Ultragenyx Pharmaceutical Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures about Market Risk Equity Risk We have exposure to equity risk with respect to the equity investments that we hold in Arcturus and Solid. The carrying value of our equity investment held in Arcturus was $90.9 million and $95.4 million as of March 31, 2021 and December 31 , 2020, respectively, and the carrying value of our equity investment held in Solid was $43.3 million and $59.3 million as of March 31, 2021 and December 31 , 2020, respectively. The fair value of our equity investments decreased by $20.6 million during the three months ended March 31, 2021 due to a decrease in the fair value of Arcturus and Solid common stock, resulting in unrealized losses on our investments in Arcturus and Solid common stock of $4.6 million and $16.0 million, respectively. A hypothetical 10 percent decrease in the market price for our equity investments in Arcturus and Solid as of March 31, 2021 and December 31, 2020 would decrease the fair value by $13.4 million and $15.5 million, respectively. Given the historic volatility of the publicly traded stock price of Arcturus and Solid, the fair value of our investments in Arcturus and Solid is subject to wide fluctuations which may have a significant impact on our net income (loss) in future periods. Interest Rate Risk Our exposure to market risk for changes in interest rates relates primarily to interest earned on our cash equivalents and marketable debt securities . The primary objective of our investment activities is to preserve our capital to fund operations. A secondary objective is to maximize income from our investments without assuming significant risk. Our investment policy provides for investments in low-risk, investment-grade debt instruments. As of March 31, 2021, we had cash, cash equivalents, and marketable debt securities totaling $1,047.0 million, compared to $1,212.0 million as of December 31, 2020, which include bank deposits, money market funds, U.S. government treasury and agency securities, and investment-grade corporate bond securities which are subject to default, changes in credit rating, and changes in market value. The securities in our investment portfolio are classified as available for sale and are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 100 basis point change in interest rates during any of the periods presented would not have had a material impact on the fair market value of our cash equivalents and marketable debt securities as of March 31, 2021 or December 31, 2020. To date, we have not experienced a loss of principal on any of these investments and as of March 31, 2021 , we did not record any allowance for credit loss from our investments. 28 Foreign Currency Risk We face foreign exchange risk as a result of entering into transactions denominated in currencies other than U.S. dollars. Due to the uncertain timing of expected payments in foreign currencies, we do not utilize any forward exchange contracts. All foreign transactions settle on the applicable spot exchange basis at the time such payments are made. Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars. An adverse movement in foreign exchange rates could have a material effect on payments made to foreign suppliers and for license agreements. For the three months ended March 31, 2021 , a majority of our revenue and expense activities and capital expenditures were denominated in U.S. dollars. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements.