NASDAQ: BBNX

•
Type 1 diabetes (T1D): an autoimmune disorder that often develops during childhood or adolescence, but can occur at any age, arising from a person’s immune system attacking and destroying the insulin-producing beta cells in the pancreas leading to elevated blood-glucose (BG) levels. According to the Centers for Disease Control and Prevention (CDC), there are currently approximately 1.9 million people with T1D in the United States, all of whom require daily insulin replacement to manage their disease.

•
Type 2 diabetes (T2D): a metabolic disorder that typically develops in adulthood, whereby the body becomes resistant to insulin, and, consequently, increased insulin production or replacement is needed to regulate BG levels. As T2D progresses, the body’s beta cells cannot maintain the increased insulin levels needed to regulate BG. There are currently approximately 38 million people with T2D in the United States according to the CDC, of whom an estimated 1.9 million require daily intensive insulin therapy, based on public and industry data.

According to the American Diabetes Association (ADA), the central objectives for disease management in the treatment of T1D are sustaining HbA1c levels at or below 7.0% over time while maintaining daily BG levels between 70 and 180 mg/dL, near the range experienced by healthy individuals, for 17 or more hours per day. Those accomplishing these goals have been shown to significantly reduce their risk of developing the long-term complications of diabetes. These guidelines were established based on the results of the landmark Diabetes Control and Complications Trial (DCCT). These results demonstrated that failure to maintain BG near an acceptable range had long-term negative health consequences for PWD, exacerbating the complications of the disorder. The achievement of glycemic goals, however, is a daunting task due to the lifelong, daily requirements and the complex and dynamic nature of the factors that drive BG levels. Currently, only about 20% of adults in the United States with T1D meet these established therapy goals for HbA1c. We believe that one of the principal reasons for these suboptimal outcomes is that, despite decades of innovation and clinical data demonstrating their superiority to alternatives, insulin pumps have only been adopted by approximately one-third of people with T1D (based on our internal estimates and publicly available industry data, including sales data publicly disclosed by the leading device manufacturers). We believe that one reason for this relatively low

5

adoption rate is the demands placed on users to perform the complex tabulations and calculations required for even the most advanced pumps (other than the iLet) to function optimally.

The dynamic evolution of care in the field of diabetes over the past several decades has been characterized by continuous cycles of innovation that have produced several generations of increasingly sophisticated and complex devices to help maintain BG levels within the normal range or achieve goal, as established by the ADA. The capabilities of devices range from offering convenience features to allowing transformative improvements in efficacy. We believe that, while these new technologies have managed to remove or reduce some “twentieth-century burdens” of disease management (e.g., logbooks, fingerstick measurements, not knowing BG levels for large stretches of the day and night), they have also added new, “twenty-first-century burdens” (e.g., bombardment with overwhelming amounts of data, constant alerts and alarms, and 24/7 information overload). The psychological, emotional and cognitive burden imposed by the continuous need for user engagement to manage the disease is substantial, unsustainable by most and unachievable by many. We believe that the iLet marks a significant breakthrough in the achievement of our ultimate goal, as it has been shown to enable clinically relevant improvements in glycemic control across broad populations of PWD, while dramatically reducing necessary user engagement.

Our Mission: Life-Changing Solutions

Our mission is to simplify and alleviate the burden of managing diabetes with life-changing solutions. Our vision is to make diabetes easier, for everyone, every day. Our goal is to establish the iLet as the standard of care for insulin delivery.

Our Solution: The iLet Bionic Pancreas

The iLet was cleared by the FDA in May 2023 for the treatment of T1D in adults and children six years and older. Unlike hybrid closed-loop systems that still require users to calculate boluses or enter carbohydrate counts, the iLet is the first and only insulin-delivery device that autonomously determines and delivers 100% of all insulin doses. This level of automation establishes an entirely new category in automated insulin delivery (AID)—true fully closed-loop dosing. The iLet’s compact design integrates with leading continuous glucose monitors (CGMs) via Bluetooth and features an intuitive app-based interface that provides real-time updates and enables secure data sharing with caregivers, supporting easier and more effective glycemic control with minimal user input.

6

Figure 1. The Suite of Components of the iLet

As shown above, the iLet includes:

•
A pumping platform, which consists of the pump itself and related single-use products, including cartridges for storing and delivering insulin, and infusion sets that connect the insulin pump to a user’s body. The pumping platform is designed to deliver analog insulin alone using either a prefilled cartridge or an empty cartridge that the user fills using an external insulin source of their choice. The iLet is not compatible with third-party infusion sets or insulin cartridges.

•
A suite of adaptive control algorithms that autonomously analyze and administer the delivery of insulin doses based on CGM data.

•
An intuitive touchscreen display that enables user interactions through a custom graphical user interface embracing smartphone simplicity.

•
A wirelessly rechargeable battery, which must be recharged every 5-7 days, similar to the battery life of other competitive pump products, and wireless software update capabilities.

7

The iLet integrates with the user’s CGM device (either DexCom G6 or G7 or Abbott’s FreeStyle Libre 3 Plus), which measures the user’s glucose levels. The iLet’s suite of three adaptive algorithms then work together, using the user’s glucose levels from the CGM and the user’s qualitative meal announcements, to understand the user’s distinct patterns of food intake and insulin needs, allowing the iLet to make all insulin dosing decisions with minimal human intervention. The three algorithms described below, refined over more than a decade, are the key enabling innovation of the iLet.

Our Strategy and Future Technologies

Our strategy to achieve our mission and expand our market share focuses on driving adoption of the iLet through targeted commercialization, superior customer support, operational efficiency, and continued innovation. We are executing a focused commercial approach that leverages our internal sales force to educate PWD and healthcare providers (HCPs) on the benefits of fully autonomous insulin delivery, while building strong customer relationships through responsive service and training programs. Our initial commercial efforts are concentrated in high-volume endocrinology practices, and over time we plan to extend our outreach to primary care settings, where a significant portion of the T1D population is managed and where the iLet’s minimal user input requirements may provide meaningful clinical and operational advantages.

Markets and Distribution Methods

We market and distribute the iLet in the United States through a direct commercial organization that includes sales, clinical, and customer support teams. Our commercial focus is centered on endocrinology practices that manage a high concentration of people using intensive insulin therapy, with plans to broaden over time into primary care practices that manage an estimated half of the T1D population. When we are not contracted with a specific health plan for direct fulfillment, we utilize independent distributors to support order processing, benefits investigation, and product delivery.

Our customer-facing infrastructure is designed to support onboarding, training, and long-term retention. We provide comprehensive education programs for patients and healthcare professionals, delivered through certified trainers, virtual resources, and digital tools. Our customer support team provides continuous technical assistance, order support, and product guidance throughout the life of the device. We also engage users, caregivers, and clinicians through community-focused initiatives such as the Bionic Universe, which helps share real-world experiences and informs future product refinements. This integrated commercial, training, and support model is intended to ensure a high quality user experience and strengthen long-term customer loyalty.

Multi-Channel Coverage and Reimbursement Strategy

We are pursuing a multi-channel coverage and reimbursement strategy designed to maximize access to the iLet across the T1D population and provide PWD greater flexibility and affordability in selecting their insulin delivery system. Historically, most insulin pumps have been reimbursed through the durable medical equipment (DME) channel, which continues to cover the iLet for a growing portion of payors. Under this model, patients typically make a significant upfront payment and are eligible for device replacement only after the standard four-year warranty period. While this structure ensures predictable reimbursement for payors, it can create financial and timing barriers that limit adoption of new and more effective technologies.

To expand access beyond the DME coverage, we are working with commercial and government payors to increase availability of the iLet through the pharmacy benefit plan (PBP) channel, which follows a “pay-as-you-go” model. This structure removes large upfront costs and allows more rapid adoption of new innovations, while providing payors the opportunity to capture longer-term healthcare savings through improved disease management and reduced complications. We believe this dual-channel approach improves accessibility for PWD, enhances flexibility for healthcare providers, and increases overall market penetration of the iLet, while positioning us to generate more consistent recurring revenue over the expected life cycle of the device.

