OMEROS CORP 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk is primarily confined to our investment securities, debt instruments and embedded derivatives. Cash, Cash Equivalents and Short-Term Investments The primary objective of our investment activities is to preserve our capital to fund operations, and we do not enter into financial instruments for trading or speculative purposes. We also seek to maximize income from our investments without assuming significant risk. As of September 30, 2025, we had cash, cash equivalents, and short-term investments of $36.1 million. In accordance with our investment policy, we invest funds in high credit quality securities such as money market funds, certificates of deposit and U.S. treasury bills to limit credit risk. The money market funds in our investment portfolio are not leveraged and are classified as available-for-sale. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a materially negative impact on the realized value of our investment portfolio. We actively monitor changes in interest rates and, with our current portfolio of short-term investments, we are not exposed to potential loss due to changes in interest rates. Convertible Notes, Term Debt and Embedded Derivatives As of September 30, 2025 and December 31, 2024, we had fixed-rate borrowings from our 2026 Notes and 2029 Notes. We record all of our fixed-rate borrowings at amortized cost and, therefore, do not experience any risk for changes in interest rates. However, we include embedded derivatives along with our debt in our reporting of our 2029 Notes in our condensed consolidated balance sheet. The derivatives on our 2029 Notes are marked to fair value every reporting period. The fair value inputs to the derivative valuation include stock price, unsecuritized discount rate, risk-free rate, volatility, and term. Consequently, we may incur gains and losses on the derivative as changes occur in any of these inputs at each reporting period. For further details see “Note 4 — Fair Value Measurements” and “Note 6 — Debt” in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. As of each of September 30, 2025 and December 31, 2024, our Term Loan borrowings were recorded at amortized cost. However, interest is calculated based on adjusted SOFR, subject to a 3.00% floor, plus 8.75% per annum. Therefore, we experience exposure to any adjustments in the adjusted SOFR. Our Term Loan includes embedded derivatives that may be affected by provisions under the Credit Agreement requiring prepayment. The Closing of the Transaction with Novo Nordisk would require mandatory prepayment of the full loan balance along with a 5.00% prepayment premium, payment of accrued and unpaid interest and certain expenses.