Memorandum

Insulet receives FDA warning letter from March 2015 inspection - June 15, 2015

Insulet received an FDA warning letter related to a March 2015 inspection of its Billerica, Massachusetts facility last Monday. According to the 8-K filing, the company released certain lots of OmniPods that “did not conform to final acceptance criteria” – there are few specifics apart from knowing that the pods were manufactured in mid-2013 and 1H14. The FDA originally issued a 483 with inspectional observations on March 27, and Insulet responded three weeks later with a corrective action plan (this was not disclosed in Insulet’s 1Q15 call on April 30). On a positive note for Insulet, last week’s warning letter deemed the April proposal adequate to address the issue, and the Agency has requested further documentation, including: (i) a description of the corrective actions; (ii) verification when complete; and (iii) information to demonstrate that the corrective actions have been effective. Insulet is required to respond within 15 days, and we don’t expect the news to have an adverse impact on Insulet’s ongoing business and operations, assuming there is no new material information. Indeed, it sounds like things are well under control, though it will be important to follow – much of Insulet’s differentiated market position stems from the impressive manufacturing innovation to now make 3+ million pods per quarter. This remains a significant barrier to other patch pump entrants, and as with any world-class healthcare company, it will be critical for the company to maintain high quality going forward. We look forward to further detail in the company’s 2Q15 call.