8

Third-Party Reimbursement

In the United States, customer orders for the iLet are typically fulfilled by billing third-party payors on behalf of customers or through our network of distributors that bill payors directly. Historically, most insulin pumps, including the iLet, are eligible for insurance reimbursement for replacement approximately once every four years, though certain health plans may extend this period or impose additional restrictions. We have entered into contracts with national and regional third-party payors to establish reimbursement for the iLet and related supplies, and we continue to expand the number of payors that provide direct coverage under both the DME and PBP channels. If we are not contracted with a prospective customer’s payor, and in-network status cannot otherwise be obtained, we seek to fulfill orders through alternate distribution partners where possible. A payor’s decision to cover our product does not guarantee an adequate reimbursement rate, and coverage policies or reimbursement levels may change over time. Even if favorable coverage and reimbursement are achieved, future changes in payor policies or healthcare reform measures could adversely affect reimbursement terms or patient access.

Product Development Pipeline and Future Initiatives

We are committed to advancing innovation in automated insulin delivery and expanding the capabilities of the iLet platform to reach more people living with insulin-requiring diabetes. Our research and development initiatives are focused on simplifying diabetes management, improving outcomes, and expanding access through new form factors, additional therapeutic configurations, and future indication expansions.

Patch Pump (Mint)

We are developing Mint, a next-generation, tubeless insulin patch pump designed to provide the same adaptive closed-loop automation of the iLet in a discreet, wearable format. The device features a two-part design, including a reusable controller that houses the electronics and adaptive algorithm paired with a disposable cartridge. The system will be waterproof, smartphone-controlled through iOS and Android applications, and designed for efficient large-scale manufacturing with reduced environmental waste. We expect Mint to expand the addressable insulin delivery market, particularly among people seeking a tubeless form factor reimbursed through the pharmacy channel. Subject to receiving FDA 510(k) clearance as an alternate controller enabled (ACE) pump, we are targeting commercial launch by the end of 2027.

Bihormonal iLet

We are developing a first-of-its-kind bihormonal system of the iLet designed to autonomously deliver both insulin and glucagon using adaptive closed-loop algorithms that determine 100% of all dosing decisions. This system aims to transform diabetes care by actively preventing and correcting both high and low blood glucose levels, potentially eliminating the fear of hypoglycemia that affects many people with T1D. Through an exclusive collaboration and license agreement with Xeris Pharmaceuticals (Xeris), we are developing a pump-compatible, shelf-stable glucagon formulation utilizing Xeris’ XeriSol technology. We plan to initiate at least one pre-pivotal and one pivotal clinical trial prior to submitting the device and algorithm for FDA 510(k) clearance and submitting a new drug application (NDA) for the glucagon formulation. If approved, the bihormonal iLet could represent a major advancement in automated glycemic control, reduce challenges associated with diabetes management and expand our reach across a broader diabetes population.

As part of our development plans, in September 2025, we completed a clinical trial in Canada assessing the pharmacokinetics (PK) and pharmacodynamics (PD) of our glucagon product candidate (also referred to as the glucagon asset, and referred to herein as the PK-PD Trial). The completion of the PK-PD Trial enables us to bridge our previous bihormonal clinical data, which tested prior formulations of glucagon in three pre-pivotal inpatient and six pre-pivotal outpatient clinical trials, to our glucagon product candidate. We believe that the results from the PK-PD Trial are supportive of the continued development of our glucagon product candidate for use in our bihormonal system of the iLet.

9

In the fourth quarter of 2025, we completed our first-in-human Phase 2a feasibility trial in New Zealand evaluating the integrated bihormonal system, including the glucagon formulation, pump, and dosing algorithms. This study represents an important step in the development of the complete bihormonal configuration and is part of our Phase 2 feasibility program. We observed no safety signals related to the glucagon formulation in this study. We expect to initiate an additional Phase 2a feasibility trial in the first half of 2026 to further evaluate the system as we advance development.

We intend to pursue the development of the iLet for expanded patient populations and indications, including people with T2D, which we believe represents a significant long-term opportunity.

Type 2 Diabetes

We intend to pursue expanded use of the iLet to treat people with insulin-dependent T2D, as we believe the size and composition of this population make it a compelling opportunity. We believe our planned expansion for the iLet’s use in T2D will require an additional 510(k) clearance. We expect we will need to conduct studies to determine the iLet’s applicability for T2D and in order to obtain the additional 510(k) clearance. Although we continue to analyze the timing related to this expansion, we do not currently have a specific timeline. While there are certain differences in how T2D is treated relative to T1D, these differences primarily relate to the amount and rate of insulin delivered. Among the T2D population, approximately 1.9 million require intensive insulin therapy, but fewer than 10% have adopted pump technology to date. This is based on our internal estimates factoring epidemiologic data from government and leading industry organizations such as the CDC as well as industry sales data from public filings and disclosures made by the leading device manufacturers (Medtronic, Tandem and Insulet) and aggregated by third-party data service providers. We believe these PWD, who span socioeconomic and educational levels, and their HCPs, 90% of whom are PCP, may find the iLet’s combination of simplicity and efficacy particularly appealing, if authorized for marketing for this use.

Competition

The medical device industry is intensely competitive, subject to rapid change, and highly sensitive to the introduction of new products, treatment techniques or technologies, and other market activities of industry participants. We primarily compete with a number of companies that manufacture and sell insulin pumps, such as Medtronic, Tandem, and Insulet. The iLet has certain characteristics that other insulin pumps manufactured by such competitors, as far as we are aware, do not currently have, such as the ability to be initialized with only the user’s body weight, being enabled by algorithms that determine 100% of the user’s insulin doses, no carb counting, an option for pay-as-you-go pharmacy reimbursement and prefilled cartridges. Outside of the insulin pump market, we face competition from a number of companies, medical researchers and pharmaceutical companies that offer or are pursuing competing delivery devices, technologies and procedures, such as prefilled insulin syringes, insulin pens and inhalable insulin products, as well as companies with approved therapeutics or in-development therapeutic candidates impacting diabetes.

Many of our competitors are either publicly-traded companies or divisions or subsidiaries of publicly-traded companies that have several competitive advantages over us, including greater market share and name recognition, greater financial and human resources for sales and marketing and product development, more well-established relationships with HCPs, customers and third-party payors, greater experience, additional lines of products with the ability to offer rebates or bundle products, and larger and more established distribution networks. In some instances, our competitors also offer products that include features that we do not currently offer. For example, Insulet offers a product with a patch form factor.

Mergers and acquisitions in the medical device industry may result in even greater resource concentration among a smaller number of competitors. Smaller or early-stage companies may also prove to be significant competitors, either alone or through collaborative arrangements with large and established companies.

Key competitive factors affecting our success are likely to be health efficacy, safety, ease of use (including complexity and disease management burden), price, reimbursement, user retention, and ability to continue to effectively innovate.

10

Manufacturing and Quality Assurance

We manufacture and assemble the iLet and related insulin cartridges at our facility in Irvine, California, which serves as our primary manufacturing and distribution center. Our facility is designed for scalability, enabling us to meet anticipated commercial demand while maintaining flexibility for future product iterations. Certain components and subassemblies are sourced from qualified third-party suppliers, and we maintain multi-sourcing strategies to help mitigate supply chain risk. We perform final assembly, software installation, functional testing, and quality control internally to ensure each product meets design specifications and performance standards. We believe that controlling our own manufacturing processes provides advantages in quality assurance, cost management, and the ability to rapidly implement design improvements.

We manufacture and assemble the iLet and related supplies using a quality management system designed to meet applicable FDA requirements for medical devices. We are subject to and maintain compliance with ISO manufacturing standards, including ISO 13485 certification, current good manufacturing practices (cGMP), and the relevant Quality Management System Regulation (QMSR) requirements. Our processes cover design controls, supplier oversight, production, verification and release testing, and post-market surveillance. We also utilize external suppliers for certain components and services and apply documented qualification and ongoing monitoring procedures for such suppliers. We are subject to periodic inspections and audits by regulatory authorities to assess compliance with applicable regulations.

Intellectual Property

Our success depends in substantial part on our ability to obtain, defend and enforce patents, maintain trade secrets and operate our business without infringing the proprietary rights of others, both in the United States and abroad. We rely on a combination of patents, trademarks, trade secrets, and confidentiality and invention assignment agreements to protect our intellectual property rights. We license from third parties certain patent rights and proprietary know-how that we believe to be necessary or useful to our business.

We also rely upon trade-secret protection for certain confidential and proprietary information and take active measures to control access to that information. There is also substantial proprietary know-how surrounding the iLet development and manufacturing processes that remains a trade secret, which we protect by maintaining and implementing appropriate policies and procedures for ensuring secrecy and confidentiality.

