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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------

                                    FORM 10-K

                                ----------------

         [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

                    FOR FISCAL YEAR ENDED DECEMBER 29, 2000.

                                       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: 0-26268

                                  MINIMED INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  DELAWARE                                   95-4408171
      (STATE OF OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

18000 DEVONSHIRE STREET, NORTHRIDGE, CALIFORNIA               91325-1219
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 362-5958

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                               TITLE OF EACH CLASS
                          COMMON STOCK, $.01 PAR VALUE
                         PREFERRED STOCK PURCHASE RIGHTS

    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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by referenced in Part III of this Form 10-K or any amendment to
this Form 10-K. [X ]

    The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 15, 2001 was $1,523,558,326 (based on closing sale price of
$31.75 per share as reported on the Nasdaq National Market). The total number
of shares outstanding of the registrant's Common Stock as of March 15, 2001 was
64,611,780.

                      DOCUMENTS INCORPORATED BY REFERENCE:

    Portions of the following document are incorporated herein by reference:
Part III -- The Registrant's Proxy Statement for its 2001 Annual Meeting (the
"2001 Proxy").

                     Exhibit Index is located at page [60]
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                                     PART I

    Some of the information in this Annual Report on Form 10-K contains
forward-looking statements, including statements relating to the anticipated
operating results, growth and financial resources of our company, development,
manufacture, introduction, and commercial acceptance of new products, the
development of new markets, trends relating to certain expenses, obtaining and
maintaining regulatory approval, acceptance of new products, obtaining and
maintaining reimbursement for our products, expectations regarding competition
from other companies and from other methods of treating medical conditions, our
ability to manufacture and distribute our products, our success in maintaining
our license agreements with Medical Research Group, Inc. and the success
of MRG's product development and performance. The forward-looking statements are
based on assumptions, including assumptions of future events. Although we
believe that our expectations are based on reasonable assumptions, the actual
results and our financial position will vary from those projected or implied in
the forward-looking statements, and the variances may be material. Such
variances result from the risks and uncertainties which affect our business,
including changes in economic and market conditions, acceptance of our products
by health care and reimbursement communities, health care legislation and
regulation, new developments in diabetes therapy, administrative and regulatory
approval and related considerations, competitive developments, technical risks
associated with product development, effective integration of our acquisitions,
maintenance and execution of strategic alliances and other factors discussed
under the caption "Risk Factors" contained in our Prospectus dated June 29, 1999
filed with the Securities and Exchange Commission. While to the best of our
knowledge, the information presented in the annual report is accurate, we
disclaim any obligation to update the information provided herein.

ITEM 1. BUSINESS

    We design, develop, manufacture, market and sell advanced microinfusion
systems and continuous glucose monitoring systems for the intensive management
of diabetes. Our primary goal is to continue to be an innovator in designing and
bringing to market advanced medical devices for the treatment of diabetes. We
are also using our drug delivery expertise to develop infusion devices for the
treatment of other chronic medical conditions. Our development efforts are
focused on creating products which will offer patients a comprehensive and
integrated approach to enhanced disease management.

    We have been selling external insulin infusion pumps and related supplies
since 1983, and we believe we have established a reputation for quality and
service associated with the MiniMed name. We believe that we are the leading
provider of insulin infusion systems in the world, with a present market share
in the United States which we estimate to be approximately 80% of new product
sales. Our net sales of these external pumps and related disposables have grown
at a compounded annual growth rate of approximately 47% from $59.5 million in
1996 to $275.8 million in 2000. In turn, this growth has driven our overall net
income from $3.3 million to $43.2 million over the same period. We intend to
leverage our existing customer base and current distribution channels to
introduce new products to satisfy more of our customers' needs and provide more
complete diabetes management solutions.

MARKET OVERVIEW

    Diabetes is a chronic, life-threatening disease, for which there is no known
cure. In patients with diabetes, the body does not produce or respond adequately
to insulin, a hormone produced by the pancreas that is critical to the
metabolism of glucose. In the normal digestive process, carbohydrates in food
are broken down into glucose, which is circulated in the bloodstream to the
cells of the body, where it is converted into energy.

     The concentration of glucose in the bloodstream must be controlled within a
relatively narrow range to maintain normal health and avoid significant
long-term health complications. Insulin, which is secreted by the islet cells in
the pancreas, is the primary regulatory mechanism by which the body metabolizes
glucose. A normal pancreas produces the correct amount of insulin required to
maintain a person's glucose at proper levels. In patients with diabetes,
however, insulin-producing cells are destroyed or exist in reduced numbers, or
some combination of both and, as a result, the body's cells do not effectively
metabolize glucose.

    Although we believe that our most significant growth opportunity is to
expand our diabetes business, we also believe that opportunities involving
application of our technology to the delivery of other drugs may become
increasingly important in the future.

TYPE 1 VERSUS TYPE 2 DIABETES

     Diabetes is typically classified into two primary types. Type 1 is the more
severe form of the disease and is characterized by a complete lack of insulin
secretion by the pancreas. In order to maintain body chemistry balance and
sustain life, Type 1 patients require life-long, daily insulin therapy. In Type
2 diabetes, the more prevalent form of the disease, the pancreas produces some
insulin, but glucose levels are still not adequately controlled. There is a
spectrum of the severity in Type 2 diabetes, ranging from those


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patients whose disease is mild and even undiagnosed, to those who can usually
manage their disease by diet and exercise, to those who use various oral
medications and to the most serious segment that requires use of insulin.

HOW MANY PEOPLE HAVE DIABETES?

    According to the American Diabetes Association, which we call the ADA,
diabetes afflicts approximately 16 million people in the Unites States, or
approximately 6% of the total population, 800,000 to 1 million of whom are
estimated by the ADA to suffer from Type 1 diabetes. The Health Care Financing
Administration, which administers the Medicare Program, estimates that there is
an incidence of 30,000 new diabetes cases per year. Although patients with Type
1 diabetes represent the primary market for our programmable insulin pumps,
there is a small but growing use of programmable insulin pumps for Type 2
diabetes. Based on industry sources, we estimate that there are approximately 4
million Type 2 patients using insulin in the U.S.

THE COMPLICATIONS OF DIABETES

    People with diabetes experience distress at both high levels of glucose --
"hyperglycemia," -- and low levels of glucose -- "hypoglycemia," with
significant short and long-term negative impacts on wellness and mortality.
Recurring high glucose levels inhibit the immune system and result in fatigue,
slow healing and lower resistance to infection. In severe cases, high glucose
levels can lead to coma and death. Chronically high glucose levels can result in
major, long-term complications such as eye disease, kidney disease, nerve
disease, male impotence and cardiovascular complications, including heart
attacks and strokes. Low glucose levels can also lead to complications,
including fainting, weakness and, in severe cases, unconsciousness, permanent
loss of cognitive power and death. According to the ADA, diabetes is a leading
cause of:

    o   new blindness in adults 20 to 74 years old with 12,000 to 24,000 new
        cases annually in the United States;

    o   renal failure with approximately 27,900 new cases in 1997; and

    o   amputations with approximately 56,000 new cases annually.

    Based upon data from the ADA, diabetes is the sixth leading direct cause of
death by disease in the United States, accounting for approximately 193,000
deaths in 1996.

COSTS TO THE HEALTH CARE SYSTEM

    The costs to the health care system associated with the treatment of
diabetes and its complications are significant. According to the ADA, the total
health care costs in the United States of treating people with all types of
diabetes was estimated to be $98.0 billion in 1997. This included approximately
$44 billion in direct medical and treatment costs and another $54.1 billion was
in indirect costs, including premature mortality and disability.

THERAPY FOR DIABETES

    To avoid the acute effects of diabetes and to reduce the associated
complications, patients with Type 1 diabetes, and many Type 2 patients, must use
insulin daily to control glucose levels. A person's glucose level will vary
depending upon food intake, insulin availability, exercise, stress and illness.
To achieve good control a patient needs a continuous supply of insulin to
provide his or her background metabolic needs, known as basal insulin, as well
as periodic larger amounts for meals, known as bolus insulin. Patients generally
follow one of two therapy protocols:

    o   conventional, which involves one or two self-administered, daily
        injections of long-acting, timed-release, insulin, as well as short
        acting insulin, along with diet control and exercise; or

    o   intensive, which consists either of (1) pump therapy with fast-acting
        insulin or (2) at least three injections per day of mixtures of
        long-acting and fast-acting insulins.

    Pumps can be programmed to better meet these needs because they usually use
only fast-acting insulin delivered in hundreds of microinfusions throughout the
day in a profile that provides both a constant flow of insulin, or basal rate,
and also bolus infusions when needed. Because of the limited number of
injections and the uneven absorption of timed-release insulins, we believe that
in many patients neither conventional nor multiple injection therapy controls
glucose levels as well as pump therapy. Our products have


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been shown in clinical trials to provide reduced glycemic variability and
significantly fewer severe hypoglycemic events than conventional or multiple
daily injection therapy.

THE DAILY RITUAL: WHAT THE DIABETES PATIENT CURRENTLY MUST DO

     In order to gauge insulin dosage, a patient should measure his or her
glucose level at least several times per day. Currently, this is generally done
by:

    o   pricking a finger with a needle;

    o   drawing a drop of blood;

    o   placing it on a disposable strip;

    o   inserting the strip into a small meter about the size of a pager; and

    o   waiting twelve seconds to two minutes for a number to appear on the
        display.

    The patient must then assess his or her carbohydrate intake and, using the
measurement of glucose concentration, compute the appropriate amount of insulin
required. The patient then administers that amount of insulin using a syringe, a
pen injector or a programmable infusion pump.

    We believe that the discomfort, complexity and time associated with this
entire process discourages patient compliance. In addition, the current glucose
monitoring procedure provides measurements at only a few points in time. With
each determination the patient does not know for sure if his or her glucose
level is rising, falling or remaining stable. This can lead to erroneous
conclusions as to the amount of insulin needed. In spite of these limitations,
we estimate the present worldwide market for these glucose meters and strips and
related disposables to be approximately $3.5 billion. The continuous glucose
monitoring technology we are currently developing is intended to eventually
compete with these glucose meters and strips, especially for insulin-using
patients, who use over half of the total worldwide supply of glucose meters and
strips. We cannot assure you, however, that our continuous glucose monitoring
systems will prove to be sufficiently accurate and effective or that we will be
able to successfully commercialize these products.

NIH LANDMARK STUDY: DCCT

    In 1984, the National Institutes for Health, which we call the NIH, started
a $165.0 million study known as the Diabetes Complications and Control Trial,
which is generally referred to as the DCCT, involving 1,441 Type 1 patients who
participated over the entire approximately ten-year term of the study. The study
was designed to determine whether close control of blood glucose levels,
approaching "normal" levels, could prevent the onset and the progression of
severe, long-term complications of Type 1 diabetes. Individuals with diabetes
with mild or no significant complications were randomly divided into two groups:

    o   the conventionally-managed patients took one or two injections daily of
        a variety of types of mixed insulins and were required to measure their
        blood glucose levels once or twice per day; and

    o   the intensively-managed patients were given the choice of three or more
        injections per day, or use of an insulin pump. These patients were
        required to take at least four glucose measurements daily.

    The NIH provided to patients who used insulin pumps our earlier Model 504-S,
although a small number of patients who had already been using other pumps were
permitted to continue using their existing pumps. Among the intensively-managed
patients, 34% overall used external pumps, and at the end of the study 42% of
the intensively-managed patients were using pumps.

    In September 1993, The New England Journal of Medicine published the results
of this landmark study, which concluded that:

    o   Serious consequences of diabetes were reduced significantly for the
        intensively-managed patient group as a whole.

    o   Progression of the three primary conditions that were evaluated was
        reduced in the intensive group relative to the conventional group: eye
        disease by 76%, kidney disease by 50% and nerve disease by 60%.


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    o   The incidence of hypoglycemic events for the intensively-managed group
        was three times higher than for the conventionally-managed group.

    o   In spite of the finding with respect to hypoglycemic events, the NIH
        concluded that Type 1 patients should be treated intensively because the
        reduction in long-term complications greatly outweighed the risk of
        hypoglycemic events. In fact, the results of the study were so
        compelling that the study was terminated a year earlier than planned.

MORE RECENT CLINICAL STUDIES

    Although the DCCT was not intended to compare the benefits of pump therapy
with multiple daily injections, more recent studies have focused on this
comparison and have concluded that pump therapy has significant advantages.

    In November 1999, Diabetes Care, a respected scientific journal, published
the results of a study conducted by Elizabeth Boland, MSN, APRN, PNP, CDE and
others, involving 75 adolescents between the ages of 12 and 20 years who were
candidates for intensive therapy. Twenty-five of the patients chose the external
programmable pump as their mode of diabetes treatment while the other fifty
patients chose multiple daily injections. The study found that the rate of
severe hypoglycemic events was reduced by almost 50% in the group using the
pump. The pump patients also used less insulin than those receiving multiple
daily injections. Furthermore, the patients using pumps found coping with
diabetes to be less difficult than adolescents using multiple daily injections.

    In April 1996, Diabetes Care published the results of a study by Bruce Bode,
M.D. and others, involving 55 patients who managed their glucose levels
intensively, using multiple daily injections for at least 12 months before
switching to our external programmable pump for a minimum of 12 months. The
study found that the patients achieved reduced glycemic variability and a
four-to six-fold reduction in severe hypoglycemic events with the pump.

    The EVADIAC study group in France presented two studies in 1996 which
included a comparison of pump therapy using implantable pumps to multiple daily
injections and external programmable pumps. We manufactured a majority of the
implantable pumps used in the studies. The studies, involving more than 240
patients, found that implantable pumps had significant advantages over
alternative intensive management therapies for Type 1 patients. The studies also
showed that patients with implantable pumps had an even greater reduction in
severe hypoglycemic events than patients with external pumps.

    In October 1996, the Journal of the American Medical Association, generally
known as JAMA, published the results of a prospective, randomized study
performed for the U.S. Department of Veterans Affairs which compared pump
therapy using our implantable pump to multiple daily injections in a total of
105 Type 2 patients. The study found that Type 2 patients with implantable pumps
achieved reduced glycemic variability and reduced risk of hypoglycemic events
without weight gain, as compared to those patients using multiple daily
injections. The study also showed that the pump patients had an enhanced quality
of life.

    In 1998, the UK Prospective Diabetes Study published in The Lancet, found,
over a ten-year period, that intensively-managed Type 2 patients had a 25%
reduction in the risks of microvascular clinical complications, such as eye
disease and kidney disease. The only disadvantages according to the study to
intensive management for Type 2 patients were weight gain and risk of
hypoglycemia. There was also no evidence that intensive treatment had any
specific adverse effect on macrovascular disease.

THE MINIMED SOLUTION

    We believe our insulin pumps and continuous glucose monitoring technologies
offer patients with diabetes substantial benefits over the current alternative
therapies. In addition, we believe our technologies for external programmable
pumps can be used in the controlled delivery of other large molecule compounds
with advantages over current treatment options.

INSULIN PUMP TECHNOLOGIES

    Our diabetes products, both those already available commercially and others
under development, reduce the serious complications of diabetes by enabling
patients to more easily, accurately and intensively manage their glucose levels.
Our programmable insulin pumps have substantial advantages over conventional or
intensive injection therapy because they:

    o   Result in Fewer Severe Hypoglycemic Events. The Diabetes Care, EVADIAC
        and JAMA studies referred to above all demonstrated this using our
        pumps.


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    o   Enable Rapid Insulin Absorption and Availability. Our pumps use
        fast-acting insulin which is more quickly absorbed into the blood.
        Regular and timed-release insulins take considerable time before
        initiating metabolism of glucose, which means that a patient using
        injection therapy must administer an injection well before the insulin
        is actually needed. Changing plans can cause problems. For example, a
        bolus injection -- a single sizable dose -- of regular insulin should be
        taken 5--15 minutes before a meal. If the carbohydrate intake or the
        timing changes, glucose control is impaired. In pump therapy, which uses
        only fast-acting insulin, only a few minutes of lead time are required
        between the infusion of a bolus and the meal.

    o   Improve Consistency of Insulin Absorption. Fast-acting insulin delivered
        by a pump in tiny microinfusions also has lower variability in
        absorption. By contrast, both conventional therapy and multiple daily
        injections require the use of timed-release insulins, which vary in
        absorption within the same patient by as much as 52% or more from one
        day to the next. Insulin delivered by pumps has been shown to have
        variability levels of less than 2.8% in most patients. In addition,
        injection therapy requires the patient to administer multiple injections
        of insulin in different locations in the body. Each location in the body
        may have different absorption characteristics. Pumps, in contrast,
        deliver the insulin through an infusion set that is usually connected
        for three days to a single site, usually in a patient's abdomen,
        providing more consistent absorption.

    o   Enhance Control Through Programmable Delivery. Because our pumps deliver
        hundreds of microdoses of insulin and are programmable, they enable the
        delivery of insulin to be more closely matched to a patient's needs as
        they vary throughout the day. This capability is important at all times
        and especially during sleep. Many patients have been shown to suffer
        from a rise in early morning glucose levels. The patient can program our
        pumps to address this condition, known as the Dawn Phenomenon, as well
        as the many other predictable fluctuations in glucose levels.

    o   Provide Continuous Insulin Supply. Our pumps deliver a virtually
        continuous infusion of insulin to provide for a patient's background
        metabolic needs. Injection therapy, in contrast, requires the repeated
        administration of boluses, which form a subcutaneous depot or collection
        of insulin and can result in tissue scarring at the injection site. In
        pump therapy, fast-acting insulin is delivered in hundreds of
        microinfusions throughout the day, thereby reducing the creation of such
        depots.

    o   Improve Patient Quality of Life. In addition to advantages related to
        glucose control, we believe our pumps provide patients with a more
        flexible lifestyle, an important advantage that makes pumps a
        particularly attractive alternative to injection therapy. Because of the
        flexibility of infusion pumps to deliver both a continuous background
        profile of fast-acting insulin and larger episodic boluses when needed
        before meals, patients are not restricted to the fixed schedule of
        eating and exercise that is required for both conventional and intensive
        injection therapy. They are less likely to have glucose level
        fluctuations as the insulin demands of an active life are met. In
        addition to these lifestyle benefits, many people using the pump report
        that they feel much better with pump therapy.

GLUCOSE SENSOR TECHNOLOGY

    In June 1999, the U.S. Food and Drug Administration, which we call the FDA,
approved our first generation continuous glucose monitoring system designed to
be used by physicians in treating patients with diabetes. Patients can wear this
initial model for several days to enable a physician to retrospectively analyze
patients' glucose levels. Physicians are able to use the information to modify
patients' treatment, which may include the prescription or reprogramming of an
insulin pump. Our current continuous glucose monitoring system is not a
substitute for the traditional methods of glucose measurement.

    Subject to receipt of a separate FDA approval, we intend to introduce a
consumer model of the glucose monitoring system that would provide the patient
with continuous glucose readings. The first generation consumer model of our
continuous glucose monitoring system is not a substitute for the traditional
methods of glucose measurement. We submitted our application to the FDA for the
consumer version of our continuous glucose monitoring system in August 2000. We
expect that the FDA will review our consumer model of the glucose monitoring
system in calendar year 2001. However, we cannot assure you when the FDA will
complete its review of our consumer model of the glucose monitoring system.
Furthermore, we cannot assure you that upon review, the FDA will approve our
consumer model of the glucose monitoring system.

    Our continuous glucose monitoring systems utilize a small, thin, pliable
sensor inserted into subcutaneous tissue, the tissue immediately under the skin,
usually in the abdomen, upper arm or thigh. This sensing element produces an
electrical signal proportional to glucose in the interstitial fluid, the fluid
in the subcutaneous tissue. We are developing a series of subsequent generations
of products utilizing this technology. The current product utilizes a sensor
connected by cable to a small recording/display unit, and future versions will
transmit the signal by telemetry to a recording/display unit. We are designing
future models of our external pumps to receive information from the sensor and
react to sensor commands, although these products, if they are successfully


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developed, will not be available for at least two years. We believe that if
these products are successfully developed we would be able to compete in the
worldwide market for glucose strips and meters, which we estimate to be
approximately $3.5 billion. There can be no guarantee that we would be able to
successfully develop such products.

    We believe that our continuous glucose monitoring systems will, if
successful, offer significant advantages over current methods of monitoring
glucose levels because our systems would:

    o   Improve Patients' Ability to Normalize Glucose Levels. Our continuous
        glucose monitoring systems have been shown in limited human trials to
        continuously and accurately measure glucose levels as compared to
        standard laboratory reference equipment. This information not only
        presents quantitative measurements but will allow patients to determine
        whether glucose levels are rising, falling or remaining stable. This
        will provide the patient a means to better manage his or her glucose
        levels.

    o   Warn Against Dangerously High or Low Blood Glucose Levels. Studies
        indicate that during the day and night patients experience wide swings
        of glucose levels which are not easily detected even by testing with
        four to six finger pricks per day. In our next generation continuous
        glucose monitoring system product, when a sensor measurement indicates a
        glucose level above or below an acceptable range, an alarm will
        activate. Our sensing systems will also operate during periods of sleep
        and will sound an alarm to wake the patient if his or her glucose level
        gets too high or too low.

    o   Improve Patient Compliance. Our subcutaneous glucose sensor is inserted
        through the skin approximately every three days. Because it is small,
        thin and pliable, the microsensor causes little, if any, patient
        discomfort. By avoiding the discomfort, complexity and time associated
        with repeatedly pricking a finger to draw blood and waiting for a meter
        reading of the sample, our continuous glucose monitoring system is
        expected to remove many of the obstacles which are believed to deter
        patient compliance, particularly in the case of intensive management of
        diabetes. A patient using our continuous glucose monitoring system would
        need only two or three sensor insertions per week and is expected to
        require fewer calibrations per week, as compared to at least 28 finger
        pricks per week for recommended monitoring with strip meters in an
        intensive management regimen.

    o   Enable Health Care Professionals to Establish Improved Treatment
        Protocols. The challenge of establishing a suitable treatment program
        for patients beginning intensive management is great. In some medical
        practices, patients are hospitalized for several days so that frequent
        glucose measurements can be made to generate a suitable treatment
        protocol. Even this procedure is limited in its effectiveness because
        the patient's behavior in the hospital differs from his or her normal
        lifestyle. Continuous sensing and recording outside a hospital will
        permit better treatment protocols to be generated at lower cost and
        without the need for hospitalization or close surveillance.

USE OF OUR INFUSION PUMP SYSTEMS FOR OTHER MEDICAL CONDITIONS

    We have gained considerable expertise from our experience with insulin
infusion and believe that this expertise can be applied to meet the delivery
requirements of many other complex drugs. Many genetically engineered and
manufactured proteins and peptides have delivery problems similar to insulin.
Delivery for these drugs is difficult because they:

    o   comprise fragile, large molecules;

    o   cannot be ingested orally;

    o   have short half-lives in the body;

    o   require site specific delivery;

    o   have very narrow effective ranges of concentration; or

    o   require a profiled delivery pattern or would otherwise require large
        boluses of drugs that are either expensive or toxic in the high doses
        required to achieve therapeutic value.

    We believe that our external programmable pumps used in the controlled
delivery of a variety of large molecule compounds may have advantages as
compared to current treatment options.


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BUSINESS STRATEGY

    Our primary goal is to continue to be an innovator in bringing to market
advanced medical devices for the treatment of diabetes, but we also intend to
use our drug delivery expertise to develop devices for the treatment of other
chronic medical conditions. To achieve these objectives, we are pursuing the
following business strategy:

    o   Expand the Market for Insulin Pumps. The NIH and the ADA have
        established intensive therapy as the standard of care for most Type 1
        patients, in part as a result of the DCCT. Clinical results have shown
        that continuous insulin therapy using programmable insulin pumps is the
        most effective way to provide intensive management. Since the benefits
        of intensive therapy have only recently been verified, and since many
        patients are treated by primary care physicians who do not have the
        facilities and support personnel to pursue intensive management, the
        majority of Type 1 patients and most insulin-using Type 2 patients are
        still being treated with conventional therapy. We estimate that in the
        United States only approximately 12% of Type 1 patients and a very small
        number of Type 2 patients are using pump therapy. As a result, we
        believe that we have a significant opportunity to expand the market for
        our insulin pumps.

    o   Develop Market for Continuous Glucose Monitoring Systems. We believe
        that there is a significant market for continuous glucose monitoring
        systems. We believe that such devices will enable diabetic patients to
        better control their blood glucose levels and delay the onset of
        complications. Continuous glucose monitoring systems will also enable
        health care providers to establish better treatment protocols for their
        patients. Clinical case studies have demonstrated how our current
        continuous glucose monitoring system can be effective in guiding
        management to improve the glycemic control in diabetic patients. Given
        the benefits of continuous glucose monitoring systems, we believe that
        we have a significant opportunity to develop the market for our current
        and future models of continuous glucose monitoring systems.

    o   Offer Comprehensive Array of Products for the Treatment of Diabetes. In
        1998, we acquired two distributors of our products and related supplies,
        Home Medical Supply, Inc. and its affiliated companies, which we call
        HMS, and Diabetes Support Systems, Inc., which we call DSS. With these
        acquisitions, we have established a presence in the market for
        additional diabetes products and supplies, such as strips and meters,
        complementing our existing distribution network for insulin pumps and
        supplies. We also believe that these acquisitions may also provide means
        to efficiently distribute other new diabetes products we intend to bring
        to market if and when FDA approval is received. Our disposable infusion
        pump system for Type 2 diabetes, if and when approved by the FDA, is
        expected to allow us to increase our presence in the much larger Type 2
        market. By increasing our ability to satisfy more of our customers'
        needs and continuing our extensive customer service efforts, we believe
        that we can maximize our revenues over the long term and create barriers
        to entry for competitors.

    o   Diversification Into Treatment of Other Medical Conditions. We believe
        that there are many opportunities to use our infusion pump technology
        with medications other than insulin. We are, therefore, exploring
        opportunities for applications of our delivery systems for other drugs
        with several biopharmaceutical companies and have entered into
        agreements with two companies. We have entered into an agreement with
        United Therapeutics Corporation, which we refer to as "UT." The
        agreement with UT relates to the development of a treatment for
        pulmonary hypertension. For more information regarding our efforts to
        diversify into treatment of other medical conditions, please read the
        section entitled "General Purpose Infusion Pump."

    o   Generate Recurring Revenue Stream. Our insulin infusion products include
        a variety of disposable products and accessories which are labeled to be
        replaced every 48 to 72 hours and provide a continuing source of revenue
        from each patient. In addition, both our continuous-flow infusion system
        for Type 2 diabetes and our continuous glucose monitoring systems are
        also disposable products or have disposable components which are
        anticipated to be replaced every 72 hours. We will seek to continue to
        expand our recurring revenue stream by adding new proprietary
        disposables and accessories, as well as by distributing other supplies
        to our customers, such as pre-filled insulin cartridges, strips and
        meters.

    o   Seek and Expand Strategic Alliances. We intend to continue our efforts
        to expand the market for our products through strategic alliances with
        key partners. In the diabetes care marketplace, we will continue to
        collaborate and expand its relationships with insulin and glucose meter
        manufacturers and hospital service providers. In December 2000, we
        invested in and entered into a strategic development agreement with
        DMCare, Inc. which we call "DMCare." Under the terms the agreement,
        DMCare will develop an automated dosing support algorithm that can be
        accessed and utilized by patients who use our insulin infusion pumps and
        their prescribing physicians. We have also agreed to participate in a
        number of other cooperative initiatives with DMCare, which include
        cross-marketing programs, reimbursement and data initiatives, and
        patient and physician educational


                                       8
<PAGE>   9


        activities. This strategic alliance with DMCare is consistent with our
        strategy to attract a broader range of general practitioners to our
        products.

