We think Ionis Pharmaceuticals (NASDAQ:IONS) can stay on top of its debt

David Iben said it well when he said: “Volatility is not a risk that interests us. What matters to us is to avoid the permanent loss of capital. It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We note that Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) has a debt on its balance sheet. But does this debt worry shareholders?

What risk does debt carry?

Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, it exists at their mercy. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. However, a more frequent (but still costly) event is when a company has to issue shares at bargain prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution in a business with the ability to reinvest at high rates of return. When we think about a company’s use of debt, we first look at cash and debt together.

Check out our latest analysis for Ionis Pharmaceuticals

What is Ionis Pharmaceuticals’ net debt?

You can click on the chart below for historical numbers, but it shows that in March 2022, Ionis Pharmaceuticals had $1.25 billion in debt, up from $918.0 million, on a year. However, his balance sheet shows that he holds $2.05 billion in cash, so he actually has $804.0 million in net cash.


How healthy is Ionis Pharmaceuticals’ balance sheet?

According to the last published balance sheet, Ionis Pharmaceuticals had liabilities of $228.0 million maturing within 12 months and liabilities of $1.58 billion maturing beyond 12 months. On the other hand, it had a cash position of 2.05 billion dollars and 26.0 million dollars of receivables at less than one year. So he actually has US$269.0 million After liquid assets than total liabilities.

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

It was also good to see that despite losing money on the EBIT line last year, Ionis Pharmaceuticals turned things around over the past 12 months, delivering an EBIT of US$21 million. There is no doubt that we learn the most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Ionis Pharmaceuticals’ ability to maintain a healthy balance sheet in the future. So if you want to see what the pros think, you might find this free analyst earnings forecast report Be interesting.

Finally, a company can only repay its debts with cold hard cash, not with book profits. Ionis Pharmaceuticals may have net cash on the balance sheet, but it is always interesting to see how well the company converts its earnings before interest and taxes (EBIT) into free cash flow, as this will influence both its need and its capacity. . to manage debt. Over the past year, Ionis Pharmaceuticals has produced strong free cash flow equivalent to 62% of its EBIT, which is what we expected. This cold hard cash allows him to reduce his debt whenever he wants.


While we sympathize with investors who find debt a concern, you should keep in mind that Ionis Pharmaceuticals has net cash of US$804.0 million, as well as more liquid assets than liabilities. . We therefore do not believe that Ionis Pharmaceuticals’ use of debt is risky. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks reside on the balance sheet, far from it. Be aware that Ionis Pharmaceuticals presents 1 warning sign in our investment analysis you should know…

In the end, it’s often best to focus on companies that aren’t in debt. You can access our special list of these companies (all with a track record of earnings growth). It’s free.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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