19. Cash and cash equivalents

Notes to the consolidated financial statements

 

31 December

(thousands of €)

2019

2018

Cash at banks

907,939

358,016

Term deposits

953,677

733,537

Money market funds

199,243

Total cash and cash equivalents

1,861,616

1,290,796

Cash and cash equivalents may comprise cash at banks, short term bank deposits and money market funds that are readily convertible to cash and are subject to an insignificant risk of changes in value. Our cash management strategy monitors and optimizes our liquidity position. Our cash management strategy may allow short term deposits with an original maturity exceeding 3 months while monitoring all liquidity aspects. Cash and cash equivalents comprised €953.7 million of term deposits which all had an original maturity longer than 3 months. All cash and cash equivalents are available upon maximum three month notice period and without significant penalty. Cash at banks were mainly composed of savings accounts and current accounts. We maintain our bank deposits in highly rated financial institutions to reduce credit risk.

At 31 December 2019, our cash and cash equivalents included $656.9 million held in USD, which could generate a foreign currency exchange gain or loss in our financial results in accordance with the fluctuation of the EUR/USD exchange rate as our functional currency is EUR.

As at 31 December 2019, the money market funds were no longer classified as cash equivalents but as current financial investments because we no longer used them for meeting short-term cash commitments.

The net increase in cash and cash equivalents of €570.8 million consisted of a transfer to current financial investments of €198.9 million, negative unrealized exchange differences of €10.0 million, both compensated by an increase in cash and cash equivalents of €779.7 million. This latter was composed of (i) €3,162.8 million of operational cash flow, of which €3,497.1 million net operational cash inflow from the Gilead collaboration and €334.3 million operational cash burn, (ii) €955.6 million net cash proceeds related to the share subscription by Gilead and €368.0 million cash proceeds related to the exercise of warrant A by Gilead , (iii) €17.2 million of cash proceeds from capital and share premium increase from exercise of warrants in 2019, less (iv) the net increase in current financial investments of €3,723.9 million.

Operational cash burn (or operational cash flow if this performance measure is positive) and net cash inflow from the Gilead transaction are financial measures that are not calculated in accordance with IFRS. Operational cash burn/cash flow is defined as the increase or decrease in our cash and cash equivalents (excluding the effect of exchange rate differences on cash and cash equivalents), minus:

  1. the net proceeds, if any, from share capital and share premium increases included in the net cash flows generated/used (–) in financing activities
  2. the net proceeds or cash used, if any, in acquisitions or disposals of businesses; the movement in restricted cash and movement in current financial investments, if any, included in the net cash flows generated/used (–) in investing activities.

This alternative performance measure is in our view an important metric for a biotech company in the development stage.

The following table presents a reconciliation of operational cash flow, net cash inflow from the Gilead transaction and the operational cash burn adjusted for the Gilead transaction, to the closest IFRS measures, for each of the periods indicated:

(thousands of €)

2019

2018

Increase in cash and cash equivalents (excluding effect of exchange differences)

779,710

129,497

Less:

 

 

Net proceeds from capital and share premium increases

(1,340,842)

(287,881)

Increase in current financial investments

4,787,284

 

Decrease in current financial investments

(1,063,344)

 

Total operational cash flow/cash burn (-)

3,162,809

(158,384)

Upfront consideration received from Gilead

3,569,815

 

Realized exchange loss on Gilead upfront

(34,853)

 

Costs associated to the transaction with Gilead

(37,849)

 

Net operational cash proceeds from the Gilead transaction

3,497,113

 

Operational cash burn adjusted for Gilead transaction

(334,304)