Affimed(AFMD) - 2022 Q4 - Annual Report

PART I This section provides an overview of the company's business, financial performance, and governance structure Key Information This section details significant risks in drug development, financial stability, third-party reliance, and intellectual property Risk Factors The company faces substantial risks from uncertain clinical trials, financial losses, third-party reliance, IP challenges, and potential Nasdaq delisting - The company operates as a development-stage entity with a significant history of operating losses, reaching an accumulated deficit of €430.2 million as of December 31, 2022[14][122] - There is a significant risk that clinical trials may be delayed or unsuccessful, exemplified by the discontinuation of the AFM11 program due to serious adverse events including a patient death[14][31] - The company depends on the success of its key clinical-stage product candidates, AFM13 and AFM24, which are still in development and may not prove successful or commercially viable[14] - The company's current liquidity is anticipated to fund operating expenses and capital requirements into 2025, but substantial additional funding will be required to complete development and commercialization[129][137] - The company relies on strategic partnerships with entities like Artiva, Genentech, and MD Anderson Cancer Center, and the failure of these collaborations could slow development progress[17][143] - The company's common shares are at risk of being delisted from Nasdaq if the closing bid price does not recover to the minimum requirement of $1.00 per share[212] Information on the Company Affimed is a clinical-stage immuno-oncology company developing innate cell engagers via its ROCK® platform, advancing key candidates History and Development of the Company Founded in 2000, Affimed is a clinical-stage immuno-oncology company developing targeted cancer immunotherapies via its ROCK® platform - Affimed is a clinical-stage immuno-oncology company founded in 2000, focused on developing innate cell engagers (ICE®) using its fit-for-purpose ROCK® platform[249][250] - The company's lead programs are AFM13, AFM24, and AFM28, for which it retains full global commercial rights[252] - As of the report date, the company has a total headcount of 228 (219 full-time equivalents), with main offices in Heidelberg, Germany[254] Business Overview Affimed's strategy involves advancing clinical candidates AFM13, AFM24, and AFM28 to activate the innate immune system against tumors Candidate Pipeline | Candidate | Approach | Indication | Status | | :--- | :--- | :--- | :--- | | AFM13 (CD30) | Monotherapy | Peripheral T-cell lymphoma | Topline Data Reported Dec 2022 | | | + Adoptive NK cells | CD30-positive lymphomas | Safety & POC, Data Reported at ASH22 | | AFM24 (EGFR) | Monotherapy | Multiple solid tumors | Enrolling Expansion Cohorts | | | + Adoptive NK cells | Multiple solid tumors | Dose Escalation Ongoing | | | + Anti-PD-L1 | Multiple solid tumors | Enrolling Expansion Cohorts | | AFM28 (CD123) | Monotherapy | Acute Myeloid Leukemia | Phase 1 study enrolling | | | + Adoptive NK cells | Acute Myeloid Leukemia | Pre-IND | - In a Phase 1/2 study with MD Anderson, AFM13 pre-complexed with cord blood-derived NK cells demonstrated a 97% Objective Response Rate (ORR) and a 77% Complete Response (CR) rate in 31 Hodgkin Lymphoma patients at the recommended Phase 2 dose[307][308] - The company is shifting its focus for AFM13 in PTCL from monotherapy to a combination with Artiva's AB-101 NK cell product, with an IND submission planned for the first half of 2023[304][309] - AFM24 is being investigated in three separate clinical studies: as a monotherapy (AFM24-101), in combination with atezolizumab (AFM24-102), and with SNK01 NK cells (AFM24-103)[261] - The company's third candidate, AFM28, targets CD123 for Acute Myeloid Leukemia (AML) and initiated a first-in-human Phase 1 study in Q1 2023[262][329] Organizational Structure Affimed N.V. serves as the parent company, overseeing its three wholly-owned subsidiaries: Affimed GmbH, AbCheck s.r.o., and Affimed, Inc - The registrant, Affimed N.V., has three direct or indirect wholly-owned subsidiaries: Affimed GmbH, AbCheck s.r.o., and Affimed, Inc[464] Property, Plant, and Equipment The company's headquarters are in leased facilities in Heidelberg, Germany, with a planned relocation to Mannheim in mid-2023 under a new ten-year lease - The company is planning to move its headquarters from Heidelberg to a new facility in Mannheim, Germany, around mid-2023 under a new ten-year lease[465] Operating and Financial Review and Prospects This section analyzes the company's financial performance, reporting a €86.0 million net loss and €430.2 million accumulated deficit in 2022, with €190.3 million cash projected into 2025 Operating Results Overview Affimed's 2022 net loss increased to €86.0 million from €57.5 million in 2021, primarily due to increased R&D and G&A expenses Key Financial Metrics | Metric | 2022 (€ thousands) | 2021 (€ thousands) | | :--- | :--- | :--- | | Total Revenue | 41,353 | 40,366 | | Operating loss | (88,119) | (64,030) | | Loss for the period | (86,004) | (57,523) | | Loss per common share | (0.60) | (0.48) | Research and Development Expenses by Project | R&D Expenses by Project | 2022 (€ thousands) | 2021 (€ thousands) | Change % | | :--- | :--- | :--- | :--- | | AFM13 | 15,130 | 19,800 | (24)% | | AFM24 | 21,687 | 19,957 | 9% | | AFM28 | 9,290 | 6,451 | 44% | | Other projects and infrastructure | 42,356 | 29,388 | 44% | | Share-based payment expense | 10,351 | 5,892 | 76% | | Total | 98,814 | 81,488 | 21% | - Revenue in 2022 was primarily derived from the Roivant collaboration (€22.7 million) and the Genentech collaboration (€18.5 million)[475][477][479] - General and administrative expenses increased by 32% to €32.1 million in 2022, mainly due to higher personnel costs, including share-based payments, and increased insurance expenses[506] Liquidity and Capital Resources As of December 31, 2022, the company