10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from              to                 

Commission File Number 001-36189

Tandem Diabetes Care, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-4327508
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11045 Roselle Street San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

(858) 366-6900

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
Common Stock, par value $0.001 per share	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

As of April 27, 2015, there were 29,801,681 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS

Part I	Financial Information	1
Item 1	Financial Statements	1
	Condensed Balance Sheets at March 31, 2015 (Unaudited) and December 31, 2014	1
	Condensed Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2015 and 2014 (Unaudited)	2
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (Unaudited)	3
	Notes to Unaudited Condensed Financial Statements	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3	Quantitative and Qualitative Disclosure about Market Risk	19
Item 4	Controls and Procedures	20
Part II	Other Information	21
Item 1	Legal Proceedings	21
Item 1A	Risk Factors	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3	Defaults Upon Senior Securities	44
Item 4	Mine Safety Disclosures	44
Item 5	Other Information	44
Item 6	Exhibits	45

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TANDEM DIABETES CARE, INC.

CONDENSED BALANCE SHEETS

(In thousands except par values)

	March 31,			December 31,
	2015			2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	62,549		$	31,176
Restricted cash		2,000			2,000
Short-term investments		53,834			36,106
Accounts receivable, net		5,226			7,652
Inventory, net		13,581			11,913
Prepaid and other current assets		1,960			1,904
Total current assets		139,150			90,751
Property and equipment, net		12,928			12,581
Patents, net		2,355			2,441
Other long term assets		692			691
Total assets	$	155,125		$	106,464
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,087		$	1,949
Accrued expense		2,586			2,920
Employee-related liabilities		8,789			9,722
Deferred revenue		803			840
Other current liabilities		2,505			2,663
Total current liabilities		18,770			18,094
Notes payable—long-term		29,459			29,440
Deferred rent—long-term		2,546			2,700
Other long-term liabilities		2,102			1,658
Total liabilities		52,877			51,892
Commitments and contingencies
Common stock, $0.001 par value; 100,000 shares authorized, 29,780 and 23,655 shares issued and outstanding at March 31, 2015 (unaudited) and December 31, 2014, respectively.		30			24
Additional paid-in capital		372,102			303,255
Accumulated other comprehensive income		39			8
Accumulated deficit		(269,923	)		(248,715	)
Total stockholders’ equity		102,248			54,572
Total liabilities and stockholders’ equity	$	155,125		$	106,464

See accompanying notes to unaudited condensed financial statements.

1

TANDEM DIABETES CARE, INC.

CONDENSED STATEMENTS OF OPERATIONS and comprehensive loss

(Unaudited)

(In thousands, except per share data)

	Three Months Ended March 31,
	2015			2014
Sales	$	12,308		$	8,065
Cost of sales		9,500			7,199
Gross profit		2,808			866
Operating expenses:
Selling, general and administrative		19,355			18,041
Research and development		3,863			3,663
Total operating expenses		23,218			21,704
Operating loss		(20,410	)		(20,838	)
Other income (expense), net:
Interest and other income		99			18
Interest and other expense		(897	)		(1,142	)
Total other income (expense), net		(798	)		(1,124	)
Net loss	$	(21,208	)	$	(21,962	)
Other Comprehensive Loss:
Unrealized gain on short-term investments	$	39		$	14
Comprehensive loss	$	(21,169	)	$	(21,948	)
Net loss per share, basic and diluted	$	(0.83	)	$	(0.96	)
Weighted average shares used to compute basic and diluted net loss per share		25,522			22,936

See accompanying notes to unaudited condensed financial statements.

2

TANDEM DIABETES CARE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2015			2014
Operating activities
Net loss	$	(21,208	)	$	(21,962	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		1,182			921
Interest expense related to amortization of debt discount and debt issuance costs		35			93
Provision for allowance for doubtful accounts		(31	)		54
Provision for inventory reserve		—			260
Amortization of premium/discount on short-term investments		(18	)		(6	)
Stock-based compensation expense		3,773			3,771
Other		(60	)		—
Changes in operating assets and liabilities:
Accounts receivable, net		2,457			1,821
Inventory, net		(1,658	)		(188	)
Prepaid and other current assets		(56	)		(118	)
Other long term assets		(17	)		—
Accounts payable		1,354			(481	)
Accrued expense		(260	)		(385	)
Employee-related liabilities		(933	)		699
Deferred revenue		(37	)		(29	)
Other current liabilities		(160	)		(1,276	)
Deferred rent		(151	)		(67	)
Other long term liabilities		366			(67	)
Net cash used in operating activities		(15,422	)		(16,960	)
Investing activities
Purchase of short-term investments		(39,099	)		(28,833	)
Proceeds from sales and maturities of short-term investments		21,500			—
Purchase of property and equipment		(600	)		(1,620	)
Purchase of patents		(74	)		(173	)
Net cash used in investing activities		(18,273	)		(30,626	)
Financing activities
Proceeds from issuance of preferred stock for cash, net of offering costs		—			27
Proceeds from public offering, net of offering costs		64,851			—
Proceeds from issuance of common stock		217			—
Net cash provided by financing activities		65,068			27
Net increase (decrease) in cash and cash equivalents		31,373			(47,559	)
Cash and cash equivalents at beginning of period		31,176			124,385
Cash and cash equivalents at end of period	$	62,549		$	76,826
Supplemental disclosures of cash flow information
Interest paid	$	863		$	1,050
Income taxes paid	$	18		$	88
Supplemental schedule of noncash investing and financing activities
Property and equipment included in accounts payable	$	1,638		$	149

See accompanying notes to unaudited condensed financial statements.

3

TANDEM DIABETES CARE, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

The Company

Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of products for people with insulin-dependent diabetes. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc.

The Company designed and commercialized its flagship product, the t:slim Insulin Delivery System, or t:slim, based on its proprietary technology platform and unique consumer-focused approach. The U.S. Food and Drug Administration (FDA) cleared t:slim in November 2011 and the Company commenced commercial sales of t:slim in the United States in August 2012. In January 2015, the Company received clearance from the FDA, to commercialize its next product, the t:flex Insulin Delivery System, or t:flex, for people with greater insulin needs. The Company intends to begin commercial sales of t:flex in the United States during the second quarter of 2015.

Tandem was originally incorporated in the state of Colorado on January 27, 2006 under the name Phluid, Inc. On January 7, 2008, the Company was reincorporated in the state of Delaware for the purposes of changing its legal name from Phluid, Inc. to Tandem Diabetes Care, Inc. and changing its state of incorporation from Colorado to Delaware.

Basis of Presentation

The Company has prepared the accompanying unaudited condensed financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.

Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, from which the balance sheet information herein was derived.

Voluntary Recall

On January 10, 2014, the Company announced a voluntary recall of select lots of cartridges used with t:slim that may have been at risk of leaking. The cause of the recall was identified during the Company’s internal product testing. The recall was expanded on January 20, 2014 to include additional lots of affected cartridges used with t:slim. The Company has incurred approximately $1.7 million in direct costs associated with the recall. The Company recorded a cost of sales charge of approximately $1.3 million in the fourth quarter of 2013 and recorded a cost of sales charge for the remainder in the first quarter of 2014 for affected cartridges shipped in 2014. The total cost of the recall consisted of approximately $0.7 million associated with the return and replacement of affected cartridges in the field and approximately $1.0 million for the write-off of affected cartridges within the Company’s internal inventory. As of December 31, 2014, the FDA determined that the recall is terminated and the Company does not currently expect any further direct financial impact of the recall beyond these costs.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes as of the date of the financial statements. Actual results could materially differ from those estimates and assumptions.

4

Restricted Cash

Restricted cash as of March 31, 2015 and December 31, 2014 was primarily composed of a $2.0 million minimum cash balance requirement in connection with the Capital Royalty Term Loan (see Note 6 “Loan Agreements”).

Accounts Receivable

The Company grants credit to various customers in the normal course of business. The Company maintains an allowance for doubtful accounts for potential credit losses. Provisions are made, generally, for receivables greater than120 days past due and based upon a specific review of other outstanding invoices. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expense, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term debt approximates its carrying value.

Revenue Recognition

Revenue is generated from sales, in the United States, of the t:slim pump, disposable cartridges and infusion sets to individual customers and third-party distributors that resell the product to insulin-dependent diabetes customers. The Company is paid directly by customers who use the products, distributors and third-party insurance payors.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title passed, the price is fixed or determinable, and collectability is reasonably assured. These criteria are applied as follows:

● The evidence of an arrangement generally consists of contractual arrangements with distributors, third-party insurance payors or direct customers.

● Transfer of title and risk and rewards of ownership are passed upon shipment of the pump to distributors or upon delivery to the customer.

● The selling prices are fixed and agreed upon based on the contracts with distributors, the customer and contracted insurance payors, if applicable. For sales to customers associated with insurance providers with whom there is no contract, revenue is recognized upon collection of cash at which time the price is determinable. The Company generally does not offer rebates to its distributors and customers.

● The Company considers the overall creditworthiness and payment history of the distributor, customer and the contracted insurance payor in concluding whether collectability is reasonably assured.

Revenue Recognition for Arrangements with Multiple Deliverables

The Company considers the deliverables in its product offering as separate units of accounting and recognizes deliverables as revenue upon delivery only if (i) the deliverable has standalone value and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is probable and substantially controlled by the Company. The Company allocates consideration to the separate units of accounting, unless the undelivered elements were deemed perfunctory and inconsequential. The Company uses the relative selling price method, in which allocation of consideration is based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE), or if VSOE and TPE are not available, management’s best estimate of a standalone selling price (ESP) for the undelivered elements.

The Company offers a cloud-based data management application, t:connect, which is made available upon purchase by t:slim pump customers. This service is deemed an undelivered element at the time of the t:slim sale. Because the Company has neither VSOE nor TPE for this deliverable, the allocation of revenue is based on the Company’s ESP. The Company establishes its ESP based on estimated cost to provide such services, including consideration for a reasonable profit margin and corroborated by comparable market data. The Company allocates fair value based on management’s ESP to this element at the time of sale and is recognizing the revenue over the four-year hosting period. At March 31, 2015 and December 31, 2014, $0.7 million was recorded as deferred revenue for the t:connect hosting service. All other undelivered elements at the time of sale are deemed inconsequential or perfunctory.

5

Product Returns

The Company offers a 30-day right of return for its t:slim pump customers from the date of shipment, provided a physician’s confirmation of the medical reason for the return is received. Estimated return allowances for sales returns are based on historical returned quantities as compared to t:slim pump shipments in those same periods. The return rate is then applied to the sales of the current period to establish a reserve at the end of the period. The return rates used in the reserve are adjusted for known or expected changes in the marketplace when appropriate. The allowance for product returns included in other current liabilities on the Company’s balance sheets at March 31, 2015 and December 31, 2014 was $0.2 million and $0.3 million, respectively. Actual product returns have not differed materially from estimated amounts reserved in the accompanying financial statements.

Warranty Reserve

The Company generally provides a four-year warranty on its t:slim pump to end user customers and may replace any pumps that do not function in accordance with the product specifications. Any pump returned to the Company may be refurbished and redeployed. Additionally, the Company offers a six-month warranty on t:slim cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment. Warranty costs are estimated based on the current expected replacement product cost, actual experience and expected failure rates from test studies performed in conjunction with the clearance of the t:slim pump with the FDA to support the longevity and reliability of the pump. The Company evaluates the reserve quarterly and makes adjustments when appropriate. At March 31, 2015 and December 31, 2014, the warranty reserve was $2.5 million and $2.0 million, respectively. Actual warranty costs have not differed materially from estimated amounts reserved in the accompanying financial statements.

The following table provides a reconciliation of the change in product warranty liabilities through March 31, 2015 (in thousands):

Balance at December 31, 2014	$	1,974
Provision for warranties issued during the period		1,332
Settlements made during the period		(834	)
Balance at March 31, 2015	$	2,472
Current portion	$	668
Non-current portion		1,804
Total	$	2,472

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the employee’s requisite service period on a straight-line basis. The Company estimates the fair value of stock options and shares issued to employees under the Employee Stock Purchase Plan (“ESPP”) using a Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of subjective assumptions including volatility, expected term, and risk-free rate. For awards that vest based on service conditions, the Company recognizes expense using the straight-line method less estimated forfeitures. As of March 31, 2015, there were no outstanding equity awards with market or performance conditions.

The Company records the expense for stock option grants to non-employees based on the estimated fair value of the stock options using the Black-Scholes option-pricing model. The fair value of non-employee awards is remeasured at each reporting period as the underlying awards vest unless the instruments are fully vested, immediately exercisable and nonforfeitable on the date of grant.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the sum of the weighted-average number of dilutive common share equivalents outstanding for the period determined using the treasury stock method. Dilutive common share equivalents are comprised of warrants, potential Employee Stock Purchase Plan (ESPP) awards, and options outstanding under the Company’s stock plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

6

Potentially dilutive securities not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in common stock equivalent shares):

	Three Months Ended
	March 31,
	2015		2014
Warrants for common stock		990,031		1,297,057
Common stock options		2,163,331		4,889,549
ESPP		127,067		137,943
		3,280,429		6,324,549

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) issued a comprehensive new revenue recognition standard that will supersede existing revenue guidance under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. On April 1, 2015, the FASB proposed deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is in the process of assessing the future impact of the adoption of the standard on its financial statements.

3. Short-Term Investments

The Company invests its excess cash in investment securities, principally debt instruments of financial institutions and corporations with strong credit ratings. The following represents a summary of the estimated fair value of short-term investments at March 31, 2015 and December 31, 2014 (in thousands):

At March 31, 2015	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	45,156	$	38	$	—	$	45,194
Government-sponsored enterprise securities	Less than 1		8,501		1		—		8,502
		$	53,657	$	39	$	—	$	53,696
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	134	$	4	$	—	$	138
Total		$	53,791	$	43	$	—	$	53,834

At December 31, 2014	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	32,536	$	9	$	—		$	32,545
Government-sponsored enterprise securities	Less than 1		3,504		—		(1	)		3,503
		$	36,040	$	9	$	(1	)	$	36,048
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	56	$	2	$	—		$	58
Total		$	36,096	$	11	$	(1	)	$	36,106

7

4. Inventory

Inventories, stated at the lower of cost or market, consisted of the following (in thousands):

	March 31,			December 31,
	2015			2014
Raw materials	$	8,091		$	7,085
Work in process		3,205			2,288
Finished goods		2,512			2,856
		13,808			12,229
Less reserve		(227	)		(316	)
Total	$	13,581		$	11,913

5. Fair Value Measurements

Authoritative guidance on fair value measurements defines fair value, establishes a consistent framework for measuring fair value, and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset of liability.
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own valuation techniques that require input assumptions.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):  

			Fair Value Measurements at
			March 31, 2015
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	54,452	$	54,452	$	—	$	—
Commercial paper		45,194	—			45,194	—
Mutual funds held for nonqualified deferred compensation plan participants (2)		138		138	—		—
Government-sponsored enterprise securities		8,502	—			8,502	—
Total assets	$	108,286	$	54,590	$	53,696	$	—
Liabilities
Deferred compensation (2)	$	138	$	138	$	—	$	—
Total liabilities	$	138	$	138	$	—	$	—

8

			Fair Value Measurements at
			December 31, 2014
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	30,050	$	30,050	$	—	$	—
Commercial paper		32,545		—		32,545		—
Mutual funds held for nonqualified deferred compensation plan participants (2)		58		58		—		—
Government-sponsored enterprise securities		3,503		—		3,503		—
Total assets	$	66,156	$	30,108	$	36,048	$	—
Liabilities
Deferred compensation (2)	$	58	$	58	$	—	$	—
Total liabilities	$	58	$	58	$	—	$	—

(1) Cash equivalents included money market funds and commercial paper with a maturity of three months or less from the date of purchase.

(2) Deferred compensation plans are compensation plans directed by the Company and structured as a Rabbi Trust for certain executives and non-employee directors. The investment assets of the Rabbi Trust are valued using quoted market prices multiplied by the number of shares held in each trust account. The related deferred compensation liability represents the fair value of the investment assets.

The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers. There were no transfers between Level 1 and Level 2 securities during the three months ended March 31, 2015.

6. Loan Agreements

SVB Revolving Line of Credit

In January 2013, the Company entered into an amended loan agreement with Silicon Valley Bank, making available a revolving line of credit in the amount up to the lesser of $1.5 million or 75% of eligible accounts receivable. There were no amounts outstanding under this loan as of December 31, 2014. The SVB revolving line of credit expired unused in January 2015.

Capital Royalty Term Loan

At December 31, 2013, the Company had $30.0 million outstanding under a term loan agreement with Capital Royalty Partners II L.P. and Capital Royalty Partners II—Parallel Fund “A” L.P., together, Capital Royalty Partners (the “Original Term Loan Agreement”). The loan accrued interest at an annual rate of 14%. In connection with the Original Term Loan Agreement the Company issued warrants with a fair value of approximately $0.4 million and paid a $0.4 million financing fee to Capital Royalty Partners, which were recorded as a debt discount. Additionally, the Company paid $0.7 million to a third party for sourcing the Capital Royalty Term Loan, which was recorded as debt issuance cost within other long term assets on the condensed balance sheets. All fees and the value of the warrants are amortized to interest expense over the remaining term using the effective interest method.

In April 2014, the Company entered into an amended agreement (the “Amended and Restated Term Loan Agreement”) with the Lenders and other parties affiliated with Capital Royalty Partners. The Amended and Restated Term Loan Agreement primarily amended certain terms of the Original Term Loan Agreement, including a reduction of the applicable interest rate from 14.0% to 11.5% and an extension of the interest only payment period from December 31, 2015 to March 31, 2018. Under the agreement, interest is payable, at the Company’s option, (i) in cash at a rate of 11.5% per annum or (ii) 9.5% of the 11.5% per annum in cash and 2.0% of the 11.5% per annum would be added to the principal of the loan and subject to accruing interest. Interest-only payments are due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period.  This agreement also provides for prepayment fees of 3% of the outstanding balance of the loan if the loan is repaid prior to March 31, 2015. The prepayment fee is reduced by 1% per year for each subsequent year until maturity.

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The loan is collateralized by all assets of the Company. The Amended and Restated Term Loan Agreement also imposes various affirmative and negative covenants on the Company. The principal financial covenants require that the Company attain minimum annual revenues of $30.0 million in 2014, $50.0 million in 2015, $65.0 million in 2016, $80.0 million in 2017 and $95.0 million thereafter.At March 31, 2015, the Company was in compliance with all of the covenants.

Aggregate borrowings outstanding under the Amended and Restated Term Loan Agreement were $30.0 million at March 31, 2015 and December 31, 2014. Borrowings under the Amended and Restated Term Loan Agreement were used to refinance amounts outstanding under the Original Term Loan Agreement. The present value of the future cash flows under the modified terms described above did not exceed the present value of the future cash flows under the original terms by more than 10%. The Company treated this amendment as a modification and the facility fee of approximately $0.1 million was recorded as a discount to the Amended and Restated Term Loan. The facility fee and the remaining balance of debt issuance costs and debt discount of the Original Term Loan are amortized over the remaining term of the Amended and Restated Term Loan using the effective interest method.

Concurrently with entering into the Amended and Restated Loan Agreement, the Company also entered into a new Term Loan Agreement (the “New Tranche Term Loan Agreement”) with the Lenders and other parties affiliated with Capital Royalty Partners, under which the Company could have borrowed up to an additional $30.0 million on or before March 31, 2015 at the same interest rate and on the same key terms as the Amended and Restated Term Loan Agreement.

In February 2015, the Company amended its Amended and Restated Term Loan Agreement, as well as its New Tranche Term Loan Agreement. Pursuant to this amendment, the interest-only payment period was extended to December 31, 2019 from March 31, 2018 at the same interest rate and on the same key terms as the existing agreements. The principal balance is due in full at the end of the term of the loan which is March 31, 2020. The present value of the future cash flows under the modified terms did not exceed the present value of the future cash flows under the previous terms by more than 10%. The Company treated this amendment as a modification. The remaining debt discount costs will be amortized over the remaining term of the Amended and Restated Term Loan using the effective interest method.

The Company did not elect to borrow any amounts under the New Tranche Loan Agreement on or before March 31, 2015, and the Company’s ability to borrow any amounts under the New Tranche Term Loan Agreement has now lapsed.

7. Stockholders’ Equity

Public Offering

In the first quarter of 2015, the Company completed a public offering of 6,037,500 shares of its common stock at a public offering price of $11.50 per share. Net cash proceeds from the public offering were approximately $64.9 million, after deducting underwriting discounts, commissions and offering expenses payable by the Company.

