NOTE 8. INVENTORIES

Inventories relate to the manufacture of the Company's Gralise and Proquin XR products at September 30, 2011 and Gralise, Glumetza and Proquin XR products at December 31, 2010. In August 2011, the Company sold its Glumetza inventory, at cost, to Santarus as part of the commercialization agreement. See Note 4 for further information with regards to the Santarus commercialization agreement. Inventories are stated at the lower of cost or market and consist of the following (in thousands):

	September 30, 2011		December 31, 2010
Raw materials	$	1,273	$	74
Work-in-process	258		202
Finished goods	1,746		1,254
Deferred costs	15		41
Total	$	3,292	$	1,571

Deferred costs represent the costs of Proquin XR product shipped for which recognition of revenue has been deferred.