Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business primarily related to interest rate sensitivities and the volatility of our common stock price.
Interest rate risk
As of December 31, 2022, we had cash, cash equivalents, and restricted cash of $187.3 million, which consisted of bank deposits and money market funds, and also had marketable securities of $257.2 million. The primary objective of our investment activities is to preserve capital to fund our operations while earning a low-risk return. Because our marketable securities are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant, and a hypothetical 10% change in market interest rates during any of the periods presented would not have had a significant impact on the total value of our portfolio. We had no debt outstanding as of December 31, 2022.
Market capitalization and common stock price sensitivity
We agreed to make a success payment to Cobalt based on our market capitalization payable in cash or stock, and success payments to Harvard based on increases in the per share fair market value of our common stock, payable in cash.
As of December 31, 2022, the estimated aggregate fair value of the success payment liabilities was $21.0 million. For the twelve months ended December 31, 2022, we recorded a gain of $81.5 million related to the aggregate change in the estimated fair value of our success payment liabilities.
Changes in our market capitalization and the fair value of our common stock as of each balance date may have a relatively large change in the estimated valuation of the success payment liabilities and resulting expense or gain. For example, for the Cobalt Success Payment, keeping all other variables constant, a hypothetical 20% increase in our market capitalization as of December 31, 2022 from $0.8 billion to $1.0 billion would have decreased the gain recorded in the year ended December 31, 2022 by $4.7 million to $8.1 million. A hypothetical 20% decrease in our market capitalization from $0.8 billion to $0.6 billion would have increased the gain recorded in the year ended December 31, 2022 by $4.9 million to $17.8 million. For the Harvard Success Payments, keeping all other variables constant, a hypothetical 20% increase in our common stock price as of December 31, 2022 from $3.95 per share to $4.74 per share would have decreased the gain recorded in the year ended December 31, 2022 by $0.7 million to $1.1 million. A hypothetical 20% decrease in the common stock price from $3.95 per share to $3.16 per share would have increased the gain recorded in year ended December 31, 2022 by $0.6 million to $2.4 million.
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Foreign currency sensitivity
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we do contract with vendors that are located outside of the United States and may be subject to fluctuations in foreign currency rates. We may enter into additional contracts with vendors located outside of the United States in the future, which may increase our foreign currency exchange risk.
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