Insulet Corporation (NASDAQ:PODD) Q4 2021 Earnings Conference Call February 23, 2022 4:30 PM ET Company Participants Deborah Gordon - VP, IR Shacey Petrovic - President & CEO Wayde McMillan - EVP & CFO Bret Christensen - EVP & Chief Commercial Officer Conference Call Participants Jayson Bedford - Raymond James Robbie Marcus - JP Morgan Lawrence Biegelsen - Wells Fargo Jeff Johnson - Baird Joanne Wuensch - Citi Danielle Antalffy - SVB Leerink Matt Taylor - UBS Steve Lichtman - Oppenheimer Matthew O'Brien - P ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-33462 INSULET CORPORATION (Exact name of Registrant as specified in its charter) Delaware 04-3523891 (State or Other Jurisdiction ...

Insulet Corporation (NASDAQ:PODD) Q3 2021 Results Conference Call November 4, 2021 4:30 PM ET Company Participants Deborah Gordon - VP, IR Shacey Petrovic - President and CEO Wayde McMillan - EVP and CFO Bret Christensen - EVP and Chief Commercial Officer Conference Call Participants Margaret Kaczor - William Blair Robbie Marcus - JP Morgan Danielle Antalffy - SVB Leerink Lawrence Biegelsen - Wells Fargo Jeff Johnson - Baird Matt Taylor - UBS Travis Steed - Barclays Jayson Bedford - Raymond James Cecilia Fu ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________ Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-33462 ___________________________________________________________ INSULET CORPORATION (Exact name ...

Insulet Corporation (NASDAQ:PODD) Q2 2021 Earnings Conference Call August 5, 2021 4:30 PM ET Company Participants Deborah Gordon - Investor Relations Shacey Petrovic - President and Chief Executive Officer Wayde McMillan - Executive Vice President and Chief Financial Officer Conference Call Participants Travis Steed - Barclays Larry Biegelsen - Wells Fargo Robbie Marcus - JPMorgan Danielle Antalffy - SVB Leerink Jeff Johnson - Baird Matthew O’Brien - Piper Sandler Margaret Kaczor - William Blair Jayson Bedf ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________ Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-33462 ___________________________________________________________ INSULET CORPORATION (Exact name of R ...

Insulet Corporation (NASDAQ:PODD) Q1 2021 Results Earnings Conference Call May 6, 2021 4:30 PM ET Company Participants Deborah Gordon - VP of IR Shacey Petrovic - President, CEO Wayde McMillan - Executive VP, CFO & Treasurer Conference Call Participants Jeff Johnson - Baird Robbie Marcus - JPMorgan Larry Biegelsen - Wells Fargo Marissa Bych - Morgan Stanley Jayson Bedford - Raymond James Danielle Antalffy - SVB Leerink Joanne Wuensch - Citibank Kyle Rose - Canaccord Ravi Misra - Berenberg Capital Anthony Pe ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________ Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a ...

Financial Data and Key Metrics Changes - In Q4 2020, the company achieved over 15% revenue growth, exceeding guidance by $9 million, driven by total Omnipod growth of 18% [26] - For the full year 2020, total Omnipod revenue growth was 23%, and total company revenue growth was 22%, marking another record year [32] - Gross margin for Q4 was 65.5%, a 150 basis point increase, while the full year gross margin was 64.4%, down 70 basis points [29][32] Business Line Data and Key Metrics Changes - U.S. Omnipod revenue grew 18% in Q4, with Omnipod DASH driving over 65% of new customer starts [27] - International Omnipod revenue also grew 18%, despite COVID-related challenges in Europe [28] - Drug delivery revenue decreased by 11% due to production timing [28] Market Data and Key Metrics Changes - The company entered five new countries in Europe and the Middle East in Q4 2020, expanding its addressable market significantly [21] - Approximately 75% of U.S. covered lives were secured for Omnipod DASH by the end of Q4, up significantly from the previous quarter [11] Company Strategy and Development Direction - The company aims to expand access and awareness, deliver consumer-focused innovation, and drive operational excellence [10] - The upcoming launch of Omnipod 5 is expected to revolutionize the market, providing unmatched freedom and simplicity for users [12][14] - The focus remains on securing broad payer coverage and customer access, with a pay-as-you-go model to eliminate barriers [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by the pandemic, with strong momentum entering 2021 [23] - The company anticipates total Omnipod revenue growth of 17% to 21% for 2021, despite ongoing pandemic impacts [34] - Management highlighted the importance of continued investment in R&D and innovation to drive long-term growth [51] Other Important Information - The company ended 2020 with $962 million in cash and investments, providing flexibility for future investments [33] - A significant one-time equity bonus of $7 million was granted to employees to enhance engagement and investment in the company's future [31] Q&A Session Summary Question: What does a limited launch of Omnipod 5 mean? - The limited launch will focus on establishing broad access in the pharmacy channel and testing customer experience and training [43] Question: What is the expected new patient growth from Omnipod 5? - The company is monitoring various scenarios for new patient growth, emphasizing the importance of user experience and access [46] Question: Can you provide insights on the long-term revenue growth and margin expansion? - The company is not providing long-range guidance until after the Omnipod 5 launch but expects to continue investing heavily in R&D and innovation [49][51] Question: What are the expectations for international Omnipod revenue growth? - The company anticipates international Omnipod revenue growth of 10% to 15%, despite pandemic-related challenges [54] Question: How recent is the milestone of 250,000 users? - The milestone was achieved in 2021, with stable attrition and utilization rates reported [59] Question: What are the commercialization plans for Omnipod and the Loop algorithm? - The partnership with Tidepool is primarily clinical, with no commercial agreement yet, but the company is working on iOS integration for Omnipod 5 [62] Question: What is driving the increase in Type 2 customer adoption? - Increased awareness and broader access through the pharmacy channel are key factors driving Type 2 adoption [65]

PART I This section details Insulet's core business, the Omnipod System, its market, operations, intellectual property, regulatory environment, human capital, and associated risks [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Insulet Corporation primarily develops, manufactures, and sells the Omnipod System, a continuous insulin delivery system for insulin-dependent diabetes, and also tailors its technology for subcutaneous drug delivery in other therapeutic areas. The company focuses on expanding market access, driving innovation (like Omnipod 5), and enhancing operational efficiency - Insulet Corporation's core business is the Omnipod System, a continuous insulin delivery system for insulin-dependent diabetes, sold since 2005. They also partner with pharmaceutical companies to adapt the Omnipod System for subcutaneous drug delivery in other therapeutic areas, with most drug delivery revenue from sales of pods to Amgen for the Neulasta Onpro kit[12](index=12&type=chunk) - The company's strategic imperatives include driving access and awareness, delivering consumer-focused innovation (e.g., Omnipod 5), expanding global market reach, and achieving operational excellence[188](index=188&type=chunk) [Overview](index=4&type=section&id=Overview) Insulet Corporation develops, manufactures, and sells the Omnipod System, a continuous insulin delivery system for insulin-dependent diabetes, and adapts its technology for other subcutaneous drug delivery areas - Insulet Corporation develops, manufactures, and sells the Omnipod System, a continuous insulin delivery system for people with insulin-dependent diabetes, and also adapts its technology for subcutaneous drug delivery in other therapeutic areas[12](index=12&type=chunk) [Market Opportunity: Management of Diabetes](index=4&type=section&id=Market%20Opportunity%3A%20Management%20of%20Diabetes) Diabetes is a chronic, life-threatening disease requiring daily insulin for millions globally, presenting a significant market for insulin pump therapy - Diabetes is a chronic, life-threatening disease caused by the body's inability to produce or effectively utilize insulin, leading to fluctuating blood glucose levels (hyperglycemia and