Our U.S. and foreign patents and patent applications generally relate to ACE insulin and bihormonal pumps, software and algorithms for modular blood glucose control systems, graphical user interfaces (GUIs) including animations and transitional GUI screens, and/or communication interfacing including disposables and wearables for connecting pumps to infusion sets. As of December 31, 2025, our owned and licensed patent estate contains approximately 67 issued U.S. patents, 20 pending U.S. nonprovisional patent applications, 107 issued foreign patents (including at least 9 issued European patents and their national validations), and 43 pending foreign patent applications. The 107 issued foreign patents include one or more issued patents in jurisdictions such as Australia, Canada, China, France, Germany, Great Britain, Hong Kong, Italy, Japan, Mexico and Spain. The 43 pending foreign patent applications include one or more pending applications in jurisdictions such as Australia, Canada, China, Europe, Israel, Japan, Mexico, and Saudi Arabia. Assuming payment of all appropriate maintenance, renewal, annuity or other governmental fees, as applicable, our owned or licensed issued U.S. patents expire between 2026 and 2042.

Depending on circumstances, we intend to file and prosecute patent applications for our technology in jurisdictions where we believe that patent protection is available and commercially important. Generally, for investigational devices that we believe are appropriate for patent protection, we will attempt to obtain patents in the United States, as well as key markets in Europe. However, depending on circumstances, we may not apply for patents in all or any of those jurisdictions, or we may pursue patent protection elsewhere. We plan to enforce our issued patents and our rights to proprietary information and technology as circumstances permit. We review third-party patents and patent applications in our fields of endeavor, both to shape our own patent strategy and to identify useful licensing opportunities.

Notwithstanding the foregoing, the patent positions of medical device companies, including our company, are uncertain and involve complex and evolving legal and factual questions. The coverage sought in a patent

11

application can be denied or significantly reduced either before or after the patent is issued. Consequently, there can be no assurance that any of our pending patent applications will result in an issued patent. There is also no assurance that any existing or future patent will provide significant protection or commercial advantage, or that any existing or future patent will not be circumvented by a more basic patent, thus requiring us to obtain a license to produce and sell the product. Generally, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date. In addition, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent the subject matter covered by each of our pending U.S. patent applications or that we were the first to file either U.S. or non-U.S. patent applications for such subject matter.

If a third party files a patent application relating to an invention claimed in our patent application, we may be required to participate in an interference or derivation proceeding declared by the U.S. Patent and Trademark Office to determine who is entitled to the patent rights. Such a proceeding could involve substantial uncertainties and cost, even if the eventual outcome is favorable to us. There can be no assurance that our patents, if issued, would be upheld as valid in court.

Third parties may claim that our products infringe their patents and other intellectual property rights. Some companies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage. If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product designs, license rights in order to continue manufacturing and selling our products or pay substantial damages. Third party infringement claims, regardless of their outcome, would not only consume our financial resources but also divert our management’s time and effort. Such claims could also cause our customers or potential customers to defer or limit their purchase or use of the affected products until resolution of the claim.

In addition to patents, we rely on trademarks, trade secrets, and know-how relating to our proprietary technology and programs, continuing innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position and protect our product brands. As of December 31, 2025, our trademark portfolio consists of six (6) registered trademarks and eleven (11) pending trademark applications. For example, our trademark portfolio includes: house marks (BETA BIONICS, stylized), product marks (iLet® bionic pancreas system) and tag-lines (DIABETES WITHOUT NUMBERS).

We rely on trade secret protection for certain unpatented aspects of other proprietary technology. There can be no assurance that others will not independently develop or otherwise acquire substantially equivalent proprietary information or techniques, that others will not gain access to our proprietary technology or disclose such technology, or that we can meaningfully protect our trade secrets. We have a policy of requiring key employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting relationship with us. Our confidentiality agreements also require our employees to assign to us all rights to any inventions made or conceived during their employment with us. We also require our consultants to assign to us any inventions made during the course of their engagement by us. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for us in the event of unauthorized use, transfer or disclosure of confidential information or inventions.

The laws of foreign countries generally do not protect our proprietary rights to the same extent as do the laws of the United States. In addition, we may experience more difficulty enforcing our proprietary rights in certain foreign jurisdictions. We work with subject matter experts internationally, and our licensing partners to best manage foreign intellectual property matters, with their advice and consent to assure that our business and proprietary data strategies are co-extensive and consistent.

These intellectual property statements are subject to a number of risks, uncertainties, factors and assumptions described under Part I. Item IA. “Risk Factors—Risks Related to Our Intellectual Property.”

License and Collaboration Agreements

Device License Agreement with Boston University

12

In December 2015, we and Boston University (BU), entered into a device license agreement, which was amended in December 2017, September 2020, February 2022 and November 2024 (collectively, the Device License Agreement). Under the Device License Agreement, we received a royalty-bearing license (with the right to sublicense) under certain of BU’s patent rights related to a system and individual components thereof for delivering multiple medicaments to a patient without medicament mis-channeling to make, use, sell, and import products, and practice processes covered by the licensed patent rights (collectively, the Licensed Products and Licensed Processes). The rights granted to us by BU under the Device License Agreement are exclusive, subject to certain reserved rights, including BU’s right to practice and/or use the licensed patent rights for non-profit purposes such as sponsored research and collaborations, government rights and other third party rights. Furthermore, at BU’s request, we will be required to negotiate a sublicense in good faith with a third party if we are unable or unwilling to use the patent rights licensed to us under the Device License Agreement to address the unmet needs of neglected people or geographic areas that such party is willing and able to address. The exclusivity may be terminated by BU if we fail to meet a specified percentage of the applicable minimum royalty amount for a given calendar year. The minimum royalty amount is a non-material amount.

Pursuant to the Device License Agreement, we agreed to use commercially reasonable efforts to market Licensed Products in the United States and elsewhere in the world. Additionally, we are obligated to meet certain diligence milestones under the Device License Agreement. We have satisfied all the milestones set forth under the Device License Agreement required to be achieved to date, with regulatory milestones relating to our marketing applications to the FDA remaining to be achieved in connection with our development of the Licensed Products and Licensed Processes.

In consideration for the licensed patent rights and other rights granted to us under the Device License Agreement, we issued 1,160 shares of our Class B common stock to BU, representing a specified ownership percentage on a fully diluted basis at the time of entering into the Device License Agreement, subject to anti-dilution adjustments, which have been satisfied and extinguished by the issuance of additional shares of Class B common stock. We are also required to pay (i) quarterly royalties of a mid-single-digit percentage based on net sales of all Licensed Products and Licensed Processes by us or our affiliates, (ii) quarterly royalties of a low double-digit percentage based on net sales by our sublicensees (in each case (i) and (ii), which royalties are creditable against the minimum royalty amount) and (iii) agreed to make quarterly lump sum payments of a low-double-digit percentage based on certain non-royalty sublicensing revenue received by us from our sublicensees. The foregoing payments are subject to customary increase under certain specified circumstances. We also granted BU board observer rights and agreed to bear the patent costs, including prior patent costs incurred by BU in respect of the licensed patent rights. Additionally, if we assign the Device License Agreement in connection with the sale of all or substantially all of our assets relating to the licensed patent rights, we will be required to pay BU an assignment fee to be agreed on with BU at the time of such assignment.

The Device License Agreement remains in effect for the Licensed Products and Licensed Processes on a country-by-country basis until the expiration, invalidation or termination of the last to expire, terminate, or invalidated licensed patent right, unless earlier terminated by BU. BU may terminate the Device License Agreement (i) for our uncured material breach, including our failure to meet any diligence milestone by the specified achievement date or our failure to make a payment due pursuant to the Device License Agreement, (ii) our breach of certain representations and warranties, (iii) upon our challenge of the validity of the licensed patent rights, or (iv) upon our bankruptcy or insolvency. BU may also terminate the agreement if it determines we are not diligently pursuing commercialization of the Licensed Products. We may terminate the Device License Agreement upon advance written notice to BU.