Shares Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants outstanding	990,031
Stock options issued and outstanding	5,194,724
Authorized for future option grants	2,734,773
Employee stock purchase plan	770,413
	9,689,941

The Company issued 87,555 shares of common stock upon the exercise of stock options and warrants during the three months ended March 31, 2015, and issued 477,741 shares of common stock upon the exercise of stock options and warrants during the year ended December 31, 2014.

In October 2013, the Company adopted the 2013 Employee Stock Purchase Plan (the “ESPP”), which enables eligible employee to purchase shares of the Company’s common stock using their after tax payroll deductions, subject to certain conditions. Generally, the ESPP consists of a two-year offering period with four six-month purchase periods which begin in May and November of each year. No shares had been purchased under the ESPP during the three months ended March 31, 2015, and 251,390 shares of the Company’s common stock were purchased under the ESPP during the year ended December 31, 2014.

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Stock-Based Compensation

The assumptions used in the Black-Scholes option-pricing model are as follows:

	Stock Option
	Three Months Ended
	March 31,
	2015			2014
Weighted average grant date fair value (per share)	$	8.58		$	17.05
Risk-free interest rate		1.7	%		1.9	%
Expected dividend yield		0.0	%		0.0	%
Expected volatility		70.4	%		78.7	%
Expected term (in years)		6.1			6.1

There were no ESPP valuations performed during the three months ended March 31, 2015 and 2014.

The following table summarizes the allocation of stock compensation expense (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Cost of sales	$	324	$	364
Selling, general & administrative		2,978		3,003
Research and development		471		404
Total	$	3,773	$	3,771

The total stock-based compensation capitalized as part of the cost of inventory was $0.2 million at each of the periods ended March 31, 2015 and December 31, 2014.

8. Collaborations

DexCom Development and Commercialization Agreement

In February 2012, the Company entered into a Development and Commercialization Agreement with DexCom, Inc. (DexCom Agreement) for the purpose of collaborating on the development and commercialization of an integrated system which incorporates the t:slim Insulin Delivery System with DexCom’s proprietary continuous glucose monitoring system. Under the DexCom Agreement, the Company paid DexCom $1.0 million at the commencement of the collaboration in 2012, and an additional $1.0 million in 2014, upon the achievement of a pre-market approval, or PMA submission to the FDA. Both payments were recorded as research and development costs in their respective years. The Company will make one additional $1.0 million payment upon the achievement of certain milestones. Additionally, the Company will reimburse DexCom up to $1.0 million of its development costs and is solely responsible for its own development costs. As of March 31, 2015, the Company has reimbursed DexCom $0.2 million of its development costs. The research and development costs recognized for the three months ended March 31, 2015, and 2014 were not significant.

Upon commercialization of the integrated system, and as compensation for the non-exclusive license rights, the Company will also pay DexCom a royalty of $100 for each integrated system sold.

JDRF Collaboration

In January 2013, the Company entered into a research, development and commercialization agreement (“JDRF Agreement”) with the Juvenile Diabetes Research Foundation (“JDRF”) to develop the t:dual Infusion System, a first-of-its-kind, dual-chamber infusion pump for the management of diabetes. According to the terms of the JDRF Agreement, JDRF will provide research funding of up to $3.0 million based on the achievement of research and development milestones, not to exceed research costs incurred by the Company. Payments the Company receives to fund the collaboration efforts under the terms of the JDRF Agreement are recorded as restricted cash and current and long-term liabilities. The liabilities are recognized as an offset of research and development expenses straight-line over the remaining months until anticipated completion of the final milestone, only to the extent that the restricted cash is utilized to fund such development activities. The estimated completion date is re-evaluated each reporting period based on development progress through that date. As of March 31, 2015, the Company estimated the completion date to be September 2016.

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As of March 31, 2015, milestone payment achievements totaled $0.7 million, and research and development costs were offset cumulatively by $0.4 million. The research and development costs were offset by $37,000 and $0.1 million for the three months ended March 31, 2015 and 2014 respectively. The Company did not have any restricted cash balances related to the JDRF Agreement at March 31, 2015 or December 31, 2014.

9. Commitments and Contingencies

From time to time, the Company may be subject to legal proceedings or regulatory encounters or other matters arising in the ordinary course of business, including actions with respect to intellectual property, employment, product liability, and contractual matters. In connection with these matters, the Company assesses, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because of the uncertainties related to the occurrence, amount, and range of loss on any pending actions, the Company is currently unable to predict their ultimate outcome, and, with respect to any pending litigation or claim where no liability has been accrued, to make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. At March 31, 2015 and December 31, 2014, there were no material matters for which the negative outcome was considered probable or estimable.

10. Subsequent Event

In April 2015, the Company entered into two foreign currency forward contracts for a total notional amount of $1.0 million, to offset a portion of the foreign exchange risk of expected future cash flows on certain euro-denominated liabilities that are associated with purchase of manufacturing equipment. Both forward contracts are short-term contracts expiring before December 31, 2015. While the foreign exchange forward contracts act as economic hedges, they are not designated as hedges for accounting purposes. Gains and losses resulting from changes in the fair values of these foreign currency forward contracts will be recorded to other income or expense on the Company’s statement of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” in Part II, Item 1A.

Certain statements contained in this Quarterly Report on Form 10-Q, including statements regarding the development, growth and expansion of our business, our intent, belief or current expectations, primarily with respect to our future operating performance, and the products we expect to offer and other statements regarding matters that are not historical facts, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the “safe harbor” created by these sections. Future filings with the SEC, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements can be found under the caption “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q as well as in our other filings with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.  

Overview

We are a medical device company with an innovative approach to the design, development and commercialization of products for people with insulin-dependent diabetes. We designed and commercialized our flagship product, the t:slim Insulin Delivery System, or t:slim. The foundation of our product portfolio is our proprietary technology platform and unique consumer-focused approach, which allows us to focus on both consumer and clinical needs to develop and commercialize products that address different segments of the insulin-dependent diabetes market. The U.S. Food and Drug Administration, or FDA, cleared t:slim in November 2011 and we commenced commercial sales of t:slim in the United States in the third quarter of 2012. In January 2015, we received clearance from the FDA to commercialize our next product, the t:flex Insulin Delivery System, or t:flex, for people with greater insulin needs. We intend to begin commercial sales of t:flex in the United States during the second quarter of 2015.

Our technology platform features our patented Micro-Delivery Technology, a miniaturized pumping mechanism which draws insulin from a flexible bag within the pump’s cartridge rather than relying on a syringe and plunger mechanism. It also features an easy-to-navigate embedded software architecture, a vivid color touchscreen and a micro-USB connection that supports both a rechargeable battery and t:connect, our data management application. Our innovative approach to product design and development is also consumer-focused and based on our extensive market research as we believe the user is the primary decision maker when purchasing an insulin pump. We also apply the science of human factors to our design and development process, which seeks to optimize our devices to the intended users, allowing users to successfully operate our devices in their intended environment. Leveraging our technology platform and consumer-focused approach, we develop products to address unmet needs of people in different segments of the large and growing insulin-dependent diabetes market.

We consider the number of units shipped per quarter to be an important metric for managing our business. Since the launch of t:slim, we have shipped approximately 20,800 pumps, broken down by quarter as follows:

	Units Shipped for Each of the Three Months Ended in Respective Years
	2015		2014		2013		2012
March 31		2,487		1,723		852	N/A
June 30	N/A			2,235		1,363		9
September 30	N/A			2,935		1,851		204
December 31	N/A			3,929		2,406		844
Total		2,487		10,822		6,472		1,057

For the three months ended March 31, 2015 and 2014, our sales were $12.3 million and $8.1 million, respectively. For the three months ended March 31, 2015 and 2014, our net loss was $21.2 million and $22.0 million, respectively.

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We have derived nearly all of our revenue from the sale of t:slim and associated supplies in the United States and expect to continue to do so until we are able to commercialize t:flex and our other products that are currently under development. During the third quarter of 2014, we submitted a PMA application to the FDA for the t:slim G4 Insulin Pump System, which we have previously referred to as t:sensor.

A substantial portion of the purchase price of an insulin pump is typically paid for by third-party payors, including private insurance companies, preferred provider organizations and other managed care providers. Access to adequate coverage and reimbursement for our current and future products by third-party payors is essential to the acceptance of our products by customers. Future sales of our current and future products will be limited unless our customers can rely on third-party payors to pay for all or part of the associated purchase cost. In circumstances that we do not have contracts established with third-party payors, to the extent possible, we utilize our network of national and regional distributors to service our customers.

We believe we can achieve profitability because our proprietary technology platform will allow us to maximize efficiencies in the development, production and sale of our products. By leveraging our technology platform, we believe we can develop and bring to market products more rapidly while significantly reducing our design and development costs. We also expect to continue to increase production volume, and to reduce the per-unit production overhead cost for our pump products and their associated disposable cartridges over time. Further, due to shared product design features, our production system is adaptable to new products and we intend to leverage our shared manufacturing infrastructure to reduce our product costs and drive operational efficiencies. By expanding our product offerings to address people in different segments of the large and growing insulin-dependent diabetes market, we believe we can increase the productivity of our sales force, thereby improving our operating margin.

From inception through March 31, 2015, we have primarily financed our operations through sales of equity securities, and, to a lesser extent, debt financings. We expect to continue to incur net losses for the next several years and may require additional capital through equity financings and debt financings in order to fund our operations to a level of revenues adequate to support our cost structure.

In the first quarter of 2015, we completed a public offering of 6,037,500 shares of our common stock at a public offering price of $11.50 per share. Net cash proceeds from the public offering were approximately $64.9 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

We have experienced considerable revenue growth since the commercial launch of t:slim in the third quarter of 2012, while incurring operating losses since our inception. Our operating results may fluctuate on a quarterly or annual basis in the future, in particular during the initial stages of commercialization of new products, including t:flex, and our growth or operating results may not be consistent with predictions made by securities analysts. We may not be able to achieve profitability in the future. For additional information about the risks and uncertainties associated with our business, see the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Voluntary Recall

On January 10, 2014, we announced a voluntary recall of select lots of cartridges used with the t:slim that may have been at risk of leaking. The cause of the recall was identified during our internal product testing. The recall was expanded on January 20, 2014 to include additional lots of affected cartridges used with the t:slim. We incurred approximately $1.7 million in direct costs associated with the recall. We recorded a cost of sales charge of approximately $1.3 million in the fourth quarter of 2013 and recorded the cost of sales charge for the remainder in the first quarter of 2014 for affected cartridges shipped in the first quarter of 2014. The total cost of the recall consisted of approximately $0.7 million associated with the return and replacement of affected cartridges in the field and approximately $1.0 million for the write-off of affected cartridges within our internal inventory. As of December 31, 2014, the FDA determined that the recall is terminated and we do not currently expect any further direct financial impact of the recall beyond these costs

Components of Results of Operations

Sales

We commenced commercial sales of t:slim in the United States in the third quarter of 2012. The t:slim Insulin Delivery System is comprised of the t:slim pump and pump-related supplies that include disposable cartridges and infusion sets. We also offer accessories including protective cases, belt clips, and power adapters. Sales of accessories since commercial launch have not been material. We primarily sell our products through national and regional distributors on a non-exclusive basis. These distributors are generally providers of medical equipment and supplies to individuals with diabetes. Our primary end customers are people with insulin-dependent diabetes. Similar to other durable medical equipment, the primary payor is generally a third-party insurance carrier and the customer is usually responsible for any medical insurance plan copay or co-insurance requirements.

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We anticipate that our sales will increase as we expand our sales and marketing infrastructure, increase awareness of our products, introduce new products into the market, including t:flex, and broaden third-party reimbursement for our products. We also expect that our sales will fluctuate on a quarterly basis in the future due to a variety of factors, including the impact of the buying patterns of our distributors and other customers, as well as the impact of seasonality. We believe that our sales are subject to seasonal fluctuation due to the impact of annual deductible and coinsurance requirements associated with most medical insurance plans utilized by our individual customers and the individual customers of our distributors. Our sales may also be negatively impacted by the summer vacation period. In addition, we have experienced, and expect to continue to experience, sequential growth of sales in each quarter from the first quarter to the fourth quarter, but we also expect sequential sales from the fourth quarter to the first quarter to be relatively flat or down. Our overall 2014 sales were weighted heavily towards the second half of the year, and we expect this trend to continue in 2015.

Cost of Sales

We manufacture the t:slim pump and its disposable cartridge at our manufacturing facility in San Diego, California. We will also manufacture the t:flex pump and its disposable cartridge at the same facility. Infusion sets and t:slim accessories are manufactured by third-party suppliers. Cost of sales includes raw materials, labor costs, manufacturing overhead expenses, product training costs and reserves for expected warranty costs, scrap and inventory obsolescence. Due to our relatively low production volumes compared to our potential production capacity, manufacturing overhead expenses are currently a significant portion of our per-unit costs. These manufacturing overhead expenses include expenses relating to quality assurance, manufacturing engineering, material procurement, inventory control, facilities, equipment, information technology and operations supervision and management.

We anticipate that our cost of sales will increase as our products gain broader market acceptance. However, as our sales increase, we expect our overall gross margin, which, for any given period, is calculated as sales less cost of sales divided by sales, to fluctuate in future periods as a result of numerous factors, including the changing percentage of products sold to distributors versus directly to individual customers, varying levels of reimbursement among third-party payors, the changing mix of products sold with different gross margins, the timing and success of new product launches, warranty and training costs, and changes in our manufacturing processes, costs or output. Manufacturing efficiencies or inefficiencies will also impact our gross margins, which we may experience as we attempt to manufacture our products on a larger scale, change our manufacturing processes, change our manufacturing capacity or output, implement additional automated manufacturing equipment and expand our manufacturing facilities.

Selling, General and Administrative

Our selling, general and administrative, or SG&A, expenses primarily consist of salary, cash-based incentive compensation, fringe benefits and stock-based compensation for our executive, financial, marketing, sales, business development, regulatory affairs and administrative functions. Other significant SG&A expenses include those incurred for product demonstration samples, commercialization activities associated with new product launches, trade shows, outside legal counsel fees, independent auditor fees, outside consultant fees, insurance premiums, facilities costs and information technology costs. We expect our SG&A expenses to increase as our business expands.

Research and Development

Our research and development, or R&D, activities primarily consist of engineering and research programs associated with our products under development, as well as R&D activities associated with our core technologies and processes. R&D expenses are primarily related to employee compensation, including salary, fringe benefits, stock-based compensation and temporary employee expenses. We also incur R&D expenses for supplies, license fees, development prototypes, outside design and testing services and milestone payments under our development and commercialization agreements. We expect our R&D expenses to increase as we initiate and advance our development projects.

Other Income and Expense

Our other income and expense primarily consists of interest expense and amortization of debt discount and debt issuance costs associated with our amended and restated term loan agreement with Capital Royalty Partners. At March 31, 2015 and December 31, 2014, there was $30.0 million of outstanding principal under our term loan agreement, which accrues interest at a rate of 11.5% per annum (see "Indebtedness").

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Results of Operations

	Three Months Ended
	March 31,
(in thousands, except percentages)	2015			2014
Sales	$	12,308		$	8,065
Cost of sales		9,500			7,199
Gross profit		2,808			866
Gross margin		23	%		11	%
Operating expenses:
Selling, general and administrative		19,355			18,041
Research and development		3,863			3,663
Total operating expenses		23,218			21,704
Operating loss		(20,410	)		(20,838	)
Other income (expense), net:
Interest and other income		99			18
Interest and other expense		(897	)		(1,142	)
Total other expense, net		(798	)		(1,124	)
Net loss	$	(21,208	)	$	(21,962	)

Comparison of the Three Months Ended March 31, 2015 and 2014

Sales. Sales for the three months ended March 31, 2015 were $12.3 million, representing an increase of 53% compared to $8.1 million for the same period in 2014. For the three months ended March 31, 2015 and 2014, sales from the t:slim pump accounted for 81% and 86% of sales, respectively, while sales of pump-related supplies primarily accounted for the remainder of our sales during those periods. Sales of accessories were not material in either of the reported periods.

The increase in t:slim pump sales during the three months ended March 31, 2015 compared to the same period in 2014 was primarily attributable to a 44% increase in t:slim pump shipments from 1,723 in the first three months of 2014 to 2,487 in the same period of 2015. The commercialization of the t:slim pump and pump-related supplies and accessories initially involved a sales force of limited size. At March 31, 2015, we operated with 60 sales territories. During the first quarter of 2014, we expanded from 36 to 60 sales territories. During the expansion of the sales territories in 2014 and for several months following, we believe our sales representatives experienced some disruption in their individual productivity as territories were realigned and responsibilities adjusted.

Sales to distributors accounted for 76% and 68% of our total sales for the three months ended March 31, 2015 and 2014, respectively. The mix of sales to distributors versus direct customers is principally determined by whether or not we have a contractual arrangement with the underlying third-party insurance payor. The increase in the percentage of our sales to distributors is primarily attributable to new exclusive arrangements between certain insurance payors and certain of our distributors that became effective during the third quarter of 2014. As a result of these new arrangements, a portion of our business that previously involved an opportunity to make a direct sale to the customer transitioned to an opportunity to make a sale through a distributor. The new arrangement has afforded its members easier access to our products as an in-network benefit and it also provided access to our products for a large portion of members who were previously unable to obtain coverage for our products.

Cost of Sales and Gross Profit. Our cost of sales for the three months ended March 31, 2015 was $9.5 million, representing an increase of 32% compared to $7.2 million for the same period in 2014. Gross profit for the three months ended March 31, 2015 was $2.8 million and gross margin was 23%, compared to gross profit of $0.9 million and gross margin of 11% for the same period in 2014. Included in cost of sales for the three months ended March 31, 2014 were costs of $0.3 million associated with our voluntary product recall of selected lots of cartridges initiated in January 2014, resulting in a reduction of the gross margin for that period of four percentage points.

The increase in our gross margin for the three months ended March 31, 2015 from the comparable period of 2014 was primarily due to a decrease in per unit manufacturing overhead costs of our products, which was driven by increased production volumes and manufacturing efficiencies. Our manufacturing overhead costs have been and will continue to be a significant component of the overall cost of our products. Also impacting the gross margin in the first quarter of 2015 as compared to the first quarter of 2014 were the percentage of products sold to distributors versus directly to individual customers, the varying levels of reimbursement among a changing mix of third-party payors, and an increase in sales of pump-related supplies, which generally have lower gross margins than our t:slim pumps.

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Selling, General and Administrative Expenses. SG&A expenses increased 7% to $19.4 million for the three months ended March 31, 2015 from $18.0 million for the same period of 2014. The increase in SG&A expenses for the three months ended March 31, 2015 was primarily the result of increased headcount within our sales, general and administrative functions, which increased costs by $1.9 million for the period ended March 31, 2015 as compared to the same period in 2014. This increase in expenses was offset by a decrease of $0.6 million associated with marketing and promotional activities, tradeshows, travel expenses and facilities costs as compared to the same period of 2014.

Research and Development Expenses. R&D expenses increased 5% to $3.9 million for the three months ended March 31, 2015 from $3.7 million for the same period of 2014 principally as a result of increased headcount within our R&D organization.

Other Income and Expense. Other expense for the three months ended March 31, 2015 and 2014 was $0.8 million and $1.1 million. Other expense for the first quarter of 2015 was primarily comprised of $0.8 million of interest expense associated with the Amended and Restated Term Loan Agreement, which was executed in April 2014. In comparison, other expense for the first quarter of 2014 was primarily comprised of $1.1 million interest expense associated with the Original Term Loan Agreement, which was executed in December 2012. The decrease in interest expense during the first quarter of 2015 compared to the same period in 2014 is due to the decrease in the interest rate on our outstanding debt from 14% to 11.5%.

Liquidity and Capital Resources

At March 31, 2015, we had $118.4 in cash, cash equivalents and short-term investments, which included $2.0 million of restricted cash. We believe that our current cash and cash equivalents balances, together with cash generated from operations and proceeds from the exercise of options and warrants will be sufficient to satisfy our liquidity requirements for at least the next 12 months. We expect that our future liquidity and capital resource needs will be impacted by numerous factors, including market acceptance and sales of our products, our financial and operating performance. We have utilized, and may continue to utilize, debt arrangements with debt providers and financial institutions to finance our operations. Factors such as interest rates and available cash will impact our decision to continue to utilize debt arrangements as a source of cash.

Historically, our primary sources of cash have included private placements and public offerings of equity securities, debt arrangements, and cash generated from operations. Our historical cash outflows have primarily been associated with cash used for operating activities such as the purchase of inventory, expansion of our sales and marketing infrastructure, increase in our R&D activities and other working capital needs, as well as cash used for investing activities, such as the acquisition of intellectual property, expenditures related to equipment and improvements used to increase our manufacturing capacity and improve our manufacturing efficiency and overall facility expansion.

