DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

6 Months Ended

Jun. 30, 2012

Distribution Agreements And Major Customer [Abstract]

DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

NOTE H - DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

Brachytherapy Seed Distribution Agreements

Our brachytherapy seed business sells our TheraSeed® device directly to healthcare providers and to third-party distributors.  Under our third-party distribution agreements, we are the exclusive palladium-103 seed supplier for the treatment of prostate cancer for each distributor, and each distributor has the non-exclusive right to sell TheraSeed® in the U.S. and Canada.  Certain agreements also provide distributors with rights to distribute TheraSeed® for the treatment of solid localized tumors other than prostate and with rights to distribute to certain locations outside of North America.  Such applications (non-prostate and outside of North America) have not been material.  Our principal non-exclusive distribution agreement is with C. R. Bard (“Bard”).  Our agreement with Bard (the “Bard Agreement”) provides for automatic one year extensions of the term, unless either party gives notice of its intent not to renew at least twelve months prior to the end of the current term. The current term expires December 31, 2013 and will be automatically extended for one additional year unless either party gives notice of its intent not to extend by December 31, 2012.

Major Customers

Sales to Bard under the Bard Agreement represented approximately 23% and 26% of total brachytherapy seed segment revenue for the three and six months ended June 30, 2012, respectively, and 27% and 28% of total brachytherapy seed segment revenue for the three and six months ended June 30, 2011, respectively. Our surgical products segment also sells to Bard. Total consolidated sales to Bard, including sales in our brachytherapy seed segment and our surgical products segment, were less than 10% of consolidated revenue for the three and six months ended June 30, 2012 and 10% and 11% for the three and six months ended June 30, 2011, respectively.

Accounts receivable from Bard represented approximately 16% of brachytherapy accounts receivable and less than 10% of consolidated accounts receivable at June 30, 2012. At December 31, 2011, accounts receivable from Bard under the Bard Agreement represented approximately 19% of brachytherapy accounts receivable and less than 10% of consolidated accounts receivable.

Core Oncology became an additional non-exclusive distributor of TheraSeed® in January 2010.  In February 2011, we terminated our agreement with Core due to Core’s failure to satisfy its financial obligation to us in accordance with the contractual terms of the agreement.Corehad been attempting to become current with amounts due to us.  However, litigation filed against Core by a third party in January 2011 created what we viewed as an unacceptable level of uncertainty surrounding Core’s ability to satisfy their financial obligations to us for both current and ongoing sales.  Subsequent to termination of the agreement, we continued to supply TheraSeed® to Core on a prepaid basis.  Sales to Core in our brachytherapy segment totaled approximately 13% and 10% of total brachytherapy seed segment revenue for the three and six months ended June 30, 2011, respectively.  In the latter half of 2011, certain customers who previously purchased TheraSeed® through Core began purchasing either from us on a direct basis or through one of our other TheraSeed® distributors. At December 31, 2011 an allowance for doubtful accounts was established for the entire amount of accounts receivable due from Core, which totaled $2.2 million (the “Core Accounts Receivable”).  On February 17, 2012, we acquired Core’s prostate brachytherapy customer base.  See Note B.  In connection with the acquisition of the Core customer base on February 17, 2012, we released Core from all claims existing at that date, including the Core Accounts Receivable.  Accordingly, the $2.2 million for which an allowance had been established was written off as uncollectible in 2012.