    While these are the strategies we are pursuing in our business, we cannot
assure you that:

    o   any of the future products mentioned above can be successfully developed
        or commercialized;

    o   the various components of any of the systems can be made to work
        together;

    o   regulatory approval for commercial distribution will be obtained;

    o   reimbursement by third-party payors will be available; or

    o   the products will be accepted in the marketplace by health care
        professionals, patients and third-party payors.

PRODUCTS

    The following table summarizes some information with respect to principal
products we own or distribute and products under development.

<TABLE>
<CAPTION>
            PRODUCT                             DESCRIPTION                   REGULATORY STATUS                   TARGET MARKETS
<S>                                 <C>                                 <C>                           <C>
INFUSION PUMPS AND SYSTEMS
External programmable insulin pump  Several models; currently on        Commercially available        Type 1 patients;
                                    eighth generation                                                 insulin-using Type 2 patients

Type 2 insulin infusion system      Disposable, constant-flow           FDA approval required         Insulin-using Type 2 patients
                                    infusion device

Implantable insulin pump            Implanted under the skin of the     CE Mark received in EU; FDA   Type 1 patients
                                    abdomen; used for insulin therapy   approval required; insulin
                                                                        approval required

General purpose infusion pump       Multipurpose drug infusion pump     Commercially available        Pulmonary hypertension; HIV
                                    for non-insulin applications                                      infection; cancer; and other
                                                                                                      medical conditions

DISPOSABLE AND ACCESSORIES
Quick-set(R) infusion set           Insulin-compatible tubing set       Commercially available        Type 1 and 2 patients
                                    with soft cannula (instead of a
                                    needle) with 90 degree angle
                                    insertion and at site disconnect

Sof-set(R) infusion set             Multiple versions;                  Commercially available        Type 1 and 2 patients
                                    insulin-compatible tubing set
                                    with soft cannula (instead of a
                                    needle)

Silhouette(R) infusion set          Insulin-compatible tubing set       Commercially available        Type 1 and 2 patients
                                    with angled soft cannula (instead
                                    of needle)

Polyfin(R) infusion set             Two versions; insulin- compatible   Commercially available        Type 1 and 2 patients
                                    tubing set with needle

Quick-serter(R)                     Automatic Quick-set cannula         Commercially available        Type 1 and 2 patients
                                    inserter

Sof-serter(R)                       Automatic Sof-set cannula inserter  Commercially available        Type 1 and 2 patients

Medication reservoir                Syringe-like reservoir used with    Commercially available        Type 1 and 2 patients
                                    external insulin pump

Prepackaged insulin cartridges      Worldwide license to package and    FDA approval required         Type 1 and 2 patients
                                    sell a new formulation of Lilly's
                                    insulin lyspro for use with
</TABLE>


                                       9
<PAGE>   10



<TABLE>
<S>                                 <C>                                 <C>                           <C>
                                     programmable infusion pumps

Solutions Software                   Communication cradle to download    Commercially available       Physicians who treat diabetes
                                     patient information from external
                                     insulin pumps and popular glucose
                                     meters

Strips and meters                    Manufactured by other companies     Commercially available       Type 1 and 2 patients
                                     and used to measure glucose levels

GLUCOSE MONITORING SYSTEMS
Physician diagnostic device          Used by health care professionals   Commercially available       Physicians who treat Diabetes
                                     to monitor patients continuously                                 patients
                                     for 2-3 days

Patient glucose monitoring system    To be used by the patient to        Under review by FDA; FDA     Type 1 and 2 patients
                                     continuously monitor glucose        approval required
                                     levels, includes hypoglycemia/
                                     hyperglycemia alarms

Sen-serter                           Automatic insertion device for      Commercially available       Type 1 and 2 patients
                                     glucose sensors

Long Term Glucose Sensor             Marketing rights to Long Term       In clinical trials; FDA      Type 1 and 2 patients
                                     Glucose Sensor under development    approval required
                                     by MRG
</TABLE>

INFUSION PUMPS AND SYSTEMS

    External Insulin Pump. We introduced our most recent version, the Model 508,
in October 1999. This model weighs about 3.5 ounces and is about the size of a
pager. The pump can accurately deliver, throughout the day, a controlled,
programmable profile of u-100 insulin in several hundred microinfusions of one
microliter, i.e., 0.1 unit of insulin, each. The insulin delivery profile can
thus be adjusted to meet individual needs. Insulin is delivered from the pump
through special insulin-compatible tubing either to a needle or soft cannula, a
tiny tube which penetrates the skin, usually into the subcutaneous tissue of the
abdomen.

    The Model 508 is an upgrade to the seventh generation of our external pumps,
the first of which was introduced in 1983. We continually seek to improve our
existing external pumps with additional features and capabilities. Our pumps
have many safety features, including numerous alarms, maximum limitations on the
rate and amount of basal and bolus deliveries, and automatic shut-off mechanisms
to prevent excessive delivery of insulin. The Model 508 stores a record of the
timing and size of the last 450 bolus doses administered plus daily totals for
the past 90 days' insulin delivery. It provides the ability to set a temporary
basal rate for particular activities such as exercise, and it can be programmed
to turn itself off if the user does not enter a command for a specified period
of time. It offers an extended bolus delivery over time which can be especially
useful with very fast-acting insulin analogs and for high fat content foods. The
Model 508 also incorporates a backlight that makes it easier for a patient to
program his or her pump in low light conditions.

    The Model 508 also includes several new features as compared to its
predecessor Model 507C which was introduced in June 1998. The Model 508 has a
remote programmer which enables a user to program a bolus delivery from a short
distance. This feature also allows, boluses to be programmed inconspicuously by
a patient. For instance, when a pump is hidden under clothing, a patient may use
the remote programmer to change delivery rates without exposing the pump.
Furthermore, a parent or a caregiver can program a bolus for a child without the
need to touch the pump case or disturb the child.

    To further enhance privacy, the Model 508 has a vibration option which
allows a patient to select either an audible or vibration alert for the purpose
of programming and alarms.

    In addition to the above, the Model 508 also has the following new features:

    o    low reservoir volume alert;

    o    greater bolus programming flexibility; and


                                       10
<PAGE>   11


    o    child block feature.

    In the second half of our fiscal year 2001, we plan to introduce our next
generation insulin infusion pump, the Paradigm. The Paradigm pump is based on a
new technology platform as compared to our Model 508. The Paradigm will be
smaller than our current Model 508 and will incorporate many new features.

    Physicians prescribe insulin pumps and associated disposables to achieve
better control of glucose levels for their patients. When a pump is prescribed,
a nurse usually assists in teaching the patient how to use the pump and the
related skills, such as calculating the appropriate amount of insulin for
boluses. A patient typically returns to the physician's office for periodic
check-ups and often contacts our Clinical Services Department for information.
While we believe that our external pumps significantly improve the quality of
life of their users and have also become increasingly easy to use, some
physicians do not prescribe external pumps for patients using intensive therapy
because they feel that some patients may not have the motivation and ability to
understand and correctly use them. Also, some patients, particularly in their
teenage and early adult years, may object to pumps because they do not like the
idea of having a device attached to their bodies. We believe that our
educational programs and publicity about our more famous pump users, such as
Nicole Johnson, Miss America 1999, are breaking down some of these barriers to
pump acceptance.

    Type 2 Insulin Infusion System. In June 1999, we obtained a license from
Elan Corporation the rights to a constant-rate disposable infusion system which
we will use for Type 2 diabetes. The infusion system is attached to the body
with an adhesive and delivers a pre-set constant rate of drug. We believe this
pump has the potential to distinguish itself in the market by its convenience
and ease of use, and we intend to market the device primarily to insulin-using
Type 2 diabetes patients. The device is designed to be used as a system, with a
drug cartridge packaged with the pump. Before we can market and sell the device,
some improvements must be completed, and we must obtain regulatory approval for
the system.

    Under a separate agreement, we will be the exclusive worldwide manufacturer
of the constant-flow disposable infusion system for all applications. Elan has
granted distribution rights to the product to other companies for use as a
system with specific pharmaceutical compounds. We are now establishing a manual
production capability, and later we will establish an automated, high-volume
manufacturing line for the product.

    Implantable Insulin Pump. The implantable insulin pump, the MIP 2007A, for
which we maintain exclusive worldwide marketing rights for diabetes, is similar
in function to the external insulin pump but is implanted under the skin of the
abdomen in a relatively minor surgical procedure. This pump releases a basal
flow of insulin, with larger programmable bolus doses delivered before meals.
The amount of insulin released can be programmed by the patient with a hand-held
communicator to meet individual needs. The communicator uses radio waves to
control the pump. The pump is used with a special, highly concentrated insulin
developed by Aventis (formerly known as Hoechst Marion Roussel, or Hoechst). The
pump is designed to store several months supply of the special insulin and is
refilled during check ups at about three month intervals in the doctor's office
from a special syringe by inserting a needle through the skin and into the pump,
which then automatically draws the insulin into its negative pressure reservoir.
The negative pressure reservoir is a significant safety feature which virtually
prevents the possibility of a spill of the stored medication from a reservoir
leak or during refilling.

On September 1, 1998, we sold assets and transferred technology related to our
implantable pump program to Medical Research Group, Inc., which we call MRG, and
also entered into a series of related transactions. Pursuant to the September 1,
1998 transactions we were required to purchase minimum quantities of
implantable pump units in 1999, 2000 and 2001 from MRG at negotiated prices. We
were also required to purchase minimum quantities in future periods in order to
preserve our exclusive worldwide marketing rights. In February, 2001, we
restructured our contractual relationship and certain elements of our operating
arrangements with MRG. As part of the restructuring, we and MRG agreed to the
following:

    o    we have invested $30 million in MRG by purchasing MRG common stock;

    o    a reduction in  minimum purchase commitments of implantable pumps;

    o    a reduction in the price we pay for each implantable pump for the next
         two years;

    o    we will continue to pursue the development of special insulins to be
         used with implantable pumps;

    o    MRG will fund the first $2 million in development efforts for the
         special insulins to be used with implantable pumps and we will fund the
         balance;


                                       11
<PAGE>   12


    o    MRG will contribute the first $4 million involved with the clinical
         trials of the implantable long term glucose sensor, and we and MRG will
         share the costs thereafter;

    o    MRG will continue developing the implantable long term glucose sensor
         for use with the implantable pump, and will also develop versions
         designed to be used on a stand-alone basis and with our external
         infusion pumps;

    o    MRG will pursue the development of a new platform implantable pump; and

    o    MRG will fund a special marketing study for the implantable pump and
         implantable sensor products.

   MRG may reacquire all of our rights in the implantable pump and the
implantable long term glucose sensor, if we fail to purchase the minimum number
of implantable pumps in 2003 or 2004, or fail to make certain additional license
fee payments to MRG of up to $12 million. However, in order to reacquire our
rights, MRG would have to pay MiniMed $60 million. In such event, MRG may
alternatively reacquire our distribution rights to the next generation
implantable pump for $7.5 million. MRG was founded by Alfred E. Mann, our
founder, Executive Chairman and largest stockholder. Mr. Mann continues to hold
a substantial equity interest in MRG.

    The implantable pump has been approved for commercial distribution in the
EU, but sales will be limited until the special insulin used with the pump is
approved. In the United States, we have filed a combined application for
approval of the pump and the special insulin. We cannot assure you that any of
these approvals will be obtained or as to the timing of obtaining them.

    Approximately 700 implantable insulin pumps have been used by patients.
During the early phase of the trials approximately 10% to 15% of patients
experienced blockage or clogging of the catheter that delivers the insulin or
the collecting of deposits on a pump valve. These problems were traced to
changes in the manufactured insulin. We believe that the problems have been
corrected, but we cannot be sure that they will not occur again.

    On February 2, 2000, a "CE" approval mark was received for the MIP 2007A.
The MIP 2007A is the next generation implantable insulin pump to the MIP 2001.
The MIP 2007A, which is manufactured for us by MRG, incorporates several
technology improvements not available in the MIP 2001. The MIP 2007A has a
longer battery life, an improved memory and is slightly lighter in weight.
European sales were initiated in June 2000. Sales of the MIP 2007A will be
limited until specially formulated implantable pump insulin is approved for
commercial use. We cannot assure you that any of these approvals will be
obtained or as to the timing of obtaining them. Neither the implantable pump nor
the special insulin have been approved for marketing or use in the United
States.

    General Purpose Infusion Pump. We have developed a general purpose
programmable infusion system that we expect to use for non-insulin applications.
We anticipate that our first application will be for pulmonary hypertension. In
September 1997, we entered into an agreement with United Therapeutics
Corporation, which we call UT, a biopharmaceutical company, to work together in
the design, development and implementation of therapies for the treatment of
pulmonary hypertension. Pulmonary hypertension is a disease that constricts the
blood vessels serving the lungs, slowing oxygen absorption and ultimately
causing heart failure. There is no known cure, and current treatments are
limited to heart/lung transplants or the intravenous administration in or near
the heart of an unstable compound with a half-life of approximately two minutes
in plasma. Current drug therapy is exceedingly expensive and deters compliance.
The drug formulation must be mixed daily and be delivered from a bulky,
refrigerated unit worn on the patient's back. This arrangement is a cumbersome
process and likely to cause complications.

    By contrast, the UT compound appears to be similarly effective at reducing
pulmonary arterial pressure but can be delivered into subcutaneous tissue using
a model of our programmable external infusion pump. UT has completed trials to
test UT's UT-15 compound at twenty-one sites within the United States and in
thirteen countries abroad. Results from early clinical trials have shown a
reduction in pulmonary arterial pressure, and we believe that this therapy will
improve patients' health and quality of life. We expect approval for this
therapy from the FDA during 2001, but there can no assurances or certainty as to
if or when such approval will be received. Our agreement provides that we will
be the exclusive supplier of pumps and related supplies for the therapy. Under
the arrangement, UT will have primary responsibility for distribution of the
therapy, while both parties will participate in marketing efforts.

    In addition to pulmonary hypertension, we have conducted preliminary work
with compounds designed to treat other chronic conditions, including HIV/AIDS
and certain forms of cancer.


                                       12
<PAGE>   13



    While we believe that new applications for our infusion pumps represent a
significant opportunity for the future, our efforts in the area are at a
preliminary stage. We cannot assure you that:

    o   our anticipated cooperative efforts with biopharmaceutical companies
        will be commercially implemented;

    o   the development of new applications for our pumps will be successful; or

    o   the applications will be approved by the FDA or other regulatory
        authorities.

    Also, many of the new applications may involve new drugs which themselves
must be approved by the FDA in addition to the approval required for the use of
our infusion systems to deliver the drugs.

DISPOSABLES AND ACCESSORIES

    Disposables for Insulin Pumps. Our external pumps are used with disposable
elements consisting of a tubing set and a special syringe-type reservoir, which
stores the insulin in the pump. The most popular tubing sets with soft cannulas
have been marketed under the trade name Sof-set. We have introduced various
versions, called:

    o   the Sof-set QR(R) -- for Quick Release;

    o   the Sof-set Ultimate QR -- incorporating several enhancements over the
        Sof-set QR which are designed to provide greater patient comfort;

    o   the Sof-set Micro -- which has a shorter length cannula and is designed
        for greater comfort for pediatric patients and patients with low body
        fat; and

    o   for customers who prefer to utilize an infusion set with a 90 degree
        needle, we have developed the Polyfin QR.

    All of these versions incorporate a quick release connector so that patients
can more conveniently disconnect the pump for showering, bathing, swimming,
exercise or intimacy. To make the insertion of the cannula through the skin
easier, we have developed, or otherwise marketed additional products, including:

    o   the Sof-serter, which allows the patient to automatically insert the
        cannula; and

    o   the Silhouette, an infusion set, with an angled cannula to facilitate
        insertion into the skin and a disconnect feature.

    In February, 2001, we introduced the Quick-set(R) infusion set. The
Quick-set which utilizes a soft cannula is inserted at a ninety degree angle and
offers an at site disconnect feature. The at site disconnect feature allows
patients to more discreetly disconnect their pump. As with the Sof-sets, we have
also developed an automatic insertion device, which we call the Quick-serter,
which allows for an automatic and easy insertion of the Quick-set cannula.

    These disposables provide us with a continuing source of revenue from pump
customers. Most of these products are labeled to be replaced every 48-72 hours.

    Pre-Packaged Insulin Cartridges. Our license and supply agreement, once we
obtain FDA approval, will enable us to manufacture and market a new formulation
of Lilly's insulin lyspro for our programmable insulin pumps. We intend to
contract with another company to formulate, fill and package cartridges that we
propose to offer for use with our external insulin pumps.

    Solutions Software. We have developed a data collection system which permits
health care professionals to download to a personal computer information from
our current and future external pumps, as well as certain popular brands of
glucose meters, and to process the information using special software and print
out the results in summary or graphical form. This information enables the
professional to assess the glucose control of the patient over a three-month
period and, where indicated, to adjust the patient's insulin requirements. This
product is now commercially available.


                                       13
<PAGE>   14
CONTINUOUS GLUCOSE MONITORING SYSTEMS

    We are planning a series of continuous glucose monitoring products:

    Physician Diagnostic Device. The first product involving our glucose sensor
is connected by wire to a recording and display device. This product received
FDA approval on June 15, 1999 for use by health care professionals to record but
not display actual glucose readings and trends in glucose levels for a
two-to-three day period. The data is downloaded by the professional into a
personal computer for evaluation. With this system, the patient is typically
asked to use various prompts to input times of meals, insulin administration,
exercise times, and other events affecting glucose metabolism. Patients can wear
this initial model for several days to enable the health care professional to
analyze retrospectively the patient's glucose levels and modify the patient's
treatment, which may include the prescription or reprogramming of an insulin
pump. The system is intended for prescription use only and for occasional use
rather than everyday use. When used, this product is only a supplement to, and
not a replacement for, standard invasive measurement of glucose levels. This
product allows identification of patterns of glucose level excursions above or
below the desired range, and is designed to facilitate therapy adjustments,
which may minimize these excursions. As discussed below, we intend to develop
and seek approval for a consumer model of the continuous glucose monitoring
system that would provide the patient with continuous glucose readings and
enable us to compete in the worldwide market for glucose strips and meters,
which we estimate to be $3.5 billion.

    Patient Continuous Glucose Monitoring System. In August 2000, we filed with
the FDA for approval of a product that will be used by patients to continuously
monitor glucose levels. In future products, we expect to make the display unit
smaller for this device so that it can be worn like a wristwatch or carried in a
pocket. We also expect that these future products will use telemetry to permit
wireless communication between the sensor and the recording and display device.
We anticipate that our next generation product will include a programmable
hypoglycemia and hyperglycemia alarm, designed to alert patients when glucose
levels drop below or rise above limits established by the administering
physician. Although our development and regulatory efforts are at a relatively
advanced stage, we cannot assure you that the development of these products will
be successful or that they will be approved for commercial distribution. We have
not completed the development and production engineering of the commercial
versions of these products and various accessories, including the introducer,
the transmitter and the receiver/display devices.

    We believe that there will be a substantial market for our continuous
glucose monitoring systems even if the cost of the sensors exceeds the cost of
the glucose strips that they would replace. However, to maximize penetration of
the glucose meter and strip market, we believe that it may be necessary for the
patient cost of using our sensors over their useful lives to be reasonably
comparable to the current cost of using strips in intensive management. We
cannot assure you that we will achieve this price, particularly if glucose meter
companies try to compete with us by reducing prices. Also, because the potential
market is large, many other companies are attempting to develop non-invasive
and/or continuous glucose measuring systems.

    Implantable Long Term Glucose Sensor. As part of our contractual
relationship with MRG, we had the option to acquire the worldwide exclusive
marketing rights to the implantable long term glucose sensor developed by MRG
for $30 million pending the preliminary results of clinical trials. In October
2000, MRG began human clinical trials for the implantable long term glucose
sensor. On January 25, 2001, we notified MRG of our exercise of the option, and
on February 21, 2001, we delivered $30 million to MRG as payment for the
exclusive marketing rights for the implantable long term glucose sensor. MRG's
long term glucose sensor is currently designed to be used with an implantable
pump. In connection with the recent restructuring of our contractual
relationship, MRG has agreed to develop additional versions of this product, one
of which is intended to operate on a stand-alone basis and one of which is
intended to operate in conjunction with our external programmable insulin pumps.
We can give you no assurance that the implantable long term glucose sensor will
be successfully developed or that it will be approved for commercial
distribution by the FDA.


FUTURE PRODUCTS

     Our long-term goal is to market "closed-loop" systems in what would
essentially constitute artificial pancreas systems. The goal is to create a
device that would automatically maintain glucose levels within a normal range
via feedback from a continuous glucose sensor to a pump and to continuously
adjust the rate of insulin infusion without the need for frequent intervention
and programming by the patient or physician. In order for such a system to be
feasible, the implantable pump or our external pump would have to operate in
conjunction with a sensor, as well as with software algorithms that can control
the implantable or external pump so that they function as a closed-loop system.
No assurance can be given that the development of a closed looped system will be
successful or that it will prove to be safe and effective and be approved for
commercial distribution.


                                       14
<PAGE>   15
RESEARCH AND DEVELOPMENT

    Our research and development activities are performed primarily by our
research and development organization, which consisted of 209 persons as of
March 6, 2001. We obtain our product ideas from our staff, patients, health care
professionals and our Medical Advisory Board, all of whose opinions on products
we actively seek through surveys, field visits, medical symposia, focus groups
and personal relationships. We expense all research and development costs as we
incur them. Research and development expenses were $16.5 million for 1998, $26.8
million for 1999 and $34.2 million for 2000.

    From time to time, we attempt to obtain U.S. governmental grants to
strengthen our research and development efforts on technically difficult
projects. These grants allow us to pursue the development of new and novel
products with less financial risk. In 1998, we were awarded a three year, $2.0
million grant under the Advanced Technology Program, which we refer to as ATP,
by the National Institute of Standards and Technology. With this money and $1.5
million in matching research and development expenses, we plan to develop and
test components for a simple, accurate, minimally invasive system for measuring
glucose levels which uses different technology from our existing continuous
glucose monitoring system and may be appropriate for Type 2 diabetes patients.
The new chemistries, materials, and devices developed under this research award
may also serve as a platform for the development of other sensing applications.
In 1998, we were also awarded two multi-year NIH grants aggregating
approximately $1,050,000 that will help us strengthen the research being
conducted under the ATP award. Furthermore, in September, 2000, we were awarded
an additional multi-year NIH grant aggregating approximately $1,112,000. The
funds under this NIH grant will be used to further our research in developing an
external closed loop system. We will own all new technology resulting from these
activities.

MARKETING AND SALES

    Patients in the United States usually place orders for our external insulin
pumps upon the advice and recommendation of their physicians, who provide the
prescriptions. Our marketing focus is on endocrinologists, diabetologists and
other health care professionals who treat diabetes patients. We also market to
third-party payors. We have also started to focus our efforts on those primary
care physicians who treat relatively large numbers of diabetes patients. We
believe that more than 90% of our revenues from the sale of our external pumps
and related disposables are reimbursed by third-party payors, subject to
applicable deductible and copayment amounts.

    Our marketing efforts include sponsoring educational symposia in intensive
diabetes management and insulin pump therapy for physicians, other health care
professionals and third-party payors. We have trained over 1400 health care
professionals in the use of our insulin pumps for intensive management of
patients. In 2000, we conducted over 40 one-day and 10 two-day symposia in the
United States and over 30 symposia internationally. We also conduct numerous
presentations to case managers for managed care organizations.

    Agreement With Nicole Johnson, Miss America 1999. We have entered into an
agreement with Nicole Johnson, Miss America 1999 to further promote early
diagnosis and aggressive treatment of diabetes. Miss Johnson was diagnosed with
Type 1 diabetes at the age of 19 and uses our external insulin pump to treat her
diabetes. Together with Miss Johnson, we have developed a program to educate
physicians, particularly primary care physicians, and the public at large
regarding diabetes diagnosis and treatment. As part of this program, we are
sponsoring Miss Johnson's personal appearances at several diabetes related
events. Also, Miss Johnson is an important part of a print advertisement
campaign aimed at advancing Miss Johnson's platform of increasing diabetes
awareness, including awareness of pump therapy. Miss Johnson is also involved in
similar promotional arrangements with other companies in the diabetes business,
such as Eli Lilly, which do not compete directly with us.

    Customer Service and Support Network. We also seek to develop patient
interest in and demand for our diabetes products by providing patients with
access to our service and support network, including:

    o   services of an experienced clinical services department available by
        telephone, toll-free, 24-hours per day, seven days per week, to answer
        patient questions and provide guidance, advice and trouble-shooting
        regarding daily pump use;

    o   free, short-term replacement pumps sent within 48 hours or less to
        promote continuous therapy;

    o   an insurance assistance department consisting of 258 people as of March
        6, 2001 to take and process orders, answer questions, simplify and
        expedite claims processing and assist patients in obtaining third-party
        reimbursement;

    o   participation in a patient advocacy program which works with the
        American Association of Clinical Endocrinologists;


                                       15
<PAGE>   16


    o   an extensive Internet web site at www.minimed.com;

    o   advertisements in targeted media; and

    o   free videotapes and other educational material.

    We believe that our strategic alliance with DMCare may further enhance our
customer service and support network. Under the terms of our agreement with
DMCare, DMCare will develop an automated dosing support algorithm that can be
accessed and utilized by patients who use our insulin infusion pumps. The
automatic dosing support algorithm may provide additional support to our
existing as well as new customers who may require and/or desire continued
support, guidance and advice regarding insulin pump therapy. Furthermore, our
alliance with DMCare may result in our customers gaining access to licensed
health care professionals 24-hours per day, seven days per week, who will assist
our customers in their ongoing efforts to treat their diabetes. We cannot,
however, be certain that any of these products will be successfully implemented.

    Managed Care. We continue to increase our presence in the managed care
marketplace. Field insurance managers are responsible for relationships with,
and the solicitation and negotiation of contracts with, third-party payors. In
2000, we increased the number of arrangements we have entered into with
third-party payors by over 116. The number of contracts with managed care
entities and other third-party payors providing for reimbursement for our
external pumps and disposables and other diabetes supplies, as of December 29,
2001, was approximately 422. We have also recently expanded our insurance
support activities whereby we assist patients in obtaining reimbursement for our
products to better address the growing managed care segment of health care
payors in the United States.