hypoglycemia)[13](index=13&type=chunk) - **Type 1 diabetes** affects an estimated **4-4.5 million people** in served countries, requiring daily insulin. **Type 2 diabetes** affects **7-7.5 million people** in served countries, with some progressing to insulin therapy[17](index=17&type=chunk) - A significant available market exists for the Omnipod System globally, as only about one-third of the U.S. Type 1 diabetes population and even less of the international Type 1 and insulin-dependent Type 2 populations use insulin pump therapy[14](index=14&type=chunk) [Our Solution: The Omnipod System](index=5&type=section&id=Our%20Solution%3A%20The%20Omnipod%20System) The Omnipod System is a tubeless, continuous insulin delivery system offering precise, personalized doses and advantages over multiple daily injections - The Omnipod System is a continuous insulin delivery system featuring a small, lightweight, self-adhesive disposable tubeless Pod and a wireless Personal Diabetes Manager (PDM), eliminating external tubing and providing precise, personalized insulin doses[21](index=21&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The Omnipod DASH, launched in the U.S. in 2019 and internationally in 2020, includes a secure Bluetooth-enabled Pod and PDM with a color touch screen, smartphone connectivity, automatic data uploads, and wireless software updates[23](index=23&type=chunk) - The Omnipod System offers advantages over multiple daily injections (MDI) therapy, such as eliminating individual injections, more accurate insulin delivery, improved HbA1c, greater flexibility, and reduced severe low blood glucose levels[20](index=20&type=chunk) [Markets and Distribution Methods](index=6&type=section&id=Markets%20and%20Distribution%20Methods) The Omnipod System is distributed in the U.S., Canada, Europe, and the Middle East through direct sales, partners, and the pharmacy channel, with intermediaries accounting for approximately 70% of 2020 sales - The Omnipod System is available in the United States, Canada, Europe, and the Middle East, sold directly to consumers, through distribution partners, and in the U.S. via the pharmacy channel[29](index=29&type=chunk) - Approximately **70% of Omnipod System sales in 2020** were through intermediaries[29](index=29&type=chunk) Revenue for Customers Comprising 10% or More of Total Revenue (2018-2020) | Customer | 2020 | 2019 | 2018 | | :------------------------------ | :--- | :--- | :--- | | Anda, Inc. | 11% | * | * | | Cardinal Health Inc. and affiliates | 10% | 11% | 12% | | Amgen, Inc. | * | * | 12% | [Competition](index=7&type=section&id=Competition) Insulet faces intense competition in the diabetes medical device market from MDI therapy, conventional tubed pump companies, and other drug delivery device manufacturers - The diabetes medical device market is highly competitive, with Insulet primarily competing with MDI therapy providers and conventional tubed pump companies like Medtronic MiniMed and Tandem Diabetes Care Inc. Roche Holdings Ltd. and The Ypsomed Group are also competitors outside the U.S[33](index=33&type=chunk) - The non-insulin drug delivery product line competes with drug delivery device companies such as West Pharmaceutical Services, Inc[33](index=33&type=chunk) [Research and Development](index=7&type=section&id=Research%20and%20Development) R&D focuses on enhancing the Omnipod System, with key efforts on Omnipod 5, an automated insulin delivery system with FDA breakthrough device designation and advanced cybersecurity - R&D efforts focus on improving the Omnipod System, including features and functionality for economic value, convenience, and simplicity[34](index=34&type=chunk) - Key development is Omnipod 5, an automated insulin delivery (AID) system integrating with Dexcom CGM (and future Abbott CGM) and Android/iOS platforms, aiming for smartphone control. The first phase of the pivotal trial was completed in October 2020, with a pediatric study completed and a Type 2 diabetes feasibility study initiated[35](index=35&type=chunk)[37](index=37&type=chunk) - Omnipod 5 received FDA's breakthrough device designation, expediting development and review for life-threatening or debilitating conditions[37](index=37&type=chunk) - Omnipod DASH is the first FDA-cleared insulin pump certified under DTSec cybersecurity standard and ISO 27001, ensuring high standards for cyber and information security[38](index=38&type=chunk) [Manufacturing and Quality Assurance](index=9&type=section&id=Manufacturing%20and%20Quality%20Assurance) Insulet manufactures the Omnipod System in its Acton, MA facility and through contract manufacturers in China, relying on a limited number of suppliers for critical components while maintaining a robust Quality Management System - The company manufactures the Omnipod System through automation, with production at its highly automated facility in Acton, Massachusetts (second line started in 2020, third expected in 2021) and through contract manufacturers in China[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Insulet relies on a limited number of suppliers for critical raw materials and components, managing risk through inventory holdings and dual-sourcing where possible[43](index=43&type=chunk)[44](index=44&type=chunk) - The company's Quality Management System is approved by BSI Group (for CE Marking) and ISO, with manufacturing processes verified and validated as required by the FDA and other regulatory bodies[45](index=45&type=chunk) [Intellectual Property](index=10&type=section&id=Intellectual%20Property) As of December 31, 2020, Insulet held over 250 patents and had over 130 patent applications covering the Omnipod System's technology, alongside registered trademarks - As of December 31, 2020, Insulet held over **250 patents** in the U.S. and other countries (expiring 2021-2042) and had over **130 patent applications pending**, covering the Omnipod System's architecture, drive system, cannula insertion, communication features, software, and drug delivery mechanisms[47](index=47&type=chunk)[48](index=48&type=chunk) - The company has registered various trademarks including INSULET®, OMNIPOD®, OMNIPOD 5™ Automated Insulin Delivery System, Omnipod DASH®, and Podder™[47](index=47&type=chunk) [Government Regulation](index=10&type=section&id=Government%20Regulation) The Omnipod System is subject to extensive regulation by the FDA and other authorities, with non-compliance potentially leading to severe enforcement actions - The Omnipod System is subject to extensive regulation by the FDA and other federal, state, local, and foreign authorities, covering product design, development, testing, approval, manufacturing, labeling, promotion, sales, and post-market surveillance[48](index=48&type=chunk)[54](index=54&type=chunk) - Compliance failures can lead to enforcement actions such as warning letters, fines, injunctions, product recalls, operating restrictions, and delays or refusal of product approvals[56](index=56&type=chunk) [United States FDA Regulation](index=10&type=section&id=United%20States%20FDA%20Regulation) Commercial distribution of medical devices in the U.S. requires FDA clearance or approval, with ongoing post-market compliance requirements - Commercial distribution of medical devices in the U.S. requires either 510(k) clearance or Pre-Market Approval (PMA) from the FDA. Insulet has obtained 510(k) clearance for Omnipod and Omnipod DASH Systems[49](index=49&type=chunk) - The 510(k) clearance pathway typically takes **3-12 months**, while PMA can take **1-3 years** and requires extensive data, including clinical trials and compliance with Quality System Regulations (QSR)[50](index=50&type=chunk)[51](index=51&type=chunk) - Post-market requirements include establishment registration, QSR compliance, labeling regulations, medical device reporting, corrections and recalls, and post-market surveillance[54](index=54&type=chunk) [Other Regulations](index=12&type=section&id=Other%20Regulations) Insulet is subject to various state and federal healthcare laws, including anti-kickback, fraud, and privacy statutes, with potential for significant penalties for non-compliance - The company is subject to state durable medical equipment (DME) provider licensure, federal Anti-Kickback Statute, Stark Law, federal Civil False Claims Act, Civil Monetary Penalties Law, and federal health care fraud statutes[58](index=58&type=chunk)[60](index=60&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) - State laws also include anti-kickback, anti-referral, false claims, and marketing