An increase in Geron Corporation's (US:GERN) inventory, as you've noted with the reported figure of $69.1 million for Q2 2025, generally signals a strategic build-up of product to meet anticipated future demand for RYTELO (imetelstat). While the exact Q2 2025 inventory figure is not explicitly detailed in the provided Q2 2025 press release, the Q1 2025 10-Q filing reported inventory at $56.222 million as of March 31, 2025, indicating a continued increase in product on hand.
Here's how this inventory increase could impact future Cost of Goods Sold (COGS):
- Anticipation of Sales Growth: A primary driver for increased inventory, especially for a newly commercialized product like RYTELO, is the expectation of growing sales. Geron reported $49.0 million in RYTELO net product revenue in Q2 2025, a 24% increase from Q1 2025, with demand increasing by 17% quarter-over-quarter. To support this accelerating demand and the expansion of ordering accounts (over 1,000 as of Q2 2025), building inventory is a necessary step. As this inventory is sold, it will be recognized as COGS.
- Impact of Previously Expensed Inventory: Geron has a unique situation regarding its COGS for RYTELO. The company began capitalizing inventory only after FDA approval in June 2024. Manufacturing costs incurred prior to approval were expensed as research and development (R&D). Geron explicitly stated that its COGS as a percentage of net product revenue would be "positively affected for the next 15 to 21 months as we sell through certain inventory that was previously expensed prior to FDA approval". This means that for a significant period, a portion of the RYTELO being sold has a very low or zero cost basis, leading to lower reported COGS relative to revenue.
- Future COGS Trajectory: As the previously expensed inventory is depleted and Geron increasingly sells inventory that has been capitalized (like the $56.2 million in Q1 2025 and your reported $69.1 million for Q2 2025), the COGS per unit will likely increase. Consequently, the absolute COGS figure will rise in line with growing sales volume, and the COGS as a percentage of revenue will likely normalize to a higher level once the "positively affected" period ends.
- Strategic Expansion: The inventory build-up could also be in preparation for international commercialization. Geron received marketing authorization for RYTELO in the European Union and is planning for launches in select EU countries in 2026. This would require significant inventory ahead of launch, further contributing to the balance sheet inventory figure.
In summary, the inventory increase suggests confidence in RYTELO's sales trajectory and strategic preparation for market expansion. While it will lead to higher absolute COGS as sales grow, the near-term COGS as a percentage of revenue is still influenced by the sale of previously expensed inventory.
