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 Our exposure to market risk is primarily confined to our investment securities. 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. To achieve our objectives, we maintain a portfolio of investments in high-credit-quality securities. As of March 31, 2026, we had cash, cash equivalents and short-term investments of $135.3 million. In accordance with our investment policy, we invest funds in highly liquid, investment-grade securities. 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 material negative effect 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 significant potential loss due to changes in interest rates. Convertible Notes, Term Debt, and Embedded Derivatives As of March 31, 2026, we had fixed-rate borrowings from our 2029 Notes, and as of December 31, 2025, we had fixed-rate borrowings from our 2026 Notes and 2029 Notes. We record all our fixed-rate borrowings at carrying value and, therefore, do not experience any risk for changes in interest rates. However, we include an embedded derivative along with our debt in our reporting of our 2029 Notes. The derivative on our 2029 Notes is marked to fair value every reporting period. The fair value inputs to the 2029 Notes’ derivative valuation include stock price, unsecuritized discount rate, risk-free rate, volatility, and term. Swings in our stock price could significantly affect the valuation of the 2029 Note conversion derivative. In addition, a decrease in interest rates could increase the valuation of the derivative. As of March 31, 2026, a 20% decrease or increase in our stock price would result in an approximate $23.8 million change in the fair value of the 2029 Notes embedded derivative within the range of $60.2 million to $107.0 million.