The following table shows a summary of our cash flows for the three months ended March 31, 2015 and 2014:

	Three Months Ended
	March 31, 2015
(in thousands)	2015			2014
Net cash provided by (used in):
Operating activities	$	(15,422	)	$	(16,960	)
Investing activities		(18,273	)		(30,626	)
Financing activities		65,068			27
Total	$	31,373		$	(47,559	)

Operating activities. Net cash used in operating activities was $15.4 million for the three months ended March 31, 2015, compared to $17.0 million for the same period in 2014. The decrease in net cash used in operating activities was primarily associated with a decrease in net loss of $0.8 million, as well as a decrease in working capital and other assets and liabilities of $0.8 million.

Investing activities. Net cash used in investing activities was $18.3 million for the three months ended March 31, 2015, which was primarily related to the purchase of $39.1 million in short-term investments and $0.7 million in purchases of long-term assets, offset by proceeds from sales and maturities of short-term investments of $21.5 million. Net cash used in investing activities was $30.6 million for the three months ended March 31, 2014, which was primarily related to the purchase of $28.8 million in short-term investments and $1.8 million in long-term assets.

Financing activities. Net cash provided by financing activities was $65.1 million for the three months ended March 31, 2015, which was primarily the result of the net proceeds from a public offering of our common stock in the amount of $64.9 million. Net cash provided by financing activities in the first three months of 2014 was not material.

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Our liquidity position and capital requirements are subject to fluctuation based on a number of factors. For example, our cash inflows and outflows may be impacted by the following:

● fluctuations in gross margins and operating margins;

● our ability to generate sales; and

● fluctuations in working capital.

Our primary short-term capital needs, which are subject to change, include expenditures related to:

● support of our commercialization efforts related to our current and future products;

● improvements in our manufacturing capacity and efficiency;

● growth of our sales, marketing and clinical infrastructure;

● new research and product development efforts;

● payment of quarterly interest due under our term debt agreement;

● the acquisition of equipment and other fixed assets;

● facilities expansion needs; and

● potential up-front fees, milestone payments or reimbursement of costs under R&D collaborations and licensing agreements.

Although we believe the foregoing items reflect our most likely uses of cash in the short-term, we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash used. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants and commit us to significant additional debt service obligations.

Indebtedness

Capital Royalty Partners Term Loans

At December 31, 2013, we had $30.0 million outstanding under a term loan agreement with Capital Royalty Partners II L.P. and Capital Royalty Partners II—Parallel Fund “A” L.P., together, Capital Royalty Partners (the “Original Term Loan Agreement”). The loan accrued interest at an annual rate of 14%.

In April 2014, we entered into an amended and restated term loan agreement (the "Amended and Restated Term Loan Agreement") with Capital Royalty Partners. The Amended and Restated Term Loan Agreement amended certain terms of the Original Term Loan Agreement, including a reduction of the applicable interest rate from 14.0% to 11.5% and an extension of the interest only payment period from December 31, 2015 to March 31, 2018. Under the agreement, interest is payable, at the Company’s option, (i) in cash at a rate of 11.5% per annum or (ii) 9.5% of the 11.5% per annum in cash and 2.0% of the 11.5% per annum would be added to the principal of the loan and subject to accruing interest. Interest-only payments are due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period. This agreement also provides for prepayment fees of 3% of the outstanding balance of the loan if the loan is repaid prior to March 31, 2015. The prepayment fee is reduced by 1% per year for each subsequent year until maturity. Aggregate borrowings outstanding under the Amended and Restated Term Loan Agreement were $30.0 million at March 31, 2015 and December 31, 2014.

The loan is collateralized by all of our assets. The Amended and Restated Term Loan Agreement also imposes various affirmative and negative covenants on us. The principal financial covenants require that we attain minimum annual revenues of $30.0 million in 2014, $50.0 million in 2015, $65.0 million in 2016, $80.0 million in 2017 and $95.0 million thereafter.

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In February 2015, we amended the Amended and Restated Term Loan Agreement. Pursuant to this amendment, the interest only payment period was extended to December 31, 2019 from March 31, 2018 at the same interest rate and on the same key terms as the existing agreements. The principal balance will be due in full at the end of the term of the loan which is March 31, 2020.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about our financial condition and results of operations that are not readily apparent from other sources. Actual results may differ from these estimates. There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies Involving Management Estimates and Assumptions,” included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We invest our excess cash primarily in commercial paper and government-sponsored enterprise securities. Some of the financial instruments in which we invest have market risk associated with them in that a change in prevailing interest rates may cause the principal amount of the instrument to fluctuate. Other financial instruments in which we invest potentially subject us to credit risk in that the value of the instrument may fluctuate based on the issuer’s ability to pay.

The primary objectives of our investment activities are to maintain liquidity and preserve principal while at the same time maximizing the income we receive from our financial instruments without significantly increasing risk. We have established guidelines regarding approved investments and maturities of investments, which are primarily designed to maintain liquidity and preserve principal.

Because of the short-term maturities of our financial instruments, we do not believe that an increase or decrease in interest rates would have any significant impact on the realized value of our investment portfolio. If a 10% change in interest rates were to have occurred on March 31, 2015, this change would not have had a material effect on the fair value of our investment portfolio as of that date.

The interest rate under our Amended and Restated Term Loan Agreement is fixed and not subject to changes in market interest rates.

Our operations are located in the United States, and nearly all of our sales since inception have been made in US dollars.Accordingly, we have assessed that we do not have any material exposure to foreign currency rate fluctuations. From time to time, we may have foreign exchange risk associated with currency exposure related to existing assets and liabilities, committed transactions and forecasted future cash flows. We seek to manage our foreign exchange risk by using derivative instruments such as foreign currency forward contracts to hedge our risks. In general, we may hedge material foreign exchange exposures up to twelve months in advance. However, we may choose not to hedge some exposures for a variety of reasons including prohibitive economic costs.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance a particular design will succeed in achieving its stated goals under all potential future conditions. Furthermore, over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As of March 31, 2015, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2015.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item  1. Legal Proceedings

From time to time we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are currently not a party to any material legal proceedings.

Item 1A. Risk Factors

The following sets forth certain risk factors associated with our business. The risk factors set forth below marked with an asterisk (*) next to the title contain changes to the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014.

If any of the following risks occur, our business, financial condition, results of operations or prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline and you might lose all or part of your investment. Additional risks and uncertainties of which we are currently unaware may also become important factors that affect us.

Risks Relating to Our Business and our Industry

We have incurred significant operating losses since inception and cannot assure you that we will achieve profitability.*

Since our inception in January 2006 we have incurred a significant net loss. As of March 31, 2015, we had an accumulated deficit of $269.9 million. To date, we have financed our operations primarily through public and private sales of our equity securities, debt financing with Capital Royalty Partners and certain of its affiliates, and sales of our products. We have devoted substantially all of our resources to the research and development of our products, the commercial launch of our products, the development of a sales and marketing team and the assembly of a management team to manage our business.

We began commercial sales of t:slim in the third quarter of 2012. Beginning in the first quarter of 2013, we have been able to manufacture and sell t:slim at a cost and in volumes sufficient to allow us to achieve a positive gross margin. For the year ended December 31, 2014 and 2013, our gross profit was $15.2 million and $6.2 million, respectively. However, although we have achieved a positive gross margin, we still operate at a substantial net loss and expect that we will continue to do so for the next several years.

To implement our business strategy we need to, among other things, grow our sales and marketing infrastructure to increase sales of our products, fund ongoing research and development activities, expand our manufacturing capabilities, and obtain regulatory clearance or approval to commercialize our products currently under development. We expect our expenses to increase significantly as we pursue these objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, especially given that we only recently expanded the size of our sales, clinical and marketing infrastructure and that we expect to begin sales of our next commercial product, t:flex, in the second quarter of 2015, which makes forecasting our sales more difficult. Any additional operating losses will have an adverse effect on our stockholders’ equity, and we cannot assure you that we will ever be able to achieve or sustain profitability.

We currently rely on sales of t:slim to generate a significant portion of our revenue, and any factors that negatively impact sales of this product may adversely affect our business, financial condition and operating results.

Our primary revenue-generating commercial product is t:slim, which we introduced to the market in the third quarter of 2012. We expect to continue to derive a significant portion of our revenue from the sale of t:slim and pump-related supplies. Accordingly, our ability to generate revenue is highly dependent on our ability to market and sell t:slim.

Sales of t:slim may be negatively impacted by many factors, including:

● problems arising from the expansion of our manufacturing capabilities, or destruction, loss, or temporary shutdown of our manufacturing facility;

● changes in reimbursement rates or policies relating to t:slim or similar products or technologies by third-party payors;

● our inability to enter into contracts with third-party payors on a timely basis and on acceptable terms;

● claims that t:slim, or any component thereof, infringes on patent rights or other intellectual property rights of third parties;

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● the harm to our reputation or any other associated liability or perceived risks that may arise from our January 2014 recall of cartridges used with t:slim; and

● adverse regulatory or legal actions relating to t:slim or similar products or technologies.

Because we currently rely on a single product to generate a significant portion of our revenue, any factors that negatively impact sales of this product, or result in sales of this product increasing at a lower rate than expected, could adversely affect our business, financial condition and operating results and negatively impact our ability to successfully launch future products currently under development.

The failure of our products to achieve and maintain market acceptance could result in us achieving sales below our expectations, which would cause our business, financial condition and operating results to be materially and adversely affected.

Our current business strategy is highly dependent on t:slim and t:flex achieving and maintaining market acceptance. We do not intend to begin commercial sales of t:flex until the second quarter of 2015. In order for us to sell our products to people with insulin-dependent diabetes, we must convince them, their caregivers and healthcare providers that it is an attractive alternative to competitive products for the treatment of diabetes, including traditional insulin pump products and MDI therapies, as well as alternative insulin treatment methodologies. Market acceptance and adoption of our products depends on educating people with diabetes, as well as their caregivers and healthcare providers, as to the distinct features, ease-of-use, positive lifestyle impact, and other perceived benefits of our products as compared to competitive products. If we are not successful in convincing existing and potential customers of the benefits of our products, or if we are not able to achieve the support of caregivers and healthcare providers for t:slim or t:flex, our sales may decline or we may fail to increase our sales in line with our forecasts.

Achieving and maintaining market acceptance of our products could be negatively impacted by many factors, including:

● the failure of our products to achieve wide acceptance among people with insulin-dependent diabetes, their caregivers, insulin-prescribing healthcare providers, third-party payors and key opinion leaders in the diabetes treatment community;

● lack of evidence supporting the safety, ease-of-use or other perceived benefits of our products over competitive products or other currently available insulin treatment methodologies;

● perceived risks associated with the use of t:slim or t:flex or similar products or technologies generally;

● the introduction of competitive products and the rate of acceptance of those products as compared to t:slim and t:flex;

● discounts, rebates and other financial incentives that our competitors may offer for competitive products;

● results of clinical studies relating to t:slim, t:flex or similar competitive products.

In addition, t:slim or t:flex may be perceived by people with insulin-dependent diabetes, their caregivers or healthcare providers to be more complicated, less reliable or less effective than traditional insulin therapies, including MDI, and people may be unwilling to change their current treatment regimens. These negative perceptions may be heightened following our January 2014 recall of cartridges used with t:slim.

Moreover, we believe that healthcare providers tend to be slow to change their medical treatment practices because of perceived liability risks arising from the use of new products and the uncertainty of third-party reimbursement. Accordingly, healthcare providers may not recommend our products until there is sufficient evidence to convince them to alter the treatment methods they typically recommend, such as receiving recommendations from prominent healthcare providers or other key opinion leaders in the diabetes treatment community that our products are effective in providing insulin therapy. Additionally, payors may have more stringent requirements for reimbursement.

Further, even if we are able to convince people with insulin-dependent diabetes, their caregivers or healthcare providers that our products compare favorably to the products and treatment alternatives offered by our competitors, the rapid evolution of technology and treatment options within our industry may cause consumers to delay the purchase of our products in anticipation of advancements, or the perception that advancements could occur, in our products or the products offered by our competitors. For example, it is possible that a consumer that is currently interested in purchasing t:slim will delay the purchase decision in anticipation of the future release of t:slim G4, or the release of a product with advanced features offered by one of our competitors.

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If t:slim or t:flex do not achieve and maintain widespread market acceptance, we may fail to achieve sales at or above our projected amounts. If our sales do not meet our projections, we may fail to meet our strategic objectives, and our business, financial condition and operating results could be materially and adversely affected.

Failure to secure or retain adequate coverage or reimbursement for t:slim, t:flex and our potential future products by third-party payors could adversely affect our business, financial condition and operating results.*

We have derived nearly all of our revenue from the sale of t:slim in the United States, and we do not expect to begin commercial sales of t:flex in the United States until the second quarter of 2015. We expect to derive nearly all of our revenue during 2015 from sales of t:slim and t:flex insulin pumps and associated supplies, and expect to continue to do so until we are able to commercialize our other products that are currently under development. A substantial portion of the purchase price of an insulin pump is typically paid for by third-party payors, including private insurance companies, preferred provider organizations and other managed care providers. Future sales of our current and future products will be limited unless our customers can rely on third-party payors to pay for all or part of the associated purchase cost. Because we have not initiated commercial sales of t:flex, there remains considerable uncertainty regarding the coverage that third-party payors will offer for this new product, particularly for individuals with type 2 diabetes where coverage requirements may necessitate additional laboratory tests or other information to support a determination of medical necessity. Access to adequate coverage and reimbursement for our current and future products by third-party payors is essential to the acceptance of our products by customers.

Many third-party payors use coverage decisions and payment amounts determined by the Centers for Medicare and Medicaid Services, or CMS, which administers the U.S. Medicare program, as guidelines in setting their coverage and reimbursement policies. Medicare has recently begun to review its reimbursement practices for diabetes-related products. Medicare implemented a competitive bidding process for blood glucose strip reimbursement, which resulted in a significant reduction in the reimbursement rate for those products. More recently, Medicare has also initiated a competitive bidding process for insulin pumps in limited geographies. As a result, there is uncertainty as to the future Medicare reimbursement rate for our products. In addition, those third-party payors that do not follow the CMS guidelines may adopt different coverage and reimbursement policies for our current and future products. It is possible that some third-party payors will not offer any coverage for our current or future products.

We currently have contracts establishing reimbursement for t:slim with more than 70 national and regional third-party payors in the United States. We are also currently in the process of approaching these and other third-party payors to discuss reimbursement for t:flex. While we anticipate adding coverage for t:flex under our current agreements and entering into additional contracts with third-party payors to provide reimbursement for both t:slim and t:flex, we cannot guarantee that we will succeed in doing so or that the reimbursement contracts that we are able to negotiate will enable us to sell our products on a profitable basis. In addition, contracts with third-party payors generally can be modified or terminated by the third-party payor without cause and with little or no notice to us. Moreover, compliance with the administrative procedures or requirements of third-party payors may result in delays in processing approvals by those third-party payors for customers to obtain coverage for our products. Failure to secure or retain adequate coverage or reimbursement for t:slim or t:flex and our future products by third-party payors, or delays in processing approvals by those payors, could result in the loss of sales, which could have a material adverse effect on our business, financial condition and operating results.

Further, the healthcare industry in the United States is increasingly focused on cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with third-party payors. If third-party payors deny coverage or reduce their current levels of payment, or if our production costs increase faster than increases in reimbursement levels, we may be unable to sell our products on a profitable basis.

We operate in a very competitive industry and if we fail to compete successfully against our existing or potential competitors, many of whom have greater resources than us, our sales and operating results may be negatively affected.

The medical device industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products or technologies, or other activities of industry participants. We expect our products will compete directly with a number of traditional insulin pumps as well as other methods for the treatment of diabetes. In particular, we expect that the competitive landscape for t:flex will be similar to that of t:slim.

Many of our existing and potential competitors are major medical device companies that are either publicly traded companies or divisions or subsidiaries of publicly traded companies. For instance, Medtronic MiniMed, a division of Medtronic, Inc., has been the market leader for many years and has the majority share of the traditional insulin pump market in the United States. Other significant insulin pump suppliers in the United States include Animas Corporation, a division of Johnson & Johnson, Roche Diagnostics, a division of F. Hoffman-La Roche Ltd., and Insulet Corporation. There are also newer companies entering the field.

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Many of these more established competitors enjoy several competitive advantages over us, including:

● greater financial and human resources for sales and marketing, and product development;

● established relationships with healthcare providers and third-party payors;

● established reputation and name recognition among healthcare providers and other key opinion leaders in the diabetes industry;

● in some cases, an established base of long-time customers;

● products supported by long-term clinical data;

● larger and more established distribution networks;

● greater ability to cross-sell products or provide incentives to healthcare providers to use their products; and

● more experience in conducting research and development, manufacturing, clinical trials, and obtaining regulatory approval or clearance.

In some instances, our competitors also offer products that include features that we do not currently offer. For instance, Medtronic currently offers a traditional insulin pump that is integrated with a CGM system with a threshold suspend feature, and Insulet offers an insulin pump with a tubeless delivery system that does not utilize an infusion set. For these and other reasons, we may not be able to compete successfully against our current or potential future competitors. As a result, we may fail to meet our strategic objectives and forecasted budget, and our business, financial condition and operating results could be materially and adversely affected.

Competitive products or other technological breakthroughs for the monitoring, treatment or prevention of diabetes or technological developments may render our products obsolete or less desirable.

Our ability to achieve our strategic objectives will depend, among other things, on our ability to develop and commercialize products for the treatment of diabetes that offer distinct features, are easy-to-use, receive adequate coverage and reimbursement from third-party payors, and are more appealing than available alternatives. Our primary competitors, as well as a number of other companies, medical researchers and pharmaceutical companies are pursuing new delivery devices, delivery technologies, sensing technologies, procedures, drugs and other therapies for the monitoring, treatment and prevention of diabetes. Any technological breakthroughs in diabetes monitoring, treatment or prevention could reduce the potential market for t:slim or t:flex or render our products obsolete altogether, which would significantly reduce our sales. In addition, even the perception that technological or treatment advancements could occur in the future could cause consumers to delay the purchase of our products.

Because the insulin-dependent diabetes market is large and growing, we anticipate that companies will continue to dedicate significant resources to developing competitive products. The frequent introduction by competitors of products that are or claim to be superior to our products may create market confusion that may make it difficult to differentiate the benefits of our products over competitive products. In addition, the entry of multiple new products has led some of our competitors to employ pricing strategies, including the use of discounts, rebates or other financial incentives that could adversely affect sales of our products. If a competitor develops a product that competes with or is perceived to be superior to our own products, or if competitors continue to utilize strategies that place downward pressure on pricing within our industry, our sales may decline, our operating margins could be reduced and we may fail to meet our projections, which would materially and adversely affect our business, financial condition and operating results.

Moreover, we have designed our products to resemble modern consumer electronic devices to address certain embarrassment and functionality concerns consumers have raised with respect to traditional pumps. The consumer electronics industry is itself highly competitive, and characterized by continual new product introductions, rapid developments in technology, and subjective and changing consumer preferences. If, in the future, consumers cease to view our products as contemporary or convenient as compared to then-existing consumer electronics technology, our products may become less desirable.

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If we are unable to expand our sales, marketing and clinical infrastructure effectively and on a timely basis, we may fail to increase our sales to meet our forecasts.

Because we began commercialization of t:slim in the third quarter of 2012, we have only limited experience marketing and selling our products as well as training new customers on the use of t:slim. We currently intend to begin marketing and selling our t:flex product during the second quarter of 2015. The vast majority of our existing customers for t:slim are individuals with type 1 diabetes, and we have only limited experience in marketing and selling our products to customers with type 2 diabetes. As a result, we may face unexpected challenges as we begin marketing and selling t:flex. We expect to derive nearly all of our revenue from the sale of t:slim, t:flex and pump-related supplies unless and until we receive regulatory clearance or approval for other products currently in development. As a result, our financial condition and operating results are and will continue to be highly dependent on the ability of our sales representatives to adequately promote, market and sell t:slim and t:flex, and the ability of our diabetes educators to train new customers on the use of our products. If our sales and marketing representatives or diabetes educators fail to achieve their objectives, our sales could decrease or may not increase at levels that are in line with our forecasts.

