Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .
We are exposed to a variety of financial risks in the normal course of our business, including market risk (including currency, price, and interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital and the unpredictability of financial markets and has sought to minimize potential adverse effects on our financial performance and position.
Market Risk
Currency risk
We are exposed to foreign exchange risk arising from various currencies, primarily with respect to the U.S. dollar and euro and to a lesser extent to the British pound and the Swiss Franc. As our U.S. operating entity primarily conducts its operations in U.S. dollars, its exposure to changes in foreign currency is insignificant. Similarly, the exposure to changes in foreign currencies of our Swiss and French entities are insignificant as well.
Our Dutch entities hold significant amounts of U.S. dollars in cash and cash equivalents and investment securities, have debt and interest obligations to Hercules denominated in U.S. dollars, generate collaboration revenue denominated in U.S. dollars, receive services from vendors denominated in U.S. dollars and occasionally British Pounds and fund the operations of our U.S. operating entity in U.S. dollars. Foreign currency denominated account receivables and account payables are short-term in nature (generally 30 to 45 days).
Variations in exchange rates will impact earnings and other comprehensive income or loss. On December 31, 2024, if the euro had weakened 10% against the U.S. dollar with all other variables held constant, pre-tax loss for the year would have been $25.0 million higher (December 31, 2023: pre-tax loss $6.0 million higher), and other comprehensive income would have been $11.0 million higher (December 31, 2023: other comprehensive loss $0.3 million higher). Conversely, if the euro had strengthened 10% against the U.S. dollar with all other variables held constant, pre-tax loss for the year would have been $25.0 million lower (December 31, 2023: pre-tax loss $6.0 million lower), and other comprehensive income would have been $12.1 million lower (December 31, 2023: other comprehensive loss $2.6 million lower).
We strive to mitigate foreign exchange risk through holding sufficient funds in euro and dollars to finance budgeted cash flows for generally 18 months.
The sensitivity in other comprehensive income to fluctuations in exchange rates primarily relates to the translation of the net assets of our Dutch entities from their functional currency euro into our reporting currency U.S. dollar.
Price risk
The market prices for the provision of preclinical and clinical materials and services, as well as external contracted research, may vary over time.
The commercial prices of any of our products or product candidates are currently uncertain.
We are not exposed to commodity price risk.
We do not hold investments classified as available-for-sale or at fair value through profit or loss; therefore, we are not exposed to equity securities price risk.
Interest rate risk
Our interest rate risk arises from short- and long-term debt and investment securities.
In June 2013, we entered into the Hercules Agreement, which was last amended in July 2024, under which our borrowings bear interest at a variable rate with a fixed floor. Long-term debt issued at fixed rates expose us to fair value interest rate risk. As of December 31, 2024, the loan bore an interest rate of 12.2%.
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As of December 31, 2024, if interest rates on borrowings had been 1.0% higher with all other variables held constant, pre-tax earnings for the year would have been $0.8 million lower (2023: $1.0 million lower; 2022: $1.0 million lower.)
We invest in government debt in accordance with our investment policy. We are exposed to interest rate risk as market interest rates could differ from the interest rates that we fix at the time of acquiring these investment securities. As we intend to hold these to maturity, we do not recognize changes in the fair value of our investment which are caused by changes in market interest rates.
This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. For example, if we hold a security that was issued at a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the fair value of our investment will probably decline.
The duration of all of our investment securities held as of December 31, 2024, was between two to five months. Due to the relatively short-term nature of these financial instruments and our ability and intention to hold these investments to maturity, we believe there is no material exposure to interest rate risk.
Credit Risk
Credit risk is managed on a consolidated basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, outstanding receivables and committed transactions with collaboration partners and security deposits paid to landlords. We currently have no debtors other than CSL Behring.
We deposited funds as security to our landlord related to our facility in Amsterdam. We also deposited funds to the provider of our U.S. corporate credit cards. The deposits are neither impaired nor past due.
Our cash and cash equivalents include bank balances, demand deposits and other short-term highly liquid investments (with maturities of less than three months at the time of purchase) that are readily convertible into a known amount of cash and are subject to an insignificant risk of fluctuation in value. Restricted cash includes deposits made in relation to facility leases. We also have short-term investment securities in U.S. and European government bonds maturing within two to five months. Our investment policy requires us to invest in U.S. and European government bonds with the highest investment credit rating. Due to the high credit quality of our counterparties, we believe there is no material exposure to credit risk in our portfolio of investment securities.
Liquidity Risk
Based on our current operating plan, research and development plans and our timing expectations related to the progress of our programs, we believe that our cash and cash equivalents and investment securities will fund our operations through the second half of 2027. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. The amount and timing of our actual expenditures may vary significantly depending on numerous factors, including the timing of a potential BLA submission, approval and commercialization of AMT-130. We expect that we will require additional funding if we decide to advance any of our other clinical product candidates into late-stage clinical development.
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The table below analyzes our financial liabilities in relevant maturity groupings based on the length of time until the contractual maturity date, as of the balance sheet date. Disclosed in the table below are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying value as the impact of discounting is not significant.
Less than
Between
Between
Undefined
1 year
1 - 3 years
3 - 5 years
Over 5 years
(in thousands)
At December 31, 2024
Long-term debt
$
—
$
8,616
$
57,403
$
—
$
—
Accounts payable, accrued expenses and other current liabilities
—
36,452
—
—
—
Commitments related to acquisition of uniQure France SAS (maximum nominal amounts) (1)
166,195
—
—
—
—
Total
$
166,195
$
45,068
$
57,403
$
—
$
—
At December 31, 2023
Long-term debt
$
—
$
13,420
$
134,150
Accounts payable, accrued expenses and other current liabilities
—
37,120
—
Commitments related to acquisition of uniQure France SAS (maximum nominal amounts) (2)
209,707
—
—
Total
$
209,707
$
50,540
$
134,150
$
—
$
—
(1) Payments are due in EUR and have been translated at the foreign exchange rate as of December 31, 2024, of $1.04 / €1.00
(2) Payments are due in EUR and have been translated at the foreign exchange rate as of December 31, 2023, of $1.10 / €1.00
In relation to our acquisition of uniQure France SAS , we entered into commitments to make payments to the former shareholders upon the achievement of certain contractual milestones. The commitments include payments related to post-acquisition services that we agreed to as part of the transaction. The timing of achieving these milestones, as well as whether the milestone will be achieved at all, and consequently the timing of payments is generally uncertain. We expect these obligations will become payable between 2029 and 2033. If and when due, up to 25% of the milestone payments can be settled with our ordinary shares .
Item 8. Financial Statements and Supplementary Data .
The information required by this Item 8 is included in Part IV, Item 15, and is incorporated by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .
None.