restriction laws, some applying to private payors[67](index=67&type=chunk) - HIPAA and California consumer privacy laws (CCPA, CPRA) govern patient information privacy and security, with non-compliance potentially leading to civil or criminal penalties[68](index=68&type=chunk)[69](index=69&type=chunk) - The Patient Protection and Affordable Care Act (ACA) and Physician Payments Sunshine Act (Open Payments program) also impact healthcare provision, payment, and transparency of payments to healthcare providers[70](index=70&type=chunk)[71](index=71&type=chunk) [International Regulations](index=15&type=section&id=International%20Regulations) International sales are subject to foreign government regulations, including EU medical device directives and data protection laws, as well as anti-bribery statutes - International sales are subject to foreign government regulations, including the European Union's Medical Device Directive (MDD) and Medical Device Regulation (MDR), requiring CE conformity marking for distribution[75](index=75&type=chunk)[76](index=76&type=chunk) - Insulet has CE Mark approval for Omnipod and Omnipod DASH Systems, allowing distribution in the EU, and Health Canada approval for sales in Canada[77](index=77&type=chunk) - The company is also subject to international anti-bribery laws like the U.S. FCPA and U.K. Bribery Act, and data protection regulations such as the GDPR in the European Economic Area[74](index=74&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) [Human Capital Resources](index=15&type=section&id=Human%20Capital%20Resources) Insulet had approximately 1,900 employees as of December 31, 2020, focusing on retention, diversity, training, and competitive compensation, with adaptive measures for COVID-19 - As of December 31, 2020, Insulet had approximately **1,900 full-time employees**, a **41% increase** over the prior year, with **84% located in the United States**[80](index=80&type=chunk)[81](index=81&type=chunk) - The company focuses on employee retention and engagement through annual surveys (**90% response rate in 2020**), quarterly Town Hall meetings, and a 'Stay Connected' initiative for remote workers[82](index=82&type=chunk)[83](index=83&type=chunk) - Insulet promotes diversity, equity, and inclusion through leadership training, targeted recruitment programs, and Employee Resource Groups (ERG) across seven categories[84](index=84&type=chunk)[85](index=85&type=chunk) - Training and development programs include a robust onboarding program (RITE Start), monthly learning programs, a new learning platform launched in June 2020, leadership development, and tuition reimbursement[86](index=86&type=chunk) - Compensation and benefits are competitive, performance-aligned, and include health insurance, retirement plans, paid leave, wellness programs, and an employee stock purchase plan with over **50% participation**[87](index=87&type=chunk)[88](index=88&type=chunk) - In response to COVID-19, the company implemented a task force, virtual onboarding/training, flexible work policies, health screenings, enhanced cleaning, and provided COVID-19 paid sick time and at-home testing[89](index=89&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Insulet faces various risks, including heavy reliance on Omnipod System sales, challenges in expanding and retaining customers, intense competition, potential obsolescence from technological breakthroughs, and the commercial success of new products. Operational risks include supply chain disruptions, manufacturing difficulties, and dependence on third-party suppliers. The company is also subject to extensive government regulation, litigation, and risks related to privacy, data security, and substantial debt [Risks Related to Our Business and Industry](index=18&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Insulet's business is highly dependent on Omnipod System sales, facing risks from market acceptance, competition, reimbursement, and healthcare reform - The company relies almost entirely on sales of the Omnipod System, making it vulnerable to factors like market acceptance, manufacturing issues, quality problems, reimbursement reductions, intellectual property claims, regulatory actions, facility disruptions, and customer attrition[90](index=90&type=chunk)[91](index=91&type=chunk) - Failure to expand and maintain an effective sales force or relationships with intermediaries could adversely affect business and brand[92](index=92&type=chunk) - Retaining a high percentage of customers is crucial for revenue growth, but economic conditions, competition, and changes in insurance reimbursement could negatively impact retention[93](index=93&type=chunk) - Ineffective growth management could strain resources, delay product delivery, and adversely affect results of operations[94](index=94&type=chunk) - Failure to secure or retain adequate coverage or reimbursement from third-party payors (private insurance, Medicare Part D, Medicaid) for Omnipod products, especially Omnipod DASH through the pharmacy channel, could materially impact financial results[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - Healthcare reform laws, such as the ACA, could adversely affect revenue and financial condition by limiting healthcare costs and changing reimbursement models[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [Risks Related to Product Development, Market Access and Competition](index=20&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Market%20Access%20and%20Competition) The medical device industry is intensely competitive, with risks including technological obsolescence, unsuccessful new product development, reliance on third parties for trials, and intellectual property infringement claims - The medical device industry is intensely competitive, with many competitors (e.g., Medtronic, Tandem, Roche, Ypsomed) having greater resources, name recognition, and established networks, potentially hindering Insulet's ability to compete effectively[102](index=102&type=chunk)[103](index=103&type=chunk) - Competition also comes from less expensive MDI therapy and potential new insulin 'patch' pumps or other diabetes treatments[104](index=104&type=chunk)[105](index=105&type=chunk) - Technological breakthroughs in diabetes monitoring, treatment, or prevention (e.g., closed-loop systems) could render the Omnipod System obsolete[106](index=106&type=chunk)[107](index=107&type=chunk) - New product development initiatives may not be effective or commercially successful, and failure to introduce innovative products in a timely manner could adversely affect the business[108](index=108&type=chunk) - Reliance on third parties for clinical trials and pre-clinical development poses risks if they fail to perform as required, potentially delaying regulatory approval or commercialization[109](index=109&type=chunk) - Unfavorable future market or clinical studies regarding the Omnipod System's efficacy could hinder sales efforts and negatively impact the business[110](index=110&type=chunk)[111](index=111&type=chunk) - Inability to adequately protect intellectual property rights (patents, trade secrets, trademarks) could impair competitiveness and limit growth[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - Claims that Insulet's products infringe on others' proprietary rights could lead to significant litigation costs, diversion of management attention, negative publicity, and restrictions on manufacturing or sales[117](index=117&type=chunk)[118](index=118&type=chunk) [Risks Related to Economic Conditions and Operating Internationally](index=22&type=section&id=Risks%20Related%20to%20Economic%20Conditions%20and%20Operating%20Internationally) Global economic conditions, including the COVID-19 pandemic, and international operations expose Insulet to risks such as supply chain disruptions, currency fluctuations, political instability, and compliance with anti-bribery laws - The COVID-19 pandemic has negatively impacted business and healthcare globally, leading to reduced consumer spending, potential decline in new orders, increased customer attrition, and supply chain disruptions[119](index=119&type=chunk)[120](index=120&type=chunk) - The pandemic also increased risks to information technology systems due to remote work and could delay product approval timelines (e.g., Omnipod 5) by diverting healthcare resources[121](index=121&type=chunk)[122](index=122&type=chunk) - International business operations (Europe, Canada, Middle East) are subject to risks such as currency fluctuations (U.S. dollar