Is Ionis Pharmaceuticals (NASDAQ:IONS) Using Debt In A Risky Way?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) makes use of debt. But should shareholders be worried about its use of debt?

We've discovered 2 warning signs about Ionis Pharmaceuticals. View them for free.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Ionis Pharmaceuticals's Debt?

As you can see below, Ionis Pharmaceuticals had US$1.79b of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$2.30b in cash offsetting this, leading to net cash of US$515.0m.

How Strong Is Ionis Pharmaceuticals' Balance Sheet?

According to the last reported balance sheet, Ionis Pharmaceuticals had liabilities of US$309.3m due within 12 months, and liabilities of US$2.11b due beyond 12 months. On the other hand, it had cash of US$2.30b and US$92.2m worth of receivables due within a year. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that Ionis Pharmaceuticals' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the US$4.51b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Ionis Pharmaceuticals also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Ionis Pharmaceuticals can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Ionis Pharmaceuticals

Over 12 months, Ionis Pharmaceuticals made a loss at the EBIT level, and saw its revenue drop to US$705m, which is a fall of 10%. We would much prefer see growth.

So How Risky Is Ionis Pharmaceuticals?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Ionis Pharmaceuticals lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$551m and booked a US$454m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$515.0m. That means it could keep spending at its current rate for more than two years. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Ionis Pharmaceuticals you should know about.

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.