Control Algorithm License Agreement with Boston University

In December 2015, we and BU entered into a control algorithm license agreement, which was amended in December 2017, September 2020, and February 2022 (collectively, the Control Algorithm Agreement). Under the Control Algorithm Agreement, we received a royalty-bearing license (with the right to sublicense) to (i) make, use, sell, and import products, and practice processes, covered by certain of BU’s patent rights related to automated control systems for treatment of T1D and similar conditions, involving monitoring and/or delivering

13

insulin, glucagon, and glucose (collectively, the Automated Control System Technology); and (ii) use, reproduce, prepare derivative works, perform, display, and distribute all or any part of the software, source code, object code and/or related documentation, covered by certain copyright rights, and related to (a) the Automated Control System Technology and (b) the iLet control algorithm. The licenses granted by BU to us pursuant to the Control Algorithm Agreement are exclusive, subject to certain reserved rights including BU, BU’s third party licensors’ and other not-for profit institutions’ rights to practice and/or use the patent rights for non-profit purposes such as sponsored research and collaborations and to permit other academic, government and not-for-profit institutions to make use of the same for educational purposes. Furthermore, at BU’s request, we will be required to negotiate a sublicense in good faith with a third party if we are unable or unwilling to use the technology licensed to us under the Control Algorithm Agreement to address the unmet needs of neglected people or geographic areas that such third party is willing to address. The exclusivity may be terminated by BU if we fail to meet a specified percentage of the applicable minimum royalty amount for a given calendar year. The minimum royalty amount is a non-material amount. Additionally, under the Control Algorithm Agreement, we granted a perpetual, non-exclusive, royalty-free license back to BU with respect to the copyrights and patents covering any derivative works of the licensed software for BU’s educational and academic purposes and to practice their reserved rights.

Pursuant to the Control Algorithm Agreement, we agreed to use commercially reasonable efforts to market Licensed Products in the United States and elsewhere in the world.

In consideration for the licensed patent rights and other rights granted to us under the Control Algorithm Agreement, we issued 1,140 shares of our Class B common stock to BU, representing a specified ownership percentage on a fully diluted basis at the time of entering into the license agreement, subject to anti-dilution adjustments, which have been satisfied and extinguished by the issuance of additional shares of Class B common stock to BU. We are also required to pay BU (i) quarterly royalties of a mid-single-digit percentage based on net sales by us and our affiliates, (ii) royalties of a low double-digit percentage of net sales by sublicensees (in each case (i) and (ii), which royalties are creditable against the minimum royalty amount) and (iii) agreed to make quarterly lump sum payments of a low double-digit percentage of the non-royalty sublicensing revenue received by us from our sublicensees. The foregoing payments are subject to customary increase under certain specified circumstances. We also granted BU board observer rights and agreed to bear the patent costs, including prior patent costs incurred by BU in respect of the licensed patent rights. Additionally, if we undergo a change of control (as defined in the Control Algorithm Agreement) we will owe BU a one-time change of control payment of $65,000. We will also be required to pay BU an assignment fee to be agreed on with BU at the time of such assignment if we assign the Control Algorithm License Agreement in connection with the sale of all or substantially all of our assets relating to the licensed patent rights and copyright.

The Control Algorithm Agreement remains in effect (i) with respect to the patent rights for the Licensed Products and Processes, on a country-by-country basis until the expiration, invalidation or termination of the last to expire, terminate, or invalidated patent right and (ii) with respect to the copyright for the software-based products and processes for thirty (30) years from the effective date of the Control Algorithm Agreement. BU may terminate the Control Algorithm Agreement (i) for our uncured material breach, including our failure to meet a milestone our failure to make a payment due to BU pursuant to the agreement, (ii) our breach of certain representations and warranties, (iii) upon our challenge of the validity of the patent rights, or (iv) upon our bankruptcy or insolvency. BU may also terminate the Control Algorithm Agreement if it determines we are not diligently pursuing commercialization of the Automated Control System. We may terminate the Control Algorithm Agreement for any reason upon advance written notice to BU.

Collaboration and License Agreement with Xeris Pharmaceuticals, Inc.

In May 2024, we and Xeris, entered into a collaboration and license agreement (Collaboration and License Agreement). Under the Collaboration and License Agreement, we received a worldwide, exclusive, royalty-bearing, sublicensable license under certain patent rights and know-how related to Xeris’ proprietary non-aqueous formulation technology and technology developed during the collaboration (Xeris Technology) to

14

develop and commercialize glucagon products that are reformulated using the Xeris Technology and developed by Xeris under a development plan under the Collaboration and License Agreement for use in a pump product or system for glycemic control (Glucagon Products) in the field of chronic glycemic control in diabetes mellitus, excluding single-dose, one-time use form for treatment of severe hypoglycemia and diagnostic uses (Field). We also received a worldwide, exclusive, sublicensable manufacturing license under the Xeris Technology to manufacture Glucagon Products in the Field following a future manufacturing transfer date to be agreed with Xeris and subject to a separate commercial supply agreement.

We and Xeris will conduct certain development activities for the Glucagon Products in accordance with the mutually agreed development plan. Xeris will be responsible for the cost of completing the activities under the development plan up to a certain development stage, and we will reimburse Xeris for any later-stage or additional work required under the development plan.

We and Xeris each agree not to directly or indirectly develop, commercialize or otherwise exploit any drug product comprising glucagon or a glucagon analogue, other than a Glucagon Product, for use with a pump system in the Field worldwide for the duration of the Collaboration and License Agreement, subject to certain specified exceptions.

Pursuant to the Collaboration and License Agreement, we agreed to use commercially reasonable efforts to develop and seek regulatory approval for a Glucagon Product in certain specified countries.

In consideration for the licenses and other rights granted to us under the Collaboration and License Agreement, we paid Xeris a one-time payment of $0.5 million for upfront fees and an additional $3.0 million upon our achievement of certain development milestone events. In addition, we are required to pay Xeris tiered royalties of low double-digit percentages based on net sales of Glucagon Products by us or our sublicensees, subject to certain customary reductions. Our obligation to pay Xeris royalties will commence, on a Glucagon Product-by-Glucagon Product and country-by-country basis, on the first commercial sale of such Glucagon Product in such country and expire on the later of (i) ten years after the first commercial sale of such Glucagon Product in such applicable country; (ii) expiration of the last valid claim of a specified patent right licensed by Xeris covering such Glucagon Product in such country; and (iii) expiration or termination or regulatory exclusivity for such Glucagon Product in the applicable country (Royalty Term).

The Collaboration and License Agreement will expire on a country-by-country and Glucagon Product-by-Glucagon Product basis upon the expiration of the Royalty Term with respect to such Glucagon Product in such country and will expire in its entirety upon the expiration of all Royalty Terms with respect to all Glucagon Products in all countries within the territory, and our licenses with respect to the Glucagon Products will automatically become fully paid-up, royalty-free, perpetual, and irrevocable. We may terminate the Collaboration and License Agreement in its entirety, or with respect to certain specified regions, on advance notice to Xeris for any or no reason. We or Xeris may terminate the Collaboration and License Agreement if the other party is in material breach of its obligations or if the other party becomes insolvent. Xeris may terminate the Collaboration and License Agreement if we commence any action or challenge regarding the scope, validity or enforceability of any of Xeris’ patent rights within the Xeris Technology licensed to us under the Collaboration and License Agreement.

Development and Commercial Agreements

Commercialization Agreement with DexCom, Inc.

In July 2023, we and DexCom, entered into a commercialization agreement (the Commercialization Agreement). Under the Commercialization Agreement, we and DexCom agreed to commercialize an AID system that is comprised of our system and DexCom’s G6 or G7 iCGM system (the Combined Platform), which we and DexCom developed under a separate development agreement executed in December 2016. We and DexCom will use commercially reasonable efforts to commercialize the Combined Platform in accordance with an agreed commercialization plan, in the territories specified in the commercialization plan. We and DexCom

15

will conduct certain development activities for the Combined Platform in accordance with an agreed development plan.

We granted DexCom a non-exclusive, limited license to use certain of our trademarks in connection with commercialization of the Combined Platform under the Commercialization Agreement. DexCom granted us (a) a non-exclusive, limited license to use the specifications and communication protocol integrating our system with DexCom’s G6 and G7 iCGM devices and (b) a non-exclusive, limited license to use certain of DexCom’s trademarks, in each case (a) and (b), in connection with the development and commercialization of the Combined System. On termination of the Commercialization Agreement, each party’s license will terminate, subject to any wind down period. We and DexCom also granted each other limited licenses to use certain data generated by the other’s devices in the Combined System.

