Does Rigel Pharmaceuticals (NASDAQ:RIGL) Have A Healthy Balance Sheet?

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. We can see that Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. 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. 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 Rigel Pharmaceuticals's Debt?

As you can see below, Rigel Pharmaceuticals had US$59.8m of debt at June 2025, down from US$99.7m a year prior. But on the other hand it also has US$108.4m in cash, leading to a US$48.6m net cash position.

How Strong Is Rigel Pharmaceuticals' Balance Sheet?

According to the last reported balance sheet, Rigel Pharmaceuticals had liabilities of US$86.6m due within 12 months, and liabilities of US$38.2m due beyond 12 months. Offsetting these obligations, it had cash of US$108.4m as well as receivables valued at US$39.9m due within 12 months. So it actually has US$23.5m more liquid assets than total liabilities.

This surplus suggests that Rigel Pharmaceuticals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Rigel Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Rigel Pharmaceuticals

Although Rigel Pharmaceuticals made a loss at the EBIT level, last year, it was also good to see that it generated US$105m in EBIT over the last twelve months. 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 Rigel Pharmaceuticals 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Rigel Pharmaceuticals may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last year, Rigel Pharmaceuticals produced sturdy free cash flow equating to 63% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Rigel Pharmaceuticals has net cash of US$48.6m, as well as more liquid assets than liabilities. So we don't think Rigel Pharmaceuticals's use of debt is risky. 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. For example - Rigel Pharmaceuticals has 2 warning signs we think you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.