strengthening), political instability, trade protection measures, regulatory changes, and difficulties in managing foreign relationships[123](index=123&type=chunk)[124](index=124&type=chunk) - Brexit could lead to greater restrictions on trade and movement between the U.K. and EU, and increased regulatory complexities[125](index=125&type=chunk) - Failure to comply with anti-bribery laws like the FCPA and U.K. Bribery Act could result in civil/criminal sanctions and disrupt business, especially given government-sponsored healthcare systems globally[126](index=126&type=chunk)[127](index=127&type=chunk) [Risks Related to Supply Chain, Operations and Third-Party Arrangements](index=24&type=section&id=Risks%20Related%20to%20Supply%20Chain%2C%20Operations%20and%20Third-Party%20Arrangements) Insulet's operations are vulnerable to supply chain disruptions, manufacturing difficulties, and reliance on third-party suppliers and intellectual property agreements, impacting product availability and functionality - Omnipod System inventory is produced and maintained in a limited number of locations (U.S. facility and two contract manufacturers in China), making it vulnerable to disruptions from political/financial instability, pandemics, natural disasters, or other events[128](index=128&type=chunk) - Inability to obtain sufficient components or raw materials on a timely basis, or manufacturing difficulties (including new line start-up issues), could harm the business[129](index=129&type=chunk)[130](index=130&type=chunk) - Dependence on third-party suppliers for components and assembly (including two contract manufacturers in China) exposes the company to supply problems, price fluctuations, manufacturing errors, and difficulties in finding alternative suppliers[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - Reliance on agreements or licenses for intellectual property (e.g., with Abbott for FreeStyle meter, Dexcom and Abbott for CGM integration) is critical; loss of these rights could impair product functionality or sales[134](index=134&type=chunk) - The partnership with Glooko for cloud-based diabetes data management is important; non-renewal of this agreement (expires December 2025) could adversely impact the business[135](index=135&type=chunk) - The non-insulin drug delivery product line faces challenges including identifying opportunities, achieving satisfactory development/pricing terms with pharmaceutical companies, manufacturing issues, long lead-times, market acceptance, and competition[136](index=136&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Risks Related to Government Regulation and Litigation](index=26&type=section&id=Risks%20Related%20to%20Government%20Regulation%20and%20Litigation) Extensive government regulation and potential litigation pose significant risks, including sales restrictions, penalties for non-compliance, product recalls, and reputational damage - Extensive government regulation (FDA, foreign authorities) could restrict sales and marketing, and non-compliance could lead to substantial penalties, including fines, injunctions, recalls, and suspension of operations[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Failure to comply with FDA's Quality System Regulations (QSR) by Insulet or its manufacturers/suppliers could interrupt manufacturing and distribution, impacting sales and operating results[149](index=149&type=chunk)[150](index=150&type=chunk) - Product malfunctions could lead to recalls or safety alerts, diverting resources, harming reputation, and impacting financial results[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Improper marketing or promotion of products (e.g., off-label use) could result in enforcement actions, fines, and reputational damage[155](index=155&type=chunk) - Non-compliance with state Durable Medical Equipment (DME) licensure rules could lead to loss of licensure and inability to sell products directly to consumers in affected states[156](index=156&type=chunk) - Relationships with customers and third-party payors are subject to fraud and abuse laws (Anti-Kickback Statute, False Claims Act), and non-compliance could result in significant penalties and exclusion from government programs[157](index=157&type=chunk)[158](index=158&type=chunk) [Risks Related to Privacy and Security](index=29&type=section&id=Risks%20Related%20to%20Privacy%20and%20Security) Insulet is subject to complex and evolving privacy and data protection laws, with cyber-attacks or breaches posing significant risks to business operations, customer data, and intellectual property - The company is subject to complex and evolving privacy and data protection laws (HIPAA, CCPA, CPRA, GDPR), which could result in claims, business practice changes, monetary penalties, and increased operational costs[159](index=159&type=chunk)[160](index=160&type=chunk) - Reliance on the proper function, availability, and security of product and information technology systems means cyber-attacks or other breaches could have a material adverse effect on business and results of operations, including unauthorized access to customer data or intellectual property[161](index=161&type=chunk) - Failure to maintain the privacy and security of customer, third-party payor, employee, supplier, or company information could lead to substantial costs, litigation, enforcement actions, and reputational damage[162](index=162&type=chunk) [Risks Related to Our Debt](index=31&type=section&id=Risks%20Related%20to%20Our%20Debt) Insulet's substantial debt, including $1.2 billion in Convertible Senior Notes, poses risks of cash flow strain, stock dilution upon conversion, and potential limitations on net operating loss carryforwards - As of December 31, 2020, Insulet had **$1.3 billion in debt**, including **$1.2 billion in Convertible Senior Notes** due between 2024 and 2026. Inability to generate sufficient cash flow to service this debt could force reductions in capital expenditures or asset sales[163](index=163&type=chunk) - Conversion of Convertible Senior Notes may dilute existing stockholders' ownership or depress the stock price[164](index=164&type=chunk) - The ability to use net operating loss carryforwards may be limited by Section 382 of the U.S. Internal Revenue Code due to significant changes in stock ownership, potentially increasing future tax liabilities[165](index=165&type=chunk) [General Risks](index=31&type=section&id=General%20Risks) General risks include challenges in attracting and retaining qualified personnel, potential disruptions from acquisitions, difficulties in raising additional funds, and stock price volatility - Success depends on attracting and retaining qualified personnel, including senior management, field sales, diabetes educators, and customer support, in an intense competitive environment[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Acquisitions or investments in new businesses, products, or technologies could disrupt operations, fail to realize expected benefits, or require significant additional resources and investments[169](index=169&type=chunk) - The company may need to raise additional funds in the future, which may not be available on acceptable terms or at all, potentially leading to dilution for existing stockholders or relinquishing valuable rights[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - The price of common stock may be volatile due to various factors, including production capacity, reimbursement changes, intellectual property litigation, new product announcements, regulatory changes, and general market conditions[173](index=173&type=chunk) [Item 1B. Unresolved Staff Comments](index=33&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - The company has no unresolved staff comments[174](index=174&type=chunk) [Item 2. Properties](index=33&type=section&id=Item%202.%20Properties) Insulet owns a 350,000 square foot facility in Acton, MA, serving as its headquarters and U.S. manufacturing site. Additionally, it leases 15 facilities across 7 countries, totaling approximately 225,000 square feet for office, R&D, and warehousing, primarily in North America and Europe - Insulet owns a **350,000 square foot facility** in Acton, MA, which houses its headquarters and U.S. manufacturing operations[175](index=175&type=chunk) - As of December 31, 2020, the company leased **15 facilities** (approximately **225,000 square feet**) in **7 countries**, primarily in North America and Europe, for office, research and development, and warehousing[175](index=175&type=chunk) [Item 3. Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 13 to the consolidated financial statements - Legal proceedings information is provided under 'Legal Proceedings' in Note 13 to the consolidated financial statements[176](index=176&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Item 4, Mine Safety Disclosures, is not applicable[177](index=177&type=chunk) PART II This part covers Insulet's common stock market, financial performance analysis, liquidity, capital resources, market risks, and audited financial statements [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Insulet's common stock is listed on The NASDAQ Global Market under the symbol PODD. As of February 18, 2021, there were 8 registered holders. The company does not anticipate paying cash dividends in the foreseeable future and had no issuer purchases of equity securities - Insulet Corporation's common stock is listed on The NASDAQ Global Market under the trading symbol **PODD**[179](index=179&type=chunk) - As of February 18, 2021, there were **8 registered holders** of common stock[179](index=179&type=chunk) Cumulative Total Return on $100 Investment (2015-2020) | | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :------------------ | :--- | :--- | :--- | :--- | :--- | :--- | | Insulet Corporation | $100 | $100 | $182 | $210 | $453 | $676 | | NASDAQ Composite | $100 | $108 | $138 | $138 | $179 | $257 | | NASDAQ Health Care | $100 | $83 | $101 | $97 | $122 | $158 | - The company intends to retain earnings for R&D and business expansion, and does not anticipate paying cash dividends for the foreseeable future[182](index=182&type=chunk) - There were no issuer purchases of equity securities[183](index=183&type=chunk) [Item 6. Selected Financial Data](index=34&type=section&id=Item%206.%20Selected%20Financial%20Data) Insulet is not required to disclose information previously mandated by this item, consistent with amendments to Regulation S-K - The company is not required to disclose information previously required by this item, consistent with amendments to Regulation S-K[184](index=184&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Insulet's financial performance, including a detailed comparison of 2020 and 2019 revenues and operating expenses, non-operating items, and liquidity. Key drivers for 2020 revenue growth were higher Omnipod volumes and favorable sales channel mix, despite COVID-19 impacts. Gross margin slightly decreased due to manufacturing start-up costs, while R&D and SG&A expenses increased due to innovation investments and customer support. The company maintains strong liquidity with $907.2 million in cash and cash equivalents [Overview](index=35&type=section&id=Overview) Insulet's mission focuses on improving diabetes management through the Omnipod System, driving access, innovation, global expansion, and operational excellence, with key developments in 2020 including manufacturing expansion and international rollout of Omnipod DASH - Insulet's mission is to improve the lives of people with diabetes through its Omnipod System, focusing on driving access, consumer-focused innovation (e.g., Omnipod 5), global market expansion, and operational excellence[186](index=186&type=chunk)[188](index=188&type=chunk) - Key developments in 2020 included producing on a second U.S. manufacturing line, securing a second contract manufacturer in China, and completing the international rollout of Omnipod DASH[189](index=189&type=chunk)[190](index=190&type=chunk) - The company expanded into **five new countries** in Western Europe and the Middle East in 2020, with further expansion planned for Turkey and Australia in 2021, and strategic entry into larger markets like Asia Pacific and Latin America[191](index=191&type=chunk)[192](index=192&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section details Insulet's revenue and operating expenses for 2020 compared to 2019, highlighting growth drivers, margin changes, and expense increases [Revenue](index=36&type=section&id=Revenue) Total revenue increased by **22.5% to $904.4 million in 2020**, driven by higher Omnipod volumes and favorable U.S. pharmacy channel sales, despite negative impacts from the COVID-19 pandemic Revenue by Segment (Years Ended December 31, 2020 vs. 2019) | (In millions) | 2020 | 2019 | % Change | Currency Impact | Constant Currency | | :-------------------- | :----- | :----- | :------- | :-------------- | :---------------- | | U.S. Omnipod | $526.9 | $420.4 | 25.3 % | — % | 25.3 % | | International Omnipod | $308.0 | $253.1 | 21.7 % | 1.8 % | 19.9 % | | Total Omnipod | $834.9 | $673.5 | 24.0 % | 0.7 % | 23.3 % | | Drug Delivery | $69.5 | $64.7 | 7.4 % | — % | 7.4 % | | Total | $904.4 | $738.2 | 22.5 % | 0.6 % | 21.9 % | - Total revenue increased by **$166.2 million (22.5%) to $904.4 million in 2020**, primarily driven by higher volumes and favorable sales channel mix, with constant currency growth of **21.9%**[195](index=195&type=chunk) - U.S. Omnipod revenue increased **25.3% to $526.9 million**, mainly due to customer base growth and increased sales through the pharmacy channel (higher average selling price)[196](index=196&type=chunk) - International Omnipod revenue increased **21.7% (19.9% in constant currency) to $308.0 million**, driven by higher volumes and expanding awareness/access[197](index=197&type=chunk) - Drug Delivery revenue increased **7.4% to $69.5 million**, primarily due to increased demand for Amgen's Neulasta Onpro kit[198](index=198&type=chunk) - The COVID-19 pandemic negatively impacted global new customer starts in 2020, and is expected to continue affecting 2021 revenues, particularly in international markets[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Operating Expenses](index=36&type=section&id=Operating%20Expenses) Operating expenses increased in 2020, with cost of revenue rising due to manufacturing start-up costs, and R&D and SG&A increasing due to innovation investments and customer support Operating Expenses (Years Ended December 31, 2020 vs. 2019) | (In millions) | 2020 Amount | 2020 Percent of Revenue | 2019 Amount | 2019 Percent of Revenue | | :---------------------------------- | :---------- | :---------------------- | :---------- | :---------------------- | | Cost of revenue | $322.1 | 35.6 % | $257.9 | 34.9 % | | Research and development expenses | $146.8 | 16.2 % | $132.3 | 17.9 % | | Selling, general and administrative expenses | $384.0 | 42.5 % | $298.0 | 40.4 % | - Cost of revenue increased **24.9% to $322.1 million in 2020**. Gross margin decreased by **70 basis points to 64.4%** due to start-up costs and inefficiencies from the second U.S. manufacturing line, higher depreciation, and COVID-19 related expenses, partially offset by higher average selling prices in the U.S. pharmacy channel[199](index=199&type=chunk) - Research and development expenses increased **11.0% to $146.8 million**, primarily due to headcount additions focused on Omnipod 5 innovation, partially offset by reduced Omnipod DASH spend[200](index=200&type=chunk) - Selling, general and administrative expenses increased **28.9% to $384.0 million**, driven by investments in customer support, headcount, an **$18.8 million increase in advertising**, **$14.6 million in amortization** from a European distributor acquisition, and **$4.8 million in stock-based compensation**, partially offset by a **$9.7 million decrease** in travel and entertainment due to COVID-19[201](index=201&type=chunk) [Non-Operating Items](index=37&type=section&id=Non-Operating%20Items) In 2020, net interest expense increased significantly due to non-cash interest and reduced interest income, while other income rose from foreign currency gains, and income tax expense remained stable despite a higher effective tax rate - Interest expense, net, increased **62.8% to $45.1 million in 2020**, primarily due to a **$9.6 million increase** in non-cash interest from convertible notes, a **$3.9 million decrease** in capitalized interest, and a **$3.9 million decrease** in interest income[202](index=202&type=chunk) - A **$8.7 million loss on extinguishment of debt** was incurred in 2019 related to the repurchase of 1.25% Notes[203](index=203&type=chunk) - Other income, net, increased **$2.4 million to $3.3 million in 2020**, mainly due to unrealized foreign currency gains, partially offset by a **$1.8 million insurance recovery** in 2019[204](index=204&type=chunk) - Income tax expense was **$2.9 million** in both 2020 and 2019. The effective tax rate increased from **19.8% in 2019 to 29.6% in 2020**, primarily