 2%] Convertible Senior [removed: Notes due June 15, 2019 and our 1.25% Convertible Senior Notes due September 15, 2021.][added: Notes.]

Our ability to make scheduled payments or to refinance the [removed: 2% and 1.25%] Convertible Senior Notes or other debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness, including the outstanding [removed: 2% and 1.25%] Convertible Senior Notes.

Since the Omnipod System is [removed: not] currently [removed: covered or reimbursed] [added: coverable] by Medicare [added: Part D through the pharmacy channel and not] as durable medical equipment or as a prosthetic device, we would not be directly affected by this program.

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

We believe that sales of most diabetes supplies are exempt from sales tax in most [added: U.S.] jurisdictions.

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

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

[removed: Ypsomed could] [added: This distributor may] have a greater financial incentive to sell its proprietary products rather than the Omnipod System.

We do not have control over [removed: Ypsomed’s] [added: our European distributor's] operational and financial condition, and we are subject to foreign regulatory and [added: import or] export requirements.

Other [removed: significant] suppliers in the United States include [removed: Animas Corporation, a division of Johnson & Johnson and] Tandem Diabetes Care, Inc.

In addition to the Omnipod System, our [removed: principal international distributor, Ypsomed,] [added: European distributor] markets and sells a suite of other products for the treatment of [removed: diabetes.][added: diabetes and also sells its own branded conventional tubed insulin pump.]

[removed: Also, Ypsomed] [added: In addition to the Omnipod System, our European distributor also markets and sells a suite of other products for the treatment of diabetes and] has introduced and sells its own branded conventional [added: tubed] insulin pump.

[removed: Ypsomed may] [added: Therefore, this distributor could] have a greater financial incentive to sell its proprietary products rather than the Omnipod [removed: System.][added: System through the contract expiration in June 2018.]

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

For example, other diabetes-focused [removed: pharmaceutical] companies, including Abbott Diabetes Care, Inc. ("Abbott"), [added: Becton Dickinson and Company,] Eli Lilly and Company, Novo Nordisk [removed: A/S] [added: A/S,] and Takeda Pharmaceuticals Company Limited, are developing similar products.

Medtronic has developed a "hybrid closed-loop" system with [removed: FDA-approval and has announced an anticipated commercial launch] [added: FDA-approval, which was commercially launched] in [removed: 2017,] [added: 2017 and] which could negatively impact our business.

For example, we are working with [removed: DexCom, Inc.] [added: DexCom] to integrate its continuous glucose monitoring technology with the Omnipod System and we continue to explore partnership opportunities with other companies that have blood glucose monitoring and continuous glucose monitoring technologies.

We are also developing with Eli Lilly and Company a new version of the Omnipod System specifically designed to deliver Humulin® R U-500 and U-200 insulin, which are more concentrated forms of [removed: insulin than traditional U-100 insulin for patients with higher insulin-resistance.]

In each of these cases, these projects [removed: are at an early stage of development,] will require substantial clinical support and are subject to regulatory approvals.

The agreement may be terminated or limited in geographical scope by Abbott [added: or us] under certain circumstances.

The FreeStyle blood glucose meter in our PDM is only approved for use with FreeStyle test [removed: strips.][added: strips in the United States.]

The absence or reduction in such reimbursement [added: or availability of the test strips] may make the Omnipod System less desirable to our current and potential customers.

Our [removed: growing] non-insulin drug delivery [removed: business] [added: product line] faces challenges which, if not met, may impair its future success and continued growth.

Our non-insulin drug delivery [removed: business] [added: product line] has grown substantially over the past years.

| • | transitions in our distribution channel; |

For example, the Tax Cuts and Jobs Act enacted on December 22, 2017, eliminated the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code of 1986, commonly referred to as the individual mandate, beginning in 2019.

Additional changes to the ACA remain possible.

As of December 31, 2017, we had outstanding principal amounts due of $751.2 million on our Convertible Senior Notes, which mature between 2019 and 2024.

Our planned assumption on July 1, 2018 of the commercial activities, including, among other things, distribution, sales, marketing, training and support, of our Omnipod System in Europe following the expiration of our current third-party global distribution agreement creates several business and operational risks related to the future sales of our Omnipod System in Europe.

We announced on July 20, 2017 our plan to assume, on July 1, 2018, all commercial activities (including, among other things, distribution, sales, marketing, training and support) of our Omnipod System across Europe following the expiration of our distribution agreement with our European distributor on June 30, 2018.

Until the expiration of the agreement, our current distribution agreement for our Omnipod products in Europe will remain in effect.

While we do not expect this transition to materially affect our financial trends during the first half of 2018, there could be a negative effect on our sales during the transition period if our European distributor places more emphasis on selling its own proprietary products and other products, instead of ours, during this period, thereby reducing our sales.

In addition, to retain current revenue streams after July 1, 2018, we will need to secure the existing customer installed base of Omnipod users in Europe, and there can be no assurance that we will succeed in doing so.

More generally, if we are unable to effectively establish direct distribution and commercial support for the Omnipod System in Europe in a timely manner (which will include hiring employees in many of these jurisdictions), we may not be able to service the current Omnipod users in Europe and grow the business as we anticipate.

We expect to incur increased operating expenses as we invest in these European operations, and it is possible that the ultimate economic benefits that we derive from these investments could be less than anticipated, or that such expected economic benefits could fail to materialize at all.

Any of the foregoing risks could negatively affect our future revenues and, depending on severity, potentially cause a materially adverse effect on our business and results of operations.

We are an approved Medicare supplier and, in January 2018, CMS issued guidance clarifying that Medicare Part D Plan Sponsors may provide coverage for products such as the Omnipod System under the Medicare Part D prescription drug program.

As a result, we must negotiate with third-party payors in order to provide our product through the pharmacy channel to users who are covered under Medicare Part D.

Compliance with administrative procedures or requirements of these third-party payors may result in delays in processing approvals by those payors

for patients to obtain Medicare Part D coverage for the use of the Omnipod System.

Medicaid coverage decisions are made by the governing authorities in each state.

As the Medicaid coverage process and stakeholders are unique to each state, the timeline to gain coverage in each state may vary.

insulin than traditional U-100 insulin for patients with higher insulin-resistance.

We are subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters.

Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including laws and regulations relating to privacy and data protection, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, personal information, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions, corrupt practices, fraud, waste and abuse restrictions, and securities law compliance.

The introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations.

For example, data protection laws passed by the federal government, many states and foreign countries require notification to users when there is a security breach for personal data.

In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States.

For example, data localization laws in some countries generally mandate that certain types of data

collected in a particular country be stored and/or processed within that country.

We could be subject to audits in Europe and around the world, particularly in the areas of consumer and data protection, as we continue to grow and expand our operations.

Legislators and regulators may make legal and regulatory changes, or interpret and apply existing laws, in ways that make our products less useful to our customers, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices.

These changes or increased costs could negatively impact our business and results of operations in material ways.

To lower our manufacturing costs, increase supply redundancy and add capacity to support growth, we are constructing a highly-automated manufacturing facility in Acton, Massachusetts.

This facility will also serve as our global headquarters.

As of December 31, 2017, we had outstanding purchase commitments with various suppliers for the construction of the facility.

To date, we have incurred capital expenditures of approximately $70 million related to this facility and we expect that capital expenditures for this facility will approach $200 million when production begins in 2019.

We may experience delays in the construction of our planned manufacturing facility.

Any defects could delay the commencement of operations of the facility, lead to fines

This agreement expires in mid-2018, at which point we will assume the distribution, sales, marketing, training and support activities of our Omnipod System across Europe.

In February 2016, we sold Neighborhood Diabetes to Liberty Medical.

| | |

| --- | --- |

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 2014, we issued and sold $201.3 million in principal amount of 2% Convertible Senior Notes, due in 2019.

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.

For example, we rely on Phillips Medisize Corporation to manufacture and supply several injection molded components of the Omnipod and we rely on NXP USA to manufacture and supply an application specific integrated circuit.

Our agreement with Ypsomed also covers China and a number of other countries.

We are an approved Medicare supplier and current Medicare coverage for continuous subcutaneous insulin infusion, or CSII therapy exists.

However, existing Medicare 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 and broad Medicaid coverage for the Omnipod System.

No assurance can be provided that we will ever secure Medicare and broad Medicaid coverage of the Omnipod System.

As a result, we have focused our efforts in establishing reimbursement for the Omnipod System by negotiating contracts with private insurers.

Our facility located at 600 Technology Park Drive, Suite 200, Billerica, MA 01821 was inspected by the FDA in March 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 FDA Form 483 and Warning Letter responses.

Our facility located in Billerica, MA was re-inspected by the FDA in November to December 2015.

This ins

pection also resulted in four inspectional observations.

We responded to these inspectional observations on December 31, 2015.

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 July 2015 we implemented a field removal of certain lots of our product due to the possibility that some Omnipod Systems had a higher rate of failure than our current manufacturing standards.

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

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

On October 29, 2015, we implemented a field correction to advise patients of the possibility of a needle deployment failure and provided recommendations on how to manage such an event.

Both field actions were initiated with the knowledge of the FDA and were reported to the agency in accordance with the requirements of 21 C.F.R. Part 806.

injury.

In addition, in October 2014, the FDA issued guidance intended to assist the FDA and industry in distinguishing medical device recalls from product enhancements.

Per the guidance, 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.

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

To lower our manufacturing costs, increase supply redundancy and add capacity to support growth, we intend to construct a highly-automated manufacturing facility in the U.S. As of December 31, 2016 we had outstanding purchase commitments with various suppliers for the construction of the facility, including $22.8 million with ATS Automation Tooling Systems Inc. for equipment purchases.

