Quarterly report pursuant to Section 13 or 15(d)

Inventory, net

 v2.3.0.11
Inventory, net
 6 Months Ended
Jun. 30, 2011
Inventory, net
6.
Inventory, net

From time to time, we capitalize certain inventory costs associated with our Lymphoseek® product prior to regulatory approval and product launch based on management’s judgment of probable future commercial use and net realizable value of the inventory.  We could be required to permanently write down previously capitalized costs related to pre-approval or pre-launch inventory upon a change in such judgment, due to a denial or delay of approval by regulatory bodies, a delay in commercialization, or other potential factors.  Conversely, our gross margins may be favorably impacted if some or all of the inventory previously expensed becomes available and is used for commercial sale.

During the six-month period ended June 30, 2011, we capitalized $213,000 of inventory costs associated with our Lymphoseek product.  During the three-month periods ended June 30, 2011 and 2010, and the six-month period ended June 30, 2010, we did not capitalize any such costs.  During the three-month period ended June 30, 2010, we expensed $324,000 of previously capitalized pharmaceutical materials to research and development as they were no longer considered to be usable in the production of future saleable final drug product inventory.

The components of net inventory as of June 30, 2011 and December 31, 2010, net of reserves of $78,000 and $81,000, respectively, are as follows:

   
June 30,
2011
(unaudited)
    
December 31,
2010
  
Pharmaceutical materials
   $ 482,000     $ 482,000  
Gamma detection device materials
     298,245       302,323  
Pharmaceutical work-in-process
     362,203       150,000  
Gamma detection device finished goods
     499,647       524,265  
Total
   $ 1,642,095     $ 1,458,588  

We estimate a reserve for obsolete inventory based on management’s judgment of probable future commercial use, which is based on an analysis of current inventory levels, historical and estimated future sales and production rates, and estimated shelf lives.