Affimed N.V.
Amsterdam, The Netherlands
Annual Report 2016
Affimed Annual Report 2016
Contents
Report by Affimed’s Management Board
Business and financial overview
Risk Management
Corporate Governance
Report by Affimed’s Supervisory Board
Consolidated Financial Statements
Company Financial Statements
Other information
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Affimed Annual Report 2016
Forward-Looking Statements
This Annual Report contains statements that constitute forward-looking statements. Many of the
forward-looking statements contained in this Annual Report can be identified by the use of forward-
looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,”
“estimate” and “potential,” among others.
Forward-looking statements appear in a number of places in this Annual Report and include, but are
not limited to, statements regarding our intent, belief or current expectations. Forward-looking
statements are based on our management’s beliefs and assumptions and on information currently
available to our management. Such statements are subject to risks and uncertainties, and actual
results may differ materially from those expressed or implied in the forward-looking statements due to
various factors, including, but not limited to, those identified under the section “Risk Management” in
this Annual Report.
Forward-looking statements speak only as of the date they are made, and we do not undertake any
obligation to update them in light of new information or future developments or to release publicly any
revisions to these statements in order to reflect later events or circumstances or to reflect the
occurrence of unanticipated events.
Affimed Annual Report 2016
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Report by Affimed’s Management Board
Overview
We are a clinical-stage biopharmaceutical company focused on discovering and developing highly
targeted cancer immunotherapies. Our product candidates are being developed in the field of immuno-
oncology, which represents an innovative approach to cancer treatment that seeks to harness the
body’s own immune defenses to fight tumor cells. The most potent cells of the human defense arsenal
are types of white blood cells called Natural Killer cells, or NK-cells, and T-cells. Our proprietary, next-
generation bispecific antibodies, which we call TandAbs because of their tandem antibody structure,
are designed to direct and establish a bridge between either NK-cells or T-cells and cancer cells. Our
TandAbs have the ability to bring NK-cells or T-cells into proximity and trigger a signal cascade that
leads to the destruction of cancer cells. Due to their novel tetravalent architecture (which provides for
four binding domains), our TandAbs bind to their targets with high affinity and have half-lives that allow
regular intravenous administration, with different dosing schemes being explored to allow for improved
exposure in heavily pretreated patient populations. We believe, based on their mechanism of action
and the preclinical and clinical data we have generated to date, that our product candidates, alone or
in combination, may ultimately improve response rates, clinical outcomes and survival in cancer
patients and could eventually become a cornerstone of modern targeted oncology care.
Affimed was founded in 2000 based on technology developed by the group led by Professor Melvyn
Little at Deutsches Krebsforschungszentrum, the German Cancer Research Center, or DKFZ, in
Heidelberg.
Focusing our efforts on antibodies specifically binding NK-cells through CD16A, a dominant activating
receptor on innate immune cells, we have built a clinical and preclinical pipeline of NK-cell-engaging
bispecific antibodies designed to activate both innate and adaptive immunity. Compared to a variety of
T-cell-engaging technologies, our NK-cell engagers appear to have a better safety profile and have
the potential to achieve more potent and deeper immune responses through enhancing crosstalk of
innate to adaptive immunity. Their safety profiles also make our molecules suitable for development as
combination therapies (e.g. with checkpoint inhibitors, or CPIs, or adoptive NK-cells). Building on our
leadership in the NK-cell space, we are also developing tetravalent, bispecific alternative antibody
formats (AAFs) for NK-cell engagement offering varying PK/PD profiles relevant to certain diseases.
As of today, we have focused our research and development efforts on four proprietary programs for
which we retain global commercial rights. Because our TandAbs bind with receptors that are known to
be present on a number of types of cancer cells, each of our TandAb product candidates could be
developed for the treatment of several different cancers. We intend to initially develop our two clinical
stage product candidates in orphan or high-medical need indications, including as a salvage therapy
for patients who have relapsed after, or are refractory to, that is who do not respond to treatment with,
standard therapies, which we refer to as relapsed/refractory. These patients have a limited life
expectancy and few therapeutic options. We believe this strategy will allow for a faster path to
approval and will likely require smaller clinical studies compared to indications with more therapeutic
options and larger patient populations. We believe such specialized market segments in oncology can
be effectively targeted with a small and dedicated marketing and sales team. We currently intend to
establish a commercial sales force in the United States and/or Europe to commercialize our product
candidates when and if they are approved.
We also see an opportunity in the clinical development of our TandAbs in combination with other
agents that harness the immune system to fight cancer cells, such as CPIs. Such combinations of
cancer immunotherapies may ultimately prove beneficial for larger patient populations in earlier stages
of diseases, beyond the relapsed/refractory disease setting.
Our offices and laboratories are located at the Technology Park adjacent to the DKFZ in Heidelberg,
where we employ 55 personnel, approximately 70% of whom have an advanced academic degree.
Including AbCheck and Affimed Inc. personnel, our total headcount is 84 (75 full time equivalents). We
are led by experienced executives with a track record of successful product development, approvals
and launches, specifically of biologics. Our supervisory board includes highly experienced experts
from the pharmaceutical and biotech industries, with a specific background in hematology.
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In 2009, we formed AbCheck, our 100% owned, independently run antibody screening platform
company, located in the Czech Republic. AbCheck is devoted to the generation and optimization of
fully human antibodies. Its technologies include a combined phage and yeast display antibody library
and a proprietary algorithm to optimize affinity, stability and manufacturing efficiency. AbCheck also
uses a super human library as well as their newly developed mass humanization technology to
discover and optimize high-quality human antibodies. In addition to providing candidates for Affimed
projects, AbCheck is recognized for its expertise in antibody discovery throughout the United States
and Europe and has been working with globally active pharmaceutical companies such as Eli Lilly,
Daiichi Sankyo, Pierre Fabre and others.
Business Overview
Our Strategy
Our goal is to engineer targeted immunotherapies, seeking to cure patients by harnessing the power
of innate and adaptive immunity (NK- and T-cells). We are developing single and combination
therapies to treat cancers and other life-threatening diseases. For this, we have developed an entirely
novel antibody platform that delivers different types of next-generation antibodies, bispecific and
trispecific Abs, as well as tetravalent, bispecific alternative antibody formats (AAFs). Based on the
unique properties and mechanism of action of these products and supported by the preclinical and
clinical data we have generated to date, we believe that our product candidates, alone or in
combination, may ultimately improve clinical outcomes in cancer patients and could eventually
become a key element of modern targeted oncology care. Key elements of our strategy to achieve this
goal are to:
(cid:1) Rapidly Advance the Development of our Clinical Stage Product Candidates, including
Combinations with Other Immunotherapies. Our product development strategy initially
targets relapsed or refractory cancer patients who have limited therapeutic alternatives, which
we believe will enable us to utilize an expedited regulatory approval process. In the second
quarter of 2015, a phase 2a proof of concept study of AFM13 as a monotherapy was initiated
by the German Hodgkin Study Group (GHSG) in HL patients that have received all standard
therapies and have relapsed after or are refractory to Adcetris. Due to delays in opening study
sites and the availability of anti-PD-1 antibodies for the treatment of relapsed/refractory HL
patients, we have experienced slower recruitment into the study than anticipated. We have
worked with GHSG to revise the overall study design in order to adapt to the changing
treatment landscape, namely the availability of anti-PD-1 antibodies. The study will now
include HL patients relapsed or refractory to treatment with both brentuximab vedotin
(Adcetris) and anti-PD-1 antibodies. Different dosing protocols of AFM13 are being explored to
allow for improved exposure in more heavily pretreated patient populations. The study is
expected to begin recruiting under the new study design in the first half of 2017 and we
anticipate providing an update on the study in the second half of 2017. We are also planning a
clinical study of AFM13 in patients with CD30+ lymphoma. In addition, we have expanded our
development strategy to combination therapies. In the first half of 2016 we initiated a phase 1b
clinical study to investigate AFM13 in combination with pembrolizumab (Keytruda) in HL
patients that have relapsed after or are refractory to chemotherapy and Adcetris. The study is
ongoing and no dose-limiting toxicities were observed in the first and second dose cohorts.
Data read-out is ongoing and we intend to provide an update in the second half of 2017. For
AFM11, we have initiated a phase 1 dose ranging study of AFM11 designed to evaluate safety
and tolerability and to potentially assess anti-tumor activity after four weeks of therapy in NHL
patients. The amended study protocol was approved by the applicable regulatory authorities in
the third quarter of 2015. We have opened new study sites to expedite recruitment into the
study. A phase 1 dose-finding clinical study of AFM11 in patients with acute lymphocytic
leukemia, or ALL, commenced in the third quarter of 2016 and is enrolling. We anticipate
providing a progress update on both studies in the first half of 2017.
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(cid:1) Establish R&D and Commercialization Capabilities in Europe and in the United States
While we plan to retain rights for our product candidates, in the future we may enter into
additional collaborations that provide value for our shareholders. We intend to build a focused
marketing and specialty sales team in Europe and in the United States to commercialize any
of our product candidates that receive regulatory approval. We have established a U.S.
presence in order to expand our access to the U.S. talent pool, to maintain a close relationship
to the financial and pharmaceutical community and to continuously measure and adapt to our
strategic position in the competitive landscape.
(cid:1) Use Our Technology Platforms and Intellectual Property Portfolio to Continue to Build
our Cancer Immunotherapy Pipeline. We generate our product candidates from our
proprietary antibody engineering technology platforms consisting of NK-cell TandAbs, T-cell
TandAbs, trispecific Abs and AAFs. We plan to continue to leverage these technologies to
develop new pipeline product candidates. We believe we can utilize our platforms to address
additional targets that we may in-license in the future or identify internally. We intend to
continue to innovate in our field and create additional layers of intellectual property in order to
enhance the platform value and extend the life cycle of our products. We believe our strong
intellectual property position can be used to support internal development as well as out-
licensing and collaboration opportunities.
(cid:1) Maximize the Value of our Collaboration Arrangements with LLS, Merck and MD
Anderson. We have a research agreement with LLS under which LLS has committed to co-
fund the development of AFM13, with the focus having been shifted towards combination
therapy in June 2016 due to the recent changes within the rapidly evolving cancer
immunotherapy treatment landscape. We believe that this collaboration will also allow us to
expedite patient enrollment for future studies by leveraging the LLS’s existing relationships
with key U.S. investigators. In January 2016, we entered into a clinical research collaboration
with Merck & Co to investigate the combination of Merck’s anti-PD-1 therapy, Keytruda
(pembrolizumab), with AFM13 for the treatment of patients with relapsed/refractory HL. In
January 2017, we entered into a clinical development and commercialization collaboration
with The University of Texas MD Anderson Cancer Center, or MD Anderson, to evaluate
AFM13 in combination with MD Anderson’s NK-cell product. MD Anderson will be responsible
for conducting preclinical research activities aimed at investigating its NK-cells derived from
umbilical cord blood in combination with AFM13, which are intended to be followed by a phase
1 study. We will fund research and development expenses for this collaboration and hold an
option to exclusive worldwide rights to develop and commercialize any product developed
under the collaboration. We believe that these collaborations help to validate and more rapidly
advance our discovery efforts, technology platforms and product candidates, and will enable
us to leverage our platforms through additional high-value partnerships. As part of our
business development strategy, we aim to enter into additional research collaborations in
order to derive further value from our platforms and more fully exploit their potential.
(cid:1)
Intensify our Collaboration with Academia. We have entered into multiple collaborations
with academic partners including the German Hodgkin Study Group, the Mayo Clinic, the
Columbia University, MD Anderson Cancer Center, as well as the German Cancer Research
Center (DKFZ). We finalized the establishment of a Scientific Advisory Board in 2015. We will
continue to engage with key experts in our areas of interest with activities.
(cid:1) Utilize AbCheck to Generate and Optimize Antibodies. We formed AbCheck in 2009 to
leverage our antibody screening platform and partner with other biopharmaceutical companies
in fee-for-service engagements. We use AbCheck’s state-of-the-art phage and yeast display
screening technologies as well as a proprietary batch humanization process and
bioinformatics tools to identify and optimize antibodies that are highly specific for the targets
we or our customers select, and that we engineer into TandAbs, trispecific Abs or AAFs.
AbCheck’s high-quality capabilities have been validated through multiple international
collaborations including a clinical research partnership with globally active pharmaceutical
companies, as well as a strategic research partnership with Pierre Fabre.
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Our Strengths
We believe we are a leader in developing cancer immunotherapies due to several factors:
(cid:1) Our Lead Product Candidate, AFM13, is a First-in-Class NK-Cell Mediated Cancer
Immunotherapy. AFM13 is a targeted immunotherapy that is currently in development for HL
as a salvage therapy. To engage and activate NK-cells, we have engineered AFM13 with a
unique binding specificity for CD16A. AFM13 binds to CD16A with approximately 1,000-fold
higher affinity than native antibody molecules via the constant region. While native antibodies
bind to CD16A and CD16B with similar affinity, AFM13 does not bind to CD16B at all. CD16B
is expressed on the surface of neutrophils, which show very limited anti-tumor activity and
exist in such large amounts that little would be left for NK-cell binding and tumor cell killing
were AFM13 not to be so selective for only CD16A. We believe that AFM13 is the only
antibody in development that can specifically engage CD16A+ cells, in particular NK-cells,
with very high affinity. In the second quarter of 2015, a phase 2a proof of concept study of
AFM13 was initiated by the German Hodgkin Study Group (GHSG) in HL patients that have
received all standard therapies and have relapsed after or are refractory to Adcetris. The
Leukemia and Lymphoma Society, or LLS, has agreed to co-fund a portion of the
development of AFM13. In addition, we are planning a clinical study of AFM13 in patients with
CD30+ lymphoma. We initiated a clinical phase 1b study investigating the combination of
AFM13 with Merck’s Keytruda (pembrolizumab) in patients with relapsed/refractory HL in the
first half of 2016. The study is designed to establish a dosing regimen for the combination
therapy and assess its safety and efficacy. We have also entered into a clinical development
and commercialization collaboration with MD Anderson to evaluate AFM13 in combination
with MD Anderson’s NK-cell product.
(cid:1) Our T-cell-engaging Lead Product Candidate, AFM11. By leveraging our technology
platform, we have built a growing pipeline of additional product candidates. Our second
product candidate, AFM11, has demonstrated in preclinical studies highly specific and
effective engagement of T-cells, inducing rapid and potent in vitro and in vivo tumor cell killing.
Although the PK of TandAbs is longer as compared to Amgen’s BiTEs such as Blincyto, we
are exploring different dosing regimens in our clinical studies to address specific features
relating to T-cell engagement, which may require longer infusion times. We have initiated a
phase 1 dose ranging study of AFM11 designed to evaluate safety and tolerability and to
potentially assess anti-tumor activity after four weeks of therapy in NHL patients. The
amended study protocol was approved by the applicable regulatory authorities in the third
quarter of 2015. A phase 1 clinical study of AFM11 in patients with ALL commenced in the
third quarter of 2016 and is enrolling. We anticipate providing a progress update on both
studies in the first half of 2017.
(cid:1) Growing Pipeline of Product Candidates Focused on Key Cancer Indications. A CD16A
NK-cell TandAb, called AFM24, targeting EGFR-wild type, a validated solid tumor target has
been engineered and characterized preclinically and expect to provide an update on the
program in the first half of 2017. In addition, we are developing AFM26 preclinically, a CD16A
NK-cell TandAb targeting another validated tumor target, B-cell maturation antigen (BCMA), in
multiple myeloma.
(cid:1) Retained Global Commercial Rights for our Four Candidates in our Product Pipeline.
Our four pipeline product candidates AFM13, AFM11, AFM24 and AFM26 are unencumbered.
We retain all options to derive value from our product candidates, including commercialization
in all or select markets when and if they are approved. To maximize the value of our platform,
we will continue to explore partnerships to support the development or commercialization of
our programs in certain territories.
(cid:1) Experienced Management Team with Strong Track Record in the Development and
Commercialization of New Medicines. Members of our management team have extensive
experience in the biopharmaceutical industry, and key members of our team have played an
important role in the development and commercialization of approved drugs. Our Chief
Executive Officer Adi Hoess was a member of the team that developed and commercialized
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Firazyr®, while our Chief Operating Officer Jörg Windisch played a leading role in the
development of Omnitrope®, Binocrit® and Zarzio®.
(cid:0) Strong Technology Base and Solid Patent Portfolio in the Field of Targeted Immuno-
Oncology. We are a leader in the field of bi-and trispecific antibody therapeutics for the
treatment of cancer. We have a patent portfolio that includes the tetravalent antibody platform
itself. Further, we have a proprietary position in NK-cell engagement, specifically regarding
binding domains directed at CD16A with no cross-reactivity to CD16B. We have more than a
decade of experience in the discovery and development of such complex antibodies, and our
molecular architecture allows for efficient and cost-effective manufacturing. In addition to
supporting internal product development, we believe our strong intellectual property position
can be used to support out-licensing and collaboration opportunities in the field of immuno-
oncology.
Our research and development pipeline
We are developing a pipeline of immune-cell engagers for the treatment of cancer as shown below:
Our lead candidate, AFM13, is a first-in-class NK-cell TandAb designed for the treatment of certain
CD30-positive (CD30+) B- and T-cell malignancies, including Hodgkin lymphoma, or HL. AFM13
selectively binds with CD30, a clinically validated target in HL patients, and CD16A, an integral
membrane glycoprotein receptor expressed on the surface of NK-cells, triggering a signal cascade
that leads to the destruction of tumor cells that carry CD30. In contrast to conventional full-length
antibodies, AFM13 does not bind to CD16B, which prevents binding to other cells, e.g. neutrophils.
We are initially developing AFM13 for HL in the salvage setting for patients who have relapsed after,
or are refractory to, Adcetris (brentuximab vedotin), a CD30-targeted chemotherapy approved by the
U.S. Food and Drug Administration, or FDA, in August 2011 as a salvage therapy for HL.
Approximately half of the patients treated with Adcetris experience disease progression in less than
half a year after initiation of therapy. In a phase 1 dose-escalation clinical study, AFM13 was well-
tolerated and demonstrated tumor shrinkage or slowing of tumor growth, with disease control shown in
16 of 26 patients eligible for efficacy evaluation. AFM13 also stopped tumor growth in patients who are
refractory to Adcetris. Six out of seven patients who became refractory to Adcetris as the immediate
prior therapy experienced stabilization of disease under AFM13 treatment according to Cheson’s
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criteria, standard criteria for assessing treatment response in lymphoma. We believe that based on its
novel mode of action, AFM13 may be beneficial to patients who have relapsed or are refractory to
treatment with Adcetris and may provide more durable clinical benefit.
In the second quarter of 2015, a phase 2a proof of concept study of AFM13 as a monotherapy was
initiated by the German Hodgkin Study Group (GHSG) in HL patients that have received all standard
therapies and have relapsed after or are refractory to Adcetris. We have worked with GHSG to revise
the overall study design in order to adapt to the changing treatment landscape, namely the availability
of anti-PD-1 antibodies. The study will now include HL patients relapsed or refractory to treatment with
both brentuximab vedotin (Adcetris) and anti-PD-1 antibodies. Different dosing protocols of AFM13 are
being explored to allow for improved exposure in more heavily pretreated patient populations. The
study is expected to begin recruiting under the new study design in the first half of 2017 and we
anticipate providing an update on the study in the second half of 2017.
In order to prepare for further clinical development, we performed preclinical studies investigating the
combination of AFM13 with check-point modulators (CPM) with collaboration partners. We believe that
AFM13 and immunomodulators administered together could lead to greater tumor cell killing because
these molecules may have a synergistic anti-tumor effect involving both NK-cells and T-cells. Based
on the preclinical data, we entered into a collaboration with Merck and have initiated a clinical phase
1b study investigating the combination of AFM13 with Merck’s anti-PD-1 antibody Keytruda
(pembrolizumab) in patients with relapsed/refractory HL in the first half of 2016. The study is ongoing
and no dose-limiting toxicities were observed in the first and second dose cohorts. Data read-out is
ongoing and we intend to provide an update in the second half of 2017. The LLS has committed to co-
fund the development of AFM13 with the focus having been shifted towards combination therapy in
June 2016 following the greater focus of combination therapies in immunooncology. In addition, we
are planning a clinical study of AFM13 in patients with CD30+ lymphoma. In January 2017, we entered
into a clinical development and commercialization collaboration with MD Anderson to evaluate AFM13
in combination with MD Anderson’s NK-cell product. MD Anderson will be responsible for conducting
preclinical research activities aimed at investigating its NK-cells derived from umbilical cord blood in
combination with AFM13, which are intended to be followed by a phase 1 study. We will fund research
and development expenses for this collaboration and hold an option to exclusive worldwide rights to
develop and commercialize any product developed under the collaboration.
Our second clinical stage candidate, AFM11, is a T-cell TandAb designed for the treatment of certain
CD19+ B-cell malignancies, including non-Hodgkin Lymphoma, or NHL and Acute Lymphocytic
Leukemia, or ALL. AFM11 binds selectively with CD19, a clinically validated target in B-cell
malignancies. It also binds to CD3, a component of the T-cell receptor complex, triggering a signal
cascade that leads to the destruction of tumor cells that carry CD19. Based on its molecular
characteristics, in particular its molecular weight, we expect AFM11 will have a longer half-life than
blinatumomab, a bispecific antibody also targeted against CD19 and CD3 developed by Amgen, and
approved in the United States and Europe. AFM11 has shown 100-fold higher affinity to CD3 resulting
in up to 40-fold greater cytotoxic potency at low T-cell counts compared to blinatumomab. We
therefore believe it may have an efficacy advantage, especially in immunocompromised patients.
Although the PK of TandAbs is longer as compared to Amgen’s BiTEs such as Blincyto, AFM11 might
have a convenience advantage due to its half-life and we are exploring different dosing regimens in
our clinical studies to address specific features relating to T-cell engagement, which may require
longer infusion times. We have initiated a phase 1 dose ranging study of AFM11 designed to evaluate
safety and tolerability and to potentially assess anti-tumor activity after four weeks of therapy in NHL
patients. The amended study protocol was approved by the applicable regulatory authorities in the
third quarter of 2015. We have opened new study sites to expedite recruitment into the study. A phase
1 dose-finding clinical study of AFM11 in patients with acute lymphocytic leukemia, or ALL,
commenced in the third quarter of 2016 and is enrolling. We anticipate providing a progress update on
both studies in the first half of 2017.
We are developing AFM24, an NK-cell-engaging bispecific antibody targeting EGFR-wild type, which
represents another validated antigen expressed by a variety of solid tumors. Constitutive EGFR
activation through amplification or dysregulation plays an important role in the pathophysiology of
numerous solid cancers, such as colorectal cancer (CRC), non-small cell lung cancer (NSCLC) or
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squamous cell carcinomas of the head and neck (HNSCC). Based on the preclinical efficacy and
safety data in cynomolgus monkey, we expect to provide an update on the program in the first half of
2017. As planned, following the selection of AFM24 as a solid tumor candidate, we have deprioritized
development of our preclinical solid tumor programs, AFM21 and AFM22, targeting Epidermal Growth
Factor Receptor variant III, or EGFRvIII.
Amphivena’s product candidate, AMV564, is a CD33/CD3-specific T-cell TandAb. In preclinical
studies, AMV564, which was derived from our TandAb platform, has demonstrated potent and
selective cytotoxic activity in AML patient samples as well as robust tumor growth inhibition and a
complete elimination of leukemic blasts in xenograft models. Amphivena has recently initiated a first-
in-human phase 1 dose escalation and expansion trial of AMV564 in patients with relapsed or
refractory acute myeloid leukemia (AML)..