Also, in December 2016, we entered into an agreement to purchase property for the planned manufacturing 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.

Our failure to effect this seamless transition may result in a disruption to our business.

This agreement expires in mid-2018.

In February 2016, we sold Neighborhood Diabetes to Liberty Medical for $6.2 million in cash, which included $1.2 million of closing adjustments finalized in June 2016 and paid by Liberty Medical.

The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod [removed: device] [added: device,] which is worn on the body for approximately three days at a [removed: time] [added: time,] and its wireless companion, the handheld PDM.

In contrast, the Omnipod System features only two discreet, easy-to-use devices that eliminate the need for a bulky [removed: pump, tubing] [added: pump] and [removed: separate blood glucose meter,] [added: tubing,] provides for virtually pain-free automated cannula insertion, communicates wirelessly and integrates a blood glucose meter.

The Omnipod System is currently available in multiple countries in Europe, [added: as well as] Canada and Israel.

Additional information regarding [removed: this acquisition] [added: our debt issuances] is provided in [removed: note 4] [added: Note 11] to the consolidated financial statements included under Item 8 of this Form 10-K.

Additional information regarding [removed: the sale of Neighborhood Diabetes] [added: our discontinued operations] is provided in [removed: note 3] [added: Note 19] to the consolidated financial statements included under Item 8 of this Form 10-K.

[removed: 2016] [added: 2017] Revenue Results:

| • | Total revenue of [removed: $367.0] [added: $463.8] million |

| ◦ | U.S. Omnipod revenue of [removed: $229.8 million] [added: $271.6 million, an 18% increase year over year] |

| ◦ | International Omnipod revenue of [removed: $71.9 million] [added: $120.0 million, a 67% increase year over year] |

| ◦ | Drug Delivery revenue of [removed: $65.3 million] [added: $72.2 million, an 11% increase year over year] |

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

Cost of revenue consists primarily of raw material, labor, warranty, inventory reserve and overhead costs such as freight-in and [removed: depreciation] [added: depreciation,] and the cost of products we acquire from third party suppliers.

This section discusses our consolidated results of operations for [removed: 2016] [added: 2017] compared to [removed: 2015,] [added: 2016,] as well as [removed: 2015] [added: 2016] compared to [removed: 2014,] [added: 2015,] 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: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | $ Change | | | | % Change | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | $ Change | | | | % Change | |

| U.S. Omnipod | $ | [removed: 229,785] [added: 271,597] | | | $ | [removed: 189,604] [added: 229,785] | | | $ | [removed: 40,181] [added: 41,812] | | | [removed: 21] [added: 18] | % | | $ | [removed: 189,604] [added: 229,785] | | | $ | [removed: 175,950] [added: 189,604] | | | $ | [removed: 13,654] [added: 40,181] | | | [removed: 8] [added: 21] | % |

| International Omnipod | [removed: 71,889] [added: 119,953] | | | | [removed: 40,339] [added: 71,889] | | | | [removed: 31,550] [added: 48,064] | | | | [removed: 78] [added: 67] | % | | [removed: 40,339] [added: 71,889] | | | | [removed: 50,025] [added: 40,339] | | | | [removed: (9,686] [added: 31,550] | | [removed: )] | | [removed: (19] [added: 78] | [removed: )%] [added: %] |

| Drug Delivery | [removed: 65,315] [added: 72,218] | | | | [removed: 33,950] [added: 65,315] | | | | [removed: 31,365] [added: 6,903] | | | | [removed: 92] [added: 11] | % | | [removed: 33,950] [added: 65,315] | | | | [removed: 5,346] [added: 33,950] | | | | [removed: 28,604] [added: 31,365] | | | | [removed: 535] [added: 92] | % |

| Total Revenue | [removed: 366,989] [added: 463,768] | | | | [removed: 263,893] [added: 366,989] | | | | [removed: 103,096] [added: 96,779] | | | | [removed: 39] [added: 26] | % | | [removed: 263,893] [added: 366,989] | | | | [removed: 231,321] [added: 263,893] | | | | [removed: 32,572] [added: 103,096] | | | | [removed: 14] [added: 39] | % |

| Cost of revenue | [removed: 155,903] [added: 186,599] | | | | [removed: 130,622] [added: 155,903] | | | | [removed: 25,281] [added: 30,696] | | | | [removed: 19] [added: 20] | % | | [removed: 130,622] [added: 155,903] | | | | [removed: 104,195] [added: 130,622] | | | | [removed: 26,427] [added: 25,281] | | | | [removed: 25] [added: 19] | % |

| Gross profit | [removed: 211,086] [added: 277,169] | | | | [removed: 133,271] [added: 211,086] | | | | [removed: 77,815] [added: 66,083] | | | | [removed: 58] [added: 31] | % | | [removed: 133,271] [added: 211,086] | | | | [removed: 127,126] [added: 133,271] | | | | [removed: 6,145] [added: 77,815] | | | | [removed: 5] [added: 58] | % |

| Gross margin | [removed: 57.5] [added: 59.8] | | % | | [removed: 50.5] [added: 57.5] | | % | | | | | | [removed: 7] [added: 2.3] | | | [removed: 50.5] [added: 57.5] | | % | | [removed: 55.0] [added: 50.5] | | % | | | | | | [removed: \-4.5] [added: 7] | |

| Research and development | [removed: 55,710] [added: 74,452] | | | | [removed: 43,208] [added: 55,710] | | | | [removed: 12,502] [added: 18,742] | | | | [removed: 29] [added: 34] | % | | [removed: 43,208] [added: 55,710] | | | | [removed: 27,900] [added: 43,208] | | | | [removed: 15,308] [added: 12,502] | | | | [removed: 55] [added: 29] | % |

| Sales and marketing | [removed: 94,483] [added: 121,617] | | | | [removed: 78,407] [added: 94,483] | | | | [removed: 16,076] [added: 27,134] | | | | [removed: 21] [added: 29] | % | | [removed: 78,407] [added: 94,483] | | | | [removed: 50,552] [added: 78,407] | | | | [removed: 27,855] [added: 16,076] | | | | [removed: 55] [added: 21] | % |

| General and administrative | [removed: 71,597] [added: 88,487] | | | | [removed: 60,392] [added: 71,597] | | | | [removed: 11,205] [added: 16,890] | | | | [removed: 19] [added: 24] | % | | [removed: 60,392] [added: 71,597] | | | | [removed: 57,548] [added: 60,392] | | | | [removed: 2,844] [added: 11,205] | | | | [removed: 5] [added: 19] | % |

| Total operating expenses | [removed: 221,790] [added: 284,556] | | | | [removed: 182,007] [added: 221,790] | | | | [removed: 39,783] [added: 62,766] | | | | [removed: 22] [added: 28] | % | | [removed: 182,007] [added: 221,790] | | | | [removed: 136,000] [added: 182,007] | | | | [removed: 46,007] [added: 39,783] | | | | [removed: 34] [added: 22] | % |

| Operating loss | [removed: (10,704] [added: (7,387] | | ) | | [removed: (48,736] [added: (10,704] | | ) | | [removed: (38,032] [added: (3,317] | | ) | | [removed: (78] [added: (31] | )% | | [removed: (48,736] [added: (10,704] | | ) | | [removed: (8,874] [added: (48,736] | | ) | | [removed: 39,862] [added: (38,032] | | [added: )] | | [removed: 449] [added: (78] | [removed: %] [added: )%] |

| Interest [added: expense] and [removed: other income (loss),] [added: other,] net | [removed: (16,114] [added: (19,187] | | ) | | [removed: (12,654] [added: (16,114] | | ) | | [removed: (3,460] [added: (3,073] | | ) | | [removed: (27] [added: 19] | [removed: )%] [added: %] | | [removed: (12,654] [added: (16,114] | | ) | | [removed: (39,006] [added: (12,654] | | ) | | [removed: 26,352] [added: (3,460] | | [added: )] | | [removed: (68] [added: 27] | [removed: )%] [added: %] |

| Loss from continuing operations before income taxes | [removed: (26,818] [added: (26,574] | | ) | | [removed: (61,390] [added: (26,818] | | ) | | [removed: (34,572] [added: (244] | | ) | | [removed: (56] [added: (1] | )% | | [removed: (61,390] [added: (26,818] | | ) | | [removed: (47,880] [added: (61,390] | | ) | | [removed: 13,510] [added: (34,572] | | [added: )] | | [removed: 28] [added: (56] | [removed: %] [added: )%] |

| Income tax expense | [removed: 392] [added: 257] | | | | [removed: 212] [added: 392] | | | | [removed: 180] [added: (135] | | [added: )] | | [removed: 85] [added: (34] | [removed: %] [added: )%] | | [removed: 212] [added: 392] | | | | [removed: 60] [added: 212] | | | | [removed: 152] [added: 180] | | | | [removed: 253] [added: 85] | % |

| Net loss from continuing operations | [removed: (27,210] [added: (26,831] | | ) | | [removed: (61,602] [added: (27,210] | | ) | | [removed: (34,392] [added: (379] | | ) | | [removed: (56] [added: (1] | )% | | [removed: (61,602] [added: (27,210] | | ) | | [removed: (47,940] [added: (61,602] | | ) | | [removed: 13,662] [added: (34,392] | | [added: )] | | [removed: 28] [added: (56] | [removed: %] [added: )%] |

| Loss from discontinued operations, net of tax | [removed: (1,669] [added: —] | | [removed: )] | | [removed: (11,918] [added: (1,669] | | ) | | [removed: (10,249] [added: (1,669] | | ) | | [removed: (86] [added: (100] | )% | | [removed: (11,918] [added: (1,669] | | ) | | [removed: (3,560] [added: (11,918] | | ) | | [removed: 8,358] [added: (10,249] | | [added: )] | | [removed: 235] [added: (86] | [removed: %] [added: )%] |

| Net loss | $ | [removed: (28,879] [added: (26,831] | ) | | $ | [removed: (73,520] [added: (28,879] | ) | | $ | [removed: (44,641] [added: 2,048] | [removed: )] | | [removed: 61] [added: (7] | [removed: %] [added: )%] | | $ | [removed: (73,520] [added: (28,879] | ) | | $ | [removed: (51,500] [added: (73,520] | ) | | $ | [removed: (22,020] [added: 44,641] | [removed: )] | | [removed: 43] [added: (61] | [removed: %] [added: )%] |

Our total revenue increased to $367.0 million, up $103.1 million, or 39%, in [removed: 2016] [added: 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.

