Inventories are stated at the lower of cost or net realizable value. Inventories consist of raw materials, work-in-process and finished goods. The Company has entered into manufacturing and supply agreements for the manufacture of drug substance and finished goods inventories, and the purchase of raw materials and production supplies. The Company’s inventories include the direct purchase cost of materials and supplies and manufacturing overhead costs.

The components of inventories as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

	March 31, 2022		December 31, 2021
Raw materials	$	62,229	$	43,366
Work-in-process		19,674		101,719
Finished goods		144,621		80,645
Inventories, net	$	226,524	$	225,730

During the year ended December 31, 2021, as part of the Viela acquisition, the step-up in value of inventory was increased to $151.6 million, which was composed of $10.1 million for raw materials, $120.9 million for work-in-process and $20.6 million for finished goods. Refer to Note 4 for further details. The Company recorded $27.2 million and $0.9 million of UPLIZNA inventory step-up expense in cost of goods sold during the three months ended March 31, 2022 and 2021, respectively.

Because inventory step-up expense is related to an acquisition, will not continue indefinitely and has a significant effect on the Company’s gross profit, gross margin percentage and net income (loss) for all affected periods, the Company discloses balance sheet and income statement amounts related to inventory step-up within the Notes to the Condensed Consolidated Financial Statements.