In addition, we have been exploring trispecific Abs for various undisclosed targets which are currently
at a discovery stage to be developed for indications such as multiple myeloma (MM), as well as
tetravalent, bispecific alternative antibody formats (AAFs) for NK-cell engagement offering varying
PK/PD profiles relevant to certain diseases.
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Operating results
To date, we have financed our operations primarily through our public offerings of our common
shares, private placements of equity securities, the incurrence of loans including convertible loans and
through government grants and milestone payments for collaborative research and development
services. Through December 31, 2016, we have raised an aggregate of €176.2 million through the
issuance of equity and incurrence of loans. To date, we have not generated any revenues from
product sales or royalties. Based on our current plans, we do not expect to generate product or royalty
revenues unless and until we or any collaboration partner obtain marketing approval for, and
commercialize, any of our product candidates.
We have generated losses since we began our drug development operations in 2000. For the year
ended December 31, 2016, we incurred a net loss of €32.2 million. As of December 31, 2016, we had
an accumulated deficit of €152.4 million.
We expect to continue incurring losses as we continue our preclinical and clinical development
programs, apply for marketing approval for our product candidates and, subject to obtaining regulatory
approval for our product candidates, build a marketing and sales team to commercialize our product
candidates. Our profitability is dependent upon the successful development, approval, and
commercialization of our product candidates and achieving a level of revenues adequate to support
our cost structure. We may never achieve profitability, and unless and until we do, we will continue to
need to raise additional cash. We intend to fund future operations through additional equity and debt
financings, and we may seek additional capital through arrangements with strategic partners or from
other sources.
Collaboration Agreements
We have entered into strategic collaborations for some of our therapeutic programs. As part of our
business development strategy, we aim to increase the number of our research collaborations in order
to derive further value from our platforms and more fully exploit their potential. Key terms of our current
material collaborations are summarized below.
Amphivena
Pursuant to a July 2013 license and development agreement, which amended and restated a 2012
license agreement between us and Amphivena Therapeutics, Inc., or Amphivena, based in San
Francisco, California, we licensed certain technology to Amphivena that enables Amphivena to
develop a product candidate for hematologic malignancies. In exchange for the technology license to
Amphivena, we received shares of stock of Amphivena, and, in connection with an equity financing
involving us and other third-party investors, we made cash investments in Amphivena in exchange for
additional shares of stock and entered into certain related agreements governing our rights as a
shareholder of Amphivena.
Amphivena separately entered into a warrant agreement with Janssen Biotech Inc. that gave Janssen
the option to acquire Amphivena following IND acceptance by the FDA of such product candidate.
Amphivena retains full rights to the product candidate following the decision by Janssen not to
exercise its option to acquire Amphivena upon effectiveness of the product candidate’s IND
application in July 2016.
Pursuant to the July 2013 license and development agreement with Amphivena, we historically
performed certain services for Amphivena related to the development of a product candidate for
hematological malignancies, and granted Amphivena certain product and technology licenses, each of
which included the right to grant sublicenses to its affiliates or third parties through multiple tiers,
subject to certain notice requirements. In consideration for the research and development work that
was performed prior to IND acceptance, Amphivena paid us service fees totaling approximately €14.3
million (net of our share in funding Amphivena) upon the achievement of milestones and phase
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progressions as described under the license and development agreement. We do not expect to
provide any additional significant services or generate significant additional revenues under the
license and development agreement.
We recognized revenues of €4.4 million, €1.8 million, €4.8 million and €3.4 million in 2013, 2014, 2015
and 2016 respectively (net of our total investments of €1.7 million), €0.0 million was deferred as of
December 31, 2016 (December 31, 2015: €2.8 million deferred).
We are paid in euros under the license and development agreement.
Although the license and development agreement with Amphivena expired when the IND became
effective, we continue to provide services to complete the remaining deliverables (i.e. material
transfer) required under the agreement, and are financially supporting the future clinical development
of AMV564 with €1.6 million in financing, €1.0 million of which was invested in Amphivena in October
2016 and €0.6 million of which was invested in March 2017. As of March 15, 2017, the cash
investments in relation to the July 2013 license and development agreement and cash investments
made in October 2016 and March 2017 totaled $2.6 million (€2.3 million), and we owned
approximately 23% of the outstanding equity of Amphivena on a fully diluted basis.
The Leukemia & Lymphoma Society
In August 2013, we entered into a research funding agreement with The Leukemia & Lymphoma
Society, or LLS, for the clinical development of AFM13. Pursuant to the research funding agreement,
LLS agreed to co-fund the clinical phase 2a development of AFM13 and to contribute up to
approximately $4.4 million (€4.2 million) over two years to support the project. We have agreed to
match LLS’s contributions toward the project budget. Our receipt of the $4.4 million total that LLS has
agreed to contribute is conditioned on the achievement of certain milestones in connection with the
development of AFM13.
The research funding agreement was amended in June 2016 to reflect a shift in development focus of
AFM13 due to recent changes within the rapidly evolving cancer immunotherapy treatment landscape
resulting in a shift to development of combination therapeutic approaches. Having successfully
established a collaboration with Merck in January 2016 to test AFM13 in combination with Keytruda in
relapsed/refractory Hodgkin lymphoma patients, we have prioritized the development of AFM13 as a
combination therapy. Consequently, we have agreed with LLS to amend the research funding
agreement so that the milestones now relate primarily to the development of AFM13 as a combination
therapy.
As of December 31, 2016 we have met five milestones and we recognized revenues of €1.1 million,
€1.6 million and €0.4 million in 2014, 2015 and 2016, respectively. We must use the funding provided
by LLS exclusively with the development program, and return any excess funding to LLS.
In consideration of LLS’s payments to us, we have agreed to pay LLS a mid-single digit royalty on net
sales of products containing AFM13 until we have paid LLS a low single digit multiple of the funding
they provided to us. After we have reached this initial royalty cap, we will pay LLS a sub-single digit
royalty on net sales until the earlier of (i) the expiration of the last to expire patent covering the AFM13
products and (ii) ten years after the initial royalty cap is satisfied. These royalty payments are
calculated on a country-by-country and product-by-product basis. We have also agreed to make
certain low-to-mid-single digit royalty payments to LLS in the event of certain transfers of rights to any
product containing AFM13 or in the event we undergo certain change of control transactions, in each
case up to the royalty cap described above. Amounts paid to us under our agreement with LLS are
paid in U.S. dollars.
Affimed Annual Report 2016
10
Merck
In January 2016, we entered into a collaboration with Merck Sharp & Dohme B.V., or Merck, based in
Haarlem, The Netherlands, to evaluate AFM13 in combination with Merck’s anti PD-1 therapy,
Keytruda (pembrolizumab). Under the terms of the agreement, Affimed will fund and conduct a phase
1b clinical trial to investigate the combination of Keytruda with Affimed’s proprietary drug candidate
AFM13 for the treatment of patients with relapsed/refractory HL. Merck will supply Affimed with
Keytruda for the clinical trial. Each party is responsible for its own internal costs and expenses to
support the clinical trial (including the costs for the respective trial compound), while we are bearing all
other costs associated with the trial.
The purpose of the study is to establish a dosing regimen for this combination therapy and assess its
safety and efficacy.
MD Anderson
In January 2017, we entered into a clinical development and commercialization collaboration with The
University of Texas MD Anderson Cancer Center, or MD Anderson, to evaluate AFM13 in combination
with MD Anderson’s NK-cell product. MD Anderson will be responsible for conducting preclinical
research activities aimed at investigating its NK-cells derived from umbilical cord blood in combination
with AFM13, which are intended to be followed by a phase 1 trial. We will fund research and
development expenses for this collaboration and hold an option to exclusive worldwide rights to
develop and commercialize any product developed under the collaboration.
Affimed Annual Report 2016
11
Financial Operations Overview
Revenue
To date, our revenues have consisted principally of collaboration and service revenue.
Collaboration revenue. Collaboration revenue of €2.9 million for the year ended December 31, 2014
was from the achievement of the second milestone under the license and development agreement
with Amphivena (€1.8 million) and from the LLS collaboration (€1.1 million). Collaboration revenue of
€6.3 million for the year ended December 31, 2015 was from the achievement of the third milestone
under the license and development agreement with Amphivena (€2.4 million), from research and
development services under the license and development agreement with Amphivena (€2.3 million)
and from the LLS collaboration (€1.6 million). Collaboration revenue of €3.8 million for the year ended
December 31, 2016 was from research and development services under the license and development
agreement with Amphivena (€3.4 million) and from the LLS collaboration (€0.4 million).
Service revenue. Service revenue is primarily revenue from service contracts entered into by
AbCheck, our wholly owned, independently operated antibody screening platform. We recognized
€0.5 million, €1.3 million and €2.4 million of service revenue in 2014, 2015 and 2016, respectively.
Service revenue of AbCheck is dependent from third party contracts as well as from the utilization of
the Unit by Affimed. The increase or decrease of the use of AbCheck’s service capabilities by Affimed
has an impact on AbCheck’s ability to generate third party revenues.
In the future, the timing of our revenue may vary significantly from the receipt of the related cash flows,
as the revenue from some upfront or initiation payments is deferred and recognized as revenue over
the estimated service period, while other revenue is earned when received, such as milestone
payments or service fees.
Our revenue has varied substantially, especially due to the impact of collaboration revenue received
from Amphivena. The amount of future revenue is dependent on our ability to conclude new
collaboration arrangements and the terms we are able to negotiate with our partners.
Other Income
Other Income in 2014, 2015 and 2016 primarily relates to earned income through several grants
and/or contracts with the German government, the European Union and other educational institutions
on behalf of the German government, primarily with respect to research and development activities
related to the use of the TandAb technology in various indication areas.
Research and Development Expenses
Research and development expenses consist principally of:
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
salaries for research and development staff and related expenses, including management
benefits;
costs for production of preclinical compounds and drug substances by contract manufacturers;
fees and other costs paid to contract research organizations in connection with additional
preclinical testing and the performance of clinical trials;
costs of related facilities, materials and equipment;
costs associated with obtaining and maintaining patents and other intellectual property;
(cid:1) amortization and depreciation of tangible and intangible fixed assets used to develop our
product candidates; and
Affimed Annual Report 2016
12
(cid:1) expenses for share-based payments.
We expect that our total research and development expenses in 2017 will be in the range of €26 to
€30 million. Our research and development expenses primarily relate to the following key programs:
(cid:1) AFM13. We initiated a phase 1b study investigating the combination of AFM13 with Merck’s
anti-PD-1 antibody Keytruda (pembrolizumab) in patients with r/r HL in 2016. Different dosing
protocols are being explored in the investigator-initiated monotherapeutic phase 2a clinical
trial of AFM13 in relapsed/refractory Hodgkin Lymphoma, or r/r HL, to allow for improved
exposure in more heavily pretreated patient populations. The study is expected to begin
recruiting under the new study design in the first half of 2017. In addition, we are planning a
clinical study of AFM13 in patients with CD30+ lymphoma. We anticipate that our research
and development expenses in 2017 for AFM13 will be lower than in 2016 due to the reduced
need to produce AFM13 clinical trial material and related lower costs.
(cid:1) AFM11. The phase 1 clinical trial of AFM11 in patients with non-Hodgkin Lymphoma, or NHL,
is ongoing and recruiting with a modified dose regimen. A phase 1 clinical study of AFM11 in
patients with ALL commenced in the third quarter of 2016 and is enrolling. Therefore, we
anticipate that our research and development expense for the AFM11 program will increase in
2017.
(cid:1) Other development programs. Our other research and development expenses relate to our
preclinical studies of our solid tumor candidate, AFM24, our multiple myeloma program
AFM26, our Amphivena collaboration (through the third quarter of 2016) and early stage
development / discovery activities. We have allocated a material amount of our resources to
such discovery activities. The expenses mainly consist of salaries and manufacturing costs for
pre-clinical and clinical study material and are expected to increase in 2017.
(cid:1)
Infrastructure costs. We incur a significant amount of costs associated with our research and
development that are non-project specific, including intellectual property-related expenses,
depreciation expenses and facility costs. Because these are less dependent on individual
ongoing programs, they are not allocated to specific projects. We assume that facility costs for
further laboratory space and IP related expenses may increase over time.
Since January 1, 2012, we have cumulatively spent €84.9 million on research and development. In the
years ended December 31, 2014, 2015 and 2016, we spent €9.6 million, €22.0 million and €30.2
million on research and development; €4.2 million, €10.0 million and €11.8 million thereof on AFM13;
and €1.2 million, €0.8 million and €2.5 million thereof on AFM11. Our research and development
expenses may vary substantially from period to period based on the timing of our research and
development activities, including due to timing of initiation of clinical trials and enrollment of patients in
clinical trials. Research and development expenses are expected to increase as we advance and
broaden the clinical development of AFM13 and AFM11 and further advance the research and
development of our preclinical product candidates. The successful development of our product
candidates is highly uncertain. At this time we cannot reasonably estimate the nature, timing and
estimated costs of the efforts that will be necessary to complete the development of, or the period, if
any, in which material net cash inflows may commence from, any of our product candidates. This is
due to numerous risks and uncertainties associated with developing drugs, including the uncertainty
of:
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other
related activities;
the cost of manufacturing clinical supplies and establishing commercial supplies of our product
candidates and any products that we may develop;
the number and characteristics of product candidates that we pursue;
the cost, timing, and outcomes of regulatory approvals;
the cost and timing of establishing sales, marketing, and distribution capabilities; and
Affimed Annual Report 2016
13
(cid:1)
the terms and timing of any collaborative, licensing, and other arrangements that we may
establish, including any milestone and royalty payments thereunder.
A change in the outcome of any of these variables with respect to the development of AFM13, AFM11
or any other product candidate that we may develop could mean a significant change in the costs and
timing associated with the development of such product candidate. For example, if the U.S. Food and
Drug Administration, or FDA, or other regulatory authority were to require us to conduct preclinical and
clinical studies beyond those which we currently anticipate will be required for the completion of
clinical development, if we experience significant delays in enrollment in any clinical trials or if we
encounter difficulties in manufacturing our clinical supplies, we could be required to expend significant
additional financial resources and time on the completion of the clinical development.
General and Administrative Expenses
Our general and administrative expenses consist principally of:
(cid:1)
salaries for employees other than research and development staff, including benefits;
(cid:1) business development expenses, including travel expenses;
(cid:1) professional fees for auditors and other consulting expenses not related to research and
development activities;
(cid:1) professional fees for lawyers not related to the protection and maintenance of our intellectual
property;
(cid:1)
(cid:1)
cost of facilities, communication and office expenses;
IT expenses;
(cid:1) amortization and depreciation of tangible and intangible fixed assets not related to research
and development activities; and
(cid:1) expenses for share-based payments.
We expect that our general and administrative expenses in 2017 will be on approximately the same
level compared to the expenses in 2016, and will increase in the future as our business expands.
These public company-related increases will likely include costs of additional personnel, additional
legal fees, accounting and audit fees, managing directors’ and supervisory directors’ liability insurance
premiums and costs related to investor relations. In addition, we may grant share-based compensation
awards to key management personnel and other employees.
Results of Operations
The numbers below have been derived from our audited consolidated financial statements for the
years ended December 31, 2014, 2015 and 2016. The discussion below should be read along with
these financial statements, and it is qualified in its entirety by reference to them.
Comparison of the years ended December 31, 2015 and 2016
Total Revenue:
Other income-net
Research and development expenses
General and administrative expenses
Year ended December 31,
2015
(in € thousand)
2016
7,562
651
(22,008)
(7,548)
6,314
145
(30,180)
(8,323)
Affimed Annual Report 2016
14
Operating income/(loss)
Finance income/(costs)-net
Income/(Loss) before tax
Income taxes
Income/(loss) for the period
Total comprehensive income/(loss)
Earnings/(loss) per common share in € per share
(21,343)
1,104
(20,239)
0
(20,239)
(20,239)
(0.71)
(32,044)
(230)
(32,274)
58
(32,216)
(32,216)
(0.97)
Revenue
Revenue decreased 17% from €7.6 million in the year ended December 31, 2015 to €6.3 million for
the year ended December 31, 2016. In 2016 and 2015, €3.4 million and €4.8 million of revenue related
to the Amphivena collaboration, net of funding Amphivena with €1.0 million (2015: funding of €0.3
million). Additional revenue of €2.4 million related to AbCheck services (2015: €1.1 million), and €0.4
million (2015: €1.6 million) to the LLS collaboration.
Research and development expenses
Year ended
December 31,
R&D Expenses by Project
2015
2016
Change %
Project
AFM13 ....................................................................
AFM11 ....................................................................
Other projects and infrastructure costs .................
Share-based payment expense/(credit) .................
Total .......................................................................
(in € thousand)
10,004
800
10,593
611
22,008
11,847
2,471
14,684
1,178
30,180
18%
209%
39%
93%
37%
Research and development expenses increased 37% from €22.0 million in the year ended December
31, 2015 to €30.2 million in the year ended December 31, 2016, mainly due to higher expenses for
AFM13, AFM11 and other projects and infrastructure. For the year 2017, we anticipate research and
development expenses to be on approximately the same level due to ongoing clinical trials with
AFM13 (phase 1b combination trial of AFM13 with Merck’s anti-PD-1 antibody Keytruda in patients
with relapsed/refractory HL and phase 2a clinical trial of AFM13 in relapsed/refractory HL), the
expected start of a clinical trial of AFM13 in patients with CD30+ lymphoma, an additional clinical trial
with AFM11 (phase 1 dose ranging study with AFM11 in ALL patients), production of clinical trial
material and preclinical research activities. The variances in project related expenses between the
year ended December 31, 2015 and the corresponding period in 2016 are mainly due to the following
projects:
(cid:1) AFM13. In the year ended December 31, 2016, we incurred higher expenses than in
the year ended December 31, 2015 primarily due to the ongoing phase 2a study and
our ongoing manufacturing activities for clinical trial material including material for our
additional clinical trials with AFM13, as well as the conduct and preparation of the
phase 1b combination trial of AFM13 with Merck’s anti PD-1 antibody Keytruda in
patients with r/r HL.
(cid:1) AFM11. In the year ended December 31, 2016, research and development expenses
were significantly higher than in the year ended December 31, 2015, primarily due to
expenses inter alia of the opening of new sites in Central and Eastern Europe for our
ongoing phase 1 study in NHL and additional expenses associated with the
preparation and initiation of a phase 1 dose-finding study in ALL.
(cid:1) Other projects and infrastructure costs. In the year ended December 31, 2016,
expenses were significantly higher than in the year ended December 31, 2015
Affimed Annual Report 2016
15
primarily due to higher expenses incurred in relation to our discovery/early stage
development activities including manufacturing costs for pre-clinical and clinical study
material and preclinical activities for AFM24 and AFM26. We also incurred higher
costs associated with our research and development that are non-project specific,
including intellectual property-related expenses, depreciation expenses and facility
costs. Because these costs are less dependent on individual ongoing programs, they
are not allocated to specific projects.
General and administrative expenses
General and administrative expenses increased 10% from €7.5 million in the year ended December 31,
2015 to €8.3 million in the year ended December 31, 2016. The increase is primarily related to higher
expenses for share-based payments of €2.4 million (2015: €1.6 million).
Finance income / (costs)-net
Finance costs for the year ended December 31, 2016 were €0.2 million, compared with finance income
of €1.1 million for the year ended December 31, 2015. Finance costs in the year ended December 31,
2016 include foreign exchange gains of €0.7 million while finance income for the year ended December
31, 2015 include foreign exchange gains of €1.8 million. Finance costs relate primarily to our loan facility
with Silicon Valley Bank and our former loan facility with Perceptive.
Income tax expense
During the year ended December 31, 2016, we recorded a tax income of €58,000 due to changes in
deferred taxes.
Comparison of the years ended December 31, 2014 and 2015
Total Revenue:
Other income/(expenses)—net
Research and development expenses
General and administrative expenses
Operating income/(loss)
Finance income/(costs)—net
Income/(Loss) before tax
Income taxes
Income/(loss) for the period
Total comprehensive income/(loss)
Earnings/(loss) per common share in € per share
Revenue
Year ended
December 31,
2014
2015
(in € thousand)
3,382
381
(9,595)
(2,346)
(8.178)
7,753
(425)
166
(259)
(259)
(0.01)
7,562
651
(22,008)
(7,548)
(21,343)
1,104
(20,239)
0
(20,239)
(20,239)
(0.71)
Revenue increased 124% from €3.4 million in the year ended December 31, 2014 to €7.6 million for
the year ended December 31, 2015, mainly due to higher revenues from the Amphivena collaboration
and higher service revenues at AbCheck in 2015.
Affimed Annual Report 2016
16
Research and development expenses
R&D Expenses by Project
Project
AFM13 ..............................................................................
AFM11 ..............................................................................
Other projects and infrastructure costs ............................
Share-based payment expense/(credit) ...........................
Total .................................................................................
Year ended
December 31,
2014
2015
Change %
(in € thousand)
4,176
1,249
5,650
(1,480)
9,595
10,004
800
10,593
611
22,008
140%
(36%)
87%
-
129%
Research and development expenses increased 129% from €9.6 million in the year ended December
31, 2014 to €22.0 million in the year ended December 31, 2015, mainly due to higher expenses for
AFM13, other projects and infrastructure. The variances in project related expenses between the year
ended December 31, 2014 and the corresponding period in 2015 are mainly due to the following
projects:
• AFM13. In the year ended December 31, 2015, we incurred higher expenses due to the
beginning of the phase 2a clinical trial and the manufacturing of clinical trial material for this
study.
• AFM11. In the year ended December 31, 2015, clinical expenses were lower than in the year
ended December 31, 2014 primarily due to higher expenses associated with the production of
the clinical study material and the preparation of the phase 1 clinical study of AFM11 in 2014,
whereas in 2015 we incurred expenses for the ongoing phase 1 study as well as expenses in
relation to the trial protocol amendment.
• Other projects and Infrastructure costs. In the year ended December 31, 2015, expenses
increased significantly primarily due to higher expenses associated with our internal R&D
activities in 2015. Other projects comprise expenses incurred in relation to the AFM21
program and our discovery/early stage development activities. We incur a significant amount
of costs associated with our research and development that are non-project specific, including
intellectual property-related expenses, depreciation expenses and facility costs. Because
these are less dependent on individual ongoing programs, they are not allocated to specific
projects.
General and administrative expenses
General and administrative expenses increased 222% from €2.3 million in the year ended December
31, 2014 to €7.5 million in the year ended December 31, 2015. In 2014, general and administrative
expenses were largely affected by a credit to the share-based payment expense of €3.4 million
resulting from a re-measurement gain at consummation of the initial public offering.
Finance income / (costs)-net
We recognized finance income net for the year ended December 31, 2015 of €1.1 million. The income
reflects the net gains from foreign exchange differences less interest expense for borrowings under
the Perceptive Credit Facility.
Finance income decreased in the year ended December 31, 2015 as compared to the year ended
December 31, 2014. The year ended December 31, 2014 was primarily affected by the gain from the
exchange of preferred shares of Affimed Therapeutics AG into common shares of Affimed N.V. and
the decrease in the fair value of the derivative conversion feature embedded in the convertible loan
Affimed Annual Report 2016
17
totaling €10.9 million. These preferred shares and convertible loan were no longer outstanding in
2015.
