TANDEM DIABETES CARE INC

Previous wording

We generate nearly all of our revenue from the sale of t:slim X2 insulin pumps and the related insulin cartridges and infusion sets. In addition, we recently launched our Tandem Mobi insulin pump. Sales of these products may be negatively impacted by many factors, including:

Current wording

We generate nearly all of our revenue from the sale of our insulin pumps and the related insulin cartridges and infusion sets, including our recently launched Tandem Mobi insulin pump. Sales of these products may be negatively impacted by many factors, including:

Previous wording

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

Current wording

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

Previous wording

Mobi insulin pump, and related products to generate a significant majority of our revenue, any factors that negatively impact sales of these products (or negatively impact the products or components integrated with these products) could adversely affect our business, financial condition and operating results. Furthermore, any disruption in our supply chain could negatively impact our ability to manufacture or otherwise supply sufficient product quantities to meet current customer demand, or any unexpected increase in demand, which could also have the effect of magnifying the negative impact of any of the factors described above.

Current wording

Because we currently rely on sales of our insulin pumps, and related products to generate a significant majority of our revenue, any factors that negatively impact sales of these products (or negatively impact the products or components integrated with these products) could adversely affect our business, financial condition and operating results. Furthermore, any disruption in our supply chain could negatively impact our ability to manufacture or otherwise supply sufficient product quantities to meet current customer demand, or any unexpected increase in demand, which could also have the effect of magnifying the negative impact of any of the factors described above.

Previous wording

Our primary competitors are major medical device companies, primarily Insulet, Medtronic, and Ypsomed. There are also a number of other companies developing and marketing their own insulin delivery systems and/or related software applications, including insulin pumps and Bluetooth-enabled insulin pens to support MDI therapy. Our primary competitors may enjoy several competitive advantages over us, including:

Current wording

Our primary competitors are major medical device companies, primarily Insulet, Medtronic, Ypsomed and Beta Bionics. There are also a number of other companies developing and marketing their own insulin delivery systems and/or related software applications, including insulin pumps and Bluetooth-enabled insulin pens to support MDI therapy. Our primary competitors may enjoy several competitive advantages over us, including:

Previous wording

In addition, the competitive environment in which we operate has resulted and may continue to result in competitive pressures on our manufacturers, suppliers, distributors, collaboration partners and other business constituents. For example, we have entered into development agreements with Dexcom, which provide us non-exclusive licenses to integrate various generations of Dexcom CGM technology with our insulin pump products. Abbott also offers glucose sensors which compete with Dexcom CGMs. Further, we have entered into an agreement with Abbott to develop and commercialize integrated diabetes solutions using Abbott’s glucose sensor. There can be no assurance that our collaborations with Dexcom and Abbott will be successful or that we will not experience delays, business disputes, or other unanticipated challenges. Competitive pressures within our industry could negatively impact the financial condition of our business partners and impact their ability to fulfill contractual obligations to us, which could negatively impact our product sales, result in delays in obtaining regulatory clearances, certifications, or approvals for new products, harm our reputation, and result in harm to our financial condition and operating results.

Current wording

In addition, the competitive environment in which we operate has resulted and may continue to result in competitive pressures on our manufacturers, suppliers, distributors, collaboration partners and other business constituents. For example, we have entered into development agreements with Dexcom, which provide us non-exclusive licenses to integrate various generations of Dexcom CGM technology with our insulin pump products. Abbott also offers glucose sensors which compete with Dexcom CGMs. We have also entered into agreements with Abbott to develop and commercialize integrated diabetes solutions using Abbott’s glucose sensors. There can be no assurance that our collaborations with Dexcom and Abbott will be successful or that we will not experience delays, business disputes, or other unanticipated challenges. Competitive pressures within our industry could negatively impact the financial condition of our business partners and impact their ability to fulfill contractual obligations to us, which could negatively impact our product sales, result in delays in obtaining regulatory clearances, certifications, or approvals for new products, harm our reputation, and result in harm to our financial condition and operating results.

