Immunocore Holdings plc 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to interest rate, currency, credit and liquidity risks. Our executive board oversees the management of these risks supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for us. The financial risk committee provides assurance to our executive board that our financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with our policies and risk objectives. The most significant financial risks to which we are exposed include the risks discussed below. Interest Rate Risk Our exposure to changes in interest rates relates to investments in deposits and to changes in the interest for overnight deposits and marketable securities. Changes in the general level of interest rates may lead to an increase or decrease in the fair value of these investments. In February 2024, we completed a private offering of $402.5 million aggregate principal amount of Notes, which mature on February 1, 2030, unless earlier converted, redeemed, or repurchased. The Notes accrue interest payable semiannually at a fixed rate of 2.50% per annum, commencing August 1, 2024. Issuance costs totaling $13.4 million are being amortized as interest expense at an effective rate of 3.06% over the life of the Notes. Given the fixed interest rate, the Company is not subject to interest rate risk with respect to these Notes. However, changes in market interest rates could affect the fair value of the Notes and the price of our ADSs, influencing the decision of noteholders to convert their Notes. We are currently not subject to interest rate risks related to any other liabilities shown in the Condensed Consolidated Balance Sheets. 29 Table of Contents Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to fluctuations in value of foreign currency cash and cash equivalents balances held by our main operating subsidiary in the United Kingdom, our operating activities in foreign subsidiaries, and outsourced supplier agreements denominated in currencies other than functional currency. We minimize foreign currency risk by maintaining cash and cash equivalents of each currency at levels sufficient to meet foreseeable expenditure to the extent practical. Our cash and cash equivalents were $498.4 million and $455.7 million as of September 30, 2025 and December 31, 2024, respectively. As of September 30, 2025, 75% of our cash and cash equivalents were held by our U.K. operating subsidiary, of which 48% were denominated in U.S. dollars, 39% were denominated in pounds sterling and 13% were denominated in euros. All of our marketable securities were held by our U.K. parent company and were denominated in U.S. dollars. The remainder of our cash and cash equivalents are held across our other subsidiaries and denominated in a mix of operating currencies. Changes in exchange rates had an impact on U.S. dollar cash and cash equivalents balances held by our main operating subsidiary in the United Kingdom, which resulted in foreign exchange losses in the nine months ended September 30, 2025 and 2024. These losses were more than offset by foreign exchange gains primarily on intercompany loans in the nine months ended September 30, 2025. Further movements in exchange rates or returns to previous exchange rate levels have caused, and may continue to cause, material fluctuations or equivalent losses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). A five percentage point increase in exchange rates would reduce the carrying value of net financial assets and liabilities held in foreign currencies as of September 30, 2025 by $5.9 million and as of December 31, 2024 by $6.5 million. A five percentage point decrease in exchange rates would increase the carrying value of net financial assets and liabilities held in foreign currencies as of September 30, 2025 by $5.9 million and as of December 31, 2024 by $6.5 million. Credit Risk We are exposed to credit risk from our operating activities, primarily accounts receivable, and cash and cash equivalents and marketable securities held with banks and financial institutions. Cash and cash equivalents and marketable securities are maintained with high-quality financial institutions in the United Kingdom and United States. We are also potentially subject to concentrations of credit risk in our accounts receivable with respect to amounts owed by a limited number of entities comprising our customer base. Our exposure to credit losses is low, however, owing largely to the credit quality of our distributors and other customers, the significant majority of which are considerably larger than us. We continually monitor our positions with, and the credit quality of, the financial institutions and corporations which are counterparts to our financial instruments and do not anticipate non-performance. The maximum default risk corresponds to the carrying amount of the financial assets shown in the Condensed Consolidated Balance Sheets. We monitor the risk of a liquidity shortage. The main factors we consider are the maturities of financial assets as well as expected cash flows from equity measures.