Income tax expense
During the year ended December 31, 2015, we did not incur any income tax.
Liquidity and Capital Resources
Since inception, we have incurred significant operating losses. For the years ended December 31,
2014, 2015 and 2016, we incurred net losses of €0.3 million, €20.2 million and €32.2 million,
respectively. To date, we have financed our operations primarily through public offerings of our
common shares, private placements of equity securities and loans, grants and revenues from
collaboration partners. As of December 31, 2016, we had cash and cash equivalents and financial
assets, which we refer to as liquidity, of €44.9 million. We subsequently raised approximately $17.7
million from a public offering of our common shares in January and February 2017.
Our cash and cash equivalents and financial assets consist primarily of deposits in savings and
deposit accounts with original maturities of three months or less and certificates of deposit with original
maturities of six months which generate a small amount of interest income. We expect to continue this
investment philosophy.
Cash Flows
Comparison of the years ended December 31, 2015 and 2016
The table below summarizes our consolidated statement of cash flows for the years ended December
31, 2015 and 2016:
Year ended December
31,
Net cash used in operating activities ................................................................
Net cash used for investing activities ................................................................
Net cash generated from financing activities ....................................................
Net changes to cash and cash equivalents ......................................................
Cash and cash equivalents at the beginning of the year ..................................
Exchange-rate related changes of cash and cash equivalents ........................
Cash and cash equivalents at the end of the year ............................................
2016
2015
(in € thousand)
(18,535)
(277)
53,498
34,686
39,725
2,329
76,740
(32,127)
(9,149)
(236)
(41,512)
76,740
179
35,407
The increase in net cash used in operating activities by 73% from €18.5 million in the year ended
December 31, 2015 to €32.1 million in the year ended December 31, 2016 was mainly due to higher
cash expenditure for research and development efforts.
The increase in net cash used for investing activities from €0.3 million in the year ended December 31,
2015 to €9.1 million in the year ended December 31, 2016 was due to net cash paid for investments in
financial assets (certificates of deposit) amounting to €8.9 million (amount of cash paid for investments
less cash received from maturity of investments).
Net cash generated from financing activities amounted to €53.5 million in the year ended December
31, 2015 while net cash used in financing activities was €0.2 million in the year ended December 31,
2016. The 2016 amount includes the early repayment of the Perceptive Credit Facility and the
borrowing of funds under the SVB Credit Facility.
Affimed Annual Report 2016
18
Comparison of the years ended December 31, 2014 and 2015
The table below summarizes our consolidated statement of cash flows for the years ended December
31, 2014 and 2015:
Net cash used in operating activities ...............................................................
Net cash used for investing activities ...............................................................
Net cash generated from financing activities ...................................................
Net changes to cash and cash equivalents .....................................................
Cash and cash equivalents at the beginning of the year .................................
Exchange-rate related changes of cash and cash equivalents ......................
Cash and cash equivalents at the end of the year ...........................................
Year ended December 31,
2014
2015
(in € thousand)
(10,547)
(298)
44,889
34,044
4,151
1,530
39,725
(18,535)
(277)
53,498
34,686
39,725
2,329
76,740
The increase in net cash used in operating activities by 76% from €10.5 million in the year ended
December 31, 2014 to €18.5 million in the year ended December 31, 2015 was mainly due to higher
cash expenditure for research and development efforts and higher general and administrative cost.
Net cash used for investing activities remained unchanged with €0.3 million.
Net cash generated from financing activities increased from €44.9 million in the year ended December
31, 2014 to €53.5 million in the year ended December 31, 2015. The 2015 amount mainly includes the
net proceeds from the public offering in May 2015 and the net proceeds received from the private
placement in October 2015.
Cash and Funding Sources
Our liquidity as of December 31, 2016 was €44.9 million and was €53.7 million as of March 31, 2017.
Funding sources generally comprise proceeds from the issuance of equity instruments, loans,
revenues from collaboration agreements and government grants.
In January 2015, we announced that we had been awarded a €2.4 million ($3 million) grant from the
German Federal Ministry of Education and Research (BMBF). The grant, awarded under the BMBF’s
“KMU-innovative: Biotechnology-BioChance” program, will cover approximately 40% of expenses for a
research and development program to develop multi-specific antibodies for the treatment of multiple
myeloma. The grant payments are scheduled to be made periodically through the end of 2017.
On May 12, 2015, we announced the closing of our offering of 5,750,000 common shares at a public
offering price of $7.15 per common share. The total amount includes 750,000 common shares issued
pursuant to the underwriters’ option to purchase additional shares which was exercised on May 7, 2015.
After deducting the underwriting discounts and other offering expenses, the net proceeds of the public
offering were €33.5 million ($37.5 million).
On October 14, 2015, we sold 3.3 million shares to SGR Sagittarius Holding AG, an existing shareholder
affiliated with Calibrium AG (formerly Aeris Capital AG), in a private placement exempt from registration,
resulting in net proceeds to us of €19.1 million ($21.8 million).
In October 2015, we entered into an at-the-market sales agreement (“Sales Agreement”) with Cowen &
Company, LLC (“Cowen”) pursuant to which we may from time to time, at our option, offer and sell our
common shares having an aggregate offering price of up to $50 million through Cowen, acting as our
sales agent. As of March 15, 2017, we had sold 32,211 of our common shares under the Sales
Agreement at an average price of $2.11 per share for net proceeds of approximately $67,938. We plan
to use proceeds from the Sales Agreement for general corporate purposes.
On November 30, 2016, our subsidiary Affimed GmbH entered into a loan agreement with Silicon Valley
Bank, a California corporation (“SVB”), as lender, which we fully guarantee. The loan agreement
Affimed Annual Report 2016
19
provides us with a senior secured term loan facility (the “SVB Credit Facility”) for up to €10.0 million,
available in two tranches, the availability of which is contingent on our satisfaction of certain conditions.
On December 8, 2016, we drew down the initial tranche of €5.0 million. We may draw up to an additional
€5.0 million or €2.5 million on or before May 31, 2017, in the case of each tranche, contingent on the
satisfaction by such date of certain conditions as set forth in the loan agreement. In connection with the
initial drawdown, we issued SVB a warrant to purchase 166,297 of our common shares, at an exercise
price of $2.00 per common share.
The interest rate on amounts borrowed under the SVB Credit Facility is calculated as the sum of (i)
one-month EURIBOR plus (ii) an applicable margin of 5.5%, with EURIBOR deemed to equal zero
percent if EURIBOR is less than zero percent. The SVB Credit Facility has a maturity date of (i) May
31, 2020, if we draw down only under Tranche 1 or under Tranche 2a as well, with an interest-only
period through (a) June 1, 2017 if only Tranche 1 is drawn down, or (b) December 1, 2017 if Tranche
2a is drawn down as well, in each case with amortized payments of principal and interest thereafter in
equal monthly installments; or (ii) November 30, 2020, if we draw down under Tranche 2b, with an
interest only period through March 1, 2018, with amortized payments of principal and interest
thereafter in equal monthly installments. Borrowings under the SVB Credit Facility are secured by a
pledge of 100% of our shares in Affimed GmbH, all intercompany accounts receivables owed by our
subsidiaries to us and a security assignment of essentially all our bank accounts, inventory, trade
receivables and payment claims as specified in the loan agreement governing the facility.
On January 25, 2017, we sold 10,000,000 of our common shares at a price of $1.80 per share in an
underwritten public offering and received approximately $16.6 million in net proceeds, after deducting
underwriting discounts and commissions and other offering expenses. The underwriters partially
executed an option to purchase additional shares and on February 9, 2017 we sold an additional
646,762 shares at a price of $1.80 per share and received approximately $1.1 million, after deducting
underwriting discounts and commissions and other offering expenses.
Funding Requirements
We expect that we will require additional funding to complete the development of our product
candidates and to continue to advance the development of our other product candidates. In addition,
we expect that we will require additional capital to commercialize our product candidates AFM13,
AFM11, AFM24 and AFM26. If we receive regulatory approval for AFM13, AFM11, AFM24 or AFM26,
and if we choose not to grant any licenses to partners, we expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing and distribution, depending on where we
choose to commercialize. We also expect to incur additional costs associated with operating as a
public company. Additional funds may not be available on a timely basis, on favorable terms, or at all,
and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term
business strategy. If we are not able to raise capital when needed, we could be forced to delay,
reduce or eliminate our product development programs or commercialization efforts.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses
and capital expenditure requirements at least until the end of 2018. We have based this estimate on
assumptions that may prove to be incorrect, and we could use our capital resources sooner than we
currently expect. Our future funding requirements will depend on many factors, including but not
limited to:
(cid:1)
(cid:1)
the scope, rate of progress, results and cost of our clinical trials, nonclinical testing,
and other related activities;
the cost of manufacturing clinical supplies, and establishing commercial supplies, of
our product candidates and any products that we may develop;
(cid:1)
the number and characteristics of product candidates that we pursue;
Affimed Annual Report 2016
20
(cid:1)
(cid:1)
(cid:1)
the cost, timing, and outcomes of regulatory approvals;
the cost and timing of establishing sales, marketing, and distribution capabilities; and
the terms and timing of any collaborative, licensing, and other arrangements that we
may establish, including any required milestone and royalty payments thereunder.
To address our financing needs, we may raise additional capital through the sale of equity or
convertible debt securities. In such an event, your ownership interest will be diluted, and the terms of
these securities may include liquidation or other preferences that adversely affect your rights as a
holder of our common shares.
For more information as to the risks associated with our future funding needs, see “Risk
Management.”
JOBS Act Exemptions
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among
other things, reduce certain reporting requirements for an “emerging growth company.” As an
emerging growth company, we are electing to take advantage of the following exemptions:
(cid:1) not providing an auditor attestation report on our system of internal controls over financial
reporting;
(cid:1) not providing all of the compensation disclosure that may be required of non-emerging growth
public companies under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection
Act;
(cid:1) not disclosing certain executive compensation-related items such as the correlation between
executive compensation and performance and comparisons of the Chief Executive Officer’s
compensation to median employee compensation; and
(cid:1) not complying with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor
discussion and analysis).
These exemptions will apply for a period of five years following the completion of our initial public
offering (through 2019) or until we no longer meet the requirements of being an “emerging growth
company,” whichever is earlier. We would cease to be an emerging growth company if we were to
have more than $1.0 billion in annual revenue or have more than $700 million in market value of our
common shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a
three-year period.
Affimed Annual Report 2016 21
Risk Management
Our business is exposed to specific industry risks, as well as general business risks. Our financial
condition or results of operations could be materially and adversely affected if any of these risks
occurs, and as a result, the market price of our common shares could decline. This Annual Report
also contains forward-looking statements that involve risks and uncertainties. Our actual results could
differ materially and adversely from those anticipated in these forward-looking statements as a result
of certain factors.
Listed below are the risks perceived by management to be the most significant. The risks faced by
Affimed during 2016 are not limited to this list; a more comprehensive set of risks are described in
Affimed’s form 20-F which was filed with the Securities Exchange Commission on March 30, 2017,
and a copy of which is available from Affimed’s website.
Risks Related to our Business Strategy
Any failure or delay in commencing or completing clinical trials for our products could severely harm
our business. To obtain the requisite regulatory approvals to market and sell any of our products, we
must demonstrate through extensive pre-clinical tests and clinical trials that the products are safe and
effective in humans. Pre-clinical tests and clinical trials are expensive, can take many years and have
an uncertain outcome. A failure of one or more of our pre-clinical programs on clinical trials could
occur at any stage of testing.
Positive or timely results from pre-clinical tests and early clinical trials do not ensure positive or timely
results in later stage clinical trials or product approval by the European Medicines Agency, or EMA,
the U.S. Food and Drug Administration, or FDA or any other regulatory authority. Products that show
positive preclinical or early clinical results often fail in later stage clinical trials.
Any delay in commencing or completing clinical trials for our product candidates would delay
commercialization of our products and severely harm our business and financial condition. It is also
possible that none of our product candidates will complete clinical trials in any of the markets in which
we intend to sell those product candidates. Accordingly, we would not receive the regulatory approvals
needed to market our product candidates.
The regulatory approval process is costly and lengthy and we may not be able to successfully obtain
all required regulatory approvals. The pre-clinical development, clinical trials, manufacturing,
marketing and labeling of pharmaceuticals and medical devices are all subject to extensive regulation
by governmental authorities and agencies in the European Union (“EU”), the US and other
jurisdictions.
We must obtain regulatory approval for products before marketing or selling any of them. The approval
process is typically lengthy and expensive, and approval is never certain.
Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will
require us to incur additional costs and significant delays.
Our products will remain subject to ongoing regulatory review even if they receive marketing approval.
If we fail to comply with continuing regulations, we could lose these approvals and the sale of our
products could be suspended.
Even if we receive regulatory approval to market a particular product, the approval could be
conditional on us conducting additional costly post-approval studies or could limit the indicated uses
included in the labeling of our products. Moreover, the product may later cause adverse effects that
limit or prevent its widespread use, force us to withdraw it from the market or impede or delay our
ability to obtain regulatory approvals in additional countries. In addition, the manufacturer of our
products, and their facilities, will continue to be subject to regulatory review and periodic inspections to
ensure adherence to applicable regulations. After receiving marketing approval, the manufacturing,
Affimed Annual Report 2016 22
labeling, packaging, adverse event reporting, storage, advertising, promotion and the product will
remain subject to extensive regulatory requirements.
Our products may not gain market acceptance. Sales of medical products depend on physicians’
willingness to prescribe the treatment, which is likely to be based on a determination by these
physicians that the products are safe and effective from a therapeutic and cost perspective relative to
competing treatments. We cannot predict whether physicians will make this determination in respect of
our products.
Even if our products achieve market acceptance, the market may prove not to be large enough to
allow us to generate significant revenues.
Our ability to generate revenue from any products that we may develop will depend on reimbursement
and pricing policies and regulations.
Our ability to commercialize our products may depend, in part, on the extent to which reimbursement
for our products will be available from government and health administration authorities, private health
insurers, managed care programs and other third-party payers.
Significant uncertainty exists as to the reimbursement status of newly approved healthcare products.
In many countries, healthcare and pharmaceutical products are subject to a regime of reimbursement
by government health authorities, private health insurers or other organizations. There is increasing
pressure from these organizations to limit healthcare costs by restricting the availability and level of
reimbursement.
Risks Related to our Financial Position and need for Additional Capital
We have a history of operating losses and anticipate that we will continue to incur losses for the
foreseeable future. We may never become profitable.
The business has incurred losses in each year since inception. These losses have arisen mainly from
costs incurred in research and development of our products and general and administrative expenses.
No assurance can be given that we will achieve profitability in the future. Furthermore, if our products
fail in clinical trials or do not gain regulatory approval, or if our products do not achieve market
acceptance, we may never achieve profitability.
Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent
periods.
We expect to need additional funding in the future, which may not be available to us on acceptable
terms, or at all, which could force us to delay or impair our ability to develop or commercialize our
products.
Our current available liquidity (including cash and cash equivalents and certificates of deposit) may not
be sufficient to finance our long term research, development and commercialization programs.
Therefore, additional funds will be required. There can be no assurance that additional funds will be
available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be
sufficient to enable us to continue to implement our long term business strategy. If we are unable to
raise such additional funds through collaboration arrangements or equity or debt financing, we may
need to delay, scale back or cease expenditures for some of our longer term research, development
and commercialization programs, or grant rights to develop and market products that we would
otherwise prefer to develop and market ourselves, thereby reducing their ultimate value to us. Our
inability to obtain additional funds necessary to operate the business could materially and adversely
affect the market price of our shares and all or part of an investment in our shares could be lost. In
Affimed Annual Report 2016 23
addition, to the extent we raise capital by issuing additional shares, shareholders’ equity interests
would be diluted.
Risks Related to Legal Compliance Matters
Our operations, including our research, development, testing and manufacturing activities, are subject
to numerous environmental, health and safety laws and regulations. If we fail to comply with such laws
and regulations, we could be subject to fines or other sanctions.
The third parties with whom we contract to manufacture our product candidates are also subject to
these and other environmental, health and safety laws and regulations. Liabilities they incur pursuant
to these laws and regulations could result in significant costs or in certain circumstances, an
interruption in operations, any of which could adversely impact our business and financial condition if
we are unable to find an alternate supplier in a timely manner.
Risks Related to Financial Reporting
Effective internal controls over financial reporting are necessary for us to provide reliable financial
reports and, together with adequate disclosure controls and procedures, are designed to prevent
fraud. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation could cause us to fail to meet our reporting obligations. Section 404 of the Sarbanes-
Oxley Act of 2002 requires management of public companies to develop and implement internal
controls over financial reporting and evaluate the effectiveness thereof.
A material weakness is a deficiency or a combination of deficiencies in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of our financial
statements will not be prevented or detected on a timely basis. No material weaknesses were
identified in connection with the preparation of our financial statements for the years ended December
31, 2015 and 2016. If the implemented internal controls fail to be effective in the future, it could result
in material misstatements in our financial statements, impair our ability to raise revenue, result in the
loss of investor confidence in the reliability of our financial statements and subject us to regulatory
scrutiny and sanctions, which in turn could harm the market value of our common shares.
Risk Management regarding Financial Instruments
Qualitative Disclosure about Market Risk
As a result of our operating and financing activities, we are exposed to market risks that may affect our
financial position and results of operations. Market risk is the potential to incur economic losses on risk
sensitive instruments arising from adverse changes in factors such as foreign exchange rate
fluctuations.
Our senior management is responsible for implementing and evaluating policies which govern our
funding, investments and any use of derivative financial instruments. Management monitors risk
exposure on an ongoing basis.
Credit risk
The Company offers services to its collaboration partners / clients with the possibility to pay with a
certain payment term. The credit risks on these payment terms have been and will continue to be
borne by the Company. These credit risks may increase in the future, which could have a material
adverse effect on its business and/or financial results. The company is aiming to negotiate advance
payments for services provided to clients or collaboration partners. The Company invoices its
collaboration partners, in relation to the contractual agreements (i.e. FTE rates, milestones reached,
etc.). The Company is therefore subject to a certain credit default risk.
Affimed Annual Report 2016 24
The cash and cash equivalents and certificates of depost are held with banks, which are rated BBB+
to AA- based on Standard & Poor’s and Moody’s.
Interest rate risks
The Group’s interest rate risk arises from cash accounts and long-term borrowings at variable rates.
Affimed entered into the SVB loan pursuant to which the Company borrowed €5.0 million with a variable
interest rate of an annual rate of 5.5% plus one-month EURIBOR, with EURIBOR deemed to equal zero
percent if EURIBOR is less than zero percent. Affimed does not expect the EURIBOR to exceed the
floor of 0% within the foreseeable future, and considers the interest risk to be low.
Our financial assets are exposed to interest rate risk. Certain financial institutions with whom we have
allocated our financial assets have introduced or are planning to introduce a negative interest rate on
financial assets held by them. We could be impaceted by these negative interest rates. However the
introduction of negative interest rates or a shift in interest rates would have an immaterial impact on
this loss of the Group.
Currency risk
Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities
are denominated in a currency that is not the entity’s functional currency. We use the euro as our
functional and reporting currency. The Group’s entities are exposed to Czech Koruna (CZK) and US
Dollars (USD). As a result, we are exposed to foreign currency exchange movements. Our material
budgeted future expenses are in euros and US dollar. We have converted into euros only the portion
of the IPO proceeds and the proceeds from our follow-on offerings and the private placement that will
be spent in euros according to our budget. The company does not apply additional hedging methods.
Assets and liabilities and income and expenses of Group companies, other than the euro, are
translated to euro at foreign exchange rates prevailing at the balance sheet date and the dates of the
transactions respectively.
Cash surpluses, held in a currency other than the functional currency, are not used for speculative
purposes. We do not enter into contracts that reflect the changes in the value of foreign currency
exchange rates to preserve the value of assets, commitments and anticipated transactions. Therefore,
fluctuations in exchange rates may distort year-to-year comparisons of financial performance.
In 2016, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €1.9 million higher/lower, mainly as a result of foreign
exchange gains/losses on translation of US dollar-denominated financial assets. The Group considers
a shift in the exchange rates of 10% as a realistic scenario.
Net investments in subsidiaries in foreign countries are long-term investments. Their book value
changes through movements of foreign currency exchange rates. We do not hedge the net
investments in foreign subsidiaries.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated
with its financial liabilities which are normally settled by delivering cash. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due.
The Group continually monitors its risk of a shortage of funds using short and mid-term liquidity
planning. This takes account of the expected cash flows from all activities. The supervisory board
undertakes regular reviews of the budget.
In 2014, 2015 and in the first quarter of 2017, Affimed raised significant funding that it estimates will
enable the Group to fund operating expenses and capital expenditure requirements at least until the
end of 2018:
Affimed Annual Report 2016 25
In 2015, the issue of new common shares and the exercise of stock options resulted in net proceeds
of €53.5 million.
In 2015, Affimed filed a “shelf registration statement” with the SEC in order to offer and sell securities
to the public in multiple, future offerings and issued shares with proceeds of €6,000 in connection with
its at-the-market sales agreement in 2016.
On November 30, 2016, the Company entered into a loan agreement with Silicon Valley Bank which
provides the Company with a loan facility for up to €10.0 million contingent on the satisfaction of
certain conditions, and drew the initial tranche of €5.0 million.
In January 2017, the Company issued 28,870 shares with proceeds of €58,000 in connection with its
at-the-market sales agreement.
In January and February 2017, the Company issued 10,646,742 common shares in a public offering at
a price of $1.80 per common share and received net proceeds of approximately €16.5 million ($17.7
million).
The Group expects to require additional funding to complete the development of the existing product
candidates. In addition, the Group expects to require additional capital to commercialize the products if
regulatory approval is received.
Affimed Annual Report 2016
26
Corporate Governance Report
I.
GENERAL
Affimed N.V. is a public limited liability company (the "Company," "Affimed," or "we") with
corporate seat in Amsterdam, the Netherlands, governed by Dutch law, and with registered office
in Heidelberg, Germany. Affimed started as a private company with limited liability and was
converted to a Dutch public limited liability company in connection with a corporate reorganization
that occurred prior to the consummation of the initial public offering of common shares of Affimed,
which began trading on the Nasdaq Global Market on September 12, 2014 under the symbol
"AFMD."
The Dutch Corporate Governance Code
We are subject to various corporate governance requirements and best practices codes, the most
relevant being those in the Netherlands and the United States. As a Dutch company, the Company
is subject to the Dutch Corporate Governance Code ("DCGC" or the "Code") and is required to
disclose in its statutory annual report filed in the Netherlands (“Annual Report”), whether it
complies with the provisions of the DCGC. The DCGC contains principles and best practice
provisions for managing boards, supervisory boards, shareholders and general meetings of
shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. If
the Company does not comply with the provisions of the DCGC (for example, because of a
conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any deviation
from the DCGC in its Annual Report.
In the present Annual Report, we address our overall corporate governance structure and state to
what extent we apply the provisions of the DCGC. The Company's deviation from certain practices
of the DCGC is due to the Company being listed in the United States with most of Affimed's
investors being outside of the Netherlands, as well as due to the international business focus of the
Company. As a company listed on Nasdaq, the Company also complies with Nasdaq's corporate
governance listing standards (except for instances where we follow our Dutch home country
corporate governance practices, including the Code, in lieu of certain Nasdaq corporate
governance requirements as explained below) and the rules and regulations promulgated by the
SEC. Nasdaq investors are often more familiar with Nasdaq's rules than with the DCGC.
