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Inventories

9 Months Ended

Sep. 30, 2012

(5) INVENTORIES

We work closely with third parties to manufacture and package finished goods for sale. We take title to the finished goods at the time of shipment from the manufacturer and warehouse such goods until distribution and sale. Inventories are stated at the lower of cost or market with cost determined using the first-in, first-out method.

We continually evaluate inventory for potential losses due to excess, obsolete or slow-moving inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates the carrying value may not be recoverable, a charge is taken to reduce the inventory to the net realizable value.

During 2009 and 2010, we built inventory to support the Caldolor product launch. Caldolor inventory represented the majority of net inventory on hand at September 30, 2012 and December 31, 2011, and has varying expiration dates through January 2015. At September 30, 2012 and December 31, 2011, we have recognized a reserve for potential obsolescence and discontinuance primarily for Caldolor of approximately $2.0 million and $2.1 million, respectively. If actual sales in future periods are less than projected sales, we could incur additional obsolescence losses.

In connection with the purchase of certain Kristalose assets in 2011, we are responsible for the purchase of the active pharmaceutical ingredient for Kristalose, and maintain the inventory at the third-party manufacturer. As the ingredients are consumed in production, the value of the ingredients is transferred from raw materials to finished goods inventory.

As of September 30, 2012 and December 31, 2011, inventory was comprised of the following:


	September 30, 2012		December 31, 2011
Raw materials	$	1,844,829	$	774,637
Finished goods		5,666,812		5,000,057

Total	$	7,511,641	$	5,774,694

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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