QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: We are subject to certain risks which may affect our results of operations, cash flows and fair values of assets and liabilities, including volatility in foreign currency exchange rates and interest rate movements.
+Added: We are subject to certain risks which may affect our results of operations, cash flows and fair values of assets and liabilities, including volatility in foreign currency exchange rates and interest rates.
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.
interest rates, particularly because the nature of the marketable securities we hold.
−Removed: Although we currently do not have any interest rate swaps or foreign currency forward contracts in place, we have historically managed the impact of foreign currency exchange rate and interest rate risk through various financial instruments and derivative instruments.
−Removed: We only use derivatives strategically to hedge existing interest rate exposure and to minimize volatility in cash flow and earnings arising from our exposure to foreign currency risk.
+Added: In order to manage our exposures, we follow established risk management policies and procedures, including the use of derivative financial instruments, such as swaps, rate locks and forwards.
We do not enter into derivative instruments for trading or speculative purposes.
12 unchanged sentences
We are subject to interest rate fluctuation exposure through our investments in money market accounts and marketable securities, the majority of which bear a variable interest rate.
−Removed: As of December 31, 2020, we held cash and cash equivalents of $1.0 billion, of which $832.7 million was cash, $151.7 million was invested in commercial paper and certificates of deposit and $24.3 million was invested in interest-bearing money market funds.
−Removed: We also held $983.3 million in marketable securities at December 31, 2020 invested in corporate debt securities, commercial paper and certificates of deposit.
−Removed: As of December 31, 2019, we had cash and cash equivalents of $246.2 million, of which $19.9 million was cash, $222.3 million was invested in interest-bearing money market funds and $4.0 million was invested in certificates of deposit.
−Removed: In addition, as of December 31, 2019 we had $94.5 million in marketable securities invested in U.S.
−Removed: government securities, commercial paper and certificates of deposit.
+Added: As of December 31, 2021, we held cash and cash equivalents of $1.5 billion, of which $887.8 million was cash, $598.3 million was invested in interest-bearing money market funds and $55.0 million was invested in commercial paper and certificates of deposit.
+Added: We also held $581.9 million in marketable securities at December 31, 2021 which was invested in commercial paper and certificates of deposit.
+Added: As of December 31, 2020, we had cash and cash equivalents of $1.0 billion, of which $832.7 million was cash, $151.7 million was invested in commercial paper and certificates of deposit and $24.3 million was invested in interest-bearing money market funds.
+Added: In addition, as of December 31, 2020, we had $983.3 million in marketable securities which was invested in corporate debt securities, commercial paper and certificates of deposit.
The objectives of our investment policy are the preservation of capital and fulfillment of liquidity needs.
2 unchanged sentences
Our debt portfolio is managed on a consolidated basis and management makes financing decisions to achieve the lowest cost of debt capital and to maximize portfolio objectives.
−Removed: Following the Notes issuance in September 2020, 100% of our outstanding debt became fixed with a total weighted average coupon rate of 2.125% as of December 31, 2020.
−Removed: In September 2020, we also entered into a five-year $1.5 billion Revolving Credit Facility with a variable interest rate that remained undrawn as of December 31, 2020.
+Added: As of December 31, 2021, 100% of our outstanding debt has fixed interest rates.
+Added: We have a $1.5 billion Revolving Credit Facility with a variable interest rate that remained undrawn as of December 31, 2021.
We are subject to interest rate fluctuation exposure related to the Revolving Credit Facility, if drawn.
−Removed: As of December 31, 2019, 33% of our debt was effectively fixed with a total weighted average interest rate of 3.69% across the portfolio.
−Removed: In connection with the Reorganization Transactions, we terminated all of our interest rate swaps and currently do not have in place any derivative hedging our debt.
+Added: We may manage our exposure to interest rate volatility on future debt issuances by entering into treasury rate lock contracts to lock in the rate on the interest payments related to anticipated debt issuances.
+Added: In June 2021, we executed treasury rate lock contracts with notional amounts totaling $600.0 million to fix the interest rate on a portion of the principal related to our 2021 Notes issued in July 2021.
+Added: The treasury lock contracts were terminated in July 2021.
Credit and Counterparty Risk
We are exposed to credit risk related to the counterparties with which we do business.
−Removed: We are subject to credit risk from our royalty assets, our receivables and our derivative contracts.
+Added: We are subject to credit risk from our royalty assets, our receivables and our derivative financial instruments.
The majority of our royalty assets and receivables arise from contractual royalty agreements that pay royalties on the sales of underlying pharmaceutical products in the United States, Europe and the rest of the world, with concentrations of credit risk limited due to the broad range of marketers responsible for paying royalties to us and the variety of geographies from which our royalties on product sales are derived.
−Removed: The products in which we hold royalties are marketed by leading biopharmaceutical industry participants, including, among others, AbbVie, Amgen, Bristol-Myers Squibb, Celgene, Gilead, Johnson & Johnson, Lilly, Merck, Pfizer, Novartis, Biogen, Roche/Genentech and Vertex.
−Removed: The individual marketers making up the largest balance of our current portion of Financial royalty assets, net were Vertex as of December 31, 2020 and Biogen as of December 31, 2019, accounting for 27% and 18%, respectively.
−Removed: Refer to “—Understanding Our Results of Operations” within this MD&A for a discussion of the marketers or royalty payors accounting for greater than 10% of our total income and other revenues for the years ended December 31, 2020 and 2019.
−Removed: We monitor the financial performance and creditworthiness of the counterparties to our royalty agreements and to our derivative contracts so that we can properly assess and respond to changes in their credit profile.
−Removed: To date, we have not experienced any significant losses with respect to the collection of income or revenue on our royalty assets or on the settlement of our derivative contracts.
−Removed: Of the $2.1 billion of notional interest rate swaps agreements in effect at December 31, 2019, the maximum exposure with any single counterparty accounted for 29% of our total interest rate swap portfolio.
−Removed: If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding.
+Added: The products in which we hold royalties are marketed by leading biopharmaceutical industry participants, including, among others, AbbVie, Amgen, Bristol Myers Squibb, Gilead, Johnson & Johnson, Lilly, Merck, Pfizer, Novartis, Biogen, Roche/Genentech and Vertex.
+Added: For the years ended December 31, 2021 and 2020, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 32% and 27% of our current portion of Financial royalty assets, net, respectively, representing the largest individual marketer and payor of our royalties.
+Added: Refer to “—Understanding Our Results of Operations” within this MD&A for a discussion of the marketers or royalty payors accounting for 10% or more of our total income and other revenues for the years ended December 31, 2021 and 2020.
+Added: We monitor the financial performance and creditworthiness of the counterparties to our royalty agreements and to our derivative financial instruments so that we can properly assess and respond to changes in their credit profile.
+Added: To date, we have not experienced any significant losses with respect to the collection of income or revenue on our royalty assets or on the settlement of our derivative financial instruments.
+Added: If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative financial instruments due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative financial instruments in a bankruptcy or other reorganization proceeding.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.