The full text of the DCGC can be found at the website of the Monitoring Commission Corporate
Governance Code (www.commissiecorporategovernance.nl). Further information about the
Company’s corporate governance practices is available at our website
(www.affimed.com/corporate-governance).
The Monitoring Committee Corporate Governance has published an amended version of the Code
on 8 December 2016, which is applicable to the Company for the financial year starting on 1
January 2017.
II.
MANAGING DIRECTORS AND SUPERVISORY DIRECTORS
The following table lists the current members of our management board:
Name
Adi Hoess
Florian Fischer
Jörg Windisch
Age
55
49
46
Position
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Jens-Peter Marschner resigned as managing director and Chief Medical Officer as per 10 August
2016.
Affimed Annual Report 2016
27
The following is a brief summary of the business experience of the members of our management
board.
Adi Hoess, Chief Executive Officer. Dr. Hoess joined us in October 2010 as Chief Commercial
Officer and has served as our Chief Executive Officer since September 2011. He has more than 20
years of professional experience with an extensive background in general management, business
development, product commercialization, fund raising and M&A. Prior to joining us, Dr. Hoess was
Chief Commercial Officer at Jerini AG and Chief Executive Officer of Jenowis AG. At Jerini AG he was
responsible for business development, marketing and sales and the market introduction of Firazyr. He
also played a major role in the sale of Jerini to Shire plc. Dr. Hoess began his professional career in
1993 at MorphoSys. Dr. Hoess received his Ph.D. in chemistry and biochemistry from the University of
Munich in 1991 and an M.D. from the Technical University of Munich in 1997.
Florian Fischer, Chief Financial Officer. Dr. Fischer joined us in 2005 as Chief Financial Officer on a
part-time basis, which has increased over time to a full time position since September 2014. Dr.
Fischer is founder and Chief Executive Officer of MedVenture Partners, a Munich-based corporate
finance and strategy advisory company focusing on the life sciences and health care industry. Dr.
Fischer was the Chief Financial Officer of Activaero GmbH from 2002 until 2011 and has been
involved with corporate development since 2011. He also served as the Chief Financial Officer of
Vivendy Ltd. from 2008 until 2013 and as a managing director of AbCheck in 2009. Prior to founding
MedVenture Partners, Dr. Fischer worked with KPMG for more than six years until 2002, where he
was responsible for biotech and healthcare assignments. Before joining KPMG, he worked for
Deutsche Bank AG. Dr. Fischer is also a director of Amphivena. He holds a graduate degree in
business administration from Humboldt University, Berlin and a Ph.D. in public health from the
University of Bielefeld.
Jörg Windisch, Chief Operating Officer. Dr. Windisch joined us in 2016 after spending 20 years at
Sandoz Biopharmaceuticals (a Novartis company), most recently serving as Chief Science Officer. He
joined Novartis in 1996 in the biologics unit of Sandoz, where he played a leading role in the
development of Somatropin (Omnitrope®), the first ever biosimilar medicine, as well as of Sandoz’
Epoetinalfa (Binocrit®) and Filgrastim (Zarzio®) products. Over the course of 15 years he built an
international technical development organization for biologics and for five years Dr. Windisch also led
the joint biologics technical development and manufacturing organization for Novartis Pharma and
Sandoz. He was involved in the development and manufacturing of about 20 biologics, six of which
are currently marketed. Dr. Windisch was educated in Austria, Germany and the U.S. and received his
Ph.D. in Biochemistry and Molecular Genetics from the University of Innsbruck. In March 2017 we
entered into a termination agreement with Dr. Windisch, who will be leaving the Company at the end
of June 2017. He will continue to support Affimed as a consulting expert following his departure.
The following table lists the supervisory directors currently in office, all of whom have been appointed
by the general meeting of shareholders. Thomas Hecht is the chairman of our supervisory board. The
term of each of our supervisory directors will terminate on the date of the annual general meeting of
shareholders in the year indicated below.
Name
Gender
Nationality
Age
Initial/re-appointment
Term
Thomas Hecht
Bernhard Ehmer
Ulrich Grau
Berndt Modig
Richard B. Stead
M
M
M
M
M
Ferdinand Verdonck M
German
German
German/US
Swedish/US
US
Belgian
66
62
68
58
64
74
September 17, 2014
January 21, 2016
July 1, 2015
September 17, 2014
June 21, 2016
September 9, 2014
2017
2019
2018
2017
2019
2017
The following is a brief summary of the business experience of the Company's supervisory
directors.
Affimed Annual Report 2016
28
Thomas Hecht, Chairman. Dr. Hecht has been the chairman of our supervisory board since 2014,
and previously was the chairman of the supervisory board of our German operating subsidiary since
2007. He is head of Hecht Healthcare Consulting in Küssnacht, Switzerland, a biopharmaceutical
consulting company founded in 2002. Dr. Hecht also serves as chairman of the board of directors of
Cell Medica Ltd., Vaximm AG and as a director of Humabs BioMed AG. Until the beginning of March
2015, he served as chairman of the supervisory council of SuppreMol GmbH and until June 2016, of
Delenex AG. Dr. Hecht was previously Vice President Marketing at Amgen Europe. A seasoned
manager and industry professional, he held various positions of increasing responsibility in clinical
development, medical affairs and marketing at Amgen between 1989 and 2002. Prior to joining the
biopharmaceutical industry, he was certified in internal medicine and served as Co-Head of the
Program for Bone Marrow Transplantation at the University of Freiburg, Germany.
Bernhard R.M. Ehmer, Director. Dr. Ehmer has been a member of our supervisory board since
2016. He has been chairman of the board of management of Biotest AG since January 2015. Prior
to this, he worked for the Imclone Group, a wholly owned subsidiary of Eli Lilly, as president of
Imclone Systems Corporation in the United States and as managing director in Germany. In
2007/2008 he was CEO of Fresenius Biotech, Germany and before this, Dr. Ehmer headed the
Business Area Oncology of Merck KGaA, Darmstadt and served as head of Global Clinical
Operations at Merck. Between 1986 and 1998 he held various functions at Boehringer Mannheim
in Germany, Italy and Singapore. Dr. Ehmer holds a degree in medicine and worked in the
Department of Internal Medicine at the Academic Teaching Hospital of the University of
Heidelberg.
Ulrich M. Grau, Director. Dr. Grau has been a member of our supervisory board since July 2015.
Prior to that, he served as an advisor to the management board of our German operating subsidiary
our board from May 2013. He has over 30 years of experience in the biotechnology and
pharmaceutical industries including general management, business development, corporate strategy
and the development of new products and technologies. Dr. Grau was Chief Operating Officer at
Micromet from 2011 to 2012. Between 2006 and 2010, Dr. Grau was a founder, President and CEO of
Lux Biosciences, Inc., a clinical stage ophthalmic company. Previously, Dr. Grau served as President
of Research and Development at BASF Pharma/ Knoll where he directed a global R&D organization
with a development pipeline which included Humira. The majority of his career was at Aventis Pharma
(now Sanofi), where he last held the position of Senior Vice President of global late stage
development. Sanofi’s product Lantus ® for the treatment of type 2 and type 1 diabetes is based on
his inventions made during his early years as a scientist with Hoechst AG. Dr. Grau received his Ph.D.
in chemistry and biochemistry from the University of Stuttgart and spent three years as a post-doctoral
fellow at Purdue University in the field of protein crystallography.
Berndt Modig, Director. Mr. Modig has been a member of our supervisory board since 2014. He has
been CEO of Pharvaris B.V. since April 2016. Prior to this, he has served as Chief Financial Officer of
Prosensa Holding N.V. from March 2010 through January 2015 when Prosensa was acquired by
BioMarin Pharmaceutical Inc. Mr. Modig also serves as member of the board of directors and
chairman of the audit committee of Auris Medical Holding AG and Axovant Sciences Ltd and as vice
chairman of the supervisory board and chairman of the audit committee of Kiadis Pharma N.V. Mr.
Modig has more than 25 years of international experience in finance and operations, private equity
and mergers and acquisitions. Before joining Prosensa, Mr. Modig was Chief Financial Officer at Jerini
AG from October 2003 to November 2008, where he directed private financing rounds, its initial public
offering in 2005 and its acquisition by Shire plc in 2008. Prior to Jerini, Mr. Modig served as Chief
Financial Officer at Surplex AG from 2001 to 2003 and as Finance Director Europe of U.S.-based
Hayward Industrial Products Inc. from 1999 to 2001. In previous positions, Mr. Modig was a partner in
the Brussels-based private equity firm Agra Industria from 1994 to 1999 and a Senior Manager in the
Financial Services Industry Group of Price Waterhouse LLP in New York from 1991 to 1994. Mr.
Modig served as a director of Mobile Loyalty plc from 2012 to 2013. Mr. Modig has a bachelor’s
degree in business administration, economics and German from the University of Lund, Sweden and
an M.B.A. degree from INSEAD, Fontainebleau, France and is a Certified Public Accountant.
Richard B. Stead, Director. Dr. Stead has been a member of our supervisory board since 2014, and
previously was a member of the supervisory board of our German operating subsidiary since 2007. He
has more than 25 years of experience in the biotechnology and pharmaceutical industries, designing
and directing clinical trials, regulatory strategy and licensing activities. He is currently Founder and
Principal of BioPharma Consulting Services, where he is involved in the development of a number of
Affimed Annual Report 2016
29
oncology products including different strategies for cancer immunotherapy. Previously, he was Vice
President, Clinical Research of Immunex Corporation, responsible for oncology and neurology product
development. Dr. Stead has served in various positions in clinical development and played a key role
in the FDA approval and commercialization of Amgen’s first two products, Epogen and Neupogen. Dr.
Stead graduated from the University of Wisconsin and earned an M.D. from Stanford University. He
completed his internship and residency as well as a fellowship in Hematology at Harvard Medical
School and the Brigham and Women’s Hospital followed by post-doctoral research in the Laboratory
of Molecular Biology at the National Cancer institute. He also serves on the boards of Ascend
Biopharmaceuticals Ltd. and the Seattle Repertory Theatre.
Ferdinand Verdonck, Director. Mr. Verdonck has been a member of our supervisory board since
July 2014. He is a director and a member of the Audit Committee of Virtus Funds and Laco
Information Services. In recent years he was director of Groupe SNEF, director and member of the
audit committee of J.P. Morgan European Investment Trust and director and chairman of the audit
committee of biotechnology companies: uniQure N.V. in the Netherlands and Movetis and Galapagos
in Belgium. He has previously served as chairman of Banco Urquijo and of Nasdaq Europe and as a
director of Dictaphone Corporation. From 1992 to 2003, he was the managing director of Almanij NV,
a financial services company which has since merged with KBC, and his responsibilities included
company strategy, financial control, supervision of executive management and corporate governance,
including board participation in publicly-traded and privately-held companies in many countries. Mr.
Verdonck holds a law degree from KU Leuven and degrees in economics from KU Leuven and the
University of Chicago.
III.
BOARD PRACTICES
Governance structure
Affimed N.V. is a public limited liability company under Dutch law with a two-tier board structure.
Our management board (raad van bestuur) has ultimate responsibility for the overall management
of Affimed. The management board is supervised and advised by a supervisory board (raad van
commissarissen). The management board and the supervisory board are accountable to Affimed’s
shareholders.
Management board
The management board manages our general affairs and ensures that we can effectively
implement our strategy and achieve our objectives.
At least once per year the management board informs the supervisory board in writing of the main
lines of the Company's strategic policy, the general and financial risks and the management and
control system. The management board provides the supervisory board with any other information
as the supervisory board requires in performing its duties.
We have a strong centralized management board led by Adi Hoess, our Chief Executive Officer,
who has a strong track record in the development and commercialization of new medicines. Our
management team has extensive experience in the biopharmaceutical industry, and key members
of our team have played an important role in the development and commercialization of approved
drugs.
For a more detailed description of the responsibilities of the management board, please refer to the
corporate governance section of our website at www.affimed.com.
Composition of the management board
The number of managing directors is determined by the supervisory board. Currently the
management board consists of three directors.
The size and composition of our management board and the combined experience and expertise of
its members should reflect the best fit for Affimed’s profile and strategy, irrespective of gender.
This aim for the best fit, in combination with the availability of qualifying candidates, has resulted in
Affimed, as of April 30, 2017, having a management board in which all three members are male. In
Affimed Annual Report 2016
30
order to increase gender diversity of the management board, in accordance with article 2:166
section 2 of the Dutch Civil Code, we pay close attention to gender diversity in the process of
recruiting and appointing new management board members. In addition, we continuously recruit
female executives, as demonstrated by the appointment of a women to a key leadership position in
2016.
Appointment, suspension and dismissal
Managing directors are appointed by the general meeting of shareholders upon a binding
nomination of the supervisory board. The general meeting of shareholders can suspend or dismiss
a management board member by an absolute majority of votes cast, upon a proposal made by the
supervisory board. If another party makes the proposal, a two-thirds majority of the votes cast,
representing more than half of the issued share capital, is required. If this qualified majority is not
achieved, second general meeting as referred to in article 2:120 section 3 of the Dutch Civil Code
may not be convened.
Supervisory board
Our supervisory board supervises the policies of the management board and the general course of
affairs of the Company's business. The supervisory board gives advice to the management board
and is guided by the Company's interests and its business when performing its duties. The
management board provides such information to the supervisory board as is required to perform its
duties. Currently, the supervisory board consists of six (6) supervisory directors.
The Company's articles of association provide for a term of appointment of supervisory directors of
up to four years. Furthermore, the Company's articles of association state that a supervisory
director may be reappointed, but that any supervisory director may be a supervisory director for no
longer than twelve years. The Company's supervisory directors are appointed for overlapping
terms. As a result of the terms of the Company’s current supervisory directors, only one to three
supervisory directors will be subject to re-appointment in any one year. The staggered terms of the
supervisory directors may deter an unsolicited takeover attempt.
The supervisory board meets as often as any supervisory director deems necessary. In a meeting
of the supervisory board, each supervisory director has a right to cast one vote. All resolutions by
the supervisory board are adopted by an absolute majority of the votes cast. In the event the votes
are equally divided, the chairman has the decisive vote. A supervisory director may grant another
supervisory director a written proxy to represent him at the meeting.
The Company's supervisory board can pass resolutions outside of meetings, provided that the
resolution is adopted in writing and all supervisory directors have consented to adopting the
resolution outside of a meeting.
The Company's supervisory directors do not have a retirement age requirement under the
Company's articles of association.
Composition of the supervisory board
The composition of the supervisory board, including its members’ combined experience and
expertise, independence, and diversity of age and gender, should reflect the best fit for Affimed’s
profile and strategy. This aim for the best fit, in combination with the availability of qualified
candidates, has resulted in Affimed currently having a supervisory board in which all six members
are male. In order to increase gender diversity in the supervisory board in accordance with article
2:166 section 2 of the Dutch Civil Code, we pay close attention to gender diversity in the process of
recruiting and appointing new supervisory board candidates.
Appointment, suspension and dismissal
Supervisory directors are appointed by the general meeting of shareholders upon a binding
nomination of the supervisory board for a term of up to four years. The general meeting of
shareholders can suspend or dismiss a supervisory board member by an absolute majority of votes
Affimed Annual Report 2016
31
cast, upon a proposal made by the supervisory board. If another party makes the proposal, a two-
thirds majority of the votes cast, representing more than half of the issued share capital, is
required. If this qualified majority is not achieved, a second general meeting as referred to in article
2:120 section 3 of the Dutch Civil Code may not be convened.
Conflicts of interest
Each member of the management board is required to immediately report any potential conflict of
interest to the chairman of the supervisory board and to the other members of the management
board and provide them with all relevant information. Each member of the supervisory board is
required to immediately report any potential conflict of interest to the chairman of the supervisory
board and provide him or her with all relevant information. The chairman determines whether there
is a conflict of interest. If a member of the supervisory board or a member of the management
board has a conflict of interest with the Company, the member may not participate in the
discussions and/or decision-making process on subjects or transactions relating to the conflict of
interest. The chairman of the supervisory board will arrange for such transactions to be disclosed
in the Annual Report.
In accordance with best practice provision III.6.4 of the DCGC, Affimed reports that no transactions
between the Company and legal or natural persons who hold at least 10% of the shares in the
Company occurred in 2016.
Supervisory Board Committees
Although the supervisory board retains ultimate responsibility, the supervisory board has delegated
certain of its tasks to its committees.
Audit committee
The audit committee, which consists of Ferdinand Verdonck (Chairman), Berndt Modig and
Bernhard Ehmer, assists the board in overseeing our accounting and financial reporting processes
and the audits of our financial statements. Our supervisory board has determined that all members
of the audit committee satisfy the “independence” requirements set forth in Rule 10A-3 under the
Exchange Act. The supervisory board has determined that Ferdinand Verdonck and Berndt Modig
qualify as “audit committee financial experts,” as such term is defined in the rules of the SEC.
The audit committee is responsible for the selection of the registered public accounting firm that
should serve as our independent auditor, and our supervisory board is responsible for
recommending the appointment of the independent auditor to the general meeting of shareholders.
In addition, the audit committee is responsible for the compensation, retention and oversight of the
independent auditor appointed by the general meeting of shareholders; pre-approving the audit
services and non-audit services to be provided by our independent auditor before the auditor is
engaged to render such services; evaluating the independent auditor’s qualifications, performance
and independence, and presenting its conclusions to the full supervisory board on at least an
annual basis and reviewing and discussing with the management board and the independent
auditor our annual audited financial statements and quarterly financial statements prior to the filing
of the respective annual and quarterly reports, among other things.
The audit committee meets as often as one or more members of the audit committee deem
necessary, but in any event at least four times per year. The audit committee meets at least once
per year with our independent auditor, without our management board being present. The audit
committee held five meetings in person and three meetings by conference call in 2016.
Compensation committee
The compensation committee, which consists of Thomas Hecht (Chairman), Ulrich Grau and
Berndt Modig, assists the supervisory board in determining management board compensation. The
committee recommends to the supervisory board for determination of the compensation of each of
our managing directors. Under SEC and Nasdaq rules, there are heightened independence
standards for members of the compensation committee, including a prohibition against the receipt
Affimed Annual Report 2016
32
of any compensation from the Company other than standard supervisory director fees. As
permitted by the listing requirements of Nasdaq, we have opted out of Nasdaq Listing Rule 5605(d)
which requires that a compensation committee consist entirely of independent directors.
The compensation committee is responsible for identifying, reviewing and approving corporate
goals and objectives relevant to management board compensation; analysing the possible
outcomes of the variable remuneration components and how they may affect the remuneration of
the managing directors; evaluating each managing director’s performance in light of such goals
and objectives and making recommendations to the supervisory board for each managing
director’s compensation based on such evaluation and for any long-term incentive component of
each managing director’s compensation in line with the remuneration policy approved by the
general meeting of shareholders. In addition, the compensation committee is responsible for
reviewing our management board compensation and benefits policies generally, among other
things.
The compensation committee held four meetings in person and three meetings by conference call
in 2016.
Nomination and corporate governance committee
The nomination and corporate governance committee, which consists of Ulrich Grau (Chairman),
Thomas Hecht and Richard B. Stead, assists our supervisory board in identifying individuals
qualified to become members of our supervisory board and management board consistent with
criteria established by our supervisory board and in developing our corporate governance
principles. As permitted by the listing requirements of Nasdaq, we have opted out of Nasdaq
Listing Rule 5605(e) which requires independent director oversight of director nominations.
The nomination and corporate governance committee held three meetings in person and one
meeting by conference call in 2016.
IV.
COMPENSATION OF MEMBERS OF THE MANAGEMENT BOARD AND SUPERVISORY
BOARD
Affimed's remuneration policy aims to attract, motivate and retain the best-qualified workforce. The
objectives and structure of the remuneration policy for the management board is regularly reviewed
and/or evaluated by the supervisory board. The current remuneration policy for the management
board and supervisory board was adopted and approved by the general meeting of shareholders
on 17 September 2014, prior to the consummation of our initial public offering. The remuneration
policy was amended where it concerns the attendance fee for meetings of the supervisory board by
the general meeting of shareholders on 21 June 2016.
Compensation of Managing Directors and Supervisory Directors
Dutch law provides that we must establish a policy in respect of the remuneration of our managing
directors and supervisory directors. With respect to remuneration in the form of plans for shares or
rights to shares (such as the Equity Incentive Plan 2014 mentioned below) the policy for managing
directors must set out the maximum number of shares or rights to shares to be granted as well as
the criteria for grants and for amending existing grants. The remuneration policy for the managing
directors provides the supervisory board with a framework within which the supervisory board
determines the remuneration of the managing directors.
Our remuneration policy for our managing directors provides the supervisory board with the
authority to enter into management services agreements with managing directors that provide for
compensation consisting of base compensation, performance-related variable compensation, long-
term equity incentive compensation (as detailed in the terms of the Equity Incentive Plan 2014
described below), pension and other benefits and severance pay and benefits. The remuneration
policy for the managing directors provides that the annual cash bonus payable to managing
directors may not exceed 100% of the annual base gross salary and will be based upon the
Affimed Annual Report 2016
33
achievement of set financial and operating goals for the period. The bonus payments may be
increased in any given year by the supervisory board upon a proposal of the compensation
committee based on any exceptional achievements of that managing director. In addition, the
remuneration policy for managing directors allows for cash termination payments, which may not
exceed 100% of the managing director’s base salary. This policy also allows for additional
compensation and benefits to our managing directors following a change of control.
The remuneration policy for the supervisory board established the compensation for our
supervisory directors. This policy provides for payments and initial and annual equity awards. This
is permissible under Dutch law, but constitutes a deviation from best practice provisions III.7.1 of
the DCGC.
The remuneration policy for our supervisory directors provides that each supervisory director is
entitled to an annual retainer of €20,000, provided that the chairman of the supervisory board is
entitled to an annual retainer of €75,000. In addition, the chairman of the audit committee is entitled
to an additional annual retainer of €15,000 and the chairmen of the compensation and nomination
and corporate governance committees are each entitled to annual retainers of €7,500. Supervisory
directors will also be paid €3,000 for each supervisory board meeting attended in person and
€1,500 for each supervisory board meeting attended by telephone, provided the meeting attended
by telephone exceeds 30 minutes. For other, including non-formal board meetings attended either in
person or by phone the Company will pay each member of the supervisory board EUR 500 per meeting,
provided that the duration of such meeting exceeds 30 minutes. The members of each committee will
be paid €1,500 for each committee meeting attended in person and €750 for each committee
meeting attended by telephone, provided the meeting attended by telephone exceeds 30 minutes.
In addition, under the remuneration policy for our supervisory directors we granted the chairman of
the supervisory board on the date of the consummation of our initial public offering in September
2014 an initial award of stock options to purchase 35,000 common shares and we will grant any
future chairman of the supervisory board an initial award of stock options to purchase 35,000
common shares on the date of their election as the chairman of the supervisory board. Further,
under the remuneration policy we granted each other supervisory director on the date of the
consummation of our initial public offering in September 2014 an initial award of stock options to
purchase 20,000 common shares and we will grant each other supervisory director an initial award
of stock options to purchase 20,000 common shares on the date of their election as a supervisory
director. These initial stock options will vest over a three-year period, with one third vesting on the
first anniversary of the grant date, and the remainder vesting in equal instalments at the end of
each three-month period following the first anniversary of the grant date. In addition, the
remuneration policy provides that each supervisory director is entitled to an annual grant of 10,000
stock options, with the chairman of the supervisory board entitled to an annual grant of 20,000
stock options. These annual awards will vest in four quarterly instalments and will be fully vested
on the first anniversary of the grant date. Initial awards and annual awards will be granted
automatically on the respective dates of issuance based on the approval by the shareholders of the
remuneration policy and will not require any further approval by the supervisory board or the
company. Supervisory directors are also entitled to be reimbursed for their reasonable expenses
incurred in attending meetings of the supervisory board and its committees.
