Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our earnings and cash flows are subject to fluctuations due to changes in interest rates, principally in connection with our investments in marketable securities, which consist primarily of corporate bonds and U.S. treasury securities. We do not believe we are materially exposed to changes in interest rates related to our investments, and we do not currently use interest rate derivative instruments to manage exposure to interest rate changes of our investments. We estimate that a 100 basis point, or 1%, unfavorable change in interest rates would have resulted in a $198.3 million and $163.0 million decrease in the fair value of our investment portfolio as of December 31, 2025 and 2024, respectively.
In addition to our investments in marketable securities, we also have exposure to changes in interest rates in connection with our variable rate Tarrytown, New York lease (as described in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Tarrytown, New York Corporate Headquarters Lease "). Our interest rate exposure is offset by our investments in marketable securities. We continue to monitor our interest rate risk and may utilize derivative instruments and/or other strategies in the future to further mitigate our interest rate exposure.
Credit Quality Risk
We have an investment policy that includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and diversification. Nonetheless, deterioration of the credit quality of an investment security subsequent to purchase may subject us to the risk of not being able to recover the full principal value of the security.
Foreign Exchange Risk
Significant changes in foreign exchange rates of the countries outside the United States where our products are sold or where operating expenses are incurred may impact our operating results and financial condition.
Our collaborators market certain products outside the United States, and we share in profits with these collaborators from commercialization of products. In addition, pursuant to the applicable terms of the agreements with our collaborators, we also share in certain worldwide development and/or commercialization-related expenses incurred by our collaborators.
We also incur worldwide development expenses for product candidates we are developing independently, incur expenses outside the United States in connection with our international operations, and record product sales for certain products outside the United States.
As sales outside the United States continue to grow, and as we expand our international operations, we will continue to assess and implement strategies, including foreign currency hedging, to mitigate our foreign exchange risk.
Market Price Risk
We are exposed to price risk on equity securities included in our investment portfolio. Our investments in equity securities include companies with which we have entered into collaboration and other strategic arrangements. As of December 31, 2025 and 2024, the carrying value of our investments in equity securities was $515.8 million and $1.307 billion, respectively. Changes in the fair value of our equity securities are included in Other income (expense), net on the Statements of Operations.
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Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth beginning on page F-1 of this report and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.