TELA Bio, Inc. — financial distress indicators
Financial-health summary
TELA Bio, Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 95/100). The main indicators are liabilities exceed assets (negative equity), operating profit does not cover interest and market-implied default probability >20%. Independently, the Ohlson accounting model puts its 1-year failure probability at 98% and the market-implied (Merton) default probability is 23.7%. In its favour: strong current ratio (3.61).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Total liabilities are 1.07× total assets.
Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).
Interest coverage (EBIT / interest) is -5.56×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Merton distance-to-default 0.72 σ → PD 24%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Debt is 81% of assets while EBITDA is not positive.
With no operating earnings, repayment depends entirely on asset sales or fresh capital.
Operating cash flow negative in 3 of the last 3 years.
A business that cannot fund itself from operations depends on external capital to survive.
O-score 3.84 → model probability 98%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Cash covers ~16 months of free-cash-flow burn.
Funding needs within two years make the company dependent on capital-market access.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (3.61).
- Revenue still growing (+16% YoY).
📰 Recent news scan
- TELA Bio Inc Extraordinary Shareholders Meeting Transcript - GuruFocusGoogle News · 2026-10-08
- TELA Bio regains Nasdaq Global Market minimum bid price compliance - TradingViewGoogle News · 2026-10-06
- TELA Bio receives FDA clearance for resorbable mesh device By Investing.com - Investing.com NigeriaGoogle News · 2026-10-06
- The FDA cleared a surgical mesh designed to be fully absorbed by the body. - Stock TitanGoogle News · 2026-10-05
- TELA Bio Receives FDA 510(k) Clearance for Liora Monofilament Scaffold, Expanding Soft-Tissue Reconstruction Portfolio - Quiver QuantitativeGoogle News · 2026-10-05
- Tesla Stock Tumbles After Big Earnings Miss - Yahoo FinanceGoogle News · 2026-07-23
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do TELA Bio, Inc.'s financial-health indicators show?
As of 2026-10-08, TELA Bio, Inc.'s public financial data places it in the 'Very weak' band with a distress score of 95/100, driven by liabilities exceed assets (negative equity), operating profit does not cover interest and market-implied default probability >20%. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is TELA Bio, Inc.'s financial distress score?
95/100 ('Very weak'). Ohlson O-score 3.84 (model 1-year failure probability 98%). Merton distance-to-default 0.72 σ (model default probability 23.7%).
What works in TELA Bio, Inc.'s favour?
Strong current ratio (3.61). Revenue still growing (+16% YoY).
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Healthcare & MedTech companies with distress indicators
- Adagio Medical Holdings, Inc. (ADGM)Very weak 100/100
- DataMEDS AI, Inc. (MEDS)Very weak 100/100
- OneMedNet Corporation (ONMD)Very weak 100/100
- Profusa, Inc. (PFSA)Very weak 100/100
- Picard Medical, Inc. (PMI)Very weak 100/100
- Synergy CHC Corp. (SNYR)Very weak 100/100
All Healthcare & MedTech companies with distress indicators →
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.