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

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

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 [removed: efficiency] [added: efficiencies] and effectiveness improvements made in 2016.

For [removed: 2017,] [added: 2018,] we expect overall research and development spending to increase [added: as compared to 2017 primarily] due to the development efforts on our ongoing [removed: projects described above.][added: projects.]

Sales and marketing expenses increased to $94.5 million, up $16.1 million, or 21%, for [removed: 2016,] [added: 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 [removed: 2017] [added: 2018] to increase [added: as compared to 2017] due to the expansion of our sales force and customer support [removed: personnel.][added: personnel and establishment of direct commercial operations in Europe.]

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

In addition to the diabetes market space, we have partnered with pharmaceutical and biotechnology companies that utilize a customized form of the Omnipod System to deliver a drug over a specified interval of time, at a certain administered volume.

The majority of our drug delivery revenue currently consists of sales of Amgen's Neulasta Onpro kit.

We are constructing a highly-automated manufacturing facility in Acton, Massachusetts, with planned production out of the facility beginning in early 2019.

The facility will also serve as our global headquarters.

We expect that the new facility will allow us to lower our manufacturing costs, increase supply redundancy, add capacity closer to our largest customer base and support growth.

We expect capital expenditures for the construction of the Acton facility and related equipment purchases will approach $200 million when production begins in 2019 and will be funded by our cash flows from operations and proceeds from our senior convertible debt offerings.

We announced on July 20, 2017 our plans to assume, on July 1, 2018, all commercial activities (including, among other things, distribution, sales, marketing, training and support) of our Omnipod System across Europe following the expiration of our distribution agreement with our European distributor on June 30, 2018.

Once we assume commercial activities following the expiration of the current distribution agreement, we expect our revenue and gross margins to increase, as average customer pricing in Europe is higher than the current distributor pricing to our European distributor.

Throughout 2018, we expect to incur increased operating expenses as we invest in our European operations.

Once European operations are established, excluding nonrecurring transition-related costs, we expect that the assumption of direct distribution will be accretive to our consolidated results of operations.

| • | In January 2018, we announced that CMS has issued guidance clarifying that Medicare Part D Plan Sponsors are permitted to provide coverage for products such as the Omnipod System under the Medicare Part D (prescription drug) program. The CMS guidance empowers us to begin working with Medicare Part D carriers to ensure beneficiaries living with diabetes have access to the Omnipod System. Securing Medicare Part D coverage also provides us with a direct pathway to gain Medicaid coverage at the state level, as many state-run Medicaid programs follow CMS prescription drug guidance to determine coverage. This allows access for lower-income individuals and families on Medicaid for whom Omnipod currently is not a covered option. The Company estimates that obtaining Medicare and Medicaid coverage extends Omnipod System coverage access to approximately 450,000 additional individuals with Type 1 diabetes in the United States. |

| • | Also in January 2018, we submitted a premarket notification 510(k) to the FDA requesting clearance for commercial distribution of our DASH TM System, which is our next generation of the Omnipod System, featuring a secured Bluetooth Low Energy enabled Pod and PDM with a touch screen color user interface |

supported by smartphone connectivity.

Upon clearance, we would begin a limited commercial release of the product prior to a full market launch.

| • | In July 2017, we announced plans to assume distribution and commercial support for the Omnipod System in Europe as further discussed above. We believe that our strategy of accessing our customers directly in Europe will allow us to have better control over existing and future markets, be closer to our customers, gain a better understanding of innovation needs specific to the European market, and expand our customer base. |

| • | During 2017, we began construction of our new, highly-automated U.S. manufacturing facility in Acton, Massachusetts. We believe that this manufacturing facility will allow us to lower our manufacturing costs, increase supply redundancy, add capacity closer our growing U.S. customer base and support our growth. The facility will also serve as our global headquarters. |

We expect our efforts in 2018 and 2019 to focus primarily on the construction and commissioning of our U.S. manufacturing facility, the establishment of our European operations, the launch of new products, such as the DASH TM Omnipod System, continuing our product development efforts, and taking the necessary actions such as amending or creating payor or distributor contracts to allow us to service patients who receive benefits through the Medicare Part D and Medicaid programs.

Our International Omnipod revenue increased to $120.0 million, up $48.1 million, or 67%, primarily due to growth in distributor sales from continued adoption in existing and newer markets within Europe such as France.

Our U.S. Omnipod revenue increased to $271.6 million, up $41.8 million, or 18%, primarily due to growth in our installed base as we continue to expand awareness of the Omnipod System.

Our drug delivery revenue increased to $72.2 million, up $6.9 million, or 11%, due to growth in demand for our primary drug delivery device on greater market adoption of Amgen's Neulasta Onpro kit.

For 2018, we expect strong revenue growth driven by our expansion in the U.S. and internationally, as well as the transition to direct distribution of our Omnipod System across Europe following the expiration of our global distribution agreement with our European distributor on June 30, 2018, partially offset by lower drug delivery revenue.

Cost of revenue increased to $186.6 million, up $30.7 million, or 20%, in 2017 compared to 2016, primarily due to an increase in sales volumes, partially offset by improvements in supply chain operations in 2017.

Gross margin increased to 59.8%, up approximately 2.3 points, in 2017 compared to 2016.

The increase in gross margin was primarily due to improvements in supply chain operations, partially offset by the unfavorable mix impact of higher distributor sales in Europe.

For 2018, we expect gross margin to increase as compared to 2017 primarily due to improvements in supply chain operations and our assumption of distribution of our Omnipod System in Europe in the second half of 2018.

Research and development expenses increased to $74.5 million, up $18.7 million, or 34%, in 2017 compared to 2016.

The increase in research and development expenses in the current period was primarily due to an increase in expenses related to our development projects, including our digital mobile Omnipod platform, which involves interaction with continuous glucose monitoring technology, our concentrated insulin program and our artificial pancreas program.

Sales and marketing expenses increased to $121.6 million, up $27.1 million, or 29%, for 2017, compared to 2016.

General and administrative expenses increased to $88.5 million, up $16.9 million, or 24%, for 2017, compared to 2016.

The increase in general and administrative expenses in the current period was primarily attributable to increased personnel-related costs and fees related to external consultants and professional service providers to support the growth in our business.

Interest expense and other, net, increased to $19.2 million, up $3.1 million, or 19%, for 2017, compared to 2016.

The increase in interest expense and other, net, in the current period was primarily due to a net increase in our outstanding long-term debt, partially offset by lower losses on the extinguishment of debt in 2017.

Non-cash interest expense, which includes the amortization of deferred financing and debt issuance costs, increased $7.9 million and cash interest expense increased $1.8 million in 2017 as compared to 2016.

These increases were partially offset by a $1.9 million reduction in losses on the extinguishment of debt in 2017, higher capitalization of interest, and higher interest income.

We expect that our interest expense and other, net, will increase in 2018 compared to the prior year primarily due to an increase in non-cash interest expense associated with the issuance in November 2017 of our 1.375% Notes, partially offset by higher capitalization of interest due to increased capital expenditures associated with the construction of our Acton, Massachusetts facility.

Income tax expense was not material to our results of operations in the years 2017 or 2016 as we have generated net operating losses to date and have fully reserved our net operating loss carryforwards.

Interest Expense and Other, Net

Income tax expense was not material to our results of operations in the years 2016 or 2015.

This facility will also serve as our global headquarters.

As of December 31, 2017, investments in construction-in-progress related to the Acton facility were approximately $70 million.

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.

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

In June 2011, we acquired Neighborhood Diabetes.

Through Neighborhood Diabetes, we provided customers with blood glucose testing supplies, traditional insulin pumps, pump supplies and pharmaceuticals and had the ability to process claims as either durable medical equipment or through pharmacy benefits.

In February 2016, we sold Neighborhood Diabetes to Liberty Medical.

| | |

| --- | --- |

| • | 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. |

We expect our efforts in 2017 to focus primarily on the expansion of our customer base in the United States and internationally, increasing our gross profit and product development.

objectives.

For 2017 we expect strong revenue growth across all of our product lines as we continue our expansion in the U.S. and internationally.

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

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

In 2016 and 2015, income tax expense was $0.4 million and $0.2 million, respectively.

The increase in tax expense is due to foreign taxes due to our acquisition in mid-2015 of the Canadian distribution business.

Loss from Discontinued Operations, Net of Tax

Our U.S. Omnipod revenue increased to $189.6 million, up $13.7 million, or 8%, due to growth in our installed base of 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 million due to strong growth in demand for our on-body injection device following regulatory approval in December 2014.

Our International Omnipod revenue decreased to $40.3 million, down $9.7 million, or 19%, primarily reflecting lower distributor sales due to changes in distributor ordering patterns despite continued growth in our installed base of Omnipod users.

This decrease internationally was partially offset by growth in Canada (we acquired our Canadian distributor in July 2015).

Cost of revenue increased to $130.6 million, up $26.4 million, or 25%, in 2015 compared to 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 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 was ultimately scrapped.

Gross margin decreased to 50.5%, down approximately 4.5 points in 2015 compared to 2014, primarily due to approximately $11.5 million of costs directly and indirectly attributable to the voluntary field safety notification.

The decrease in gross margin also reflects an increased investment in product quality and related policies and procedures to stand behind our products, which contributed to a $3.3 million increase in warranty expense year over year, of which $0.4 million related to the voluntary field safety notification.

Research and development expenses 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.

Additionally, there was a $6.9 million increase in costs associated with marketing campaigns, new market opportunities and other strategic initiatives.

General and administrative expenses increased to $60.4 million, up $2.8 million, or 5%, for 2015 compared to 2014, mainly the result of an increase of $1.7 million in audit, professional services and consulting fees and an increase of $1.6 million in technology license fees and consulting services.

Additionally, there was an increase in shipping costs of $1.4 million, an increase in employee related expenses of $0.9 million, a $0.9 million increase in expenses associated with claims and settlements and a $0.9 million increase in occupancy and depreciation expense.

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

Interest and other income (loss), net decreased to $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 mid-2014 from 3.75%.

In 2015 and 2014, income tax expense was $0.2 million and $0.1 million, respectively.

Income tax expense is comprised of a current portion for 2015 and 2014 and deferred portion for 2015.

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

The increase in tax expense was due to foreign taxes due to our acquisition in 2015 of the Canadian distribution assets.

The loss from discontinued operations increased by approximately $8.4 million in 2015 compared to 2014.

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

[removed: The] [added: We consider investments that, when purchased, have a remaining maturity of 90 days or less to be cash equivalents.The] primary objectives of our investment strategy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields.

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

As of December 31, [removed: 2016,] [added: 2017,] we had outstanding debt recorded on our consolidated balance sheet of [removed: $332.8] [added: $566.2] million, net of [removed: our] deferred financing costs and unamortized debt discount totaling [removed: $79.3] [added: $185.0] million, related to our [removed: 2% and 1.25%] [added: Convertible Senior] Notes.

As the interest rates are [removed: fixed,] [added: fixed and the notes are not carried at fair value,] changes in interest rates do not affect the value of our debt.

We are primarily exposed to currency exchange rate fluctuations related to our subsidiary operation in [removed: Canada.][added: Canada and, to a lesser extent, Europe.]

[removed: The] [added: Currently, 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.

A hypothetical 10% increase or decrease in foreign currencies that we transact in would not have a material adverse impact on our [removed: business,] [added: cash flows,] financial condition or results of operations.

We expect that as we establish our commercial operations in Europe during 2018 that our business will become more susceptible to foreign exchange rate volatility, primarily related to the Euro and the British Pound.

We consider investments that, when purchased, have a remaining maturity of 90 days or less to be cash equivalents.

Foreign Currency Exchange Risk.

The Omnipod System features a small, lightweight, self-adhesive disposable tubeless Omnipod [removed: device] [added: device,] which is worn on the body for approximately three days at a [removed: time] [added: time,] and its wireless [removed: companion,] [added: companion:] the handheld Personal Diabetes Manager (“PDM”).

Conventional [added: tubed] insulin pumps require people with insulin-dependent diabetes to learn to use, manage and wear a number of cumbersome components, including up to 42 inches of tubing.

In contrast, the Omnipod System features only two discreet, easy-to-use devices that eliminate the need for a bulky [removed: pump, tubing] [added: pump] and [removed: separate blood glucose meter,] [added: tubing,] provides for virtually pain-free automated cannula insertion, communicates wirelessly and integrates a blood glucose meter.

The Omnipod System is currently available in multiple countries in Europe, [added: as well as in] Canada and Israel.

The information on our website is not part of this Annual Report on Form 10-K for the year ended December 31, [removed: 2016.][added: 2017.]

| • | Type 1 diabetes is characterized by the body’s nearly complete inability to produce insulin. It is frequently diagnosed during childhood or adolescence. Individuals with Type 1 diabetes require daily insulin [removed: therapy,] [added: therapy to survive,] typically administered via injections or continuous infusion through pump [removed: therapy, to survive.] [added: therapy. It is estimated that approximately 1.5 million people have Type 1 diabetes in the United States.] |

| • | 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 [removed: therapy,] [added: therapies,] which often [removed: includes] [added: include] insulin therapy. [added: It is estimated that approximately 1.7 million people in the United States have Type 2 diabetes requiring daily insulin administration.] |

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

Achieving this result can be very difficult without multiple daily injections of insulin or the use of continuous subcutaneous insulin infusion [removed: (“CSII”)] [added: (“CSII”), often referred to as pump] therapy.

Additionally, the time spent in managing diabetes, the swings in blood glucose levels and the fear of hypoglycemia can [removed: all] render diabetes management overwhelming to patients and their families.

There are [removed: three] [added: two] primary types of insulin therapy practiced today: [removed: conventional therapy;] multiple daily injection (“MDI”) therapy using syringes or insulin pens; and [removed: CSII] [added: pump] therapy using insulin pumps.

The Omnipod Insulin Management System is an innovative continuous insulin delivery system that provides all the proven benefits of [removed: CSII] [added: insulin pump] therapy in a way no conventional insulin pump can.

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

[removed: ][added:  ]

Continuous insulin delivery at preset rates eliminates the need for [added: individual] injections and the interruptions that come with them.

| • | A small, constant background supply of insulin [removed: (called a basal rate)] [added: (basal)] is delivered automatically at a programmed rate, all day and night. |

| • | An extra dose of insulin [removed: (called a bolus)] [added: (bolus)] can be delivered when a patient needs it to match the carbohydrates in a meal or snacks or to correct high blood glucose. |

| • | The Pod is a small, lightweight, self-adhesive device that the [removed: patient] [added: user] fills with insulin and 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. |

| • | The PDM is a wireless, handheld device that programs the Pod with the [removed: patient's] [added: user's] personalized insulin-delivery instructions, wirelessly monitors the Pod's operation and includes a FreeStyle® blood glucose meter. |

The Omnipod System consists of just two devices, as opposed to up to seven for conventional [added: tubed] insulin pumps.

As a result, the Omnipod System is easy for patients to use, which [added: also] reduces the training burden on healthcare [removed: professionals.][added: professionals and users.]

We also believe that the Omnipod System’s ease of use and substantially lower training burden helps to redefine which diabetes patients are appropriate for [removed: CSII] [added: insulin pump] therapy, [removed: enabling] [added: allowing] healthcare professionals to prescribe [removed: CSII] [added: pump] therapy to a broader pool of patients.

The Omnipod System’s unique patented design and proprietary manufacturing process [removed: have enabled] [added: allow] us to provide CSII therapy at a relatively low up-front investment compared to conventional [added: tubed] insulin pumps.

We believe that our pricing model reduces the risk of investing in [removed: CSII] [added: pump] therapy for third-party payors and makes [removed: CSII] [added: this] therapy much more accessible for people with insulin-dependent diabetes.

In [removed: 2016] [added: 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.

| • | Omnipod [removed: Dash] [added: DASH] Insulin Management System. [removed: Development] [added: We are developing our next generation] of [added: the Omnipod System, which features] a [removed: secured] [added: secure] Bluetooth Low Energy enabled Pod and PDM with a touch screen color user interface supported by [removed: web application and smart phone] [added: smartphone] connectivity. [added: We refer to this as our Omnipod DASH System, or (“DASH”). In January 2018, we submitted a premarket notification 510(k) application to the FDA requesting permission for commercial distribution of DASH.] |

| • | Omnipod Horizon Automated Glucose Control. [removed: Development of] [added: We are also developing] a hybrid closed loop control system that [removed: will] [added: would] utilize the [removed: Dash] [added: DASH] mobile platform. Our Pod will communicate with [removed: a] [added: Dexcom Inc.'s ("Dexcom")] continuous glucose monitor and help control insulin delivery utilizing an algorithm located on the Pod. |

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

In order to manufacture sufficient volumes and achieve a cost-effective per unit production price for the Omnipod, we have designed the Omnipod to be manufactured through [removed: a] [added: our current] semi-automated process.

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

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

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

We [removed: rely on] [added: utilize] outside vendors for the supply of components, sub-assemblies, and various services used in the manufacture of the Omnipod System.

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

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

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

[removed: We believe that to] [added: To] maintain a competitive advantage, we [added: believe we] must develop and preserve the proprietary aspect of our technologies.

Currently, we require our employees, consultants and [removed: advisors] [added: advisers] to execute non-disclosure agreements in connection with their employment, consulting or advisory relationships with us, where appropriate.

We also require our employees, consultants and [removed: advisors] [added: advisers] who we expect to work on our current or future products to agree to disclose and assign to us all inventions conceived during their work with us that are developed using our property or which relate to our business.

As of December 31, [removed: 2016,] [added: 2017,] we had [removed: obtained 23 issued] [added: 16 granted and active] United States patents with expiration dates ranging from 2020 through 2034, and had [removed: 32] [added: 53] additional pending United States patent applications.

In January 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued guidance clarifying that Medicare Part D Plan Sponsors may provide coverage for products such as the Omnipod System under the Medicare Part D (prescription drug) program.

We believe this guidance will allow many additional people with diabetes to begin accessing our product in the future.

Securing Medicare Part D coverage also provides us with a direct pathway to gain Medicaid coverage at the state level, as many state-run Medicaid programs follow CMS prescription drug guidance to determine coverage.