Previous wording

Our current business and growth strategy is highly dependent on our insulin pumps and related products achieving and maintaining market acceptance. For us to sell our products to people with insulin-dependent diabetes, we must demonstrate to them, their caregivers and healthcare providers that our products are an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative diabetes monitoring, treatment or prevention methodologies. Market acceptance and adoption of our products depends on educating people with diabetes, as well as their caregivers and healthcare providers, about the distinct features, ease-of-use, beneficial treatment outcomes, and other perceived benefits of our products as compared to competing products. If we are not successful in convincing existing and potential customers of the benefits of our products, or if we are not able to achieve the support of caregivers and healthcare providers for our products, our sales may decline or we may achieve sales below our expectations.

Current wording

Our current business and growth strategy is highly dependent on our insulin pumps and related products achieving and maintaining market acceptance. For us to sell our products to people with insulin-dependent diabetes, we must demonstrate to them, their caregivers and healthcare providers that our products are an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative diabetes monitoring, treatment or prevention methodologies. Market acceptance and adoption of our products depends on educating people with diabetes, as well as their caregivers and healthcare providers, about the distinct features, ease-of-use, beneficial treatment outcomes, and other perceived benefits of our products as compared to competing products. If we are not successful in educating existing and potential customers of the benefits of our products, or if we are not able to achieve the support of caregivers and healthcare providers for our products, our sales may decline or we may achieve sales below our expectations.

Previous wording

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

Current wording

•perceived risks or uncertainties associated with the use of our products, or components thereof (including due to any product recalls), or of similar products or technologies of our competitors;

Previous wording

We are pursuing a multi-channel managed care strategy and are in discussions to offer Mobi through the pharmacy channel. However, the commercial opportunity in the pharmacy channel will be limited unless a substantial portion of the sales price for Mobi is covered by third-party payors, including private insurance companies, health maintenance organizations, preferred provider organizations, federal and state government healthcare agencies, intermediaries, Medicare, Medicaid and other managed care providers. Medicare Part D plan sponsors may provide coverage for Mobi under the Medicare Part D prescription drug program, which requires negotiating with third-party payors in order to provide Mobi through the pharmacy channel in the United States. If our efforts to enter into additional contracts with intermediaries and third-party payors are not successful, our ability to offer Mobi through the pharmacy channel will be limited.

Current wording

We are pursuing a multi-channel managed care strategy and are in discussions to offer Mobi through the pharmacy channel. However, the commercial opportunity in the pharmacy channel will be limited unless a substantial portion of the sales price for Mobi is covered by third-party payors, including private insurance companies, health maintenance organizations, preferred provider organizations, federal and state government healthcare agencies, intermediaries, Medicare, Medicaid and other managed care providers. Medicare Part D plan sponsors may provide coverage for Mobi under the Medicare Part D prescription drug program, which requires negotiating with third-party payors to provide Mobi through the pharmacy channel in the United States. If our efforts to enter into additional contracts with intermediaries and third-party payors are not successful, our ability to offer Mobi through the pharmacy channel will be limited.

Previous wording

In October 2023, Hamas initiated an attack against Israel, provoking a state of war and the risk of a larger regional conflict. While we cannot predict the broader consequences, these conflicts and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may disrupt sales through our local distributor in Israel.

Current wording

In October 2023, Hamas initiated an attack against Israel, provoking a state of war and subsequently a larger regional conflict. While we cannot predict the broader consequences, these conflicts and retaliatory and counter-retaliatory actions could materially adversely affect global trade, currency exchange rates, inflation, regional economies, and the global economy, which in turn may disrupt sales through our local distributor in Israel.

Previous wording

As of June 30, 2024, we had $452.4 million in cash, cash equivalents and short-term investments. Our management expects the continued growth of our business, including the expansion of our customer service infrastructure to support our growing base of customers, our plans to continue expanding commercial sales of our products outside of the United States, the growth of our manufacturing and warehousing operations, and the increase of our facility footprint to accommodate additional headcount and R&D activities, will continue to increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. Accordingly, our future capital requirements will depend on many factors, including:

Current wording

As of September 30, 2024, we had $473.3 million in cash, cash equivalents and short-term investments. Our management expects the continued growth of our business, including the expansion of our customer service infrastructure to support our growing base of customers, our plans to continue expanding commercial sales of our products outside of the United States, the growth of our manufacturing and warehousing operations, and the increase of our facility footprint to accommodate additional headcount and R&D activities, will continue to increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. Accordingly, our future capital requirements will depend on many factors, including:

Previous wording

Our employees and personnel use Artificial Intelligence (“AI”) technologies (including generative AI) to perform their work. The use and disclosure of personal data in AI technologies is subject to various data privacy laws and other data privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use AI, it could make our business less efficient and result in competitive disadvantages.