    Expanded Sales Force. We market our diabetes products and serve customers
through our direct sales organization and distributors. In addition to senior
sales and marketing management and an extensive in-house support staff, as of
March 6, 2001, our direct sales organization in the United States consisted of 4
Division directors, 8 Regional Managers and 157 field sales personnel,
consisting of District Sales Managers, Territory Managers, Diabetes Nurse
Specialists, Pump Trainers, and Sensor Application Specialists, a Director of
Managed Care and 15 Managed Care Regional Managers Account Managers. These
representatives are extensively trained and specialize in diabetes therapy and
the use of our products. We compensate our sales representatives in the United
States with a base salary, a sales commission and an annual bonus based on
meeting performance objectives. In the United States, we also contract with, and
employ, nurse educators who are certified pump trainers to assist in educating
potential patients about use of our external pumps.

    Use of Distributors. We believe that our strategy of maintaining our own
direct sales force dedicated to diabetes is an important factor in market
development and an important competitive advantage. Nevertheless, we also use
independent distributors in the United States to strengthen our direct sales
force and increase the number of physicians served. Some third-party payors in
the United States require that some classes of purchases be made through
specified distributors, and some distributors in the United States and
internationally maintain a substantial infrastructure to support physician and
patient needs. Internationally, independent distributors are used to provide
sales coverage in geographic areas not served by the direct sales force employed
by our international subsidiaries. In 2000, we increased the relative percentage
of sales processed directly through us. As a result of our continued investment
in our internal reimbursement capabilities, our acquisition of HMS and DSS and
the activities of our field insurance managers, we expect the percentage of our
sales made through our direct sales force will be maintained at least at the
current rate.

    International Sales. We have our own international sales organizations
consisting of 60 people as of December 29, 2000, including administrative staff,
serving France, Germany, the Netherlands, Belgium, Scandinavia, Australia and
the Baltic region. We also have a distribution manager in the United Kingdom and
use independent distributors in other countries. We believe that the
international market provides a large opportunity for growth and are seeking to
expand our international business. International sales of diabetes products
increased over 24% to $17.0 million in 2000. Also, we expect that some of our
new products and new applications will be introduced in foreign countries before
being introduced in the United States because the regulatory approval process in
other countries has generally been less time consuming and less expensive than
in the United States.

    In January 1998, we acquired all of the assets of Dartec A.B., a distributor
of diabetes products located in Sweden, for $2.7 million in cash. Dartec now
MiniMed Nordic AB had been a distributor of our products, and the acquisition of
its business gives us a direct sales organization covering the Scandinavian
countries and the Baltic region.

MANUFACTURING

    We purchase most of our components, some subassemblies and various services
used in the manufacture of our products from outside vendors. These outside
vendors generally produce their items to our specifications and in most
instances to our designs. We then assemble the components into finished
products. We purchase some disposable products from OEM suppliers.


                                       16
<PAGE>   17


    Our Quality Assurance Department provides guidance to vendors and inspects
and tests products at various steps in the manufacturing cycle. This ensures
that products comply with our stringent specifications. The manufacturing
facilities are subject to periodic inspection by regulatory authorities.

    We have received approvals from the International Standards Organization,
which we refer to as ISO, that allow us to introduce some products into the EU
more quickly based on annual certification of our quality system. These
approvals are the ISO 9002 relating to quality standards, which we received in
1995, and the ISO 9001 relating to design control standards, which we received
in 1996.

    We rely on single sources for some important parts, including hybrid
circuits, integrated circuits, special insulin formulations and various
disposable products and components. We also have a sole source subcontract
arrangement for sterilization services.

    We have established secondary source suppliers in some circumstances when
appropriate, and we create safety stocks to address changes in market demand.
Arrangements for additional or replacement suppliers for some of these parts
could not be accomplished quickly. The loss of any of the critical sole source
vendors could materially harm our business, financial condition and results of
operations. In 1998, we established and validated a semi-automated sensor
manufacturing department to address initial market requirements.

COMPETITION

    We currently consider our primary competition in the diabetes market to be
injection therapy, and we compete against this delivery modality chiefly by
educating doctors, nurses, patients, managed care organizations and other
third-party payors about the need for intensive management of glucose levels and
the advantages of pump therapy over multiple daily injections.

    Insulin Pumps. In the sale of our external pumps, we compete primarily with
Disetronic Medical Systems, Inc., which we call Disetronic. Disetronic
introduced a competitive external pump product in the United States
approximately nine years ago. Currently Disetronic offers three different pump
models for sale. We estimate that Disetronic currently has approximately 20% of
the U.S. market for external pumps for new patients, but is still the dominant
supplier in certain countries in Europe, especially in Germany. We believe that
our success will encourage other companies to enter this market, although we
believe that there are substantial barriers to entry, including access to
technology and the need for extensive distribution and customer service
organizations. In February 2000 a new company, Animas Corporation, which we call
Animas, received 510(k) clearance on a new insulin pump. Animas has initiated
commercial sales of its pump in the U.S. However, we do not believe that Animas
has yet achieved a significant market share.

    Internationally, in addition to Disetronic, we compete in the insulin pump
market against several smaller suppliers which generally offer less
sophisticated products in certain countries with relatively small markets. We
compete with other pump makers primarily on the basis of product design, quality
and utility, physician and patient education, support services and price. We
cannot assure you that past, current and potential makers of competitive pumps,
some of which may have substantially greater financial, technical, marketing and
other resources, will not become more significant competitive factors in the
future. We believe that we may be faced with additional competition in the near
future.

    A number of companies and medical researchers are working on new delivery
devices, delivery technologies, procedures, drugs and bioengineered therapeutics
for the treatment and prevention of diabetes, such as, for example, inhaled
insulin, pancreas transplantation and insulin-producing islet and beta cell
preparations and devices. If successful, these or other technologies and/or
medical procedures could adversely affect our business and results of operations
and could possibly make our products obsolete.

    Diabetes Supplies and Prescription Drugs. We believe that our most
significant competition in the areas of diabetes supplies and prescription drugs
comes from national mail order pharmacies, World Wide Web based pharmacies,
local and national retail and hospital pharmacies, cost containment and managed
care companies and other distributors of diabetes supplies. Many of these
companies have substantially greater resources than we have. Moreover, companies
in the health care industry, and in the provider segment in particular, are
consolidating to a significant extent. This trend could produce competitors with
larger and substantially greater resources. Competitive pressure could adversely
affect our market share, and we could experience significant price erosion. We
compete in this segment on the basis of customer service, convenience, product
availability, and price. We believe that our installed base of pump patients
offers a significant opportunity for these sales.


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<PAGE>   18


    In the field of diabetes supplies, Polymedica Industries, Inc., Chronimed
Inc., and Transworld Home Healthcare, Inc. are publicly-held companies that
compete with us. We have direct competition in our pharmacy operations from
other national mail service companies such as Merck/Medco Managed Care, L.L.C.,
Express Scripts Inc., PCS Health Systems, Inc., Drugstore.com, PlanetRx.com and
Diversified Pharmaceutical Services, Inc., as we seek to redirect focus on
distribution of prescription drugs by mail order. We will also begin to
concentrate on the distribution of pharmaceuticals to which we have proprietary
rights.

    Glucose Measurement. Numerous companies, some of which have substantially
greater financial, technical, manufacturing, marketing and other resources than
we do, are attempting to develop a variety of products for glucose measurement.
Some of these products and their corresponding technologies are directed toward
non-invasive measurement systems. They generally use infrared light directed
through tissue, analyzing the reflectance from an arm or transmission through a
finger inserted into a well, through an ear lobe or through other tissue. These
products appear to face substantial technical obstacles, and to date none has
been approved by the FDA for commercial distribution. If, however, any of these
products are successfully developed, some patients may prefer such products to
our continuous glucose monitoring systems.

    There are also several efforts aimed at reducing the discomfort associated
with the finger pricks required with current glucose meter systems. These
efforts include reducing the depth of penetration of the needle, using a laser
and/or using other methods to breach the outer derma layers to extract
interstitial fluid rather than blood. Still other approaches are being pursued
for glucose level determination including attempts to draw out interstitial
fluid by electrical or chemical means and then measuring the glucose. We know of
at least three other efforts that are being directed toward subcutaneous
measurement with electrochemical sensors.

    Cygnus, Inc. is one company pursuing the development of a method of
measuring glucose levels. On December 6, 1999, an FDA advisory committee
recommended approval of Cygnus' GlucoWatch Monitor. The GlucoWatch Monitor is a
device worn like a watch that uses electric currents to extract interstitial
fluid and measure glucose levels of diabetic patients. The FDA panel imposed the
following three conditions for the approval: (i) education; (ii) labeling; and
(iii) a post market study to detect hypoglycemia and hyperglycemia. In May 2000
Cygnus received an approvable letter from the FDA for its GlucoWatch. In March
2001, the FDA formally approved the GlucoWatch.

    It is possible that some patients might prefer the GlucoWatch or other
systems to our continuous glucose monitoring systems for routine monitoring of
glucose levels. The successful development and acceptance of non-invasive or
minimally invasive glucose measurement systems or systems without pain could
materially and adversely affect our continuous glucose monitoring system
program.

PATENTS, PROPRIETARY RIGHTS AND TRADEMARKS

    We file patent applications to protect technology, inventions and
improvements that we consider important to the development of our business. We
prosecute and manage our patent portfolio using our in-house patent counsel and
technical advisors as well as outside patent counsel. We currently hold
approximately 69 issued U.S. patents and foreign patents. Many U.S. and foreign
patent applications that cover various aspects of our technology are also
pending. In addition, we have exclusive licenses under a number of patents.

    Litigation may be necessary to enforce patents issued to us, to protect
trade secrets or know-how owned by us or to determine the enforceability, scope
and validity of the proprietary rights of others. Although we know of no
infringement of patents held by others, it is always possible that a third-party
may assert infringement. We believe that we own or have the right to use all
technology incorporated into our products, but an adverse determination in any
litigation or interference proceeding to which we may become a party could
subject us to significant liabilities to third parties or require us to seek
licenses from third parties.

    Although patent and intellectual property disputes in the medical device
area have often been settled through licensing or similar arrangements,
associated costs may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that necessary licenses would be
available to us on satisfactory terms or at all. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from manufacturing and selling some of our
products or planned products, which could have a material adverse affect our
business, diversification opportunities, financial condition and results of
operations.


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<PAGE>   19


    We own the registered trademarks MiniMed(R), Sof-set(R), QR(R), Polyfin(R),
Silhouette(R), "Making a Difference in Diabetes(R)," and "Advancing Solutions in
Diabetes(R)," and other trademarks are being used and/or pursued for
registration. We also rely on trade secrets and proprietary know-how that we
seek to protect, in part, through confidentiality agreements with our employees
and consultants. We cannot assure that any unprotected information will not also
be developed by others.

GOVERNMENT REGULATION

    Clinical testing, manufacture and sale of our products are subject to
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign agencies. In the United States, we are required
to register as a medical device manufacturer with the FDA and state agencies
such as the Food and Drug Branch of the California Department of Health
Services. We are subject to inspection on a routine basis by both the FDA and
the California Department of Health for compliance with the FDA's Quality System
Regulations, which is commonly referred to as QSR. These regulations impose
procedural and documentation requirements upon us with respect to manufacturing
and quality assurance activities.

    Unless an exemption applies, each medical device that we wish to market in
the United States must receive either "510(k)" clearance or "PMA approval" in
advance from the FDA pursuant to the Federal Food, Drug, and Cosmetic Act. The
FDA's 510(k) clearance process usually takes from two to twelve months, but it
can take longer. The process of obtaining PMA approval is much more costly,
lengthy and uncertain. The FDA's PMA approval process generally requires from
one to three years or even longer. No assurance can be given that 510(k)
clearance or PMA approval will ever be obtained for any product we propose to
market.

    The FDA decides whether a device must undergo either the 510(k) clearance
or PMA approval process based upon statutory criteria. These criteria include
the level of risk that the agency perceives is associated with the device and a
determination of whether the product is within a type of device that is similar
to devices that are already legally marketed. Those devices deemed to pose
relatively less risk are placed in either class I or II, which require the
manufacturer to submit a premarket notification requesting 510(k) clearance
unless an exemption applies. The premarket notification must demonstrate that
the proposed device is substantially equivalent in intended use and in safety
and effectiveness to a legally marketed "predicate device" that is either in
class I, class II, or is a "pre-amendments" class III device, for example, one
that was in commercial distribution before May 18, 1976, for which the FDA has
not yet decided to require PMA approval. In contrast, devices deemed by the FDA
to pose the greatest risk, or to be novel devices lacking a legally marketed
predicate, are placed in class III and are required to undergo the PMA approval
process. This process requires the manufacturer to file a PMA application
presenting extensive clinical testing data and other information to prove the
safety and effectiveness of the device to the FDA's satisfaction, and the FDA's
completion of satisfactory QSR inspection of the manufacturing facilities. In
addition, a new PMA or PMA supplement is required in the event of a modification
to a PMA device, its labeling or its manufacturing process affecting the safety
or effectiveness of the device.

    External pumps have generally qualified for clearance under the 510(k)
process, although some features of advanced pumps may require clinical
validation. Our Paradigm Model insulin infusion pump as well as our Models 508,
507C, 407C, 507, 506, 505, 504S and 502 external pumps have all been cleared by
the FDA pursuant to the 510(k) process. Our second generation continuous glucose
monitoring system is going through the PMA process.

    We cannot assure you that future models of our external pumps will qualify
for 510(k) clearance as opposed to the more extensive PMA process.

    After a device receives 510(k) clearance, any modification that could
significantly affect its safety or effectiveness, or that would constitute a
major change in the intended use of the device, requires a new 510(k) clearance.
The FDA requires each manufacturer to make this determination in the first
instance, but the FDA can review any such decision. If the FDA disagrees with a
manufacturer's decision not to seek a new 510(k) clearance, the agency may
retroactively require the manufacturer to submit a premarket notification
requiring 510(k) clearance. The FDA also can require the manufacturer to cease
marketing and/or recall the modified device until 510(k) clearance is obtained.
After receiving 510(k) clearance, we have on occasion made modifications to our
cleared devices for which we have concluded 510(k) clearance is not required. We
cannot assure you that the FDA would agree with any of our decisions not to seek
510(k) clearance. If the FDA requires us to seek 510(k) clearance for any
modification, the FDA also may require us to cease marketing and/or recall the
modified device until we obtain a new 510(k) clearance.

    Under the Federal Food, Drug, and Cosmetic Act, a non-biologic drug for
human use requires regulatory approval of a New Drug Application, or NDA, before
it may be commercialized. This process is lengthy, expensive and uncertain.
Among other things, it requires adequate and well-controlled human clinical
trials to establish the safety and efficacy of the product and a satisfactory
FDA inspection of the drug manufacturing facilities to assess compliance with
Current Good Manufacturing Practice or GMP, which


                                       19
<PAGE>   20


includes elaborate testing, control, documentation and other quality assurance
procedures. We cannot assure you that FDA approval of any NDA that we or Aventis
submit will be granted on a timely basis, or at all. After approval is obtained,
a supplemental NDA approval is generally required for each proposed new
indication, often accompanied by data similar to that submitted with the
original NDA.

    After the FDA grants a manufacturer approval to bring a device or drug to
market, a number of post market regulatory requirements apply, including
labeling regulations, the QSR, and the Medical Device Reporting regulation which
requires that manufacturers report to the FDA certain types of adverse events
involving their products. Class II devices can be subject to additional special
controls, for example performance standards, post market surveillance, patient
registries, and FDA guidelines that do not apply to class I devices. Clearances
and approvals restrict devices and drugs to specifically labeled uses, and the
FDA actively enforces regulations prohibiting marketing of products for
unapproved or "off label" uses. Changes in existing requirements or adoption of
new requirements could have a material adverse effect on our business.

    The FDA also conducts inspections to determine whether we conform with QSR,
and subsequent QSR inspections will continue after the FDA clearance or
approval. The FDA completed an inspection in May 1997 under the Good
Manufacturing Practices regulations for devices, which are the predecessor of
QSR. We received only minor citations, all of which were corrected. In 1999 the
FDA conducted a directed inspection of our facilities. We did not receive any
citations as a result of such inspection. In January 2000, the FDA conducted
another directed inspection of our facilities. Following the January 2000
inspection, we received only minor citations, which have all been corrected. In
May 2000, the FDA conducted another inspection of our facilities. We did not
receive any citations as a result of such inspection. A further inspection may
be conducted relative to any PMA application submitted by us for other products
or pursuant to the FDA's practice of performing periodic inspections.

    If we fail to comply with the FDA's requirements, the agency can institute a
wide variety of enforcement actions. The FDA sometimes issues a public warning
letter, which could have an adverse impact on our business. The FDA also can
pursue stronger remedies, such as:

    o   refusing our requests for 510(k) clearance or PMA approval of new
        products, withdrawing product approvals already granted, requiring us to
        recall products;

    o   asking a court to require us to pay civil penalties or criminal fines or
        adhere to operating restrictions; or

    o   closing down our operations.

    Ultimately, criminal prosecution is available to the FDA as punishment for
the most serious offenses. Any FDA enforcement action could have an adverse
effect on our business, financial condition and results of operations.

    The FDA can withdraw an NDA or PMA if new evidence or new information shows
the drug or device is no longer safe or effective, or if the FDA discovers that
the NDA or PMA contains any untrue statement of material fact. Other reasons
justifying withdrawal of an NDA or PMA by the FDA include, but are not limited
to, failure to maintain required records or to file records and reports, new
questions regarding manufacturing, and whether labeling is false or misleading.

    Our implantable pump will require PMA approval, and Aventis' insulin for
this pump will require NDA approval prior to our ability to commercially offer
the implantable pump system in the U.S. Our prepackaged insulin cartridges as
well as our Type 2 insulin infusions system will require NDA approval for the
insulin to be used in such products. We are in the process of obtaining such
approvals. However, we cannot provide any guarantees that we will be able to
successfully obtain such approvals.

    In late 1991, the FDA adopted new procedures for the review of products
that involve both devices and drugs, permitting clinical investigation and
approval to be coordinated by a lead center of the FDA. At that time, we
withdrew our initial PMA application, expecting that we and Aventis would file a
single application containing an NDA element for the insulin and a PMA element
for the pump. Under this scenario, we expected that the FDA's Center for Drug
Evaluation and Research would be the lead center and responsible for reviewing
the NDA portion of the application, while the Center for Devices and
Radiological Health will be responsible for reviewing the PMA portion; the FDA's
approval would consist of an approved NDA for the insulin and an approved PMA
for the pump. The FDA has indicated that there would be only one holder of the
approved application for the pump and insulin combination product. The holder
would be the entity to file supplements. We believe that Aventis will permit us
to be the holder of the approved application but no final agreement with Aventis
has been entered into.


                                       20
<PAGE>   21


    We, however, submitted a written request to the FDA asking that the PMA for
the pump and the NDA for the insulin be reviewed separately, rather than
pursuant to a single application. Under this approach, our hope is that our PMA
application and our NDA application for Aventis' insulin would proceed
separately through the regulatory process, although both would rely upon the
same clinical data. Also, we would own the ultimate PMA approval for the pump as
well as the NDA approval for Aventis' insulin, and each product would be labeled
for use with the other. We would have the right to seek necessary supplemental
approvals for both the PMA, and the NDA. The FDA granted our request.

    Exports of products subject to 510(k) notification requirements, but not yet
cleared to market, are permitted without FDA export approval if statutory
requirements are met. Unapproved products subject to PMA requirements must
receive prior FDA export approval unless they are approved for use by any member
country of the EU and other countries, including Australia, Canada, Israel,
Japan, New Zealand, Switzerland and South Africa, in which case they can be
exported to any country without prior FDA approval.

    International sales are subject to foreign government regulation, the
requirements of which vary substantially from country to country. The time
required to obtain approval by a foreign country may be longer or shorter than
that required for FDA approval, and the requirements may differ. The EU requires
that a company must obtain the CE Mark prior to sale within the EU of some
medical devices, including implantable products. During this process, the
sponsor must demonstrate compliance with designated manufacturing and quality
requirements known as the "ISO" requirements. In March 1995, we obtained the CE
Mark to market the implantable pump throughout the EU, but commercial
distribution of the implantable pump in the EU has been, and will continue to
be, limited until the special insulin required for use in the pump is approved
and made available. In March 1995, we received certification under quality
standards known as the ISO 9002 standards, and in July 1996, we received
certification under the ISO 9001 design control standards. Most recently, in
February 2000, a CE Mark for the next generation implantable pump, the MIP
2007A, was granted. We currently maintain exclusive worldwide marketing rights
for MIP 2007A. As is the case with QSR inspections in the United States,
inspections by various foreign bodies continue in the EU on a periodic basis
after receipt of the CE Mark.

     We are also subject to numerous federal, state and local laws relating to
such matters as billing third-party payors, avoiding unlawful inducements to
purchase or prescribe our products, safe working conditions, manufacturing
practices, environmental protection, fire hazard control and disposal of
hazardous or potentially hazardous substances. Additionally, we must comply with
various FDA, and in some cases Federal Trade Commission, requirements for
design, safety, advertising, labeling, record keeping and reporting of adverse
experiences with the use of a product. We cannot assure you that we will not be
required to incur significant costs to comply with such laws and regulations in
the future or that such laws or regulations will not have a material adverse
effect upon our ability to do business.

    Our pharmacy businesses are subject to various federal and state regulatory
requirements relating to the distribution of prescription pharmaceuticals. For
example, the U.S. Drug Enforcement Administration, which we call the DEA,
regulates controlled drug substances, such as narcotics, under the Controlled
Substances Act and the Controlled Substances Import and Export Act.
Manufacturers, distributors and dispensers of controlled substances must be
registered and inspected by the DEA and are subject to reporting and record
keeping requirements. We cannot assure you that we will not be required to incur
significant costs to comply with such laws and regulations in the future or that
such laws or regulations will not have a material adverse effect upon our
ability to do business.

THIRD-PARTY REIMBURSEMENT

    In the United States, our insulin infusion pumps are generally purchased
directly by patients and dealers and in some cases physicians, physician groups,
and/or hospitals. In many cases, on behalf of the patients, we bill third-party
payors, including private insurance companies, health maintenance organizations,
preferred provider organizations, other managed care providers, and, to a
limited extent, Medicaid. Under the Medicaid program, states generally reimburse
for approved procedures on a reasonable cost basis or a fee schedule. Currently,
some states reimburse our products under the Medicaid program.

    On April 1, 2000, the Medicare program began coverage of insulin infusion
pumps and related disposable supplies for Medicare beneficiaries under certain
circumstances. The insulin infusion pump has been classified by the Medicare
program as a capped rental item. As a capped rental item, MiniMed is paid a
certain rental fee for a ten-month period for each insulin infusion pump
received by a Medicare beneficiary. In the tenth month, the beneficiary has a
choice of purchasing or renting the infusion pump. Depending on the
beneficiary's decision, MiniMed is paid monthly rental fees for an additional
three or five months. The capped rental reimbursement model used by the Medicare
program is different from our traditional reimbursement models. Generally, we
are paid a lump sum for our insulin infusion pumps by third party payors other
than Medicare.


                                       21
<PAGE>   22


    As for infusion sets used with our insulin infusion pumps, the Medicare
program reimburses us a set fee per week for all infusion set needs of a
beneficiary. Again the Medicare reimbursement model for infusion sets is
different from our traditional reimbursement models. Traditionally, we receive a
certain sum for each box of infusion sets supplied to our customers by third
party payors other than Medicare.

    We do not receive reimbursement from third party payors for our physician
diagnostic glucose monitoring device. Rather, physicians purchase our physician
diagnostic device and seek reimbursement for its use during the scope of their
individual practice. Medicare Carriers, which make benefit and coverage
determinations for medicare beneficiaries, in a limited number of states as well
as a limited number of insurance companies are providing reimbursement for the
use of the physician diagnostic device under miscellaneous CPT codes. We are
supporting the American Association of Clinical Endocronoligists in their
efforts to obtain CPT codes for our physician diagnostic continuous glucose
monitoring device. We believe that if a CPT code is issued for our physician
diagnostic continuous glucose monitoring device, more third party payors would
be willing to reimburse physicians for the use of such device. We further
believe that as the number of third-party payors that reimburse physicians for
the use our physician diagnostic continuous glucose monitoring device increases,
our sales of such devices may also increase.

    We maintain an insurance assistance department consisting of 258 people as
of March 6, 2001 to take and process orders, to simplify and expedite claims
processing and to assist patients in obtaining third-party reimbursement. We
believe that more than 90% of the revenues derived from our external pump and
related disposable sales are reimbursed by third-party payors, subject to
applicable deductible and copayment amounts. We also maintain a managed care
sales force of 11 people who market our products directly to third party
payors. Last year we increased the number of managed care contracts by
approximately 116 to bring the total number of contracts to approximately 416.

    Third-party payors may decline to reimburse for procedures, supplies or
services determined to be not "medically necessary" or "reasonable." Some payors
have initially indicated that they would decline to reimburse for some of our
products on that basis. We try to deter and reverse such practices through
education and have expanded our insurance assistance efforts toward this end.
Our efforts are usually successful, but such reimbursement may become less
likely in the future as pressure increases for lower health care costs and
particularly near-term costs.

    Medicare and many other third-party payors also do not reimburse for
"experimental" or "investigational" procedures. There is usually no precise date
when a procedure ceases to be experimental or investigational, but devices in
clinical investigation under an investigational device exemption are usually
deemed to be experimental or investigational. The failure to cover early use of
a procedure deters usage, delaying acceptance even longer. In the United States
many third-party payors still consider use of implantable pumps to be an
investigational procedure. Reimbursement for the small number of pumps sold in
the United States has therefore been limited to date.

    There is widespread concern that health care market initiatives in the
United States may lead third-party payors to decline or further limit
reimbursement. The extent to which third-party payors may determine that use of
our products will save costs or will at least be cost effective is highly
uncertain, and it is possible, especially for diabetes, that they will merely
focus on the lower initial costs associated with injection therapy or will
otherwise limit reimbursement for insulin pumps or other products we develop.
Because of uncertainties regarding the possible health care reform measures that
could be proposed in the future and initiatives to reduce costs by private
payors, we cannot predict whether reimbursement for our products will be
affected or, if affected, the extent of any effect. The unavailability of
third-party coverage or the inadequacy of reimbursement for our products would
adversely affect our business and operating results.

PRODUCT LIABILITY AND WARRANTIES

    We usually give two to four-year warranties on our external pumps. The
special motors contained in our external pumps are warranted for life. We set
aside a reserve based on monthly return rates to pay for customer service and
repair of products. We set aside additional reserves during early stages of
product introduction. We believe such reserves are adequate, but in the event of
a major product problem or recall, the reserves may not be sufficient to cover
all costs. Such an event could have a material adverse affect our business and
operating results.