On 21 June 2016, the general meeting of shareholders resolved to award the chairman of the
supervisory board a one-time additional grant of stock options to purchase 20,000 common shares
and each member of the supervisory board a one-time additional grant of stock options to
purchase 10,000 common shares. The additional stock options were awarded to compensate the
supervisory directors for the exercise prices of the stock options exceeding the then current fair
market value of the underlying shares. These additional stock options will vest in four quarterly
installments and will be fully vested on the first anniversary of the date of the grant.
The aggregate cash compensation including termination benefits, including benefits in kind,
accrued or paid to our managing directors and supervisory directors with respect to the year ended
December 31, 2016, for services in all capacities was approximately €2.5 million. As of December
31, 2016, we have no amounts set aside or accrued to provide pension, retirement or similar
benefits to our managing directors and supervisory directors. In 2016, awards for 1,250,500 stock
options were granted to management and members of the supervisory board. Further details on
Affimed Annual Report 2016
34
the managing directors and supervisory directors individual remuneration are outlined in Note 35 to
the Company only financial statements and Note 21 to the consolidated financial statements.
In accordance with Dutch law, we are not required to disclose information regarding third party
compensation of our directors or director nominees. As a result, our practice varies from the third-
party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3).
Long-term incentive plans
Equity Incentive Plan 2014
In conjunction with the closing of our initial public offering (“IPO”), we established the Affimed N.V.
Equity Incentive Plan 2014 (“the 2014 Plan”) with the purpose of advancing the interests of our
shareholders by enhancing our ability to attract, retain and motivate individuals who are expected
to make important contributions to us. The maximum number of shares available for issuance
under the 2014 Plan equals 7% of the total outstanding common shares on September 17, 2014, or
1,678,891 common shares. On January 1 of any calendar year thereafter, an additional 5% of the
total outstanding common shares on that date becomes available for issuance under the 2014
Plan. The absolute number of shares available for issuance under the 2014 Plan will increase
automatically upon the issuance of additional shares by the Company. The option exercise price
for options under the 2014 Plan is the fair market value of a share as defined in the 2014 Plan on
the relevant grant date. We are following home country rules relating to the re-pricing of stock
options. Under applicable Dutch law, re-pricing is permissible, but constitutes a deviation from the
best practice provisions of the DCGC. As a result, if we engage in re-pricing of stock options, we
would be required to provide an explanation in our annual report for why we do not comply with the
best practice provisions.
Plan administration. The 2014 Plan is administered by our compensation committee. Approval of
the compensation committee is required for all grants of awards under the 2014 Plan. The
compensation committee may delegate to the managing directors the authority to grant equity
awards under the 2014 Plan to our employees.
Eligibility. Managing directors, supervisory directors and other employees and consultants of the
Company are eligible for awards under the 2014 Plan.
Awards. Awards include options and restricted stock units.
Vesting period. Subject to any additional vesting conditions that may be specified in an individual
grant agreement, and the accelerated vesting conditions below, the plan provides for three year
vesting of stock options. One-third of the stock options granted to participants in connection with
the start of their employment vest on the first anniversary of the grant date, with the remainder
vesting in equal tranches at the end of each 3-month period thereafter. Stock options granted to
other participants vest in equal tranches at the end of each 3-month period after the grant date
over the course of the vesting period. The compensation committee will establish a vesting
schedule for awards granted to supervisory directors as well as for any awards in the form of
restricted stock units.
Accelerated vesting. Unless otherwise specified in an individual grant agreement, the 2014 Plan
provides that upon a change of control of the Company (as defined in the 2014 Plan) all then
outstanding equity awards will vest and become immediately exercisable. It also provides that upon
a participant’s termination of service due to (i) retirement (or after reaching the statutory retirement
age), (ii) permanent disability rendering the relevant participant incapable of continuing
employment or (iii) death, all outstanding equity awards that would have vested during a 12 month
period following such termination of service will vest and become immediately exercisable.
Otherwise at termination all unvested awards will be forfeited. If a participant experiences a
termination of service without “cause” or for “good reason” (in each case, as defined in the 2014
Plan) within six months prior to a change of control, the Company will make a cash payment
equivalent to the economic value that the participant would have realized in connection with the
change of control upon the exercise and sale of the equity awards that such participant forfeited
upon his or her termination of service. In connection with a change of control and subject to the
Affimed Annual Report 2016
35
approval of the supervisory board, the management board may amend the exercise provisions of
the 2014 Plan.
Stock Option Equity Incentive Plan 2007
Under the Stock Option Equity Incentive Plan 2007 (the “2007 SOP”), our German operating
subsidiary granted options that were exercisable for preferred shares. In conjunction with the
corporate reorganization in connection with our initial public offering, all outstanding awards
granted under the 2007 SOP were converted into awards exercisable for common shares of
Affimed N.V., and no additional grants will be made under the 2007 SOP. All awards are fully
vested and can be exercised by the beneficiaries. The 2007 SOP is administered by the
management board, or with respect to awards to our officers, by the supervisory board.
Carve Out Agreements
Our pre-IPO shareholders have entered into agreements with our managing directors and certain
of our supervisory directors and consultants that grant the beneficiaries the right to receive
common shares of the company. These agreements were satisfied or will be satisfied in the future
through a transfer to the beneficiaries of in the aggregate 7.78% of the common shares owned by
our pre-IPO shareholders, or the respective market value thereof in cash to the beneficiaries.
Managing director and supervisory director services agreements
Our managing directors have entered into management services agreements with us which
became effective upon the consummation of our initial public offering in September 2014 (for two of
the current managing directors) and the approval of the shareholder meeting in January 2016 (for
one managing director). These agreements provide for benefits upon a termination of service. Prior
to the closing of our IPO certain of our managing and supervisory directors have entered into
consulting agreements with us. All such consulting agreements were terminated in connection with
our IPO. Any existing consulting agreements between supervisory directors and us prior to their
appointment as supervisory director were terminated before their appointment.
The management services agreements are for a definite period of time, which period equals the
term of office of the managing director. In addition, the management services agreements provide
for a termination notice period of six months, both for us and for the managing director. In the event
of an urgent cause, the management services agreements may be terminated with immediate
effect.
Each management services agreement provides for payment of severance upon pre-defined
circumstances such as a termination by us without urgent cause or the existence of certain events
posing the managing director to terminate the management services agreement for urgent cause
(including, but not limited to, a reduction of the managing director's salary) for which the severance
is 100% of the managing director's gross annual compensation.
The management services agreements provide for a lump-sum payment following a change of
control, subject to certain conditions. In the event of termination of the managing services
agreements following a change of control, the aforementioned severance is increased to 150% of
the managing director's gross annual compensation. In addition, the managing director receives an
amount equal to the average variable compensation over the last two years.
The management services agreements contain post-termination restrictive covenants, including a
post-termination non-competition covenant, which lasts until six months after the management
services agreement has ended, and a non-solicitation covenant, which lasts until two years after
the management services agreement has ended.
Insurance and Indemnification
Our managing directors and supervisory directors have the benefit of indemnification provisions in
our articles of association. These provisions give managing directors and supervisory directors the
Affimed Annual Report 2016
36
right, to the fullest extent permitted by law, to recover from us amounts, including but not limited to
litigation expenses, and any damages they are ordered to pay, in relation to acts or omissions in
the performance of their duties. However, there is generally no entitlement to indemnification for
acts or omissions that amount to willful (opzettelijk), intentionally reckless (bewust roekeloos) or
seriously culpable (ernstig verwijtbaar) conduct. In addition, upon consummation of our initial public
offering, we entered into agreements with our managing directors and supervisory directors to
indemnify them against expenses and liabilities to the fullest extent permitted by law. These
agreements also provide, subject to certain exceptions, for indemnification for related expenses
including, among others, attorneys’ fees, judgments, penalties, fines and settlement amounts
incurred by any of these individuals in any action or proceeding. In addition to such indemnification,
we provide our managing directors and supervisory directors with directors’ and officers’ liability
insurance.
Insofar as indemnification of liabilities arising under the U.S. Securities Act of 1933 (the “Securities
Act”) may be permitted to supervisory directors, managing directors or persons controlling us
pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.
V.
Related party transactions
The following is a description of related party transactions Affimed or its direct subsidiary Affimed
GmbH have entered into since January 1, 2016 with any of our members of our supervisory board
or management board and the holders of more than 5% of our common shares.
Agreements with Supervisory Directors
We had a consulting agreement with Ulrich M. Grau, whose term as a supervisory director became
effective as of July 1, 2015. Dr. Grau’s remuneration under the agreement consisted of service
fees for business development, corporate strategy and the development of new products. In June
2015, this consulting agreement was terminated and all associated rights and obligations ceased.
Also, according to a service agreement with i-novion Inc., of which Dr. Grau serves as Chairman of
the Board of Directors, i-novion Inc. conducted certain preclinical services for us. In 2016, i-novion
Inc. received related payments of €86,000.
Agreements with former Managing Directors
In 2016, we entered into a consulting agreement with our former Managing Director Jens-Peter
Marschner consisting of services for the support of clinical trials and other activities in the field of
clinical development. In 2016, Dr. Marschner received related payments of €29,000. Dr. Marschner
has terminated the consulting agreement as of May 31, 2017.
Agreements with Amphivena
In 2013, we entered into a license and development agreement, which amended and restated a
2012 license agreement, with Amphivena Therapeutics, Inc., or Amphivena, based in San
Francisco, to develop an undisclosed product candidate for hematologic malignancies in exchange
for an interest in Amphivena and certain milestone payments. We also assigned and licensed
certain technology to Amphivena and provided it with funding. Although the license and
development agreement with Amphivena expired when the product candidate’s IND became
effective in July 2016, we continue to provide services to complete the deliverables required under
the agreement, and are supporting the future clinical development of AMV564 with €1.6 million in
financing, €1.0 million of which was invested in Amphivena in October 2016 and €0.6 million of
which was invested in March 2017.
Registration rights agreement
Affimed Annual Report 2016
37
Following the consummation of our IPO, we entered into a registration rights agreement with
certain of our existing shareholders pursuant to which we granted them the rights set forth below.
Demand registration rights. Certain of our shareholders that are party to the Registration Rights
Agreement (the “RRA Shareholders”) are entitled to request that we effect up to an aggregate of
four demand registrations under the Registration Rights Agreement, and no more than one
demand registration within any six-month period, covering the RRA Shareholders’ common shares
that are subject to transfer restrictions under Rule 144 (“registrable securities”). The demand
registration rights are subject to certain customary conditions and limitations, including customary
underwriter cutback rights and deferral rights. No demand registration rights exist while a shelf
registration is in effect.
Piggyback registration rights. If we propose to register any common shares (other than in a shelf
registration or on a registration statement on Form F-4, S-4 or S-8), the RRA Shareholders are
entitled to notice of such registration and to include their registrable securities in that registration.
The registration of RRA Shareholders’ registrable securities pursuant to a piggyback registration
does not relieve us of the obligation to effect a demand registration. The managing underwriter has
the right to limit the number of registrable securities included in a piggyback registration if the
managing underwriter believes it would interfere with the successful marketing of the common
shares.
Form F-3 registration rights. When we are eligible to use Form F-3, one or more RRA Shareholders
have the right to request that we file a registration statement on Form F-3. RRA Shareholders will
have the right to cause us to undertake underwritten offerings from the shelf registration, but no
more than one underwritten offering in a six-month period. Each underwritten takedown constitutes
a demand registration for purposes of the maximum number of demand registrations we are
obligated to effectuate.
Subject to limited exceptions, the Registration Rights Agreement provides that we must pay all
registration expenses in connection with a demand, piggyback or shelf registration. The
Registration Rights Agreement contains customary indemnification and contribution provisions.
Indemnification Agreements
We have entered into indemnification agreements with our managing directors and supervisory
directors. The indemnification agreements and our articles of association require us to indemnify
our managing directors and supervisory directors to the fullest extent permitted by law.
VI.
INTERNAL RISK MANAGEMENT AND CONTROL SYSTEMS
Our management board, including our chief executive officer and chief financial officer, after
evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-
15(e) under the Exchange Act) as of December 31, 2016, have concluded that based on the
evaluation of these controls and procedures required by Rule 13a-15(b) of the Exchange Act, our
disclosure controls and procedures were effective and the risk management and control systems
worked properly in 2016. We conclude that these systems provide a reasonable assurance that the
financial report does not contain any errors of material importance.
The main elements of our internal control and risk management system in relation to the financial
reporting process comprise the following:
- Clear assignment of responsibilities
- Segregation of duties and four eyes principle
- Appropriate financial accounting system including authorisation concepts
- Use of checklists when preparing quarterly and annual financial statements
- Use of guidelines and work procedures
Affimed Annual Report 2016
38
Our internal control system has been discussed with the supervisory board's audit committee and
the external auditors on a regular basis.
A Disclosure Committee is in place, which advises the various officers and departments involved,
including the CEO and the CFO, on the timely review, publication and filing of periodic and current
(financial) reports. In addition to the certification by the CEO and the CFO under U.S. law, each
individual member of the supervisory board and management board must under Dutch law, sign
the consolidated and the company-only financial statements being disclosed and submitted to the
General Meeting of Shareholders for adoption.
A description of the risk factors and the risk management approach, as well as the sensitivity of the
Company's results to external factors and variables are described in more detail in "Risk
Management."
VII.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the
supervision and with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting based upon criteria established in Internal Control – Integrated Framework
(2013) by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, our management concluded that our internal control over financial reporting was
effective as of December 31, 2016.
VIII.
CODE OF CONDUCT
We have adopted a Code of Conduct which covers a broad range of matters including the handling
of conflicts of interest, compliance issues and other corporate policies such as insider trading and
equal opportunity and non-discrimination standards. Our Code of Conduct applies to all of our
supervisory directors, managing directors and employees. We have published our Code of Conduct
on our website, www.affimed.com.
IX.
SHARES AND SHAREHOLDERS’ RIGHTS
General meeting of shareholders
Affimed shareholders exercise their rights through annual and extraordinary general meetings of
shareholders. We are required to convene an annual general meeting of shareholders in the
Netherlands each year, no later than six months after the end of the Company’s financial year.
Additional extraordinary general meetings of shareholders may be convened at any time by the
supervisory board and the management board. Pursuant to Dutch law, one or more shareholders,
who jointly represent at least 10% of the issued capital may, on their application, be authorized by
a Dutch district court to convene a general meeting of shareholder.
The agenda for the annual general meeting of shareholders must contain certain matters as
specified in our articles of association and under Dutch law, including the adoption of our annual
financial statements. Shareholders are entitled to propose items for the agenda of the general
meeting of shareholders provided that they hold at least 3% of the issued share capital. Proposals
for agenda items for the general meeting of shareholders must be submitted at least 60 days prior
to the date of the meeting. The general meeting of shareholders is also entitled to vote on
Affimed Annual Report 2016
39
important decisions regarding Affimed’s identity or character, including major acquisitions and
divestments.
In accordance with our articles of association, for each general meeting of shareholders, the
management board may determine that a record date will be applied in order to establish which
shareholders are entitled to attend and vote at the general meeting of shareholders. Such record
date shall be the 28th day prior to the day of the general meeting. The record date and the manner
in which shareholders can register and exercise their rights will be set out in the notice of the
meeting.
We encourage participation in Affimed’s general meetings of shareholders. All shareholders and
others entitled to attend general meetings of shareholders are authorized to attend the general
meeting of shareholders, to address the meeting and, in so far as they have such right, to vote.
Voting rights
In accordance with Dutch law and our articles of association, each issued common share and each
issued cumulative preferred share confers the right to cast one vote at the general meeting of
shareholders. Each holder of shares may cast as many votes as it holds shares. Shareholders may
vote by proxy. No votes may be cast at a general meeting of shareholders on shares held by us or
our subsidiaries or on shares for which we or our subsidiaries hold depositary receipts.
Nonetheless, the holders of a right of use and enjoyment (vruchtgebruik) and the holders of a right
of pledge in respect of shares held by us or our subsidiaries in our share capital are not excluded
from the right to vote on such shares, if the right of use and enjoyment (vruchtgebruik) or the right
of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries.
Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such
subsidiary holds a right of use and enjoyment (vruchtgebruik) or a right of pledge. Shares which
are not entitled to voting rights pursuant to the preceding sentences will not be taken into account
for the purpose of determining the number of shareholders that vote and that are present or
represented, or the amount of the share capital that is provided or that is represented at a general
meeting of shareholders.
Decisions of the general meeting of shareholders are taken by an absolute majority of votes cast,
except where Dutch law or the articles of association provide for a qualified majority or unanimity.
In accordance with Dutch law and generally accepted business practices, our articles of
association do not provide quorum requirements generally applicable to general meetings of
shareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule
5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and
that such quorum may not be less than one-third of the outstanding voting stock.
Under our articles of association, our managing directors and supervisory directors are appointed
by the general meeting of shareholders upon a binding nomination by our supervisory board. The
general meeting of shareholders may overrule the binding nomination by a resolution adopted with
a two-thirds majority of the votes cast representing at least half of the issued share capital. If the
general meeting of shareholders overrules the binding nomination, the supervisory board shall
make a new binding nomination.
Issue of additional shares and pre-emptive rights
Shares may be issued following a resolution by the general meeting of shareholders on a proposal
of the management board made with the approval of the supervisory board. The general meeting of
shareholders may resolve to delegate this authority to the management board for a period of time
not exceeding five years. At the general meeting of shareholders held at September 12, 2014, our
management board was granted the authority, with effect from September 17, 2014 being the date
of our conversion into a Dutch public limited liability company prior to the consummation of our
initial public offering, for a period of five years (i.e., until September 17, 2019) and subject to the
approval of the supervisory board, to resolve to (i) issue common shares (either in the form of
stock dividend or otherwise) and/or grant rights to subscribe common shares in the share capital of
the Company, for a maximum of common shares that can be issued under the size of the
authorised share capital of the Company as per the date of adoption of such resolution and (ii)
Affimed Annual Report 2016
40
issue cumulative preferred shares and/or grant rights to subscribe for cumulative preferred shares,
to a maximum of cumulative preferred shares that can be issued under the size of the authorised
share capital of the Company as per the date of adoption of such resolution.
Upon the issuance of new common shares, holders of Affimed’s common shares have a pre-
emptive right to subscribe to common shares in proportion to the total amount of their existing
holdings of Affimed’s common shares. According to the Company’s articles of association, this pre-
emptive right does not apply to any issuance of shares to Affimed employees.
The general meeting of shareholders may decide to restrict or exclude pre-emptive rights. The
general meeting of shareholders may also resolve to designate the management board as the
corporate body authorized to restrict or exclude pre-emptive rights for a period not exceeding five
years.
At the general meeting of shareholders held at September 12, 2014, with effect from September
17, 2014 being the date of our conversion into a Dutch public limited liability company prior to the
consummation our initial public offering, our management board was granted the authority, for a
period of five years (i.e., until September 17, 2019) and subject to the approval of the supervisory
board, to restrict or exclude the pre-emptive rights of holders of common shares upon the issuance
of common shares and/or upon the granting of rights to subscribe for common shares.
Repurchase by Affimed of its own shares
Affimed may only acquire fully paid shares of any class in its capital for a consideration following
authorization by the general meeting of shareholders and subject to certain provisions of Dutch law
and the Company’s articles of association, if: (i) the Company’s shareholders’ equity less the
payment required to make the acquisition does not fall below the sum of paid-up and called-up
capital and any reserves required by Dutch law or its articles of association and (ii) the Company
and its subsidiaries would not thereafter hold shares or hold a pledge over shares with an
aggregate par value exceeding 50% of its then current issued share capital.
At the general meeting of shareholders held at June 21, 2016, our management board was granted
the authority, for a period of 18 months, with effect from the same date (i.e., until December 21,
2017) and subject to the approval of the supervisory board, to cause the repurchase of common
shares by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of
the most recent closing price of a common share on any stock exchange where the common
shares are listed.
No authorization of the general meeting of shareholders is required if common shares are acquired
by us with the intention of transferring such common shares to our employees under an applicable
employee stock purchase plan.
Articles of Association
Our articles of association outline certain of the Company’s basic principles relating to corporate
governance and organization. The current text of the articles of association is available at the
Trade Register of the Chamber of Commerce and Industry for Amsterdam and on our public
website at www.affimed.com. A resolution to amend the articles of association may only be
adopted by the general meeting at the proposal of the management board with the prior approval
of the supervisory board. A proposal to amend the articles of association whereby any change
would be made in the rights which vest in the holders of shares of a specific class in their capacity
as such, shall require the prior approval of the meeting of holders of the shares of that specific
class.
Independent Auditor
The general meeting of shareholders appoints the independent auditor. The audit committee was
closely involved in the evaluation of Affimed's independent auditor and has recommended to the
supervisory board the independent auditor to be proposed for (re)appointment by the general
meeting of shareholders. In addition, the audit committee evaluates and, where appropriate,
Affimed Annual Report 2016
41
recommends the replacement of the independent auditors. On June 21, 2016, the general meeting
of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for
the financial year 2016.
Anti-Takeover Provisions
Dutch law permits us to adopt protective measures against takeovers. Although we have not
adopted any specific takeover measures, our management board has been designated for a period
of five years from September 17, 2014 (i.e., until September 17, 2019) to issue cumulative
preferred shares and grant rights to subscribe for cumulative preferred shares, up to the amount of
our authorized share capital. Our cumulative preferred shares are a separate class of equity
securities that could be issued for defensive purposes. Such shares would typically have both a
liquidation and dividend preference over our common stock and otherwise accrue cash dividends
at a fixed rate.
X.
COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE
As a Dutch company, the Company is subject to the DCGC and is required to disclose in this
Annual Report, filed in the Netherlands, whether the Company complies with the provisions of the
DCGC. If the Company does not comply with the provisions of the DCGC (for example, because of
a conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any
deviation from the DCGC in this Annual Report. The Company's most substantial deviations from
the DCGC are summarized below.
Remuneration
(cid:1) The Company has granted and intends to grant options and restricted stock units in the future to
members of its supervisory board, which qualifies as a deviation from best practice provision
III.7.1 of the DCGC. Such remuneration is in accordance with the Nasdaq corporate governance
requirements and market practice among companies listed at Nasdaq. The Company is in
competition with other companies in this field and intends to maintain an attractive
compensation package for its current and any future supervisory board members. The number
of option rights granted to each supervisory board member is determined by the general
meeting of shareholders.
(cid:1) The remuneration committee of the Supervisory Board has not prepared a remuneration report
as referred to in best practise provision II.2.12 of the DCGC, which qualifies as a deviation from
best practice provision III.5.10 of the DCGC. An overview of the implementation and planning of
the remuneration of managing and supervisory directors is described in more detail in the
annual report (20-F) filed with the Securities and Exchange Commission on March 30, 2017
(available on our website: http://www.affimed.com/sec).