This allows access for lower-income individuals and families on Medicaid for whom Omnipod is currently not an option.

The Company estimates that obtaining Medicare and Medicaid coverage extends access to Insulet's Omnipod System to approximately 450,000 additional individuals with Type 1 diabetes in the United States.

We announced in 2017 our plans to assume, on July 1, 2018, all commercial activities (including, among other things, distribution, sales, marketing, training and support) of our Omnipod System across Europe following the expiration of our distribution agreement with Ypsomed Distribution AG ("Ypsomed" or our "European distributor") on June 30, 2018.

The majority of our drug delivery revenue currently consists of sales of Amgen's Neulasta Onpro kit.

We are constructing a highly-automated manufacturing facility in Acton, Massachusetts, with planned production out of the facility beginning in early 2019.

The facility will also serve as our global headquarters.

We expect that the new facility will allow us to lower our manufacturing costs, increase supply redundancy, add capacity closer to our largest customer base and support growth.

In January 2018, we submitted a premarket notification 510(k) to the U.S. Food and Drug Administration ("FDA") requesting clearance for commercial distribution of our DASHTM System, which is our next generation of the Omnipod System, featuring a secured Bluetooth Low Energy enabled Pod and PDM with a touch screen color user interface supported by smartphone connectivity.

Upon clearance, we would begin a limited commercial release of the product prior to a full market launch.

Insulin pumps are used to perform continuous subcutaneous insulin infusion, or insulin pump therapy, and typically use a programmable device and an infusion set to administer insulin into the person’s body.

MDI therapy involves the administration of a rapid acting insulin before meals (bolus) to bring blood glucose levels down into the healthy range.

MDI therapy may also require a separate injection of a long-acting (basal) insulin, to control glucose levels between meals; this type of insulin is typically taken once or twice per day.

By comparison, insulin pump therapy uses only rapid acting insulin to fulfill both mealtime (bolus) and background (basal) requirements.

Insulin pump therapy allows a person to customize their bolus and basal insulin doses to meet their insulin needs throughout the day, and is intended to more closely resemble the physiologic function of a healthy pancreas.

Insulin pump therapy has been shown to provide people with insulin-dependent diabetes with numerous advantages relative to MDI therapy.

For example, insulin pump therapy eliminates individual insulin injections, delivers insulin more accurately and precisely than injections, often improves HbA1c (a common measure of blood glucose levels) over time, provides greater flexibility with meals, exercise and daily schedules, and can reduce severe low blood glucose levels.

We estimate that approximately one-third of the Type 1 diabetes population in the United States use insulin pump therapy.

In addition, we believe less than 10% of the Type 2 diabetes population in the United States who are insulin-dependent use insulin pump therapy.

We believe that the distinct advantages and increased awareness of insulin pump therapy as compared to other available insulin therapies will continue to generate demand for insulin pump devices.

In addition to the diabetes market space, we have partnered with pharmaceutical and biotechnology companies that utilize a customized form of the Omnipod System to deliver specific drugs over a specified interval of time, at a certain administered volume.

In 2017, the results of a clinical study were published in a peer-reviewed, scientific journal demonstrating that insulin infusion devices similar to the Omnipod System can effectively maintain the blood glucose levels at a basal level across a representative sample of individuals, including children and adolescents, with Type 1 diabetes.

This study further demonstrates the effectiveness of the Omnipod System and builds on the catalog of clinical evidence that helps us build support for our product within the physician community.

The Omnipod System competes for patients in the insulin delivery industry.

As the majority of new Omnipod System end-users have previously used MDI therapy, which is currently the most prevalent method of insulin delivery, we believe that we primarily compete with companies that provide MDI products such as insulin syringes and needles.

Also, we compete with companies in the insulin pump therapy market, which consist of conventional tubed pump companies and patch-pump companies.

The competitive landscape in our industry is undergoing significant change.

For example, during 2017, Animas Corporation, a division of Johnson & Johnson, announced that it is exiting the insulin pump market in the United States and other countries.

Our non-insulin drug delivery product line also competes with drug delivery device companies such as West Pharmaceutical Services, Inc.

| • | Concentrated Insulin Delivery. In collaboration with Eli Lilly, we are developing new products that leverage the DASH mobile platform 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. These new products are being specifically designed to deliver Humalog ® 200 units/mL and Humulin® R U-500 insulin, which are concentrated forms of insulin used by people with highly insulin resistant Type 2 diabetes. We believe these innovations should significantly expand our access to more of the Type 2 diabetes market. |

To lower our manufacturing costs, increase supply redundancy, add capacity closer to our largest customer base, and support our growth, we continue to invest in our supply chain operations.

To date, we have invested approximately $70 million in property, equipment and infrastructure related to the new facility.

Our trademarks include OMNIPOD(R), DASHTM, OMNIPOD U-200TM, OMNIPOD U-500TM, and HORIZONTM.

We sell our Omnipod System directly to patients or indirectly through intermediaries, such as independent distributors and the pharmacy channel, in the United States, Canada, Europe, and Israel.

Our exclusive European distribution agreement expires on June 30, 2018, at which time we plan to assume all commercial activities (including, among other things, distribution, sales, marketing, training and support) of our Omnipod System across Europe.

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.

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

In June 2011, we acquired Neighborhood Holdings, Inc. and its wholly-owned subsidiaries (collectively, “Neighborhood Diabetes”).

Through Neighborhood Diabetes, we provided customers with blood glucose testing supplies, traditional insulin pumps, pump supplies and pharmaceuticals, processing claims as either durable medical equipment or through pharmacy benefits.

In February 2016, we sold Neighborhood Diabetes to Liberty Medical LLC ("Liberty Medical").

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

| | |

| --- | --- |

Managing Diabetes

Both MDI and CSII therapies are considered intensive insulin management therapies.

Many healthcare professionals believe that intensive insulin management therapies are superior to conventional therapies in delaying the onset and reducing the severity of diabetes-related complications.

As a result, we believe that the use of intensive insulin management therapies has significantly expanded over the past decade, and that many Type 1 patients manage their diabetes using an intensive insulin management therapy.

A significantly smaller percentage of people with insulin-requiring Type 2 diabetes manage their diabetes using an intensive insulin management therapy.


| • | 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. |

We continue to invest in our supply chain operations to increase manufacturing capacity and reduce the per-unit production cost for the Omnipod System.

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.

Although a number of these suppliers are sole-source suppliers, we continue to focus on identifying alternate supply sources and duplicate custom tooling.

We sell our Omnipod System through a combination of direct sales representatives and independent distributors in both the United States and outside of the United States.

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

The majority of our patients have previously undertaken MDI therapy, which is substantially less expensive than CSII therapy.

The Omnipod System competes with a number of existing insulin delivery devices as well as other methods for the treatment of diabetes.

Other significant competitors in the United States are Animas Corporation, a division of Johnson & Johnson, and Tandem Diabetes Care, Inc. We also compete with drug delivery device companies such as West Pharmaceuticals.

In order to obtain pre-market approval and, in some cases, a 510(k) clearance, a product sponsor must conduct well-controlled clinical trials designed to test the safety and effectiveness of the product.

Conducting clinical trials generally entails a long, costly and uncertain process that is subject to delays and failure at any stage.

The data obtained from clinical trials may be inadequate to support approval or clearance of a submission.

In addition, the occurrence of unexpected findings in connection with clinical trials may prevent or delay obtaining approval or clearance.

If we conduct clinical trials, they may be delayed or halted, or be inadequate to support approval or clearance.

| • | PMA. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, devices deemed not substantially equivalent to a previously cleared 510(k) device or devices in commercial distribution before May 28, 1976 for which PMAs have not been required, generally require a PMA before they can be commercially distributed. A PMA application must be supported by extensive data, including technical information, pre-clinical and clinical trials, manufacturing and labeling to demonstrate the safety and effectiveness of the device to the FDA’s satisfaction. After a PMA application is complete, the FDA begins an in-depth review of the submitted information, which generally takes between one and three years, but may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility to ensure compliance with Quality System Regulations, or QSRs, which impose elaborate design development, testing, control, documentation and other quality assurance procedures in the design and manufacturing process. The FDA may approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution and collection of long-term follow-up data from patients in the clinical study that supported approval. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including the loss or withdrawal of the approval. After any pre-market approval, a new pre-market approval application or application supplement may be required in the event of modifications to the device, its labeling, intended use or indication or its manufacturing process. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel. |

Our facility located at 600 Technology Park Drive, Suite 200, Billerica, MA 01821 was inspected by the FDA in March 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 FDA Form 483 and Warning Letter responses.

Our facility located in Billerica, MA was re-inspected by the FDA in November to December 2015.

This inspection also resulted in four inspectional observations.

We responded to these inspectional observations on December 31, 2015.

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 July 2015 we implemented a field removal of certain lots of our product due to the possibility that some Omnipod Systems had a higher rate of failure than our current manufacturing standards.

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

The information required by this Item is provided under "Legal Proceedings" in [removed: note 15] [added: Note 12] 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-2016x12x31_10xk.htm 10-K][added: podd-2017x12x31_10xk.htm PODD-2017-12-31_10-K]

| | For the fiscal year ended December 31, [removed: 2016] [added: 2017] |

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: 2016] [added: 2017] was approximately [removed: $1.7] [added: $3.0] billion.