Unless earlier terminated, the Commercialization Agreement remains in effect for three years from the date of First Commercial Launch of the Combined Platform, after which it renews for successive one-year periods. Either party may terminate the Commercialization Agreement on written notice to the other party prior to the expiration of the initial term or any renewal term. We or DexCom may also terminate the Commercialization Agreement (i) in the event of any infringement of a third party’s intellectual property rights by the terminating party’s system, and the terminating party is unable to modify its system to be non-infringing or upon certain events relating to intellectual property matters, (ii) for the other party’s uncured material breach, or (iii) if the other party becomes insolvent. DexCom may terminate the Commercialization Agreement in certain circumstances if we are acquired.

Development and Commercialization Agreement with Abbott Diabetes Care Inc.

In April 2024, we and Abbott, entered into a development and commercialization agreement (Development and Commercialization Agreement). Under the Development and Commercialization Agreement, we and Abbott agree to develop and commercialize an automated insulin delivery system comprised of our subcutaneous insulin infusion delivery system combined with Abbott’s CGM sensor (Libre-Beta System).

Under the Development and Commercialization Agreement, we and Abbott agreed to jointly prepare a development plan setting forth each party’s responsibilities in developing the Libre-Beta System in the United States. We are responsible for all development and clinical trials for the Libre-Beta System, and Abbott is responsible for all development for the continuous glucose monitoring system. We and Abbott agreed to jointly develop a regulatory plan for the Libre-Beta System, setting out the regulatory activities to be performed by each party. We and Abbott also agreed to jointly prepare a commercialization plan for the Libre-Beta System to launch the Libre-Beta System in the United States.

Abbott granted us a non-exclusive, limited license under Abbott’s existing background intellectual property and any intellectual property developed solely by Abbott under the Development and Commercialization Agreement for us to perform our obligations under the Development and Commercialization Agreement. Abbott also granted us a non-exclusive, limited license to use Abbott’s trademarks for the sole purposes of developing and marketing the Libre-Beta System.

We granted Abbott a non-exclusive, limited license under our existing background intellectual property and any intellectual property developed solely by us under the Development and Commercialization Agreement for Abbott to perform its obligations under the Development and Commercialization Agreement. We also granted Abbott a non-exclusive, limited license to use our trademarks for the sole purposes of developing the Libre-Beta System and marketing the continuous glucose monitoring system for use with the Libre-Beta System.

If the Development and Commercialization Agreement terminates prior to the first commercial sale of a Libre-Beta System, the foregoing licenses will terminate upon termination of the Development and Commercialization Agreement. If the Development and Commercialization Agreement terminates after the first

16

commercial sale of a Libre-Beta System, such licenses will continue for a defined period following such termination in order to provide continued access and support to users of the Libre-Beta System.

The Development and Commercialization Agreement remains in effect for a five-year term, after which it will renew for successive two-year periods. We or Abbott may terminate the Development and Commercialization Agreement on prior written notice to the other party at any time after a defined period following the first commercial sale of the Libre-Beta System in the United States. We or Abbott may also terminate the Development and Commercialization Agreement (i) for the other party’s material breach, (ii) upon the other party’s bankruptcy or insolvency, or (iii) if the other party is acquired by or merges with any one of certain named competitors. In addition, if the first commercial sale of the Libre-Beta System has not occurred by a specified date, then either party may terminate the Development and Commercialization Agreement on written notice to the other party.

Government Regulation and Product Approval

Our products and operations are subject to extensive regulation by the FDA, and other federal and state authorities in the United States, as well as comparable authorities and bodies in foreign jurisdictions. Our products are subject to regulation as drugs and medical devices in the United States under the federal Food, Drug, and Cosmetic Act (FDCA), as implemented and enforced by the FDA.

FDA Regulation of Medical Devices

The FDA and other U.S. and foreign governmental agencies regulate, among other things, with respect to medical devices to ensure medical devices distributed in the United States are safe and effective for their intended uses and otherwise meet the requirements of the FDCA:

•
product design, development and manufacturing;

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

•
product safety;

•
marketing, sales and distribution;

•
pre-market clearance or approval;

•
record keeping procedures;

•
advertising and promotion;

•
recalls and field safety corrective actions;

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

•
post-market approval studies; and

•
product import and export.

FDA Pre-Market Clearance and Approval Requirements

Each medical device we seek to commercially distribute in the United States must first receive 510(k) clearance, de novo classification, or approval of a pre-market approval (PMA) application from the FDA, unless specifically exempted. Both the 510(k) clearance and PMA processes can be resource intensive, expensive and lengthy, and require payment of significant user fees, unless an exemption is available.

17

The FDA classifies medical devices into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness. Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the QMSR, facility registration and product listing, reporting of adverse medical events and certain device malfunctions (known as medical device reporting (MDR), and truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and additional conditions set forth in FDA guidance documents. While most Class I devices are exempt from the 510(k) pre-market notification requirement, manufacturers of most Class II devices are required to submit to the FDA a pre-market notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) pre-market notification is generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices are placed in Class III, requiring approval of a PMA application. Some pre-amendment devices are unclassified but are subject to the FDA’s pre-market notification and clearance process in order to be commercially distributed. Novel devices that have not yet been classified are automatically classified as Class III and are subject to the PMA approval process, except that such novel devices that are low to moderate risk may obtain marketing authorization through the de novo classification process rather than the PMA process. Our currently commercialized iLet is comprised of hardware and software devices, which are classified as Class II.

The FDA has established three different classification regulations for components of glycemic control systems. These regulations establish the classification (and thus the regulatory path to market), as well as the requirements, such as special controls, to which such components must adhere. These classification regulations govern: (1) the ACE insulin infusion pump; (2) the interoperable automated glycemic controller (iAGC); and (3) the iCGM, each of which is determined by the FDA to be Class II.

The FDA defines an ACE insulin pump as a device intended for the infusion of insulin into a patient. The ACE pump may include basal and bolus drug delivery at set or variable rates. ACE pumps are designed to reliably and securely communicate with external devices, such as automated insulin dosing systems, to allow drug delivery commands to be received, executed, and confirmed. ACE insulin pumps are intended to be used both alone and in conjunction with digitally connected medical devices for the purpose of insulin delivery.

The FDA defines an iAGC as a device intended to automatically calculate drug doses based on inputs such as glucose and other relevant physiological parameters, and to command the delivery of such drug doses from a connected infusion pump. iAGCs are designed to reliably and securely communicate with digitally connected devices to allow drug delivery commands to be sent, received, executed, and confirmed. iAGCs are intended to be used in conjunction with digitally connected devices for the purpose of maintaining glycemic control.

The FDA defines an iCGM as a system intended to automatically measure glucose in bodily fluids continuously or frequently for a specified period of time. iCGM systems are designed to reliably and securely transmit glucose measurement data to digitally connected devices, including automated insulin dosing systems, and are intended to be used alone or in conjunction with these digitally connected medical devices for the purpose of managing a disease or condition related to glycemic control.

The iLet pumping platform is cleared by FDA as an ACE insulin pump. Our proprietary automated dosing algorithms embedded within the iLet are cleared by FDA as an iAGC. Our partner’s iCGM makes up the third Class II component of our automated glycemic control system.

18

510(k) Clearance Process

To obtain 510(k) clearance, a manufacturer must submit a pre-market notification to the FDA demonstrating that the proposed device is substantially equivalent to a previously-cleared 510(k) device, a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of PMA applications, or is a device that has been reclassified from Class III to either Class II or I. In rare cases, Class III devices may be cleared through the 510(k) process. The FDA’s 510(k) clearance process usually takes from three to 12 months from the date the application is submitted and filed with the FDA, but may take significantly longer, particularly for a novel type of product. Although many 510(k) pre-market notifications are cleared without clinical data, in some cases, the FDA requires significant clinical data to support substantial equivalence. In reviewing a pre-market notification submission, the FDA may request additional information, including clinical data, which may significantly prolong the review process.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the de novo classification process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. Once a de novo application is reviewed and approved, it results in the device having a Class II status and future devices from the company or a competitor may use the company’s de novo-classified device as a 510(k) predicate.

After a device receives 510(k) clearance, any subsequent modification of the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or could require a PMA. The FDA requires each manufacturer to make this determination initially, but the FDA may review any such decision and may disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA is obtained. Under these circumstances, the FDA may also subject a manufacturer to significant regulatory fines or other penalties.

Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult and costly for manufacturers to utilize the 510(k) clearance process for their products.

De Novo Classification Process

Devices of a new type that FDA has not previously classified based on risk are automatically classified into Class III, regardless of the level of risk they pose. However, the FDA may authorize such novel devices that are low- to moderate-risk through the de novo classification process. A medical device may be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent or a manufacturer may request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. The FDA is required to classify the device within 120 days following receipt of the de novo application, although in practice, the FDA’s review may take significantly longer.

