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INVENTORY, NET

6 Months Ended

Jun. 30, 2011

INVENTORY, NET

8. INVENTORY, NET

Inventory, net consisted of the following:

		June 30, 2011			December 31, 2010
Raw materials		$	50,157		$	37,433
Work-in-process		128,907			140,898
Finished goods		126,357			113,029
Total inventory, net		$	305,421		$	291,360

We have committed to make future minimum payments to third parties for certain raw material inventories, including agreements to purchase minimum amounts of modafinil through 2012. Over the past few years, we have been developing a manufacturing process for the active pharmaceutical ingredient in NUVIGIL that is more cost effective than our prior process of separating modafinil into armodafinil. As a result of our plan to manufacture armodafinil in the future using this new process and the launch of NUVIGIL in 2009, we assessed the potential impact of these items on certain of our existing agreements to purchase modafinil and recorded charges and gains. As of June 30, 2011 and December 31, 2010, our aggregate future purchase commitments remaining totaled $5.7 million and $8.6 million, respectively, and are fully reserved.

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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