due to a decrease in U.S. pre-tax income[205](index=205&type=chunk) [Adjusted EBITDA](index=38&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA increased to $146.1 million in 2020 from $107.5 million in 2019 Adjusted EBITDA Reconciliation (Years Ended December 31, 2020 vs. 2019) | (in millions) | 2020 | 2019 | | :-------------------------- | :----- | :----- | | Net income | $6.8 | $11.6 | | Interest expense, net | 45.1 | 27.7 | | Income tax expense | 2.9 | 2.9 | | Depreciation and amortization | 55.4 | 27.9 | | Stock-based compensation | 35.9 | 28.7 | | Loss on extinguishment of debt | — | 8.7 | | Adjusted EBITDA | $146.1 | $107.5 | - Adjusted EBITDA increased to **$146.1 million in 2020** from **$107.5 million in 2019**[206](index=206&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) Constant currency revenue growth and Adjusted EBITDA are non-GAAP financial measures used by management to evaluate operating results and comparative performance - Constant currency revenue growth and Adjusted EBITDA are non-GAAP financial measures used by management to evaluate operating results and comparative performance[207](index=207&type=chunk)[208](index=208&type=chunk) - Constant currency revenue growth represents the change in revenue using prior year exchange rates, while Adjusted EBITDA is net income adjusted for interest, taxes, depreciation, amortization, stock-based compensation, and other unusual items[207](index=207&type=chunk)[208](index=208&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, Insulet maintained strong liquidity with $907.2 million in cash and cash equivalents, deemed sufficient for the next twelve months - As of December 31, 2020, Insulet had **$907.2 million in cash and cash equivalents** and **$40.4 million in marketable securities**, believing current liquidity is sufficient for the next twelve months[210](index=210&type=chunk) [Convertible Debt](index=38&type=section&id=Convertible%20Debt) As of December 31, 2020, Insulet had $1,202.5 million in outstanding Convertible Senior Notes due in 2024 and 2026, with capped call options in place to mitigate potential dilution Outstanding Convertible Senior Notes as of December 31, 2020 | Issuance Date | Coupon | Principal Outstanding (in millions) | Due Date | Conversion Rate (per $1,000) | Conversion Price per Share | | :-------------- | :----- | :-------------------------------- | :--------- | :--------------------------- | :------------------------- | | November 2017 | 1.375% | $402.5 | November 2024 | 10.7315 | $93.18 | | September 2019 | 0.375% | $800.0 | September 2026 | 4.4105 | $226.73 | | Total | | $1,202.5 | | | | - In connection with the 0.375% Convertible Senior Notes, Insulet purchased capped call options covering **3.5 million shares** with an initial strike price of **$335.90 per share** to reduce potential dilution[211](index=211&type=chunk)[212](index=212&type=chunk) [Summary of Cash Flows](index=40&type=section&id=Summary%20of%20Cash%20Flows) In 2020, net cash from operating activities was $84.0 million, investing activities provided $14.0 million (driven by marketable securities sales), and financing activities provided $605.5 million from stock issuance, a mortgage, and equipment financing Summary of Cash Flows (Years Ended December 31, 2020 vs. 2019) | (in millions) | 2020 | 2019 | | :------------------------------------ | :----- | :----- | | Cash provided by (used in): | | | | Operating activities | $84.0 | $98.4 | | Investing activities | $14.0 | $(73.6) | | Financing activities | $605.5 | $73.5 | | Effect of exchange rate changes on cash | $4.8 | $1.5 | | Net increase in cash and cash equivalents | $708.3 | $99.8 | - Net cash from operating activities was **$84.0 million in 2020**, primarily from net income adjusted for non-cash items, offset by a **$63.4 million working capital outflow** driven by increased inventories, prepaid expenses, and accounts receivable[214](index=214&type=chunk) - Net cash provided by investing activities was **$14.0 million in 2020**, a significant change from **$73.6 million used in 2019**, mainly due to **$180.5 million in net sales of marketable securities**, partially offset by **$129.0 million in capital expenditures**[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Net cash from financing activities was **$605.5 million in 2020**, driven by **$478.7 million from common stock issuance**, **$70.0 million from a mortgage**, and **$60.0 million from equipment financing**[220](index=220&type=chunk)[221](index=221&type=chunk) - An error in the previously issued Condensed Consolidated Statement of Cash Flows for Q3 2020 was identified and will be corrected prospectively, impacting operating and investing activities but not net cash increase or net income[223](index=223&type=chunk)[224](index=224&type=chunk) [Commitments and Contingencies](index=41&type=section&id=Commitments%20and%20Contingencies) As of December 31, 2020, Insulet had total contractual obligations of $1,703.9 million, including significant debt and purchase obligations, and is involved in ongoing patent infringement litigation with Roche Diabetes Care, Inc Contractual Obligations and Commitments as of December 31, 2020 | (in millions) | Short Term | Long Term | Total | | :------------------------ | :--------- | :-------- | :------ | | Operating lease obligations | $5.6 | $13.1 | $18.7 | | Debt obligations | $15.6 | $1,315.1 | $1,330.7 | | Interest payments | $14.7 | $45.8 | $60.5 | | Purchase obligations | $257.3 | $36.7 | $294.0 | | Total contractual obligations | $293.2 | $1,410.7 | $1,703.9 | - The company is involved in a patent infringement lawsuit with Roche Diabetes Care, Inc., seeking monetary damages, but not injunctive relief, as the patent expired in 2019. The ultimate outcome and potential losses are currently unassessable[226](index=226&type=chunk) [Off-Balance Sheet Arrangements](index=42&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2020, Insulet had $2.8 million in outstanding letters of credit and bank guarantees, collateralized by restricted cash - As of December 31, 2020, Insulet had **$2.8 million in outstanding letters of credit and bank guarantees**, collateralized by restricted cash[227](index=227&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Revenue recognition, particularly for variable consideration and drug delivery, and accruals for contingencies, involve significant management judgment and estimates - Revenue recognition involves significant judgment and estimates, particularly for variable consideration adjustments like rebates, which reduced gross sales by **$82.5 million in 2020**[229](index=229&type=chunk) - Drug delivery revenue is recognized over time using a blend of cost and time incurred to measure progress, requiring judgment in assessing completion of in-process inventory[230](index=230&type=chunk) - Accruals for contingencies, including legal proceedings and claims, are based on management's judgment regarding probability and range of loss[231](index=231&type=chunk) [Accounting Standards Issued and Not Yet Adopted as of December 31, 2020](index=44&type=section&id=Accounting%20Standards%20Issued%20and%20Not%20Yet%20Adopted%20as%20of%20December%2031%2C%202020) ASU 2019-12 (Income Taxes) is effective in Q1 2021 with no significant impact, while ASU 2020-06 (Convertible Debt Instruments) is effective in Q1 2022, with early adoption potentially decreasing additional paid-in capital and increasing debt - ASU 2019-12 (Income Taxes) is effective for Insulet in Q1 2021, with no significant impact expected on consolidated financial statements[233](index=233&type=chunk) - ASU 2020-06 (Convertible Debt Instruments) is effective for Insulet in Q1 2022, with early adoption permitted. Early adoption would result in an approximate **$330 million decrease in additional paid-in capital** and a **$250 million increase in debt**, with no impact on diluted EPS[234](index=234&type=chunk) [Forward-Looking Statements](index=44&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements about future events or financial performance, which are predictions subject to risks, uncertainties, and assumptions that could cause actual results to differ materially - The report contains forward-looking statements about future events or financial performance, identified by terms like 'may,' 'will,' 'expects,' 'plans,' and 'anticipates'[235](index=235&type=chunk) - These statements are predictions based on current expectations and projections, subject to risks, uncertainties, and assumptions that could cause