Current wording

Our employees and personnel may use Artificial Intelligence (“AI”) technologies (including generative AI) to perform their work. The use and disclosure of personal data in AI technologies is subject to various data privacy laws and other data privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use AI, it could make our business less efficient and result in competitive disadvantages.

Previous wording

In addition, our insulin pumps and other products rely on software and hardware, some of which is developed by third-party service providers or other third parties with whom we work, that could contain vulnerabilities. We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work), but we may not be able to detect, mitigate, and remediate such vulnerabilities, including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Our risks may increase significantly due to the use of mobile and cloud-based applications in our medical devices. For example, while use of our Tandem Device Updater is designed to give us the ability to quickly recover from certain risks and/or vulnerabilities, the use of mobile applications enables third parties to store their information on mobile devices that we do not control. Vulnerabilities could be exploited and result in a security incident.

Current wording

In addition, our insulin pumps and other products rely on software and hardware, some of which is developed by third-party service providers or other third parties with whom we work, that could contain vulnerabilities. We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work), but we may not be able to detect, mitigate, and remediate such vulnerabilities, including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Our risks may increase significantly due to the use of mobile and cloud-based applications in our medical devices. For example, while use of our Tandem Device Updater is designed to give us the ability to quickly recover from certain risks and/or vulnerabilities, the use of mobile applications enables third parties to store their information on mobile devices that we do not control. Vulnerabilities could be exploited and result in a security incident. In addition to vulnerabilities, the reliance of our insulin pumps and other products on software and hardware exposes us and our customers to risks that may impact the performance of our products. For example, in March 2024, we issued a recall of our Apple iOS t:connect mobile app in the United States relating to an issue that could cause rapid depletion of a user’s t:slim X2 insulin pump battery (the “March 2024 Recall”). On August 20, 2024, we released an updated version of the impacted app to correct the issue described in the March 2024 recall.

Previous wording

On January 17, 2020, we learned that an unauthorized person gained access to a few employees’ email accounts through a cyber-attack commonly known as “phishing.” As a result, we have been defending a lawsuit entitled Joseph Deluna et al. v. Tandem Diabetes Care, Inc., which was filed in the Superior Court of the State of California in the County of San Bernardino. On November 28, 2022, the court granted our motion for summary adjudication on the plaintiffs’ allegations that we violated the Confidentiality of Medical Information Act. On February 8, 2023, the plaintiffs asked the court to dismiss their remaining two claims with prejudice, which terminated the case at the Superior Court. On March 7, 2023, the plaintiffs filed a notice of appeal of the Court’s order granting the Company’s motion for summary adjudication. On August 15, 2023, the parties reached a settlement and on August 21, 2023, the Court issued an order dismissing the appeal. The risks posed by any future similar matters include civil monetary damages, attorney fees and costs, other legal penalties, reputational damage, loss of goodwill, and competitive harm.

Current wording

On January 17, 2020, we learned that an unauthorized person gained access to a few employees’ email accounts through a cyber-attack commonly known as “phishing.” As a result, we defended a lawsuit entitled Joseph Deluna et al. v. Tandem Diabetes Care, Inc., which was filed in the Superior Court of the State of California in the County of San Bernardino. On November 28, 2022, the court granted our motion for summary adjudication on the plaintiffs’ allegations that we violated the Confidentiality of Medical Information Act. On February 8, 2023, the plaintiffs asked the court to dismiss their remaining two claims with prejudice, which terminated the case at the Superior Court. On March 7, 2023, the plaintiffs filed a notice of appeal of the Court’s order granting the Company’s motion for summary adjudication. On August 15, 2023, the parties reached a settlement and on August 21, 2023, the Court issued an order dismissing the appeal. The risks posed by any future similar matters include civil monetary damages, attorney fees and costs, other legal penalties, reputational damage, loss of goodwill, and competitive harm.