A key element of our business strategy is the continued expansion of our sales, marketing and clinical infrastructure to drive adoption of our products, which includes our team of diabetes educators that trains new customers on the use of our products. We have rapidly increased the number of sales, marketing and clinical personnel employed by us since the initial commercial launch of t:slim. However, we have faced considerable challenges in growing our sales, marketing and clinical force over the past 12-18 months, including with respect to recruiting, training and assimilation of new territories and accounts. We expect to continue to face significant challenges as we manage and grow our sales, marketing and clinical infrastructure and work to motivate and retain the individuals who make up those networks. In particular, newly hired sales representatives require training and take time to achieve full productivity, and the overall expansion of our sales force also disrupts the productivity of our existing sales representatives. In addition, unexpected turnover would have a negative impact on our ability to achieve our sales projections. Further, if a sales, marketing or clinical representative were to depart and be retained by one of our competitors, we may fail to prevent him or her from helping competitors solicit business from our existing customers, which could adversely affect our sales. Similarly, if we are not able to recruit and retain a network of diabetes educators, we may not be able to successfully train new customers on the use of t:slim or t:flex, which could delay new sales and harm our reputation. We expect that the management and future expansion of our sales, marketing and clinical personnel will continue to place significant burdens on our management team. If we are unable to retain and expand our sales, marketing and clinical capabilities in line with our strategic plans, we may not be able to effectively commercialize our existing or planned products, or enhance the strength of our brand, either of which could result in the failure of our sales to increase in line with our projections or could even cause sales to decline.

Our sales and marketing efforts are dependent on independent distributors who are free to market products that compete with our own. If we are unable to maintain or expand our network of independent distributors, our sales may be negatively affected.

For the year ended December 31, 2014, sales to approximately 36 independent distributors represented approximately 75% of our sales. While we expect that the percentage of our sales to independent distributors will decrease over time as we enter into contracts with additional third-party payors, we believe that a meaningful percentage of our sales will continue to be to independent distributors for the foreseeable future and it is possible that the percentage of our sales to independent distributors could even increase in the near term. For example, our dependence upon independent distributors could increase if third-party payors decide to contract with independent distributors directly in lieu of contracting with us to supply our products to their members on a direct basis. None of our independent distributors has been required to sell our products exclusively and each of them may freely sell the products of our competitors. Our distributor agreements generally have one-year initial terms with automatic one-year renewal terms, and are terminable in connection with a party’s material breach.

Some of our independent distributors account for a significant portion of our sales volume. For the year ended December 31, 2014, our three largest independent distributors comprised approximately 38% of our sales. If any of our key independent distributors were to cease to distribute our products, our sales could be adversely affected. In such a situation, we may need to seek alternative independent distributors or increase our reliance on our other independent distributors or our direct sales representatives, which may not prevent our sales from being adversely affected. Additionally, to the extent that we enter into additional arrangements with independent distributors to perform sales, marketing, or distribution services, the terms of the arrangements could cause our product margins to be lower than if we directly marketed and sold our products.

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Our ability to maintain and grow our revenue depends in part on retaining a high percentage of our customer base.

A key to maintaining and growing our revenue is the retention of a high percentage of our customers due to the potentially significant revenue generated from ongoing purchases of disposable insulin cartridges. In addition, our pumps are designed and tested to remain effective for four years and a satisfied customer may consider purchasing another product from us when the time comes to replace the pump. We have developed retention programs aimed at customers, their caregivers and healthcare providers, which include training specific to our products, ongoing support by sales and clinical employees and 24/7 technical support and customer service. If demand for our products fluctuates as a result of the introduction of competitive products, changes in reimbursement policies, manufacturing problems, perceived safety or reliability issues with our or competitors’ products, the failure to secure regulatory clearance or approvals, or for other reasons, our ability to attract and retain customers could be harmed. The failure to retain a high percentage of our customers would negatively impact our revenue growth and may have a material adverse effect on our business, financial condition and operating results.

If important assumptions about the potential market for our products are inaccurate, or if we have failed to understand what people with insulin-dependent diabetes are seeking in an insulin pump, our business and operating results may be adversely affected.

Our business strategy was developed based on a number of important assumptions about the diabetes industry in general, and the insulin-dependent diabetes market in particular, any one or more of which may prove to be inaccurate. For example, we believe that the benefits of insulin pump therapy as compared to other common insulin treatment alternatives will continue to drive growth in the market for insulin pump therapy. In addition, we believe the incidence of diabetes in the United States and worldwide is increasing rapidly. However, each of these trends is uncertain and limited sources exist to obtain reliable market data. The actual incidence of diabetes, and the actual demand for our products or competitive products, could differ materially from our projections if our assumptions are incorrect. In addition, our strategy of focusing exclusively on the insulin-dependent diabetes market may limit our ability to increase sales or achieve profitability.

Another key element of our business strategy is utilizing market research to understand what people with diabetes are seeking to improve their diabetes therapy management. This strategy underlies our entire product design, marketing and customer support approach and is the basis on which we developed our current products and are pursuing the development of new products. However, our market research is based on interviews, focus groups and online surveys involving people with insulin-dependent diabetes, their caregivers and healthcare providers that represent only a small percentage of the overall insulin-dependent diabetes market. As a result, the responses we received may not be reflective of the broader market and may not provide us accurate insight into the desires of people with insulin-dependent diabetes. In addition, understanding the meaning and significance of the responses received during our market research necessarily requires that analysis be conducted and conclusions be drawn. We may not be able perform an analysis that yields meaningful results, or the conclusions we draw from the analysis could be misleading. Moreover, even if our market research has allowed us to better understand the features consumers are seeking in an insulin pump to improve management of their diabetes therapy, there can be no assurance that consumers will actually purchase our products or that our competitors will not develop products with similar features.

We have a limited operating history and may face difficulties encountered by companies early in their commercialization in competitive and rapidly evolving markets.

We commenced operations in 2006, began commercializing t:slim in the third quarter of 2012 and significantly expanded our operations during 2014. We have not yet commenced any significant marketing activities or commercial sales of t:flex. Accordingly, we have a limited operating history upon which to evaluate our business and forecast our future sales and operating results. In assessing our business prospects, you should consider the various risks and difficulties frequently encountered by companies early in their commercialization in competitive and rapidly evolving markets, particularly companies that develop and sell medical devices. These risks include our ability to:

● implement and execute our business strategy;

● expand and improve the productivity of our sales and marketing infrastructure to grow sales of our existing and proposed products;

● increase awareness of our brand and build loyalty among people with insulin-dependent diabetes, their caregivers and healthcare providers;

● manage expanding operations, including complying with a broad range of legal requirements within a highly regulated industry;

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● expand our manufacturing capabilities, including increasing production of current products efficiently while maintaining quality standards and adapting our manufacturing facilities to the production of new products;

● respond effectively to competitive pressures and developments;

● enhance our existing products and develop proposed products;

● obtain and maintain regulatory clearance or approval to commercialize proposed products and enhance our existing products;

● perform clinical trials with respect to our existing products and proposed products; and

● attract, retain and motivate qualified personnel in various areas of our business.

Due to our limited operating history, we may not have the institutional knowledge or experience to be able to effectively address these and other risks that may face our business. In addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to respond effectively to those trends. As a result of these or other risks, we may not be able to execute key components of our business strategy, and our business, financial condition and operating results may suffer.

Manufacturing risks may adversely affect our ability to manufacture products and could negatively impact our sales and operating margins.

Our business strategy depends on our ability to manufacture our current and proposed products in sufficient quantities and on a timely basis so as to meet consumer demand, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We are subject to numerous risks relating to our manufacturing capabilities, including:

● quality or reliability defects in product components that we source from third-party suppliers;

● our inability to secure product components in a timely manner, in sufficient quantities and on commercially reasonable terms;

● our failure to increase production of products to meet demand;

● the challenge of implementing and maintaining acceptable quality systems while experiencing rapid growth;

● our inability to modify production lines to enable us to efficiently produce future products or implement changes in current products in response to regulatory requirements;

● our ability to manufacture multiple products simultaneously within the same manufacturing facility and utilizing common manufacturing equipment;

● difficulty identifying and qualifying alternative suppliers for components in a timely manner; and

● potential damage to or destruction of our manufacturing equipment or manufacturing facility.

These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. As demand for our products increases, and as the number of our commercial products expands, we will have to invest additional resources to purchase components, hire and train employees, and enhance our manufacturing processes and quality systems. Over the past year we have implemented several new pieces of equipment that are intended to improve our manufacturing capacity and efficiency. However, it is possible that we may not derive the anticipated improvements from these investments. If we fail to increase our production capacity efficiently while also maintaining quality requirements, our sales may not increase in line with our forecasts and our operating margins could fluctuate or decline. In addition, although we expect some of our products in development to share product features and components with t:slim, manufacturing of these products may require the modification of our production lines, the hiring of specialized employees, the identification of new suppliers for specific components, or the development of new manufacturing technologies. It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make these products commercially viable.

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We depend on a limited number of third-party suppliers for certain components, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.

We rely on third-party suppliers to supply components of t:slim, t:flex and of our potential future products, including our disposable cartridges. For example, we rely on plastic injection molding companies to provide plastic molded components, electronic manufacturing suppliers to provide electronic assemblies, and machining companies to provide machined mechanical components. We also purchase all of our infusion sets and pump accessories from third-party suppliers. For our business strategy to be successful, our suppliers must be able to provide us with components in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Increases in our product sales, whether forecasted or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components in a manner that meets these various requirements.

We do not have long-term supply agreements with most of our suppliers and, in many cases, we make our purchases on a purchase order basis. Under most of our supply agreements, we have no obligation to buy any given quantity of products, and our suppliers have no obligation to manufacture for us or sell to us any given quantity of products. As a result, our ability to purchase adequate quantities of our products may be limited. Additionally, our suppliers may encounter problems that limit their ability to manufacture products for us, including financial difficulties or damage to their manufacturing equipment or facilities. If we fail to obtain sufficient quantities of high quality components to meet demand on a timely basis, we could lose customer orders, our reputation may be harmed and our business could suffer.

We generally use a small number of suppliers for our products. Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules. Moreover, due to the recent commercialization of our products and the limited amount of our sales to date, we do not have long-standing relationships with our manufacturers and may not be able to convince suppliers to continue to make components available to us unless there is demand for such components from their other customers. As a result, there is a risk that certain components could be discontinued and no longer available to us. We have in the past been, and we may in the future be, required to make significant “last time” purchases of component inventory that is being discontinued by the manufacturer to ensure supply continuity. If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors such as the proprietary nature of our products, our quality control standards and regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components. Failure of any of our suppliers to deliver products at the level our business requires would limit our ability to meet our sales commitments, which could harm our reputation and could have a material adverse effect on our business.

We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA, or other regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures or civil penalties. It could also require us to cease using the components, seek alternative components or technologies and modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals. Any disruption of this nature or increased expenses could harm our commercialization efforts and adversely affect our operating results.

We operate primarily at a single location comprised of four buildings, and any disruption at this location could adversely affect our business and operating results.

Our principal offices are presently located in four buildings in San Diego, California. Substantially all of our operations are conducted at this location, including our manufacturing processes, research and development activities, customer and technical support, and management and administrative functions. In addition, substantially all of our inventory of component supplies and finished goods is held at this location. We take precautions to safeguard our facilities, including acquiring insurance, employing back-up generators, adopting health and safety protocols and utilizing off-site storage of computer data. However, vandalism, terrorism or a natural or other disaster, such as an earthquake, fire or flood, could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and operating results.

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If we do not enhance our product offerings through our research and development efforts, we may fail to effectively compete or become profitable.

In order to increase our sales and market share in the insulin-dependent diabetes market, we must enhance and broaden our product offerings in response to the evolving demands of people with insulin-dependent diabetes and healthcare providers, as well as competitive pressures and technologies. We may not be successful in developing, obtaining regulatory approval for, or marketing our proposed products when anticipated, or at all. In addition, notwithstanding our market research efforts, our future products may not be accepted by consumers, their caregivers, healthcare providers or third-party payors who reimburse consumers for our products. The success of any proposed product offerings will depend on numerous factors, including our ability to:

● identify the product features that people with insulin-dependent diabetes, their caregivers and healthcare providers are seeking in an insulin pump and successfully incorporate those features into our products;

● develop and introduce proposed products in sufficient quantities and in a timely manner;

● offer products at a price that is competitive with other products then available;

● work with third-party payors to obtain reimbursement for our products;

● adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties;

● demonstrate the safety and efficacy of proposed products; and

● obtain the necessary regulatory approvals for proposed products.

If we fail to generate demand by developing products that incorporate features requested by consumers, their caregivers or healthcare providers, or if we do not obtain regulatory clearance or approval for proposed products in time to meet market demand, we may fail to generate sales sufficient to achieve or maintain profitability. We have in the past experienced, and we may in the future experience, delays in various phases of product development and commercial launch, including during research and development, manufacturing, limited release testing, marketing and customer education efforts. Any delays in our anticipated regulatory submissions or approvals, or subsequent product launches, may significantly impede our ability to successfully compete in our markets. In particular, such delays could cause customers to delay or forego purchases of our products, or to purchase our competitors’ products. Even if we are able to successfully develop proposed products when anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly rendered obsolete by changing consumer preferences or the introduction by our competitors of products embodying new technologies or features.

The safety and efficacy of our products is not supported by long-term clinical data, which could limit sales, and our products could cause unforeseen negative effects.

t:slim, which we currently market in the United States, received pre-market clearance under Section 510(k) of the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA. t:flex, which we intend to begin marketing and selling in the United States during the second quarter of 2015, also has received 501(k) clearance. The 510(k) clearance process is shorter and typically requires the submission of less supporting documentation than other FDA approval processes and does not always require long-term clinical studies. As a result, we currently lack the breadth of published long-term clinical data supporting the safety and efficacy of our products and the benefits they offer that might have been generated in connection with other approval processes. For these reasons, people with insulin-dependent diabetes and healthcare providers may be slower to adopt or recommend our products, we may not have comparative data that our competitors have or are generating, third-party payors may not be willing to provide coverage or reimbursement for our products and we may be subject to greater regulatory and product liability risks. These and other factors could slow the adoption of our products and result in our sales being lower than anticipated. In addition, future studies or clinical experience may indicate that treatment with our products is not superior to treatment with competitive products. Such results could slow the adoption of our products and significantly reduce our sales, which could prevent us from achieving our forecasted sales targets or achieving or sustaining profitability. Moreover, if future results and experience indicate that our products cause unexpected or serious complications or other unforeseen negative effects, we could be subject to mandatory product recalls, suspension or withdrawal of FDA clearance or approval, significant legal liability or harm to our business reputation.

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Any alleged illness or injury associated with any of our products or product recall may negatively impact our financial results and business prospects depending on the scope, degree of publicity, reaction of our customers, healthcare professionals, and collaborators, competitive reaction, and consumer attitudes overall. Even if such an allegation or product liability claim lacks merit, cannot be substantiated, is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness, injury or death could adversely affect our reputation with customers, healthcare professionals, and existing and potential collaborators, and could adversely affect our operating results and cause a decline in our stock price.

We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products or the generation of significant future revenues.

In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships to develop proposed products and to pursue new markets, or we may amend or modify similar agreements that we already have in place. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process. Other companies, including those with substantially greater financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.

Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations, termination rights or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with our current or future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to our collaborators’ or our future products. Disputes between our collaborators and us may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.

For example, we have entered into a development and commercialization agreement with DexCom, which provides us a non-exclusive license to integrate the DexCom G4 PLATINUM Continuous Glucose Monitor with t:slim G4, which we have previously referred to as t:sensor, during the term of the agreement. This agreement currently runs until January 4, 2017, with automatic one-year renewals. The license granted covers the United States and other territories may be added from time to time. Under certain circumstances, the agreement may be terminated by either party without cause or on short notice. Termination of this agreement could require us to redesign t:slim G4 and attempt to integrate an alternative CGM system into our insulin pump systems, which would require significant development and regulatory activities that might delay the launch and commercialization of t:slim G4 or, following its launch, might not be completed in time to prevent an interruption in the availability of the product to our customers.

If there are significant disruptions in our information technology systems, our business, financial condition and operating results could be adversely affected.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory management, product development tasks, research and development data, customer service and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, attacks by computer viruses or hackers, power losses, and computer system or data network failures. In addition, t:connect, our cloud-based data management application, is hosted by a third-party service provider whose security and information technology systems are subject to similar risks, and our t:slim and t:flex pumps and products currently in development contain software which could be subject to computer virus or hacker attacks or other failures.

The failure of our or our service providers’ information technology systems or our pumps’ software to perform as we anticipate or our failure to effectively implement new information technology systems could disrupt our entire operation or adversely affect our software products and could result in decreased sales, increased overhead costs, and product shortages, all of which could have a material adverse effect on our reputation, business, financial condition and operating results.

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If we fail to properly manage our anticipated growth, our business could suffer.

Our rapid growth has placed, and we expect that it will continue to place, a significant strain on our management team and on our financial resources. For example, between December 31, 2013 and December 31, 2014 our employee base has increased more than 30% and we expect to continue to experience growth of our employee base during 2015. Failure to manage our growth effectively could cause us to misallocate management or financial resources, and result in losses or weaknesses in our infrastructure, which could materially adversely affect our business. Additionally, our anticipated growth will increase the demands placed on our suppliers, resulting in an increased need for us to manage our suppliers and monitor for quality assurance. Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our business objectives.

We depend on the knowledge and skills of our senior management and other key employees, and if we are unable to retain and motivate them or recruit additional qualified personnel, our business may suffer.

We have benefited substantially from the leadership and performance of our senior management, as well as certain key employees. For example, our chief executive officer, as well as other key members of management, have experience successfully scaling an early stage medical device company to achieve profitability. Our success will depend on our ability to retain our current management and key employees, and to attract and retain qualified personnel in the future. Competition for senior management and key employees in our industry is intense and we cannot guarantee that we will be able to retain our personnel or attract new, qualified personnel. The loss of the services of certain members of our senior management or key employees could prevent or delay the implementation and completion of our strategic objectives, or divert management’s attention to seeking qualified replacements. Each member of senior management as well as our key employees may terminate employment without notice and without cause or good reason. The members of our senior management are not subject to non-competition agreements. Accordingly, the adverse effect resulting from the loss of certain members of senior management could be compounded by our inability to prevent them from competing with us.

If we are found to have violated laws protecting the confidentiality of patient health information, we could be subject to civil or criminal penalties, which could increase our liabilities and harm our reputation or our business.

There are a number of federal and state laws protecting the confidentiality of certain patient health information, including patient records, and restricting the use and disclosure of that protected information. In particular, the U.S. Department of Health and Human Services, or HHS, promulgated patient privacy rules under the HIPAA. These privacy rules protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purpose. If we, or any of our service providers, are found to be in violation of the promulgated patient privacy rules under HIPAA, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our reputation and have a material adverse effect on our business, financial condition and operating results.

We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could have a material adverse effect on our business, financial condition and operating results.

From time to time, we may consider opportunities to acquire other products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including:

● problems assimilating the acquired products or technologies;

● issues maintaining uniform standards, procedures, controls and policies;

● unanticipated costs associated with acquisitions;

● diversion of management’s attention from our existing business;

● risks associated with entering new markets in which we have limited or no experience; and

● increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters.

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We have no current commitments with respect to any acquisition. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.

Risks Related to our Financial Results and Need for Financing

Our future capital needs are uncertain and we may need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.*

At March 31, 2015, we had $118.4 million in cash, cash equivalents and short-term investments, which included $2.0 million of restricted cash. We believe that our cash on hand, cash generated from operations and cash proceeds from the exercise of warrants and options will be sufficient to satisfy our liquidity requirements for at least the next 12 months. However, the continued growth of our business, including the expansion of our sales and marketing infrastructure, research and development activities, and manufacturing capabilities, will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. As a result, we may seek additional funds in the future. Our future capital requirements will depend on many factors, including:

● the revenue generated by sales of t:slim and t:flex, and any other future products that we may develop and commercialize;

● the costs associated with maintaining and expanding our sales and marketing infrastructure;

● the expenses we incur in maintaining our manufacturing facility and adding additional manufacturing equipment and capacity;

● the cost associated with developing and commercializing our proposed products or technologies;

● the cost of obtaining and maintaining regulatory clearance or approval for our current or future products;

● the cost of ongoing compliance with legal and regulatory requirements;

● expenses we incur in connection with potential litigation or governmental investigations;

● anticipated or unanticipated capital expenditures; and

● unanticipated general and administrative expenses.

As a result of these and other factors, we do not know the extent to which we may be required to raise additional capital. We may in the future seek additional capital from public or private offerings of our capital stock, borrowings under credit lines or other sources. In particular, we have an effective shelf registration statement on file with the SEC, under which we may offer to sell equity securities. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, we may incur significant financing costs, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

If we are unable to raise additional capital, we may not be able to expand our sales and marketing infrastructure, enhance our current products or develop new products, take advantage of future opportunities, or respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer demand. Any of these events could adversely affect our ability to achieve our strategic objectives, which could have a material adverse effect on our business, financial condition and operating results.

Our operating results may fluctuate significantly from quarter to quarter.

