Is Nuvation Bio (NYSE:NUVB) 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.' 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 Nuvation Bio Inc. (NYSE:NUVB) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

Our free stock report includes 2 warning signs investors should be aware of before investing in Nuvation Bio. Read for free now.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Nuvation Bio's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Nuvation Bio had debt of US$5.69m, up from none in one year. But on the other hand it also has US$461.7m in cash, leading to a US$456.0m net cash position.

How Strong Is Nuvation Bio's Balance Sheet?

We can see from the most recent balance sheet that Nuvation Bio had liabilities of US$52.8m falling due within a year, and liabilities of US$20.3m due beyond that. Offsetting these obligations, it had cash of US$461.7m as well as receivables valued at US$5.46m due within 12 months. So it actually has US$394.1m more liquid assets than total liabilities.

This excess liquidity is a great indication that Nuvation Bio's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Nuvation Bio has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Nuvation Bio 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.

See our latest analysis for Nuvation Bio

While it hasn't made a profit, at least Nuvation Bio booked its first revenue as a publicly listed company, in the last twelve months.

So How Risky Is Nuvation Bio?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Nuvation Bio 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$158m and booked a US$606m accounting loss. But the saving grace is the US$456.0m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Nuvation Bio (1 is potentially serious) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.