Xenon Pharmaceuticals Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk Foreign currency risk As of March 31, 2022, we had U.S. dollar denominated cash and cash equivalents and marketable securities of $513.5 million and Canadian dollar denominated cash and cash equivalents of CAD$30.5 million. We are subject to foreign currency exchange rate risk in part, as a result of entering into transactions denominated in currencies other than U.S. dollars, particularly those denominated in Canadian dollars. We also hold Canadian dollar denominated cash and cash equivalents, accounts receivable and accounts payable. Changes in foreign currency exchange rates can create significant foreign exchange gains or losses to us. We do not currently hedge our exposure and thus assume the risk of future gains or losses on the amounts of Canadian dollars held. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to the Canadian dollar would have a material effect on our operating results. Interest rate sensitivity As of March 31, 2022, we had cash and cash equivalents and marketable securities of $537.9 million. Our interest rate sensitivity is primarily attributable to our cash and cash equivalents and marketable securities. A 100 basis point, or 1%, unfavorable change in interest rates would have resulted in approximately a $3.1 million decrease in the fair value of our marketable securities as of March 31, 2022. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage interest rate exposure. Inflation risk Inflation may generally affect us by increasing our cost of labor and research and development expenses. While we have experienced increased operating expenses in recent periods, which we believe are due in part to the recent growth in inflation, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2022 and 2021.