We began commercial sales of t:slim in the third quarter of 2012. There has been and may continue to be meaningful variability in our operating results from quarter to quarter, as well as within each quarter. Our operating results, and the variability of these operating results, will be affected by numerous factors, including:

● our ability to increase sales of t:slim and to commercialize and sell our future products, and the number of our products sold in each quarter;

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● acceptance of our products by people with insulin-dependent diabetes, their caregivers, healthcare providers and third-party payors;

● the pricing of our products and competitive products, including the use of discounts, rebates or other financial incentives by our competitors;

● the effect of third-party coverage and reimbursement policies;

● our ability to establish and grow an effective sales and marketing infrastructure;

● the amount of, and the timing of the payment for, insurance deductibles required to be paid by our customers and potential customers under their existing insurance plans;

● interruption in the manufacturing or distribution of our products;

● our ability to manufacture products that meet quality and reliability requirements;

● seasonality and other factors affecting the timing of purchases of our products;

● timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

● results of clinical research and trials on our existing and future products;

● the ability of our suppliers to timely provide us with an adequate supply of components that meet our requirements;

● regulatory clearance or approvals affecting our products or those of our competitors; and

● the timing of revenue recognition associated with our product sales pursuant to applicable accounting standards.

As a result of our limited operating history, and due to the complexities of the industry in which we operate, it will be difficult for us to forecast demand for our current or future products with any degree of certainty, which means it will be difficult for us to forecast our sales. In addition, we will be significantly increasing our operating expenses as we expand our business. Accordingly, we may experience substantial variability in our operating results from quarter to quarter, including anticipated or unanticipated quarterly losses. If our quarterly or annual operating results fall below the expectation of investors or securities analysts, the price of our common stock could decline substantially. Further, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our credit facility with Capital Royalty Partners.*

As of March 31, 2015, we owed an aggregate principal amount of $30.0 million to Capital Royalty Partners and their related affiliates pursuant to term loan agreements. We currently do not have the ability to borrow additional amounts under our agreements with Capital Royalty Partners. Our ability to make scheduled payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves at the time a scheduled payment becomes due and our actual and projected financial and operating performance. The amount of our cash reserves and our financial and operating performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, or interest on our existing or future indebtedness. If our cash balances or cash flows from operations are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital, or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. In addition, in the event of our breach of the term loan agreements with Capital Royalty Partners we may be required to repay any outstanding amounts earlier than anticipated.

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Our term loan agreement with Capital Royalty Partners contains restrictive and financial covenants that may limit our operating flexibility.*

Our loan agreement with Capital Royalty Partners contains certain restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lenders or terminate the applicable loan agreement. Our term loan agreement also contains certain financial covenants, including minimum revenue and cash balance requirements, and financial reporting requirements. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under our agreement. Further, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance the amounts outstanding under a given agreement.

Risks Related to our Intellectual Property and Potential Litigation

Our ability to protect our intellectual property and proprietary technology is uncertain.*

We rely primarily on patent, trademark and trade secret laws, as well as confidentiality and non-disclosure agreements, to protect our proprietary technologies. As of March 31, 2015, our patent portfolio consisted of approximately 34 issued U.S. patents and 47 pending U.S. patent applications. Of these, our issued U.S. patents expire between approximately 2021 and 2031. We are also seeking patent protection for our proprietary technology in other countries throughout the world. In addition, we also have seven pending U.S. trademark applications, as well as 18 trademark registrations, including six U.S. trademark registrations and 12 foreign trademark registrations.

We have applied for patent protection relating to certain existing and proposed products and processes. Currently, eight of our issued U.S. patents as well as various pending U.S. and foreign patent applications relate to the structure and operation of our pumping mechanism and are therefore particularly important to the functionality of our products. If we fail to file a patent application timely in any jurisdiction, we may be precluded from doing so at a later date. Further, we cannot assure you that any of our patent applications will be approved in a timely manner or at all. The rights granted to us under our patents, and the rights we are seeking to have granted in our pending patent applications, may not be meaningful or provide us with any commercial advantage. In addition, those rights could be opposed, contested or circumvented by our competitors, or be declared invalid or unenforceable in judicial or administrative proceedings. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer the same or similar products or technologies. Even if we are successful in receiving patent protection for certain products and processes, our competitors may be able to design around our patents or develop products that provide outcomes which are comparable to ours without infringing on our intellectual property rights. Due to differences between foreign and U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States. Even if patents are granted outside the United States, effective enforcement in those countries may not be available.

We rely on our trademarks and trade names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved in a timely manner or at all. Third parties also may oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote additional resources to marketing new brands. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks.

We have entered into confidentiality agreements and intellectual property assignment agreements with our officers, employees, temporary employees and consultants regarding our intellectual property and proprietary technology. In the event of unauthorized use or disclosure or other breaches of those agreements, we may not be provided with meaningful protection for our trade secrets or other proprietary information.

If a competitor infringes upon one of our patents, trademarks or other intellectual property rights, enforcing those patents, trademarks and other rights may be difficult and time consuming. Patent law relating to the scope of claims in the industry in which we operate is subject to rapid change and constant evolution and, consequently, patent positions in our industry can be uncertain. Even if successful, litigation to defend our patents and trademarks against challenges or to enforce our intellectual property rights could be expensive and time consuming and could divert management’s attention from managing our business. Moreover, we may not have sufficient resources or desire to defend our patents or trademarks against challenges or to enforce our intellectual property rights. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may have a material adverse effect on our business, financial condition and operating results.

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The medical device industry is characterized by patent litigation, and from time to time we may be subject to litigation that could be costly, result in the diversion of management’s time and efforts, or require us to pay damages.

Our success will depend in part on not infringing the patents or violating the other proprietary rights of third parties. Significant litigation regarding patent rights exists in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make and sell our products. The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation.

From time to time we receive communications from third parties alleging our infringement of their intellectual property rights. Any intellectual property dispute or litigation could force us to do one or more of the following:

● stop selling our products or using technology that contains the allegedly infringing intellectual property;

● incur significant legal expenses;

● pay substantial damages to the party whose intellectual property rights we are allegedly infringing;

● redesign those products that contain the allegedly infringing intellectual property; or

● attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.

Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. Further, as the number of participants in the diabetes market increases, the possibility of intellectual property infringement claims against us increases.

We may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

Many of our employees were previously employed at other medical device companies, including those that are our direct competitors or could potentially be our direct competitors. In some cases, those employees joined our company recently. We may be subject to claims that we, or our employees, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of these former employers or competitors. In addition, we have been and may in the future be subject to allegations that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we successfully defend against these claims, litigation could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. We cannot guarantee that this type of litigation will not continue, and any future litigation or the threat thereof may adversely affect our ability to hire additional direct sales representatives. A loss of key personnel or their work product could hamper or prevent our ability to commercialize proposed products, which could have an adverse effect on our business, financial condition and operating results.

We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses.

Our business exposes us to potential product liability claims that are inherent in the design, manufacture, testing and sale of medical devices. We could become the subject of product liability lawsuits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition, injury or death to customers. The risk of one or more product liability claims or lawsuits may be even greater following our January 2014 voluntary recall of cartridges used with the t:slim pump. In addition, the misuse of our products or the failure of customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims. Product liability lawsuits and claims, safety alerts or product recalls, with or without merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain customers, any of which could have a material adverse effect on our business, financial condition and operating results.

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Although we maintain third-party product liability insurance coverage, it is possible that claims against us may exceed the coverage limits of our insurance policies. Even if any product liability loss is covered by an insurance policy, these policies typically have substantial deductibles for which we are responsible. Product liability claims in excess of applicable insurance coverage could have a material adverse effect on our business, financial condition and operating results. In addition, any product liability claim brought against us, with or without merit, could result in an increase of our product liability insurance premiums. Insurance coverage varies in cost and can be difficult to obtain, and we cannot guarantee that we will be able to obtain insurance coverage in the future on terms acceptable to us or at all. Our inability to obtain sufficient insurance coverage to protect again potential product liability claims could prevent or limit our commercialization of current products or products currently under development.

Risks Related to our Legal and Regulatory Environment

Our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state regulatory agencies. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated costs or lower than anticipated sales. The FDA and other U.S. governmental agencies regulate numerous elements of our business, including:

● product design and development;

● pre-clinical and clinical testing and trials;

● product safety;

● establishment registration and product listing;

● labeling and storage;

● marketing, manufacturing, sales and distribution;

● pre-market clearance or approval;

● servicing and post-market surveillance;

● advertising and promotion; and

● recalls and field safety corrective actions.

Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the FDCA or approval of a PMA application from the FDA, unless an exemption from pre-market review applies. In the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based on extensive data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Products that are approved through a PMA application generally need FDA approval before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all for our proposed products.

We initially received pre-market clearance for t:slim under Section 510(k) of the FDCA in November 2011. We obtained 510(k) clearance for t:connect and t:flex in February 2013 and January 2015, respectively. From time to time, we make modifications to these products that may require a new 510(k). We received 510(k) clearance for modifications to t:slim and its associated cartridge during 2014 and may pursue 510(k) clearance for additional modifications in the future. If the FDA requires us to go through a more rigorous examination for future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline or to not increase in line with our forecasts. In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain PMA process.

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The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

● we may not be able to demonstrate that our products are safe and effective for their intended users;

● the data from our clinical trials may be insufficient to support clearance or approval; and

● the manufacturing process or facilities we use may not meet applicable requirements.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently cleared or approved products on a timely basis.

Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating revenue from these products or achieving profitability. Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some customers from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters, recalls of products, delays in the introduction of products into the market, refusal of the FDA or other regulators to grant future clearances or approvals, and the suspension or withdrawal of existing approvals by the FDA or other regulators. Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results.

Further, we may evaluate international expansion opportunities in the future. If we expand our operations outside of the United States, we will become subject to various additional regulatory and legal requirements under the applicable laws and regulations of the international markets we enter. These additional regulatory requirements may involve significant costs and expenditures and, if we are not able comply any such requirements, our international expansion and business could be significantly harmed.

Modifications to our products may require new 510(k) clearances or pre-market approvals, or may require us to cease marketing or recall the modified products until clearances are obtained.

Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, requires a new 510(k) clearance or, possibly, a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary for changes that we have made to our products. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared or approved products for which we previously concluded that new clearances or approvals were not necessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Further, the FDA’s ongoing review of the 510(k) program may make it more difficult for us to modify our previously cleared products, either by imposing stricter requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or by applying more onerous review criteria to such submissions.

If we or our third-party suppliers fail to comply with the FDA’s good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner.

We and our third-party suppliers are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may impose inspections or audits at any time. If we or our suppliers have significant non-compliance issues or if any corrective action plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action against us. Any of the foregoing actions could have a material adverse effect on our reputation, business, financial condition and operating results.

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A recall of our products, or the discovery of serious safety issues with our products, could have a significant negative impact on us.

The FDA has the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us, one of our distributors or any of our other third-party suppliers could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any products that we distribute would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost-effective and timely manner.

Further, under the FDA’s medical device reporting, or MDR, regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an adverse effect on our reputation, financial condition and operating results.

In January 2014, we implemented a voluntary recall of select lots of cartridges used with t:slim that may be at risk of leaking. A cartridge leak could potentially result in the delivery of too much or too little insulin, which could lead to unexpected high or low blood glucose levels. Too much insulin can result in severe low blood sugar, or hypoglycemia, and too little insulin can lead to severe high blood sugar, or hyperglycemia, both of which can lead to serious injury or death. We notified the FDA of the recall and also notified our customers and any of our independent distributors that may have received affected cartridges. We have also filed multiple MDRs with the FDA following the recall and we may file additional MDRs in the future as we collect additional information.

Any adverse event involving any products that we distribute could result in future voluntary corrective actions, such as recalls or customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.

Our failure to comply with U.S. federal and state fraud and abuse laws, including anti-kickback laws and other U.S. federal and state anti-referral laws, could have a material, adverse impact on our business.

There are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws. Our relationships with healthcare providers and other third parties are subject to scrutiny under these laws. Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs.

Healthcare fraud and abuse regulations are complex, and even minor irregularities can potentially give rise to claims that a statute or prohibition has been violated. The laws that may affect our ability to operate include:

● the federal healthcare programs’ Anti-Kickback Law, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

● federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

● the federal HIPAA of 1996, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

● the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections; and

● foreign and U.S. state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

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Further, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act, or, collectively, the PPACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity can now be found guilty under the PPACA without actual knowledge of the statute or specific intent to violate it. In addition, the PPACA provides that 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 false claims statutes. Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare and Medicaid programs and forfeiture of amounts collected in violation of those prohibitions. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition and operating results.

To enforce compliance with the federal laws, the U.S. Department of Justice, or DOJ, has recently increased its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from our core business. Additionally, if a healthcare company settles an investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal or state regulatory authorities might challenge our current or future activities under these laws. Any of these challenges could have a material adverse effect on our reputation, business, financial condition and operating results. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. Additionally, we cannot predict the impact of any changes in these laws, whether or not retroactive.

We may be liable if we engage in the off-label promotion of our products.

Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of the off-label use of our products. Healthcare providers may use our products off-label, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA determines that our promotional materials or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in substantial damage awards against us and harm our reputation.

Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of our products.

Recent political, economic and regulatory influences are subjecting the healthcare industry to fundamental changes. The sales of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government health administration authorities, private health insurers, health maintenance organizations and other healthcare-related organizations. Both the Federal and state governments in the United States continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. This legislation and regulation may result in decreased reimbursement for medical devices, which may further exacerbate industry-wide pressure to reduce the prices charged for medical devices. This could harm our ability to market our products and generate sales.

In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products. Delays in receipt of or failure to receive regulatory clearances or approvals for our proposed products would have a material adverse effect on our business, financial condition and operating results.

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Federal and state governments in the United States have enacted legislation to overhaul the nation’s healthcare system. While the goal of healthcare reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs. The PPACA substantially changes the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical device industries. Among other things, the PPACA:

● establishes a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research;

● implements payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and

● creates an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. Most recently, on August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year which commenced in 2013. The uncertainties regarding the ultimate features of the PPACA and other healthcare reform initiatives and their enactment and implementation may have an adverse effect on our customers’ purchasing decisions regarding our products. In the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of our products. Cost control initiatives could decrease the price that we receive for our products. At this time, we cannot predict which, if any, additional healthcare reform proposals will be adopted, when they may be adopted or what impact they, or the PPACA, may have on our business and operations, and any of these impacts may be adverse on our operating results and financial condition.

Our financial performance may be adversely affected by medical device tax provisions in the healthcare reform laws.

The PPACA imposes, among other things, an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States beginning in 2013. Under these provisions, the Congressional Research Service predicts that the total cost to the medical device industry may be up to $20 billion over the next decade. We do not believe that our current products are currently subject to this tax based on the retail exemption under applicable Treasury Regulations. However, the availability of this exemption is subject to interpretation by the IRS, and the IRS may disagree with our analysis. In addition, future products that we manufacture, produce or import may be subject to this tax. The financial impact this tax may have on our business is unclear and there can be no assurance that our business will not be materially adversely affected by it.

Risks Related to our Common Stock

Because of their significant stock ownership, certain of our executive officers, directors and principal stockholders will be able to exert control over us and our significant corporate decisions.*

Based on an aggregate of 29,779,800 shares of our common stock outstanding as of March 31, 2015, our executive officers and directors, and their affiliates owned, in the aggregate, approximately 41% of the voting power of our outstanding common stock. These persons, acting together, will have the ability to significantly influence the outcome of all matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation, or sale of all or substantially all of our assets.

The interests of the aforementioned stockholders might not coincide with the interests of the other holders of our capital stock. This concentration of ownership may reduce the value of our common stock by, among other things:

● delaying, deferring or preventing a change in control of our company;

● impeding a merger, consolidation, takeover or other business combination involving our company; or

● causing us to enter into transactions or agreements that are not in the best interests of all stockholders.

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Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could reduce our stock price and prevent our stockholders from replacing or removing our current management.

Our amended and restated certificate of incorporation and bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:

● authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by the board of directors without prior stockholder approval;

● provide for the adoption of a staggered board of directors whereby the board is divided into three classes each of which has a different three-year term;

● provide that the number of directors shall be fixed by the board;

● prohibit our stockholders from filling board vacancies;

● provide for the removal of a director only with cause and then by the affirmative vote of the holders of a majority of the outstanding shares;

● prohibit stockholders from calling special stockholder meetings;

● prohibit stockholders from acting by written consent without holding a meeting of stockholders;

● require the vote of at least two-thirds of the outstanding shares to approve amendments to the certificate of incorporation or bylaws; and

● require advance written notice of stockholder proposals and director nominations.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Our board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval.

Our amended and restated certificate of incorporation authorizes our board of directors, without the approval of our stockholders, to issue 5,000,000 shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated certificate of incorporation, as shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, and the issuance of such shares in the future may reduce the value of our common stock.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2014, we have federal net operating loss, or NOL, carryforwards of approximately $177.2 million. In general, if there is an “ownership change” with respect to our company, as defined under Section 382 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the utilization of our NOL carryforwards may be subject to substantial limitations imposed by the Code, and similar state provisions. In general, an ownership change occurs whenever there is a shift in ownership of our company by more than 50% by one or more 5% stockholders over a specified time period. We updated our Section 382/383 analysis, from January 1, 2012 through December 31, 2013, regarding the limitation of the net operating losses and research and development credits. Based upon the analysis, we determined that no ownership changes occurred during that period. However, previous analysis determined that ownership changes have occurred in years prior to 2012, but will not have a material impact on the future utilization of such carryforwards. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. Accordingly, if we earn net taxable income, our ability to use net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increases in our future tax liabilities.

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We do not intend to pay cash dividends.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, pursuant to the term loan agreements with Capital Royalty Partners, we are precluded from paying any cash dividends. Accordingly, you may have to sell some or all of your shares of our common stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell shares and you may lose the entire amount of the investment.

The requirements of being a public company will increase our costs and may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of The NASDAQ Stock Market and other applicable securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Recent legislation permits “emerging growth companies” to implement many of these requirements over a longer period and up to five years from the end of our last fiscal year. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses.

In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. Although we have hired additional employees to help us comply with these requirements, in the future we may need to hire more employees or utilize external consultants in order to further support our efforts, which will increase our expenses.

New regulations related to "conflict minerals" may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

On August 22, 2012, the SEC adopted a new rule requiring disclosures by public companies of specified minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule requires companies to perform due diligence, disclose and annually report to the SEC whether or not such minerals originate from the Democratic Republic of Congo or an adjoining country. The rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals may be limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. Within our supply chain, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We are currently investigating the use of conflict materials, if any, within our supply chain.

We are an “emerging growth company” and we do not know whether the reduced disclosure requirements and relief from certain other significant obligations that are applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not “emerging growth companies.” These exemptions include the following:

● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

● less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

● exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

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We intend to take advantage of these exemptions but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, which could result in a reduction in the price of our common stock.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting for so long as we are an “emerging growth company.”

Under existing SEC rules and regulations, we will be required to disclose changes made in our internal control over financial reporting on a quarterly basis and management will be required to assess the effectiveness of our controls annually. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to five years from our November 2013 initial public offering.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404(a) of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm conducted in connection with Section 404(b) of the Sarbanes-Oxley Act after we no longer qualify as an “emerging growth company,” may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We are required to disclose changes made in our internal control procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an “emerging growth company” for up to five years from our November 2013 initial public offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

The price of our common stock might fluctuate significantly.

Prior to our initial public offering in November 2013, there was no public market for our common stock. The trading price of our common stock is likely to be volatile for the foreseeable future. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

● actual or anticipated fluctuations in our quarterly financial and operating results;

● our actual or perceived need for additional capital to fund our operations;

● perceptions about the market acceptance of our products and the recognition of our brand;

● overall performance of the equity markets;

● introduction of proposed products, or announcements of significant contracts, licenses or acquisitions, by us or our competitors;

● legislative, political or regulatory developments;

● issuance of securities analysts’ reports or recommendations;

● additions or departures of key personnel;

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● threatened or actual litigation and government investigations;

● sale of shares of our common stock by us or members of our management; and

● general economic conditions.

These and other factors might cause the market price of our common stock to fluctuate substantially, which may negatively affect the liquidity of our common stock. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Accordingly, the price of our common stock could fluctuate based upon factors that have little or nothing to do with our company, and these fluctuations could materially reduce our share price.

Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results and financial condition.

Future sales, or the perception of future sales, of shares of our common stock could materially reduce the market price of our common stock.*

Sales of our common stock, or the perception in the market that the holders of a large number of our shares intend to sell such shares, could reduce the market price of our common stock which would impair our ability to raise future capital through the sale of additional equity securities. We had outstanding 29,779,800 shares of common stock as of March 31, 2015, of which approximately 12,141,958 shares are restricted securities that may be sold only in accordance with the resale restrictions under Rule 144 of the Securities Act. In addition, as of March 31, 2015, we had outstanding options to purchase 5,194,724 shares of common stock and warrants to purchase 990,031 shares of common stock that, if exercised, will result in these additional shares becoming available for sale. As of March 31, 2015, there are also an aggregate of 3,505,186 shares of our common stock reserved for future grant or issuance under our 2013 Equity Incentive Plan and Employee Stock Purchase Plan.

