Affimed(AFMD) - 2023 Q2 - Quarterly Report

Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including comprehensive loss, financial position, cash flows, and changes in equity, for the interim period Unaudited Consolidated Statements of Comprehensive Loss Affimed N.V. reported a significant increase in comprehensive loss for the three months ended March 31, 2023, primarily driven by higher research and development expenses and a decrease in revenue compared to the prior year Unaudited Consolidated Statements of Comprehensive Loss (€ thousand) | Metric | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Revenue | 4,510 | 8,006 | | Operating loss | (31,461) | (17,134) | | Loss for the period | (31,983) | (16,665) | | Total comprehensive loss | (31,983) | (22,839) | | Basic and diluted loss per share | (0.21) | (0.14) | - Revenue decreased by 43.67% from €8,006 thousand in Q1 2022 to €4,510 thousand in Q1 2023[2] - Operating loss widened by 83.62% from €17,134 thousand in Q1 2022 to €31,461 thousand in Q1 2023, largely due to a 60.67% increase in Research and development expenses[2] Consolidated Statements of Financial Position The company's financial position shows a decrease in total assets and total equity from December 31, 2022, to March 31, 2023, primarily due to a reduction in cash and cash equivalents and an accumulated deficit Consolidated Statements of Financial Position (€ thousand) | Metric | March 31, 2023 (€ thousand) | December 31, 2022 (€ thousand) | | :-------------------------- | :-------------------------- | :----------------------------- | | Total Assets | 167,958 | 200,512 | | Total Equity | 125,090 | 152,915 | | Total Non-current Liabilities | 11,430 | 12,946 | | Total Current Liabilities | 31,438 | 34,651 | | Cash and cash equivalents | 155,848 | 190,286 | - Total assets decreased by 16.24% from €200,512 thousand at December 31, 2022, to €167,958 thousand at March 31, 2023[5] - Total equity decreased by 18.19% from €152,915 thousand to €125,090 thousand over the same period, mainly due to an increase in accumulated deficit[5] Unaudited Consolidated Statements of Cash Flows The company experienced significant net cash outflows from operating activities, leading to a substantial decrease in cash and cash equivalents during the three months ended March 31, 2023 Unaudited Consolidated Statements of Cash Flows (€ thousand) | Cash Flow Activity | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | (33,244) | (28,420) | | Net cash used for investing activities | (8) | (106) | | Net cash used for financing activities | (634) | (169) | | Net changes to cash and cash equivalents | (33,886) | (28,695) | | Cash and cash equivalents at the beginning of the period | 190,286 | 197,630 | - Net cash used in operating activities increased by 17.09% to €33,244 thousand in Q1 2023 from €28,420 thousand in Q1 2022[7] - Cash and cash equivalents decreased by €33,886 thousand during Q1 2023, starting at €190,286 thousand and ending lower than the previous year's starting balance[7] Unaudited Consolidated Statements of Changes in Equity The company's total equity decreased significantly during the first three months of 2023, primarily due to the loss for the period, despite an increase in capital reserves from equity-settled share-based payment awards Unaudited Consolidated Statements of Changes in Equity (€ thousand) | Metric | Balance as of January 1, 2023 (€ thousand) | Balance as of March 31, 2023 (€ thousand) | | :-------------------------- | :----------------------------------------- | :---------------------------------------- | | Issued capital | 1,493 | 1,493 | | Capital reserves | 582,843 | 587,001 | | Fair Value reserves | (1,231) | (1,231) | | Accumulated deficit | (430,190) | (462,173) | | Total equity | 152,915 | 125,090 | - Total equity decreased by €27,825 thousand from €152,915 thousand at January 1, 2023, to €125,090 thousand at March 31, 2023[9] - The accumulated deficit increased by €31,983 thousand during Q1 2023, reflecting the loss for the period[9] Notes to the Condensed Consolidated Interim Financial Statements This section provides detailed explanatory notes to the condensed consolidated interim financial statements, covering accounting policies, revenue, financial assets, equity, and subsequent events 1. Reporting Entity Affimed N.V. is a Dutch clinical-stage biopharmaceutical company focused on developing highly targeted cancer immunotherapies, operating through its subsidiaries in Germany, Czech Republic, and the USA - Affimed N.V. is a clinical-stage biopharmaceutical company specializing in cancer immunotherapies[11] - The Group includes Affimed N.V. and its wholly-owned subsidiaries: Affimed GmbH (Germany), AbCheck