The number of shares outstanding of each of the registrant’s classes of common stock as of February [removed: 21, 2017:][added: 16, 2018:]

| Common Stock, $0.001 Par Value Per Share | | [removed: 57,651,012] [added: 58,391,036] |

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: 2016.][added: 2017.]

| Item 1 | [removed: [Business](#s4C682F8352FA535CBC598F9C2F43A4CA)] [added: [Business](#sA05C734DD0765110B65E35003B3AF7DE)] | [removed: [3](#s4C682F8352FA535CBC598F9C2F43A4CA)] [added: [3](#sA05C734DD0765110B65E35003B3AF7DE)] |

| Item 1A | [Risk [removed: Factors](#s17526602CACB5D5E9F1C1CDDABD16387)] [added: Factors](#s49864FD00A4D5796BD047EA9BAE696D1)] | [removed: [14](#s17526602CACB5D5E9F1C1CDDABD16387)] [added: [16](#s49864FD00A4D5796BD047EA9BAE696D1)] |

| Item 1B | [Unresolved Staff [removed: Comments](#s001A9733D1FB59E38B91483AAC94BE72)] [added: Comments](#sBE74A5031063514EA5502D0131F82065)] | [removed: [34](#s001A9733D1FB59E38B91483AAC94BE72)] [added: [39](#sBE74A5031063514EA5502D0131F82065)] |

| Item 2 | [removed: [Properties](#s935B223B7CF35EE5A172B977585A8952)] [added: [Properties](#sDBC3A78F72855D109DDE1C3AD968DA36)] | [removed: [34](#s935B223B7CF35EE5A172B977585A8952)] [added: [39](#sDBC3A78F72855D109DDE1C3AD968DA36)] |

| Item 3 | [Legal [removed: Proceedings](#s7A2E47BB4AD65DFFB0AE2EFDC1EA6072)] [added: Proceedings](#s3FF7C448152F5C89BBB9E479A60FE057)] | [removed: [35](#s7A2E47BB4AD65DFFB0AE2EFDC1EA6072)] [added: [39](#s3FF7C448152F5C89BBB9E479A60FE057)] |

| Item 4 | [Mine Safety [removed: Disclosures](#s13B7E37B6A505C8C9051170F8ED500E7)] [added: Disclosures](#s7F1F57B6160857F2B15BAB00C21E6DB1)] | [removed: [35](#s13B7E37B6A505C8C9051170F8ED500E7)] [added: [39](#s7F1F57B6160857F2B15BAB00C21E6DB1)] |

| Item 5 | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s2EE179A0FB39527E90ACF9644AB26FFC)] [added: Securities](#sD7BD37589A24508F9097DE1BE20A9987)] | [removed: [36](#s2EE179A0FB39527E90ACF9644AB26FFC)] [added: [40](#sD7BD37589A24508F9097DE1BE20A9987)] |

| Item 6 | [Selected Financial [removed: Data](#sA183A9D79399598087482ADF501DB67F)] [added: Data](#s12741FE0D64756B68AD6EB8598339A1F)] | [removed: [37](#sA183A9D79399598087482ADF501DB67F)] [added: [42](#s12741FE0D64756B68AD6EB8598339A1F)] |

| Item 7 | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s69A06B81B1A853668210AB9BCBDE0FBB)] [added: Operations](#s089108C747785BEBBC68A5D5B59187C5)] | [removed: [39](#s69A06B81B1A853668210AB9BCBDE0FBB)] [added: [44](#s089108C747785BEBBC68A5D5B59187C5)] |

| Item 7A | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s8CF5339213C351BEB804F81B6F36B2BC)] [added: Risk](#s40544B5EE7C55FFC9E6441C1C262CD95)] | [removed: [47](#s8CF5339213C351BEB804F81B6F36B2BC)] [added: [53](#s40544B5EE7C55FFC9E6441C1C262CD95)] |

| Item 8 | [Financial Statements and Supplementary [removed: Data](#sEDD9E8D31FEB5717BB8760A1314F523A)] [added: Data](#sC374D2ED03E2518C91D9A7668DE5ECF2)] | [removed: [47](#sEDD9E8D31FEB5717BB8760A1314F523A)] [added: [53](#sC374D2ED03E2518C91D9A7668DE5ECF2)] |

| Item 9 | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s8698E4F5A1CE501B8C7C874377C08DEA)] [added: Disclosure](#s1C5D651BDFEF5D5A8D902A90EF66CBCF)] | [removed: [86](#s8698E4F5A1CE501B8C7C874377C08DEA)] [added: [91](#s1C5D651BDFEF5D5A8D902A90EF66CBCF)] |

| Item 9A | [Controls and [removed: Procedures](#sEC1FF687C6B35105B0A9940D4E16F70A)] [added: Procedures](#sCBE260B1DEE45E9FB6E254934812CE44)] | [removed: [86](#sEC1FF687C6B35105B0A9940D4E16F70A)] [added: [91](#sCBE260B1DEE45E9FB6E254934812CE44)] |

| Item 9B | [Other [removed: Information](#s74D8FAC697755707A95306F8E3DDF4D0)] [added: Information](#s2E2DCF20526A581FA63FDC60647AE177)] | [removed: [88](#s74D8FAC697755707A95306F8E3DDF4D0)] [added: [93](#s2E2DCF20526A581FA63FDC60647AE177)] |

| Item 10 | [Directors, Executive Officers and Corporate [removed: Governance](#s654D6B0CE81A578686BB61821EC45244)] [added: Governance](#s35E9F37747E7526181CB44A9C5E3D40D)] | [removed: [88](#s654D6B0CE81A578686BB61821EC45244)] [added: [93](#s35E9F37747E7526181CB44A9C5E3D40D)] |

| Item 11 | [Executive [removed: Compensation](#sD87F9E25226F5E83B4B591CF281B0D40)] [added: Compensation](#s52C7F1CCF2B25B1DBA6D42F23F7ED5D5)] | [removed: [88](#sD87F9E25226F5E83B4B591CF281B0D40)] [added: [93](#s52C7F1CCF2B25B1DBA6D42F23F7ED5D5)] |

| Item 12 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s862D8B8621F05D14984939892B7D5F1F)] [added: Matters](#s1484EE9B5BEB55938DC03C0B2B754A8A)] | [removed: [88](#s862D8B8621F05D14984939892B7D5F1F)] [added: [93](#s1484EE9B5BEB55938DC03C0B2B754A8A)] |

| Item 13 | [Certain Relationships and Related Transactions, and Director [removed: Independence](#sB64011FEF0AD56648DA63F14EABCDBC9)] [added: Independence](#s43F0CCFEC9E0517CA46A845EC9C2A2BC)] | [removed: [88](#sB64011FEF0AD56648DA63F14EABCDBC9)] [added: [93](#s43F0CCFEC9E0517CA46A845EC9C2A2BC)] |

| Item 14 | [Principal Accounting Fees and [removed: Services](#sEDA9E7BBD1185D77AE52728FAE9D7BB7)] [added: Services](#s6DCB9DAEED245EE6BF8A6E10C618F3F6)] | [removed: [88](#sEDA9E7BBD1185D77AE52728FAE9D7BB7)] [added: [93](#s6DCB9DAEED245EE6BF8A6E10C618F3F6)] |

| Item 15 | [Exhibits, Financial Statement [removed: Schedules](#s0B78A13633E2564286DB189679D7E6EA)] [added: Schedules](#s7C7BC0C475475240A318429164E6AAE0)] | [removed: [89](#s0B78A13633E2564286DB189679D7E6EA)] [added: [94](#s7C7BC0C475475240A318429164E6AAE0)] |

| Item 16 | Form 10-K Summary | [removed: [89](#s13c20fbeba614f6eab445463e9f9a1b5)] [added: [94](#s4531EFEECB6C5BF8888E1F825DBC9E5E)] |

| | [EXHIBIT [removed: INDEX](#s849FF51A2AE75324AC439DEE0D5963DD)] [added: INDEX](#s119711DA1D3C5BD1BA672EF058FB56A0)] | [removed: [91](#s849FF51A2AE75324AC439DEE0D5963DD)] [added: [96](#s119711DA1D3C5BD1BA672EF058FB56A0)] |

| [PART I](#s91446BB515B15429810950D819CFBCC0) | | |

| [PART II](#sED75D7A694DF5396BB231EED7F93F5A0) | | |

| [PART II](#sED75D7A694DF5396BB231EED7F93F5A0)I | | |

| [PART I](#sED75D7A694DF5396BB231EED7F93F5A0)V | | |

| | [SIGNATURES](#sC74C1655C2B55D44963158386E5C1D6B) | [94](#sC74C1655C2B55D44963158386E5C1D6B) |

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

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

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

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

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

We lease a total of approximately [removed: 133,000] [added: 143,000] square feet of office space, laboratory, warehousing and other related facilities.

We lease other facilities in Canada, China, [added: the United Kingdom,] California and Tennessee containing a total of approximately [removed: 4,000] [added: 14,000] square feet under leases expiring from [removed: May 2017] [added: April 2018] to [removed: May 2018.][added: December 2020.]

In December 2016, we [removed: entered into an agreement to purchase] [added: purchased] property for [removed: the planned] [added: our U.S.] manufacturing facility in Acton, Massachusetts.

| Fiscal Year [removed: 2015] [added: 2017] | | | | | | | |

As of February [removed: 21, 2017,] [added: 16, 2018,] there were approximately [removed: 10] [added: 11] 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: 2011] [added: 2012] 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: 2016.][added: 2017.]

[removed: ][added: ]

| | [removed: 2011 | | |] 2012 | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | [added: 2017 | | |]

The following table sets forth information regarding securities authorized for issuance under our equity compensation plans as of December 31, [removed: 2016.][added: 2017.]

| Equity compensation plans [added: not] approved by security [removed: holders(1)] [added: holders(2)] | [removed: 3,576,322] [added: 773,122] | | | $ | [removed: 24.45] [added: 35.08] | | | [removed: 4,487,991] [added: —] | | |

| Equity compensation plans [removed: not] approved by security [removed: holders(2)] [added: holders(1)] | [removed: 827,200] [added: 3,598,462] | | | $ | [removed: 28.54] [added: 35.10] | | | [removed: —] [added: 5,058,556] | | |

As of December 31, [removed: 2016,] [added: 2017,] 860,123 restricted stock units were outstanding.

