Customer, Supplier and Product Concentration

Customer Concentration

In the three and six month periods ended June 30, 2018 and 2017, a significant portion of the Company’s gross and net revenues reported were to three large wholesale drug distributors, and a significant portion of the Company’s accounts receivable as of June 30, 2018 and December 31, 2017 were due from these wholesale drug distributors as well. AmerisourceBergen Health Corporation (“Amerisource”), Cardinal Health, Inc. (“Cardinal”) and McKesson Drug Company (“McKesson”) collectively referred to herein as the “Big 3 Wholesalers”, 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 individual customer accounted for 10% or more of gross sales, net revenue or gross trade receivables for the indicated dates and periods. If sales to the Big 3 Wholesalers 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 the Big 3 Wholesalers, but as of and for the three and six month periods ended June 30, 2018 and 2017, the Company has not experienced significant losses with respect to its collection of these gross accounts receivable balances.

The following table sets forth the percentage of the Company's gross accounts receivable attributable to the Big 3 Wholesalers as of June 30, 2018 and December 31, 2017:



Big 3 Wholesalers combined:	June 30, 2018	December 31, 2017
Percentage of gross trade accounts receivable	87%	86%

The following table sets forth the percentage of the Company’s gross sales attributable to the Big 3 Wholesalers for the three and six month periods ended June 30, 2018 and 2017:



	Three Months Ended June 30,		Six Months Ended June 30,
Big 3 Wholesalers combined:	2018	2017	2018	2017
Percentage of gross sales	83%	81%	83%	80%

The following table sets forth the Company’s net revenues disaggregated by major customers for the three and six month periods ended June 30, 2018 and 2017 (dollar amounts in thousands):



	Three Months Ended June 30, 2018			Three Months Ended June 30, 2017			Six Months Ended June 30, 2018			Six Months Ended June 30, 2017
Disaggregation of net revenues by major customers	Amount		% of Total Revenues	Amount		% of Total Revenues	Amount		% of Total Revenues	Amount		% of Total Revenues
Amerisource	$	39,256	20.6%	$	39,654	19.9%	$	77,211	20.6%	$	83,591	18.5%
Cardinal	29,861		15.6%	33,260		16.7%	57,051		15.2%	82,228		18.2%
McKesson	43,128		22.6%	50,749		25.5%	96,349		25.7%	120,460		26.6%
Big 3 Wholesalers combined	112,245		58.8%	123,663		62.1%	230,611		61.5%	286,279		63.3%
All Others	78,699		41.2%	75,477		37.9%	144,396		38.5%	166,281		36.7%
Total Revenues	190,944		100.0%	199,140		100.0%	375,007		100.0%	452,560		100.0%

Sales to the Big 3 Wholesalers primarily represent purchases of products in the Prescription Pharmaceuticals segment and generate the majority of the Prescription Pharmaceuticals segment revenue. The Prescription Pharmaceuticals segment revenue represents 90.2% and 91.7% of the consolidated net revenue for three month periods ended June 30, 2018 and 2017, respectively, while during six month periods ended June 30, 2018 and 2017, the Prescription Pharmaceuticals segment revenue represents 89.7% and 92.8% of the consolidated net revenue, respectively. Chain pharmacies are the major customers in the Consumer Health segment. For more information, see Note 10 — Segment Information.

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 certain of the Company’s abbreviated new drug applications and new drug applications, only one supplier of raw materials has been identified. 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 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, which 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 the three and six month periods ended June 30, 2018 or 2017.

Product Concentration

In the three and six month periods ended June 30, 2018, none of the Company's products represented 10% or more of its total net revenue. In the three month period ended June 30, 2017, none of the Company's products represented 10% or more of its total net revenue, while Ephedrine Sulfate Injection represented approximately 13% of the Company's total net revenue in the six month period ended June 30, 2017. The Company attempts to minimize the risk associated with product concentrations by continuing to acquire and develop new products to add to its existing portfolio.