Is Alnylam Pharmaceuticals (NASDAQ:ALNY) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) does carry debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Alnylam Pharmaceuticals

What Is Alnylam Pharmaceuticals's Net Debt?

The chart below, which you can click on for greater detail, shows that Alnylam Pharmaceuticals had US$2.45b in debt in September 2024; about the same as the year before. However, its balance sheet shows it holds US$2.78b in cash, so it actually has US$332.2m net cash.

How Strong Is Alnylam Pharmaceuticals' Balance Sheet?

We can see from the most recent balance sheet that Alnylam Pharmaceuticals had liabilities of US$1.22b falling due within a year, and liabilities of US$2.95b due beyond that. Offsetting these obligations, it had cash of US$2.78b as well as receivables valued at US$353.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$1.04b.

Of course, Alnylam Pharmaceuticals has a titanic market capitalization of US$32.4b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Alnylam Pharmaceuticals boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Alnylam Pharmaceuticals's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Alnylam Pharmaceuticals reported revenue of US$2.1b, which is a gain of 22%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Alnylam Pharmaceuticals?

While Alnylam Pharmaceuticals lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$16m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. The good news for Alnylam Pharmaceuticals shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example - Alnylam Pharmaceuticals has 1 warning sign we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.