Certain holders of shares of common stock have the right, subject to various conditions and limitations, to include their shares in registration statements relating to our securities. In addition, these holders are entitled to piggyback registration rights with respect to the registration under the Securities Act of shares of our common stock. Shares of common stock sold under these registration statements can be freely sold in the public market. In the event registration rights are exercised and a large number of shares of common stock are sold in the public market, those sales could reduce the trading price of our common stock.

In the future, we also may issue our securities if we need to raise additional capital. The number of new shares of our common stock issued in connection with raising additional capital could constitute a material portion of the then-outstanding shares of our common stock.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Footnote	Exhibit Number	Description of Document
(1)	3.1	Amended and Restated Certificate of Incorporation as currently in effect.
(1)	3.2	Amended and Restated Bylaws as currently in effect.
	10.1	Omnibus Amendment No. 2, dated February 23, 2015, by and between Tandem Diabetes Care, Inc., Capital Royalty Partners II L.P., Capital Royalty Partners II-Parallel Fund “A” L.P, Capital Royalty Partners II (Cayman) L.P., Capital Royalty Partners II - Parallel Fund “B” (Cayman) L.P. and Parallel Investment Opportunities Partners II L.P.
	31.1	Certification of Kim D. Blickenstaff, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of John Cajigas, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*	32.1	Certification of Kim D. Blickenstaff, Chief Executive Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*	32.2	Certification of John Cajigas, Chief Financial Officer, pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	XBRL Instance Document.
	101.SCH	XBRL Taxonomy Extension Schema Document.
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

(1) Filed as an exhibit to the registrant’s Registration Statement on Form S-1 (File No. 333-191601) and incorporated herein by reference.

  * This certification is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Tandem Diabetes Care, Inc.
Dated: April 30, 2015	By:	/s/ Kim D. Blickenstaff
		Kim D. Blickenstaff
		President, Chief Executive Officer and Director (on behalf of the registrant and as the registrant’s Principal Executive Officer)
	By:	/s/ John Cajigas
		John Cajigas
		Chief Financial Officer and Treasurer (on behalf of the registrant and as the registrant’s Principal Financial and Accounting Officer)

46

EX-10.1

Exhibit 10.1

OMNIBUS AMENDMENT AGREEMENT NO. 2

THIS OMNIBUS AMENDMENT AGREEMENT NO. 2 (this “Amendment”), dated as of February 23, 2015, is made among TANDEM DIABETES CARE, INC., a Delaware corporation (the “Borrower”), (i) the financial institutions listed on the signature pages hereof under the heading “EXISTING TERM LOAN LENDERS” (each an “Existing Term Loan Lender” and, collectively, the “Existing Term Loan Lenders”) and (ii) the financial institutions listed on the signature pages hereof under the heading “NEW TRANCHE TERM LOAN LENDERS” (each an “New Tranche Term Loan Lender” and, collectively, the “New Tranche Term Loan Lenders”, and together with the Existing Term Loan Lenders, the “Term Loan Lenders”).

The Borrower and the Existing Term Loan Lenders are parties to an Amended and Restated Term Loan Agreement dated as of April 4, 2014, as amended by that certain Consent and Amendment Agreement, dated as of June 20, 2014 (as so amended, the “Existing Term Loan Agreement”).  The Borrower and the New Tranche Term Loan Lenders are parties to a Term Loan Agreement dated as of April 4, 2014, as amended by that certain Consent and Amendment Agreement, dated as of June 20, 2014 (as so amended, the “New Tranche Term Loan Agreement”).

The Borrower has requested that the Term Loan Lenders extend the period during which the Borrower shall pay interest only on the Loans.  The Term Loan Lenders have agreed to such request, subject to the terms and conditions hereof.

Accordingly, the parties hereto agree as follows:

SECTION 1Definitions; Interpretation.

(a)Terms Defined in Term Loan Agreement.  All capitalized terms used in this Amendment (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Existing Term Loan Agreement, or the New Tranche Term Loan Agreement, as applicable.

(b)Interpretation.  The rules of interpretation set forth in Section 1.03 of the Existing Term Loan Agreement, or the New Tranche Term Loan Agreement, as applicable, shall be applicable to this Amendment and are incorporated herein by this reference.

SECTION 2Amendments.  

(a)In reliance upon the representations and warranties of the Borrower set forth in this Amendment, the Existing Term Loan Agreement shall be amended as follows, effective as of the date hereof:

(i)The following definitions in Section 1.01 of the Existing Term Loan Agreement shall be amended and restated as follows:

‘“Interest-Only Period” means the period from and including the Closing Date and through and including the twenty-third (23^rd) Payment Date.

“PIK Period” means the period beginning on the Closing Date and ending on the earlier to occur of (i) the twenty-third (23^rd) Payment Date after the Closing Date and (ii) the date on which any Event of Default shall have occurred (provided that if such Event of Default shall have been cured or waived, the PIK Period shall resume until the earlier to occur of the next Event of Default and the twenty-third (23^rd) Payment Date after the Closing Date).”

(ii) Section 3.01(a) of the Existing Term Loan Agreement shall be amended and restated as follows:

1

“(a)Repayment.  During the Interest-Only Period, no payments of principal of the Loans shall be due.  Borrower agrees to repay to the Lenders the outstanding principal amount of the Loans on the Maturity Date.”

(b)In reliance upon the representations and warranties of the Borrower set forth in this Amendment, the New Tranche Term Loan Agreement shall be amended as follows, effective as of the date hereof:

(i)The following definitions in Section 1.01 of the New Tranche Term Loan Agreement shall be amended and restated as follows:

‘“Interest-Only Period” means the period from and including the Closing Date and through and including the twenty-third (23^rd) Payment Date.

“PIK Period” means the period beginning on the Closing Date and ending on the earlier to occur of (i) the twenty-third (23^rd) Payment Date after the Closing Date and (ii) the date on which any Event of Default shall have occurred (provided that if such Event of Default shall have been cured or waived, the PIK Period shall resume until the earlier to occur of the next Event of Default and the twenty-third (23^rd) Payment Date after the Closing Date).”

(ii) Section 3.01(a) of the New Tranche Term Loan Agreement shall be amended and restated as follows:

“(a)Repayment.  During the Interest-Only Period, no payments of principal of the Loans shall be due.  Borrower agrees to repay to the Lenders the outstanding principal amount of the Loans on the Maturity Date.”

SECTION 3Representations and Warranties; Reaffirmation.  To induce the Term Loan Lenders to enter into this Amendment, the Borrower hereby represents and warrants to each Term Loan Lender on the date hereof as follows:

(a)This Amendment is within the Borrower’s corporate powers and has been duly authorized by all necessary corporate and, if required, by all necessary shareholder action.  This Amendment has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b)Borrower hereby ratifies, confirms, reaffirms, and acknowledges its obligations under the Loan Documents to which it is a party and agrees that the Loan Documents to which it is a party remain in full force and effect, undiminished by this Amendment, except as expressly provided herein.  By executing this Amendment, Borrower acknowledges that it has read, consulted with its attorneys regarding, and understands the Amendment.

(c)On the date hereof, after giving effect to this Amendment, no Default shall have occurred and be continuing.  

SECTION 4Miscellaneous.

(i)Existing Term Loan Agreement and the New Tranche Term Loan Agreement Otherwise Not Affected; No Waiver.  Except as expressly contemplated hereby, the Existing Term Loan Agreement and the New Tranche Term Loan Agreement, respectively, shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects.  Nothing contained herein shall be deemed to constitute a waiver of compliance with any term or condition contained in the Existing Term Loan Agreement or the New Tranche Term Loan Agreement or any of the other Loan Documents or constitute a course of conduct or dealing among the parties.  Except as expressly stated herein, the Term Loan Lenders reserve all rights, privileges and remedies under the Loan

2

Documents.  All references in the respective Loan Documents to the Existing Term Loan Agreement or the New Tranche Term Loan Agreement shall be deemed to be references to the Existing Term Loan Agreement or the New Tranche Term Loan Agreement as amended hereby.

(b)No Reliance.  The Borrower hereby acknowledges and confirms to the Term Loan Lenders that the Borrower is executing this Amendment on the basis of its own investigation and for its own reasons without reliance upon any agreement, representation, understanding or communication by or on behalf of any other Person.

(c)Binding Effect.  This Amendment shall be binding upon, inure to the benefit of and be enforceable by the Borrower, each Term Loan Lender and their respective successors and assigns.

(d)Governing Law.  This Amendment and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Amendment and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.

(e)Complete Agreement; Amendments.  This Amendment and the other Loan Documents, contains the entire and exclusive agreement of the parties hereto and thereto with reference to the matters discussed herein and therein.  This Amendment supersedes all prior commitments, drafts, communications, discussions and understandings, oral or written, with respect thereto.  This Amendment may not be modified, amended or otherwise altered except in accordance with the terms of Section 12.04 of the Existing Term Loan Agreementand the New Tranche Term Loan Agreement, respectively.

(f)Severability. Whenever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations.  If, however, any provision of this Amendment shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Amendment, or the validity or effectiveness of such provision in any other jurisdiction.

(g)Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Amendment.

(h)Interpretation.  This Amendment is the result of negotiations between and has been reviewed by counsel to the Term Loan Lenders, the Borrower and other parties, and is the product of all parties hereto.  Accordingly, this Amendment shall not be construed against any of the Term Loan Lenders merely because of any Term Loan Lender’s involvement in the preparation thereof.

(i)Controlling Provisions.  In the event of any inconsistencies between the provisions of this Amendment and the provisions of any other Loan Document, the provisions of this Amendment shall govern and prevail.  Except as expressly modified by this Amendment, the Loan Documents shall not be modified and shall remain in full force and effect.  This Amendment shall be deemed a Loan Document.

[Remainder of page intentionally left blank]

3

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of the date first above written.

THE BORROWER

TANDEM DIABETES CARE, INC.

By /s/ John Cajigas

Name: John Cajigas

Title: Chief Financial Officer

THE EXISTING TERM LOAN LENDERS

CAPITAL ROYALTY PARTNERS II L.P.

By CAPITAL ROYALTY PARTNERS II GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized signatory

CAPITAL ROYALTY PARTNERS II – PARALLEL FUND “A” L.P.

By CAPITAL ROYALTY PARTNERS II - PARALLEL FUND “A” GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II – PARALLEL FUND “A” GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

Capital Royalty Partners II

(Cayman) L.P.

By CAPITAL ROYALTY PARTNERS II

(CAYMAN) GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II

(CAYMAN) GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

WITNESS: /s/ Mary Hukill                                                                                                                                

Name: Mary Hukill

CAPITAL ROYALTY PARTNERS II –

PARALLEL FUND “B” (CAYMAN) L.P.

By CAPITAL ROYALTY PARTNERS II

(CAYMAN) GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II

(CAYMAN) GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

WITNESS: /s/ Mary Hukill                                                                                                                                

Name: Mary Hukill

THE NEW TRANCHE TERM LOAN LENDERS

CAPITAL ROYALTY PARTNERS II L.P.

By CAPITAL ROYALTY PARTNERS II GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

CAPITAL ROYALTY PARTNERS II – PARALLEL FUND “A” L.P.

By CAPITAL ROYALTY PARTNERS II - PARALLEL FUND “A” GP L.P., its General Partner

By CAPITAL ROYALTY PARTNERS II – PARALLEL FUND “A” GP LLC, its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

PARALLEL INVESTMENT OPPORTUNITIES PARTNERS II L.P.,

By PARALLEL INVESTMENT OPPORTUNITIES PARTNERS II GP L.P.,
its General Partner

By PARALLEL INVESTMENT OPPORTUNITIES PARTNERS II LLC,
its General Partner

By /s/ Nathan Hukill

Name: Nathan Hukill

Title: Authorized Signatory

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kim D. Blickenstaff, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tandem Diabetes Care, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Tandem Diabetes Care, Inc.
By:	/s/ Kim D. Blickenstaff
	Kim D. Blickenstaff
	President and Chief Executive Officer

Dated: April 30, 2015

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Cajigas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tandem Diabetes Care, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Tandem Diabetes Care, Inc.
By:	/s/ John Cajigas
	John Cajigas
	Chief Financial Officer and Treasurer

Dated: April 30, 2015

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Tandem Diabetes Care, Inc. (the “Company”) for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kim D. Blickenstaff, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented.

Date: April 30, 2015	/s/ Kim D. Blickenstaff
	Kim D. Blickenstaff
	President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Tandem Diabetes Care, Inc. (the “Company”) for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Cajigas, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented.

Date: April 30, 2015	/s/ John Cajigas
	John Cajigas
	Chief Financial Officer and Treasurer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Stockholders' Equity - Schedule of Shares of Common Stock Reserved for Future Issuance (Detail)	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	9,689,941
Common stock warrants outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	990,031
Stock options issued and outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	5,194,724
Authorized for future option grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	2,734,773
Employee stock purchase plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for future issuance	770,413

XML

Summary of Significant Accounting Policies - Schedule of Anti-Dilutive Securities (Detail)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	3,280,429	6,324,549
Warrants for common stock [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	990,031	1,297,057
Common stock options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	2,163,331	4,889,549
Employee stock purchase plan [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	127,067	137,943

XML

Commitments and Contingencies - Additional Information (Detail)	Mar. 31, 2015 LegalProceeding	Dec. 31, 2014 LegalProceeding
Commitments And Contingencies Disclosure [Abstract]
Regulatory proceedings	0	0

XML

Inventory

3 Months Ended

Mar. 31, 2015

Inventory Disclosure [Abstract]

Inventory

4. Inventory

Inventories, stated at the lower of cost or market, consisted of the following (in thousands):

	March 31,			December 31,
	2015			2014
Raw materials	$	8,091		$	7,085
Work in process		3,205			2,288
Finished goods		2,512			2,856
		13,808			12,229
Less reserve		(227	)		(316	)
Total	$	13,581		$	11,913

XML

Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Parenthetical) (Detail) (Maximum [Member])	3 Months Ended
	Mar. 31, 2015
Maximum [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash equivalents maturity term	3 months

XML

Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	$ 108,286	$ 66,156
Total liabilities	138	58
Cash equivalents [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	54,452	30,050
Commercial paper [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	45,194	32,545
Mutual funds held for nonqualified deferred compensation plan participants [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	138	58
Government-sponsored enterprise securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	8,502	3,503
Deferred compensation [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total liabilities	138	58
Level 1 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	54,590	30,108
Total liabilities	138	58
Level 1 [Member] | Cash equivalents [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	54,452	30,050
Level 1 [Member] | Mutual funds held for nonqualified deferred compensation plan participants [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	138	58
Level 1 [Member] | Deferred compensation [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total liabilities	138	58
Level 2 [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	53,696	36,048
Level 2 [Member] | Commercial paper [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	45,194	32,545
Level 2 [Member] | Government-sponsored enterprise securities [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	$ 8,502	$ 3,503

XML

Fair Value Measurements - Additional Information (Detail) (USD $)	Mar. 31, 2015
Fair Value Disclosures [Abstract]
Transfer between level 1 and level 2 securities	$ 0

XML

Loan Agreements - Additional Information (Detail) (USD $)	3 Months Ended	0 Months Ended	1 Months Ended
	Mar. 31, 2015	Apr. 04, 2014	Jan. 31, 2013	Dec. 31, 2014	Feb. 28, 2015
Debt Instrument [Line Items]
Loan outstanding	$ 30,000,000			$ 30,000,000
Minimum annual revenues attainable in 2014	30,000,000
Minimum annual revenues attainable in 2015	50,000,000
Minimum annual revenues attainable in 2016	65,000,000
Minimum annual revenues attainable in 2017	80,000,000
Minimum annual revenues attainable in 2018	95,000,000
Original Term Loan Agreement [Member]
Debt Instrument [Line Items]
Loan outstanding				30,000,000
Interest rate	14.00%
Warrants fair value recorded as debt discount	400,000
Debt issuance cost	700,000
Original Term Loan Agreement [Member] | Capital Royalty Partners
Debt Instrument [Line Items]
Debt financing fee	400,000
Amended and Restated Term Loan Agreement [Member]
Debt Instrument [Line Items]
Interest rate		11.50%
Interest payable as cash		9.50%
Compounded interest payable		2.00%
Interest-only payments description	Under the agreement, interest is payable, at the Company’s option, (i) in cash at a rate of 11.5% per annum or (ii) 9.5% of the 11.5% per annum in cash and 2.0% of the 11.5% per annum would be added to the principal of the loan and subject to accruing interest. Interest-only payments are due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period.
Prepayment fee percentage		3.00%
Prepayment fee percentage on loan repayment		1.00%
Present value of the future cash flows	10.00%
Debt discount	100,000
Amended and Restated Term Loan Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		11.50%
Interest payment period		Dec. 31, 2015
Amended and Restated Term Loan Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		14.00%
Interest payment period		Mar. 31, 2018
New Tranche Term Loan Agreement [Member]
Debt Instrument [Line Items]
Available revolving line of credit	30,000,000
Interest-only payments description	the interest-only payment period was extended to December 31, 2019 from March 31, 2018 at the same interest rate and on the same key terms as the existing agreements. The principal balance is due in full at the end of the term of the loan which is March 31, 2020.
Present value of the future cash flows					10.00%
Term loan agreement terms	the Company could have borrowed up to an additional $30.0 million on or before March 31, 2015 at the same interest rate and on the same key terms as the Amended and Restated Term Loan Agreement
SVB Revolving Line of Credit [Member]
Debt Instrument [Line Items]
Available revolving line of credit			1,500,000
Revolving line of credit facility as percentage of accounts receivable			75.00%
Revolving line of credit amount outstanding				$ 0
Revolving line of credit expiring date			Jan. 31, 2015

XML

Short-Term Investments

3 Months Ended

Mar. 31, 2015

Investments Debt And Equity Securities [Abstract]

Short-Term Investments

3. Short-Term Investments

The Company invests its excess cash in investment securities, principally debt instruments of financial institutions and corporations with strong credit ratings. The following represents a summary of the estimated fair value of short-term investments at March 31, 2015 and December 31, 2014 (in thousands):

At March 31, 2015	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	45,156	$	38	$	—	$	45,194
Government-sponsored enterprise securities	Less than 1		8,501		1		—		8,502
		$	53,657	$	39	$	—	$	53,696
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	134	$	4	$	—	$	138
Total		$	53,791	$	43	$	—	$	53,834

At December 31, 2014	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	32,536	$	9	$	—		$	32,545
Government-sponsored enterprise securities	Less than 1		3,504		—		(1	)		3,503
		$	36,040	$	9	$	(1	)	$	36,048
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	56	$	2	$	—		$	58
Total		$	36,096	$	11	$	(1	)	$	36,106

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Stockholders' Equity - Additional Information (Detail) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from public offering, net of offering costs	$ 64,851,000
Stock-based compensation cost	$ 200,000	$ 200,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock shares issued	87,555	477,741
ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase of common stock under ESPP	0	251,390
Purchase of common stock offering period	2 years
Number of stock purchase plan offering periods	4
Stock purchase period	6 months
Secondary Public Offering [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares offered for public offering	6,037,500
Shares offering price per share	$ 11.50

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Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 62,549	$ 31,176
Restricted cash	2,000	2,000
Short-term investments	53,834	36,106
Accounts receivable, net	5,226	7,652
Inventory, net	13,581	11,913
Prepaid and other current assets	1,960	1,904
Total current assets	139,150	90,751
Property and equipment, net	12,928	12,581
Other long term assets	692	691
Total assets	155,125	106,464
Current liabilities:
Accounts payable	4,087	1,949
Accrued expense	2,586	2,920
Employee-related liabilities	8,789	9,722
Deferred revenue	803	840
Other current liabilities	2,505	2,663
Total current liabilities	18,770	18,094
Notes payable—long-term	29,459	29,440
Deferred rent—long-term	2,546	2,700
Other long-term liabilities	2,102	1,658
Total liabilities	52,877	51,892
Commitments and contingencies
Common stock, $0.001 par value; 100,000 shares authorized, 29,780 and 23,655 shares issued and outstanding at March 31, 2015 (unaudited) and December 31, 2014, respectively.	30	24
Additional paid-in capital	372,102	303,255
Accumulated other comprehensive income	39	8
Accumulated deficit	(269,923)	(248,715)
Total stockholders’ equity	102,248	54,572
Total liabilities and stockholders’ equity	155,125	106,464
Patents [Member]
Current assets:
Patents, net	$ 2,355	$ 2,441

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Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Organization and Basis of Presentation

1. Organization and Basis of Presentation

The Company

Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of products for people with insulin-dependent diabetes. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc.