Previous wording

For example, in November 2023, at the Unified Patent Court (the “UPC”), we filed a revocation action and an action for a declaration of non-infringement of EP Patent No. 2 196 231 B1 (the “’231 patent”) against Roche Diabetes Care GmbH. While Roche contends that Tandem’s t:slim X2 pump infringes the ‘231 patent, we contend that our t:slim X2 pump does not infringe the ‘231 patent. Furthermore, we contend that the claims of the ‘231 patent are invalid over the prior art and should be revoked. In February 2024, Roche filed an infringement action against Tandem and one of its distributors at the UPC contending that Tandem’s t:slim X2 pump infringes the ‘231 patent. On November 6, 2024, the UPC (Paris Central Division) will hold a hearing on Tandem’s motion to revoke the claims of the ‘231 patent.

Current wording

For example, in November 2023, at the Unified Patent Court (“UPC”), Paris Central Division (the “UPC Paris”), we filed a revocation action and an action for a declaration of non-infringement of EP Patent No. 2 196 231 B1 (the “’231 patent”) against Roche Diabetes Care GmbH. While Roche contends that Tandem’s t:slim X2 pump infringes the ‘231 patent, we contend that our t:slim X2 pump does not infringe the ‘231 patent. Furthermore, we contend that the claims of the ‘231 patent are invalid over the prior art and should be revoked. In February 2024, Roche filed an infringement action against Tandem and its distributor in Germany at the UPC, Hamburg Local Division (“UPC Hamburg”) contending that Tandem’s t:slim X2 pump, and the offering, marketing, using, importing, possessing, and supplying of such devices, infringes the ‘231 patent. Roche seeks, among other things, damages and other monetary relief, costs and expenses of the legal proceedings, and an order to cease and desist the allegedly infringing activities. At the UPC Hamburg, Tandem has asserted that the t:slim X2 pump does not infringe the claims of the ‘231 patent and Tandem’s distributor has asserted that the t:slim X2 pump does not infringe the claims of the ‘231 patent and that the claims of the ‘231 patent are invalid and should be revoked. On November 6, 2024, the UPC Paris will hold a hearing on Tandem’s action to revoke the claims of the ‘231 patent.

Previous wording

In December 2023, F. Hoffman-La Roche AG and Roche Diabetes Care GmbH (collectively, “Roche”), filed an infringement action at the UPC against multiple defendants including Tandem Diabetes Care, Inc. and Tandem Diabetes Care Europe B.V. Roche alleges our t:slim X2 insulin pump, and the offering, marketing, using, importing, possessing, and supplying of such devices, infringe EP Patent No. 1 970 677 B1 (the “‘677 patent”). Roche seeks, among other things, damages and other monetary relief, costs and expenses of the legal proceedings, and an order to cease and desist the allegedly infringing activities. As the UPC is a new court system that came into effect in 2023, enforcement and litigation under the UPC is new and we cannot accurately predict the outcome of such proceedings.

Current wording

In December 2023, F. Hoffman-La Roche AG and Roche Diabetes Care GmbH (collectively, “Roche”), filed an infringement action at the UPC, Dusseldorf Division (“UPC Dusseldorf”) against Tandem Diabetes Care, Inc. and Tandem Diabetes Care Europe B.V. and Tandem’s distributors in Germany, France, the Netherlands and Denmark. Roche alleges our t:slim X2 insulin pump, and the offering, marketing, using, importing, possessing, and supplying of such devices, infringe EP Patent No. 1 970 677 B1 (the “‘677 patent”). While Roche contends that Tandem’s t:slim X2 pump infringes the ‘677 patent, we contend that our t:slim X2 pump does not infringe the ‘677 patent. Furthermore, we contend that the claims of the ‘677 patent are invalid over the prior art and should be revoked. Roche seeks, among other things, damages and other monetary relief, costs and expenses of the legal proceedings, and an order to cease and desist the allegedly infringing activities. On April 9, 2025, the UPC Dusseldorf will hold a hearing on Roche’s action asserting infringement of the ‘677 patent, Tandem and its distributors’ counterclaims that the t:slim X2 pump does not infringe the ‘677 patent, and Tandem and its distributors’ actions to revoke the claims of the ‘677 patent.

