Customer, Supplier and Product Concentration

12 Months Ended

Dec. 31, 2016

Customer, Supplier and Product Concentration

Customer Concentration

In the years ended December 31, 2016, 2015 and 2014, a significant portion of the Company’s gross and net sales reported were through three large wholesale drug distributors, and a significant portion of the Company’s accounts receivable as of December 31, 2016, 2015 and 2014 were due from these wholesale drug distributors as well. AmerisourceBergen Health Corporation (“Amerisource”), Cardinal Health, Inc. (“Cardinal”) and McKesson Drug Company (“McKesson”) are all distributors of the Company’s products, as well as suppliers of a broad range of health care products. Aside from these three wholesale drug distributors, no other customers accounted for more than 10% of gross sales, net revenues or gross trade receivables for the indicated dates and periods.

The following table sets forth the percentage of the Company’s gross and net sales and gross accounts receivable attributable to these three distributors for the periods indicated:



	2016			2015			2014
	Gross Sales	Net Revenue	Gross Accounts Receivable	Gross Sales	Net Revenue	Gross Accounts Receivable	Gross Sales	Net Revenue	Gross Accounts Receivable
Amerisource	29.5%	23.3%	35.6%	28.0%	23.2%	28.8%	38.3%	29.2%	45.4%
Cardinal	15.4%	16.3%	15.1%	19.7%	19.5%	26.1%	15.9%	13.6%	16.9%
McKesson	32.5%	24.2%	33.2%	30.1%	27.3%	27.9%	22.7%	19.1%	22.7%
Combined Total	77.4%	63.8%	83.9%	77.8%	70.0%	82.8%	76.9%	61.9%	85.0%

If sales to Amerisource, Cardinal or McKesson were to diminish or cease, the Company believes that the end users of its products would find little difficulty obtaining the Company’s products from another distributor. Further, the Company is subject to credit risk from its accounts receivable, more heavily weighted to Amerisource, Cardinal and McKesson, but as of and for the years ended December 31, 2016, 2015 and 2014, the Company has not experienced significant losses with respect to its collection of these gross accounts receivable balances.

Supplier Concentration

The Company requires a supply of quality raw materials and components to manufacture and package pharmaceutical products for its own use and for third parties with which it has contracted. The principal components of the Company’s products are active and inactive pharmaceutical ingredients and certain packaging materials. Certain of these ingredients and components are available from only a single source and, in the case of many of our products, only one supplier of raw materials has been identified and qualified. Because FDA approval of drugs requires manufacturers to specify their proposed suppliers of active ingredients and certain packaging materials in their applications, FDA approval of any new supplier would be required if such active ingredients or such packaging materials were no longer available from the specified supplier. The qualification of a new supplier could delay the Company’s development and marketing efforts. In addition, certain of the pharmaceutical products marketed by the Company are manufactured by a third party manufacturer that serves as the Company’s sole source of that finished product. If for any reason the Company is unable to obtain sufficient quantities of any of the raw materials or components required to produce and package its products, it may not be able to manufacture its products as planned, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Likewise, if the Company’s manufacturing partners experience any similar difficulties in obtaining raw materials or in manufacturing the finished product, the Company’s results of operations would be negatively impacted.

No individual supplier represented 10% or more of the Company’s purchases in any of the years ended December 31, 2016, 2015 and 2014.

Product Concentration

In the year ended December 31, 2016, one unapproved Prescription Pharmaceutical product represented approximately 20% of the Company’s total net sales revenue, while in the years ended December 31, 2015 and 2014, none of the Company’s products represented 10% or more of net revenue. The Company attempts to minimize the risk associated with product concentration by continuing to acquire and develop new products to add to its portfolio.