Re-pricing of stock options
(cid:1) The Company is following home country rules relating to the re-pricing of stock options under
the 2014 Plan. Under applicable Dutch law, re-pricing of stock options is permissible, but
constitutes a deviation from best practice provision II.2.7 of the DCGC where it concerns the
stock options granted to the Company's managing directors and supervisory directors. The
Company is in competition with other companies in this field and intends to maintain an
attractive compensation package for its current and any future management and supervisory
board. Therefore such a re-pricing possibility gives the Company more flexibility to react on high
volatility of its shares and maintain issued stock options as a valuable incentive. The re-pricing
is subject to the approval of the respective Committees as defined in the 2014 Plan.
Board nominations and shareholder voting
Affimed Annual Report 2016
42
(cid:1) Pursuant to our articles of association, the supervisory board will nominate one or more
candidates for each vacant seat on the management board or the supervisory board. A
resolution of the Company's general meeting of shareholders to appoint a member of the
management board or the supervisory board other than pursuant to a nomination by the
Company's supervisory board requires at least two-thirds of the votes cast representing more
than half of the Company's issued share capital, which qualifies as a deviation from best
practice provision IV.1.1 of the DCGC. Although a deviation from the provision IV.1.1 of the
DCGC, the supervisory board and the management board hold the view that these provisions
will enhance the continuity of Affimed’s management and policies.
Independence
(cid:1) More than one of our current members of the supervisory board are not deemed independent
based on the standards set out in the DCGC, which qualifies as a deviation from best practice
provisions III.2.1 and III.2.2 of the DCGC. The Company will evaluate for any future composition
of the supervisory board whether to comply again with these best practice provisions III.2.1 and
III.2.2 of the DCGC.
Chairman of the compensation committee
(cid:1) Thomas Hecht, chairman of our supervisory board, chairs the compensation committee, which
qualifies as a deviation from best practice provision III.5.11 of the DCGC. We have opted out of
the director independence requirements under applicable Nasdaq rules.
May 21, 2017
On behalf of the Management Board,
Dr. Adi Hoess, CEO,
Dr. Florian Fischer, CFO
Affimed Annual Report 2016
43
Supervisory Board report
The Supervisory Board is an independent corporate body responsible for supervising and advising the
Management Board and overseeing the general course of affairs and strategy of the Company. The
Supervisory Board is guided by the interests of the Company and the enterprise connected with the
Company and will take into consideration the overall good of the enterprise and the relevant interests of all
the Company's stakeholders. We report on the activities of the Supervisory Board in 2016.
We had a number of highlights and corporate updates in 2016 and early 2017.
In May 2016, we initiated a Phase 1b combination trial of our lead NK-cell engager AFM13 with Merck’s
Keytruda. We are the sole sponsor of this trial, while Merck provides Keytruda for the study. In September
2016, we initiated a Phase 1 monotherapy trial of our T-cell engager AFM11 in acute lymphocytic
leukemia, or ALL.
In addition to the collaboration with Merck, we entered into an exclusive collaboration with the University
of Texas MD Anderson Cancer Center to evaluate AFM13 with MD Anderson’s proprietary NK-cell
product, which we announced in early January 2017. Also announced in January 2017, our wholly owned
subsidiary AbCheck achieved the first clinical milestone in its collaboration with Eli Lilly. The milestone is
the commencement of patient enrollment for a Phase 1 study of an antibody discovered under the
collaboration agreement. It has triggered an undisclosed milestone payment to AbCheck from Eli Lilly and
represents an important validation of AbCheck’s technology suite and its capability to reliably deliver high-
quality antibodies suitable for clinical development.
In November 2016 we repaid the existing loan facility with Perceptive and entered into a new loan
agreement with Silicon Valley Bank of up to €10 million. In addition, we raised €16.5 million (or $17.7
million) in net proceeds in an underwritten follow-on financing in January and February 2017.
In August 2016 we announced the departure of our CMO Dr. Jens-Peter Marschner. In the interim, Dr.
Anne Kerber, is serving as acting CMO.
We recently entered into a termination agreement with Dr. Jörg Windisch, COO, who will be leaving the
Company at the end of June 2017. Dr. Windisch has accepted a position on the executive committee of a
non-competing company focusing on the large-scale manufacturing of biologics and the development of
biosimilars. He will continue to support Affimed as a consulting expert following his departure.
Composition
The Supervisory Board determines the number of its members, provided that the Supervisory Board shall
always consist of at least three members. The composition of the Supervisory Board changed in 2016.
Michael B. Sheffery left the Supervisory Board effective June 29, 2015 and was replaced by Dr. Bernhard
Ehmer, who was elected in the extraordinary general meeting on January 21, 2016. Dr. Ehmer, who
meets the NASDAQ independence requirements, joined the Audit Committee and became the new
member in addition to Ferdinand Verdonck (Chairman) and Berndt Modig in the beginning of 2016. The
Supervisory Board profile was not amended in 2016 and the Supervisory Board is of the opinion that its
composition is currently in accordance with such profile.
The following table lists the members of the Supervisory Board. See chapter II. “Managing Directors and
Supervisory Directors” of the Corporate Governance Report of the Management for detailed biographies
including details on their profession, principal positions and other positions. Thomas Hecht is the chairman
Affimed Annual Report 2016
44
of the Supervisory Board. The term of each member will terminate on the date of the annual general
meeting of shareholders in the year indicated below.
Name
Thomas Hecht
Bernhard Ehmer
Ulrich Grau
Berndt Modig
Richard B. Stead
Ferdinand Verdonck September 9, 2014
Initial/re-appointment Term
September 17, 2014
2017
January 21, 2016
2019
July 1, 2015
2018
September 17, 2014
2017
June 21, 2016
2019
2017
Age Gender
66
62
68
58
64
74
M
M
M
M
M
M
Nationality
German
German
German/US
Swedish/US
US
Belgian
Meeting and activities
The Supervisory Board held four meetings in person in 2016. The Management Board attended these
meetings. During these meetings, key areas of discussion were the progress of the various projects, the
main risks of the business, the financial situation and the strategic direction of the Company including
structural changes thereto.
In addition, the Supervisory Board discussed the Company’s internal control system with the audit
committee and the external independent auditor. The Supervisory Board, on the advice of the audit
committee, also discussed the result of the assessment of the structure and operation of the internal risk
management and control systems as well as significant changes thereto including the need for an internal
audit function. Based on the results of the review of the audit committee the Supervisory Board currently
does not see a need for an internal audit function.
The Supervisory Board reviewed the Company's annual financial statements, including non-financial
information. The report of the external auditor to the annual financial statements is included in the annual
accounts. The Supervisory Board agrees to the contents of the annual accounts and will recommend the
adoption thereof by the annual general meeting of shareholders.
The Supervisory Board meetings were all attended by the complete Supervisory Board. All Supervisory
Board members made adequate time available to give sufficient attention to matters concerning Affimed.
Each of the members was able to frequently attend Supervisory Board meetings.
The members of the Supervisory Board have regular contact with the members of the Management Board
outside of the scheduled meetings of the Supervisory Board. These informal consultations ensure that the
Supervisory Board remains well-informed about the Company’s operations.
The Supervisory Board is responsible for the quality of its own performance and it discusses, once a year
on its own, without the members of the Management Board both its own performance and that of the
individual members, as well as the performance of the Management Board and its individual members. In
2016 the Supervisory Board conducted an evaluation through a self-assessment and was positive, overall,
about the performance of its committees and the Management Board. Further the Supervisory Board was
satisfied with the performance of the Supervisory Board and determined that it works well together, with all
members fully contributing to discussions.
During the financial year 2016 no conflict of interest of a Supervisory Board member was reported. We
refer to the chapter Conflict of Interest in the corporate governance report of the annual report for further
information.
Affimed Annual Report 2016
45
Committees of the Supervisory Board
The Supervisory Board has three permanent committees to which certain tasks are assigned. The
committees report back on their activities to the Supervisory Board on a regular basis. The composition of
each committee is detailed in the following table.
Name
audit committee
compensation committee nomination and corporate
governance committee
Bernhard Ehmer
Ulrich Grau
Thomas Hecht
Berndt Modig
Richard B. Stead
Ferdinand Verdonck
member
member
chairman
member
chairman
member
chairman
member
member
Audit committee
The audit committee assists the Supervisory Board in overseeing Affimed’s accounting and financial
reporting processes and the audits of the financial statements. The audit committee meets at least four
times per year and during the regular meetings at least once a year with our external independent auditor,
without the Management Board being present. In 2016, the audit committee’s main areas of focus were
review of quarterly financial statements, the Company’s system of internal controls and risk management,
auditing approach and auditing timelines of quarterly and annual financial statements and discussion of
the financing situation.
The financial statements of the company for 2016 as presented by the Management Board have been
audited by KPMG as independent external auditors. KPMG attended the audit committee meeting in
which the annual accounts and the auditor’s report were discussed. The Management Board and the audit
committee report to the Supervisory Board annually on their dealings with the external auditor, including
the auditor’s independence. The Supervisory Board takes these reports into account when deciding on the
nomination for the appointment of an external auditor that is submitted to the general meeting of
shareholders.
The audit committee held five meetings in person and three meetings by conference call in 2016.
Nomination and corporate governance committee
The nomination and corporate governance committee assists the Supervisory Board in identifying
individuals qualified to become members of the Supervisory Board and Management Board consistent
with criteria established by the Supervisory Board and in developing our corporate governance principles.
The Nomination and corporate governance committee held three meetings in person and one meeting by
conference call in 2016.
Compensation committee
The compensation committee assists the Supervisory Board in determining Management and Supervisory
Board compensation. The main responsibilities of the compensation committee are preparing proposals
Affimed Annual Report 2016
46
for the Supervisory Board on the remuneration policy for the Management Board, to be adopted by the
general meeting of shareholders, and preparing proposals on the remuneration of individual members of
the Management Board. For more information on the remuneration policy, see Compensation of
Managing Directors and Supervisory Directors in the Corporate Governance section in the management
report.
The compensation committee held four meetings in person and three meetings by conference call in
2016.
Remuneration of the Supervisory Board
The compensation of Supervisory Board members consists of a fixed annual fee in cash and an additional
meeting fee for any Supervisory Board meeting or committee meeting. Members of the Supervisory Board
are entitled to annual grants under our share-based compensation plans. Remuneration is subject to an
annual review by the Supervisory Board.
The remuneration of members of the Supervisory Board complies with almost all aspects of the provision
of the Dutch Corporate Governance Code. The exceptions are where it conforms more closely to
customary practice in the biotechnology industry worldwide, in particular in the United States. These
exemptions and further details on the remuneration of the Supervisory Board are disclosed in the
Corporate Governance section in the management report.
An overview of the implementation and planning of the remuneration of supervisory and managing
directors and in addition the remuneration policy is given in more detail in section “Item 6. Directors,
Senior Management and Employees – Compensation” in the annual report (20-F) filed with the Securities
and Exchange Commission on March 30, 2017 (available on our website http://www.affimed.com.sec).
Independence of the Supervisory Board
The Supervisory Board is a separate corporate body that is independent of the Management Board of the
Company. Members of the Supervisory Board can neither be a member of the Management Board nor an
employee of Affimed. Two of our Supervisory Board members, Dr. Thomas Hecht and Dr. Ulrich Grau, do
not meet the independence requirements according to the Dutch Corporate Governance Code (see also
the Corporate Governance section in the management report in which deviations from the Dutch
Corporate Governance Code are disclosed).
Affimed Annual Report 2016
47
Appreciation
The Supervisory Board is of the opinion that during the year 2016, its composition, mix and depth of
available expertise, working processes, level and frequency of engagement in all critical Company
activities, and access to all necessary and relevant information and the Company’s management and staff
were satisfactory and enabled it to carry out its duties towards all the Company’s stakeholders.
The members of the Supervisory Board would like to express their gratitude and appreciation to the
Management Board and employees of Affimed for their efforts and performance in 2016. In particular, the
Supervisory Board would very much like to thank our shareholders for their continued support.
May 21, 2017
On behalf of the Supervisory Board,
Dr. Thomas Hecht,
Chairman of the Supervisory Board
Affimed Annual Report 2016
48
Consolidated Financial Statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Affimed Annual Report 2016
53
Notes to the consolidated financial statements
(in € thousand)
1.
Reporting entity
Affimed N.V. (in the following Affimed or Company) is a Dutch company with limited liability (naamloze
vennootschap) and has its corporate seat in Amsterdam, the Netherlands. The Company was founded
as Affimed Therapeutics B.V. on May 14, 2014 as private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid) for a purpose of a corporate reorganization of Affimed
Therapeutics AG and converted its legal form under Dutch law to a public company with limited liability
for an initial public offering of its common shares.
The consolidated financial statements of Affimed comprise the Company and its wholly owned and
controlled subsidiaries Affimed GmbH, Heidelberg, Germany (former Affimed Therapeutics AG),
AbCheck s.r.o., Plzen, Czech Republic and Affimed Inc., Delaware, USA. Financial information
presented in the consolidated financial statements for periods prior to the consummation of the
corporate reorganization on September 17, 2014 is that of Affimed GmbH and its subsidiary AbCheck
s.r.o. Affimed N.V. had not conducted any operations and had not held any assets or liabilities,
including contingent liabilities, prior to the reorganization. Affimed Inc. was formed in February 2015
and provides internal services for the Group.
Affimed is a clinical-stage biopharmaceutical group focused on discovering and developing targeted
cancer immunotherapies. The Company’s product candidates are developed in the field of immuno-
oncology, which represents an innovative approach to cancer research that seeks to harness the
body’s own immune system to fight tumor cells. Affimed has own research and development programs
and collaborations, where the Company is performing research services for third parties.
2.
Corporate Reorganization as of September 17, 2014
At the initial step of the corporate reorganization, the shareholders of Affimed Therapeutics AG
subscribed for 15,984,168 common shares in Affimed Therapeutics B.V and agreed to transfer their
common shares and their preferred shares in Affimed Therapeutics AG to Affimed Therapeutics B.V in
consideration therefore. Simultaneously, the share in Affimed Therapeutics B.V. held by Stichting
Affimed Therapeutics was cancelled, and as a result, Affimed Therapeutics AG became a wholly
owned subsidiary of Affimed Therapeutics B.V. The legal form of Affimed Therapeutics B.V. was
converted from a Dutch private company with limited liability to a Dutch public Company with limited
liability, which resulted in a name change into Affimed N.V.
In conjunction with the corporate reorganization, the outstanding awards granted under the Stock
Option Equity Incentive Plan 2007 (ESOP 2007) as well as under the carve-out plan, were converted
into awards exercisable for common shares of Affimed N.V. The carve-out plan granted the right to
receive a cash payment equal to a certain percentage of the fair value of Affimed Therapeutics AG
upon the occurrence of a defined exit event.
The securities of Affimed Therapeutics AG were exchanged for common shares of Affimed B.V.
according to the following ratios:
(i)
(ii)
Common shares and Series D preferred shares on an one-to 7.54 ratio except for shares
held by a less than 5% shareholder, which were exchanged on a one- to 15.46 basis;
Series E preferred shares on a one-to-13.70 basis;
Affimed Annual Report 2016
54
Notes to the consolidated financial statements
(in € thousand)
(iii)
ESOP 2007 awards into awards exercisable for common shares of Affimed N.V. on a one-
to 7.54 basis.
The carve-out plan provided for a transfer to the grantees of 7.78% of the common shares of the
Company owned by the pre-IPO shareholders of the Company at the expiration of the lock up
agreements entered into in connection with the IPO. As a result of the consummation of the corporate
reorganization, the Company is no longer obliged to deliver cash or common shares to the grantees
under the carve-out plan.
The conversion of preferred shares in Affimed Therapeutics AG that had been classified as liability into
common shares of Affimed N.V. resulted in a gain of €4,835 recognized as finance income in 2014.
3.
Basis of preparation – consolidated financial statements
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board as adopted in the
European Union (EU-IFRSs) and with Section 2:362(9) of Netherlands Civil Code.
With reference to the income statement of the Company, use has been made of the exemption
pursuant to Section 402 of Book 2 of the Netherlands Civil Code.
The consolidated financial statements were authorized for issuance by the management board and
supervisory board on May 21, 2017.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis. The Group did
not opt for a valuation of liabilities at fair value through profit or loss.
Consolidation
The Company controls an entity when the Company has power over the investee, is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. A subsidiary is consolidated from the date on which control is
transferred to the Company. It is de-consolidated from the date control ceases.
Intercompany transactions, balances and unrealized gains on transactions between group companies
are eliminated.
Functional and presentation currency
These consolidated financial statements are presented in euro, which is also the subsidiaries’
functional currency. All financial information presented in euro has been rounded to the nearest
thousand (abbreviated €) or million (abbreviated € million).
Affimed Annual Report 2016
55
Notes to the consolidated financial statements
(in € thousand)
Presentation of consolidated statement of comprehensive loss
The line items include revenue, research and development expenses and general and administrative
expenses. Cost of sales and gross profit are not meaningful measures for Affimed as a clinical-stage
biopharmaceutical company with a focus on research and development activities. All expenses with
regards to own research and development and collaboration and research service agreements are
presented in research and development expenses.
4.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements.
Current and non-current distinction
Affimed presents current and non-current assets and current and non-current liabilities as separate
classifications in the statement of financial position. Affimed classifies all amounts expected to be
recovered or settled within twelve months after the reporting period as current and all other amounts
as non-current.
Foreign currency transactions
Transactions in foreign currencies are translated to euro at exchange rates at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are
translated to euro at the exchange rate at the reporting date.
The foreign currency gain or loss on monetary items is the difference between amortized cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during
the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the
reporting period.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Foreign exchange gains or losses that relate to borrowings, cash and cash equivalents and financial
assets are presented in the statement of comprehensive loss within ‘finance income/costs net’. All
other foreign exchange gains and losses are presented in the statement of comprehensive loss within
‘Other income/expenses – net’.
Notes to the cash flow statement
The cash flow statement has been prepared using the indirect method for cash flows from operating
activities. The cash disclosed in the cash flow statement is comprised of cash and cash equivalents.
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term bank deposits
and are not subject to a significant risk of changes in value. Interest paid and received is included in
Affimed Annual Report 2016
56
Notes to the consolidated financial statements
(in € thousand)
the cash flow from operating activities.
Revenue recognition
The Group licenses its intellectual property to third parties that use the intellectual property to develop
product candidates and provides related research and development services to those parties or
provides research services based on intellectual property provided by the customer for those services.
The research services are performed on a “best efforts” basis without a guarantee of technological or
commercial success.
Collaboration and license agreements are evaluated to determine whether they involve multiple
elements that can be considered separate units of accounting. To date, the Group has not licensed or
sold its intellectual property without continuing involvement by providing the related research and
development services. Accordingly, the results under the Group’s collaboration and license
agreements have not qualified as separate units of accounting.
Revenue from collaborative or other research service agreements is recognized according to the stage
of completion.
Non-refundable upfront licensing fees, research funding or technology access fees that have generally
no stand-alone value to the customer and require continuing involvement in the form of research and
development services or other efforts by the Group are recognized as revenue over the term of the
service agreement which is the period of performance.
Milestone payments are contingent upon the achievement of contractually stipulated targets. The
achievement of these milestones depends largely on meeting specific requirements laid out in the
collaboration and license agreements. Consideration that is contingent upon achievement of a
milestone is recognized in its entirety as revenue in the period in which the milestone is achieved, but
only if the consideration earned from the achievement of a milestone meets all the criteria for the
milestone to be considered substantive at the inception of the agreement. For a milestone to be
the milestone must (i) be
considered substantive,
commensurate with either the Group's performance to achieve the milestone or the enhancement of
the value of the item delivered as a result of a specific outcome resulting from the Group's
performance to achieve the milestone, (ii) relate solely to past performance, and (iii) be reasonable
relative to all results and payment terms in the collaboration agreement.
the consideration earned by achieving
Research and development
Research expenses are recognized as expenses when incurred. Costs incurred on development
projects are recognized as intangible assets as of the date as of which it can be established that it is
probable that future economic benefits attributable to the asset will flow to the Group considering its
technological and commercial feasibility. Given the current stage of the development of the Group’s
products, no development expenditures have yet been capitalized. Intellectual property-related costs
for patents are part of the expenditure for the research and development projects. Therefore,
registration costs for patents are expensed when incurred as long as the research and development
project concerned does not meet the criteria for capitalization.
Affimed Annual Report 2016
57
Notes to the consolidated financial statements
(in € thousand)
As part of the process of preparing the consolidated financial statements Affimed is required to
estimate its accrued expenses. This process involves reviewing quotations and contracts, identifying
services that have been performed on its behalf, estimating the level of service performed and the
associated cost incurred for the service when Affimed has not yet been invoiced or otherwise notified
of the actual cost. The majority of Affimed’s service providers invoice monthly in arrears for services
performed or when contractual milestones are met. Affimed makes estimates of its accrued expenses
as of each balance sheet date in the consolidated financial statements based on facts and
circumstances known to it at that time. Affimed periodically confirms the accuracy of its estimates with
the service providers and makes adjustments if necessary.
Employee benefits
(i)
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided.
A liability is recognized for the amount expected to be paid under a short-term cash bonus, if the
Group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
(ii)
Share-based payment transactions
The Company’s share-based payment awards outstanding as of December 31, 2015 and 2016 are
classified as equity-settled share-based payment plans. Fair value of share-based equity-settled
compensation plans is measured at grant date and compensation cost is recognized over the vesting
period with a corresponding increase in equity. Fair value is estimated using the Black-Scholes-Merton
formula. The formula determines the value of an option based on input parameters like the value of the
underlying instrument, the exercise price, the expected volatility of share price returns, dividends, the
risk-free interest rate and the time to maturity of the option. The number of stock options expected to
vest is estimated at each measurement date.
Government grants
The Group receives certain government grants that support its research effort in defined projects.
These grants generally provide for reimbursement of approved costs incurred as defined in the
respective grants. Income in respect of grants also includes contributions towards the costs of
research and development. Income is recognized when costs under each grant are incurred in
accordance with the terms and conditions of the grant and the collectability of the receivable is
reasonably assured.
Government grants relating to costs are deferred and recognized in the income statement over the
period necessary to match them with the costs they are intended to compensate. When the cash in
relation to recognized government grants is not yet received the amount is included as a receivable on
the statement of financial position.
Affimed Annual Report 2016
58
Notes to the consolidated financial statements
(in € thousand)
The Group recognizes income from government grants under ‘Other income’ in the consolidated
statement of comprehensive loss.
Lease payments
Payments made under operating leases are recognized in profit or loss on a straight-line basis over
the term of the lease.
Finance income and finance costs
Finance income comprises interest income from interest bearing bank deposits. Interest income is
recognized as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings including gains or losses from early
extinguishment of debt. Borrowing costs are recognized in profit or loss using the effective interest
method.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
(iii) Non-derivative financial assets
The Group’s non-derivative financial assets include trade and other receivables, certificates of deposit
at banks with original maturities of more than three months and cash and cash equivalents.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets and measured as loans and
receivables. Loans and receivables are subsequently carried at amortized cost using the effective
interest method.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three
months or less.
(iv) Non-derivative financial liabilities
The Group’s classes of financial liabilities are borrowings and trade and other payables. The Group
initially recognizes non-derivative financial liabilities on the date that they are originated and measures
them at amortized cost using the effective interest rate method. The Group derecognizes a financial
liability when its contractual obligations are discharged, cancelled or expire.
