Description of the notes—Conversion rights—Adjustment to shares delivered upon conversion upon a
make-whole fundamental change

Holders who convert their notes in connection with a “make-whole fundamental change” (as defined in the Preliminary Prospectus) occurring prior to June 15, 2016 are entitled to an increase in the conversion rate for the notes so surrendered for conversion.

The following table sets forth hypothetical stock price and the number of additional shares by which the conversion rate will be increased per $1,000 principal amount of notes in the event of such a make-whole fundamental change.

		Stock Price
Effective Date		$19.77		$22.00		$26.00		$30.00		$34.00		$38.00		$42.00		$45.00		$50.00		$55.00		$60.00		$65.00		$70.00		$75.00		$80.00
June 29, 2011		12.4067		10.7236		7.6185		5.6283		4.2932		3.3640		2.6970		2.3152		1.8340		1.4863		1.2276		1.0297		0.8748		0.7509		0.6498
June 15, 2012		12.4067		10.3647		7.0174		4.9240		3.5640		2.6531		2.0272		1.6836		1.2710		0.9910		0.7948		0.6530		0.5473		0.4660		0.4018
June 15, 2013		12.4067		9.6956		6.0287		3.8023		2.4257		1.5693		1.0363		0.7733		0.4979		0.3436		0.2551		0.2018		0.1673		0.1433		0.1252
June 15, 2014		12.4067		8.5789		4.5413		2.0733		0.4928		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000
June 15, 2015		12.4067		6.4953		0.3957		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000
June 15, 2016		12.4067		7.2796		0.2866		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000

The exact stock prices and effective dates may not be set forth in the table above, in which case:

	•		If the stock price is between two stock prices in the table or the effective date is between two effective dates in the table, the number of additional shares will be determined by a straightline interpolation between the number of additional shares set forth for the higher and lower stock prices and the earlier and later effective dates, as applicable, based on a 365-day year.
	•		If the stock price is greater than $80.00 per share (subject to adjustment in the same manner as the stock prices set forth in the first row of the table above), no additional shares will be added to the conversion rate.
	•		If the stock price is less than $19.77 per share (subject to adjustment in the same manner as the stock prices set forth in the first row of the table above), no additional shares will be added to the conversion rate.

Notwithstanding the foregoing, in no event will the total number of shares of common stock issuable upon conversion exceed 50.5816 per $1,000 principal amount of notes, subject to adjustment in the same manner as the conversion rate as set forth in the Preliminary Prospectus under the caption “Description of the notes—Conversion rights—Conversion rate adjustments.”

Our obligation to satisfy the additional shares requirement could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2011:

	•		on an actual basis,
	•		on a pro forma basis to give effect to the consummation of the Acquisition as if it had occurred on March 31, 2011; and
	•		on a pro forma as adjusted basis to give effect to the sale of the notes (assuming the underwriter’s option to purchase additional notes is not exercised), the application of the net proceeds therefrom as described in “Use of proceeds” in this pricing term sheet and the consummation of the Acquisition.

You should read this table in conjunction with “Use of proceeds” and “Unaudited pro forma condensed combined financial statements” as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, each of which is incorporated by reference into the Preliminary Prospectus from our Quarterly Report on Form 10-Q for the three months ended March 31, 2011 and Neighborhood Diabetes’ consolidated financial statements and related notes thereto, incorporated by reference into the Preliminary Prospectus from our Current Report on Form 8-K, filed by us with the SEC on June 7, 2011.

							As of March 31, 2011
						Pro forma for				Pro Forma as
(in thousands, except share amounts)		Actual				the acquisition				Adjusted
Cash and cash equivalents(1)		$	104,488			$	66,696			$	102,441
5.375% convertible senior notes due 2013(2)(3)			85,000				85,000				15,000
Notes offered hereby(3)			—				—				125,000
Other long-term liabilities(4)			1,492				1,581				1,581
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding, actual, pro forma for the Acquisition and pro forma as adjusted			—				—				—
Common stock, $0.001 par value per share; 100,000,000 shares authorized; 45,829,569 shares issued and outstanding, actual; 47,027,200 shares issued and outstanding, pro forma for the Acquisition and pro forma as adjusted			46				47				47
Additional paid-in capital			453,435				477,865				477,865
Accumulated deficit			(393,701	)			(397,166	)			(397,166	)
Total stockholders’ equity			59,780				80,746				80,746
Total capitalization		$	146,272			$	167,327			$	222,327

		to be separated into a liability and an equity component, such that interest expense reflects the issuer’s non-convertible debt interest rate. Upon issuance, a debt discount will be recognized as a decrease in debt and an increase in equity. The debt component will accrete up to the principal amount over the expected term of the debt. ASC 470-20 does not affect the actual amount that we are required to repay, and the amount shown in the table above for our 5.375% convertible senior notes due 2013 and the notes offered hereby is the aggregate principal amount of the notes and does not reflect the debt discount, fees and expenses that we have recognized with respect to our 5.375% convertible senior notes or will be required to recognize with respect to the notes offered hereby.
(4)		Represents the non-current portion of an agreement fee we received in March 2008 in connection with an amendment to the development and license agreement between us and Abbott Diabetes Care, Inc. See note 2 to our consolidated financial statements for the three month period ended March 31, 2011 incorporated by reference herein. The “pro forma” adjustment represents the fair value of the potential additional cash consideration required under the terms of the Acquisition Agreement.