held €190.3 million in cash, projected to fund operations into 2025, following an €89.8 million public offering - The company ended 2022 with €190.3 million in cash and cash equivalents, with a projected cash runway to fund operations into 2025[509][520] - In April 2022, the company raised net proceeds of €89.8 million through an underwritten public offering of its common shares[513][525] Cash Flow Summary | Cash Flow Metric | 2022 (€ thousands) | 2021 (€ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (104,892) | (86,591) | | Net cash generated from/(used for) investing activities | 5,605 | (3,850) | | Net cash generated from financing activities | 88,557 | 133,581 | Directors, Senior Management and Employees This section outlines the company's two-tier governance structure, detailing compensation and board practices, with a total headcount of 228 as of March 2023 - The company operates under a two-tier board structure with a separate management board (led by CEO Adi Hoess) and a supervisory board (chaired by Thomas Hecht)[532][536][544] Executive Compensation Summary 2022 | (in € thousand) | Adi Hoess (CEO) | Wolfgang Fischer (COO) | Angus Smith (CFO) | Total (All Managing Directors) | | :--- | :--- | :--- | :--- | :--- | | Total cash compensation | 764 | 596 | 629 | 3,662 | | Share-based payment expense | 1,836 | 1,000 | 1,082 | 6,732 | - The company's Equity Incentive Plan 2014 allows for the issuance of new shares, with an automatic increase of 5% of total outstanding common shares becoming available each year on January 1[551] - As of March 23, 2023, the company's total headcount was 228 (219 full-time equivalents)[582] Major Shareholders and Related Party Transactions This section identifies major shareholders as of March 15, 2023, including key institutional investors holding over 5% of common shares, and confirms indemnification agreements with directors and officers Major Shareholders as of March 15, 2023 | Shareholder | Shares Beneficially Owned | Percent (%) | | :--- | :--- | :--- | | Entities affiliated with Ridgeback Capital Management | 12,882,610 | 8.6 | | Entities affiliated with Ari Zweiman | 9,106,250 | 6.1 | | Entities affiliated with Blackrock, Inc. | 8,182,926 | 5.5 | | Entities affiliated with Cooperatieve Gilde Healthcare V U.A. | 8,125,000 | 5.4 | | All managing directors and supervisory directors as a group | 6,654,591 | 4.3 | Financial Information This section presents the company's IFRS consolidated financial statements, confirming no material legal proceedings and no dividends declared or planned for the past three years or foreseeable future - The company has not been a party to any litigation that has had a material adverse effect on its financial position[597] - No cash dividends were declared on common shares in 2020, 2021, or 2022, and the company does not anticipate paying any in the foreseeable future[598] Additional Information This section provides supplementary tax information for shareholders in Germany, the Netherlands, and the United States, noting German tax residency and discussing potential PFIC status for U.S. Holders - Although incorporated in the Netherlands, the company is considered exclusively tax resident in Germany under the German-Dutch tax treaty due to its place of effective management being in Germany[239][611] - For U.S. Holders, the company notes that it does not believe it was a Passive Foreign Investment Company (PFIC) for the 2022 taxable year, but its status in future years is uncertain and depends on factors like market capitalization and asset composition[237][700] PART II This section details the company's internal controls, procedures, and corporate governance practices, including compliance with Nasdaq listing standards as a foreign private issuer Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, affirmed by an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[725] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[726] - The independent registered public accounting firm, KPMG AG, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[727][763] Corporate Governance As a foreign private issuer on Nasdaq, Affimed adheres to Dutch corporate governance practices, differing from Nasdaq standards in quorum, proxy solicitation, and committee independence - The company, as a foreign private issuer, follows certain Dutch corporate governance practices in lieu of specific Nasdaq listing standards[740] - Deviations from Nasdaq standards include the lack of a generally applicable quorum requirement for shareholder meetings, different proxy solicitation practices, and opting out of rules requiring compensation and nominating committees to consist entirely of independent directors[741][742][743][744] PART III This section contains the company's full audited consolidated financial statements for the three years ended December 31, 2022, prepared under IFRS, including the independent auditor's report Financial Statements This section presents the full audited consolidated financial statements for Affimed N.V. and its subsidiaries for the three years ended December 31, 2022, prepared under IFRS - The independent auditor, KPMG AG, identified revenue recognition from collaboration agreements as a critical audit matter due to the challenging and subjective judgment required to evaluate the anticipated total costs of research programs, which are used to measure the stage of completion[768][769] Consolidated Financial Position Summary | (in € thousand) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 190,286 | 197,630 | | Total Assets | 200,512 | 225,135 | | Equity and Liabilities | | | | Total Equity | 152,915 | 135,951 | | Total Liabilities | 47,597 | 89,184 | | Total Equity and Liabilities | 200,512 | 225,135 | - Subsequent to year-end, the company reported that its deposits with Silicon Valley Bank (SVB) were protected following the bank's failure in March 2023, with full access to cash maintained through the newly created bridge bank and the sale of SVB UK to HSBC, with no expected impact on business activities[934]