Previous wording

If any of our dosing devices is found to infringe Roche’s patents and Roche’s patents are also found to be valid, we could be required to redesign our technology or obtain a license from Roche to continue importing, marketing and selling our dosing devices in certain countries in Europe. However, we may not be successful in the redesign of our technology or able to obtain any such license on commercially reasonable terms or at all. We also could be forced, including by court order, to cease importing, marketing and selling certain of our products in certain countries in Europe that are found to be infringing until the patents expire. Even if we were ultimately to prevail, litigation with Roche could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business. We cannot reasonably estimate the final outcome, including any potential liability or any range of potential future charges associated with litigation.

Current wording

If any of our products are found to infringe Roche’s patents and Roche’s patents are also found to be valid, we could be required to redesign our technology or obtain a license from Roche to continue importing, marketing and selling our dosing devices in certain countries in Europe. However, we may not be successful in the redesign of our technology or able to obtain any such license on commercially reasonable terms or at all. We also could be forced, including by court order, to cease importing, marketing and selling certain of our products in certain countries in Europe that are found to be infringing until the patents expire. Even if we were ultimately to prevail, litigation with Roche could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business. We cannot reasonably estimate the final outcome, including any potential liability or any range of potential future charges associated with litigation.

Previous wording

In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to regulatory divergence between the EU and the UK. On May 26, 2021, the MDR became applicable in the EU. However, the MDR is not applicable in the UK. In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the framework set out by the MDD. The government plans to introduce new legislation governing medical devices with an aim for core aspects of the future regime for medical devices to apply from July 1, 2025. New legislation has been proposed and is also anticipated for adoption during 2024 to bring into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime. Should the UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the future. We could therefore, both now and in the future, face significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our business. Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us. These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.

Current wording

In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to further regulatory divergence between the EU and the UK. On May 26, 2021, the MDR became applicable in the EU. However, the MDR is not applicable in the UK. In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the framework set out by the MDD. The government plans to introduce new legislation governing medical devices with an aim for core aspects of the future regime for medical devices to apply from July 1, 2025. New legislation has been proposed and is also anticipated for adoption during 2024 to bring into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime. Should the UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the future. We could therefore, both now and in the future, face significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our business. Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us. These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.

Previous wording

Under current law, federal net operating losses (NOLs) incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of taxable income. As of December 31, 2023, we had accumulated federal and state NOL carryforwards of approximately $168.0 million, and $262.4 million, respectively. Of the total federal NOL carryforwards, approximately $78.4 million were generated after January 1, 2018, and therefore do not expire under current law but can only be utilized to offset 80% of future taxable income. The remaining federal NOL carryforwards of $89.6 million will begin to expire in 2033, and state tax loss carryforwards continue to expire.

Current wording

Under current law, federal net operating losses (NOLs) incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOL carryforwards in a taxable year is limited to 80% of taxable income in such year. As of December 31, 2023, we had accumulated federal and state NOL carryforwards of approximately $168.0 million, and $262.4 million, respectively. Of the total federal NOL carryforwards, approximately $78.4 million were generated after January 1, 2018, and therefore do not expire under current law but can only be utilized to offset 80% of future taxable income. The remaining federal NOL carryforwards of $89.6 million will begin to expire in 2033, and state tax loss carryforwards continue to expire.

Previous wording

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change in its equity ownership value over a three-year period, the corporation’s ability to use its pre-change NOL and research credit carryforwards may be subject to substantial limitations, which could cause U.S. federal income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause NOL carryforwards to expire unused. Similar rules may apply under state tax laws. In addition, there may be other limitations under state law on our ability to utilize NOLs, including temporary suspensions or other limitations on the use of NOLs to offset taxable income. We believe we experienced at least one ownership change that significantly reduced our ability to utilize our pre-2018 NOL and research credit carryforwards before they expire. Additionally, future ownership changes under Section 382 may also limit our ability to fully utilize any remaining tax benefits.

Current wording

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change in its equity ownership value over a three-year period, the corporation’s ability to use its pre-change NOL and research credit carryforwards may be subject to substantial limitations, which could cause U.S. federal income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause NOL carryforwards to expire unused. Similar rules may apply under state tax laws. In addition, there may be other limitations under state law on our ability to utilize NOL carryforwards, including temporary suspensions or other limitations on the use of NOL carryforwards to offset taxable income. We believe we experienced at least one ownership change that significantly reduced our ability to utilize our pre-2018 NOL and research credit carryforwards before they expire. Additionally, future ownership changes under Section 382 may also limit our ability to fully utilize any remaining tax benefits.