Krystal Biotech, Inc. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We had cash, cash equivalents and short-term investments of $845.6 million as of June 30, 2026, which consisted primarily of money market funds, commercial paper, corporate bonds and U.S. government agency securities. The investments in these financial instruments are made in accordance with an investment policy which specifies the categories, allocations and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. Some of the financial instruments in which we invest could be subject to market risk. This means that a change in prevailing interest rates may cause the value of the instruments to fluctuate. For example, if we purchase a security that was issued with a fixed interest rate and the prevailing interest rate later rises, the value of that security will probably decline. To minimize this risk, we intend to maintain a portfolio which may include cash, cash equivalents and short-term investment securities available-for-sale in a variety of securities which may include money market funds, government and non-government debt securities and commercial paper, all with various maturity dates. Due to the conservative nature of our investment portfolio, an hypothetical change in market interest rates of 100 basis points would not have a material effect on the fair market value of our investments. We also have established operations in Europe and Japan and hold cash in Swiss Francs, Euros, Japanese Yen, and Great British Pounds. We are subject to foreign exchange rate risk arising from transactions conducted in the aforementioned foreign currencies. Future movements in foreign exchange rates are inherently uncertain, and significant fluctuations in exchange rates may positively or negatively affect our foreign currency exposures, which could materially impact our condensed consolidated results of operations and financial position. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Further, we do not believe our cash, cash equivalents and short-term investments have significant risk of default or illiquidity. While we believe our cash, cash equivalents and short-term investments do not contain excessive risk, we cannot provide absolute assurance that any investments we make in the future will not be subject to adverse changes in market value. Our cash, cash equivalents and short-term investments are recorded at fair value.