David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. We can see that Milestone Pharmaceuticals Inc. (NASDAQ:MIST) does use debt in its business. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Milestone Pharmaceuticals's Net Debt?

As you can see below, at the end of September 2025, Milestone Pharmaceuticals had US$56.2m of debt, up from US$52.4m a year ago. Click the image for more detail. However, it does have US$82.6m in cash offsetting this, leading to net cash of US$26.4m.

How Strong Is Milestone Pharmaceuticals' Balance Sheet?

According to the last reported balance sheet, Milestone Pharmaceuticals had liabilities of US$10.5m due within 12 months, and liabilities of US$56.7m due beyond 12 months. Offsetting this, it had US$82.6m in cash and US$1.51m in receivables that were due within 12 months. So it can boast US$16.8m more liquid assets than total liabilities.

This surplus suggests that Milestone Pharmaceuticals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Milestone Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Milestone Pharmaceuticals's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Given it has no significant operating revenue at the moment, shareholders will be hoping Milestone Pharmaceuticals can make progress and gain better traction for the business, before it runs low on cash.

So How Risky Is Milestone Pharmaceuticals?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Milestone Pharmaceuticals had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$43m and booked a US$58m accounting loss. However, it has net cash of US$26.4m, so it has a bit of time before it will need more capital. 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. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Milestone Pharmaceuticals has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

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.