(2) Consists of the following inducement grants made to certain executive officers upon their initial hire by us: [removed: one inducement grant of 499,468 shares of non-qualified stock option awards made to Patrick J.]

(3) The maximum number of shares of our common stock that remain available for future issuance under our [removed: 2007] [added: 2017] Stock Option and Incentive Plan as of December 31, [removed: 2016] [added: 2017] is [removed: 4,487,991] [added: 5,058,556] shares.

(4) As of December 31, [removed: 2016, 962,219] [added: 2017, 994,364] restricted stock units were outstanding.

The weighted-average exercise price of outstanding options as of such date issued as inducement grants [removed: (excluding restricted stock units)] was $35.08.

For more information relating to our equity compensation plans, see footnote [removed: 16] [added: 13] to our consolidated financial statements.

We did not repurchase any of our equity securities during the quarter ended December 31, [removed: 2016,] [added: 2017,] nor issue any securities that were not registered under Securities Act.

| First Quarter | $ | 47.22 | | | $ | 36.98 | |

| Second Quarter | $ | 51.31 | | | $ | 39.10 | |

| Third Quarter | $ | 59.46 | | | $ | 49.49 | |

| Fourth Quarter | $ | 71.80 | | | $ | 55.67 | |

| Insulet Corporation | $ | 100 | | $ | 175 | | $ | 217 | | $ | 178 | | $ | 178 | | $ | 325 | |

| NASDAQ Composite | 100 | | | 142 | | | 162 | | | 173 | | | 187 | | | 242 | | |

| NASDAQ Health Care | 100 | | | 156 | | | 199 | | | 208 | | | 170 | | | 204 | | |

| Total(4) | 4,371,584 | | | $ | 35.10 | | | 5,058,556 | | (3) |

| | |

| --- | --- |

| • | one inducement grant of 499,468 shares of non-qualified stock option awards made to Patrick J. Sullivan upon being hired by us in September 2014; |

| | |

| --- | --- |

| • | one inducement grant of 26,756 non-qualified stock options made to 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 (37,976 of which have vested as of December 31, 2017) 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 (28,685 of which have vested as of December 31, 2017) 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 (14,418 of which have vested as of December 31, 2017) 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 (14,954 of which have vested as of December 31, 2017) made to Michael Spears upon being hired by us in July 2015. |

| First Quarter | $ | 45.18 | | | $ | 29.39 | |

| Second Quarter | $ | 31.85 | | | $ | 26.23 | |

| Third Quarter | $ | 34.39 | | | $ | 25.64 | |

| Fourth Quarter | $ | 39.32 | | | $ | 26.36 | |

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

| NASDAQ Composite | 100 | | | 116 | | | 165 | | | 189 | | | 200 | | | 217 | | |

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

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

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 and 6,061 of which vested during the years ended December 31, 2015 and 2016, respectively) made to 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 (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 (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 (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 (7,477 of which vested during the year ended December 31, 2016) made to Michael Spears upon being hired by us in July 2015.

| (In thousands, except share and per share data) | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Revenue | $ | [removed: 366,989] [added: 463,768] | | | $ | [removed: 263,893] [added: 366,989] | | | $ | [removed: 231,321] [added: 263,893] | | | $ | [removed: 185,139] [added: 231,321] | | | $ | [removed: 148,898] [added: 185,139] | |

| Cost of revenue | [removed: 155,903] [added: 186,599] | | | | [removed: 130,622] [added: 155,903] | | | | [removed: 104,195] [added: 130,622] | | | | [removed: 95,364] [added: 104,195] | | | | [removed: 80,430] [added: 95,364] | | |

| Gross profit | [removed: 211,086] [added: 277,169] | | | | [removed: 133,271] [added: 211,086] | | | | [removed: 127,126] [added: 133,271] | | | | [removed: 89,775] [added: 127,126] | | | | [removed: 68,468] [added: 89,775] | | |

| Research and development | [removed: 55,710] [added: 74,452] | | | | [removed: 43,208] [added: 55,710] | | | | [removed: 27,900] [added: 43,208] | | | | [removed: 21,765] [added: 27,900] | | | | [removed: 24,359] [added: 21,765] | | |

| Sales and marketing | [removed: 94,483] [added: 121,617] | | | | [removed: 78,407] [added: 94,483] | | | | [removed: 50,552] [added: 78,407] | | | | [removed: 45,176] [added: 50,552] | | | | [removed: 40,436] [added: 45,176] | | |

| General and administrative (1) | [removed: 71,597] [added: 88,487] | | | | [removed: 60,392] [added: 71,597] | | | | [removed: 57,548] [added: 60,392] | | | | [removed: 49,509] [added: 57,548] | | | | [removed: 34,642] [added: 49,509] | | |

| Total operating expenses | [removed: 221,790] [added: 284,556] | | | | [removed: 182,007] [added: 221,790] | | | | [removed: 136,000] [added: 182,007] | | | | [removed: 116,450] [added: 136,000] | | | | [removed: 99,437] [added: 116,450] | | |

| Operating loss | [removed: (10,704] [added: (7,387] | | ) | | [removed: (48,736] [added: (10,704] | | ) | | [removed: (8,874] [added: (48,736] | | ) | | [removed: (26,675] [added: (8,874] | | ) | | [removed: (30,969] [added: (26,675] | | ) |

| Interest [added: expense] and [removed: other income (loss),] [added: other,] net [added: (3)] | [removed: (16,114] [added: (19,187] | | ) | | [removed: (12,654] [added: (16,114] | | ) | | [removed: (39,006] [added: (12,654] | | ) | | [removed: (15,783] [added: (39,006] | | ) | | [removed: (15,702] [added: (15,783] | | ) |

| Loss from continuing operations before income taxes | [removed: (26,818] [added: (26,574] | | ) | | [removed: (61,390] [added: (26,818] | | ) | | [removed: (47,880] [added: (61,390] | | ) | | [removed: (42,458] [added: (47,880] | | ) | | [removed: (46,671] [added: (42,458] | | ) |

| Income tax expense (benefit) | [removed: 392] [added: 257] | | | | [removed: 212] [added: 392] | | | | [removed: 60] [added: 212] | | | | [removed: 22] [added: 60] | | | | [removed: (9] [added: 22] | | [removed: )] |

| Net loss from continuing operations | [removed: (27,210] [added: (26,831] | | ) | | [removed: (61,602] [added: (27,210] | | ) | | [removed: (47,940] [added: (61,602] | | ) | | [removed: (42,480] [added: (47,940] | | ) | | [removed: (46,662] [added: (42,480] | | ) |

| Loss from discontinued operations, net of tax(2) | [removed: (1,669] [added: —] | | [removed: )] | | [removed: (11,918] [added: (1,669] | | ) | | [removed: (3,560] [added: (11,918] | | ) | | [removed: (2,494] [added: (3,560] | | ) | | [removed: (5,205] [added: (2,494] | | ) |

| Net loss | $ | [removed: (28,879] [added: (26,831] | ) | | $ | [removed: (73,520] [added: (28,879] | ) | | $ | [removed: (51,500] [added: (73,520] | ) | | $ | [removed: (44,974] [added: (51,500] | ) | | $ | [removed: (51,867] [added: (44,974] | ) |

| Net loss from continuing operations per share | [removed: (0.48] [added: (0.46] | | ) | | [removed: (1.08] [added: (0.48] | | ) | | [removed: (0.86] [added: (1.08] | | ) | | [removed: (0.78] [added: (0.86] | | ) | | [removed: (0.97] [added: (0.78] | | ) |

| Net loss from discontinued operations per share | [removed: (0.03] [added: —] | | [removed: )] | | [removed: (0.21] [added: (0.03] | | ) | | [removed: (0.06] [added: (0.21] | | ) | | [removed: (0.05] [added: (0.06] | | ) | | [removed: (0.11] [added: (0.05] | | ) |

| Weighted-average number of shares used in calculating net loss per [removed: share(3)] [added: share] | [removed: 57,251,377] [added: 58,003,434] | | | | [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] | | |

| (In thousands) | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Cash and cash equivalents | $ | [removed: 137,174] [added: 272,577] | | | $ | [removed: 122,672] [added: 137,174] | | | $ | [removed: 151,193] [added: 122,672] | | | $ | [removed: 149,727] [added: 151,193] | | | $ | [removed: 57,293] [added: 149,727] | |

| Short-term [removed: investments(4)] [added: investments] | $ | [removed: 161,396] [added: 167,479] | | | $ | [removed: —] [added: 161,396] | | | $ | — | | | $ | — | | | $ | — | |

| Working capital | $ | [removed: 314,263] [added: 451,146] | | | $ | [removed: 125,605] [added: 314,263] | | | $ | [removed: 163,900] [added: 125,605] | | | $ | [removed: 155,824] [added: 163,900] | | | $ | [removed: 61,650] [added: 155,824] | |

| Total assets | $ | [removed: 456,647] [added: 816,744] | | | $ | [removed: 275,126] [added: 456,647] | | | $ | [removed: 297,182] [added: 275,126] | | | $ | [removed: 286,541] [added: 297,182] | | | $ | [removed: 196,055] [added: 286,541] | |

