Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth 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?

The chart below, which you can click on for greater detail, shows that Ionis Pharmaceuticals had US$1.79b in debt in December 2024; about the same as the year before. But on the other hand it also has US$2.30b in cash, leading to a US$515.0m net cash position.

How Strong Is Ionis Pharmaceuticals' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Ionis Pharmaceuticals had liabilities of US$309.3m due within 12 months and liabilities of US$2.11b due beyond that. 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.

Having regard to Ionis Pharmaceuticals' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$5.24b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Ionis Pharmaceuticals boasts net cash, so it's fair to say it does not have a heavy debt load! 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 want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

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%. That's not what we would hope to see.

So How Risky Is Ionis Pharmaceuticals?

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 Ionis Pharmaceuticals lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$551m of cash and made a loss of US$454m. But the saving grace is the US$515.0m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Ionis 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.