When FDA grants a request for de novo classification, the device is granted marketing authorization and can serve as a predicate for future devices of that type, through a 510(k) premarket notification.

19

Pre-market Approval Process

A PMA application must be submitted and approved prior to marketing if the medical device is in Class III (although the FDA has the discretion to continue to allow certain pre-amendment Class III devices to use the 510(k) process) or cannot be cleared through the 510(k) process. A PMA application must be supported by, among other things, extensive technical, preclinical, and clinical trials, as well as manufacturing and labeling data to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device.

After a PMA application is submitted and found to be sufficiently complete, the FDA begins an in-depth review of the submitted information. During this review period, the FDA may request additional information or clarification of information already provided. In addition, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and recommend to the FDA whether, or upon what conditions, the device should be approved. Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’s overall decision-making process. Further, the FDA generally will conduct a pre-approval inspection of the manufacturing facility(ies) to evaluate compliance with QMSR, which requires manufacturers to implement and follow design, testing, control, documentation and other quality assurance procedures.

FDA review of a PMA application typically takes one to three years but could take longer. The review time is often significantly extended as a result of the FDA asking for additional information or clarification of information already provided.

If an FDA evaluation of a PMA application is favorable, the FDA may issue either an approval letter, or approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of a device, subject to the conditions of approval and the limitations established in the approval letter. If the FDA’s evaluation of a PMA application or manufacturing facility(ies) is not favorable, the FDA will deny approval of the PMA or issue a not-approvable letter. The FDA also may determine that additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA. The PMA process can be expensive, uncertain and lengthy and a number of devices for which FDA approval has been sought by other companies have never been approved by the FDA for marketing.

New PMA applications or PMA supplements may be required for modifications to the manufacturing process, indications, labeling, device specifications, materials or design of a device that has been approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel. The FDA uses the same procedures and actions in reviewing PMA supplements as it does in reviewing original PMAs.

Exempt Devices

If a manufacturer’s device falls into a generic category of Class I or Class II devices that FDA has exempted by regulation, a premarket notification is not required before marketing the device in the United States. Manufacturers of such devices are required to register their establishments and list their devices. Some 510(k)-exempt devices are also exempt from QMSR requirements, except for the QMSR’s complaint handling and recordkeeping requirements.

20

Regulation of Combination Products in the United States

Certain products may be comprised of components, such as drug components and device components, that would normally be regulated under different types of regulatory authorities, and frequently by different centers at the FDA. These products are known as combination products. Specifically, under regulations issued by the FDA, a combination product may be:

•
a product comprised of two or more regulated components that are physically, chemically, or otherwise combined or mixed and produced as a single entity;

•
two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, or biological and drug products;

•
a drug, or device, or biological product packaged separately that according to its investigational plan or proposed labeling is intended for use only with an approved individually specified drug, or device, or biological product where both are required to achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose; or

•
any investigational drug, or device, or biological product packaged separately that according to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required to achieve the intended use, indication, or effect.

Under the FDCA and its implementing regulations, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product. The designation of a lead center generally eliminates the need to receive approvals from more than one FDA component for combination products, although it does not preclude consultations by the lead center with other components of FDA. The determination of which center will be the lead center is based on the “primary mode of action” of the combination product. Thus, if the primary mode of action of a drug-device combination product is attributable to the device product, the FDA center responsible for premarket review of the device product would have primary jurisdiction for the combination product. The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to the regulatory review process. That office serves as a focal point for combination product issues for agency reviewers and industry. It is also responsible for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.

A combination product with a device primary mode of action generally would be reviewed and cleared or approved pursuant to the device review processes under the FDCA. In reviewing the PMA, 510(k), or De Novo request for such a product, however, FDA reviewers in the device center could consult with their counterparts in the drug center to ensure that the drug component of the combination product met applicable requirements regarding safety and effectiveness. In addition, under FDA regulations, combination products are subject to cGMP requirements applicable to both drugs and devices, including the QMSR applicable to medical devices.

21

Clinical Trials

Clinical trials are almost always required to support a PMA or de novo classification and are sometimes required to support a 510(k) submission. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (IDE) regulations, which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board (IRB) for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may impose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, the sponsor, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Although the QMSR does not fully apply to investigational devices, the requirement for controls on design and development does apply. The sponsor also must manufacture the investigational device in conformity with the quality controls described in the IDE application and any conditions of IDE approval that FDA may impose with respect to manufacturing.

Investigational devices may only be distributed for use in an investigation and must bear a label with the statement: “CAUTION—Investigational device. Limited by Federal law to investigational use.”

Sponsors of certain clinical trials of medical devices are required to register with clinicaltrials.gov, a public database of clinical trial information, and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is made public as part of the registration. Sponsors are also obligated to disclose the results of these trials after completion. Disclosure of the results of these trials can be delayed until the product being studied has been approved or cleared. Competitors may use this publicly available information to gain knowledge regarding the design and progress of our development programs.

22

Expedited Development and Review Programs

The Breakthrough Devices Program, is a voluntary program offered to manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The goal of the program is to provide patients and health care providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the statutory standards for PMA approval, 510(k) clearance and de novo classification.

The program is available to medical devices that meet certain eligibility criteria, including that the device provides more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions, and that the device meets one of the following criteria: (i) the device represents a breakthrough technology, (ii) no approved or cleared alternatives exist, (iii) the device offers significant advantages over existing approved or cleared alternatives, or (iv) the availability of the device is in the best interest of patients.

Breakthrough Device designation provides certain benefits to device developers, including more interactive and timely communications with FDA staff, use of post-market data collection, when scientifically appropriate, to facilitate expedited and efficient development and review of the device, opportunities for efficient and flexible clinical study design, and prioritized review of premarket submissions.

Post-Market Regulation of Medical Devices

After a medical device is placed on the market, numerous FDA regulatory requirements apply, including, but not limited to the following:

•
the QMSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process;

•
establishment registration, which requires establishments involved in the production and distribution of medical devices, intended for commercial distribution in the United States, to register with the FDA;

•
medical device listing, which requires manufacturers to list the devices they have in commercial distribution with the FDA;

•
clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use;

•
medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

•
correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

•
complying with federal law and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database;

•
the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations;

•
labeling regulations, which prohibit “misbranded” devices from entering the market, as well as prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and

•
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

23

The FDA has broad post-market and regulatory enforcement powers. Medical device manufacturers are subject to unannounced inspections by the FDA and other state, local and foreign regulatory authorities to assess compliance with the QMSR and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers.

Failure to comply with applicable regulatory requirements may result in enforcement or other adverse action by the FDA, which may include one or more of the following sanctions:

•
untitled letters or warning letters;

•
customer notifications for repair, replacement or refunds;

•
fines, injunctions, consent decrees and civil penalties;

•
mandatory recall or seizure;

•
administrative detention or bans;

•
operating restrictions, partial suspension or total shutdown of production;

•
refusing requests for or denying 510(k) clearance or PMA of new product versions;

•
revocation of 510(k) clearance or PMAs previously granted;

•
reclassification of a marketed device; and

•
criminal prosecution and penalties.

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission depending on the type of device and by state regulatory and enforcement authorities. Promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes.

Furthermore, under the federal U.S. Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In addition, we are required to meet regulatory requirements in countries outside the United States, which can change rapidly with relatively short notice.

