20. Cash and cash equivalents

Cash and cash equivalents may comprise cash at banks, bank deposits and money market funds that are readily convertible to cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents on 31 December 2021 comprised €1,007.5 million of term deposits which all had an original maturity longer than 3 months but are readily convertible to cash without a significant penalty. All cash and cash equivalents are available upon maximum three month notice period and without significant penalty. Cash at banks were mainly composed of notice accounts and current accounts. Our credit risk is mitigated by selecting a panel of highly rated financial institutions for our deposits.

On 31 December 2021, our cash and cash equivalents included $807.9 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. We refer to note 10 for more details about the currency exchange gains or losses recognized in our consolidated income statement.

The net increase in cash and cash equivalents of €90.3 million was composed of (i) €564.8 million of operational cash burn, (ii) €3.3 million of cash proceeds from capital and share premium increase from exercise of subscription rights in 2021, (iii) the net sale of current financial investments of €566.4 million, (iv) €56.8 million of positive unrealized exchange differences, and (v) €28.7 million cash proceeds from disposal of Fidelta.

Operational cash burn (or operational cash flow if this liquidity measure is positive) is a financial measure that is 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 from/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 from/used in (–) investing activities.

This alternative liquidity 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 burn, to the closest IFRS measures, for each of the periods indicated: