Quarterly report pursuant to Section 13 or 15(d)

Inventory, net

Inventory, net

9 Months Ended

Sep. 30, 2011

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 nine-month period ended September 30, 2011, we capitalized $213,000 of inventory costs associated with our Lymphoseek product. During the three-month periods ended September 30, 2011 and 2010, and the nine-month period ended September 30, 2010, we did not capitalize any such costs. During the nine-month period ended September 30, 2010, we expensed $351,000 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 September 30, 2011 and December 31, 2010 are as follows:

	September 30, 2011 (unaudited)		December 31, 2010
Pharmaceutical materials	$	482,000	$	482,000
Pharmaceutical work-in-process		362,203		150,000
Total	$	844,203	$	632,000

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, estimated future sales and production rates, and estimated shelf lives. Based on our evaluations, we did not record a reserve for obsolete inventory as of September 30, 2011 or December 31, 2010.