Here's Why Geron (NASDAQ:GERN) Can Manage Its Debt Despite Losing Money

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The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We note that Geron Corporation (NASDAQ:GERN) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Geron's Debt?

As you can see below, at the end of June 2025, Geron had US$231.4m of debt, up from US$83.4m a year ago. Click the image for more detail. But on the other hand it also has US$389.9m in cash, leading to a US$158.5m net cash position.

A Look At Geron's Liabilities

According to the last reported balance sheet, Geron had liabilities of US$64.3m due within 12 months, and liabilities of US$231.4m due beyond 12 months. Offsetting these obligations, it had cash of US$389.9m as well as receivables valued at US$34.0m due within 12 months. So it can boast US$128.2m more liquid assets than total liabilities.

This short term liquidity is a sign that Geron could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Geron 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 ultimately the future profitability of the business will decide if Geron 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 Geron

In the last year Geron wasn't profitable at an EBIT level, but managed to grow its revenue by 11,877%, to US$164m. That's virtually the hole-in-one of revenue growth!

So How Risky Is Geron?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Geron lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$204m of cash and made a loss of US$88m. But at least it has US$158.5m on the balance sheet to spend on growth, near-term. Importantly, Geron's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting Geron insider transactions.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.