    Our business involves the inherent risk of product liability claims. We
maintain product liability insurance with coverage limits of $15.0 million per
occurrence and an annual aggregate maximum of $15.0 million, with a deductible
of $50,000 per occurrence. We cannot assure that this insurance coverage will
continue to be available on acceptable terms or that the coverage will be enough
to pay all future product liability claims.

EMPLOYEES


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<PAGE>   23


    As of March 6, 2001, we employed approximately 1,539 full-time persons
including 209 in research and development, 300 in manufacturing, production
engineering and quality assurance, 751 in administration and support and 279 in
sales and marketing. We also used 88 temporary workers as of March 6, 2001. We
believe that the success of our business depends, in part, on our ability to
attract and retain qualified personnel, particularly scientific, technical and
key management personnel. We believe that our relationships with our employees
are good.

ITEM 2. PROPERTIES

    Under a "synthetic" lease and sublease, we have constructed on the campus
of California State University Northridge, which we call CSUN, approximately
500,000 square feet of building of space on 19 acres of land for our
manufacturing, administrative and other activities. During the year 2000, we
moved our headquarters from Sylmar, California to this newly constructed
building in Northridge, California. Under the terms of our arrangement with
CSUN, we expect to obtain access to an additional 9 acres, which we expect to
take possession in 2002, on which we intend to construct an additional 146,000
square feet of facilities. We also are in discussions for an option to lease an
additional contiguous 12 acres on the CSUN campus. For further discussion of our
facilities in Northridge, California, see "Management's Discussion and Analysis
of Financial Condition -- Liquidity and Capital Resources."

    We own a facility in Hollywood, Florida which consists of an aggregate of
approximately 32,000 square feet, and lease an additional 21,135 square feet of
warehouse space adjacent to this facility. We also lease approximately 50,600
square feet of space in Chatsworth, California. We own an aggregate of about
175,000 square feet in Sylmar, California. Approximately 23,400 square feet of
the space is leased to Alfred E. Mann, our Executive Chairman, and approximately
9,711 square feet is leased to MRG. In 2000, we leased an additional 3,620
square feet and 5,930 square feet to AlleCure Corporation and Advanced Bionics
Corporation, respectively, on a short-term basis. Mr. Mann has a substantial
financial interest in each such organization. All such leases are on terms we
believe to be equal to at least fair market terms to us. We plan to move all of
our remaining operations from the Sylmar location late in 2001, at which time we
will endeavor to sell or lease the entire complex. We believe that our current
facilities as described above satisfy our space requirements for the foreseeable
future.

ITEM 3. LEGAL PROCEEDINGS

    On February 9, 1999, we were served with a complaint filed in the Civil
District Court for the Parish of Orleans, State of Louisiana, by Diabetes
Resources, Inc., which is also known as Insulin Infusion Specialties, and which
we will refer to as IIS. IIS entered into an Educational Dealer Agreement with
us in July, 1997, relating to the distribution of some of our products by IIS.
The agreement expired and we declined to renew that agreement, pursuant to its
terms as of December 31, 1998. IIS is alleging that we engaged in unfair
competition, breached the agreement, violated applicable trade secret laws and
defamed IIS. IIS did not specify the amount of damages it is seeking in its
complaint. We removed the action to Federal Court, filed an answer denying the
material allegations, and filed a counterclaim seeking damages for unfair trade
practices. We have filed an amended counterclaim seeking damages based on IIS's
failure to pay amounts due and owing. We believe that we have meritorious
defenses to the claims asserted by IIS. Trial in the matter has been set for
September 2001. Discovery in this litigation is continuing.

    We are not presently a party to any other pending legal proceedings which we
believe are material. From time to time we are subject to various legal
proceedings for product liability, employment and other general business related
claims. These claims arise out the ordinary course of our business. We do not
believe that any of these claims, individually or collectively, will have any
material adverse effect on our business or financial condition, results of
operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not Applicable.


                                       23
<PAGE>   24


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Our Common Stock began trading on the Nasdaq National Market under the
symbol "MNMD" on July 25, 1995. The following table summarizes, for the periods
indicated, the intra-day high and low sales prices per share of our Common Stock
as adjusted for a 2:1 stock split paid on August 18, 2000 to stockholders of
record on August 2, 2000:

<TABLE>
<CAPTION>
                                                                                HIGH       LOW
                                                                             ---------  --------
<S>                                                                          <C>        <C>
       2000
         Fourth Quarter Ended December 29, 2000.........................     $   90.25  $  39.75
         Third Quarter Ended September 29, 2000.........................         92.56     55.00
         Second Quarter Ended June 30, 2000.............................         72.06     45.88
         First Quarter Ended March 31, 2000.............................         67.25     30.78
       1999
         Fourth Quarter Ended December 31, 1999.........................     $   45.63  $  25.07
         Third Quarter Ended October 1, 1999............................         54.13     33.75
         Second Quarter Ended July 2, 1999..............................         39.50     22.91
         First Quarter Ended April 2, 1999..............................         29.69     19.25
</TABLE>

RECORD HOLDERS

The last reported sale price of our Common Stock on the Nasdaq National Market
on December 29, 2000 was $42.031. As of December 29, 2000, our company had
approximately 1,476 stockholders of record.

DIVIDENDS

    We have never declared or paid any cash dividends on our Common Stock. We
currently intend to retain all of our available funds for use in our business.
We do not anticipate paying any cash dividends in the foreseeable future. The
Board of Directors will make future determinations relating to our dividend
policy, considering the following in making any such determination:

    o   our future earnings;

    o   our capital requirements;

    o   our financial condition;

    o   our future prospects; and

    o   other factors which the Board of Directors might deem relevant.

SALES OF UNREGISTERED SECURITIES

    Not Applicable.


                                       24
<PAGE>   25


ITEM 6. SELECTED FINANCIAL DATA

    The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with the our financial statements and notes
thereto included elsewhere herein and with "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The selected consolidated
financial data as of December 29, 2000, December 31, 1999, January 1, 1999,
January 2, 1998, and December 27, 1996 and for each of the five fiscal years in
the period ended December 29, 2000 have been derived from the audited financial
statements of MiniMed Inc. The audited financial statements as of December 31,
1999 and December 29, 2000 and for the three fiscal years in the period ended
December 29, 2000, which are included elsewhere in this Annual Report, have been
audited by Deloitte & Touche LLP, our independent auditors.

<TABLE>
<CAPTION>
                                                                                FISCAL YEAR
                                      ----------------------------------------------------------------------------------------
                                          1996               1997               1998               1999               2000

                                      DECEMBER 27,        JANUARY 2,         JANUARY 1,        DECEMBER 31,       DECEMBER 29,
                                          1996               1998               1999               1999               2000
                                      ------------       ------------       ------------       ------------       ------------
                                                              (in thousands, except share and per share data)
<S>                                   <C>                <C>                <C>                <C>                <C>
INCOME STATEMENT DATA:
Net sales ......................      $     76,396       $     99,492       $    138,577       $    212,296       $    294,403
Cost of sales ..................            32,314             38,704             51,518             72,907             93,657
                                      ------------       ------------       ------------       ------------       ------------
Gross profit ...................            44,082             60,788             87,059            139,389            200,746
Operating expenses:
  Selling, general and
     administrative ............            32,101             41,237             57,059             88,451            124,142
  Research and development .....             7,900              9,447             16,531             26,798             34,159
  Research and development
     contract ..................              --                 --               (6,000)            (6,000)              --
  Merger related expenses ......              --                1,000               --                 --                 --
                                      ------------       ------------       ------------       ------------       ------------
          Total operating
            expenses ...........            40,001             51,684             67,590            109,249            158,301
                                      ------------       ------------       ------------       ------------       ------------
Operating income ...............             4,081              9,104             19,469             30,140             42,445
Interest expense ...............              (163)              (237)               (47)              (118)               (50)
Other income, including interest
  income .......................             1,062              1,851              1,503              5,143             21,639
                                      ------------       ------------       ------------       ------------       ------------
Income before income taxes .....             4,980             10,718             20,925             35,165             64,034
Provision for income taxes .....            (1,662)            (4,029)            (7,882)           (13,266)           (20,879)
                                      ------------       ------------       ------------       ------------       ------------
Net income .....................      $      3,318       $      6,689       $     13,043       $     21,899       $     43,155
                                      ============       ============       ============       ============       ============
Basic income per share .........      $       0.07       $       0.13       $       0.24       $       0.37       $       0.68
                                      ============       ============       ============       ============       ============
Basic weighted average shares
  outstanding ..................        47,764,000         51,620,000         53,760,000         59,294,000         63,756,000
                                      ============       ============       ============       ============       ============
Diluted income per share .......      $       0.07       $       0.12       $       0.23       $       0.35       $       0.64
                                      ============       ============       ============       ============       ============
Diluted weighted averages shares
  outstanding ..................        50,268,000         54,224,000         56,664,000         62,942,000         67,200,000
                                      ============       ============       ============       ============       ============
</TABLE>


<TABLE>
                                               DECEMBER 27,    JANUARY 2,     JANUARY 1,   DECEMBER 31,  DECEMBER 29,
                                                   1996          1998           1999            1999         2000
                                               ------------   -----------   ------------   ------------  ------------
                                                                           (IN THOUSANDS)
<S>                                            <C>            <C>           <C>            <C>           <C>
    BALANCE SHEET DATA:
    Working capital .......................      $ 36,153      $ 63,409       $ 84,771       $253,891     $306,903
    Total assets ..........................        64,424       105,819        157,652        353,798      450,960
    Notes payable, net of current portion .         1,528           728          1,059           --           --
    Retained earnings .....................         1,394         8,083         21,126         43,025       86,180
    Total stockholders' equity ............        48,131        83,083        133,833        327,098      425,996
</TABLE>


                                       25
<PAGE>   26


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    The following discussion of the financial condition and results of MiniMed
Inc. should be read in conjunction with the consolidated financial statements
and the related notes thereto included elsewhere herein. The discussion in this
Annual Report contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
in the forward-looking statements. See language relating to forward-looking
statements preceding Item 1, "Business."

GENERAL

    Our sales and profits have been generated primarily through the sale of
external pumps and related disposable products used to deliver insulin in the
intensive management of diabetes. Additionally, through our acquisition of two
distribution businesses, we have broadened our product offerings to include
other diabetes supplies and pharmacy products generally used in the treatment of
this disease.

         Product development and manufacturing operations have focused on four
product lines: external pumps, disposable products used with our external pumps,
continuous glucose monitoring systems, and implantable insulin pumps. Future
development of the external pump and disposable product lines will focus upon
improving the existing technology for its current use in diabetes treatment,
with the ultimate objective of linking the insulin delivery systems to a
continuous monitoring system. Our objective is to create an "artificial
pancreas", capable of controlling glucose levels in patients without significant
patient intervention. Our infusion pump technology may also be used for the
treatment of other medical conditions. Our continuous glucose monitoring system
has been characterized as a first of its kind technology, and full
commercialization will be subject to successful implementation of manufacturing,
sales, marketing and reimbursement plans. Sales of continuous glucose monitoring
systems commenced in 1999, as we launched a physician version of this product
line after receiving regulatory approval in June, 1999. Commercialization of the
physician version continued during 2000. We filed an application with the FDA
for approval of our consumer version of this product in August 2000. Our
application is currently under review.

On September 1, 1998, we sold assets and transferred technology related to our
implantable pump program to Medical Research Group, Inc., which we call MRG.
Alfred E. Mann, our founder, Executive Chairman and largest stockholder also
founded MRG and he continues to hold a substantial equity interest in MRG. As
part of the transaction to transfer this technology, we acquired an option to
purchase worldwide exclusive marketing rights to a long-term glucose sensor
being developed by MRG for $30.0 million and have retained exclusive marketing
rights to the implantable pump product line for diabetes and certain other
medical conditions. Under these initial arrangements, we were obligated to make
mandatory purchases of implantable pumps from MRG through 2001 and additional
purchases of implantable products in subsequent periods to retain our
exclusivity. In February 2001, we restructured our agreements with MRG and
exercised our option for the worldwide marketing rights to MRG's long-term
glucose sensor. Significant terms of the restructured agreements include a $30.0
million equity investment by us in MRG, a waiver by MRG of our prior purchase
commitments, reduced minimum purchase commitments and purchase prices,
redefinition of funding responsibilities for future joint research and
development programs and the transfer of marketing rights for non-diabetes
medical conditions to MRG (See further discussion in "Liquidity and Capital
Resources").

    During 1999, we entered into two strategic relationships that will affect
future product development, manufacturing, sales and marketing efforts, as well
as financial performance. In February 1999, we entered into an agreement with
Eli Lilly & Co., which we call Lilly, giving us a worldwide license to package
and sell a formulation of Lilly's insulin lyspro for use with our programmable
insulin infusion pumps. We will offer this insulin to our patients in pre-filled
cartridges to be used exclusively in our programmable insulin infusion pumps. In
June 1999, we entered into agreements with a division of Elan Corporation, plc,
which we call Elan, to manufacture and market exclusively under our name for
insulin delivery a disposable, constant-flow infusion system. Our current plans
are to offer this disposable infusion system to patients with Type 2 diabetes,
further broadening our potential markets. We will also manufacture this infusion
system for Elan and its other licensees for use with a variety of other
pharmaceutical compounds. Our ability to market products related to each of
these agreements is subject to regulatory approval (including separate
regulatory approval of the insulin to be used in connection with the disposable
infusion system), the timing and certainty of which are not predictable.





                                       26
<PAGE>   27
RESULTS OF OPERATIONS

    The following table sets forth for the years indicated the percentage
relationship to net sales of certain items in our consolidated statements of
operations and the percentage changes in the dollar amounts of such items on a
comparative basis for the last three fiscal years:

<TABLE>
<CAPTION>

                                                                                      ANNUAL
                                                                                     INCREASE
                                                                                    (DECREASE)
                                                                                -----------------
                                               PERCENTAGE OF NET SALES           1998        1999
                                           -------------------------------        VS.         VS.
                                            1998         1999         2000       1999        2000
                                           -----        -----        -----
<S>                                        <C>          <C>          <C>        <C>         <C>
Net sales ...........................      100.0%       100.0%       100.0%      53.2%       38.7%
Cost of sales .......................       37.2%        34.3%        31.8%      41.5%       28.5%
                                           -----        -----        -----
Gross profit ........................       62.8%        65.7%        68.2%      60.1%       44.0%
Operating expenses:
  Selling, general and administrative       41.2%        41.7%        42.2%      55.0%       40.4%
  Research and development ..........       11.9%        12.6%        11.6%      62.1%       27.5%
  Research and development contract .       (4.3)%       (2.8)%        0.0%       0.0%     (100.0)%
                                           -----        -----        -----
Total operating expenses ............       48.8%        51.5%        53.8%      61.6%       44.9%
                                           -----        -----        -----
Operating income ....................       14.0%        14.2%        14.4%      54.8%       40.8%
                                           =====        =====        =====
</TABLE>

    The following table sets forth net sales and gross profits for our
significant business activities for the three years ended December 29, 2000:

<TABLE>
<CAPTION>
                                                           FISCAL YEAR                     PERCENTAGE OF NET SALES
                                              ------------------------------------      -----------------------------
                                                1998          1999          2000         1998        1999        2000
                                              --------      --------      --------      -----       -----       -----
                                                                           (IN THOUSANDS)
<S>                                           <C>           <C>           <C>           <C>         <C>         <C>
NET SALES:
External pumps and related
disposables:
  External pumps:
     Domestic ..........................      $ 66,690      $108,744      $147,641       48.1%       51.2%       50.1%
     International .....................         5,815         8,290        10,755        4.2%        3.9%        3.7%
                                              --------      --------      --------      -----       -----       -----
       Subtotal ........................        72,505       117,034       158,396       52.3%       55.1%       53.8%
  Disposable products:
     Domestic ..........................        44,605        73,783       107,661       32.2%       34.8%       36.6%
     International .....................         4,646         6,639         9,756        3.4%        3.1%        3.3%
                                              --------      --------      --------      -----       -----       -----
       Subtotal ........................        49,251        80,422       117,417       35.6%       37.9%       39.9%
                                              --------      --------      --------      -----       -----       -----
Total external pumps and related
  disposables ..........................       121,756       197,456       275,813       87.9%       93.0%       93.7%
Implantable insulin pumps(1) ...........         1,391         1,811         1,329        1.0%        0.9%        0.5%
Other diabetes supplies(1) .............         6,548         8,729        11,329        4.7%        4.1%        3.8%
Glucose Monitoring Systems .............          --             163         3,195       --           0.1%        1.1%
Pharmacy products(1) ...................         8,882         4,137         2,737        6.4%        1.9%        0.9%
                                              --------      --------      --------      -----       -----       -----
          Total net sales ..............      $138,577      $212,296      $294,403      100.0%      100.0%      100.0%
                                              ========      ========      ========      =====       =====       =====
GROSS PROFITS:
   External pumps and related
     disposables:
     External pumps:
        Domestic .......................     $  53,200     $  85,061       $ 117,882       38.4%      40.1%      40.0%
        International ..................         3,621         4,641           6,154        2.6%       2.2%       2.1%
                                             ---------     ---------       ---------       ----       ----       ----
          Subtotal .....................        56,821        89,702         124,036       41.0%      42.3%      42.1%
     Disposable products:
        Domestic .......................        25,946        42,693          66,125       18.7%      20.1%      22.5%
        International ..................         2,505         3,211           5,643        1.8%       1.5%       1.9%
                                             ---------     ---------       ---------       ----       ----       ----
          Subtotal .....................        28,451        45,904          71,768       20.5%      21.6%      24.4%
                                             ---------     ---------       ---------       ----       ----       ----
   Total external pumps and related
     disposables .......................        85,272       135,606         195,804       61.5%      63.9%      66.5%
   Implantable insulin pumps(1) ........        (1,684)         (633)           (865)      -1.2%      -0.3%      -0.3%
   Other diabetes supplies(1) ..........         2,316         3,468           4,047        1.7%       1.6%       1.4%
   Glucose monitoring systems ..........          --             122           1,309         --        0.1%       0.4%
   Pharmacy products(1) ................         1,155           826             451        0.8%       0.4%       0.2%
                                             ---------     ---------       ---------       ----       ----       ----
</TABLE>


                                       27
<PAGE>   28

<TABLE>
<S>                                          <C>           <C>             <C>             <C>        <C>        <C>
         Total gross profits.......          $  87,059     $ 139,389       $ 200,746       62.8%      65.7%      68.2%
                                             =========     =========       =========       ====       ====       ====
</TABLE>


(1) Implantable insulin pump sales are international, and other diabetes
    supplies and pharmacy products sales are primarily domestic.

FISCAL 2000 AND FISCAL 1999

    Net Sales. Consolidated net sales increased 38.7% in 2000 over 1999 to
$294,403,000 from $212,296,000. Our sales growth is primarily the result of an
increase of 39.7%, or $78,357,000, in sales of external pumps and related
disposable products. Sales of external pumps grew 35.3% in 2000, with external
pump domestic sales growing 35.8% and external pump international sales
increasing 29.7%. The domestic increase is primarily related to an increase in
unit volume of 37.3% moderated by a slight decrease in average selling prices.
The increase in external pump international sales is unit volume driven, as
realized international average sales prices were also slightly lower than in
1999.

     Commencing in the second quarter of 2000, we began selling our programmable
external insulin pumps to qualified Medicare beneficiaries when the Health Care
Financing Administration began covering these products. Shipments of external
pumps to patients who have Medicare as their primary source of reimbursement was
the major factor in the reduction of external pump average sales prices during
2000. Revenue for the Medicare patients is recognized over a payment period
ranging from 13 to 15 months. The patient also has the right to return the pump
at any time during the payment period. This is contrasted to our traditional
sales model, where revenue is recognized upon shipment and there is no inherent
right of return. During 2000 approximately 4.2% of our domestic external pump
shipments were billed under the Medicare program. If the Medicare pumps shipped
during 2000 had been reimbursed in our more traditional models, revenues would
have increased by approximately $3.8 million with a corresponding increase in
gross profits and operating results. The financial impact to our operating
results of the Medicare reimbursement program is more pronounced as we start up
Medicare sales activity. Over time, assuming Medicare sales volumes remain
relatively consistent, the impact of the Medicare reimbursement program upon our
short-term operations should diminish. Domestic external pump prices remained
relatively consistent for units sold to non-Medicare patients and distributors.

    International average selling prices for pumps and related disposable
products were slightly lower in 2000 compared to 1999 due to decreased exchange
rates and increased sales in countries where independent dealers are utilized
compared to the prices realized in the markets where we have direct sales
operations.

    Sales of related disposable products increased 46.0% in 2000, with domestic
sales growth at 45.9% and international sales growth at 46.9%. This increase in
sales of disposable products was primarily volume driven in both the domestic
and international markets. This volume increase has been a function of our
external pump sales growth, as the number of patients utilizing our external
pumps has almost doubled over the past two years. Prices have also increased due
to two factors: first, we continue to experience a shift in product mix of the
infusion sets sold, with customers moving to the more expensive models; and
second, domestic average sales prices have increased as a result of processing
more disposable sales directly with third-party payors through our direct sales
organization, as contrasted to sales to independent dealers.

    Implantable pump sales decreased by 26.6% in 2000 over 1999. Sales activity
of this product line remains limited due to the lack of required regulatory
approvals, and to date, sales of implantable pumps have been generated mainly in
connection with clinical trials and compassionate use of the pumps for patients
who have difficulty in glucose control with other therapies. In February 2001,
we submitted to the FDA our application for approval of this device in
combination with the special insulin required for its use. The original
implantable pump and the current enhanced version of the implantable pump have
received the CE Mark permitting commercial sale in Europe, however, separate
approval is required from the EU for the special insulin. The insulin is
manufactured by an independent pharmaceutical company, which continues to
control the European regulatory filings for its insulin. The applications for
approval of the insulin in EU have been filed and are currently under review. No
assurance can be given as to when any of these approvals will be received, if at
all.

   Sales of other diabetes supplies increased 29.8%, or $2,600,000 in 2000
over 1999. This increase resulted from overall market growth and the
continuation of internal efforts to market these products to our external pump
patient base which began in 1999. Average sales prices for these products
decreased in 2000 over 1999 due to competitive pressures and the addition of
more Medicare patients to our patient base. Pharmaceutical products sales
decreased 33.8%, or $1,400,000 in 2000 compared to 1999. While pharmacy sales
continue to decrease, we maintain this business activity in anticipation of
future commercial activities related to our disposable pump and pre-filled
insulin cartridge product lines and to support clinical trial activity for the
use of other compounds in our current infusion


                                       28
<PAGE>   29
systems. Fiscal 2000 was the first full year of sales activity relating to our
continuous glucose monitoring system, with sales increasing $3,032,000 from
1999. In addition to establishing a strong base of physicians utilizing this
technology, we sold a number of systems to pharmaceutical companies for use in
various diabetes drug clinical trial activities.

    Cost of Sales and Operating Expenses. Cost of sales increased 28.5% in 2000
over 1999 to $93,657,000 from $72,907,000. As a percentage of net sales, cost of
sales decreased to 31.8% in 2000 from 34.3% in 1999. Our overall gross margin
percentage improvement was achieved primarily through cost improvements in our
external pump and related disposables product lines. Implantable pump gross
margins decreased in 2000 compared to 1999 and remained negative due to the
reduction in sales activity. Future margins on implantable pumps may be
adversely impacted by a contractual purchase commitment for these products to
MRG (see further discussion in "Liquidity and Capital Resources). Gross margins
in the diabetes supply and pharmacy product lines also decreased due to the
pricing pressures of these competitive environments that were partially offset
by volume-based cost reductions. Gross margins on the limited volume of
continuous glucose monitoring system sales were 41.0% for the year. The fully
automated manufacturing operation related to this product line is currently
under development and will significantly impact future margins, largely
depending upon sales and manufacturing volumes.

    Gross margin percentages on worldwide sales of external pumps and the
related disposable products increased to 71.0% of sales in 2000 over 68.7% in
1999. For external pumps, gross margins improved to 78.3% for 2000 compared to
76.6% in 1999. Included in cost of sales for domestic external pumps for 1999
was a nonrecurring charge of $1,500,000 related to costs required to correct
the software of the Model 508 insulin pump which was launched in October 1999.
Adjusted for this non-recurring charge, margins on external pumps for 1999 would
have been 77.9%. While average sales prices on external pumps have decreased
domestically and internationally, manufacturing costs of external pumps have
also decreased due to improved manufacturing efficiencies and volume-based cost
savings. Related disposable product gross margin percentages increased to 61.1%
in 2000 from 57.1% in 1999. The improved margins are a function of stronger
pricing achieved through our direct sales efforts and the continued worldwide
shift of our customers to the higher margin products combined with continued
volume-based cost reduction efforts achieved internally and with our contract
manufacturers.

    Selling, general and administrative expenses increased 40.4% in 2000 over
1999 to $124,142,000 from $88,451,000. As a percentage of net sales, these
expenses have increased for 2000 compared to 1999. Selling and marketing
expenses increased primarily due to increased sales volumes, which led to
increased sales commissions and other variable field and in-house sales costs.
In 2000, we continued our expansion of the field sales presence through the
addition of direct sales representatives, managed care and other payor sales
representatives and nurse specialists who will enhance our ability to educate
and train patients and health care professionals. We also increased
international selling and marketing expenditures, expanding our operations in
Germany, establishing a direct sales operation in Australia and a European
headquarters in Belgium. General and administrative expenses have increased
primarily due to continued investment in our information systems and related
expenditures. We commenced a complete information system upgrade during 2000,
with the first phase of the project scheduled to be completed by the end of
2001. In addition to information systems, our next largest investment in general
and administrative expenses is in reimbursement personnel increases to support
our growth and the continued shift of our domestic business activities to direct
sales.

    Research and development expenses increased 27.5% in 2000 over 1999 to
$34,159,000 from $26,798,000. As a percentage of sales, research and development
expenses decreased to 11.6% during 2000 from 12.6% during 1999. The 2000
increase in research and development costs resulted primarily from increased
expenses in the development of future generations of external pumps and their
related disposable products. We continue to invest in start-up manufacturing
operations for our current and future continuous glucose monitoring systems, the
disposable pump product line and insulin development for all of our insulin
delivery systems. Research and development expenses will continue to rise during
2001 as several products prepare for launch and enter the later stages of
development. These products include our next platform of external pumps and
related disposable products, the consumer version of our continuous glucose
monitoring system, several insulin programs, and our disposable infusion system
for the treatment of Type 2 diabetes and other medical conditions.

    From time to time we invest in new and developing technologies that may
provide improvements to our core technology or that may provide additional
applications for our existing technologies and products. These investments may
be in the form of equity investments, loans, research and development
agreements, and strategic alliances or cooperation agreements. No assurance can
be given as to when such investments will provide useful new technologies or
applications, if at all. Such investments may result in losses that could
adversely affect our future earnings and results of operations. During 2000, we
sold a portion of our investment in Trimeris, Inc., a drug-development company,
recognizing a gain of approximately $11.0 million.