(v) Compound financial instruments
The Company entered into certain loan agreements pursuant to which it issued warrants to purchase
common shares of the Company at the option of the respective holders (see note 17). The number of
Affimed Annual Report 2016
59
Notes to the consolidated financial statements
(in € thousand)
shares to be issued does not vary with changes in their fair value.
The liability component of the loans were recognized initially at the fair value of a similar liability that
did not have a warrant. The equity component was recognized initially at the difference between the
fair value of the compound financial instrument as a whole and the fair value of the liability component.
Subsequent to initial recognition, the liability component is measured at amortized cost using the
effective interest method. The equity component is not re-measured subsequent to initial recognition
except on conversion or expiry.
Impairment
(vi) Trade and other receivables
Trade and other receivables are assessed at each reporting date to determine whether there is
objective evidence that they are impaired. Trade or other receivables are impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the receivable, and that
the loss event had a negative effect on the estimated future cash flows of that receivable that can be
estimated reliably. A loss event is the inability of a debtor to pay because of its bankruptcy. All
receivables are assessed for specific impairment. Losses are recognized in profit or loss and reflected
in an allowance account against receivables. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. No
impairments or reversals of impairments were recognized in 2014, 2015 or 2016.
(vii) Non-financial assets
Assets that are subject to depreciation / amortization are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss is
recognized as the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Non-
financial assets that were previously impaired are reviewed for possible reversal of the impairment at
each reporting date.
(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7) (cid:8)(cid:9)(cid:10)(cid:7)(cid:11)
Income taxes comprise current and deferred tax. Current tax and deferred tax are recognized in profit
or loss except to the extent that it relates to items recognized directly in equity or in other
comprehensive loss.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognized for temporary differences associated with assets and liabilities if the transaction
which led to their initial recognition is a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss.
Affimed Annual Report 2016
60
Notes to the consolidated financial statements
(in € thousand)
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the
reporting date.
Deferred tax assets and liabilities are presented net if there is a legally enforceable right to offset.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which
they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Fair Value Measurement
All assets and liabilities for which fair value is recognized in the consolidated financial statements are
organized in accordance with the following fair value hierarchy, based on the lowest level input
parameter that is significant on the whole for fair value measurement:
•
•
•
Level 1 – Prices for identical assets or liabilities quoted in active markets (non-adjusted)
Level 2 – Measurement procedures, in which the lowest level input parameter significant on the
whole for fair value measurement is directly or indirectly observable for on the market
Level 3 – Measurement procedures, in which the lowest level input parameter significant on the
whole for fair value measurement is not directly or indirectly observable for on the market
The carrying amount of all trade and other receivables, certificates of deposit, cash and cash
equivalents and trade and other payables is a reasonable approximation of the fair value and therefore
information about the fair values of those financial instruments has not been disclosed. The note
disclosure for the fair value of a loan (financial liability) is based on level 2 measurement procedures
(see note 17).
Loss per share
Affimed presents loss per share data for its common shares. Loss per common share is calculated by
dividing the loss of the period by the weighted average number of common shares outstanding during
the period, adjusted for the stock split in 2014.
The Company has granted warrants under certain loan agreements (see note 17) and options under
share-based payment programs (see note 16) which potentially have a dilutive effect; no instruments
actually had a dilutive effect.
Critical judgments and accounting estimates
The preparation of the consolidated financial statements in conformity with IFRS requires management
to make judgments, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Affimed Annual Report 2016
61
Notes to the consolidated financial statements
(in € thousand)
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods
affected.
In preparing these financial statements, the critical judgments made by management in applying the
Group's accounting policies resulted in the following accounting estimates:
(i)
Share-based payments
The fair value of stock options issued by Affimed N.V. is estimated using the Black-Scholes-Merton
formula. The formula determines the value of an option based on input parameters like the value of the
underlying instrument, the exercise price, the expected volatility of share price returns, dividends, the
risk-free interest rate and the time to maturity of the option. The fair value of share-based equity-
settled compensation plans is measured at grant date and compensation cost is recognized over the
vesting period with a corresponding increase in equity. The number of stock options expected to vest
is estimated at each measurement date.
(ii)
Revenue recognition
Elements of consideration in collaboration and license agreements are non-refundable up-front
research funding payments, technology access fees and milestone payments. Generally, the Group
has continuing performance obligations and therefore up-front payments are deferred and the related
revenues recognized in the period of the expected performance. Technology access fees are generally
deferred and recognized over the expected term of the research service agreement on a straight line
basis.
The Group estimates that the achievement of a milestone reflects a stage of completion under the
terms of the agreements and recognizes revenue when a milestone is achieved. If the research
service is cancelled due to technical failure, the remaining deferred revenues from upfront payments
are recognized.
New standards and interpretations applied for the first time
A number of amendments to standards and new or amended interpretations are effective for annual
periods beginning on or after January 1, 2016, and have been applied in preparing these financial
statements.
Standard/interpretation
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IAS 16, 38 Clarification of acceptable methods
of depreciation and amortization
Amendments to IAS 1 Disclosure Initiative
Amendments to IFRS 10, 12 and IAS 28 Investment Entities
Amendment to IFRS 11 Accounting for Acquisitions of Interests in
Joint Operations
Effective Date 1
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
Affimed Annual Report 2016
62
Notes to the consolidated financial statements
(in € thousand)
1 Shall apply for periods beginning on or after the effective date.
The Group has reduced the scope of notes disclosure according to the amendment of IAS 1
Disclosure Initiative. None of the other amendments to standards and new or amended interpretations
had an effect on the consolidated financial statements of the Group.
New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations are effective for annual periods
beginning after December 31, 2016, and have not been applied in preparing these consolidated
financial statements.
Standard/interpretation
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments (2014)
Amendments to IAS 7 Disclosure Initiative
IFRS 16 Leases
Clarifications to IFRS 15 Revenue from Contracts with Customers
Amendments to IFRS 2: Classification and Measurement of Share-
based Payment Transactions
Annual Improvements to IFRS Standards 2014-2016 Cycle
1 Shall apply for periods beginning on or after the effective date.
Effective Date 1
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2019
January 1, 2018
January 1, 2018
January 1, 2018
The Group is assessing the potential impact that IFRS 9, 15 or 16 could have on its consolidated
financial statements. The other new or amended standards and interpretations are not expected to
have a significant effect on the consolidated financial statements of the Group.
5.
Segment reporting
(i)
Information about reportable segment
The Group is active in the discovery, pre-clinical and clinical development of antibodies based on core
technology. The activities are either conducted as own project development or for third party
companies. Management of resources and reporting to the decision maker is based on the Group as a
whole.
(ii)
Geographic information
The geographic information below analyses the Group’s revenue and non-current assets by the
country of domicile and other countries. In presenting the following information, segment revenue has
been based on the geographic location of the customers and segment assets were based on the
geographic location of the assets.
Affimed Annual Report 2016
63
Notes to the consolidated financial statements
(in € thousand)
Discovery activities and research services are conducted in both the Heidelberg and Plzen premises.
Pre-clinical and clinical activities are conducted and coordinated from Heidelberg.
Revenues:
Germany
Europe
USA
Non-current assets as of December 31:
Germany
Czech Republic
(iii)
Major Customers
2014
111
367
2,904
3,382
2015
125
711
6,725
7,562
692
295
987
2016
6
1,397
4,911
6,314
618
259
877
In 2014 and 2015, the Group’s revenue with each of its two collaboration partners, Amphivena and the
Leukemia and Lymphoma Society (in the following LLS), exceeded 10%. In 2016, the Group’s revenue
with three customers exceeded 10%.
6.
Revenue
Collaboration agreement Amphivena
Until July 2016, Affimed was party to a collaboration with Amphivena Therapeutics Inc., San
Francisco, USA (in the following Amphivena). The purpose of the collaboration was the development
of a product candidate for hematological malignancies. The collaboration included a License and
Development Agreement between Amphivena and Affimed, which expired when Amphivena obtained
the approval of an investigational new drug application (IND) from the FDA in July 2016.
Pursuant to the license and development agreement between Affimed and Amphivena, Affimed
granted a license to intellectual property and agreed to perform certain services for Amphivena related
to the development of a product candidate for hematological malignancies. In consideration for the
research and development work that was performed, Amphivena was required to pay to Affimed
service fees totaling approximately €16 million payable according to the achievement of milestones
and phase progressions as described under the license and development agreement. Since the
expiration of the agreement, the parties have been closing out the collaboration by exchanging
documentation and transferring materials and third party contracts.
During the years 2014, 2015 and 2016, the Company recognized revenue upon achievement of
milestones and for the performance of research and development services. Revenue in 2016
amounted to €3.4 million, net of Affimed’s share in funding Amphivena (2015: €4.8 million, 2014: €1.8
million).
Affimed Annual Report 2016
64
Notes to the consolidated financial statements
(in € thousand)
Amphivena has obtained funding solely by issuing preferred stock to investors. Investors provide
financing in exchange for preferred stock issued by Amphivena under the terms of certain stock
purchase agreements. Through December 31, 2016, Affimed participated in the financing of
Amphivena with cash investments of €1.7 million.
(cid:12)(cid:5)(cid:13)(cid:13)(cid:9)(cid:14)(cid:5)(cid:15)(cid:9)(cid:8)(cid:16)(cid:5)(cid:3) (cid:9)(cid:17)(cid:15)(cid:7)(cid:7)(cid:6)(cid:7)(cid:3)(cid:8) (cid:18)(cid:19)(cid:7) (cid:20)(cid:7)(cid:21)(cid:22)(cid:7)(cid:6)(cid:16)(cid:9) (cid:23) (cid:20)(cid:24)(cid:6)(cid:25)(cid:19)(cid:5)(cid:6)(cid:9) (cid:26)(cid:5)(cid:4)(cid:16)(cid:7)(cid:8)(cid:24) (cid:27)(cid:20)(cid:20)(cid:26)(cid:28)
Affimed is party to a collaboration with LLS to fund the development of a specific TandAb. Under the
terms of the agreement, LLS has agreed to contribute up to $4.4 million contingent upon the
achievement of certain milestones.
In the event that the research and development is successful, Affimed must proceed with
commercialization of the licensed product. If Affimed decides for business reasons not to continue the
commercialization, Affimed must at its option either repay the amount funded or grant a license to LLS
to enable LLS to continue with the development program. In addition, LLS is entitled to receive
royalties from Affimed based on the Group’s future revenue from any licensed product, with the
amount of royalties not to exceed three times the amount funded.
In June 2016, the research funding agreement with LLS was amended to reflect a shift to the
development of combination therapeutic approaches so that the milestones now relate primarily to the
development of a combination therapy.
The Company achieved several milestones and recognized revenue for related payments of €1.1
million in 2014, €1.6 million in 2015 and €0.4 million in 2016 for research and development services.
Research service agreements
AbCheck has entered into certain research service agreements. These research service agreements
provide for non-refundable upfront technology access research funding or capacity reservation fees
and milestone payments. The Group recognized revenue of €478 in 2014, €1,126 in 2015 and of
€2,442 in 2016.
7.
Other income and expenses - net
Other income and expenses, net mainly comprises income from government grants for research and
development projects of €171 (2015: €716, 2014: €381).
8.
Research and development expenses
The following table shows the different types of expenses allocated to research and development
costs:
Affimed Annual Report 2016
Notes to the consolidated financial statements
(in € thousand)
Third-party services
Personnel expenses
Legal, consulting and patent expenses
Cost of Materials
Amortisation and depreciation
Operating lease expenses
Other expenses
65
2016
€
20,170
6,648
758
1,028
322
297
957
30,180
2014
€
5,558
292
1,549
844
428
243
681
9,595
2015
€
15,386
3,637
902
902
308
267
606
22,008
In 2014, personnel expenses and Legal, consulting and patent expenses include a net gain of €1,480
for share based payments resulting from the decrease in the carrying amount of the liability for share-
based payments prior to the corporate reorganization (see note 2).
9.
General and administrative expenses
The following table shows the different types of expenses allocated to general and administrative
costs:
Personnel expenses
Legal, consulting and audit fees
Operating lease expenses
Other expenses
2014
-2,836
4,391
81
710
2,346
2015
3,658
2,468
89
1,333
7,548
2016
4,729
2,210
111
1,273
8,323
In 2014, personnel expenses and Legal, consulting and audit fees include a net gain of €3,412 for
share based payments resulting from the decrease in the carrying amount of the liability for share-
based payments due to the corporate reorganization (see note 2).
Affimed Annual Report 2016
66
Notes to the consolidated financial statements
(in € thousand)
10. Employee benefits
The following table shows the items of employee benefits:
Wages and salaries
Social security costs
2014
3,176
470
3,646
2015
5,066
583
5,649
2016
7,445
807
8,252
The employer's contributions to pension insurance plans of €362 (2015: €269, 2014: €242) are
classified as payments under a defined contribution plan, and are recognized as an expense.
11. Finance income and finance costs
2014
2015
2016
Gain from exchange of Preferred Shares of Affimed AG into
Common Shares of Affimed N.V. (see note 2)
Changes in fair value of derivative conversion feature
Interest Preferred Shares
Interest Convertible Loan
Interest Perceptive Loan Agreement (see note 17)
Other finance cost Perceptive Loan Agreement (see note 17)
Interest SVB Loan Agreement (see note 17)
Foreign exchange differences
Interest certificates of deposit (see note 14)
Other finance income/finance costs
Finance income/costs - net
4,835
6,094
-3,617
-402
-260
0
0
0
0
0
0
-703
0
0
1,106
1,808
0
-3
0
-1
7,753
1,104
0
0
0
0
-762
-242
-41
691
122
2
-230
Affimed Annual Report 2016
67
Notes to the consolidated financial statements
(in € thousand)
12.
Income taxes
The Company did not incur any material income tax in the periods presented. As of December 31,
2016 deferred tax liabilities from temporary differences result mainly from borrowings (€129; 2015:
€142) and other assets (€121; 2015: €45). Deferred tax assets from differences resulting from trade
and other receivables (€292; 2015: €338), intangible assets (€49; 2015: €44) and trade and other
payables (€31; 2015: €15) have not been recognized as deferred tax assets as no sufficient future
taxable profits or offsetting deferred tax liabilities are available. A reconciliation between actual income
taxes and the expected tax benefit from the loss before tax multiplied by the Company's applicable tax
rate is presented below:
2014
2015
2016
Loss before tax
-425
-20,239
-32,274
Income tax benefit at tax rate of
29.825 %
Adjustments due to impairment of
deferred tax assets
127
6,036
9,626
2,787
-6,251
-8,747
Permanent differences
-2,837
Adjustments for local tax rates
Non deductible expenses
Other
Income taxes
119
0
-30
166
199
18
163
-165
0
-948
12
154
-39
58
tax
losses were mitigated
In Germany, Affimed has tax losses carried forward of €117.6 million (2015: €89.2 million) for
corporate income tax purposes and of €117.3 million (2015: €89.0 million) for trade tax purposes that
are available indefinitely for offsetting against future taxable profits of that entity. Restrictions on the
utilization of
through Economic Growth Acceleration Act
(Wachstumsbeschleunigungsgesetz). According to the provisions of this act unused tax losses of a
corporation as at the date of a qualified change in ownership are preserved to the extent they are
compensated by an excess of the fair value of equity for tax purposes above its carrying amount of the
Company. The maximum amount of tax losses at risk of being lost due to ownership changes is
approximately €59 million. Deferred tax assets have not been recognized in respect of any losses
carried forward as no sufficient taxable profits of Affimed are expected.
In the Czech Republic, all tax losses incurred in prior years (2015: €0.3 million) were used in the fiscal
year 2016.
Affimed Annual Report 2016
68
Notes to the consolidated financial statements
(in € thousand)
13. Trade and other receivables
The trade receivables as of December 31, 2016 of €970 (2015: €105) are all due in the short-term, do
not bear interest and are not impaired. As of December 31, 2016 trade receivables of €219 (2015: €0)
were overdue. Other receivables are all due short-term and mainly comprise receivables for research
and development grants and other government subsidies of €14 (2015: €68), value-added tax
receivables of €642 (2015: €607) and receivables related to refunding of research and development
costs €385 (2015: €0).
14. Financial assets
Financial assets include certificates of deposit denominated in U.S. dollars ($10 million) due in March
2017. In 2016, the Group recognized foreign exchange gains of €597 and interest income of €122
related to certificates of deposit.
15. Equity
At December 31, 2016 the share capital of €333 (2015: €333) is divided into 33,262,745 (2015:
33,259,404) common shares with a par value of €0.01.
On May 12, 2015, the Company issued 5,750,000 common shares at a public offering at a price of
$7.15 per common share. After deducting the offering expenses of €3,091, equity increased by the net
proceeds of the public offering of €33,490. In October 2015, an existing shareholder purchased
3,325,236 common shares at $6.55 per share in a private placement, leading to an equity increase of
€19,064, net of related expenses of €25.
In December 2016, the Company issued 3,341 common shares in connection with its at-the-market
sales agreement and received proceeds of €6.
According to the articles of association of Affimed N.V., up to 55,000,000 common shares and
55,000,000 preferred shares with a par value of €0.01 are authorized to be issued. As of December
31, 2016, 33,262,745 (December 31, 2015: 33,259,404) common shares have been issued and are
outstanding. Preferred shareholders are entitled to receive a fixed dividend yield prior to common
shareholders, unpaid preferred dividends accumulate. As of December 31, 2016 no preferred shares
have been issued.
16. Share based payments
In the corporate reorganization on September 17, 2014, an equity-settled share based payment
program was established by Affimed N.V. (ESOP 2014). Based on this program, the Company
granted 795,000 awards in 2015 and 1,778,095 awards in 2016 to certain members of the
Management Board, the Supervisory Board, consultants and employees. The awards vest in
installments over three years, and the final exercise date of the options is 10 years after the grant date
of the instruments. All outstanding share-based payment awards issued prior to the corporate
reorganization were modified and exchanged for equity-settled awards (see note 2).
Affimed Annual Report 2016
69
Notes to the consolidated financial statements
(in € thousand)
As of December 31, 2016, 3,044,345 ESOP 2014 awards were outstanding (December 31, 2015:
1,350,000), 952,458 awards (December 31, 2015: 259,583) were vested. 83,750 ESOP 2014 awards
forfeited due to termination of employment, and no options were exercised. The options outstanding at
December 31, 2016 had an exercise price in the range of $2.51 to $13.47 (2015: $5.18 to $13.47) and
weighted average remaining contractual life of 8.9 years (2015: 9.2 years)
The expense of the granted options is recorded over the vesting period, starting from the service
commencement date, which is generally the grant date.
In 2016, an expense of €3,545 was recognized affecting research and development expenses
(€1,178) and general and administrative expenses (€2,367). In 2015, an expense of €2,220 was
recognized affecting research and development expenses (€611) and general and administrative
expenses (€1,609). In 2014, a net gain for share-based compensation of €4,892 was recognized
affecting research and development expenses (€1,480) and general and administrative expenses
(€3,412) including a gain of €8,261 due to the re-measurement of the previously issued awards under
ESOP 2007 and the carve-out plan as of September 17, 2014, the modification date.
The fair value of options granted under the ESOP 2014 program was determined using the Black-
Scholes valuation model. As the Company was listed on the NASDAQ the closing price of the common
shares at grant date was used. Other significant inputs into the model are as follows (weighted
average):
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate
2015
$4.99
$8.72
$8.74
65%
5.90
0.00
0.17%
2016
$1.99
$3.55
$3.57
69%
5.90
0.00
-0.32%
Expected volatility is estimated based on the observed daily share price returns of a peer group
measured over a historic period equal to expected life. In the second quarter of 2016 Affimed was
introduced to the peer group as sufficient trading data became available to use the share price returns
of Affimed to estimate volatility over a historic period equal to expected life.
17. Borrowings
Perceptive
In July 2014, the Company entered into a credit facility agreement with an affiliate of Perceptive
Affimed Annual Report 2016
70
Notes to the consolidated financial statements
(in € thousand)
Advisors LLC (the “Perceptive loan”) of $14 million and drew an amount of $5.5 million as of July 31,
2014. Repayment started in April 2016 in monthly installments of $200, with the final balance due in
August 2018. Finance costs included interest of an annual rate of 9% plus one month LIBOR, with
LIBOR deemed to equal 1% if LIBOR is less than 1%, and an arrangement fee in the amount of 2% of
the facility. In addition, the Company issued 106,250 warrants to the lender. The warrants are
convertible into common shares of the Company with a strike price of $8.80. Upon initial recognition,
the fair value of the warrant of €613 was recognized in equity, net of tax of €183. Fair value was
determined using the Black-Scholes-Merton formula, with an expected volatility of 65% and an
expected time of six years to exercise of the warrant. The contractual maturity of the warrant is ten
years.
In 2015, the Company and Perceptive agreed to cancel the option to draw the outstanding facility of
$8.5 million. In 2016 the Company repaid all outstanding amounts under the Perceptive loan. The
group recognized early repayment fees of €110 and extinguishment losses of the debt of €132.
The loan was measured at amortized cost using the effective interest method. Interest costs of €762
(2015: €703; 2014: €258) and foreign exchange losses of €86 (2015: €527; 2014: €424) were
recognized in profit or loss. As of December 31, 2015 the fair value of the liability amounted to €4,978
whereas the carrying amount was €4,576. In 2015, according to the repayment schedule €1,472 were
classified as current liabilities.
Silicon Valley Bank
On November 30, 2016, the Company entered into a loan agreement with Silicon Valley Bank (the
“SVB loan”) which provides the Company with a senior secured term loan facility for up to €10.0 million
available in two tranches. As of December 31, 2016 the Company has drawn the initial tranche of €5.0
million.
Finance costs comprise the interest rate of one-month EURIBOR plus an applicable margin of 5.5%,
with a floor of 5.5%, related one-time legal and arrangement fees of €226 and a final payment fee
equal to 10% of the total principal amount to be paid with the last instalment. Pursuant to the loan
agreement, the Group also granted 166,297 warrants to SVB to purchase Affimed’s common shares
with a per-share exercise price of $2.00. The Group recognized the fair value of the warrant of €142 in
equity, net of tax of €60 and net of transaction costs of €7. Fair value was determined using the Black-
Scholes-Merton formula, with an expected volatility of 80% and an expected time of five years to
exercise of the warrant. The contractual maturity of the warrant is ten years.
Up to an additional €5.0 million may be drawn by the Company until May 31, 2017, contingent on the
satisfaction of certain conditions and the issue of additional warrants exercisable for the Company’s
shares in an amount equal to 9.5% of the additional amount drawn, subject to a maximum aggregate
number of shares equal to 0.5% of the outstanding share capital of the Company at the time of the
drawdown of the relevant tranche.
The loan is secured by a pledge of 100% of Company’s shares in Affimed GmbH, all intercompany
claims owed by Affimed’s subsidiaries to Affimed and a security assignment of all of the Company’s
and Affimed GmbH bank accounts, inventory, trade receivables and payment claims recognized in the
consolidated financial statements with the following book values:
Affimed Annual Report 2016
71
Notes to the consolidated financial statements
(in € thousand)
Leasehold improvements and equipment
Inventories
Trade and other receivables
Financial assets
Cash and cash equivalents
Book value as of December 31, 2016
thereof
assets
pledged
Consolidated
financial
statements
822
197
2,255
9,487
35,407
48,168
542
177
1,217
9,487
34,674
46,097
As of December 31, 2016 the Company believes that the fair value of the liability did not differ
significantly from its carrying amount (€4,590). The loan has a maturity date of May 31, 2020 with an
interest-only period through June 1, 2017 with amortized payments of principal and interest thereafter
in equal monthly installments. As of December 31, 2016, €973 were classified as current liabilities.
