Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
Financing Agreement
As of December 31, 2025, our primary exposure to interest rate risk was associated with our variable rate borrowings under the Financing Agreement. Any outstanding principal on the Term Loans will bear interest at a rate per annum on the basis of a 360-day year equal to the sum of (i) the three-month forward-looking term secured overnight financing rate administered by the Federal Reserve Bank of New York (subject to a 1.0% per annum floor) plus (ii) 4.75%. See Note 8 “Long Term Debt” to the consolidated financial statements included in this Annual Report. Interest rates are sensitive to a variety of factors, including changes in fiscal and monetary policies, geopolitical events, changes in global economic conditions and other factors beyond our control. As of December 31, 2025, the interest rate associated with the $350.0 million of borrowings outstanding under the Financing Agreement was 8.75%. For the year ended December 31, 2025, the effect of a hypothetical 100 basis point increase or decrease in the interest rate would have changed our interest expense under the Financing Agreement by approximately $1.6 million.
Investment Portfolio
We are exposed to market risk with respect to our cash, cash equivalents and marketable securities. We regularly review our investments and monitor the financial markets. We invest in high-quality financial instruments, primarily money market funds, U.S. government and agency securities, government-sponsored bond obligations and certain other corporate debt securities, with the effective duration of the portfolio less than 12 months and no security with an effective duration in excess of 24 months, which we believe are subject to limited credit risk. We currently do not hedge interest rate exposure. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we believe that an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. We do not believe that we have any material exposure to interest rate risk or changes in credit ratings arising from our investments.
Foreign Exchange Exposure
As we expand our operations into Europe, we are exposed to risks related to changes in foreign currency exchange rates, primarily between the U.S. dollar, euro and Swiss franc. The majority of our expenses are generally denominated in the currencies in which they are incurred, which is primarily the U.S. dollar. As we endeavor to expand our presence in international markets, to the extent we are required to enter into agreements denominated in a currency other than the U.S. dollar, results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Capital Market Risk
Although we receive product revenues from sales of Rezdiffra, we may in the future depend on funds raised through other sources. One potential source of funding is through equity offerings. Our ability to raise funds in this manner depends upon, among other things, capital market forces affecting our stock price.
Effects of Inflation
Inflation generally may affect us by increasing our cost of labor, clinical trial costs and manufacturing costs. We do not believe inflation, including as a result of recent changes in tariff policy, has had a material effect on our business, financial condition or results of operations during the years ended December 31, 2025, 2024 or 2023. Should global inflation increase in the future, we expect increases in clinical trial, selling, labor and other operating costs. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases of our product. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is included in our Financial Statements and Supplementary Data set forth in Item 15 of Part IV of this Annual Report.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.