Replies to post #163561 on Biotech Values

[DonShimoda]

You are right, you can't, but I was attempting to answer a different question. You can control whether you choose to settle your trade in dollars (GLPYY) or euros (GLPG.BR). You can also control the timing of your purchase and sale. I haven't run the numbers yet but just eyeballing it, if you were to convert your shares back into USD today, the gain in GLPG.BR's stock price over the last few weeks looks like it was completely offset by the the stronger dollar. In comparison, the ADRs are up ~ 10% over the same time period.

[mcbio]

As long as the underlying company's balance sheet and revenues are in a currency other than dollars, how do you avoid currency risk no matter which instrument yo select?

Well, if you settle the trade in dollars, aren't you effectively hedging the underlying currency risk? Also, despite the fact that GLPG.BR has some revenues, they are effectively a development stage biotech whose success will be tied to the successful development of its pipeline in the intermediate-term and not tied to revenues per se.

[DonShimoda]

To clarify my earlier post, I am drawing a distinction between corporate currency risk (which among other factors is dependent on whether a product is sold in a customers local currency and repatriated) and the currency risk associated with investing directly in a non-US corporation as compared to using its ADR. The former represents translation risk which hits a company's P&L while the latter is a transactional risk that hits your wallet.