The Company designed and commercialized its flagship product, the t:slim Insulin Delivery System, or t:slim, based on its proprietary technology platform and unique consumer-focused approach. The U.S. Food and Drug Administration (FDA) cleared t:slim in November 2011 and the Company commenced commercial sales of t:slim in the United States in August 2012. In January 2015, the Company received clearance from the FDA, to commercialize its next product, the t:flex Insulin Delivery System, or t:flex, for people with greater insulin needs. The Company intends to begin commercial sales of t:flex in the United States during the second quarter of 2015.

Tandem was originally incorporated in the state of Colorado on January 27, 2006 under the name Phluid, Inc. On January 7, 2008, the Company was reincorporated in the state of Delaware for the purposes of changing its legal name from Phluid, Inc. to Tandem Diabetes Care, Inc. and changing its state of incorporation from Colorado to Delaware.

Basis of Presentation

The Company has prepared the accompanying unaudited condensed financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.

Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, from which the balance sheet information herein was derived.

Voluntary Recall

On January 10, 2014, the Company announced a voluntary recall of select lots of cartridges used with t:slim that may have been at risk of leaking. The cause of the recall was identified during the Company’s internal product testing. The recall was expanded on January 20, 2014 to include additional lots of affected cartridges used with t:slim. The Company has incurred approximately $1.7 million in direct costs associated with the recall. The Company recorded a cost of sales charge of approximately $1.3 million in the fourth quarter of 2013 and recorded a cost of sales charge for the remainder in the first quarter of 2014 for affected cartridges shipped in 2014. The total cost of the recall consisted of approximately $0.7 million associated with the return and replacement of affected cartridges in the field and approximately $1.0 million for the write-off of affected cartridges within the Company’s internal inventory. As of December 31, 2014, the FDA determined that the recall is terminated and the Company does not currently expect any further direct financial impact of the recall beyond these costs.

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Stockholders' Equity - Summary for Allocation of Stock Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	$ 3,773	$ 3,771
Cost of sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	324	364
Selling, general & administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	2,978	3,003
Research and development [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	$ 471	$ 404

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Organization and Basis of Presentation - Additional Information (Detail) (USD $)	0 Months Ended	3 Months Ended
	Jan. 10, 2014	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013
Organization And Basis Of Presentation [Line Items]
Incorporation date		Jan. 27, 2006
Reincorporation date		Jan. 07, 2008
Direct costs associated with the recall	$ 1,700,000
Return and replacement of affected cartridges	700,000
Provision for inventory reserve	1,000,000		260,000
Cost of sales [Member]
Organization And Basis Of Presentation [Line Items]
Direct costs associated with the recall				$ 1,300,000

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Collaborations - Additional Information (Detail) (USD $)	3 Months Ended	12 Months Ended		3 Months Ended
	Mar. 31, 2015 Milestone	Dec. 31, 2014	Dec. 31, 2012	Mar. 31, 2014	Sep. 30, 2016
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Restricted cash	$ 2,000,000	$ 2,000,000
DexCom Agreement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of additional milestone payments	1
Additional payment upon achievement of milestones	1,000,000
Reimbursement of development costs	1,000,000		1,000,000
Additional research and development expense upon FDA approval		1,000,000
Reimbursed development costs	200,000
Royalty Payable	100
JDRF Agreement [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Research and development offset cumulative amount	400,000
Aggregate amount of milestone payment achievements	700,000
Research and development offset amount	37,000			100,000
Restricted cash	0	0
JDRF Agreement [Member] | Scenario Forecast [Member] | Maximum [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Research and development offset cumulative amount					$ 3,000,000

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Summary of Significant Accounting Policies - Summary of Reconciliation of Change in Product Warranty Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Movement In Standard And Extended Product Warranty Increase Decrease Roll Forward
Beginning balance	$ 1,974
Provision for warranties issued during the period	1,332
Settlements made during the period	(834)
Ending balance	2,472
Current portion	668
Non-current portion	$ 1,804

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes as of the date of the financial statements. Actual results could materially differ from those estimates and assumptions.

Restricted Cash

Restricted cash as of March 31, 2015 and December 31, 2014 was primarily composed of a $2.0 million minimum cash balance requirement in connection with the Capital Royalty Term Loan (see Note 6 “Loan Agreements”).

Accounts Receivable

The Company grants credit to various customers in the normal course of business. The Company maintains an allowance for doubtful accounts for potential credit losses. Provisions are made, generally, for receivables greater than120 days past due and based upon a specific review of other outstanding invoices. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expense, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term debt approximates its carrying value.

Revenue Recognition

Revenue is generated from sales, in the United States, of the t:slim pump, disposable cartridges and infusion sets to individual customers and third-party distributors that resell the product to insulin-dependent diabetes customers. The Company is paid directly by customers who use the products, distributors and third-party insurance payors.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title passed, the price is fixed or determinable, and collectability is reasonably assured. These criteria are applied as follows:

— The evidence of an arrangement generally consists of contractual arrangements with distributors, third-party insurance payors or direct customers.

— Transfer of title and risk and rewards of ownership are passed upon shipment of the pump to distributors or upon delivery to the customer.

— The selling prices are fixed and agreed upon based on the contracts with distributors, the customer and contracted insurance payors, if applicable. For sales to customers associated with insurance providers with whom there is no contract, revenue is recognized upon collection of cash at which time the price is determinable. The Company generally does not offer rebates to its distributors and customers.

— The Company considers the overall creditworthiness and payment history of the distributor, customer and the contracted insurance payor in concluding whether collectability is reasonably assured.

Revenue Recognition for Arrangements with Multiple Deliverables

The Company considers the deliverables in its product offering as separate units of accounting and recognizes deliverables as revenue upon delivery only if (i) the deliverable has standalone value and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is probable and substantially controlled by the Company. The Company allocates consideration to the separate units of accounting, unless the undelivered elements were deemed perfunctory and inconsequential. The Company uses the relative selling price method, in which allocation of consideration is based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE), or if VSOE and TPE are not available, management’s best estimate of a standalone selling price (ESP) for the undelivered elements.

The Company offers a cloud-based data management application, t:connect, which is made available upon purchase by t:slim pump customers. This service is deemed an undelivered element at the time of the t:slim sale. Because the Company has neither VSOE nor TPE for this deliverable, the allocation of revenue is based on the Company’s ESP. The Company establishes its ESP based on estimated cost to provide such services, including consideration for a reasonable profit margin and corroborated by comparable market data. The Company allocates fair value based on management’s ESP to this element at the time of sale and is recognizing the revenue over the four-year hosting period. At March 31, 2015 and December 31, 2014, $0.7 million was recorded as deferred revenue for the t:connect hosting service. All other undelivered elements at the time of sale are deemed inconsequential or perfunctory.

Product Returns

The Company offers a 30-day right of return for its t:slim pump customers from the date of shipment, provided a physician’s confirmation of the medical reason for the return is received. Estimated return allowances for sales returns are based on historical returned quantities as compared to t:slim pump shipments in those same periods. The return rate is then applied to the sales of the current period to establish a reserve at the end of the period. The return rates used in the reserve are adjusted for known or expected changes in the marketplace when appropriate. The allowance for product returns included in other current liabilities on the Company’s balance sheets at March 31, 2015 and December 31, 2014 was $0.2 million and $0.3 million, respectively. Actual product returns have not differed materially from estimated amounts reserved in the accompanying financial statements.

Warranty Reserve

The Company generally provides a four-year warranty on its t:slim pump to end user customers and may replace any pumps that do not function in accordance with the product specifications. Any pump returned to the Company may be refurbished and redeployed. Additionally, the Company offers a six-month warranty on t:slim cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment. Warranty costs are estimated based on the current expected replacement product cost, actual experience and expected failure rates from test studies performed in conjunction with the clearance of the t:slim pump with the FDA to support the longevity and reliability of the pump. The Company evaluates the reserve quarterly and makes adjustments when appropriate. At March 31, 2015 and December 31, 2014, the warranty reserve was $2.5 million and $2.0 million, respectively. Actual warranty costs have not differed materially from estimated amounts reserved in the accompanying financial statements.

The following table provides a reconciliation of the change in product warranty liabilities through March 31, 2015 (in thousands):

Balance at December 31, 2014	$	1,974
Provision for warranties issued during the period		1,332
Settlements made during the period		(834	)
Balance at March 31, 2015	$	2,472
Current portion	$	668
Non-current portion		1,804
Total	$	2,472

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the employee’s requisite service period on a straight-line basis. The Company estimates the fair value of stock options and shares issued to employees under the Employee Stock Purchase Plan (“ESPP”) using a Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of subjective assumptions including volatility, expected term, and risk-free rate. For awards that vest based on service conditions, the Company recognizes expense using the straight-line method less estimated forfeitures. As of March 31, 2015, there were no outstanding equity awards with market or performance conditions.

The Company records the expense for stock option grants to non-employees based on the estimated fair value of the stock options using the Black-Scholes option-pricing model. The fair value of non-employee awards is remeasured at each reporting period as the underlying awards vest unless the instruments are fully vested, immediately exercisable and nonforfeitable on the date of grant.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the sum of the weighted-average number of dilutive common share equivalents outstanding for the period determined using the treasury stock method. Dilutive common share equivalents are comprised of warrants, potential Employee Stock Purchase Plan (ESPP) awards, and options outstanding under the Company’s stock plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in common stock equivalent shares):

	Three Months Ended
	March 31,
	2015		2014
Warrants for common stock		990,031		1,297,057
Common stock options		2,163,331		4,889,549
ESPP		127,067		137,943
		3,280,429		6,324,549

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) issued a comprehensive new revenue recognition standard that will supersede existing revenue guidance under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. On April 1, 2015, the FASB proposed deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is in the process of assessing the future impact of the adoption of the standard on its financial statements.

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Condensed Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	29,780,000	23,655,000
Common stock, shares outstanding	29,780,000	23,655,000

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Summary of Reconciliation of Change in Product Warranty Liabilities

The following table provides a reconciliation of the change in product warranty liabilities through March 31, 2015 (in thousands):

Balance at December 31, 2014	$	1,974
Provision for warranties issued during the period		1,332
Settlements made during the period		(834	)
Balance at March 31, 2015	$	2,472
Current portion	$	668
Non-current portion		1,804
Total	$	2,472

Schedule of Anti-Dilutive Securities

Potentially dilutive securities not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in common stock equivalent shares):

	Three Months Ended
	March 31,
	2015		2014
Warrants for common stock		990,031		1,297,057
Common stock options		2,163,331		4,889,549
ESPP		127,067		137,943
		3,280,429		6,324,549

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 27, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Trading Symbol	TNDM
Entity Registrant Name	TANDEM DIABETES CARE INC
Entity Central Index Key	0001438133
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		29,801,681

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Short-Term Investments (Tables)

3 Months Ended

Mar. 31, 2015

Investments Debt And Equity Securities [Abstract]

Summary of Estimated Fair Value of Short-Term Investments

The following represents a summary of the estimated fair value of short-term investments at March 31, 2015 and December 31, 2014 (in thousands):

At March 31, 2015	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	45,156	$	38	$	—	$	45,194
Government-sponsored enterprise securities	Less than 1		8,501		1		—		8,502
		$	53,657	$	39	$	—	$	53,696
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	134	$	4	$	—	$	138
Total		$	53,791	$	43	$	—	$	53,834

At December 31, 2014	Maturity (in years)	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
Available-for-sale investment securities:
Commercial paper	Less than 1	$	32,536	$	9	$	—		$	32,545
Government-sponsored enterprise securities	Less than 1		3,504		—		(1	)		3,503
		$	36,040	$	9	$	(1	)	$	36,048
Trading securities:
Mutual funds held for nonqualified deferred compensation plan participants		$	56	$	2	$	—		$	58
Total		$	36,096	$	11	$	(1	)	$	36,106

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Condensed Statements of Operations and Comprehensive Loss (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Sales	$ 12,308	$ 8,065
Cost of sales	9,500	7,199
Gross profit	2,808	866
Operating expenses:
Selling, general and administrative	19,355	18,041
Research and development	3,863	3,663
Total operating expenses	23,218	21,704
Operating loss	(20,410)	(20,838)
Other income (expense), net:
Interest and other income	99	18
Interest and other expense	(897)	(1,142)
Total other income (expense), net	(798)	(1,124)
Net loss	(21,208)	(21,962)
Other Comprehensive Loss:
Unrealized gain on short-term investments	39	14
Comprehensive loss	$ (21,169)	$ (21,948)
Net loss per share, basic and diluted	$ (0.83)	$ (0.96)
Weighted average shares used to compute basic and diluted net loss per share	25,522	22,936

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Stockholders' Equity

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Stockholders' Equity

7. Stockholders’ Equity

Public Offering

In the first quarter of 2015, the Company completed a public offering of 6,037,500 shares of its common stock at a public offering price of $11.50 per share. Net cash proceeds from the public offering were approximately $64.9 million, after deducting underwriting discounts, commissions and offering expenses payable by the Company.

Shares Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants outstanding	990,031
Stock options issued and outstanding	5,194,724
Authorized for future option grants	2,734,773
Employee stock purchase plan	770,413
	9,689,941

The Company issued 87,555 shares of common stock upon the exercise of stock options and warrants during the three months ended March 31, 2015, and issued 477,741 shares of common stock upon the exercise of stock options and warrants during the year ended December 31, 2014.

In October 2013, the Company adopted the 2013 Employee Stock Purchase Plan (the “ESPP”), which enables eligible employee to purchase shares of the Company’s common stock using their after tax payroll deductions, subject to certain conditions. Generally, the ESPP consists of a two-year offering period with four six-month purchase periods which begin in May and November of each year. No shares had been purchased under the ESPP during the three months ended March 31, 2015, and 251,390 shares of the Company’s common stock were purchased under the ESPP during the year ended December 31, 2014.

Stock-Based Compensation

The assumptions used in the Black-Scholes option-pricing model are as follows:

	Stock Option
	Three Months Ended
	March 31,
	2015			2014
Weighted average grant date fair value (per share)	$	8.58		$	17.05
Risk-free interest rate		1.7	%		1.9	%
Expected dividend yield		0.0	%		0.0	%
Expected volatility		70.4	%		78.7	%
Expected term (in years)		6.1			6.1

There were no ESPP valuations performed during the three months ended March 31, 2015 and 2014.

The following table summarizes the allocation of stock compensation expense (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Cost of sales	$	324	$	364
Selling, general & administrative		2,978		3,003
Research and development		471		404
Total	$	3,773	$	3,771

The total stock-based compensation capitalized as part of the cost of inventory was $0.2 million at each of the periods ended March 31, 2015 and December 31, 2014.

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Loan Agreements

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Loan Agreements

6. Loan Agreements

SVB Revolving Line of Credit

In January 2013, the Company entered into an amended loan agreement with Silicon Valley Bank, making available a revolving line of credit in the amount up to the lesser of $1.5 million or 75% of eligible accounts receivable. There were no amounts outstanding under this loan as of December 31, 2014. The SVB revolving line of credit expired unused in January 2015.

Capital Royalty Term Loan

At December 31, 2013, the Company had $30.0 million outstanding under a term loan agreement with Capital Royalty Partners II L.P. and Capital Royalty Partners II—Parallel Fund “A” L.P., together, Capital Royalty Partners (the “Original Term Loan Agreement”). The loan accrued interest at an annual rate of 14%. In connection with the Original Term Loan Agreement the Company issued warrants with a fair value of approximately $0.4 million and paid a $0.4 million financing fee to Capital Royalty Partners, which were recorded as a debt discount. Additionally, the Company paid $0.7 million to a third party for sourcing the Capital Royalty Term Loan, which was recorded as debt issuance cost within other long term assets on the condensed balance sheets. All fees and the value of the warrants are amortized to interest expense over the remaining term using the effective interest method.

In April 2014, the Company entered into an amended agreement (the “Amended and Restated Term Loan Agreement”) with the Lenders and other parties affiliated with Capital Royalty Partners. The Amended and Restated Term Loan Agreement primarily amended certain terms of the Original Term Loan Agreement, including a reduction of the applicable interest rate from 14.0% to 11.5% and an extension of the interest only payment period from December 31, 2015 to March 31, 2018. Under the agreement, interest is payable, at the Company’s option, (i) in cash at a rate of 11.5% per annum or (ii) 9.5% of the 11.5% per annum in cash and 2.0% of the 11.5% per annum would be added to the principal of the loan and subject to accruing interest. Interest-only payments are due quarterly on March 31, June 30, September 30 and December 31 of each year of the interest-only payment period.  This agreement also provides for prepayment fees of 3% of the outstanding balance of the loan if the loan is repaid prior to March 31, 2015. The prepayment fee is reduced by 1% per year for each subsequent year until maturity.

The loan is collateralized by all assets of the Company. The Amended and Restated Term Loan Agreement also imposes various affirmative and negative covenants on the Company. The principal financial covenants require that the Company attain minimum annual revenues of $30.0 million in 2014, $50.0 million in 2015, $65.0 million in 2016, $80.0 million in 2017 and $95.0 million thereafter.At March 31, 2015, the Company was in compliance with all of the covenants.

Aggregate borrowings outstanding under the Amended and Restated Term Loan Agreement were $30.0 million at March 31, 2015 and December 31, 2014. Borrowings under the Amended and Restated Term Loan Agreement were used to refinance amounts outstanding under the Original Term Loan Agreement. The present value of the future cash flows under the modified terms described above did not exceed the present value of the future cash flows under the original terms by more than 10%. The Company treated this amendment as a modification and the facility fee of approximately $0.1 million was recorded as a discount to the Amended and Restated Term Loan. The facility fee and the remaining balance of debt issuance costs and debt discount of the Original Term Loan are amortized over the remaining term of the Amended and Restated Term Loan using the effective interest method.

Concurrently with entering into the Amended and Restated Loan Agreement, the Company also entered into a new Term Loan Agreement (the “New Tranche Term Loan Agreement”) with the Lenders and other parties affiliated with Capital Royalty Partners, under which the Company could have borrowed up to an additional $30.0 million on or before March 31, 2015 at the same interest rate and on the same key terms as the Amended and Restated Term Loan Agreement.

In February 2015, the Company amended its Amended and Restated Term Loan Agreement, as well as its New Tranche Term Loan Agreement. Pursuant to this amendment, the interest-only payment period was extended to December 31, 2019 from March 31, 2018 at the same interest rate and on the same key terms as the existing agreements. The principal balance is due in full at the end of the term of the loan which is March 31, 2020. The present value of the future cash flows under the modified terms did not exceed the present value of the future cash flows under the previous terms by more than 10%. The Company treated this amendment as a modification. The remaining debt discount costs will be amortized over the remaining term of the Amended and Restated Term Loan using the effective interest method.

The Company did not elect to borrow any amounts under the New Tranche Loan Agreement on or before March 31, 2015, and the Company’s ability to borrow any amounts under the New Tranche Term Loan Agreement has now lapsed.

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Summary Of Significant Accounting Policies [Line Items]
Restricted cash	$ 2,000,000	$ 2,000,000
Receivables considered as uncollectible, maximum past due days	120 days
Deferred revenue	700,000	700,000
Revenue recognition hosting period	4 years
Offered period for sales return	30 days
Allowance for product returns	200,000	300,000
Warranty reserve	2,472,000	1,974,000
Performance Shares [Member]
Summary Of Significant Accounting Policies [Line Items]
Equity awards outstanding	0
Warranty reserves [Member]
Summary Of Significant Accounting Policies [Line Items]
Warranty reserve	2,500,000	2,000,000
Slim Pump [Member]
Summary Of Significant Accounting Policies [Line Items]
Warranty period offered	4 years
Slim cartridges and infusion sets [Member]
Summary Of Significant Accounting Policies [Line Items]
Warranty period offered	6 months
Original Term Loan Agreement [Member]
Summary Of Significant Accounting Policies [Line Items]
Restricted cash	$ 2,000,000	$ 2,000,000

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Inventory (Tables)

3 Months Ended

Mar. 31, 2015

Inventory Disclosure [Abstract]

Summary of Inventory

Inventories, stated at the lower of cost or market, consisted of the following (in thousands):

	March 31,			December 31,
	2015			2014
Raw materials	$	8,091		$	7,085
Work in process		3,205			2,288
Finished goods		2,512			2,856
		13,808			12,229
Less reserve		(227	)		(316	)
Total	$	13,581		$	11,913

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Subsequent Event

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

Subsequent Event

10. Subsequent Event

In April 2015, the Company entered into two foreign currency forward contracts for a total notional amount of $1.0 million, to offset a portion of the foreign exchange risk of expected future cash flows on certain euro-denominated liabilities that are associated with purchase of manufacturing equipment. Both forward contracts are short-term contracts expiring before December 31, 2015. While the foreign exchange forward contracts act as economic hedges, they are not designated as hedges for accounting purposes. Gains and losses resulting from changes in the fair values of these foreign currency forward contracts will be recorded to other income or expense on the Company’s statement of operations.

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Collaborations

3 Months Ended

Mar. 31, 2015

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Collaborations

8. Collaborations

DexCom Development and Commercialization Agreement

In February 2012, the Company entered into a Development and Commercialization Agreement with DexCom, Inc. (DexCom Agreement) for the purpose of collaborating on the development and commercialization of an integrated system which incorporates the t:slim Insulin Delivery System with DexCom’s proprietary continuous glucose monitoring system. Under the DexCom Agreement, the Company paid DexCom $1.0 million at the commencement of the collaboration in 2012, and an additional $1.0 million in 2014, upon the achievement of a pre-market approval, or PMA submission to the FDA. Both payments were recorded as research and development costs in their respective years. The Company will make one additional $1.0 million payment upon the achievement of certain milestones. Additionally, the Company will reimburse DexCom up to $1.0 million of its development costs and is solely responsible for its own development costs. As of March 31, 2015, the Company has reimbursed DexCom $0.2 million of its development costs. The research and development costs recognized for the three months ended March 31, 2015, and 2014 were not significant.

Upon commercialization of the integrated system, and as compensation for the non-exclusive license rights, the Company will also pay DexCom a royalty of $100 for each integrated system sold.

JDRF Collaboration

In January 2013, the Company entered into a research, development and commercialization agreement (“JDRF Agreement”) with the Juvenile Diabetes Research Foundation (“JDRF”) to develop the t:dual Infusion System, a first-of-its-kind, dual-chamber infusion pump for the management of diabetes. According to the terms of the JDRF Agreement, JDRF will provide research funding of up to $3.0 million based on the achievement of research and development milestones, not to exceed research costs incurred by the Company. Payments the Company receives to fund the collaboration efforts under the terms of the JDRF Agreement are recorded as restricted cash and current and long-term liabilities. The liabilities are recognized as an offset of research and development expenses straight-line over the remaining months until anticipated completion of the final milestone, only to the extent that the restricted cash is utilized to fund such development activities. The estimated completion date is re-evaluated each reporting period based on development progress through that date. As of March 31, 2015, the Company estimated the completion date to be September 2016.

As of March 31, 2015, milestone payment achievements totaled $0.7 million, and research and development costs were offset cumulatively by $0.4 million. The research and development costs were offset by $37,000 and $0.1 million for the three months ended March 31, 2015 and 2014 respectively. The Company did not have any restricted cash balances related to the JDRF Agreement at March 31, 2015 or December 31, 2014.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

From time to time, the Company may be subject to legal proceedings or regulatory encounters or other matters arising in the ordinary course of business, including actions with respect to intellectual property, employment, product liability, and contractual matters. In connection with these matters, the Company assesses, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because of the uncertainties related to the occurrence, amount, and range of loss on any pending actions, the Company is currently unable to predict their ultimate outcome, and, with respect to any pending litigation or claim where no liability has been accrued, to make a meaningful estimate of the reasonably possible loss or range of loss that could result from an unfavorable outcome. At March 31, 2015 and December 31, 2014, there were no material matters for which the negative outcome was considered probable or estimable.

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Organization and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

The Company

The Company

Tandem Diabetes Care, Inc. is a medical device company focused on the design, development and commercialization of products for people with insulin-dependent diabetes. Unless the context requires otherwise, the terms the “Company” or “Tandem” refer to Tandem Diabetes Care, Inc.

The Company designed and commercialized its flagship product, the t:slim Insulin Delivery System, or t:slim, based on its proprietary technology platform and unique consumer-focused approach. The U.S. Food and Drug Administration (FDA) cleared t:slim in November 2011 and the Company commenced commercial sales of t:slim in the United States in August 2012. In January 2015, the Company received clearance from the FDA, to commercialize its next product, the t:flex Insulin Delivery System, or t:flex, for people with greater insulin needs. The Company intends to begin commercial sales of t:flex in the United States during the second quarter of 2015.

Tandem was originally incorporated in the state of Colorado on January 27, 2006 under the name Phluid, Inc. On January 7, 2008, the Company was reincorporated in the state of Delaware for the purposes of changing its legal name from Phluid, Inc. to Tandem Diabetes Care, Inc. and changing its state of incorporation from Colorado to Delaware.

Basis of Presentation

Basis of Presentation

The Company has prepared the accompanying unaudited condensed financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments which are of a normal and recurring nature, considered necessary for a fair presentation of the financial information contained herein, have been included.

Interim financial results are not necessarily indicative of results anticipated for the full year or any other period(s). These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, from which the balance sheet information herein was derived.

Voluntary Recall

Voluntary Recall

On January 10, 2014, the Company announced a voluntary recall of select lots of cartridges used with t:slim that may have been at risk of leaking. The cause of the recall was identified during the Company’s internal product testing. The recall was expanded on January 20, 2014 to include additional lots of affected cartridges used with t:slim. The Company has incurred approximately $1.7 million in direct costs associated with the recall. The Company recorded a cost of sales charge of approximately $1.3 million in the fourth quarter of 2013 and recorded a cost of sales charge for the remainder in the first quarter of 2014 for affected cartridges shipped in 2014. The total cost of the recall consisted of approximately $0.7 million associated with the return and replacement of affected cartridges in the field and approximately $1.0 million for the write-off of affected cartridges within the Company’s internal inventory. As of December 31, 2014, the FDA determined that the recall is terminated and the Company does not currently expect any further direct financial impact of the recall beyond these costs.

Use of Estimates

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes as of the date of the financial statements. Actual results could materially differ from those estimates and assumptions.

Restricted Cash

Restricted Cash

Restricted cash as of March 31, 2015 and December 31, 2014 was primarily composed of a $2.0 million minimum cash balance requirement in connection with the Capital Royalty Term Loan (see Note 6 “Loan Agreements”).

Accounts Receivable

Accounts Receivable

The Company grants credit to various customers in the normal course of business. The Company maintains an allowance for doubtful accounts for potential credit losses. Provisions are made, generally, for receivables greater than120 days past due and based upon a specific review of other outstanding invoices. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expense, and employee-related liabilities are reasonable estimates of their fair values because of the short-term nature of these assets and liabilities. Short-term investments are carried at fair value. Based on the borrowing rates currently available for loans with similar terms, the Company believes that the fair value of its long-term debt approximates its carrying value.

Revenue Recognition

Revenue Recognition

Revenue is generated from sales, in the United States, of the t:slim pump, disposable cartridges and infusion sets to individual customers and third-party distributors that resell the product to insulin-dependent diabetes customers. The Company is paid directly by customers who use the products, distributors and third-party insurance payors.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title passed, the price is fixed or determinable, and collectability is reasonably assured. These criteria are applied as follows:

— The evidence of an arrangement generally consists of contractual arrangements with distributors, third-party insurance payors or direct customers.

— Transfer of title and risk and rewards of ownership are passed upon shipment of the pump to distributors or upon delivery to the customer.

— The selling prices are fixed and agreed upon based on the contracts with distributors, the customer and contracted insurance payors, if applicable. For sales to customers associated with insurance providers with whom there is no contract, revenue is recognized upon collection of cash at which time the price is determinable. The Company generally does not offer rebates to its distributors and customers.

— The Company considers the overall creditworthiness and payment history of the distributor, customer and the contracted insurance payor in concluding whether collectability is reasonably assured.

Revenue Recognition for Arrangements with Multiple Deliverables

The Company considers the deliverables in its product offering as separate units of accounting and recognizes deliverables as revenue upon delivery only if (i) the deliverable has standalone value and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is probable and substantially controlled by the Company. The Company allocates consideration to the separate units of accounting, unless the undelivered elements were deemed perfunctory and inconsequential. The Company uses the relative selling price method, in which allocation of consideration is based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE), or if VSOE and TPE are not available, management’s best estimate of a standalone selling price (ESP) for the undelivered elements.

The Company offers a cloud-based data management application, t:connect, which is made available upon purchase by t:slim pump customers. This service is deemed an undelivered element at the time of the t:slim sale. Because the Company has neither VSOE nor TPE for this deliverable, the allocation of revenue is based on the Company’s ESP. The Company establishes its ESP based on estimated cost to provide such services, including consideration for a reasonable profit margin and corroborated by comparable market data. The Company allocates fair value based on management’s ESP to this element at the time of sale and is recognizing the revenue over the four-year hosting period. At March 31, 2015 and December 31, 2014, $0.7 million was recorded as deferred revenue for the t:connect hosting service. All other undelivered elements at the time of sale are deemed inconsequential or perfunctory.

Product Returns

The Company offers a 30-day right of return for its t:slim pump customers from the date of shipment, provided a physician’s confirmation of the medical reason for the return is received. Estimated return allowances for sales returns are based on historical returned quantities as compared to t:slim pump shipments in those same periods. The return rate is then applied to the sales of the current period to establish a reserve at the end of the period. The return rates used in the reserve are adjusted for known or expected changes in the marketplace when appropriate. The allowance for product returns included in other current liabilities on the Company’s balance sheets at March 31, 2015 and December 31, 2014 was $0.2 million and $0.3 million, respectively. Actual product returns have not differed materially from estimated amounts reserved in the accompanying financial statements.

Warranty Reserve

Warranty Reserve

The Company generally provides a four-year warranty on its t:slim pump to end user customers and may replace any pumps that do not function in accordance with the product specifications. Any pump returned to the Company may be refurbished and redeployed. Additionally, the Company offers a six-month warranty on t:slim cartridges and infusion sets. Estimated warranty costs are recorded at the time of shipment. Warranty costs are estimated based on the current expected replacement product cost, actual experience and expected failure rates from test studies performed in conjunction with the clearance of the t:slim pump with the FDA to support the longevity and reliability of the pump. The Company evaluates the reserve quarterly and makes adjustments when appropriate. At March 31, 2015 and December 31, 2014, the warranty reserve was $2.5 million and $2.0 million, respectively. Actual warranty costs have not differed materially from estimated amounts reserved in the accompanying financial statements.

The following table provides a reconciliation of the change in product warranty liabilities through March 31, 2015 (in thousands):

Balance at December 31, 2014	$	1,974
Provision for warranties issued during the period		1,332
Settlements made during the period		(834	)
Balance at March 31, 2015	$	2,472
Current portion	$	668
Non-current portion		1,804
Total	$	2,472

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and the portion that is ultimately expected to vest is recognized as compensation expense over the employee’s requisite service period on a straight-line basis. The Company estimates the fair value of stock options and shares issued to employees under the Employee Stock Purchase Plan (“ESPP”) using a Black-Scholes option-pricing model on the date of grant. The Black-Scholes option-pricing model requires the use of subjective assumptions including volatility, expected term, and risk-free rate. For awards that vest based on service conditions, the Company recognizes expense using the straight-line method less estimated forfeitures. As of March 31, 2015, there were no outstanding equity awards with market or performance conditions.

The Company records the expense for stock option grants to non-employees based on the estimated fair value of the stock options using the Black-Scholes option-pricing model. The fair value of non-employee awards is remeasured at each reporting period as the underlying awards vest unless the instruments are fully vested, immediately exercisable and nonforfeitable on the date of grant.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the sum of the weighted-average number of dilutive common share equivalents outstanding for the period determined using the treasury stock method. Dilutive common share equivalents are comprised of warrants, potential Employee Stock Purchase Plan (ESPP) awards, and options outstanding under the Company’s stock plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share (because inclusion would be anti-dilutive) are as follows (in common stock equivalent shares):

	Three Months Ended
	March 31,
	2015		2014
Warrants for common stock		990,031		1,297,057
Common stock options		2,163,331		4,889,549
ESPP		127,067		137,943
		3,280,429		6,324,549

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) issued a comprehensive new revenue recognition standard that will supersede existing revenue guidance under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. On April 1, 2015, the FASB proposed deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company is in the process of assessing the future impact of the adoption of the standard on its financial statements.

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Stockholders' Equity - Schedule of Assumptions Used in Black-Scholes Option-Pricing Model (Detail) (Stock Options [Member], USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value (per share)	$ 8.58	$ 17.05
Risk-free interest rate	1.70%	1.90%
Expected dividend yield	0.00%	0.00%
Expected volatility	70.40%	78.70%
Expected term (in years)	6 years 1 month 6 days	6 years 1 month 6 days

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Schedule of Shares of Common Stock Reserved for Future Issuance

The following shares of common stock are reserved for future issuance at March 31, 2015:

Common stock warrants outstanding	990,031
Stock options issued and outstanding	5,194,724
Authorized for future option grants	2,734,773
Employee stock purchase plan	770,413
	9,689,941

Schedule of Assumptions Used in Black-Scholes Option-Pricing Model

The assumptions used in the Black-Scholes option-pricing model are as follows:

	Stock Option
	Three Months Ended
	March 31,
	2015			2014
Weighted average grant date fair value (per share)	$	8.58		$	17.05
Risk-free interest rate		1.7	%		1.9	%
Expected dividend yield		0.0	%		0.0	%
Expected volatility		70.4	%		78.7	%
Expected term (in years)		6.1			6.1

Summary for Allocation of Stock Compensation Expense

The following table summarizes the allocation of stock compensation expense (in thousands):

	Three Months Ended
	March 31,
	2015		2014
Cost of sales	$	324	$	364
Selling, general & administrative		2,978		3,003
Research and development		471		404
Total	$	3,773	$	3,771

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Short-Term Investments - Summary of Estimated Fair Value of Short-Term Investments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Amortized Cost	53,657	36,040
Short-term investments, Unrealized Gain	39	9
Short-term investments, Unrealized Loss		(1)
Short-term investments, Estimated Fair Value	53,696	36,048
Short-term investments, Amortized Cost	53,791	36,096
Short-term investments, Unrealized Gain	43	11
Short-term investments, Unrealized Loss		(1)
Short-term investments, Estimated Fair Value	53,834	36,106
Commercial paper [Member]
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Amortized Cost	45,156	32,536
Short-term investments, Unrealized Gain	38	9
Short-term investments, Estimated Fair Value	45,194	32,545
Commercial paper [Member] | Maximum [Member]
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Maturity (in years)	1 year	1 year
Government-sponsored enterprise securities [Member]
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Amortized Cost	8,501	3,504
Short-term investments, Unrealized Gain	1
Short-term investments, Unrealized Loss		(1)
Short-term investments, Estimated Fair Value	8,502	3,503
Government-sponsored enterprise securities [Member] | Maximum [Member]
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Maturity (in years)	1 year	1 year
Trading securities — mutual funds held for nonqualified deferred compensation plan participants [Member]
Cash Cash Equivalents And Short Term Investments [Line Items]
Short-term investments, Amortized Cost	134	56
Short-term investments, Unrealized Gain	4	2
Short-term investments, Estimated Fair Value	138	58

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Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating activities
Net loss	$ (21,208)	$ (21,962)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	1,182	921
Interest expense related to amortization of debt discount and debt issuance costs	35	93
Provision for allowance for doubtful accounts	(31)	54
Provision for inventory reserve		260
Amortization of premium/discount on short-term investments	(18)	(6)
Stock-based compensation expense	3,773	3,771
Other	(60)
Changes in operating assets and liabilities:
Accounts receivable, net	2,457	1,821
Inventory, net	(1,658)	(188)
Prepaid and other current assets	(56)	(118)
Other long term assets	(17)
Accounts payable	1,354	(481)
Accrued expense	(260)	(385)
Employee-related liabilities	(933)	699
Deferred revenue	(37)	(29)
Other current liabilities	(160)	(1,276)
Deferred rent	(151)	(67)
Other long term liabilities	366	(67)
Net cash used in operating activities	(15,422)	(16,960)
Investing activities
Purchase of short-term investments	(39,099)	(28,833)
Proceeds from sales and maturities of short-term investments	21,500
Purchase of property and equipment	(600)	(1,620)
Purchase of patents	(74)	(173)
Net cash used in investing activities	(18,273)	(30,626)
Financing activities
Proceeds from issuance of preferred stock for cash, net of offering costs		27
Proceeds from public offering, net of offering costs	64,851
Proceeds from issuance of common stock	217
Net cash provided by financing activities	65,068	27
Net increase (decrease) in cash and cash equivalents	31,373	(47,559)
Cash and cash equivalents at beginning of period	31,176	124,385
Cash and cash equivalents at end of period	62,549	76,826
Supplemental disclosures of cash flow information
Interest paid	863	1,050
Income taxes paid	18	88
Supplemental schedule of noncash investing and financing activities
Property and equipment included in accounts payable	$ 1,638	$ 149

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Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

Authoritative guidance on fair value measurements defines fair value, establishes a consistent framework for measuring fair value, and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1:	Observable inputs such as unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly for substantially the full term of the asset of liability.
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own valuation techniques that require input assumptions.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):  

			Fair Value Measurements at
			March 31, 2015
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	54,452	$	54,452	$	—	$	—
Commercial paper		45,194	—			45,194	—
Mutual funds held for nonqualified deferred compensation plan participants (2)		138		138	—		—
Government-sponsored enterprise securities		8,502	—			8,502	—
Total assets	$	108,286	$	54,590	$	53,696	$	—
Liabilities
Deferred compensation (2)	$	138	$	138	$	—	$	—
Total liabilities	$	138	$	138	$	—	$	—

			Fair Value Measurements at
			December 31, 2014
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	30,050	$	30,050	$	—	$	—
Commercial paper		32,545		—		32,545		—
Mutual funds held for nonqualified deferred compensation plan participants (2)		58		58		—		—
Government-sponsored enterprise securities		3,503		—		3,503		—
Total assets	$	66,156	$	30,108	$	36,048	$	—
Liabilities
Deferred compensation (2)	$	58	$	58	$	—	$	—
Total liabilities	$	58	$	58	$	—	$	—

(1) Cash equivalents included money market funds and commercial paper with a maturity of three months or less from the date of purchase.

(2) Deferred compensation plans are compensation plans directed by the Company and structured as a Rabbi Trust for certain executives and non-employee directors. The investment assets of the Rabbi Trust are valued using quoted market prices multiplied by the number of shares held in each trust account. The related deferred compensation liability represents the fair value of the investment assets.

The Company’s Level 2 financial instruments are valued using market prices on less active markets with observable valuation inputs such as interest rates and yield curves. The Company obtains the fair value of Level 2 financial instruments from quoted market prices, calculated prices or quotes from third-party pricing services. The Company validates these prices through independent valuation testing and review of portfolio valuations provided by the Company’s investment managers. There were no transfers between Level 1 and Level 2 securities during the three months ended March 31, 2015.

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Inventory - Summary of Inventory (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Inventory Disclosure [Abstract]
Raw materials	$ 8,091	$ 7,085
Work in process	3,205	2,288
Finished goods	2,512	2,856
Inventory gross	13,808	12,229
Less reserve	(227)	(316)
Total	$ 13,581	$ 11,913

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Subsequent Event - Additional Information (Detail) (Subsequent Event, USD $) In Millions, unless otherwise specified	1 Months Ended
	Apr. 30, 2015 Contracts
Subsequent Event
Subsequent Event [Line Items]
Notional amounts of foreign currency forward contracts cash flow liabilities	$ 1.0
Foreign exchange forward contracts expiring date	Dec. 31, 2015
Number of foreign currency forward contracts	2

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):  

			Fair Value Measurements at
			March 31, 2015
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	54,452	$	54,452	$	—	$	—
Commercial paper		45,194	—			45,194	—
Mutual funds held for nonqualified deferred compensation plan participants (2)		138		138	—		—
Government-sponsored enterprise securities		8,502	—			8,502	—
Total assets	$	108,286	$	54,590	$	53,696	$	—
Liabilities
Deferred compensation (2)	$	138	$	138	$	—	$	—
Total liabilities	$	138	$	138	$	—	$	—

			Fair Value Measurements at
			December 31, 2014
			(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents (1)	$	30,050	$	30,050	$	—	$	—
Commercial paper		32,545		—		32,545		—
Mutual funds held for nonqualified deferred compensation plan participants (2)		58		58		—		—
Government-sponsored enterprise securities		3,503		—		3,503		—
Total assets	$	66,156	$	30,108	$	36,048	$	—
Liabilities
Deferred compensation (2)	$	58	$	58	$	—	$	—
Total liabilities	$	58	$	58	$	—	$	—

(1) Cash equivalents included money market funds and commercial paper with a maturity of three months or less from the date of purchase.

(2) Deferred compensation plans are compensation plans directed by the Company and structured as a Rabbi Trust for certain executives and non-employee directors. The investment assets of the Rabbi Trust are valued using quoted market prices multiplied by the number of shares held in each trust account. The related deferred compensation liability represents the fair value of the investment assets.