Health Check: How Prudently Does Oncolys BioPharma (TSE:4588) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Oncolys BioPharma Inc. (TSE:4588) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Oncolys BioPharma Carry?

As you can see below, Oncolys BioPharma had JP¥316.7m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have JP¥1.35b in cash offsetting this, leading to net cash of JP¥1.04b.

How Healthy Is Oncolys BioPharma's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Oncolys BioPharma had liabilities of JP¥318.9m due within 12 months and liabilities of JP¥98.7m due beyond that. On the other hand, it had cash of JP¥1.35b and JP¥346.8m worth of receivables due within a year. So it can boast JP¥1.28b more liquid assets than total liabilities.

This short term liquidity is a sign that Oncolys BioPharma could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Oncolys BioPharma boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Oncolys BioPharma 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 Oncolys BioPharma

Over 12 months, Oncolys BioPharma made a loss at the EBIT level, and saw its revenue drop to JP¥29m, which is a fall of 9.0%. We would much prefer see growth.

So How Risky Is Oncolys BioPharma?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Oncolys BioPharma lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through JP¥1.9b of cash and made a loss of JP¥2.1b. With only JP¥1.04b on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for Oncolys BioPharma you should be aware of.

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.