s.r.o. (Czech Republic), and Affimed Inc. (USA)[10] 2. Basis of Preparation and Changes to Group's Accounting Policies The interim financial statements are prepared in accordance with IAS 34, with accounting policies consistent with the prior annual statements. Critical judgments and estimates remain unchanged, and new accounting standards are not expected to have a significant impact - Interim financial statements are prepared in accordance with IAS 34 Interim Financial Reporting[12] - The accounting policies applied are consistent with those in the consolidated financial statements as of and for the year ended December 31, 2022[17] - New standards and amendments to standards, effective January 1, 2024, are not expected to have a significant effect on the interim financial statements[19] Loss per Share The calculation of diluted loss per share excludes anti-dilutive options and warrants due to the net loss reported - Diluted weighted average number of ordinary shares calculation excluded 25,718,919 options and warrants due to their anti-dilutive effect from the net loss[13] Fair Value Measurement Fair value measurements are categorized into a three-level hierarchy based on input observability, with most current assets and liabilities approximating fair value - Fair value measurements are classified into Level 1, 2, or 3 hierarchy based on input observability[20] - The carrying amount of trade and other receivables, other assets, prepaid expenses, cash and cash equivalents, trade and other payables, and loans reasonably approximates their fair value[21] 3. Revenue Affimed's revenue significantly decreased in Q1 2023 compared to Q1 2022, primarily due to reduced revenue from the Genentech collaboration as work on product candidates was completed. The Roivant collaboration contributed a stable amount of revenue Collaboration Revenue (€ million) | Collaboration | Q1 2023 Revenue (€ million) | Q1 2022 Revenue (€ million) | | :------------ | :-------------------------- | :-------------------------- | | Genentech | 0.2 | 3.9 | | Roivant | 4.3 | 3.9 | - Revenue from the Genentech collaboration decreased significantly from €3.9 million in Q1 2022 to €0.2 million in Q1 2023, as work on product candidates was completed by the end of 2022[25] - Remaining performance obligations as of March 31, 2023, are approximately €6.0 million, with €5.1 million expected to be recognized as revenue over the next 12 months[29] Disaggregation of Revenue Revenue disaggregation shows all Q1 2023 revenue originated from the USA, with collaboration revenue forming the majority Disaggregation of Revenue (€ thousand) | Category | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :------------------- | :--------------------------------------------- | :--------------------------------------------- | | Geographic Information: | | | | Germany | 0 | 137 | | USA | 4,510 | 7,869 | | Major Service Lines: | | | | Collaboration revenue | 4,456 | 7,869 | | Service revenue | 54 | 137 | | Timing on Revenue Recognition: | | | | Over time | 4,510 | 8,006 | - All revenue in Q1 2023 was generated from the USA, compared to €137 thousand from Germany in Q1 2022[30] - Collaboration revenue constituted the vast majority of total revenue in both periods, with €4,456 thousand in Q1 2023[30] 4. Finance Income and Finance Costs The company recorded net finance costs of €519 thousand in Q1 2023, a significant shift from net finance income of €471 thousand in Q1 2022, primarily due to negative foreign exchange differences Finance Income and Finance Costs (€ thousand) | Category | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Interest SVB Loan Agreement | (477) | (378) | | Foreign exchange differences | (552) | 915 | | Other finance income/costs—net | 510 | (66) | | Total | (519) | 471 | - Foreign exchange differences shifted from an income of €915 thousand in Q1 2022 to a cost of €552 thousand in Q1 2023[31] 5. Long-term Financial Assets The fair value of preferred shares held in Amphivena remains nil as of March 31, 2023, following an impairment recognized in 2021 due to the company's decision to wind down - Preferred shares in Amphivena are recognized at a fair value of nil, consistent with December 31, 2022[32] - The impairment was recognized in 2021 following Amphivena's decision to wind down[32] 6. Trade and Other Receivables Trade receivables increased to €12 thousand as of March 31, 2023, from nil at December 31, 2022, while other receivables, mainly VAT, decreased Trade and Other Receivables (€ thousand) | Receivable Type | March 31, 2023 (€ thousand) | December 31, 2022 (€ thousand) | | :---------------- | :-------------------------- | :----------------------------- | | Trade receivables | 12 | 0 | | Other receivables | 700 | 1,500 | - Other receivables, primarily value-added tax receivables, decreased from €1.5 million at December 31, 2022, to €0.7 million at March 31, 2023[33] 7. Other Assets and Prepaid Expenses Other assets and prepaid expenses significantly increased to €5.2 million as of March 31, 2023, mainly due to a new directors and officers' liability insurance premium Other Assets and Prepaid Expenses (€ million) | Item | March 31, 2023 (€ million) | December 31, 2022 (€ million) | | :--------------------------------------- | :------------------------- | :---------------------------- | | Total Other assets and prepaid expenses | 5.2 | 2.5 | | D&O liability insurance premium | 1.7 | 0 | - A new directors and officers' liability insurance premium of €1.7 million was recorded in Q1 2023[34] 8. Equity The company's issued share capital remained stable, with no changes in the number of common shares outstanding during Q1 2023. A public offering in April 2022 previously generated significant net proceeds - As of March 31, 2023, the share capital was €1,493 thousand, comprising 149,339,335 common shares[35] - A public offering in April 2022 generated net proceeds of €89.8 million ($97.1 million) from the issuance of 25,875,000 common shares[35] 9. Share-based Payments Affimed granted a significant number of share-based awards in Q1 2023, increasing outstanding options, while share-based payment expenses remained stable. The fair value of these awards is determined using Black-Scholes-Merton and Monte Carlo models - 7,668,750 awards were granted in Q1 2023 with a fair value of €5.8 million ($6.2 million)[37] - Outstanding ESOP 2014 options increased to 22,787,669 as of March 31, 2023, from 15,269,734 at December 31, 2022[38] Share-based Compensation Expense (€ thousand) | Expense Category | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :---------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Research and development expenses | 2,313 | 2,305 | | General and administrative expenses | 1,845 | 1,942 | | Total compensation expense | 4,158 | 4,247 | Fair Value Measurement Fair value of share-based awards is determined using Black-Scholes-Merton and Monte Carlo models, considering inputs like share price and volatility Fair Value Measurement Inputs (Service Conditions) | Input (Service Conditions) | March 31, 2023 | March 31, 2022 | | :------------------------- | :------------- | :------------- | | Fair value at grant date | $0.81 | $3.32 | | Share price at grant date | $1.07 | $4.47 | | Expected volatility | 90% | 90% | | Risk-free interest rate | 3.95% | 2.18% | - Fair value of options with service conditions is determined using the Black-Scholes-Merton model[42] - Fair value of options with market conditions (granted in Q1 2022) was determined using a Monte Carlo simulation[43] 10. Borrowings Affimed has term loans from Silicon Valley Bank and a smaller loan from UniCredit Leasing CZ. The SVB loan bears interest at ECB Base Rate plus 5.5% and is secured by company assets - The Silicon Valley Bank loan agreement provides up to €25 million in term loans, with €17.5 million drawn by December 2021[46] - The SVB loan bears interest at the greater of the European Central Bank Base Rate and 0%, plus 5.5%, and matures in November 2025[46] - An amount of €113 thousand was outstanding for the UniCredit Leasing CZ loan as of March 31, 2023, with €97 thousand classified as current liabilities[48] 11. Related Parties Compensation for supervisory and management board members, including share-based payment expenses, increased in Q1 2023 compared to Q1 2022 Related Party Compensation (€ thousand) | Category | Three months ended March 31, 2023 (€ thousand) | Three months ended March 31, 2022 (€ thousand) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Supervisory Board compensation | 125 | 109 | | Management Board compensation | 944 | 893 | | Share-based payment expenses (Supervisory Directors) | 112 | 279 | | Share-based payment expenses (Managing Directors) | 1,637 | 1,507 | - Management Board compensation increased by 5.71% in Q1 2023 compared to Q1 2022[49] 12. Subsequent Events In April 2023, Affimed underwent a reorganization to focus on its three clinical-stage development programs, resulting in a 25% reduction in headcount. The financial impact is being evaluated, with expected cost savings offsetting one-time termination payments - Affimed conducted a reorganization in April 2023 to focus on its three clinical-stage development programs[52] - The reorganization led to an approximate 25% reduction in full-time equivalent headcount[52] - One-time cash expenditure for termination payments is expected to be offset by cost savings during 2023[52]