5. Financial Risk Management

5.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall financial risk management seeks to minimize potential adverse effects resulting from unpredictability of financial markets on the Company’s financial performance.

Financial risk management is carried out by the finance department. The finance department identifies and evaluates financial risks and proposes mitigating actions if deemed appropriate.

(a) Market risk

Market risk is the risk that changes in market prices – such as foreign exchange rates, interest rates and equity prices – will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

Foreign exchange risk

Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities in foreign currencies, primarily with respect to the U.S. dollar. The Company has an exposure associated with the time delay between entering into a contract, budget or forecast and the realization thereof. The Company operates a foreign exchange policy to manage the foreign exchange risk against the functional currency based on the Company’s cash balances and the projected future spend per major currency.

At year-end, a substantial amount of the Company’s cash balances are denominated in U.S. Dollars. This amount reflects the Company’s current expectation of future expenditure in U.S. dollars.

At December 31, 2025 the Company’s net position of financial instruments denominated in U.S. dollars was a net asset of € 4,067,000 (2024: net asset of € 5,898,000). Foreign currency denominated receivables and trade payables are short term in nature (generally 30 to 45 days). As a result, the foreign exchange results recognized in 2025 and 2024 are mainly caused by the cash balance denominated in U.S. dollars.

A reasonably possible weakening of the U.S. dollar by 10% against the functional currency of the Company at December 31, 2025 would have increased the Company’s net loss by € 407,000 (2024: increased by € 590,000). A 10% strengthening of the U.S. dollar against the functional currency of the Company would have an equal but opposite effect on the Company’s net loss. The analysis assumes that all other variables, in particular interest rates, remain constant.

Price risk

The market prices for the production of preclinical materials and services as well as external contracted research may vary over time. Currently, the commercial prices of any of the Company’s future product candidates is uncertain. When product candidates approach the regulatory approval date or potential regulatory approval date, the uncertainty of potential sales prices decreases. The Company is not exposed to commodity price risk.

Furthermore, the Company does not hold investments designated for sale and is therefore not exposed to equity securities price risk.

Cash flow and fair value interest rate risk

The Company’s interest rate risk arises from current accounts, deposits, and money market funds. The sensitivity analysis below has been determined based on the exposure to interest rates on these short-term maturity primary financial instruments.

A 10% increase or decrease on actual interest rate is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

As of December 31, 2025, if interest rates had been 10% higher, then pre-tax earnings for the year would have been        € 231,000 higher, while if interest rates had been 10% lower, then pre-tax earnings for the year would have been € 231,000 lower.

The Company’s exposure to interest rate risks on loans and leases is limited due to the use of fixed interest rates. The Company has a loan with a fixed interest rate, totaling € 4,872,000, including accrued interest, at December 31, 2025 (2024: € 4,582,000). Details on the interest rates and maturities of these loans are provided in Note 13.

(b) Credit risk

Credit risk represents the risk of financial loss caused by default of the counterparty. The Company has no large receivables balances with external parties outside of cash and cash equivalents. The Company’s cash management policy is focused on preserving capital, providing liquidity for operations and optimizing yield while accepting limited risk (Short-term credit ratings must be rated A-1/P-1/F1 at a minimum by at least one of the Nationally Recognized Statistical Rating Organizations (“NRSROs”) specifically Moody’s, Standard & Poor’s or Fitch. Long-term credit rating must be rated A2 or A at a minimum by at least one NRSRO). As of December 31, 2025, the Company is in compliance with its cash management policy.

At December 31, 2025 and December 31, 2024, all of the Company’s cash and cash equivalents were held at five large institutions, Rabobank, ABN Amro, BNP Paribas, Wells Fargo and JP Morgan. All institutions are highly rated (Moody’s long-term debt ratings of Aa2, Aa3, A1, A1 and A1 for Rabobank, ABN Amro, BNP Paribas, Wells Fargo and JP Morgan respectively) with sufficient capital adequacy and liquidity metrics.

There are no financial assets past due date or impaired. No credit limits were exceeded during the reporting period.

(c) Liquidity risk

Liquidity risk represents the risk that an entity will encounter difficulty in meeting obligations associated with its financial liabilities. Prudent liquidity risk management implies ensuring sufficient availability of cash resources for funding of operations and planning to raise cash if and when needed, either through issue of shares or through credit facilities. Management monitors rolling forecasts of the Company’s liquidity reserve on the basis of expected cash flow.

The table below analyzes ProQR’s undiscounted liabilities into relevant maturity groupings based on the remaining period at year-end until the contractual maturity date:

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The Company’s future capital requirements and the period for which the Company’s existing resources will support its operations may vary significantly from what the Company expects. The Company’s monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with successful development of the Company’s product candidates is highly uncertain, the Company is unable to estimate the actual funds it will require for development of its product candidates.

5.2 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders (although at this time the Company does not have retained earnings and is therefore currently unable to pay dividends), return capital to shareholders, issue new shares or sell assets to reduce debt.

The total amount of equity as recorded on the balance sheet is managed as capital by the Company.

5.3 Fair value measurement

For financial instruments that are measured on the balance sheet at fair value, IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Fair value of financial assets and liabilities that are measured at fair value on a recurring basis

Some of the Company’s financial assets and liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and liabilities are determined (in particular, the valuation technique and inputs used).

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The investments in Kamal Therapeutics, Inc (“Kamal”) and Yarrow Biotechnology, Inc (“Yarrow”) are measured using valuation methods based on so-called Level 3 inputs. Level 3 inputs are unobservable inputs. Changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would not significantly change the fair value determined for Kamal and Yarrow.

Warrants are measured using valuation methods based on so-called Level 2 inputs. Level 2 inputs are inputs other than quoted prices that are observable for the liability, either directly or indirectly.

The carrying amount of all financial assets and financial liabilities is a reasonable approximation of the fair value and therefore information about the fair values of each class has not been disclosed.

Share options and restricted stock units (“RSUs”) granted to employees and consultants are measured at the fair value of the equity instruments granted. The fair value of options is determined through the use of an option-pricing model considering, among others, the following variables: