Note 5—Inventories

At September 30, 2011 and December 31, 2010, inventories at cost, net of reserves, were as follows:


	September 30, 2011			December 31, 2010
	(In thousands)
Raw materials	$	3,776		$	888
Work-in-progress		6,930			2,605
Finished goods		1,713			913


Inventory at cost		12,419			4,406
Inventory reserves		(4,415	)		(1,266	)


Total	$	8,004		$	3,140

An allowance is established when management determines that certain inventories may not be saleable. The Company states inventories at the lower of cost or market. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company records reserves for the difference between the cost and the market value. These reserves are recorded based upon various factors for the Company's products, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected product demand, and the expected shelf life of the product. For the three and nine months ended September 30, 2011 the Company recorded a $3.4 million charge against income to reserve for excess KRYSTEXXA inventory that had expiration dates such that it was unlikely the product will be sold.