Celgene Corp. (CELG)
Analysis of Inventory
High level of difficulty
Accounting Policy on Inventory
Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Celgene periodically reviews the composition of inventory in order to identify excess, obsolete, slow-moving or otherwise non-saleable items. If non-saleable items are observed and there are no alternate uses for the inventory, Celgene will record a write-down to net realizable value in the period that the decline in value is first recognized. Included in inventory are raw materials used in the production of preclinical and clinical products, which are charged to research and development expense when consumed.
Celgene capitalizes inventory costs associated with certain products prior to regulatory approval of products, or for inventory produced in new production facilities, when management considers it highly probable that the pre-approval inventories will be saleable. The determination to capitalize is based on the particular facts and circumstances relating to the expected regulatory approval of the product or production facility being considered, and accordingly, the time frame within which the determination is made varies from product to product. The assessment of whether or not the product is considered highly probable to be saleable is made on a quarterly basis and includes, but is not limited to, how far a particular product or facility has progressed along the approval process, any known safety or efficacy concerns, potential labeling restrictions and other impediments. Celgene could be required to write down previously capitalized costs related to pre-launch inventories upon a change in such judgment, or due to a denial or delay of approval by regulatory bodies, a delay in commercialization or other potential factors. As of December 31, 2018, the carrying value of pre-approval inventory was not material.
Source: 10-K (filing date: 2019-02-26).
Celgene Corp., balance sheet: inventory
US$ in millions
|Dec 31, 2018||Dec 31, 2017||Dec 31, 2016||Dec 31, 2015||Dec 31, 2014|
|Work in process|
|Inventory||Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.||Celgene Corp.’s inventory increased from 2016 to 2017 but then declined significantly from 2017 to 2018.|