    Other. Other income for 2000 consisted of the capital gain described above
and interest income generated from our cash, cash equivalents, and short-term
investment balances. Our effective tax rate for all years has been computed
giving consideration to the

                                       29
<PAGE>   30


pretax results applicable to our foreign and domestic tax jurisdictions and a
continual decrease in our valuation allowance against net deferred tax assets
due to improved operating results. Our income tax obligations have been
significantly reduced as a result of research and development and manufacturing
tax credits. We have not incurred any material foreign income tax expense to
date. Inflation has not significantly impacted our results of operations for the
past three years.

FISCAL 1999 AND FISCAL 1998

    Net Sales. Consolidated net sales increased 53.2% in 1999 over 1998 to
$212,296,000 from $138,577,000. Our sales growth is primarily the result of an
increase of 62.2%, or $75,700,000, in sales of external pumps and related
disposable products. Sales of external pumps grew 61.4% in 1999, with external
pump domestic sales growing 63.1% and external pump international sales
increasing 42.6%. The domestic increase is primarily related to increased unit
volume combined with a small increase in average selling prices. The increase in
international external pump sales is unit volume driven, as realized
international average sales prices were slightly lower than in 1998. The
domestic price increase was a function of the our continued efforts to increase
the percentage of pump sales processed directly with third-party payors rather
than selling pumps at larger discounts to independent dealers, and market
acceptance of price increases on our pumps related to technological enhancements
introduced during the last two years. International average selling prices for
pumps and related disposable products were slightly lower in 1999 compared to
1998 due to increased sales in emerging foreign markets where independent
dealers are utilized, compared to the prices realized in the markets where we
have direct operations. Sales of the related disposable products increased 63.3%
in 1999, with domestic sales growth at 65.4% and international sales growth at
42.9%. Similar to our external pumps, this increase in sales of disposable
products was primarily volume driven in both the domestic and international
markets. Two other factors influenced the sales growth of our disposable
products. First, we experienced a shift in product mix of the infusion sets
sold, with customers moving to the more expensive models of our infusion sets.
Second, similar to our external pump product line, domestic average sales prices
have increased as a result of processing more sales directly with third-party
payors by our direct sales organization, as contrasted to sales to independent
dealers.

    Sales of implantable pumps increased by 30.2% or $420,000 in 1999 over 1998.
Sales activity of this product line remains limited due to the lack of required
regulatory approvals, and to date, sales of implantable pumps have been
generated mainly in connection with clinical trials and compassionate use of the
pumps for patients with particularly difficult cases. We originally received
certification for the implantable pump under the applicable directives issued by
the EU, and received the CE Mark in March 1995, thus permitting commercial sale
throughout the EU. An enhanced version of the implantable pump received the CE
Mark in February 2000. Separate approval from the EU, however, is required for
commercial sale of the insulin for use in the pump. The insulin is manufactured
by an independent pharmaceutical company, which also controls the regulatory
filings for its insulin. The implantable pump and the special insulin also
remain subject to regulatory review and approval in the United States. No
assurance can be given as to when any of these approvals will be received, if at
all.

    Sales of other diabetes supplies increased 33.3%, or $2,181,000 in 1999
over 1998. This increase resulted from overall market growth and the
commencement of internal efforts to market these products to our external pump
patient base. Average sales prices for these products have increased in 1999
over 1998, as a decreasing percentage of our diabetes supplies business was
derived from lower paying Medicare patients. Pharmaceutical products sales
decreased 53.4%, or $4,745,000 in 1999 compared to 1998. The 1999 sales decrease
is a further continuation of our narrowing and restructuring of the pharmacy
operations to better support our future business activities. During the fourth
quarter of 1999 we recognized our first revenues on sales of the continuous
glucose monitoring system.

   Cost of Sales and Operating Expenses. Cost of sales increased 41.5% in 1999
over 1998 to $72,907,000 from $51,518,000. As a percentage of net sales, cost of
sales decreased to 34.3% in 1999 from 37.2% in 1998. Our overall gross margin
percentage improvement was achieved primarily through margin improvement in the
implantable pump, other diabetes supplies and pharmacy products. Implantable
pump margins improved primarily due to cost reductions achieved because of the
sale of assets and transfer of technology to MRG. Margin improvements in other
diabetes supplies and pharmacy product areas are the result of our repositioning
of these businesses.

     Gross margin percentages on domestic sales of external pumps and the
related disposable products remained constant in 1999 compared to 1998. While
average sales prices on external pumps increased, manufacturing costs of
external pumps also increased, as our latest model external pump incorporates
several technological advancements including a remote bolus programming device.
Additionally, included in cost of sales for domestic external pumps is a
nonrecurring charge of $1,500,000 million recorded in the fourth


                                       30
<PAGE>   31


quarter of 1999 for the estimated costs of correcting a software error on
certain external pumps sold in October and November of 1999. Domestic disposable
product gross margin percentages remained consistent from 1999 to 1998. While
the shift in product mix to more expensive infusion sets resulted in increased
sales prices, the gross profit margin percentages on these enhanced infusion
sets are lower due to higher costs. International gross margin percentages on
external pumps and related disposable products decreased in 1999 from 1998 due
to our increased expansion into new markets where we are realizing lower prices.

    Selling, general and administrative expenses increased 55.0% in 1999 over
1998 to $88,451,000 from $57,059,000. As a percentage of net sales, these
expenses remained consistent for 1999 compared to 1998. Selling and marketing
expenses increased primarily due to increased sales volumes, which led to
increased sales commissions and other variable field and in-house sales costs.
Additionally, we continued the expansion of our direct sales organization during
1999 through the addition of new sales representatives, continued development of
our managed care marketing efforts and an expanding commitment to field
education and training. We also increased international selling and marketing
expenditures to expand our overall international presence, particularly in
Germany and in new international markets. General and administrative expenses
increased to support our growth, primarily in the areas of reimbursement and
information systems.

    Research and development expenses increased 62.1% in 1999 over 1998 to
$26,798,000 from $16,531,000. As a percentage of sales, research and development
expenses increased to 12.6% during 1999 from 11.9% during 1998. The 1999
increase in research and development costs resulted from greater resources
directed toward the development of continuous glucose monitoring systems and the
related pilot manufacturing operations, development efforts related to future
generations of external pumps, expansion of the data communication capabilities
of our products, support of efforts for the use of our core technology in the
treatment of other medical conditions, and product development efforts related
to our pre-filled insulin cartridge program and our disposable infusion systems.
Research and development expenses will continue to rise during 2000, as we plan
to introduce several new products over the next several years, including the
consumer version of our continuous glucose monitoring system, new generations of
external insulin pumps and related disposable products (including pre-filled
insulin cartridges), expansion of our core technology for the treatment of other
medical conditions and our disposable infusion system, both for the treatment of
Type 2 diabetes and under our commitment to supply this product to Elan and its
licensees.

    During the 1998 first quarter, we signed a research and development contract
with American Medical Instruments, Inc., also known as AMI, a member of The
Marmon Group of Companies. Under the terms of the agreement we performed
research and development services on the development of electronics and
telemetry for future models of infusion pumps. Upon achievement of quarterly
performance milestones, we have received $12.0 million in funding, $6.0 million
received in each of 1999 and 1998, respectively. Subject to payment of royalties
to AMI, we have the right to sell products utilizing the technologies developed
pursuant to the agreement on a worldwide basis, with the exception of Japan. We
also have the right to purchase the technologies developed at prices ranging
from an aggregate of $13.5 million to $19.0 million during certain periods
commencing January 2000 and concluding April 30, 2002. During each of 1999 and
1998, we recorded the $6.0 million we received under this research and
development contract as a reduction of operating expenses. Costs related to
completion of the obligations under this agreement are included in research and
development expense.

LIQUIDITY AND CAPITAL RESOURCES

    We generated cash from operations of $40,059,000 in 2000 compared to cash
generated from operations of $10,275,000 in 1999. The increase in operating cash
flows was the result of increased overall profitability and our tax benefits
from the exercise of non-qualified stock options. These increases were partially
offset by continued growth in our accounts receivable driven by sales growth and
our continuing shift in business to direct sales and billing activities to third
party payors. Cash balances were also decreased by an increase in inventories.
Our inventories were increased in planning the move to our new corporate
headquarters and in an effort to purchase adequate supplies of key components to
support our continued sales growth.

    During 1998, we used $2,921,000 cash from operations. Our use of cash in
1998 included several factors. We used cash in 1998 to retire approximately
$6,333,000 in current liabilities related to our acquisitions of HMS and DSS.
These liabilities included $1,772,000 in trade payables of the HMS pharmacy
operations, $1,893,000 in trade payables and accrued liabilities related to DSS


                                       31
<PAGE>   32


operations, $1,910,000 in other accrued liabilities and all of the accrued but
unpaid amounts related to the $1.0 million in merger related expenses recorded
in fiscal 1997. If we had not retired these liabilities, we would have generated
cash flow from operating activities of $3,412,000 rather than the $2,921,000
reported as cash used in operations. Inventory and receivable balances also
increased in 1998 to support our increased business activity.

    Capital expenditures were $38,256,000 for 2000, $20,402,000 for 1999 and
$18,570,000 for 1998. The 1998 and 1999 capital expenditures related primarily
to building manufacturing capacity for the continuous glucose monitoring
systems, as well as other building improvements, manufacturing expansion,
research and development engineering equipment and information systems upgrades
to support growth. The 2000 capital expenditures related primarily to furniture
and equipment for our new facility, continued investment in equipment related to
our new product lines, information technology spending to support our growing
business activity and tooling, molds and software necessary for our future
product releases. We anticipate that future capital expenditures will continue
to increase at an even faster rate in support of our new product activities and
to build the infrastructure necessary to accommodate continuing growth. We
retired $2.8 million in bank debt related to HMS operations and used $2.7
million of cash during the first quarter of 1998 to complete our acquisition of
Dartec AB, a Scandinavian distributor.

    As stated previously, we restructured our agreement with MRG in February,
2001 and exercised our option to purchase the exclusive worldwide marketing
rights to MRG's long-term glucose sensor for $30.0 million. The restructured
agreement with MRG requires us to make a $30.0 million equity investment in MRG,
which was completed in March, 2001. Our ownership position in MRG is
approximately 8.0%. Additionally, we are required to make mandatory minimum
purchases of implantable pump units from MRG over the next four years in the
following amounts:


          2001.......................................      $ 1,980,000
          2002.......................................        3,240,000
          2003.......................................        4,860,000
          2004.......................................        7,020,000
                                                           -----------
                    Total............................      $17,100,000
                                                           ===========

    We have accrued $3,285,000 as of December 29, 2000 related to implantable
pump purchase commitments in excess of expected usage during the four-year
period. In addition to these mandatory purchase commitments, to maintain
exclusive marketing rights on the fully-implanted systems for periods subsequent
to 2002 we are required to pay license fees of $12.5 million to MRG related to
achievement of development milestones of future products for the treatment of
diabetes which are in the early stages of development. Furthermore, we are
required to pay additional fees of up to $12 million in periods subsequent to
2002, which amount may be reduced to the extent we purchase implantable pumps in
excess of the minimum purchase requirements. In the event that we fail to
satisfy the minimum purchase commitments in 2003 or 2004 or fail to render the
required license fee payments, MRG has the right to repurchase all of the
distribution rights for $60.0 million or purchase distribution rights to MRG's
next generation implantable pump for $7.5 million. MRG has agreed to supplement
our funding the development of the special insulin used in the implantable
system and to fund a greater portion of the clinical trials of the long-term
glucose sensor.

    In 1999, we entered into a transaction pursuant to which we began
construction of corporate headquarters, research and development and
manufacturing facilities on the campus of California State University,
Northridge, the first phase of which was initially to be financed with a $65.0
million credit transaction. During October 2000, we negotiated with the lessors
to increase this arrangement to $80.0 million to further expand this facility.
The transaction was structured as a synthetic lease for the facility development
and, in a related transaction, we obtained a revolving line of credit to borrow
up to $15.0 million. Under the terms of the arrangement, a special purpose trust
subleases the land to us and leases the improvements to us. In connection with
these transactions, we pledged substantially all of our assets as collateral
security and are subject to various affirmative and negative covenants regarding
the conduct of our business, including restrictions on the payment of dividends,
incurrence of additional debt, capital expenditures, investments, and other
operating considerations. These arrangements could adversely affect our ability
to acquire additional capital resources or engage in certain strategic
transactions. The synthetic lease has an initial term of five years, with two
one-year renewal options. Additionally, we have the option of purchasing the
leasehold and improvements during this period. If we do not exercise this
option, we will be forced to abandon the premises. We anticipate exercising this
option prior to its expiration, which will require additional resources. The
underlying ground lease has a term of 40 years with renewal options for up to an
additional 40 years. Under these arrangements, we are committed to annual
payments that are indexed to market interest rates and currently range from $5.5
million to $6.2 million, which we expect to commence on April 1, 2001.
Additionally, we are committed to average annual payments in future periods of
approximately $450,000 plus periodic cost of living adjustments, per the terms
of the ground lease for the Northridge property. When the synthetic lease
terminates, we will be able to assume the obligations of the special purpose
trust as the lessee under the ground lease if we exercise our option to
purchase.

    In September 2000, the Company entered into an agreement to lease certain
computer software and hardware in conjunction with its implementation of a new
enterprise resource planning system, which we call ERP. The lessors have agreed
to fund up to $16.0 million under this operating lease. Upon full funding of
this lease, we will be committed to annual payments not to exceed $4.0


                                       32
<PAGE>   33


million, depending upon the amounts drawn under this operating lease. Full
funding of this lease is not expected until late 2001. The Company made payments
under this lease of $538,000 during 2000.

    On October 31, 1998, we acquired DSS, a distributor of our products and
other diabetes supplies located in South Florida. We acquired substantially all
of the net assets of DSS with payment of $4.9 million consisting of $3.1 million
in cash and $1.8 million in notes payable, all of which have been retired. In
connection with this acquisition, we also assumed certain liabilities and
retired approximately $2.0 million in short-term and long-term debt of DSS
during the 1998 fourth quarter.

    On November 5, 1998, we entered into an agreement with a wholly-owned
subsidiary of Medtronic, Inc. enabling Medtronic to purchase $30.0 million of
our common stock at $15.00 per share, adjusted for two stock splits, the
approximate market value of the stock at that time. Medtronic purchased
2,000,000 shares of unregistered common shares during the 1998 fourth quarter.
In connection with this sale, we granted Medtronic certain registration rights
associated with the shares. Other financing activities during 1998 included an
unsecured line of credit which enabled us to borrow up to $10.0 million. This
line of credit expired and had never been drawn and was replaced with a new
credit facility, described above.

    We received $6.0 million during each of 1998 and 1999 under terms of our
research and development contract with AMI. As indicated above, we have the
right to either purchase the technologies developed or acquire a fully paid-up,
exclusive worldwide license for these technologies, in either case at prices
ranging from an aggregate of $13.5 million to $19.0 million, subject to downward
adjustment through April 30, 2002. Alternatively, we may elect to pay royalties
on sales of products utilizing the technology developed pursuant to the
contract. It is our current intention to purchase these technologies during 2001
at a cost between $16.0 million and $17.0 million.

    Management believes that our current level of our cash and cash equivalents
and short-term investments will be sufficient to meet our needs for working
capital and capital expenditures for the next 24 to 36 months. The requirements
for additional capital and working capital, however, are subject to change and
will depend upon numerous factors, including:

    o   the level of capital expenditures, especially related to the completion
        of our manufacturing operations for the continuous glucose monitoring
        system, the disposable pump operations and our various insulin projects;

    o   research and development activities and results;

    o   competitive and technological developments;

    o   health care reimbursement trends; and

    o   the availability for our acquisition of complementary additional
        distribution channels, products, and technologies.

    During future periods, we may require significant amounts of cash to pursue
opportunities and promote continued growth and expansion.

QUARTERLY RESULTS

    The following table sets forth some of our selected consolidated financial
information for our eight most recent quarters. In the opinion of management,
this unaudited financial information has been prepared on the same basis as the
audited financial information, and includes all adjustments, consisting only of
normal, recurring adjustments, necessary to present this information fairly when
read in conjunction with our consolidated financial statements and notes thereto
contained elsewhere in this annual report on this Form 10-K.


                                       33
<PAGE>   34


<TABLE>
<CAPTION>
                                                          1999
                                      --------------------------------------------
                                          Q1          Q2         Q3          Q4
                                      ---------   ---------  ---------   ---------
<S>                                   <C>         <C>        <C>         <C>
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
 Net sales..........................  $  40,911   $  49,083  $  51,400   $  70,902
 Cost of sales......................     13,838      16,280     16,502      26,287
                                      ---------   ---------  ---------   ---------
 Gross profits......................  $  27,073   $  32,803  $  34,898   $  44,615
                                      =========   =========  =========   =========
 Net income.........................  $   3,782   $   4,873  $   5,816   $   7,428
                                      =========   =========  =========   =========
 Basic earnings per share...........  $    0.07   $    0.09  $    0.09   $    0.12
                                      =========   =========  =========   =========
 Diluted earnings per share.........  $    0.06   $    0.08  $    0.09   $    0.12
                                      =========   =========  =========   =========
</TABLE>



<TABLE>
<CAPTION>
                                                           2000
                                      --------------------------------------------
                                         Q1          Q2         Q3           Q4
                                      ---------   ---------  ---------   ---------
<S>                                   <C>         <C>        <C>         <C>
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
 Net sales..........................  $  60,338   $  69,411  $  72,138   $  92,516
 Cost of sales......................     19,592      22,155     22,459      29,451
                                      ---------   ---------  ---------   ---------
 Gross profits......................  $  40,746   $  47,256  $  49,679   $  63,065
                                      =========   =========  =========   =========
 Net income.........................  $   6,247   $   8,622  $   9,525   $  18,761
                                      =========   =========  =========   =========
 Basic earnings per share...........  $    0.10   $    0.14  $    0.15   $    0.29
                                      =========   =========  =========   =========
 Diluted earnings per share.........  $    0.09   $    0.13  $    0.14   $    0.28
                                      =========   =========  =========   =========
</TABLE>

    Our results of operations have historically fluctuated on a quarterly basis.
These seasonal trends have resulted in sales and earnings for each of the first
three quarters being significantly lower than sales in the fourth quarter.
Fluctuations of earnings from quarter to quarter have and will continue to
result from numerous factors, including:

    o   response to practices of insurance companies and other third-party
        payors with respects to reimbursement for our products, which tend to
        result in increased sales of our external infusion pumps and disposables
        later in the calendar year, after patients' deductibles are satisfied;

    o   market acceptance of our products;

    o   timing of regulatory approvals;

    o   new product introductions;

    o   competition;

    o   our ability to manufacture our products efficiently;

    o   timing of research and development expenditures; and

    o   the structure of our sales compensation program.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We invest excess cash in short-term debt securities that are classified as
available for sale. Two of the main risks associated with these investments are
interest rate risk and credit risk. Typically, when interest rates rise, there
is a corresponding decline in the market value of the debt securities.
Fluctuations in interest rates should not have a material effect on our
financial statements because of the short-term nature of the securities in which
we invest. Credit risk refers to the possibility that the issuer of the debt
securities will not be able to make principal and interest payments. We have
limited our investments to investment grade or comparable securities and have
not experienced any losses on our investments to date due to credit risk.


                                       34
<PAGE>   35


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

     The following independent auditors' report and the consolidated financial
statements of MiniMed Inc. and its subsidiaries are included in Item 8:

<TABLE>
<CAPTION>
                                                                                                                               PAGE
<S>                                                                                                                            <C>
Independent Auditors' Report..................................................................................................  36
Consolidated Balance Sheets -- December 31, 1999 and December 29, 2000........................................................  37
Consolidated Statements of Income -- Years Ended January 1, 1999, December 31, 1999 and December 29, 2000.....................  38
Consolidated Statements of Stockholders' Equity and Comprehensive Income -- Years Ended January 1, 1999, December 31, 1999
   and December 29, 2000......................................................................................................  39
Consolidated Statements of Cash Flows -- Years Ended January 1, 1999, December 31, 1999 and December 29, 2000.................  40
Notes to Consolidated Financial Statements....................................................................................  42
</TABLE>


                                       35
<PAGE>   36


                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of MiniMed Inc.:

     We have audited the accompanying consolidated balance sheets of MiniMed
Inc. and its subsidiaries (the "Company") as of December 31, 1999 and December
29, 2000 and the related consolidated statements of income, stockholders' equity
and comprehensive income, and of cash flows for each of the three years in the
period ended December 29, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and December 29, 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 29, 2000 in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Los Angeles, California
February 7, 2001


                                       36

<PAGE>   37


                                  MINIMED INC.

                           CONSOLIDATED BALANCE SHEETS
                     DECEMBER 31, 1999 AND DECEMBER 29, 2000

                                     ASSETS

<TABLE>
<CAPTION>
                                                                               1999           2000
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
CURRENT ASSETS:
Cash and cash equivalents ..............................................   $ 92,718,000   $105,612,000
Short-term investments .................................................     77,716,000     81,976,000
Accounts receivable, net of allowance for doubtful accounts
  of $13,108,000 and $16,240,000 at December 31, 1999 and
  December 29, 2000, respectively ......................................     65,938,000     89,153,000
Inventories:
  Raw materials ........................................................      9,380,000     15,025,000
  Work-in-process ......................................................      2,315,000      2,143,000
  Finished goods .......................................................      7,643,000     14,695,000
                                                                           ------------   ------------
         Total inventories .............................................     19,338,000     31,863,000
Deferred income taxes ..................................................      9,973,000      8,424,000
Income taxes receivable ................................................      5,761,000      3,568,000
Prepaid expenses and other current assets ..............................      7,602,000     11,271,000
                                                                           ------------   ------------
         Total current assets ..........................................    279,046,000    331,867,000
NOTE RECEIVABLE FROM AFFILIATE .........................................      3,600,000      3,600,000
LONG-TERM INVESTMENTS ..................................................      8,552,000      6,655,000
DEFERRED INCOME TAXES ..................................................           --       18,672,000
OTHER ASSETS -- Net ....................................................     17,969,000     18,820,000
LAND, BUILDINGS, PROPERTY AND EQUIPMENT -- Net .........................     44,631,000     71,346,000
                                                                           ------------   ------------
         TOTAL ASSETS ..................................................   $353,798,000   $450,960,000
                                                                           ============   ============
                                    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable............................................................   $  1,000,000   $       --
Accounts payable .......................................................      3,573,000      6,739,000
Accrued salaries and related benefits ..................................      7,749,000      8,016,000
Accrued sales commissions ..............................................      2,964,000      1,863,000
Accrued warranties .....................................................      3,859,000      3,681,000
Accrued software refurbishment costs ...................................      1,200,000           --
Accrued related party purchase commitment obligations ..................      3,500,000      3,285,000
Other accrued expenses .................................................      1,310,000      1,380,000
                                                                           ------------   ------------
         Total current liabilities .....................................     25,155,000     24,964,000
                                                                           ------------   ------------
DEFERRED INCOME TAXES ..................................................      1,545,000           --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Common stock, par value $.01; 100,000,000 shares authorized;
    62,300,594 and 64,547,080 shares issued and outstanding as
    of December 31, 1999 and December 29, 2000, respectively ...........        634,000        656,000
  Additional capital ...................................................    280,508,000    337,751,000
  Accumulated other comprehensive income ...............................      2,931,000      1,409,000
  Retained earnings ....................................................     43,025,000     86,180,000
                                                                           ------------   ------------
         Total stockholders' equity ....................................    327,098,000    425,996,000
                                                                           ------------   ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................   $353,798,000   $450,960,000
                                                                           ============   ============
</TABLE>

          See notes to consolidated financial statements.




                                       37

<PAGE>   38

                                  MINIMED INC.

                        CONSOLIDATED STATEMENTS OF INCOME
      YEARS ENDED JANUARY 1, 1999, DECEMBER 31, 1999 AND DECEMBER 29, 2000

<TABLE>
<CAPTION>

                                                               FISCAL YEAR
                                              -----------------------------------------------
                                                   1998             1999            2000
                                              -------------    -------------    -------------

<S>                                           <C>              <C>              <C>
NET SALES .................................   $ 138,577,000    $ 212,296,000    $ 294,403,000
COST OF SALES .............................      51,518,000       72,907,000       93,657,000
                                              -------------    -------------    -------------
GROSS PROFIT ..............................      87,059,000      139,389,000      200,746,000
                                              -------------    -------------    -------------
OPERATING EXPENSES:
  Selling, general and administrative .....      57,059,000       88,451,000      124,142,000
  Research and development ................      16,531,000       26,798,000       34,159,000
  Research and development contract .......      (6,000,000)      (6,000,000)            --
                                              -------------    -------------    -------------
          Total operating expenses ........      67,590,000      109,249,000      158,301,000
                                              -------------    -------------    -------------
OPERATING INCOME ..........................      19,469,000       30,140,000       42,445,000
INTEREST EXPENSE ..........................         (47,000)        (118,000)         (50,000)
OTHER INCOME, Including interest income ...       1,503,000        5,143,000       21,639,000
                                              -------------    -------------    -------------
INCOME BEFORE INCOME TAXES ................      20,925,000       35,165,000       64,034,000
PROVISION FOR INCOME TAXES ................       7,882,000       13,266,000       20,879,000
                                              -------------    -------------    -------------
NET INCOME ................................   $  13,043,000    $  21,899,000    $  43,155,000
                                              =============    =============    =============
Basic earnings per share ..................   $        0.24    $        0.37    $        0.68
                                              =============    =============    =============

Basic weighted average shares outstanding .      53,760,000       59,294,000       63,756,000
                                              =============    =============    =============
Diluted earnings per share ................   $        0.23    $        0.35    $        0.64
                                              =============    =============    =============
Diluted weighted average shares outstanding      56,664,000       62,942,000       67,200,000
                                              =============    =============    =============
</TABLE>

                 See notes to consolidated financial statements.


                                       38
<PAGE>   39


                                  MINIMED INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
      YEARS ENDED JANUARY 1, 1999, DECEMBER 31, 1999 AND DECEMBER 29, 2000

<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                                   ------------------------------      ADDITIONAL
                                                     NUMBER OF                          PAID-IN        COMPREHENSIVE
                                                       SHARES          AMOUNT           CAPITAL           INCOME
                                                   -------------    -------------    -------------     -------------
<S>                                                <C>              <C>              <C>               <C>
BALANCE, JANUARY 2, 1998 ......................       53,069,638         $540,000    $  73,401,000
Issuance of common stock in
 private offering (net of expenses) ...........        2,000,000           20,000       29,970,000
Exercise of stock options .....................        1,005,588           11,000        1,815,000
Tax benefit associated with stock
 option exercises .............................                                          4,972,000
Issuance of stock under employee
 stock plan ...................................          115,432            1,000        1,163,000
Stock awards to directors .....................            6,128                            76,000
Comprehensive income:
  Net income ..................................                                                        $  13,043,000
  Other comprehensive income:
    Unrealized holding loss on security,
     net of $106,000 in deferred
     income taxes .............................                                                             (326,000)
    Foreign currency translation
     adjustments ..............................                                                                5,000
                                                                                                       -------------
        Total other comprehensive loss ........                                                             (321,000)
                                                                                                       -------------
        Total comprehensive income.............                                                        $  12,722,000
                                                   -------------    -------------    -------------     =============
BALANCE, JANUARY 1, 1999 ......................       56,196,786          572,000      111,397,000
Issuance of common stock in public offering
 (net of expenses) ............................        4,345,000           44,000      140,544,000
Exercise of stock options .....................        1,652,878           17,000        5,507,000
Tax benefit associated with stock option
 exercises.....................................                                         21,034,000
Issuance of stock under employee stock plan ...          103,268            1,000        1,946,000
Stock awards to directors .....................            2,662                            80,000
Comprehensive income:
  Net income ..................................                                                        $  21,899,000
  Other comprehensive income:
    Unrealized holding gain on security, net
    of $1,416,000  in deferred income taxes ...                                                            2,310,000
  Foreign currency translation adjustments ....                                                           (117,000)
                                                                                                       -------------
        Total other comprehensive income ......                                                            2,193,000
                                                                                                       -------------
        Total comprehensive income ............                                                        $  24,092,000
                                                   -------------    -------------    -------------     =============
BALANCE, DECEMBER 31, 1999 ....................       62,300,594          634,000      280,508,000
Exercise of stock options .....................       2,185,243           22,000       14,955,000
Tax benefit associated with stock option
 exercises ....................................                                         39,703,000
Issuance of stock under employee stock plan ...           59,669                         2,498,000
Stock awards to directors .....................            1,574                            87,000
Comprehensive income:
  Net income...................................                                                        $  43,155,000
  Other comprehensive income:
    Unrealized holding gain on security, net of
      $3,433,000 in deferred income taxes......                                                            7,033,000
    Less: reclassification adjustment for gain
      included in  net income, net of
      $3,588,000 in income taxes ..............                                                           (7,415,000)
    Foreign currency translation adjustments ..                                                           (1,140,000)
                                                                                                       -------------
        Total other comprehensive loss ........                                                           (1,522,000)
                                                                                                       -------------
        Total comprehensive income ............                                                        $  41,633,000
                                                   -------------    -------------    -------------     =============

BALANCE, DECEMBER 29, 2000 ....................       64,547,080    $     656,000    $ 337,751,000
                                                   -------------    =============    =============




                                                    ACCUMULATED
                                                       OTHER
                                                   COMPREHENSIVE       RETAINED
                                                       INCOME          EARNINGS            TOTAL
                                                   -------------     -------------     -------------
<S>                                                <C>               <C>               <C>
BALANCE, JANUARY 2, 1998 ......................    $   1,059,000        $8,083,000        83,083,000
Issuance of common stock in
 private offering (net of expenses) ...........                                          29,990,000
Exercise of stock options .....................                                            1,826,000
Tax benefit associated with stock
 option exercises .............................                                            4,972,000
Issuance of stock under employee
 stock plan ...................................                                            1,164,000
Stock awards to directors .....................                                               76,000
Comprehensive income:
  Net income ..................................                         13,043,000        13,043,000
  Other comprehensive income:
    Unrealized holding loss on security,
     net of $106,000 in deferred
     income taxes .............................                                             (326,000)
    Foreign currency translation
     adjustments ..............................                                                5,000

        Total other comprehensive loss ........         (321,000)

        Total comprehensive income ............
                                                   -------------     -------------     -------------
BALANCE, JANUARY 1, 1999 ......................          738,000        21,126,000       133,833,000
Issuance of common stock in public offering
 (net of expenses) ...........................                                           140,588,000
Exercise of stock options .....................                                            5,524,000
Tax benefit associated with stock option
 exercises.....................................                                           21,034,000
Issuance of stock under employee stock plan ...                                            1,947,000
Stock awards to directors .....................                                               80,000
Comprehensive income:
  Net income ..................................                         21,899,000        21,899,000
  Other comprehensive income:
    Unrealized holding gain on security, net
      of $1,416,000 in deferred income taxes....                                           2,310,000
    Foreign currency translation adjustments ..                                             (117,000)

        Total other comprehensive income ......        2,193,000

        Total comprehensive income ............
                                                   -------------     -------------     -------------
BALANCE, DECEMBER 31, 1999 ....................        2,931,000        43,025,000       327,098,000
Exercise of stock options......................                                           14,977,000
Tax benefit associated with stock option
 exercises ....................................                                           39,703,000
Issuance of stock under employee stock plan ...                                            2,498,000
Stock awards to directors......................                                               87,000
Comprehensive income:
  Net income...................................                         43,155,000        43,155,000
  Other comprehensive income:
    Unrealized holding gain on security, net of
      $3,433,000 in deferred income taxes .....                                            7,033,000
    Less: reclassification adjustment for gain
      included in net income, net of $3,588,000
      in income taxes..........................                                           (7,415,000)
    Foreign currency translation adjustments ..                                           (1,140,000)

        Total other comprehensive loss ........       (1,522,000)

        Total comprehensive income ............
                                                   -------------     -------------     -------------

BALANCE, DECEMBER 29, 2000 ....................    $   1,409,000     $  86,180,000     $ 425,996,000
                                                   =============     =============     =============
</TABLE>




          See notes to consolidated financial statements.


                                       39

<PAGE>   40

                                  MINIMED INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
      YEARS ENDED JANUARY 1, 1999, DECEMBER 31, 1999 AND DECEMBER 29, 2000

<TABLE>
<CAPTION>

                                                                         1998              1999             2000
                                                                     -------------    -------------    -------------
<S>                                                                  <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................   $  13,043,000    $  21,899,000    $  43,155,000
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
  Depreciation ...................................................       4,134,000        7,318,000       12,057,000
  Directors' fees paid in common stock ...........................          76,000           80,000           87,000
  Deferred income taxes ..........................................      (1,629,000)      (4,305,000)     (18,512,000)
  Tax benefit from exercise of non-qualified stock options .......       4,972,000       21,034,000       39,703,000
  Changes in operating assets and liabilities:
    Accounts receivable, net .....................................     (14,439,000)     (27,150,000)     (23,400,000)
    Inventories ..................................................      (8,908,000)      (2,478,000)     (12,557,000)
    Prepaid expenses and other current assets ....................      (2,464,000)      (3,767,000)      (3,673,000)
    Other assets .................................................         940,000           44,000          134,000
    Accrued sales commissions ....................................         317,000          704,000       (1,101,000)
    Accrued salaries and related benefits ........................       1,512,000        2,518,000          304,000
    Accounts payable .............................................        (459,000)      (1,874,000)       3,179,000
    Accrued warranties ...........................................         370,000        1,031,000         (178,000)
    Income taxes .................................................         880,000       (6,916,000)       2,193,000
    Accrued software refurbishment costs .........................            --          1,200,000       (1,200,000)
    Accrued related party purchase commitment obligations ........       2,000,000        1,500,000         (215,000)
    Other accrued expenses .......................................      (3,266,000)        (563,000)          83,000
                                                                     -------------    -------------    -------------
    Net cash provided by (used in) operating activities ..........      (2,921,000)      10,275,000       40,059,000
                                                                     -------------    -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Short-term investments .........................................       5,237,000      (64,240,000)      (4,260,000)
  Sale (Acquisition) of marketable securities ....................            --               --          1,359,000
  Acquisition of Dartec A.B ......................................      (2,670,000)            --               --
  Acquisition of Diabetes Support Systems, Inc. ("DSS") ..........      (3,052,000)            --               --
  Long-term investments ..........................................      (1,140,000)            --               --
  Purchase of technology license .................................            --         (7,000,000)      (1,500,000)
  Purchase of land, buildings, property and equipment ............     (18,570,000)     (20,402,000)     (38,256,000)
                                                                     -------------    -------------    -------------
  Net cash used in investing activities ..........................     (20,195,000)     (91,642,000)     (42,657,000)
                                                                     -------------    -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of notes payable .....................................      (2,820,000)      (1,160,000)      (1,000,000)
  Repayment of notes payable in connection with DSS acquisition ..      (2,028,000)            --               --
  Proceeds from public offering, net of expenses .................            --        140,588,000             --
  Proceeds from private offering, net of expenses ................      29,990,000             --               --
  Proceeds from stock option exercises ...........................       1,826,000        5,524,000       14,977,000
  Proceeds from issuance of common stock under employee stock plan       1,164,000        1,947,000        2,498,000
                                                                     -------------    -------------    -------------
  Net cash provided by financing activities ......................      28,132,000      146,899,000       16,475,000
                                                                     -------------    -------------    -------------
Effect of cumulative foreign currency translation adjustment on
  cash and cash equivalents ......................................           5,000         (117,000)        (983,000)
                                                                     -------------    -------------    -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................       5,021,000       65,415,000       12,894,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...................      22,282,000       27,303,000       92,718,000
                                                                     -------------    -------------    -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD .........................   $  27,303,000    $  92,718,000    $ 105,612,000
                                                                     =============    =============    =============
SUPPLEMENTAL CASH FLOW INFORMATION -- Cash paid during
  the period for:
    Interest .....................................................   $      62,000    $     108,000    $      60,000
    Income taxes .................................................   $   3,854,000    $   1,106,000    $     201,000

</TABLE>

                 See notes to consolidated financial statements.


                                       40

<PAGE>   41



                                  MINIMED INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
      YEARS ENDED JANUARY 1, 1999, DECEMBER 31, 1999 AND DECEMBER 29, 2000

     SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES --
The Company issued 6,128, 2,662 and 1,574 shares of common stock to certain
Directors in lieu of fees during 1998, 1999 and 2000, respectively. The Company
recorded an unrealized holding loss of $326,000 during 1998, an unrealized
holding gain of $2,310,000 during 1999 and an unrealized holding gain of
$7,033,000 during 2000, net of deferred income taxes, on marketable securities
classified as long-term investments available for sale. During 1998, the Company
accepted a $3.6 million note receivable from a related party in conjunction with
the sale of $3.0 million of net implantable pump inventory components and
$600,000 of net implantable pump fixed assets.

     On October 31, 1998, the Company acquired substantially all of the assets
and certain of the liabilities of Diabetes Support Systems, Inc. ("DSS"). In
connection with this acquisition, the Company paid cash as follows:

        Assets acquired:
          Property and equipment...........................  $     188,000
          Accounts receivable..............................      1,438,000
          Goodwill.........................................      8,500,000
          Inventories......................................        304,000
          Other assets.....................................         93,000
        Liabilities assumed:
          Accounts payable and accrued expenses............     (3,643,000)
          Notes payable....................................     (2,028,000)
        Long-term debt issued to sellers...................     (1,800,000)
                                                             -------------
        Cash paid in acquisition...........................  $   3,052,000
                                                             =============

                 See notes to consolidated financial statements.







                                       41


<PAGE>   42

                                  MINIMED INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      YEARS ENDED JANUARY 1, 1999, DECEMBER 31, 1999 AND DECEMBER 29, 2000

     The fiscal years referenced herein are as follows:

              FISCAL YEAR                                    YEAR ENDED
              -----------                                    ----------
                2000.................................    December 29, 2000
                1999.................................    December 31, 1999
                1998.................................    January 1, 1999

1. GENERAL INFORMATION

     Operations -- MiniMed Inc. ("MiniMed" or the "Company") designs, develops,
manufactures, markets and sells advanced microinfusion systems and glucose
monitoring systems for the intensive management of diabetes. The drug delivery
systems include external and implantable microinfusion drug pumps and related
disposable products which provide long-term delivery of medication for the
treatment of diabetes. The Company is also developing these systems to treat
other medical conditions. On June 15, 1999, the Company received Federal Drug
Administration ("FDA") approval of the first generation of glucose monitoring
systems which provide diabetic patients with continuous monitoring of glucose
levels and may ultimately be linked to the microinfusion pumps to create an
artificial pancreas. Other development efforts focus on developing non-diabetes
uses of the Company's technologies. The Company generally markets its products
through either a direct sales force or independent distributors in the United
States and a combination of direct sales representatives and independent
distributors in international markets. The main markets for products are the
United States and Western Europe. Through its acquisitions of Home Medical
Supply, Inc. and its affiliated companies ("HMS") and Dartec AB (now "MiniMed
NordicAB") in fiscal 1997, and DSS in fiscal 1998, the Company also acts as a
distributor of additional diabetes supplies and operates a pharmacy.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Stock Split -- On July 19, 2000, the Company announced a 2-for-1 stock
split, in the form of a stock dividend, to result in the issuance of one
additional share of common stock for every share of common stock outstanding.
The stock split was effective August 2, 2000 for holders of record at the close
of business on that date and was distributed on August 18, 2000. In accordance
with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per
Share," the Company has recorded the effects of this stock split on share and
per share amounts and all prior periods have been restated.

     Principles of Consolidation -- The accompanying financial statements
include the accounts of the Company and its wholly owned subsidiaries, MiniMed
Distribution Corp., MiniMed Development Corp., MiniMed S.A., MiniMed GmbH,
MiniMed Nordic AB and MiniMed Pty. Ltd., and its indirect subsidiaries. All
intercompany accounts and transactions have been eliminated. The financial
statements of MiniMed S.A., MiniMed GmbH, MiniMed Nordic AB and MiniMed Pty. LTD
have been translated using the exchange rates at the end of each period for
balance sheet items and the weighted average exchange rates during each period
for operating results. Adjustments arising from the translation of financial
statements located outside the United States are recorded as a component of
comprehensive income.

     Reclassifications -- Certain reclassifications have been made to various
balances in the 1998 and 1999 financial statements to conform with current year
presentation.

     Cash and Cash Equivalents -- The Company considers all highly liquid
instruments with an original maturity of three months or less to be cash
equivalents.

     Investments -- The Company classifies all of its marketable investments as
available-for-sale, with unrealized holding gains and losses recorded directly
to other comprehensive income. Cost approximates fair value for all short-term
investments. Long-term investments include an investment in the common stock of
Trimeris, Inc. The fair value of this investment was $7,412,000 and $5,515,000
at December 31, 1999 and December 29, 2000, respectively. The Company recorded
an unrealized holding loss of


                                       42

<PAGE>   43


$326,000 during 1998, an unrealized holding gain of $2,310,000 during 1999 and
an unrealized holding gain of $7,033,000 during 2000 on this investment, net of
$106,000, $1,416,000 and $3,433,000, respectively in deferred income taxes.
During 2000, the Company sold 213,226 shares of its investment in Trimeris
common stock and recorded a gain of $11,003,000 in other income. Also, included
in long-term investments at December 31, 1999 and December 29, 2000 was a
$1,140,000 investment in the common stock of Pharmaceutical Discovery
Corporation ("PDC") which is recorded using the cost method. PDC's chairman and
majority shareholder is MiniMed's Executive Chairman. The Company owns less than
5% of PDC's common stock. Realized gains and losses and declines in value judged
to be other-than-temporary are included in investment income, which is included
in other income in the Company's consolidated statements of income. Realized
gains and losses on short-term investments for 1998, 1999 and 2000 were not
material. The Company's investment policy is to invest idle and excess funds in
high grade, short-term, fixed income securities. The primary objective of
investment activities is to protect capital value.

     Inventories -- Inventories are stated at the lower of cost or net
realizable value. Cost is determined using the first-in, first-out method.

     Land, Buildings, Property and Equipment, and Depreciation -- Land,
buildings, property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the related
assets.

     Research and Development -- Research and development costs are expensed as
incurred.

     Research and Development Contract -- On March 31, 1998, the Company signed
a research and development contract with American Medical Instruments, Inc.
("AMI"), a member of The Marmon Group of Companies. Under terms of this
agreement, the Company received $12.0 million in funding related to two research
projects. The Company completed these projects during fiscal 1999 and recorded
$6.0 million related to this contract during each of fiscal 1998 and fiscal
1999. These revenues have been recorded as a reduction of operating expenses.
Costs related to the completion of the contractual obligations are included in
research and development expense.

     Under terms of this contract, the Company may sell products developed under
the agreement on a world-wide basis, except for Japan, subject to the payment of
royalties to AMI. The Company may purchase the technology related to these
projects from AMI at prices ranging from $13.5 million to $19.0 million through
April 30, 2002. The Company has applied the principles of SFAS No. 68,
"Accounting for Research and Development Contracts" to account for this
transaction.

     Income Taxes -- Income taxes are provided for taxes currently payable or
refundable, and deferred income taxes arising from future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The effects of income taxes are measured based on enacted tax laws and
rates. An allowance is provided for net deferred tax assets for which
realization is not likely.

     Revenues and Concentration of Credit Risk -- In December 1999, the
Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements," that summarizes
certain of the SEC's views on applying generally accepted accounting principles
to revenue recognition in the financial statements. It requires that an entity
recognize revenue only when all of the following criteria are met:

    o   Persuasive evidence of an arrangement exists,

    o   Delivery has occurred or services have been rendered,

    o   The seller's price to the buyer is fixed or determinable, and

    o   Collectibility is reasonably assured.

     The Company recognizes revenue in accordance with the provisions of SAB No.
101. For most sales transactions, revenues are recognized when products are
shipped. In other instances, where customers maintain the right to return the
product, revenues are recognized as non-refundable payments are received and the
revenue recognition process is complete when the customer no longer has the
right to return the products.


                                       43

<PAGE>   44

     During 1998, 1999 and 2000, the Company derived approximately 92.4%, 93.6%
and 94.2%, respectively, of its revenues from domestic sales. A significant
portion of domestic revenues represents products sold by the Company directly to
patients. The Company bills these patients directly or processes billing to
their health care payors, which include indemnity insurers, HMOs, PPOs and
various governmental agencies. Levels of payments from third-party payors and
patients vary, depending upon the specific benefits provided under each
patient's coverage. On an overall basis, the Company's accounts receivable
balances are subject to credit risk similar to other entities dependent upon
third-party health care payors and the insureds for reimbursement.

     Foreign revenues outside of France, Germany, Austria, Belgium, the
Netherlands, Sweden and Australia represent sales to independent dealers. Sales
to the European dealers may be shipped from the United States or through the
Company's European subsidiaries. Certain foreign sales are transacted directly
with patients by the Company's European subsidiaries, with reimbursement
provided by the appropriate third party. No single customer represents more than
10% of the Company's sales for any period presented.

     The Company has recorded an allowance for doubtful accounts to account for
the difference between recorded revenues and anticipated collections from
distributors, patients and third-party payors. The allowance and provision for
bad debts are adjusted periodically based upon the Company's evaluation of
historical collection experience, industry reimbursement trends and other
relevant factors. The Company determines the allowance amount based upon an
analysis of the collectibility of specific accounts and the aging of the
accounts receivable.

     Stock Based Compensation -- The Company has granted stock options for a
fixed number of shares to employees with an exercise price equal to the fair
market value of the shares at the date of grant. The Company has adopted the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," which disclosures are presented in Note 11. The Company accounts
for stock option grants in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly,
recognizes no compensation expense for the stock option grants.

     Pervasiveness of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of certain
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Company's most significant estimates relate to the allowance for
uncollectible accounts, provisions for obsolete inventory, accrued warranty
obligations and accrued related party purchase commitment obligations.

     Recent Accounting Pronouncement -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Implementation of this standard was delayed by the FASB for a 12-month period.
The Company will adopt SFAS No. 133 as required for its first quarterly filing
of fiscal year 2001 and the Company believes that the adoption of SFAS No. 133
will not have a material effect on the Company's operations.

3. BUSINESS COMBINATION

     On January 2, 1998, the Company acquired Dartec, now MiniMed Nordic, a
distributor of diabetes products, including the Company's products, located in
Sweden. The Company purchased substantially all of the net assets of MiniMed
Nordic for $2.7 million. In connection with this purchase, the Company recorded
$2.7 million of goodwill to other long-term assets. This goodwill is being
amortized over a period of 15 years on a straight-line basis.

     On October 31, 1998, the Company acquired DSS, a distributor of diabetes
products, including the Company's products, located in South Florida. The
Company purchased substantially all of the net assets of DSS, and certain
liabilities, for $3.1 million in cash and notes payable totaling $1.8 million.
The notes payable bear interest at 6.0% and are due and payable $800,000 on
October 31, 1999 and $1.0 million on October 31, 2000. Both of these notes
payable and related interest have been retired. In connection with the purchase
of DSS, the Company recorded $8.5 million of goodwill to other long-term assets.
This goodwill is being amortized over a period of 25 years on a straight-line
basis.


                                       44


<PAGE>   45


4. FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS No. 107, "Disclosure of Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments for which it is
practical to estimate that value. For cash and cash equivalents the carrying
amount reported in the balance sheet represents fair value. For accounts
receivable, accounts payable and note payable, the carrying amount on the
balance sheet also approximates fair value due to the short term nature of these
instruments.

5. RELATED PARTY TRANSACTIONS

     Facilities Agreements -- During 1998, the Company leased certain warehouse
facilities from Advanced Bionics Corporation ("ABC"), a company with a
substantial ownership interest held by Alfred E. Mann, MiniMed's largest single
stockholder and Executive Chairman. Rental expense related to this lease with
ABC was $37,000, $144,000 and $149,000 during 1998, 1999 and 2000, respectively.
The Company has leased certain operating facilities to Mr. Mann under a
five-year lease commitment. Rents charged under this agreement were $144,000
during each of the years ended January 1, 1999, December 31, 1999 and December
29, 2000, respectively. Rental income related to all of these leases is recorded
in other income. During the fourth quarter of 2000 the Company entered into two
additional short-term leases, one with ABC and one with Allecure Corporation,
another entity with a substantial ownership interest by Mr. Mann.

     Relationship with Medical Research Group, Inc. ("MRG") - On September 1,
1998, the Company sold assets and transferred technology related to its
implantable pump program to MRG and entered into a series of related
transactions. Certain terms and conditions of these transactions were revised on
February 1, 2001. MRG was founded by MR. Mann who continues to hold a
substantial equity interest in MRG. Current terms and conditions of the MRG
relationship, along with the financial statement effect of this relationship are
summarized as follows.

     The Company sold assets, consisting primarily of inventories and equipment
to MRG in exchange for a note receivable of approximately $3.6 million. No gain
or loss has been recognized on the sale of these assets. The note receivable and
all accrued interest have been paid in the first quarter of 2001. Interest
income recognized on this note receivable was $84,000 in 1998 and $252,000 in
both 1999 and 2000. The Company has also leased facilities and improvements to
MRG at which MRG carries out its activities. The Company has recorded $63,000,
$147,000 and $89,000 as rental income under this lease during 1998, 1999 and
2000, respectively. The obligations of MRG under such lease are guaranteed by
Mr. Mann. Certain employees of the Company involved in the manufacturing
operations and research and development activities related to the implantable
pump product line have become employees of MRG.

     The Company maintains exclusive distribution rights to the implantable
pump product line for diabetes and remains responsible for pursuing regulatory
approval of this product and the special insulin required for the treatment of
diabetes. MRG will provide MiniMed with up to $2.0 million in future funding to
support the development and regulatory approval of insulins to be used in the
implantable pump.

     The Company also obtained an option to purchase exclusive worldwide
marketing rights to a long-term glucose sensor, currently under development by
MRG, for $30.0 million subject to MRG's achievement of certain development
milestones. MRG achieved these milestones during the fourth quarter of 2000 and
the Company exercised this option in February 2001. MiniMed and MRG have a joint
financial responsibility for pursuing regulatory approval of the long-term
glucose sensor.



                                       45


<PAGE>   46

     Under terms of the restructured agreements, the Company made a $30.0
million equity investment in MRG and is required to make the following future
minimum purchases of implantable pump units based upon current prices:

              2001..............................    $  1,980,000
              2002..............................       3,240,000
              2003..............................       4,860,000
              2004..............................       7,020,000
                                                    ------------
                        Total...................    $ 17,100,000
                                                    ============

     The implantable pump and related insulin have not been approved for
commercial distribution in the United States. The implantable pump has been
approved for commercial distribution in the European Union ("EU"), but sales
will be limited until the special insulin used with the pump is approved. The
Company has accrued $3,500,000 and $3,285,000 at December 31, 1999 and December
29, 2000, respectively related to implantable pump purchase commitment
obligations in excess of expected usage.

     In addition to these mandatory purchase commitments, the Company is
required to pay license fees of $12.5 million to MRG related to achievement of
development milestones of future products for the treatment of diabetes which
are in the early stages of development. Furthermore, the Company is required to
pay additional fees of up to $12 million in periods subsequent to 2002, which
amount may be reduced to the extent the Company purchases implantable pumps in
excess of the minimum purchase requirements. In the event that the Company fails
to satisfy the minimum purchase requirements in 2003 or 2004 or fails to make
the license fee payments, MRG has the right to repurchase all of the Company's
distribution rights for $60.0 million or purchase distribution rights to MRG's
next generation implantable pump for $7.5 million.

6. LONG-TERM INVESTMENTS AND OTHER ASSETS

     Long-term investments consist of the following:

<TABLE>
                                                         DECEMBER 31, 1999  DECEMBER 29, 2000
                                                         -----------------  -----------------
<S>                                                       <C>               <C>
     Investment in Trimeris common stock
       -- at fair value.............................        $7,412,000        $5,515,000
     Investment in PDC common stock -- at cost .....         1,140,000         1,140,000
                                                            ----------        ----------
                                                            $8,552,000        $6,655,000
                                                            ==========        ==========
</TABLE>

     Other assets-net consist of the following:

<TABLE>
<S>                                                          <C>               <C>
      Technology license ............................        $ 7,094,000        $ 8,543,000
      Goodwill in connection with MiniMed Nordic
        acquisition .................................          2,502,000          2,327,000
      Goodwill in connection with DSS acquisition ...          8,104,000          7,764,000
      Other .........................................            269,000            186,000
                                                             -----------        -----------
                                                             $17,969,000        $18,820,000
                                                             ===========        ===========
</TABLE>

     The Company has recorded $673,000 and $1,243,000 as accumulated
amortization on other assets at December 31, 1999 and December 29, 2000
respectively. The Company has also recorded $51,000 during 1998 and $570,000
during both 1999 and 2000 as amortization expense on other assets.