actual results to differ materially[235](index=235&type=chunk)[236](index=236&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Insulet manages interest rate risk through short-term investments and is exposed to foreign currency exchange risk, primarily from Euro, British Pound, and Canadian Dollar denominated revenues, resulting in net realized and unrealized losses in 2020 - Insulet's investment strategy prioritizes principal preservation, liquidity, and yield, primarily investing in cash equivalents and short-term securities (money market funds, U.S. Treasury, corporate debt), resulting in no material exposure to interest rate risk[238](index=238&type=chunk) - As of December 31, 2020, outstanding convertible debt had a carrying value of **$933.1 million** and a fair value of **$2.0 billion**, impacted by interest rates and stock price changes[239](index=239&type=chunk) - Capped call options were entered into to reduce potential equity dilution from convertible senior notes, covering **3.5 million shares** with an initial strike price of **$335.90**[240](index=240&type=chunk) - Approximately **34% of 2020 revenue** was foreign currency denominated, exposing the company to foreign currency exchange risk, primarily with the Euro, British Pound, and Canadian Dollar[241](index=241&type=chunk) - Net realized and unrealized losses from foreign currency transactions amounted to **$3.2 million** for the year ended December 31, 2020[242](index=242&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Insulet Corporation's audited consolidated financial statements for the years ended December 31, 2020, 2019, and 2018, along with the report of the independent registered public accounting firm. It includes the balance sheets, statements of income, comprehensive income, stockholders' equity, cash flows, and detailed notes to the financial statements - The financial statements for the years ended December 31, 2020, 2019, and 2018, along with the Report of the Registered Independent Public Accounting Firm, are included in this report[243](index=243&type=chunk) [Report of Independent Registered Public Accounting Firm](index=46&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued unqualified opinions on Insulet's consolidated financial statements and internal control over financial reporting, identifying Drug Delivery revenue recognition as a critical audit matter - Grant Thornton LLP issued an unqualified opinion on Insulet Corporation's consolidated financial statements as of December 31, 2020 and 2019, and for the three years ended December 31, 2020, confirming fair presentation in accordance with GAAP[247](index=247&type=chunk)[248](index=248&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2020, based on COSO criteria[248](index=248&type=chunk) - Revenue Recognition - Drug Delivery was identified as a critical audit matter due to significant management judgment in measuring progress towards performance obligation satisfaction, requiring additional audit effort[256](index=256&type=chunk)[257](index=257&type=chunk) [Consolidated Balance Sheets](index=48&type=section&id=Consolidated%20Balance%20Sheets) Insulet's consolidated balance sheets show total assets increased to $1,872.9 million in 2020 from $1,142.9 million in 2019, driven by significant increases in cash and cash equivalents, inventories, and property, plant and equipment Consolidated Balance Sheets (as of December 31, 2020 and 2019) | (in millions) | 2020 | 2019 | | :------------------------------------ | :----- | :----- | | **ASSETS** | | | | Cash and cash equivalents | $907.2 | $213.7 | | Short-term investments | $40.4 | $162.4 | | Accounts receivable trade, net | $83.8 | $69.3 | | Inventories | $154.3 | $101.0 | | Prepaid expenses and other current assets | $63.0 | $44.6 | | Total current assets | $1,248.7 | $591.0 | | Long-term investments | — | $58.4 | | Property, plant and equipment, net | $478.7 | $399.4 | | Other intangible assets, net | $28.7 | $13.2 | | Goodwill | $39.8 | $39.8 | | Other assets | $77.0 | $41.1 | | **Total assets** | **$1,872.9** | **$1,142.9** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $54.1 | $54.5 | | Accrued expenses and other current liabilities | $138.1 | $103.2 | | Current portion of long-term debt | $15.6 | — | | Total current liabilities | $207.8 | $157.7 | | Long-term debt, net | $1,043.7 | $887.9 | | Other liabilities | $17.8 | $21.4 | | **Total liabilities** | **$1,269.3** | **$1,067.0** | | **Stockholders' Equity** | | | | Common stock | $0.1 | $0.1 | | Additional paid-in capital | $1,264.3 | $749.0 | | Accumulated deficit | $(666.3) | $(672.0) | | Accumulated other comprehensive income (loss) | $5.5 | $(1.2) | | **Total stockholders' equity** | **$603.6** | **$75.9** | | **Total liabilities and stockholders' equity** | **$1,872.9** | **$1,142.9** | [Consolidated Statements of Income](index=49&type=section&id=Consolidated%20Statements%20of%20Income) Insulet's consolidated statements of income show revenue increased to $904.4 million in 2020, with operating income at $51.5 million and net income at $6.8 million Consolidated Statements of Income (Years Ended December 31, 2020, 2019, and 2018) | (in millions, except share and per share data) | 2020 | 2019 | 2018 | | :-------------------------------------------- | :----- | :----- | :----- | | Revenue | $904.4 | $738.2 | $563.8 | | Cost of revenue | $322.1 | $257.9 | $193.6 | | Gross profit | $582.3 | $480.3 | $370.2 | | Research and development | $146.8 | $132.3 | $94.8 | | Selling, general and administrative | $384.0 | $298.0 | $248.0 | | Operating income | $51.5 | $50.0 | $27.4 | | Interest expense, net | $(45.1) | $(27.7) | $(21.3) | | Loss on extinguishment of debt | — | $(8.7) | — | | Other income (expense), net | $3.3 | $0.9 | $(0.9) | | Income before income taxes | $9.7 | $14.5 | $5.2 | | Income tax expense | $(2.9) | $(2.9) | $(1.9) | | Net income | $6.8 | $11.6 | $3.3 | | Net income per share: | | | | | Basic | $0.11 | $0.19 | $0.06 | | Diluted | $0.10 | $0.19 | $0.05 | | Weighted-average number of common shares outstanding (in thousands): | | | | | Basic | 64,735 | 60,594 | 58,860 | | Diluted | 65,946 | 62,304 | 61,008 | [Consolidated Statements of Comprehensive Income](index=50&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Insulet's consolidated statements of comprehensive income show total comprehensive income of $13.5 million in 2020, primarily driven by net income and a positive foreign currency translation adjustment Consolidated Statements of Comprehensive Income (Years Ended December 31, 2020, 2019, and 2018) | (in millions) | 2020 | 2019 | 2018 | | :---------------------------------------- | :----- | :----- | :----- | | Net income | $6.8 | $11.6 | $3.3 | | Other comprehensive income, net of tax | | | | | Foreign currency translation adjustment | $6.8 | $0.6 | $(2.2) | | Unrealized (loss) gain on available-for-sale securities, net of tax | $(0.1) | $1.1 | $(0.2) | | Total other comprehensive income (loss), net of tax | $6.7 | $1.7 | $(2.4) | | Total comprehensive income | $13.5 | $13.3 | $0.9 | [Consolidated Statements of Stockholders' Equity](index=51&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity significantly increased to $603.6 million in 2020, primarily due to common stock issuance and net income, while the accumulated deficit decreased - Total stockholders' equity increased significantly from **$75.9 million in 2019 to $603.6 million in 2020**, primarily driven by the issuance of common stock (**$477.5 million**) and net income (**$6.8 million**)[268](index=268&type=chunk) - Additional paid-in capital increased from **$749.0 million in 2019 to $1,264.3 million in 2020**, reflecting the common stock issuance and stock-based compensation[268](index=268&type=chunk) - Accumulated deficit decreased from **$(672.0) million in 2019 to $(666.3) million in 2020**, reflecting net income[268](index=268&type=chunk) [Consolidated Statements of Cash Flows](index=52&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Insulet's consolidated statements of cash flows show a net increase in cash, cash equivalents, and restricted cash of $708.3 million in 2020, driven by significant cash flows from financing and investing activities Consolidated Statements of Cash Flows (Years Ended December 31, 2020, 2019, and 2018) | (in millions) | 2020 | 2019 | 2018 | | :-------------------------------------------------------------------------------- | :----- | :----- | :----- | | Cash flows from operating activities | $84.0 | $98.4 | $35.9 | | Cash flows from investing activities | $14.0 | $(73.6) | $(184.5) | | Cash flows from financing activities | $605.5 | $73.5 | $(8.7) | | Effect of exchange rate changes on cash | $4.8 | $1.5 | $(1.4) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $708.3 | $99.8 | $(158.7) | | Cash, cash equivalents, and restricted cash, beginning of year | $213.7 | $113.9 | $272.6 | | Cash, cash equivalents, and restricted cash, end of year | $922.0 | $213.7 | $113.9 | [Notes to Consolidated Financial Statements](index=53&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting Insulet's consolidated financial statements, covering business nature, accounting policies, segment data, revenue, cash, investments, inventories, property, goodwill, liabilities, leases, debt, commitments, stock-based compensation, comprehensive income, defined contribution plan, interest expense, income taxes, and net income per share [Note 1. Nature of the Business](index=53&type=section&id=Note%201.