Inventories and Other Assets

12 Months Ended

Dec. 31, 2011

(3) Inventories and Other Assets

The Company uses the lower of first-in, first-out ("FIFO") cost or market method of accounting for inventory.

Inventories consist of the following:	(in thousands)
	2011			2010

Inventory work-in-process, January 1	$	787		$	0
Transfer from Other Assets		0			864
Production		302			373
Spoilage		(192	)		(450	)

Inventory work-in-process, December 31	$	897		$	787

The production of Alferon N Injection® from the Work-In-Process Inventory was restarted in May 2010, continued into January 2011 with its conversion into Active Pharmaceutical Ingredient ("API") and is completed for the related Final Lot Release Test. To formulate, fill, finish and package ("fill and finish") Alferon N Injection® Drug Product, the Company requires an FDA approved third party Contract Manufacturing Organization ("CMO"). The Work-In-Process Inventory has expiration dates of September 30, 2012 through March 10, 2013. Upon the expected mid-2012 completion of the fill and finish process, it is projected that Alferon N Injection® will then have an expected shelf life of 42 months. In January 2012, the Company agreed to a Technology, Transfer, Validation and Commercial Supply Agreement with Althea Technologies, Inc. ("Althea") regarding the fill and finish for Alferon N Injection®. Provided the Company receives a Release Approval from the FDA as to quality and consistency of its current inventory and final product, as well as Althea is successful in the fill and finish process, the Company estimates that commercial sales of Alferon N Injection® could commence in the later part of 2012. While at December 31, 2011 the Work-In-Process Inventory has no manufacturing steps to be undertaken at its New Brunswick, NJ facility, it will not be classified as Finished Goods until the fill and finish process is completed to create a product that can be commercially sold.

- Definition

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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