                                       46

<PAGE>   47


7. LAND, BUILDINGS, PROPERTY AND EQUIPMENT -- NET

     Land, buildings, property and equipment, net consist of the following:

<TABLE>
<CAPTION>

                                                                                                        ESTIMATED
                                                                      DECEMBER 31,      DECEMBER 29,    USE LIVES
                                                                          1999              2000         (YEARS)
                                                                    ----------------  ---------------  ---------
<S>                                                                 <C>               <C>               <C>
                  Land, buildings and improvements...............   $    15,817,000   $    18,198,000   20 to 40
                  Machinery and equipment........................        25,963,000        44,346,000   3 to 5
                  Tooling and molds..............................         3,355,000         7,091,000      3
                  Computer software..............................         7,423,000        12,749,000      3
                  Furniture and fixtures.........................         8,062,000        16,287,000      8
                                                                    ---------------   ---------------
                                                                         60,620,000        98,671,000
                  Less accumulated depreciation..................       (15,989,000)      (27,325,000)
                                                                    ---------------   ---------------
                            Total................................   $    44,631,000   $    71,346,000
                                                                    ===============   ===============
</TABLE>

8. EARNINGS PER SHARE

    Earnings per share ("EPS") are calculated in the following table. The
reconciliation between the numerator and denominator for basic and diluted EPS
is as follows:

<TABLE>
<CAPTION>

                                                                           INCOME         SHARES      PER-SHARE
                                                                         (NUMERATOR)   (DENOMINATOR)   AMOUNT
                                                                       --------------  ------------   ---------
<S>                                                                    <C>             <C>            <C>
                  YEAR ENDED JANUARY 1, 1999:
                    Basic EPS -
                       Net income applicable to common stock......     $   13,043,000    53,760,000    $ .24
                                                                       ==============   ===========    =====
                    Effect of dilutive securities -
                       Stock options..............................                        2,904,000
                                                                       --------------   -----------    -----
                      Diluted EPS -
                       Net income applicable to common stock......     $   13,043,000    56,664,000    $ .23
                                                                       ==============   ===========    =====
                  YEAR ENDED DECEMBER 31, 1999
                    Basic EPS -
                       Net income applicable to common stock......     $   21,899,000    59,294,000    $ .37
                                                                       ==============   ===========    =====
                    Effect of dilutive securities -
                       Stock options..............................                        3,648,000
                                                                       --------------   -----------    -----
                    Diluted EPS -
                       Net income applicable to common stock......     $   21,899,000    62,942,000    $ .35
                                                                       ==============   ===========    =====
                  YEAR ENDED DECEMBER 29, 2000:
                    Basic EPS -
                       Net income applicable to common stock......     $ 43,155,000      63,756,000    $ .68
                                                                       ============     ===========    =====
                    Effect of dilutive securities -
                       Stock options..............................                        3,444,000
                                                                       --------------   -----------    -----
                    Diluted EPS -
                       Net income applicable to common stock......     $ 43,155,000      67,200,000    $ .64
                                                                       ============     ===========    =====
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

     Leases - In May 1999, the Company entered into an agreement to lease up to
28 acres of land located on the campus of California State University,
Northridge, where it has constructed the first phase of a corporate
headquarters, research and development and manufacturing facility. The ground
lease has an initial term of 40 years with renewal options for up to an
additional 40 years. Pursuant to the terms of the ground lease, the Company made
payments of $400,000 and $300,000 during 1999 and 2000, respectively, and is
committed to average annual payments in future periods of approximately $450,000
plus periodic cost of living adjustments.

     In May 1999, the Company also entered into a transaction pursuant to which
it now leases certain buildings constructed on the land described above. The
lessors of the buildings originally committed to fund up to a maximum of $65.0
million for the first phase of construction of the buildings and provided the
Company with a $15.0 million revolving line of credit that has never been drawn.
During October 2000, the Company successfully negotiated an increase of this
lease arrangement to $80.0 million in order to expand the development of this
facility. Under the terms of the transaction, a special purpose trust subleases
the land, buildings and improvements to the Company. The lease has an initial
term of five years, with


                                       47

<PAGE>   48
two one-year renewal options. Under the revised arrangement, the Company is
committed to annual rent payments under this operating lease that are indexed to
market interest rates and currently range from $5.5 million to $6.2 million
commencing on April 1, 2001. The Company began relocating portions of its
operations to the Northridge site late in the third quarter of 2000 and recorded
$800,000 as rent expense under this lease during 2000. Construction on the
unfinished buildings at Northridge continued during the fourth quarter of 2000
and is scheduled to be completed in the first quarter of 2001.

     In connection with these transactions, the Company pledged substantially
all of its assets as collateral security, and is subject to various affirmative
and negative covenants regarding the conduct of its business including
restrictions on the payment of dividends and the incurrence of additional debt.
These arrangements could adversely affect the Company's ability to acquire
additional capital resources or engage in certain strategic transactions. The
Company's February 2001 exercise of its $30.0 million option to purchase
exclusive worldwide marketing rights of MRG's long-term glucose sensor combined
with its $30.0 million equity investment in MRG violated certain covenants of
the arrangement. The lessors have provided the Company with a waiver regarding
these covenants and have restructured the lease to provide for these
transactions in subsequent periods.

     In September 2000, the Company entered into an agreement to lease certain
computer software and hardware in conjunction with its implementation of a new
enterprise resource planning ("ERP") system. The lessors have agreed to fund up
to $16.0 million for this lease. Upon full funding of this lease, the Company
will be committed to annual payments not to exceed $4.0 million, depending upon
the amounts drawn under this operating lease. Full funding of this lease is not
expected until late 2001. The Company made payments under this lease of $538,000
during 2000.

    As part of its ERP activities, the Company entered into a contract with
Siemens Medical Solutions Health Services Corporation, formerly Shared Medical
Systems Corporation ("SMS"), licensing medical billing software and support
services. After significant evaluation of the SMS product it has been determined
that the SMS product will not integrate effectively with the Company's selected
ERP system. When it became clear that the integration issue could not be solved,
the Company notified SMS of its intent to cancel the agreement. SMS responded by
claiming the Company is in breach of the agreement. The parties are currently in
discussions to resolve this situation.

     Legal Proceedings - On February 9, 1999, the Company was served with a
complaint filed in the Civil District Court For the Parish of Orleans, State of
Louisiana, by Diabetes Resources, Inc., which is also known as Insulin Infusion
Specialties ("IIS"). The Company and IIS entered into an Educational Dealer
Agreement in July, 1997, relating to the distribution of certain MiniMed
products by IIS. The Company declined to renew that agreement, pursuant to its
terms, as of December 31, 1998. IIS is alleging that MiniMed engaged in unfair
competition, breached the agreement, violated applicable trade secret laws and
defamed IIS. IIS did not specify the amount of damages it is seeking in its
complaint. The Company believes that it has meritorious defenses to IIS's
claims. The action was removed to Federal Court, and the Company has filed an
answer denying the material allegations, and filed a counterclaim seeking
damages for unfair trade practices. The Company has filed an amended
counterclaim seeking damages based on IIS's failure to pay amounts due and
owing. The Company believes that it has meritorious defenses to the claims
asserted by IIS. Trial in the matter is scheduled for September 2001. Discovery
in this litigation is continuing.

     During the normal course of business, the Company may be subject to other
litigation involving various business matters. Management believes that an
adverse outcome of any such known matters would not have a material adverse
impact on the Company's financial statements.

10. STOCKHOLDERS' EQUITY

     Stock Options and Purchase Plan -- The Company has granted stock options
under its incentive stock plan ("stock option plan"), which provides that
options may have a term of up to 10 years and become exercisable and vest in
annual increments of up to six years. Options to purchase an additional
4,911,172 shares are available for grant at December 29, 2000. Stock option plan
activity is as follows:

<TABLE>
<CAPTION>

                                                                                      WEIGHTED
                                                                                    AVERAGE PRICE
                                                                SHARES                PER SHARE
                                                              ---------             -------------
<S>                                                           <C>                      <C>
      Outstanding options at January 2, 1998........          6,996,624                $  3.90
      Options granted...............................          1,632,000                $ 11.43
      Options exercised.............................         (1,005,588)               $  1.92
      Options canceled..............................           (151,800)               $  6.86
                                                              ---------
      Outstanding options at January 1, 1999........          7,471,236                $  5.75
      Options granted...............................          2,137,000                $ 23.22
      Options exercised.............................         (1,652,878)               $  3.34
      Options canceled..............................           (216,000)               $ 13.08
                                                              ---------
      Outstanding options at December 31, 1999......          7,739,358                $ 10.81
      Options granted...............................          1,847,500                $ 47.65
      Options exercised.............................         (2,185,243)               $  6.91
      Options canceled..............................           (147,800)               $ 18.19
                                                              ---------
      Outstanding options at December 29, 2000......          7,253,815                $ 21.39
                                                              =========

</TABLE>

                                       48
<PAGE>   49




          The following table summarizes information about stock options
     outstanding at December 29, 2000:

<TABLE>
<CAPTION>

                                                                                                SHARES
                             NUMBER                 WEIGHTED              WEIGHTED            EXERCISABLE        WEIGHTED
      RANGE OF           OUTSTANDING AT         AVERAGE REMAINING          AVERAGE          AT DECEMBER 29,       AVERAGE
   EXERCISE PRICES      DECEMBER 29, 2000       CONTRACTUAL LIFE       EXERCISE PRICE            2000         EXERCISE PRICE
-------------------    ------------------      ------------------      --------------      ---------------    --------------
<S>          <C>            <C>                       <C>                 <C>                  <C>               <C>
$   1.25 -   3.69           1,294,075                 2.36                $   2.43             1,174,075         $   2.30
$   3.79 -   9.44           1,041,824                 4.51                    8.02               488,624             7.40
$   9.69 -  20.38           1,320,761                 5.25                   11.16               532,761            10.36
$  21.31 -  37.08           1,844,250                 6.28                   23.85               271,584            22.85
$  37.91 -  64.06           1,752,905                 7.25                   48.45                32,500            55.04
                           ----------                 ----                --------            ----------         --------
                            7,253,815                 5.38                $  21.39             2,499,544         $   7.93
                           ==========                 ====                ========            ==========         ========

</TABLE>

     During 1996, the Company's stockholders approved an employee stock purchase
plan ("stock purchase plan"). Substantially all of the Company's employees are
eligible to participate in the stock purchase plan through regular payroll
deductions. Options under the stock purchase plan are granted for an
indeterminable number of shares on semi-annual offering dates and are
automatically exercised six months from the offering date, subject to the right
of participating employees to withdraw from the stock purchase plan prior to the
expiration of the relevant six-month period. Options are exercised at the lesser
of: (1) 85% of the fair market value of the common stock on the offering date;
or (2) 85% of the fair market value of the common stock on the exercise date.
Transfer of shares issued under the stock purchase plan is prohibited for one
year from the exercise date. Transactions related to the employee stock purchase
plan are summarized as follows:

<TABLE>
<CAPTION>
                                                                           WEIGHTED AVERAGE
                                                           SHARES           EXERCISE PRICE
                                                        -----------         --------------
<S>                                                     <C>                 <C>
Shares available at January 2, 1998................       3,841,088
Exercised..........................................         115,432            $ 10.09
                                                        -----------            -------
Shares available at January 1, 1999................       3,725,656
Exercised..........................................         103,268            $ 18.89
                                                        -----------            -------
Shares available at December 31, 1999..............       3,622,388
Exercised..........................................          59,669            $ 41.92
                                                        -----------            -------
Shares available at December 29, 2000..............       3,562,719
                                                        ===========
</TABLE>

     All stock options are granted at the fair market value of the Company's
common stock at the grant date. The aggregate estimated fair value of options
granted in 1998, 1999 and 2000 was $14,230,000, $30,834,000 and $56,245,000,
respectively. The Company applies APB Opinion No. 25 and related interpretations
in accounting for its stock option plan and stock purchase plan. Accordingly, no
compensation cost for the Company's stock option plan and stock purchase plan
has been recognized in 1998, 1999 or 2000. Had compensation cost for the
Company's stock option plan and stock purchase plan been determined based on the
fair value at the grant dates for awards under those plans consistent with SFAS
No. 123, the Company's net income and earnings per share for the years ended
January 1, 1999, December 31, 1999 and December 29, 2000 would have been reduced
to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED
                                                                  -----------------------------------------------
                                                                    JANUARY 1,   DECEMBER 31,       DECEMBER 29,
                                                                       1999           1999              2000
                                                                  -------------  --------------    --------------
<S>                                                               <C>            <C>               <C>
Net income to common stockholders:
  As reported.................................................    $  13,043,000  $   21,899,000    $   43,155,000
  Pro forma...................................................    $  10,420,000  $   15,354,000    $   29,133,000
Net income per common and common equivalent share:
  As reported -- basic........................................    $       0.24   $         0.37    $         0.68
  Pro forma -- basic..........................................            0.19             0.26              0.46
  As reported -- diluted......................................            0.23             0.35              0.64
  Pro forma -- diluted........................................            0.18             0.24              0.43

</TABLE>


                                       49

<PAGE>   50



     The fair value of options granted under the stock option plan during 1998,
1999 and 2000 was determined using the Black-Scholes option pricing model
utilizing the following weighted-average assumptions:

<TABLE>
<CAPTION>

                                                                      YEAR ENDED
                                                     ----------------------------------------------
                                                     JANUARY 1,     DECEMBER 31,       DECEMBER 29,
                                                        1999            1999               2000
                                                     ----------     -----------        ----------
<S>                                                  <C>             <C>                <C>
                Dividend yield...................           0%              0%                 0%
                Volatility.......................          51%             57%                64%
                Risk-free interest rate..........        5.45%           5.22%              6.49%
                Expected lives...................     7 years         6 years            6 years

</TABLE>


     Pro forma compensation cost of options granted under the employee stock
purchase plan is measured based upon the discount from market value.

     Stockholders' Rights Plan -- In May 1995, the Company's Board of Directors
approved a plan to protect stockholders' rights in the event of a proposed
takeover of the Company, which plan was amended by the Board of Directors in
February 1999. Under the plan, the Board of Directors declared a dividend
distribution of a Series B Preferred Stock purchase right (a "Right") on each
share of the Company's common stock (a "Common Share") outstanding on July 24,
1995, and each Common Share issued thereafter. Upon becoming exercisable, each
Right will entitle its holder to purchase 1/1000 of a share of Series B
Preferred Stock at an exercise price of $250.00. The Rights are not exercisable
or transferable apart from the Common Shares unless certain events occur,
including a public announcement that a person has acquired or announced a tender
or exchange offer to acquire 15% or more of the outstanding Common Shares.
Unless the Rights are redeemed, in the event that an Acquiring Person acquires
15% or more of the outstanding Common Shares (other than pursuant to a tender
offer deemed fair by the Company's Board of Directors), each Right not held by
the Acquiring Person will entitle the holder to purchase for the exercise price
that number of Common Shares (or other shares or assets) having market value
equal to two times the exercise price of the Right. In the event that (i) the
Company is acquired in a merger or business combination in which the Company is
not the surviving corporation or in which the Common Shares are exchanged for
stock or assets of another entity, or (ii) 50% or more of the Company's
consolidated assets or earning power is sold, each Right not held by an
Acquiring Person will entitle the holder to purchase for the exercise price that
number of shares of common stock of the acquiring company having a market value
equal to two times the exercise price. The Rights are redeemable, in whole but
not in part, at the Company's option, at $0.01 per Right at any time prior to
becoming exercisable and in certain other circumstances. The Rights expire in
2005 unless they have been earlier redeemed or exchanged.

11. EMPLOYEE BENEFIT PLAN

     The Company has a defined contribution plan which is available to
substantially all full-time employees of the Company. During 1995 and future
periods, the Company is obligated to contribute a certain percentage of all
employee contributions with limits specified by the Plan. Contributions to the
Plan in the years ended January 1, 1999, December 31, 1999 and December 29, 2000
were $387,000, $625,000 and $878,000, respectively.

12. INCOME TAXES

     Pretax income (loss) for the three years in the period ended December 29,
2000 was subject to income tax in the following jurisdictions:

<TABLE>
<CAPTION>

                                                                                   YEAR ENDED
                                                               ------------------------------------------------
                                                                  JANUARY 1,      DECEMBER 31,     DECEMBER 29,
                                                                     1999             1999             2000
                                                               ---------------  ---------------  --------------
<S>                                                            <C>              <C>              <C>
                  Domestic.................................    $   21,270,000   $   36,370,000   $  66,893,000
                  Foreign..................................          (345,000)      (1,205,000)     (2,859,000)
                                                               --------------   --------------   -------------
                  Pretax income............................    $   20,925,000   $   35,165,000   $  64,034,000
                                                               ==============   ==============   =============

</TABLE>





                                       50
<PAGE>   51


    Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>

                                                                                    YEAR ENDED
                                                                 -----------------------------------------------
                                                                   JANUARY 1,      DECEMBER 31,     DECEMBER 29,
                                                                      1999             1999             2000
                                                                 --------------  ---------------  --------------
<S>                                                              <C>             <C>              <C>
                 Current:
                   Federal..................................     $   4,142,000   $   (2,972,000)  $    (145,000)
                   Foreign..................................            30,000           52,000         255,000
                   State....................................           367,000         (543,000)       (422,000)
                                                                 -------------   --------------   -------------
                                                                     4,539,000       (3,463,000)       (312,000)
                 Effect of nonqualified stock option
                   exercises upon income taxes currently
                   payable..................................         4,972,000       21,034,000      39,703,000
                 Deferred:
                   Federal..................................        (1,545,000)      (2,823,000)    (13,356,000)
                   State....................................           (84,000)      (1,482,000)     (5,156,000)
                                                                 -------------   --------------      ----------
                                                                    (1,629,000)      (4,305,000)    (18,512,000)
                                                                 -------------   --------------   --------------
                                                                 $   7,882,000   $   13,266,000   $  20,879,000
                                                                 =============   ==============   =============

</TABLE>


     The components of deferred income tax assets (liabilities) at December 31,
1999 and December 29, 2000 are as follows:

<TABLE>
<CAPTION>

                                                              DECEMBER 31, 1999             DECEMBER 29, 2000
                                                       ----------------------------  -----------------------------
                                                           FEDERAL         STATE        FEDERAL           STATE
                                                       -------------   ------------  -------------    ------------

<S>                                                    <C>             <C>           <C>              <C>
               Current deferred tax assets:
                 Accrued warranties.................   $   1,312,000   $    112,000  $   1,288,000   $      94,000
                 NOL carryforwards..................       2,365,000        340,000           --              --
                 Accrued vacation...................         485,000         58,000        755,000          54,000
                 Allowance for doubtful
                    accounts........................       3,664,000        684,000      5,114,000         374,000
                 Reserve for obsolete inventory.....         536,000         46,000        631,000          46,000
                 Other..............................         371,000         --             68,000            --
                                                       -------------   ------------  -------------    ------------
                                                           8,733,000      1,240,000      7,856,000         568,000
               Long-term deferred tax (liabilities)
                 assets and tax credits:
                 NOL carryforwards..................         --              --          9,350,000       6,022,000
                 Depreciation.......................      (1,521,000)      (189,000)      (715,000)        (41,000)
                 Unrealized gain on securities......      (1,840,000)      (157,000)    (1,706,000)       (125,000)
                 Tax credits........................       1,000,000      1,162,000      3,938,000         715,000
                 Other..............................         --              --          1,150,000          84,000
                                                       -------------   ------------  -------------    ------------
                                                          (2,361,000)       816,000     12,017,000       6,655,000
                                                       -------------   ------------  -------------    ------------
               Net deferred tax assets..............   $   6,372,000   $  2,056,000  $  19,873,000    $  7,223,000
                                                       =============   ============  =============    ============
</TABLE>

     A reconciliation of the Company's provision for income taxes for 1998, 1999
and 2000 to the U.S. Federal Statutory rates is as follows:

<TABLE>
<CAPTION>

                                                                                       YEAR ENDED
                                                                     ---------------------------------------------
                                                                       JANUARY 1,     DECEMBER 31,    DECEMBER 29,
                                                                          1999            1999            2000
                                                                     -------------  ---------------  -------------
<S>                                                                  <C>            <C>              <C>
               Provision for income taxes at U.S. statutory
                 rates..........................................     $   7,324,000  $   12,308,000   $  22,412,000
               State taxes, net of Federal benefit..............           655,000       1,811,000       2,497,000
               Non-deductible expenses..........................            99,000         273,000         427,000
               Foreign loss not usable..........................           121,000         422,000       1,001,000
               Reduction of valuation allowance.................          (270,000)        (36,000)             --
               Research and development income tax credits......                --      (1,000,000)     (4,554,000)
               California manufacturer's investment income
                 tax credit.....................................                --        (500,000)       (700,000)
               Other............................................           (47,000)        (12,000)       (204,000)
                                                                     -------------  --------------  --------------
                                                                     $   7,882,000  $   13,266,000  $   20,879,000
                                                                     =============  ==============  ==============
</TABLE>

                                       51
<PAGE>   52

13. OPERATING SEGMENTS AND OPERATIONS BY GEOGRAPHIC AREA

     During 1999, the Company reorganized its diabetes products operating
segment to illustrate the differences in revenues and gross profit generation
from external infusion pumps, related disposable products, implantable pumps and
other diabetes supplies. Additionally, during 1999 the Company began conducting
business in a new operating segment, glucose monitoring systems.

     The Company has organized its operating segments around differences in
products offered. The Company conducts business in six operating segments;
external infusion pumps, related disposable products, implantable pumps, other
diabetes supplies, glucose monitoring systems and pharmaceutical products. The
external infusion pumps and related disposable products operating segments
derive their revenues from the manufacture and distribution of drug delivery
systems primarily for the treatment of diabetes. The implantable pumps operating
segment derives its revenues from the distribution of internal drug delivery
systems primarily for the treatment of diabetes. The other diabetes supplies
operating segment generates revenues from the distribution of a broad range of
diabetes treatment products, including blood glucose testing strips and meters.
The pharmaceutical products operating segment derives its revenues from the
distribution of prescription drugs to treat certain medical conditions,
including diabetes and, previously, HIV/AIDS and renal failure.

     The Company manages its operating segments through analysis of segment net
sales and gross profit. The external infusion pumps, related disposable
products, implantable pumps, glucose monitoring systems and other diabetes
supplies operating segments are aggregated into the diabetes products operating
segment for purposes of tracking selling, general and administrative expenses,
interest expense, other income, capital expenditures, depreciation expense and
assets and liabilities as the type of customers, the distribution channels and
the nature of the regulatory environment are similar.

     In the following tables, net sales by operating segment and geographic area
include sales to customers, as reported in the Consolidated Statements of Income
at sales prices which approximate market.

<TABLE>
<CAPTION>


                OPERATING SEGMENTS                                  1998              1999              2000
                ------------------                            ----------------  ----------------  ---------------
<S>                                                           <C>               <C>               <C>
                Net sales:
                  Pharmaceutical products.................    $     8,882,000   $     4,137,000   $    2,737,000
                  External infusion pumps.................         72,505,000       117,034,000      158,396,000
                  Related disposable products.............         49,251,000        80,422,000      117,417,000
                  Implantable pumps.......................          1,391,000         1,811,000        1,329,000
                  Glucose monitoring systems..............                 --           163,000        3,195,000
                  Other diabetes supplies.................          6,548,000         8,729,000       11,329,000
                                                              ---------------   ---------------   --------------
                          Total net sales.................    $   138,577,000   $   212,296,000   $  294,403,000
                                                              ---------------   ---------------   --------------
                Gross profit:
                  Pharmaceutical products.................    $     1,155,000   $       826,000   $      451,000
                  External infusion pumps.................         56,821,000        89,702,000      124,036,000
                  Related disposable products.............         28,451,000        45,904,000       71,768,000
                  Implantable pumps.......................         (1,684,000)         (633,000)        (865,000)
                  Glucose monitoring systems..............                 --           122,000        1,308,000
                  Other diabetes supplies.................          2,316,000         3,468,000        4,048,000
                                                              ---------------   ---------------   --------------
                          Total gross profit..............    $    87,059,000   $   139,389,000   $  200,746,000
                                                              ---------------   ---------------   --------------
                Operating profit (loss):
                  Pharmaceutical products.................    $    (1,378,000)  $    (2,805,000)  $   (1,036,000)
                  Diabetes products.......................         20,847,000        32,945,000       43,481,000
                                                              ---------------   ---------------   ---------------
                          Total operating profit..........    $    19,469,000   $    30,140,000   $   42,445,000
                                                              ---------------   ---------------   ---------------
                Interest expense..........................            (47,000)         (118,000)         (50,000)
                Other income..............................          1,503,000         5,143,000       21,639,000
                                                              ---------------   ---------------   ---------------
                Income before income taxes................    $    20,925,000   $    35,165,000   $   64,034,000
                                                              ===============   ===============   ==============
                Identifiable assets:
                  Pharmaceutical products.................    $     4,458,000   $     6,012,000   $    3,372,000
                  Diabetes products.......................        153,194,000       347,786,000      447,588,000
                                                              ---------------   ---------------   --------------
                          Total...........................    $   157,652,000   $   353,798,000   $  450,960,000
                                                              ===============   ===============   ==============
</TABLE>


     Capital expenditures and depreciation expense related to the Company's
pharmaceutical products operations are not material compared to its diabetes
products operations for the three years presented.


                                       52



<PAGE>   53

<TABLE>
<CAPTION>


          GEOGRAPHIC AREAS                                                1998              1999             2000
                                                                    ----------------  ----------------  ---------------
 <S>                                                                 <C>               <C>               <C>
          NET SALES:
            North America.......................................    $   127,981,000   $   198,641,000   $   277,435,000
            Europe..............................................         10,596,000        13,655,000        16,297,000

            Australia...........................................              --                --              671,000
                                                                    ----------------  ----------------  ---------------
            Consolidated........................................    $   138,577,000   $   212,296,000   $   294,403,000
                                                                    ===============   ===============   ===============
          OPERATING INCOME (LOSS):
            North America.......................................    $    20,099,000   $    31,236,000   $    44,691,000
            Europe..............................................           (630,000)       (1,096,000)       (2,184,000)

            Australia...........................................              --                --              (62,000)
                                                                    ----------------  ----------------  ---------------
            Consolidated........................................    $    19,469,000   $    30,140,000   $    42,445,000
                                                                    ===============   ===============   ===============
          IDENTIFIABLE ASSETS AT END OF PERIOD:
            North America.......................................    $   149,768,000   $   344,446,000   $   433,867,000
            Europe..............................................          7,884,000         9,352,000        16,296,000

            Australia...........................................             --                 --              797,000
                                                                    ----------------  ----------------  ---------------
            Consolidated........................................    $   157,652,000   $   353,798,000   $   450,960,000
                                                                    ===============   ===============   ===============

</TABLE>







                                       53

<PAGE>   54


                                  MINIMED INC.