%20Nature%20of%20the%20Business) Insulet Corporation develops, manufactures, and sells the Omnipod System for insulin-dependent diabetes, distributing it globally, and also adapts its technology for subcutaneous drug delivery in other therapeutic areas - Insulet Corporation develops, manufactures, and sells the Omnipod System, a continuous insulin delivery system, including Omnipod and Omnipod DASH, for insulin-dependent diabetes[273](index=273&type=chunk) - The Omnipod System is sold in the U.S., Europe, Canada, and the Middle East, directly to end-users or indirectly through intermediaries (distributors, wholesalers, pharmacy channel)[273](index=273&type=chunk) - The company also partners with pharmaceutical companies to adapt the Omnipod System for subcutaneous drug delivery in other therapeutic areas, with most drug delivery revenue from sales of pods to Amgen for the Neulasta Onpro kit[274](index=274&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=53&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) The consolidated financial statements are prepared in U.S. dollars under GAAP, requiring management estimates and assumptions, with key policies covering consolidation, foreign currency, cash, marketable securities, and revenue recognition under ASC 606 - The consolidated financial statements are prepared in U.S. dollars in accordance with GAAP, requiring management estimates and assumptions[275](index=275&type=chunk) - Key accounting policies include principles of consolidation, foreign currency translation (net effect reported in accumulated other comprehensive loss), cash and cash equivalents (highly liquid investments with maturities ≤ 90 days), and marketable securities (available-for-sale, carried at fair value)[276](index=276&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk)[281](index=281&type=chunk) - Revenue recognition follows ASC 606, recognizing revenue when customers obtain control of promised products, with variable consideration (rebates, discounts) estimated and included only if a significant reversal is improbable[300](index=300&type=chunk)[301](index=301&type=chunk) - Effective January 1, 2020, the company adopted ASU 2016-13 (Credit Losses), resulting in a **$1.1 million increase** to the opening accumulated deficit due to an increased allowance for credit losses on accounts receivable[311](index=311&type=chunk) [Note 3. Segment and Geographic Data](index=58&type=section&id=Note%203.%20Segment%20and%20Geographic%20Data) Insulet operates as one reportable segment, with the CEO as the chief operating decision-maker, and provides disaggregated revenue and long-lived asset data by geographic region - The company operates under one reportable segment, with the CEO as the chief operating decision-maker, evaluating performance using consolidated financial information[314](index=314&type=chunk)[315](index=315&type=chunk) Geographic Revenue (Years Ended December 31, 2020, 2019, and 2018) | (in millions) | 2020 | 2019 | 2018 | | :-------------- | :----- | :----- | :----- | | United States | $596.4 | $485.1 | $391.8 | | International | $308.0 | $253.1 | $172.0 | | Total | $904.4 | $738.2 | $563.8 | Geographic Long-Lived Assets, Net (as of December 31, 2020 and 2019) | (in millions) | 2020 | 2019 | | :-------------- | :----- | :----- | | United States | $409.7 | $363.0 | | China | $66.2 | $35.9 | | Other | $2.8 | $0.5 | | Total | $478.7 | $399.4 | [Note 4. Revenue and Contract Acquisition Costs](index=59&type=section&id=Note%204.%20Revenue%20and%20Contract%20Acquisition%20Costs) Total revenue reached $904.4 million in 2020, with U.S. Omnipod contributing $526.9 million and International Omnipod $308.0 million, and deferred revenue and capitalized contract acquisition costs also increased Disaggregated Revenues (Years Ended December 31, 2020, 2019, and 2018) | (in millions) | 2020 | 2019 | 2018 | | :---------------- | :----- | :----- | :----- | | U.S. Omnipod | $526.9 | $420.4 | $323.5 | | International Omnipod | $308.0 | $253.1 | $172.0 | | Total Omnipod | $834.9 | $673.5 | $495.5 | | Drug Delivery | $69.5 | $64.7 | $68.3 | | Total revenue | $904.4 | $738.2 | $563.8 | Revenue for Customers Comprising 10% or More of Total Revenue (2020, 2019, 2018) | Customer | 2020 | 2019 | 2018 | | :------------------------------ | :--- | :--- | :--- | | Anda, Inc. | 11% | * | * | | Cardinal Health Inc. and affiliates | 10% | 11% | 12% | | Amgen, Inc. | * | * | 12% | - Deferred revenue related to unsatisfied performance obligations totaled **$6.4 million at December 31, 2020**, up from **$4.2 million in 2019**[318](index=318&type=chunk) - Capitalized contract acquisition costs, net of amortization, were **$32.9 million at December 31, 2020**, with **$10.6 million amortization expense** recognized in 2020[319](index=319&type=chunk) [Note 5. Cash and Cash Equivalents](index=60&type=section&id=Note%205.%20Cash%20and%20Cash%20Equivalents) Total cash and cash equivalents significantly increased to $907.2 million in 2020 from $213.7 million in 2019, primarily driven by money market mutual funds Cash and Cash Equivalents (as of December 31, 2020 and 2019) | (in millions) | 2020 | 2019 | | :---------------------------------------------------------------- | :----- | :----- | | Cash | $164.6 | $85.3 | | Money market mutual funds | $739.8 | $115.5 | | Commercial paper | — | $10.0 | | Restricted cash | $2.8 | $2.9 | | Total cash and cash equivalents | $907.2 | $213.7 | | Restricted cash included in other assets | $14.8 | — | | Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows | $922.0 | $213.7 | - Total cash and cash equivalents significantly increased to **$907.2 million in 2020** from **$213.7 million in 2019**[321](index=321&type=chunk) [Note 6. Investments](index=60&type=section&id=Note%206.%20Investments) Short-term investments decreased to $40.4 million in 2020 from $162.4 million in 2019, with no long-term investments in 2020 Short-term Investments (as of December 31, 2020 and 2019) | (in millions) | Amortized Cost (2020) | Fair Value (2020) | Amortized Cost (2019) | Fair Value (2019) | | :-------------------------- | :-------------------- | :---------------- | :-------------------- | :---------------- | | U.S. government and agency bonds | $35.1 | $35.3 | $94.7 | $95.0 | | Corporate bonds | $2.8 | $2.9 | $51.0 | $51.1 | | Certificates of deposit | $2.2 | $2.2 | $6.3 | $6.3 | | Commercial paper | — | — | $10.0 | $10.0 | | Total short-term investments | $40.1 | $40.4 | $162.0 | $162.4 | Long-term Investments (as of December 31, 2019) | (in millions) | Amortized Cost (2019) | Fair Value (2019) | | :-------------------------- | :-------------------- | :---------------- | | U.S. government and agency bonds | $52.9 | $52.9 | | Corporate bonds | $2.8 | $2.8 | | Certificates of deposit | $2.7 | $2.7 | | Total long-term investments | $58.4 | $58.4 | - Short-term investments decreased from **$162.4 million in 2019 to $40.4 million in 2020**, while long-term investments were **zero in 2020** compared to **$58.4 million in 2019**[260](index=260&type=chunk) [Note 7. Inventories](index=61&type=section&id=Note%207.%20Inventories) Total inventories increased to $154.3 million in 2020 from $101.0 million in 2019, driven by significant increases in work-in-process and finished goods Inventories (as of December 31, 2020 and 2019) | (in millions) | 2020 | 2019 | | :-------------- | :----- | :----- | | Raw materials | $30.7 | $23.3 | | Work-in-process | $59.6 | $40.3 | | Finished goods | $64.0 | $37.4 | | Total inventories | $154.3 | $101.0 | - Total inventories increased to **$154.3 million in