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

| Long-term debt and capital lease [removed: obligations(5)] [added: obligations(3)] | $ | [removed: 332,768] [added: 566,173] | | | $ | [removed: 171,967] [added: 332,768] | | | $ | [removed: 166,283] [added: 171,967] | | | $ | [removed: 117,627] [added: 166,283] | | | $ | [removed: 101,726] [added: 117,627] | |

| Other long-term liabilities | $ | [removed: 5,032] [added: 6,030] | | | $ | [removed: 3,952] [added: 5,032] | | | $ | [removed: 2,774] [added: 3,952] | | | $ | [removed: 1,943] [added: 2,774] | | | $ | [removed: 1,867] [added: 1,943] | |

| Total stockholders’ equity | $ | [removed: 63,150] [added: 158,516] | | | $ | [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: (1)] [added: (2)] | [removed: Included a] [added: Includes an impairment] charge of [removed: $6.1] [added: $9.0] million [added: in 2015] related to [removed: in-process internally developed software in 2016.] [added: the impairment of the Neighborhood Diabetes asset group.] See [removed: note 12] [added: Note 19] to our consolidated financial statements included in this Annual Report on Form 10-K. |

| [removed: (5)] [added: (3)] | In June 2008, we issued and sold $85.0 million principal amount of 5.375% Convertible Senior Notes due June 2013. In June 2011, we issued 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 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 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 [removed: 2013 and 2014] [added: November 2017,] we [removed: acquired $9.0] [added: issued $402.5] million [added: of 1.375% Convertible Notes due November 2024] and [removed: $1.5 million, respectively,] [added: repurchased $63.4 million in principal] of [removed: manufacturing equipment under capital leases.] [added: the 2% Notes.] See [removed: notes 7 and 8] [added: Note 11] to our consolidated financial statements included in this Annual Report on Form 10-K. |

| Long-term investments | $ | 125,549 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |

| (1) | Includes a charge of $6.1 million related to in-process internally developed software in 2016. |

| | |

| --- | --- |

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

| (3) | In January 2013, we 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 note 7 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. |

Our financial statements as of December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] and for each of the three years in the period ended December 31, [removed: 2016,] [added: 2017,] and the Reports of the Registered Independent Public Accounting Firms are included in this report as listed in the index.

| [Reports of Independent Registered Public Accounting [removed: Firm](#s7704795992CB54469A1E8B264AEEA602)s] [added: Firm](#s0C0004D3459E59EB9B0CC0468302BA94)s] | [removed: [48](#s7704795992CB54469A1E8B264AEEA602)] [added: [54](#s0C0004D3459E59EB9B0CC0468302BA94)] |

| [Consolidated Balance Sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015](#sC8EF266EAE54593AB5F4206C9D854B95)] [added: 201](#s83D032D6637A5D2DAD45A14F3FD4D588)6] | [removed: [50](#sC8EF266EAE54593AB5F4206C9D854B95)] [added: [56](#s83D032D6637A5D2DAD45A14F3FD4D588)] |

| [Consolidated Statements of Operations for the Years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s8E0F1D4183285920A3015181C8BB9A99)] [added: 201](#sD17E3F319FC7530292C7D549926CBF36)5] | [removed: [51](#s8E0F1D4183285920A3015181C8BB9A99)] [added: [57](#sD17E3F319FC7530292C7D549926CBF36)] |

| [Consolidated Statements of Comprehensive Loss for the Years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#sED4B57A03ADE5EA79137F9C2036CAA52)] [added: 201](#s7A1CAD5E63E355F9A73F495AA16F7350)5] | [removed: [52](#sED4B57A03ADE5EA79137F9C2036CAA52)] [added: [58](#s7A1CAD5E63E355F9A73F495AA16F7350)] |

| [Consolidated Statements of Stockholders' Equity for the Years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s0A07518D5850562EA37FF8EA94A0820F)] [added: 201](#s36049B99681653E6BD2C4674CE82E1E0)5] | [removed: [53](#s0A07518D5850562EA37FF8EA94A0820F)] [added: [59](#s36049B99681653E6BD2C4674CE82E1E0)] |

| [Consolidated Statements of Cash Flows for the Years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014](#s0007896094E35079B1218EE66A3739CE)] [added: 201](#sB06E0831ACC25F1D9095C87E5AB011FA)5] | [removed: [54](#s0007896094E35079B1218EE66A3739CE)] [added: [60](#sB06E0831ACC25F1D9095C87E5AB011FA)] |

| [Notes to Consolidated Financial [removed: Statements](#s692C51F0411C5C3B92A562B03968E0CA)] [added: Statements](#s4AEB11ABF1D55898A955D49D2B085219)] | [removed: [55](#s692C51F0411C5C3B92A562B03968E0CA)] [added: [61](#s4AEB11ABF1D55898A955D49D2B085219)] |

Board of Directors and [removed: Stockholders][added: Shareholders]

We have audited the accompanying consolidated [removed: 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, [removed: stockholders’ equity,] [added: stockholders' equity] and cash flows [added: of Insulet Corporation] for the year ended December 31, [removed: 2016.][added: 2015.]

Our audit [removed: of the basic consolidated financial statements included] [added: also includes] the financial statement schedule listed in the [removed: index appearing under] [added: Index at] Item [removed: 15(a).][added: 15(a) for the year ended December 31, 2015.]

These financial statements [removed: and financial statement schedule] are the responsibility of the [removed: Company’s] [added: Company's] management.

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]

In our opinion, the [removed: consolidated] financial statements referred to above present fairly, in all material respects, the [removed: financial position of Insulet Corporation and subsidiaries as of December 31, 2016, and the] [added: consolidated] results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows [added: of Insulet Corporation] for the year ended December 31, [removed: 2016] [added: 2015,] in conformity with [removed: accounting principles] [added: U.S.] generally accepted [removed: in the United States of America.][added: accounting principles.]

[removed: Also] [added: Also,] in our opinion, the related financial statement [removed: schedule,] [added: schedule for the year ended December 31, 2015] when considered in relation to the basic [removed: 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 [removed: States),] [added: States) ("PCAOB"),] the Company’s internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO),] [added: ("COSO"),] and our report dated February [removed: 27, 2017] [added: 21, 2018] expressed an unqualified opinion.

We have audited the accompanying consolidated balance [removed: sheet] [added: sheets] of Insulet Corporation [added: (a Delaware corporation) and subsidiaries (the “Company”)] as of December 31, [removed: 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of operations, comprehensive loss, [removed: stockholders' equity] [added: shareholders’ equity,] and cash flows for each of the two years in the period ended December 31, [removed: 2015.][added: 2017, and the related notes and schedule (collectively referred to as the "financial statements").]

Our responsibility is to express an opinion on [removed: these] [added: the Company's] financial statements [removed: and schedule] based on our audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

In our opinion, the financial statements [removed: referred to above] present fairly, in all material respects, the [removed: consolidated] financial position of [removed: Insulet Corporation at] [added: the Company as of] December 31, [removed: 2015,] [added: 2017] and [added: 2016, and] the [removed: consolidated] results of its operations and its cash flows for each of the two years in the period ended December 31, [removed: 2015,] [added: 2017,] in conformity with [removed: U.S.] [added: accounting principles] generally accepted [removed: accounting principles.][added: in the United States of America.]

(except for the effects of discontinued operations as discussed in [added: Note 19 as to which the date is September 6, 2016 and the effects of the adoption of ASU 2016-19 and ASU 2016-18 as discussed in] Notes 2 and [removed: 3] [added: 7,] as [added: to which the date is February 21, 2018 )]

| | December 31, [removed: 2016] [added: 2017] | | | | December 31, [removed: 2015] [added: 2016] | | |

| [removed: Cash and] [added: Cash,] cash equivalents [removed: | $] [added: and restricted cash, beginning of year (3)] | 137,174 | | | [removed: $] | 122,672 | | [added: | | 151,193 | | |]

| Short-term investments | [removed: 161,396] [added: 167,479] | | | | [removed: —] [added: 161,396] | | |

| Accounts receivable, net | [removed: 28,803] [added: 53,373] | | | | [removed: 42,530] [added: 28,803] | | |

| [removed: Inventories, net] [added: Inventories] | [removed: 35,514] [added: 33,793] | | | | [removed: 12,024] [added: 35,514] | | |

| Prepaid expenses and other current assets | [removed: 7,073] [added: 9,949] | | | | [removed: 4,283] [added: 7,073] | | |

| Total current assets | [removed: 369,960] [added: 537,171] | | | | [removed: 190,761] [added: 369,960] | | |

| Property and equipment, net | [removed: 46,266] [added: 107,864] | | | | [removed: 41,793] [added: 44,753] | | |

[removed: |] Other [removed: intangible assets, net | 528 | | | | 933 | | |][added: Intangible Assets, Net]

| Goodwill | [removed: 39,677] [added: 39,840] | | | | [removed: 39,607] [added: 39,677] | | |

| Other assets | [removed: 216] [added: 1,969] | | | | [removed: 76] [added: 216] | | |

| Total assets | $ | [removed: 456,647] [added: 816,744] | | | $ | [removed: 275,126] [added: 456,647] | |

| Accounts payable | $ | [removed: 13,160] [added: 24,413] | | | $ | [removed: 15,213] [added: 13,160] | |

| Accrued expenses and other current liabilities | [removed: 40,959] [added: 59,256] | | | | [removed: 36,744] [added: 41,228] | | |

| Deferred revenue | [removed: 1,309] [added: 2,356] | | | | [removed: 2,361] [added: 1,309] | | |

| Total current liabilities | [removed: 55,697] [added: 86,025] | | | | [removed: 65,156] [added: 55,697] | | |

Opinion on the financial statements

Basis for opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.