                VALUATION AND QUALIFYING ACCOUNTS -- SCHEDULE II

<TABLE>
<CAPTION>

                      COLUMN A                    COLUMN B        COLUMN C -- ADDITIONS       COLUMN D         COLUMN E
                      --------                 -------------  ---------------------------  --------------   --------------
                                                 BALANCE AT     CHARGED TO    CHARGED TO                      BALANCE AT
                                                  BEGINNING      COSTS AND      OTHER                           END OF
        DESCRIPTION                               OF PERIOD     EXPENSES(1)    ACCOUNTS      DEDUCTIONS         PERIOD
        -----------                            -------------  --------------  ----------   --------------   --------------
        Allowance for doubtful accounts:
<S>                                            <C>            <C>                          <C>              <C>
          1998.............................    $   6,250,000  $   4,505,000                $  (1,911,000)   $    8,844,000
          1999.............................    $   8,844,000  $   7,292,000                $  (3,028,000)   $   13,108,000
          2000.............................    $  13,108,000  $   3,653,000                $    (521,000)   $   16,240,000
        Accrued warranties:
          1998.............................    $   2,458,000  $   1,537,000                $  (1,167,000)   $    2,828,000
          1999.............................    $   2,828,000  $   1,597,000                $    (566,000)   $    3,859,000
          2000.............................    $   3,859,000  $   1,352,000                $  (1,530,000)   $    3,681,000
        Accrued related party purchase
         commitment obligations:
          1998.............................    $          --  $   2,000,000                $          --    $    2,000,000
          1999.............................    $   2,000,000  $   1,500,000                $          --    $    3,500,000
          2000.............................    $   3,500,000  $          --                $     (215,000)  $    3,285,000

</TABLE>
----------

(1) The allowance for doubtful accounts represents charges to bad debt expense
    for the year.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not Applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

     Information regarding our Directors and Executive Officers is incorporated
by reference to our definitive Proxy Statement for our annual meeting of
stockholders which is to be held on June 7, 2001. The Proxy Statement will be
filed with the Securities Exchange Commission no later than 120 days after
December 29, 2000. We refer to the Proxy Statement to be filed as the "2001
Proxy."

ITEM 11. EXECUTIVE COMPENSATION

     Information with respect to this item is incorporated by reference to our
2001 Proxy.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Information with respect to this item is incorporated by reference to our
2001 Proxy.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    Information with respect to this item is incorporated by reference to our
2001 Proxy.



                                       54


<PAGE>   55

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. FINANCIAL STATEMENTS

     See index to financial statements under Item 8 for a list of all financial
statements filed as part of this report.

    2. FINANCIAL STATEMENT SCHEDULES

     The following financial statement schedules are filed as a part of this
Annual Report on Form 10-K:

         Schedule II -- Valuation and Qualifying Accounts

    All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the consolidated
financial statements or notes thereto.

    3. EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K

     The following exhibits are filed as part of this Annual Report on Form 10-K
or are incorporated herein by reference:

<TABLE>
<S>               <C>

      2.1         Reorganization Agreement among Robert A. Kusher, Craig Lowy, MiniMed Inc. and MiniMed Distribution Corp. dated
                  as of October 19, 1997 (included as Exhibit 2.1 to the Company's Current Report on Form 8-K filed October 20,
                  1997, which is incorporated herein by reference).

      2.2         Amendment to Reorganization Agreement among Robert A. Kusher, Craig Lowy, MiniMed Inc. and MiniMed Distribution
                  Corp. dated as of January 2, 1998 (included as Exhibit 2.1 to the Company's Current Report on Form 8-K filed
                  January 16, 1998, which is incorporated herein by reference).

      2.3         Asset Purchase Agreement dated as of October 8, 1998, by and among Diabetes Support Systems, Inc., MiniMed
                  Distribution Corp. and MiniMed Inc. (included as Exhibit 2.3 to the Company's Annual Report on the Form 10-K
                  for the fiscal year ended January 1, 1999 which is incorporated herein by reference).

      3(i).1      Amended and Restated Certificate of Incorporation (included as Exhibit 3(i).1 to the Company's
                  Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

      3(ii).1     Bylaws of MiniMed Inc. (included as Exhibit 3.2 to the Company's Registration Statement on Form S-1 (file no.
                  33-92710) which is incorporated herein by reference).

      3(ii).2     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3.3 to the Company's 1996 Annual Report on Form 10-K
                  which is incorporated herein by reference).

      3(ii).3     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                  for the period ended October 2, 1998 which is incorporated herein by reference).

      3(ii).4     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                  for the period ended July 2, 1999 which is incorporated herein by reference).

      3(ii).5     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                  for the period ended October 1, 1999 which is incorporated herein by reference).

      3(ii).6     Amendment to Bylaws of MiniMed Inc. adopted October 13, 1999. (included as Exhibit 3(ii).6 to the Company's
                  Annual Report on Form 10-K for the year ended December 31, 1999 which is incorporated herein by reference).

      3(ii).7     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                  for the period ended September 29, 2000 which is incorporated herein by reference).

      3(ii).8     Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).2 to the Company's Quarterly Report on Form 10-Q
                  for the period ended September 29, 2000 which is incorporated herein by reference).

      4.1         Form of Stockholder Rights Agreement (included as Exhibit 3.4 to the Company's Registration Statement on Form
                  S-1 (file no. 33-92710) which is incorporated herein by reference).

      4.2         Amendment to Rights Agreement effective as of May 1, 1999 by and between MiniMed Inc. and Harris Trust
</TABLE>


                                       55

<PAGE>   56
<TABLE>

<S>               <C>

                  Company of California (previously filed as Exhibit 4.3 to the Company's Registration Statement on Form S-3,
                  Registration No. 333-80527 on June 11, 1999, and incorporated herein by reference).

     10.1         First Amendment to Stock Pledge Agreement made by MiniMed in favor of ING (U.S.) Capital LLC dated as of June
                  24, 1999 (included as Exhibit 10.1 to the Company's Quarterly Report for the period ended October 1, 1999 which
                  is incorporated herein by reference).

     10.2         Ground Sublease by and between North Campus-University Park Development Corporation and First Security Bank,
                  N.A. as Owner Trustee dated as of May 18, 1999 (included as Exhibit 10.1 to the Company's Quarterly Report on
                  Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.3         Parent Guaranty dated as of May 18, 1999 from MiniMed Inc. to First Security Bank, N.A. as Trustee (included as
                  Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is
                  incorporated herein by reference).

     10.4         Master Lease between First Security Bank, N.A. as Trustee and MiniMed Development Corp. dated May 18, 1999
                  (included as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999
                  which is incorporated herein by reference).

     10.5         Participation Agreement among MiniMed Development Corp. as Construction Agent and Lessee, MiniMed Inc. and
                  First Security Bank, N.A. as Trustee, et. Al. dated May 18, 1999 (included as Exhibit 10.2 to the Company's
                  Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.6         First Amendment to Participation Agreement and Related Documents among MiniMed Development Corp. as
                  Construction Agent and Lessee, MiniMed Inc. and First Security Bank, N.A. as Trustee, et. Al. dated October 30,
                  2000 (included as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September
                  29, 2000 which is incorporated herein by reference).

     10.7         Revolving Credit Agreement dated as of May 18, 1999, among MiniMed Inc., the Revolving Credit Lenders and ING
                  (U.S.) Capital LLC (included as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the period
                  ended July 2, 1999 which is incorporated herein by reference).

     10.8         Security Agreement dated as of May 18, 1999, among MiniMed Inc., certain subsidiaries of MiniMed Inc. and ING
                  (U.S.) Capital LLC (included as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the period
                  ended July 2, 1999 which is incorporated herein by reference).

     10.9         Change of Control Agreement dated August 12, 1999 between MiniMed Inc. and Stephen Bowman (included
                  as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended October 1, 1999 which is
                  incorporated herein by reference).

     10.10        Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Alfred E. Mann (included as Exhibit
                  10.1 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                  herein by reference).

     10.11        Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Terrance H. Gregg (included as Exhibit
                  10.2 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                  herein by reference).

     10.12        Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Eric S. Kentor (included as Exhibit
                  10.3 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                  herein by reference).

     10.13        Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and David Morley (included as Exhibit 10.4
                  to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated herein
                  by reference).

     10.14        Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Kevin R. Sayer (included as Exhibit
                  10.5 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                  herein by reference).

     10.15        Change of Control Agreement dated August 12, 2000 between MiniMed Inc. and Steven Schultz

     10.16        Change of Control Agreement dated October 19, 2000 between MiniMed Inc. and Kevin Wells

     10.17        Third Amended and Restated 1994 Stock Incentive Plan (Incorporated by reference from Exhibit 4.1 to Post
                  Effective Amendment No. 2 to the Company's Registration Statement on Form S-8 filed by the Company on September
                  16, 1999, registration no. 33-95630).

     10.18        MiniMed Inc. 1994 Stock Incentive Plan -- Form of Option. (included as Exhibit 10.15 to the Company's Annual

</TABLE>


                                   56
<PAGE>   57

<TABLE>

<S>               <C>
                  Report on Form 10-K for the year ended December 31, 1999 which is incorporated herein by reference).

     10.19        MiniMed Inc. 1992 Stock Incentive Plan -- Form of Option (included as Exhibit 4.4 to the Company's Registration
                  Statement on Form S-1 (file no. 33-92710) which is incorporated herein by reference).

     10.20        MiniMed Inc. 1992 Stock Incentive Plan -- Amendment to Form of Option (included as Exhibit 10.17 to the
                  Company's Annual Report on Form 10-K for the year ended
                  December 31, 1999 which is incorporated herein by
                  reference).

     10.21        MiniMed Technologies Limited Amended and Restated 1992 Option Plan (included as Exhibit 10.17 to
                  the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by
                  reference).

     10.22        MiniMed Inc. Option Agreement -- Assumption of MiniMed Technologies Limited Options (included as Exhibit 10.18
                  to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by
                  reference).

     10.23        License Supply and Distribution Agreement between Eli Lilly and Company and MiniMed Inc. dated February 1, 1999
                  (included as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999
                  which is incorporated herein by reference).

     10.24        Amendment to License Supply and Distribution Agreement between Eli Lilly and Company and MiniMed Inc. dated as
                  June 28, 1999 (included as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the period ended
                  July 2, 1999 which is incorporated herein by reference).

     10.25        License Agreement dated February 13, 1980, as amended December 10, 1990, by and between Applied Physics
                  Laboratory of the Johns Hopkins University, Pacesetter Infusion, Ltd. And MiniMed Technologies Limited
                  (included as Exhibit 10.24 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is
                  incorporated herein by reference).

     10.26        Development, License and Supply Agreement between Elan Pharmaceutical Technologies, Elan Pharma International
                  Limited and MiniMed Inc. dated June 11, 1999 (included as Exhibit 10.9 to the Company's Quarterly Report on
                  Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.27        License and Manufacturing Agreement between Elan Pharmaceutical Technologies, Elan Pharma
                  International Limited and MiniMed Inc. dated June 11, 1999 (included as Exhibit 10.10 to the Company's
                  Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.28        License Agreement dated as of October 1, 1993 by and between MiniMed Inc. and Wilson Greatbatch Ltd. (included
                  as Exhibit 10.25 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated
                  herein by reference).

     10.29        Form of Indemnity Agreement between MiniMed Inc. and each of its officers and directors (included as Exhibit
                  10.27 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by
                  reference).

     10.30        MiniMed Inc. Non-Employee Director Deferred Stock Units Plan (included as Exhibit 10.14 to the Company's 1995
                  Annual Report on Form 10-K which is incorporated herein by reference).

     10.31        MiniMed Inc. Employee Stock Purchase Plan (included as Exhibit 10.15 to the Company's 1995 Annual Report on
                  Form 10-K which is incorporated herein by reference).

     10.32        Lease dated as of August 1, 1995, as amended by Amendment thereto dated as of July 1, 1996, by and between
                  MiniMed Inc. and Alfred E. Mann (included as Exhibit 10.17 to the Company's 1996 Annual Report on Form 10-K
                  which is incorporated herein by reference).

     10.33        Lease dated as of October 15, 2000 by and between MiniMed Inc. and Advanced Bionics Corporation.

     10.34        Lease dated as of October 15, 2000 by and between MiniMed Inc. and AlleCure.

     10.35        Agreement Regarding Implantable Pump Business dated September 1, 1998, by and between Medical
                  Research Group, LLC, a California limited liability company and MiniMed Inc., a Delaware corporation (included
                  as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q which is incorporated by reference herein).

     10.36        Implantable Pump License and Distribution Agreement dated September 1, 1998, by and between
                  Medical Research Group, LLC, a California limited liability company and MiniMed Inc., a Delaware corporation
                  (included as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q which is incorporated by reference
                  herein).

     10.37        Glucose Sensor Option Agreement dated September 1, 1998, by and between Medical Research Group, LLC, a
                  California limited liability company and MiniMed Inc., a Delaware corporation (included as Exhibit 10.3 to the
                  Company's Quarterly Report on Form 10-Q which is incorporated by reference herein).

     10.38        Guarantee of Alfred E. Mann dated September 1, 1998 (included as Exhibit 10.4 to the Company's Quarterly
</TABLE>


                                   57
<PAGE>   58

<TABLE>
<S>               <C>
                  Report on Form 10-Q which is incorporated by reference herein).

     10.39        Amended and Restated Implantable Pump License and Distribution Agreement dated February 1, 2001, by and between
                  Medical Research Group, Inc., a Delaware corporation and MiniMed Inc., a Delaware corporation.

     10.40        Amendment to Glucose Sensor Option Agreement dated February 1, 2001, by and between Medical Research Group,
                  Inc., a Delaware corporation and MiniMed Inc., a Delaware corporation.

     10.41        Stock Purchase Agreement dated February 1, 2001, by and between Medical Research Group, Inc., a Delaware
                  corporation and MiniMed Inc., a Delaware corporation.

     21.1         Subsidiaries of the Company.

     23.1         Consent of Deloitte & Touche LLP.

</TABLE>

(b) 1. REPORTS ON FORM 8-K

        None.









                                       58



<PAGE>   59
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Action of 1934, as amended, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                               MINIMED INC.


Date: March 28, 2001           By:             /s/ ALFRED E. MANN
                                    -------------------------------------------
                                                  Alfred E. Mann
                                                     Executive
                                                     Chairman

Date: March 28, 2001           By:             /s/ KEVIN R. SAYER
                                    -------------------------------------------
                                                  Kevin R. Sayer
                                          Senior Vice President, Finance
                                           and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>


                       SIGNATURE                                                 TITLE                                   DATE
                       ---------                                                 -----                                   -----
<S>                                                      <C>                                                        <C>
                  /s/ ALFRED E. MANN                     Director, Executive Chairman                               March 28, 2001
-----------------------------------------------------
                    Alfred E. Mann

                 /s/ TERRANCE H. GREGG                   Director, President, and Chief Operating Officer           March 28, 2001
-----------------------------------------------------
                   Terrance H. Gregg

                  /s/ KEVIN R. SAYER                     Senior Vice President, Finance and Chief Financial         March 28, 2001
-----------------------------------------------------    Officer (Principal Financial and Accounting Officer)
                    Kevin R. Sayer

                /s/ DAVID CHERNOF, M.D.                  Director                                                   March 28, 2001
-----------------------------------------------------
                  David Chernof, M.D.

               /s/ CAROLYNE KAHLE DAVIS                  Director                                                   March 28, 2001
-----------------------------------------------------
                 Carolyne Kahle Davis

                 /s/ WILLIAM R. GRANT                    Director                                                   March 28, 2001
-----------------------------------------------------
                   William R. Grant

                  /s/ DAVID MACCALLUM                    Director                                                   March 28, 2001
-----------------------------------------------------
                    David MacCallum

                /s/ JAY SKYLER, M.D.                     Director                                                   March 28, 2001
-----------------------------------------------------
                  Jay Skyler, M.D.

                 /s/ THOMAS R. TESTMAN                   Director                                                   March 28, 2001
-----------------------------------------------------
                   Thomas R. Testman

                 /s/ JOHN C. VILLFORTH                   Director                                                   March 28, 2001
-----------------------------------------------------
                   John C. Villforth


</TABLE>



                                       59

<PAGE>   60

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

      EXHIBIT
      NUMBER                                                           DESCRIPTION
      --------                                                         -----------
<S>                <C>
      2.1          Reorganization Agreement among Robert A. Kusher, Craig Lowy, MiniMed Inc. and MiniMed Distribution Corp. dated
                   as of October 19, 1997 (included as Exhibit 2.1 to the Company's Current Report on Form 8-K filed October 20,
                   1997, which is incorporated herein by reference).

      2.2          Amendment to Reorganization Agreement among Robert A. Kusher, Craig Lowy, MiniMed Inc. and MiniMed Distribution
                   Corp. dated as of January 2, 1998 (included as Exhibit 2.1 to the Company's Current Report on Form 8-K filed
                   January 16, 1998, which is incorporated herein by reference).

      2.3          Asset Purchase Agreement dated as of October 8, 1998, by and among Diabetes Support Systems, Inc., MiniMed
                   Distribution Corp. and MiniMed Inc. (included as Exhibit 2.3 to the Company's Annual Report on the Form 10-K
                   for the fiscal year ended January 1, 1999 which is incorporated herein by reference).

      3(i).1       Amended and Restated Certificate of Incorporation (included as Exhibit 3(i).1 to the Company's Quarterly Report
                   on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

      3(ii).1      Bylaws of MiniMed Inc. (included as Exhibit 3.2 to the Company's Registration Statement on Form S-1 (file no.
                   33-92710) which is incorporated herein by reference).

      3(ii).2      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3.3 to the Company's 1996 Annual Report on Form 10-K
                   which is incorporated herein by reference).

      3(ii).3      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                   for the period ended October 2, 1998 which is incorporated herein by reference).

      3(ii).4      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                   for the period ended July 2, 1999 which is incorporated herein by reference).

      3(ii).5      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                   for the period ended October 1, 1999 which is incorporated herein by reference).

      3(ii).6      Amendment to Bylaws of MiniMed Inc. adopted October 13, 1999. (included as Exhibit 3(ii).6 to the Company's
                   Annual Report on Form 10-K for the year ended December 31, 1999 which is incorporated herein by reference).

      3(ii).7      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).1 to the Company's Quarterly Report on Form 10-Q
                   for the period ended September 29, 2000 which is incorporated herein by reference).

      3(ii).8      Amendment to Bylaws of MiniMed Inc. (included as Exhibit 3(ii).2 to the Company's Quarterly Report on Form 10-Q
                   for the period ended September 29, 2000 which is incorporated herein by reference).

      4.1          Form of Stockholder Rights Agreement (included as Exhibit 3.4 to the Company's Registration Statement on Form
                   S-1 (file no. 33-92710) which is incorporated herein by reference).

      4.2          Amendment to Rights Agreement effective as of May 1, 1999 by and between MiniMed Inc. and Harris Trust Company
                   of California (previously filed as Exhibit 4.3 to the Company's Registration Statement on Form S-3,
                   Registration No. 333-80527 on June 11, 1999, and incorporated herein by reference).

     10.1          First Amendment to Stock Pledge Agreement made by MiniMed in favor of ING (U.S.) Capital LLC dated as of June
                   24, 1999 (included as Exhibit 10.1 to the Company's Quarterly Report for the period ended October 1, 1999 which
                   is incorporated herein by reference).

     10.2          Ground Sublease by and between North Campus-University Park Development Corporation and First Security Bank,
                   N.A. as Owner Trustee dated as of May 18, 1999 (included as Exhibit 10.1 to the Company's Quarterly Report on
                   Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.3          Parent Guaranty dated as of May 18, 1999 from MiniMed Inc. to First Security Bank, N.A. as Trustee (included as
                   Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is
                   incorporated herein by reference).

     10.4          Master Lease between First Security Bank, N.A. as Trustee and MiniMed Development Corp. dated May 18, 1999
                   (included as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999
                   which is incorporated herein by reference).

     10.5          Participation Agreement among MiniMed Development Corp. as Construction Agent and Lessee, MiniMed Inc. and
                   First Security Bank, N.A. as Trustee, et. Al. dated May 18, 1999 (included as Exhibit 10.2 to the Company's
</TABLE>


                                       60

<PAGE>   61

<TABLE>
<S>                <C>

                   Quarterly Report on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.6          First Amendment to Participation Agreement and Related Documents among MiniMed Development Corp. as
                   Construction Agent and Lessee, MiniMed Inc. and First Security Bank, N.A. as Trustee, et. Al. dated October 30,
                   2000 (included as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended September
                   29, 2000 which is incorporated herein by reference).

     10.7          Revolving Credit Agreement dated as of May 18, 1999, among MiniMed Inc., the Revolving Credit Lenders and ING
                   (U.S.) Capital LLC (included as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the period
                   ended July 2, 1999 which is incorporated herein by reference).

     10.8          Security Agreement dated as of May 18, 1999, among MiniMed Inc., certain subsidiaries of MiniMed Inc. and ING
                   (U.S.) Capital LLC (included as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the period
                   ended July 2, 1999 which is incorporated herein by reference).

     10.9          Change of Control Agreement dated August 12, 1999 between MiniMed Inc. and Stephen Bowman (included as
                   Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended October 1, 1999 which is
                   incorporated herein by reference).

     10.10         Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Alfred E. Mann (included as Exhibit
                   10.1 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                   herein by reference).

     10.11         Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Terrance H. Gregg (included as Exhibit
                   10.2 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                   herein by reference).

     10.12         Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Eric S. Kentor (included as Exhibit
                   10.3 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                   herein by reference).

     10.13         Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and David Morley (included as Exhibit 10.4
                   to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated herein
                   by reference).

     10.14         Change of Control Agreement dated March 1, 1999 between MiniMed Inc. and Kevin R. Sayer (included as Exhibit
                   10.5 to the Company's Quarterly Report on Form 10-Q for the period ended April 2, 1999 which is incorporated
                   herein by reference).

     10.15         Change of Control Agreement dated August 12, 2000 between MiniMed Inc. and Steven Schultz

     10.16         Change of Control Agreement dated October 19, 2000 between MiniMed Inc. and Kevin Wells

     10.17         Third Amended and Restated 1994 Stock Incentive Plan (Incorporated by reference from Exhibit 4.1 to Post
                   Effective Amendment No. 2 to the Company's Registration Statement on Form S-8 filed by the Company on September
                   16, 1999, registration no. 33-95630).

     10.18         MiniMed Inc. 1994 Stock Incentive Plan -- Form of Option. (included as Exhibit 10.15 to the Company's Annual
                   Report on Form 10-K for the year ended December 31, 1999 which is incorporated herein by reference).

     10.19         MiniMed Inc. 1992 Stock Incentive Plan -- Form of Option (included as Exhibit 4.4 to the Company's Registration
                   Statement on Form S-1 (file no. 33-92710) which is incorporated herein by reference).

     10.20         MiniMed Inc. 1992 Stock Incentive Plan -- Amendment to Form of Option (included as Exhibit 10.17 to the
                   Company's Annual Report on Form 10-K for the year ended December 31, 1999 which is incorporated herein by
                   reference).

     10.21         MiniMed Technologies Limited Amended and Restated 1992 Option Plan (included as Exhibit 10.17 to the Company's
                   Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by reference).

     10.22         MiniMed Inc. Option Agreement -- Assumption of MiniMed Technologies Limited Options (included as Exhibit 10.18
                   to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by
                   reference).

     10.23         License Supply and Distribution Agreement between Eli Lilly and Company and MiniMed Inc. dated February 1, 1999
                   (included as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended July 2, 1999
                   which is incorporated herein by reference).
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<S>                <C>

                   Amendment to License Supply and Distribution Agreement between Eli Lilly and Company and MiniMed Inc. dated as

     10.24         June 28, 1999 (included as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the period ended
                   July 2, 1999 which is incorporated herein by reference).

     10.25         License Agreement dated February 13, 1980, as amended December 10, 1990, by and between Applied Physics
                   Laboratory of the Johns Hopkins University, Pacesetter Infusion, Ltd. And MiniMed Technologies Limited
                   (included as Exhibit 10.24 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is
                   incorporated herein by reference).

     10.26         Development, License and Supply Agreement between Elan Pharmaceutical Technologies, Elan Pharma International
                   Limited and MiniMed Inc. dated June 11, 1999 (included as Exhibit 10.9 to the Company's Quarterly Report on
                   Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.27         License and Manufacturing Agreement between Elan Pharmaceutical Technologies, Elan Pharma International
                   Limited and MiniMed Inc. dated June 11, 1999 (included as Exhibit 10.10 to the Company's Quarterly Report
                   on Form 10-Q for the period ended July 2, 1999 which is incorporated herein by reference).

     10.28         License Agreement dated as of October 1, 1993 by and between MiniMed Inc. and Wilson Greatbatch Ltd. (included
                   as Exhibit 10.25 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated
                   herein by reference).

     10.29         Form of Indemnity Agreement between MiniMed Inc. and each of its officers and directors (included as Exhibit
                   10.27 to the Company's Registration Statement on Form S-1 (file no. 33-92710) which is incorporated herein by
                   reference).

     10.30         MiniMed Inc. Non-Employee Director Deferred Stock Units Plan (included as Exhibit 10.14 to the Company's 1995
                   Annual Report on Form 10-K which is incorporated herein by reference).

     10.31         MiniMed Inc. Employee Stock Purchase Plan (included as Exhibit 10.15 to the Company's 1995 Annual Report on
                   Form 10-K which is incorporated herein by reference).

     10.32         Lease dated as of August 1, 1995, as amended by Amendment thereto dated as of July 1, 1996, by and between
                   MiniMed Inc. and Alfred E. Mann (included as Exhibit 10.17 to the Company's 1996 Annual Report on Form 10-K
                   which is incorporated herein by reference).

     10.33         Lease dated as of October 15, 2000 by and between MiniMed Inc. and Advanced Bionics Corporation.

     10.34         Lease dated as of October 15, 2000 by and between MiniMed Inc. and AlleCure.

     10.35         Agreement Regarding Implantable Pump Business dated September 1, 1998, by and between Medical Research Group,
                   LLC, a California limited liability company and MiniMed Inc., a Delaware corporation (included as
                   Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q which is incorporated by reference herein).

     10.36         Implantable Pump License and Distribution Agreement dated September 1, 1998, by and between Medical Research
                   Group, LLC, a California limited liability company and MiniMed Inc., a Delaware corporation (included as
                   Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q which is incorporated by reference herein).

     10.37         Glucose Sensor Option Agreement dated September 1, 1998, by and between Medical Research Group, LLC, a
                   California limited liability company and MiniMed Inc., a Delaware corporation (included as Exhibit 10.3 to the
                   Company's Quarterly Report on Form 10-Q which is incorporated by reference herein).

     10.38         Guarantee of Alfred E. Mann dated September 1, 1998 (included as Exhibit 10.4 to the Company's Quarterly Report
                   on Form 10-Q which is incorporated by reference herein).

     10.39         Amended and Restated Implantable Pump License and Distribution Agreement dated February 1, 2001, by and between
                   Medical Research Group, Inc., a Delaware corporation and MiniMed Inc., a Delaware corporation.

     10.40         Amendment to Glucose Sensor Option Agreement dated February 1, 2001, by and between Medical Research Group,
                   Inc., a Delaware corporation and MiniMed Inc., a Delaware corporation.

     10.41         Stock Purchase Agreement dated February 1, 2001, by and between Medical Research Group, Inc., a Delaware
                   corporation and MiniMed Inc., a Delaware corporation.

     21.1          Subsidiaries of the Company.

     23.1          Consent of Deloitte & Touche LLP.
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