We Think Biotechnology Assets (BME:BST) Has A Fair Chunk Of Debt

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.' 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. As with many other companies Biotechnology Assets, S.A. (BME:BST) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Biotechnology Assets's Net Debt?

As you can see below, Biotechnology Assets had €2.14m of debt at June 2025, down from €2.45m a year prior. On the flip side, it has €615.5k in cash leading to net debt of about €1.53m.

How Strong Is Biotechnology Assets' Balance Sheet?

According to the last reported balance sheet, Biotechnology Assets had liabilities of €3.10m due within 12 months, and liabilities of €3.90m due beyond 12 months. Offsetting these obligations, it had cash of €615.5k as well as receivables valued at €2.54m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €3.85m.

Of course, Biotechnology Assets has a market capitalization of €19.7m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Biotechnology Assets will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Biotechnology Assets

In the last year Biotechnology Assets had a loss before interest and tax, and actually shrunk its revenue by 9.5%, to €3.1m. That's not what we would hope to see.

Caveat Emptor

Importantly, Biotechnology Assets had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at €1.7m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. For example, we would not want to see a repeat of last year's loss of €2.1m. So to be blunt we do think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 3 warning signs with Biotechnology Assets , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.