Inventories

9 Months Ended

Sep. 30, 2011

Inventories [Abstract]

Inventories

3. Inventories

Inventories are stated at the lower of cost or market (net realizable value) and net of a valuation allowance for potential excess or obsolete material. As of September 30, 2011, there was no valuation allowance for potential excess or obsolete material; as of December 31, 2010 the valuation allowance equaled $1.4 million. Cost is determined by the first-in, first-out method. Raw materials consist of bulk drug material for BYETTA, SYMLIN and BYDUREON. Work-in-process inventories consist of in-process BYETTA cartridges and in-process SYMLIN cartridges. Finished goods inventories consist of both BYETTA and SYMLIN drug product in a disposable pen/cartridge delivery system.

We expense costs relating to the purchase and production of pre-approval inventories as research and development expense in the period incurred until such time as we believe future commercialization is probable and future economic benefit is expected to be realized.

Inventories, net consist of the following (in thousands):

	September 30, 2011		December 31, 2010
Raw materials	$	77,383	$	90,183
Work-in-process		22,201		19,051
Finished goods		7,761		9,395
	$	107,345	$	118,629

Included in raw materials inventories as of September 30, 2011 and December 31, 2010 is $21.2 million and $23.3 million, respectively, of exenatide, the active pharmaceutical ingredient, or API, which we plan to use to manufacture BYDUREON. We expect that exenatide for BYDUREON could also be used to manufacture BYETTA, subject to certain regulatory requirements.