FDA Regulation of Drug Products

In the U.S., pharmaceutical products are subject to extensive regulation by the FDA. The FDCA and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending NDAs warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Pharmaceutical product development for a new product or certain changes to an approved product in the U.S. typically involves nonclinical laboratory and animal tests, the submission to the FDA of an investigational new drug application (IND), which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically take many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not issued a clinical hold within this 30-day period, the clinical trial may begin. Clinical trials involve the administration of the investigational drug to healthy volunteers or patients

24

under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with Good Clinical Practice (GCP), an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; and (iii) under protocols detailing the objectives of the trial and the criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. Imposition of a clinical hold may be full or partial. The study protocol and informed consent information for patients in clinical trials must also be submitted to an IRB for approval. The IRB will also monitor the clinical trial until completed. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into patients, the product is tested to assess safety, dosage tolerance, metabolism, pharmacokinetics, pharmacological actions, side effects associated with drug exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the drug. In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by confirmatory evidence.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing and distribution of the product may begin in the U.S. The NDA must include the results of all nonclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee unless a waiver applies. Under an approved NDA, the applicant is also subject to an annual program fee. These fees typically increase annually. The FDA has 60 days from its receipt of an NDA to determine whether the application will be filed based on the FDA’s determination that it is sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of NDAs. Most applications are classified as Standard Review products that are reviewed within ten months of the date the FDA files the NDA; most applications classified as Priority Review are reviewed within six months of the date the FDA files the NDA. An NDA can be classified for Priority Review when the FDA determines the drug has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information or information intended to clarify information already provided in the NDA submission. Most innovative drug products (other than biological products) obtain FDA marketing approval pursuant to an NDA submitted under Section 505(b)(1) of the FDCA, commonly referred to as a traditional or “full NDA.” In 1984, with passage of the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, that established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs based on an innovator or “reference” product, Congress also enacted Section 505(b)(2) of the FDCA, which provides a hybrid pathway combining features of

25

a traditional NDA and a generic drug application. Section 505(b)(2) enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy data for an existing approved product, or published literature, in support of its application. Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products that would require new clinical data to demonstrate safety or effectiveness. Section 505(b)(2) permits the filing of an NDA in which the applicant relies, at least in part, on information from studies made to show whether a drug is safe or effective that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. A Section 505(b)(2) applicant may eliminate or reduce the need to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously approved product is scientifically appropriate. The FDA may also require companies to perform additional studies or measurements, including nonclinical and clinical studies, to support the change from the approved product. The FDA may then approve the new product for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication for which the Section 505(b)(2) NDA applicant has submitted data.

Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with cGMP is satisfactory and the NDA contains data that provide evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the NDA submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a Risk Evaluation and Mitigation Strategy (REMS) to help ensure that the benefits of the drug outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (ETASU). An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.

Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved NDA, including changes in indications, product labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or supplement to an approved NDA, before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing original NDAs.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including investigation by federal and state authorities.

Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and

26

surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a drug’s manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Regulatory Exclusivity and Approval of Follow-on Products

Hatch-Waxman Exclusivity

In addition to enacting Section 505(b)(2) of the FDCA as part of the Hatch-Waxman Amendments to the FDCA, Congress also established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application (ANDA) to the agency. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include preclinical and clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a generic manufacturer must rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug (RLD).

In order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to an RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” Unlike the 505(b)(2) NDA pathway that permits a follow-on applicant to conduct and submit data from additional clinical trials or nonclinical studies in order to support the proposed change(s) to the reference product, the ANDA regulatory pathway does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data.

Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.

As part of the NDA review and approval process, applicants are required to list with the FDA each patent that has claims that cover the applicant’s product or method of therapeutic use. Upon approval of a new drug, each of the patents listed in the application for the drug is then published in the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential follow-on competitors in support of approval of an ANDA or 505(b)(2) NDA.

27

When an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any patents listed for the reference product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. Moreover, to the extent that the Section 505(b)(2) NDA applicant is relying on studies conducted for an already approved product, the applicant also is required to certify to the FDA concerning any patents listed for the NDA-approved product in the Orange Book to the same extent that an ANDA applicant would.

If the follow-on applicant does not challenge the innovator’s listed patents, the FDA will not approve the ANDA or 505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant.

An ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivities listed in the Orange Book for the referenced product have expired. The Hatch-Waxman Amendments to the FDCA provided a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity (NCE). For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA or 505(b)(2) NDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval.

The FDCA also provides for a period of three years of data exclusivity if an NDA or NDA supplement includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as new indications, dosage forms, route of administration or combination of ingredients. Three-year exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutory requirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product; rather, this three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving follow-on applications for drugs containing the original active ingredient.

Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed under Section 505(b)(1) of the FDCA; however, an applicant submitting a traditional NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Patent Term Extension

A patent claiming a prescription drug for which FDA approval is granted may be eligible for a limited patent term extension under the FDCA, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The restoration period granted on a patent covering a new

28

FDA-regulated medical product is typically one-half the time between the date a clinical investigation on human beings is begun and the submission date of an application for premarket approval of the product, plus the time between the submission date of an application for approval of the product and the ultimate approval date. However, the restoration period can be reduced for any time the FDA determines that the applicant did not diligently pursue approval. In addition, patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, only those claims covering the approved product, a method for using it, or a method for manufacturing it may be extended, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the marketing approvals. The United States Patent and Trademark Office (USPTO) reviews and approves the application for any patent term extension or restoration in consultation with the FDA. However, the USPTO may not grant an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than requested.

Foreign Government Regulation

The regulatory review processes for medical devices and drugs varies from country to country, and many countries also impose product standards, packaging requirements, environmental requirements, labeling requirements and import restrictions on devices. Each country has its own tariff regulations, duties, and tax requirements. Failure to comply with applicable foreign regulatory requirements may subject a company to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution or other consequences.

Other Healthcare Laws

Our current and future business activities are subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we conduct our business. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims and healthcare professional payment transparency laws and regulations.

The federal Anti-Kickback Statute (AKS) prohibits, among other things, any person or entity from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce either the referral of an individual, for an item or service or the purchasing, leasing, ordering, or arranging for or recommending the purchase, lease or order of any good, facility, item or service, for which payment may be made, in whole or in part, under federal healthcare programs such as the Medicare and Medicaid programs. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the AKS has been violated. In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation.

Additionally, the civil False Claims Act (FCA) prohibits, among other things, knowingly presenting or causing the presentation of a false or fraudulent claim for payment to, or approval by, the U.S. government. In addition to actions initiated by the government itself, the statute authorizes actions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud. Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the

29

action. If the government intervenes and is ultimately successful in obtaining redress in the matter, or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of the recovery. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of life sciences companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil FCA. The government has obtained multi-million and multi-billion dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.

The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The majority of states also have analogous laws which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, including commercial insurers.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the AKS, a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their respective implementing regulations, which impose, among other things, requirements on certain covered HCPs, health plans, and healthcare clearinghouses and their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information as well as their covered subcontractors, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), and its implementing regulations, also imposed annual reporting requirements on manufacturers of certain devices, drugs and biologics for payments available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals; as well as ownership and investment interests held by physicians and their immediate family members.

Finally, there are analogous state and foreign laws and regulations, such as state and foreign laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other HCPs, marketing expenditures or product pricing; state and local laws that require the registration of medical device sales representatives; state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

30

The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may violate one or more of the requirements. If our future operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to significant penalties, including, without limitation, administrative civil and criminal penalties, damages, fines, imprisonment, the curtailment or restructuring of our operations, additional reporting and oversight obligations, exclusion from participation in federal and state healthcare programs and imprisonment.

United States Health Reform

The United States and some foreign jurisdictions have enacted or are considering a number of health reform measures to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access.

The implementation of the ACA in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly. There have been executive, judicial and congressional challenges, and a number of amendments that have impacted certain aspects of the ACA. For example, on August 16, 2022, the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025. Congress is considering proposed legislation intended to further reduce healthcare costs with alternatives to replace the expiring ACA subsidies. It is possible that the ACA and the IRA will be subject to additional challenges and health reform measured by the second Trump administration in the future.

We believe that there will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payors to reduce costs while expanding individual healthcare benefits, particularly in light of the change of administration. For example, the current Trump administration is pursuing policies to reduce regulations and expenditures across government including at the Department of Health and Human Services (HHS), the FDA, the Centers for Medicare & Medicaid Services (CMS), and related agencies. These actions include, for example, (1) directives to reduce agency workforce and cut programs; (2) eliminating the Biden administration’s executive order that directed HHS to establish an AI task force and develop a strategic plan; and (3) directing certain federal agencies to enforce existing law regarding hospital and price plan price transparency by standardizing prices across hospitals and health plans. It is possible that certain of these changes could impose additional limitations on the rates we will be able to charge for our current and future products or the amounts of reimbursement available for our current and future products from governmental agencies or third-party payors. Current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition.

Coverage and Reimbursement

In the United States and markets in other countries, patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors are critical to new device acceptance.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and devices they will cover and the amount of reimbursement. Coverage may be more limited than the purposes for which the drug or device is approved by the FDA or comparable foreign regulatory authorities. In the United States, CMS, an agency within HHS, determines whether and to what extent a new drug or device will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. However, no uniform policy of coverage and reimbursement for products exists

31

among third-party payors. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

•
a covered benefit under its health plan;

•
safe, effective and medically necessary;

•
appropriate for the specific patient;

•
cost-effective; and

•
neither experimental nor investigational.

