5. INVENTORIES

Inventories consist of (in thousands):

	Balance as of
	June 30, 2013		December 31, 2012
Raw materials	$	19,890	$	5,139
Work in process	1,015		2,635
Finished goods	13,099		17,506
Deferred costs	213		73
Total	$	34,217	$	25,353

As of June 30, 2013 and December 31, 2012, the raw materials inventories consist primarily of the active pharmaceutical ingredients, or API, for the commercialization of Qsymia® (phentermine and topiramate extended-release) capsules CIV, the finished goods inventory consists of both Qsymia and STENDRATM (avanafil) primarily for commercialization, while the work in process and deferred costs inventories relate exclusively to Qsymia. The deferred costs represent the costs of Qsymia product shipped to customers, including wholesalers, certified retail pharmacies and certified mail order pharmacies, but not yet shipped to patients through prescriptions, and for which recognition of revenue has been deferred.

Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. The Company periodically evaluates the carrying value of inventory on hand for potential excess amount over demand using the same lower of cost or market approach as that used to value the inventory. As a result of this evaluation, for the three and six months ended June 30, 2013, the Company recognized a total charge of $4.4 million and $10.2 million, respectively, for inventories on hand in excess of demand, plus a purchase commitment fee.