Is MoonLake Immunotherapeutics (NASDAQ:MLTX) Using Debt In A Risky Way?

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.' 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. We can see that MoonLake Immunotherapeutics (NASDAQ:MLTX) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does MoonLake Immunotherapeutics Carry?

The image below, which you can click on for greater detail, shows that at March 2025 MoonLake Immunotherapeutics had debt of US$73.0m, up from none in one year. However, it does have US$480.1m in cash offsetting this, leading to net cash of US$407.1m.

A Look At MoonLake Immunotherapeutics' Liabilities

According to the last reported balance sheet, MoonLake Immunotherapeutics had liabilities of US$24.0m due within 12 months, and liabilities of US$74.7m due beyond 12 months. Offsetting this, it had US$480.1m in cash and US$2.99m in receivables that were due within 12 months. So it actually has US$384.4m more liquid assets than total liabilities.

This short term liquidity is a sign that MoonLake Immunotherapeutics could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that MoonLake Immunotherapeutics has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine MoonLake Immunotherapeutics's ability to maintain a healthy balance sheet going forward. 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 MoonLake Immunotherapeutics

Since MoonLake Immunotherapeutics doesn't have significant operating revenue, shareholders may be hoping it comes up with a great new product, before it runs out of money.

So How Risky Is MoonLake Immunotherapeutics?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year MoonLake Immunotherapeutics had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$140m of cash and made a loss of US$145m. While this does make the company a bit risky, it's important to remember it has net cash of US$407.1m. That means it could keep spending at its current rate for more than two years. 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. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with MoonLake Immunotherapeutics (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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.