Customer, Supplier and Product Concentration

12 Months Ended

Dec. 31, 2019

Customer, Supplier and Product Concentration

Customer Concentration

In the years ended December 31, 2019, 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 December 31, 2019, 2018 and 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. The Company is subject to credit risk from its accounts receivable, heavily weighted to the Big 3 Wholesalers, but as of and for the years ended December 31, 2019, 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 Company’s gross trade accounts receivable, gross sales and net revenue disaggregated by major customers for the periods indicated:



Gross Accounts Receivable as of December 31,
	2019				2018				2017
Disaggregation of gross A/R by major customers	Gross Accounts Receivable		Gross Accounts Receivable %		Gross Accounts Receivable		Gross Accounts Receivable %		Gross Accounts Receivable		Gross Accounts Receivable %
Amerisource	$	56,945	22.0	%	$	55,160	17.9	%	$	99,771	26.3	%
Cardinal	40,158		15.6	%	59,443		19.3	%	79,731		21.1	%
McKesson	118,258		45.8	%	149,000		48.3	%	146,321		38.6	%
Combined Total	215,361		83.4	%	263,603		85.5	%	325,823		86.0	%
Other	42,812		16.6	%	44,702		14.5	%	52,936		14.0	%
Grand Total	$	258,173	100.0	%	$	308,305	100.0	%	$	378,759	100.0	%



Gross Sales
	2019				2018				2017
Disaggregation of gross sales by major customers	Gross Sales		Gross Sales %		Gross Sales		Gross Sales %		Gross Sales		Gross Sales %
Amerisource	$	348,030	20.8	%	$	386,543	20.5	%	$	554,690	23.6	%
Cardinal	354,253		21.2	%	390,438		20.7	%	411,458		17.5	%
McKesson	680,478		40.6	%	789,620		41.8	%	918,157		39.1	%
Combined Total	1,382,761		82.6	%	1,566,601		83.0	%	1,884,305		80.2	%
Other	291,435		17.4	%	321,261		17.0	%	466,766		19.8	%
Grand Total	$	1,674,196	100.0	%	$	1,887,862	100.0	%	$	2,351,071	100.0	%



Net Revenue
	2019				2018				2017
Disaggregation of net revenues by major customers	Net Revenue		Net Revenue %		Net Revenue		Net Revenue %		Net Revenue		Net Revenue %
Amerisource	$	138,667	20.3	%	$	144,776	20.9	%	$	160,671	19.1	%
Cardinal	115,489		16.9	%	109,747		15.8	%	150,257		17.9	%
McKesson	157,572		23.1	%	173,363		25.0	%	222,715		26.5	%
Combined Total	411,728		60.3	%	427,886		61.7	%	533,643		63.5	%
Other	270,701		39.7	%	266,132		38.3	%	307,402		36.5	%
Grand Total	$	682,429	100.0	%	$	694,018	100.0	%	$	841,045	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 represented 88.5%, 89.4% and 91.9%, of the net revenue for the years ended December 31, 2019, 2018 and 2017, respectively. Chain pharmacies are the major customers in the Consumer Health segment. For more information, see Note 12 - “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 any of the years ended December 31, 2019, 2018 and 2017.

Product Concentration

In the years ended December 31, 2019 and 2018, none of the Company’s products represented 10% or more of total net revenue, while in the year ended December 31, 2017, Ephedrine Sulfate Injection represented approximately 10% of the Company’s total 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.