As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for the iLet, in either configuration for T1D or other indications, the resulting reimbursement payment rates might not be adequate for us to maintain pricing sufficient to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations. It is also possible that CMS and other third-party payors may continue to review and modify the current coverage and reimbursement of diabetes-related products in connection with anticipated changes to the regulatory approval process for insulin pumps and related products, software applications and services. Patients are unlikely to use our devices, once approved, unless coverage is provided and reimbursement is adequate to cover a significant portion of their cost. Because the iLet may have a higher cost of goods than conventional therapies, and may require long-term follow up evaluations, coverage and reimbursement rates may be inadequate for us to achieve profitability. Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products. Further, it is possible that some third-party payors will not offer any coverage for iLet or our future products. For instance, it is possible that third-party payors may adopt policies in the future that designate one or more of our competitors as their preferred, in-network provider of insulin pumps and that such policies would discourage or prohibit the payors’ members from purchasing our products, which would adversely impact our ability to sell the iLet.

We are pursuing a multi-channel managed care strategy through both traditional DME and PBP channels. If covered, the iLet is typically reimbursed through traditional medical benefit channels. As a medical device company, reimbursement from government and/or commercial third-party healthcare payors, including Medicare and Medicaid, is an important element of our success. Our product is eligible for Medicare coverage as DME under Medicare Part B. Coverage criteria for DME is determined by CMS under national coverage determinations as well as by local Medicare Administrative Contractors under local coverage determinations. Therefore, Medicare reimbursement for the iLet is subject to various coverage conditions. We are also offering the iLet through the PBP channel. However, the commercial opportunity in the PBP channel may be limited unless a substantial portion of the sales price for the iLet 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 iLet under the Medicare Part D prescription drug program, which requires negotiating with third-party payors in order to provide iLet through the PBP channel in the United States. Securing and retaining adequate coverage or reimbursement for the iLet and our future products by third-party payors, and expedient processing approvals by those payors, is necessary for sales and the health of our business, financial condition and operating results.

The BIOSECURE Act

The United States recently passed legislation, namely the BIOSECURE Act (BIOSECURE Act), to prohibit U.S. federal executive agencies from procuring or obtaining any biotechnology equipment or service

32

produced or provided by a “biotechnology company of concern” or entering into or renewing a contract, loan, or grant with an entity that uses such biotechnology equipment or equipment. Specifically, on October 9, 2025, the U.S. Senate passed a revised version of the BIOSECURE Act as an amendment to the National Defense Authorization Act (NDAA) for Fiscal Year 2026. The final version of the NDAA containing this legislative language was passed by the Senate and House of Representatives and signed into law by President Trump on December 18, 2025. The BIOSECURE Act prohibits the U.S. government from procuring or obtaining biotechnology equipment or services produced or provided by a “biotechnology company of concern” (BCC); entering into, extending, or renewing government contracts with an entity that directly or indirectly uses biotechnology equipment or services from a BCC in performance of that federal contract; and/or issuing grants or loans to purchase, obtain, or use biotechnology equipment or services produced by a BCC. The BIOSECURE Act also prohibits U.S. government loan and grant recipients from using federal loan or grant money to enter into contracts with entities that use equipment from BCCs in the performance of any federal prime contract or subcontract. Companies designated as a BCC include those that are identified on the U.S. Department of Defense’s annual List of Chinese Military Companies, also known as the 1260H List, and the U.S. government also has the ability to designate entities as BCCs through a separate designation process. Given the BIOSECURE Act, we may be restricted in our ability to work with certain Chinese biotechnology companies to the extent we would contract with, or otherwise receive funding from, the U.S. government.

Data Privacy and Security

In the ordinary course of our business, we may process personal or sensitive data. Accordingly, we are or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy, security, and protection. Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act (TCPA), Children’s Online Privacy Protection Act (COPPA), the Controlling the Assault of Non‑Solicited Pornography and Marketing Act (CANSPAM), the California Consumer Privacy Act (CCPA), Washington’s My Health My Data Act (MHMD), the European Union General Data Protection Regulation (EU GDPR) and the United Kingdom General Data Protection Regulation (UK GDPR). Several states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act. Additionally, we are, or may become, subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.

The CCPA and other similar privacy laws described herein are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance. For example, the CCPA applies to personal information of consumers, business representatives, and employees who are California residents and imposes obligations on covered businesses to provide specific disclosures related to a business’s collecting, using, and disclosing personal data and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to correct the individual’s personal data, to delete the individual’s personal data, to opt out of certain personal data disclosures, and to limit use of the individual’s sensitive personal data in certain cases). Also, the CCPA provides for civil penalties and a private right of action for certain data breaches which may include an award of statutory damages.

Moreover, cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties with whom we work (including our current and future contract research organizations (CROs)). Such threats are prevalent, continue to rise, are increasingly difficult to detect and come from a variety of sources, including traditional computer "hackers," threat actors, "hacktivists," organized criminal threat actors, personnel, sophisticated nation states and nation-state supported actors, including via advanced persistent threat intrusions. If we (or the third parties with whom we work) experience a security incident or are perceived to have experienced a security incident, we could face adverse consequences.

33

Licensure

To distribute our product through the pharmacy channel in the United States, we rely on intermediaries that hold the pharmacy licenses required in each jurisdiction. Certain states impose professional licensure requirements on individuals who provide diabetes education and related support. We believe our certified diabetes educators operate in compliance with these requirements, but if our educators or our company were found to be non-compliant, we may be required to modify how we deliver education, clinical support, or customer service.

U.S. Foreign Corrupt Practices Act

The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. individuals and corporations, as well as their representatives from, directly or indirectly offering, promising, authorizing or making corrupt payments, gifts or transfers of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business. The scope of the FCPA would include interactions with certain healthcare professionals in many countries. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.

Facilities

Our principal office is located in Irvine, California, where we lease approximately 50,000 square feet of office, laboratory and manufacturing space. We lease and sublease additional corporate offices in San Diego, California that consist of approximately 21,000 square feet of office space. We also lease corporate offices in Concord, Massachusetts that consist of approximately 13,000 square feet of office space. The lease for our office, laboratory and manufacturing space in Irvine, California expires in June 2032, the lease and sublease for our offices in San Diego, California expires in February 2027 and August 2028, respectively, and the lease for our office in Concord, Massachusetts expires in May 2026. We believe that our facilities are adequate for our current needs and that suitable additional or substitute space would be available if needed.

Employees and Human Capital Resources

As of December 31, 2025, we had 420 full-time employees and three part-time employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. We have not experienced any work stoppages as a result of labor disputes or strikes. We have built a strong and positive workplace culture, and we pride ourselves on maintaining good relationships with our employees. All our employees enjoy a range of benefits including company-matching 401(k) contributions, participation in our equity incentive program, and employee stock purchase plan and our payment of health insurance premiums for both the employee and the employee’s family.

Environmental Matters

Our research and development and manufacturing processes involve the controlled use of hazardous materials, including flammables, toxics, corrosives and biologics. Our research operations produce hazardous biological and chemical waste products. We seek to comply with applicable laws regarding the handling and disposal of such materials. Given the small volume of such materials used or generated at our facilities, we do not expect our compliance efforts to have a material effect on our capital expenditures, earnings and competitive position. However, we cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We do not currently maintain separate environmental liability coverage and any such contamination or discharge could result in significant cost to us in penalties, damages and suspension of our operations.

34

Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. There are currently no claims or actions pending against us, the ultimate disposition of which we believe could have a material adverse effect on our results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Corporate Information

We were originally incorporated under the laws of the Commonwealth of Massachusetts in October 2015. In August 2024, we reincorporated under the laws of the State of Delaware. Our principal executive offices are located at 11 Hughes, Irvine, California 92618, and our telephone number is (949) 427-7785. Our website is www.betabionics.com. Information contained on, or accessible through, our website shall not be deemed incorporated into, and is not a part of, this Annual Report. We have included our website in this Annual Report solely as an inactive textual reference.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after the reports are electronically filed or furnished to the Securities and Exchange Commission, or SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information that we file with the SEC electronically.

We intend to announce material information to the public through filings with the SEC, the investor relations page on our website, which is located at www.betabionics.com, press releases, public conference calls, and public webcasts. The information disclosed through the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. The information we post through these channels is not a part of this Annual Report. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

35