Is 89bio (NASDAQ:ETNB) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies 89bio, Inc. (NASDAQ:ETNB) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is 89bio's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 89bio had US$35.9m of debt, an increase on US$25.0m, over one year. However, it does have US$638.8m in cash offsetting this, leading to net cash of US$602.8m.

A Look At 89bio's Liabilities

The latest balance sheet data shows that 89bio had liabilities of US$37.9m due within a year, and liabilities of US$41.7m falling due after that. Offsetting these obligations, it had cash of US$638.8m as well as receivables valued at US$19.4m due within 12 months. So it can boast US$578.6m more liquid assets than total liabilities.

This surplus liquidity suggests that 89bio's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, 89bio boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if 89bio can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for 89bio

Given its lack of meaningful operating revenue, 89bio shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is 89bio?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that 89bio had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$400m and booked a US$387m accounting loss. But at least it has US$602.8m on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 4 warning signs for 89bio (2 are significant) you should be aware of.

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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.