18. Trade and other payables
Trade and other payables comprise trade payables of €4,506 (2015: €3,743) and are normally settled
within 30 days or at a separate settlement date which was agreed between the parties. Other payables
mainly comprise payroll and employee related liabilities for withholding taxes and social security
contributions of €471 (2015: €444) and payables due to employees for outstanding bonus, unused
holidays and other accruals. Other payables are normally settled within 30 days.
19. Loss per share
Loss per common share is calculated by dividing the loss of the period by the weighted average
number of common shares outstanding during the period, adjusted for reorganization of the Company
(see note 2).
2014
2015
2016
Net loss
(259)
(20,239)
(32,216)
Weighted number of common
shares outstanding
17,632,825
28,477,438
33,259,505
Loss per share in € per share
(0.01)
(0.71)
(0.97)
Affimed Annual Report 2016
72
Notes to the consolidated financial statements
(in € thousand)
No instruments had a dilutive effect.
20. Operating leases and other commitments and contingencies
(viii) Lease and other commitments
The Group has entered into rental agreements for premises as well as into leases for vehicles and the
use of licenses. These contracts have an average life of between one and four years with renewal
options included in some contracts. There are no restrictions placed upon the lessee by entering into
these leases. In 2016, lease expenses of €409 and license fees of €405 have been recognized in
consolidated statement of comprehensive income (2015: €356 and €278; 2014: €324 and €248).
Future minimum lease payment obligations under non-cancellable operating leases as of the reporting
date are as follows:
Within one year
Between one and five years
(ix) Contingencies
2015
642
990
1,632
2016
700
541
1,241
Affimed has entered into various license agreements that contingently trigger payments upon
achievement of certain milestones and royalty payments upon commercialization of a product in the
future.
21. Related parties
(i) Shareholders
As of December 31, 2016 and December 31, 2015 one shareholder holds more than 20% of the voting
rights (2014 two shareholders).
(ii) Transactions with key management personnel
Affimed Annual Report 2016
73
Notes to the consolidated financial statements
(in € thousand)
The compensation of managing directors and other key management personnel comprised of the
following:
Short-term employee benefits
Termination benefits
Share-based payments
2014
2015
2016
911
0
-3,253
-2,342
1,633
0
1,474
3,107
1,879
430
2,292
4,601
Remuneration of Affimed’s managing directors comprises fixed and variable components and share-
based payment awards. In addition, the managing directors receive supplementary benefits such as
fringe benefits and allowances. In the case of an early termination, the managing directors receive a
severance.
Compensation for other key management personnel comprises fixed and variable components and
share-based payment awards.
The supervisory directors of Affimed N.V., appointed as of September 12, 2014, received
compensation for their services on the supervisory board of €350 (2015: €296), the supervisory
directors of Affimed Therapeutics AG, the predecessor of Affimed N.V., did not receive compensation
for their services on the supervisory board. In 2016, the Group recognized expenses for share-based
payments for supervisory board members of €381 (2015: €478, 2014: €727).
Selected managing directors and supervisory directors entered into service and consulting agreements
with the Company:
Dr. Florian Fischer is founder and Chief Executive Officer of MedVenture Partners, a Munich-based
corporate finance and strategy advisory company focusing on the life sciences and health care
industry. MedVenture Partners rendered services for a consideration of €129 in 2014. The contract
with MedVenture Partners was terminated following the IPO in 2014.
Dr. Adolf Hoess received compensation for consulting services of €163 in 2014. The consulting
contract with Dr. Adolf Hoess was terminated following the IPO in 2014.
Dr. Thomas Hecht is Head of Hecht Healthcare Consulting (HHC) in Küssnacht, Switzerland, a
biopharmaceutical consulting company. In 2014, he rendered services amounting to €49.
Dr. Richard B. Stead is Founder and Principal of BioPharma Consulting Services LLC, where he is
involved in the development of a number of oncology products including different strategies for cancer
immunotherapy. In 2014, he rendered services amounting to €25.
Dr. Ulrich Grau is a significant shareholder and Chairman of the Board of Directors of i-novion Inc.,
which was engaged by the Company to conduct preclinical services. In 2016, i-novion Inc. received
Affimed Annual Report 2016
74
Notes to the consolidated financial statements
(in € thousand)
related payments of €86 (2015: €138).
Jens-Peter Marschner rendered consulting services amounting to €29 in 2016 (€0 in 2015).
The following table provides the total amounts of outstanding balances related to key management
personnel:
Thomas Hecht
Richard Stead
Berndt Modig
Ferdinand Verdonck
Ulrich Grau
Bernhard Ehmer
Jens-Peter Marschner
Outstanding balances
December
31, 2015
December
31, 2016
19
6
9
11
13
0
0
23
14
8
10
17
11
2
22. Financial risk management
(x)
Financial risk management objectives and policies
The Group’s principal financial instruments comprise cash and cash equivalents, certificates of deposit
at commercial banks and investor loans presented in borrowings. The main purpose of these financial
instruments is to raise funds for the Group's operations. The Group has various other financial assets
and liabilities such as trade and other receivables and trade and other payables, which arise directly
from its operations.
The main risks arising from the Group's financial instruments are credit risk and liquidity risk. The
measures taken by management to manage each of these risks are summarized below.
(xi) Credit risk
The Company’s financial assets comprise to a large extent cash and cash equivalents. In addition
financial assets include certificates of deposit and trade and other receivables. The total carrying
amount of cash and cash equivalents (€35.4 million, 2015: €76.7 million), certificates of deposit (€9.5
million, 2015: €0 million) and trade and other receivables (€2.3 million, 2015: €0.9 million) represents
the maximum credit exposure of €47.2 million (2015: €77.6 million).
The cash and cash equivalents and certificates of deposit are held with banks, which are rated BBB+
to AA- based on Standard & Poor’s and Moody’s.
(xii)
Interest rate risk
Affimed Annual Report 2016
75
Notes to the consolidated financial statements
(in € thousand)
The group’s interest rate risk arises from cash accounts and long-term borrowings at variable rates.
Affimed entered into the SVB loan pursuant to which the Company borrowed €5.0 million with a
variable interest rate of an annual rate of 5.5% plus one-month EURIBOR, with EURIBOR deemed to
equal zero percent if EURIBOR is less than zero percent. The group does not expect the EURIBOR to
exceed the floor of 0% within the foreseeable future, and considers the interest risk to be low.
Market interest rates on cash and cash equivalents were low in 2016, resulting in interest income of €9
in 2016. A shift in interest rates (increase or decrease) would not have a material impact on the loss of
the group.
(xiii) Foreign currency risk
Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities
are denominated in a currency that is not the entity’s functional currency.
The group’s entities are exposed to Czech Koruna (CZK) and US Dollars (USD). The net exposure as
of December 31, 2016 was €18,974 (2015: €27,423) and mainly relates to US Dollars.
In 2016, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €1,897 (2015: €2,794) higher/lower, mainly as a result of
foreign exchange gains/losses on translation of US dollar-denominated financial assets. The group
considers a shift in the exchange rates of 10% as a realistic scenario.
Loss is less sensitive to movement in exchange rates shifts in 2016 than in 2015 because of the
decreased volume of US dollar-denominated transactions.
The following significant exchange rates have been applied during the year:
2014
2015
2016
CZK or USD/EUR
CZK or USD/EUR
CZK or USD/EUR
0.03632
0.03606
0.75273
0.82366
0.03666
0.03701
0.90190
0.91853
0.03699
0.03701
0.90404
0.94868
CZK - Average Rate
CZK - Spot rate
USD - Average Rate
USD - Spot rate
(xiv) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated
with its financial liabilities which are normally settled by delivering cash. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due.
Affimed Annual Report 2016
76
Notes to the consolidated financial statements
(in € thousand)
The Group continually monitors its risk of a shortage of funds using short and mid-term liquidity
planning. This takes account of the expected cash flows from all activities. The supervisory board
undertakes regular reviews of the budget.
In 2015, 2016 and at the beginning of 2017, Affimed raised significant funding that it estimates will
enable the group to fund operating expenses and capital expenditure requirements at least until the
end of 2018:
In 2015, the issue of new common shares and the exercise of stock options resulted in net proceeds of
€53,498 (see note 15).
In 2015, Affimed filed a “shelf registration statement” with the SEC in order to offer and sell securities
to the public in multiple, future offerings and issued shares with proceeds of €6 in connection with its
at-the-market sales agreement in 2016.
On November 30, 2016, the Company entered into a loan agreement with Silicon Valley Bank which
provides the Company with a loan facility for up to €10.0 million contingent on the satisfaction of
certain conditions, and drew the initial tranche of €5.0 million.
In January 2017, the Company issued 28,870 shares with proceeds of €58 in connection with its at-
the-market sales agreement.
In January and February 2017, the Company issued 10,646,742 common shares in a public offering at
a price of $1.80 per common share and received net proceeds of approximately €16.5 million ($17.7
million).
The group expects to require additional funding to complete the development of the existing product
candidates. In addition, the group expects to require additional capital to commercialize the products if
regulatory approval is received.
(xv) Capital management
The primary objective of the Group's capital management is to ensure that it maintains its liquidity in
order to finance its operating activities and meet its liabilities when due.
The Group manages its capital structure primarily through equity.
23. Subsequent events
In January and February 2017, the Company issued 10,646,742 common shares in a public offering at
a price of $1.80 per common share and received net proceeds of approximately €16.5 million ($17.7
million).
Affimed Annual Report 2016
77
Company Financial Statements
Balance sheet of Affimed N.V.
Income statement of Affimed N.V.
Notes to the financial statements of Affimed N.V.
Affimed Annual Report 2016
80
Notes to the Company financial statements for the year ended 31 December
2016
24. General information
Affimed N.V. (in the following ‘Affimed’ or the ‘Company’) has its corporate seat in Amsterdam. The
Company was founded as Affimed Therapeutics B.V. on May 14, 2014 for a purpose of a corporate
reorganization and converted its legal form under Dutch law to a public company with limited liability for
an initial public offering of its common shares which was completed in September 2014.
Affimed is a clinical-stage biopharmaceutical group focused on discovering and developing targeted
cancer immunotherapies. The Company’s product candidates are developed in the field of immuno-
oncology, which represents an innovative approach to cancer research that seeks to harness the body’s
own immune system to fight tumor cells. Affimed has own research and development programs and
collaborations, where the Company is performing research services for third parties.
The Company financial statements are part of the 2016 financial statements of Affimed N.V.
25. Basis of preparation
The Company financial statements have been prepared in accordance with Title 9, Book 2 of the
Netherlands Civil Code.
For setting the principles for the recognition and measurement of assets and liabilities and determination
of the result for its company financial statements, the Company makes use of the option provided in
section 2:362(8) of the Netherlands Civil Code. This means that the principles for the recognition and
measurement of assets and liabilities and determination of the result (hereinafter referred to as principles
for recognition and measurement) of the company financial statements of the Company are the same
as those applied for the consolidated EU-IFRS financial statements. See the notes to the consolidated
EU-IFRS financial statements for a description of these principles.
In case no other policies are mentioned, reference is made to the accounting policies as described in
the accounting policies in the consolidated EU-IFRS financial statements. For an appropriate
interpretation, the Company financial statements should be read in conjunction with the EU-IFRS
consolidated financial statements.
Participating interests in group companies
Participating interests in group companies are accounted for in the Company financial statements
according to the net asset method. Net asset value is based on the measurement of assets, provisions
and liabilities and determination of net result based on the principles applied in the consolidated financial
statements. Participations with a negative net asset value are valued at nil. A share of the profits from
the participation, in later years, will only be processed if and insofar as the cumulative unrecognized
share has compensated the loss. However, if the Company wholly or partly guarantees the debts of a
participation, or has the constructive obligation to allow the participation (for its share) to pay its debts,
a provision is recognized in the amount of the expected payments by the Company on behalf of the
participation. The provision is formed primarily at the expense of long-term unsecured receivables that
should actually be seen as part of net investment, and the remainder presented under provisions.
Result of participating interests
The share in the result of participating interests consists of the share of the Company in the result of
these participating interests. Results on transactions involving the transfer of assets and liabilities
between the Company and its participating interests and mutually between participating interests
themselves, are eliminated to the extent that they can be considered as not realised.
Affimed Annual Report 2016
81
The financial information of the Company is included in the consolidated financial statements. For this
reason, in accordance with Section 402, Book 2 Netherlands Civil Code, the income statement of the
Company exclusively states the share in the result of participating interests after taxation and the other
result after taxation.
26. Financial fixed assets
Financial fixed assets solely include the investment of the Company in its fully owned subsidiary Affimed
GmbH (former Affimed Therapeutics AG), with statutory seat in Heidelberg, Germany. We refer to note
32 for the pledge of the shares in Affimed GmbH.
Movements in the financial fixed assets were as follows:
In € thousand
Affimed GmbH
Total
Opening Net asset value January 1, 2016
Capital contribution
Fair value of warrant note (net of taxes)
Share in result of participating interest
1,602
25,390
142
(25,976)
1,602
25,390
142
(25,976)
Net asset value at December 31, 2016
1,158
1,158
The Company has issued a warrant note in consideration of the loan agreement between Affimed GmbH
and SVB (see note 29).
27. Financial assets
Financial assets include certificates of deposit denominated in U.S. dollars ($10 million) due in March
2017. We refer to note 32 for the pledge of all amounts of financial assets.
28. Cash and cash equivalents
Cash and cash equivalents have been pledged. We refer to note 32.
Affimed Annual Report 2016
82
29. Equity
As of December 31, 2016 the number of issued common shares is 33,262,745 with a par value of €0.01
per share. All issued shares are fully paid. Besides the minimum amount of share capital to be held
under Dutch law, there are no distribution restrictions applicable to equity of the Company.
As the structure of the equity components for the Company financial statements is largely based on
legal aspects, the presentation of the movement in shareholder’s equity is different from the presentation
in the consolidated financial statements.
The movement in shareholder’s equity is as follows:
In € thousand
Issued
capital
Other
reserves
Unappro-
priated
result
Total
equity
January 1, 2015
240
39,129
(7,574)
31,795
Issue of common shares
Share issuance costs
Share options exercised
Net result
Share-based payments
91
-
2
-
-
55
55,580
(3,117)
942
-
2,220
-
-
(20,239)
-
55,671
(3,117)
944
(20,239)
2,220
December 31, 2015
333
94,754
(27,813)
67,274
January 1, 2016
Issue of common shares
Issue of warrant note
Net result
Share-based payments
December 31, 2016
333
-
-
-
-
55
333
94,754
(27,813)
67,274
6
142
-
3,545
-
-
(32,216)
-
6
142
(32,216)
3,545
98,447
(60,029)
38,751
Issued capital
In May and October 2015, the Company issued 5,750,000 and 3,325,236 common shares at $7.15 per
share and $6.55 per share respectively. In total an amount of €55.6 million was recognized in other
reserves.
In December 2016, the Company issued 3,341 common shares in connection with its at-the-market
sales agreement and received proceeds of €6,000.
According to the articles of association of the Company, up to 55,000,000 common shares and
55,000,000 preferred shares with a par value of €0.01 are authorized to be issued. Preferred
shareholders are entitled to receive a fixed dividend yield prior to common shareholders, unpaid
preferred dividends accumulate. As of December 31, 2016 no preferred shares have been issued.
Other reserves
In 2016, the Company granted 166,297 warrants to Silicon Valley Bank to purchase Affimed’s common
shares as part of the loan agreement entered into by the Company’s subsidiary Affimed GmbH (see
note 32). Affimed recognized the fair value of the warrant of €142,000 in equity, net of tax of €60,000
Affimed Annual Report 2016
83
and net of transaction costs of €7,000. Fair value was determined using the Black-Scholes-Merton
formula, with an expected volatility of 80% and an expected time of five years to exercise of the warrant.
The contractual maturity of the warrant is ten years.
The Company has adopted a share-based compensation plan (ESOP 2014), pursuant to which the
Company’s directors, selected employees and consultants are granted the right to acquire common
shares of the Company (note 16 of the consolidated financial statements). The share-based payment
expenses are recorded in the income statement. The ESOP 2014 plan is equity-settled. In case of an
equity-settled plan, there is no obligation to transfer economic benefits, therefore the credit entry should
be recognized as an increase in equity. The Company uses “Other reserves” as the equity classification.
30. Payables to subsidiaries
These payables relate to Affimed GmbH and do not bear interest.
31. Other current payables
In € thousand
Trade payables
Social security and wage tax
Other liabilities
Total
December
31, 2016
December
31, 2015
305
187
420
912
325
182
513
1,020
32. Off balance sheet commitments
On November 30, 2016, the Company’s subsidiary Affimed GmbH entered into a loan agreement with
Silicon Valley Bank (SVB) which provides the subsidiary with a senior secured term loan facility for up
to €10.0 million available in two tranches. As of December 31, 2016 Affimed GmbH has drawn the initial
tranche of €5.0 million. Pursuant to the loan agreement, the Company granted 166,297 warrants to SVB
to purchase Affimed’s common shares.
Up to an additional €5.0 million may be drawn by the subsidiary until May 31, 2017, contingent on the
satisfaction of certain conditions and the issue of additional warrants exercisable for the Company’s
shares in an amount equal to 9.5% of the additional amount drawn, subject to a maximum aggregate
number of shares equal to 0.5% of the outstanding share capital of the Company at the time of the
drawdown of the relevant tranche.
The loan is secured by a pledge of 100% of Company’s shares in Affimed GmbH, all intercompany
claims owed by Affimed’s subsidiaries to the Company and a security assignment of all of the Company’s
and Affimed GmbH’s bank accounts, inventory, trade receivables and payment claims recognized in the
financial statements (total value of €39.9 million in the Company’s financial statements at December 31,
2016).
Affimed Annual Report 2016
84
33. Other result after taxation
In € thousand
Other income (service fee)
General and administrative expenses
Other gains/(losses) – net
Net operating result
Financial income
Financial expense
Net financial result
Result before taxation
Taxation
Result after taxation
2016
1,408
(8,381)
(8)
(6,981)
2,148
(1,407)
741
(6,240)
0
(6,240)
2015
750
(6,539)
0
(5,789)
2,408
(239)
2,169
(3,620)
0
(3,620)
The Company has entered into a service agreement with Affimed Therapeutics AG (now Affimed
GmbH). The service fee includes the reimbursement of the net service expenses and a mark-up rate (at
arms-length) on these net service expenses.
34. Employee benefits and number of employees
The average number of employees during 2016 was 3.5 employees and consisted of managing directors
only. The managing director’s compensation is shown in note 35.
35. Related-party transactions
Director’s remuneration 2016
Managing directors
(in € thousand)
Periodically paid compensation
Consulting service fees
Bonuses
Termination benefits
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
*Including sign on bonus of €50,000
Hoess
Fischer Marschner1 Windisch
Total
434
0
110
0
544
1,228
1,228
327
0
60
0
387
464
464
210
29
37
430
706
184
184
324
0
110*
0
434
162
1,295
29
317
430
2,071
2,038
162
2,038
Affimed Annual Report 2016
85
Supervisory directors
(in € thousand)
Hecht Ehmer Grau3 Modig Stead Verdonck
Total
Periodically paid compensation
Service fees
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
Director’s remuneration 2015
Managing directors
(in € thousand)
Periodically paid compensation
Bonuses
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
Supervisory directors
117
0
117
94
94
40
0
40
47
47
47
86
133
93
93
50
0
50
49
49
38
0
38
49
49
58
0
58
49
49
350
86
436
381
381
Hoess
Fischer Marschner
Total
424
149
573
774
774
319
83
402
298
298
319
83
402
252
252
1,062
315
1,377
1,324
1,324
(in € thousand)
Grau3 Hecht Modig
Stead Verdonck
Total
Periodically paid compensation
Service fees
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
24
138
162
47
47
120
0
120
167
167
51
0
51
88
88
40
0
40
88
88
61
0
61
88
88
296
138
434
478
478
1 Dr. Jens-Peter Marschner served as CMO until August 10, 2016.
2 Expense related to the issuance of options under the 2014 Plan. Details of options granted are
summarized in the table below.
3 Dr. Ulrich Grau is a significant shareholder and Chairman of the Board of Directors of i-novion Inc.,
which was engaged by the Company to conduct preclinical services. In 2016, i-novion Inc. received
related payments of €86,000.
For further details and other information with regard to related-party transactions as well as Management
and Supervisory Director’s compensation reference is made to note 21 of the consolidated financial
statements.
Affimed Annual Report 2016
86
Stock options granted under the Equity Incentive Plan 2014
Awards granted in 2016
Managing directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Adi Hoess ........................
Florian Fischer ................
Jörg Windisch ..................
Jörg Windisch……………
Total
July 6, 2016
July 6, 2016
October 19, 2015*
July 6, 2016
600,000
245,000
150,000
95,500
1,090,500
July 6, 2026
2.67
2.67
July 6, 2026
7.06 October 19, 2025
July 6, 2026
2.67
* Jörg Windisch was granted 150,000 stock options on signing the management service agreement. The management service
agreement and the stock option grant became effective upon his appointment by the general meeting of shareholders on
January 21, 2016.
Supervisory directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Thomas Hecht .................
Bernhard Ehmer…………
Bernhard Ehmer…………
Ulrich Grau ......................
Berndt Modig ...................
Richard Stead .................
Ferdinand Verdonck ........
Total
June 21, 2016
January 21, 2016
June 21, 2016
June 21, 2016
June 21, 2016
June 21, 2016
June 21, 2016
40,000
20,000
20,000
20,000
20,000
20,000
20,000
160,000
3.05
3.34
3.05
3.05
3.05
3.05
3.05
June 21, 2026
January 21, 2026
June 21, 2026
June 21, 2026
June 21, 2026
June 21, 2026
June 21, 2026
Awards granted in 2015
Managing directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Adi Hoess ........................
Florian Fischer ................
Jens-Peter Marschner .....
Total
Supervisory directors
September 4, 2015
September 4, 2015
September 4, 2015
290,000
105,000
80,000
475,000
9.42 September 4, 2025
9.42 September 4, 2025
9.42 September 4, 2025
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Ulrich Grau ......................
Thomas Hecht .................
Berndt Modig ...................
Richard Stead .................
Ferdinand Verdonck ........
Total
July 1, 2015
June 9, 2015
June 9, 2015
June 9, 2015
June 9, 2015
20,000
20,000
10,000
10,000
10,000
70,000
13.47
12.44
12.44
12.44
12.44
July 1, 2025
June 9, 2025
June 9, 2025
June 9, 2025
June 9, 2025
Affimed Annual Report 2016
87
For further disclosure related to the share-options we refer to note 16 of the consolidated financial
statements. The Company aims to meet its obligations by virtue of the granted option rights by issuing
new shares (no purchase of treasury shares).
36. Audit fees
With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the
financial year have been charged by KPMG Accountants N.V. to the Company, its subsidiaries and other
consolidated entities.
(in € thousand)
Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services
(in € thousand)
Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services
KPMG
Accountants
N.V.
2016
Other KPMG
network
Total
KPMG
2016
2016
36
0
0
0
36
90
90
0
7
187
126
90
0
7
223
KPMG
Accountants
N.V.
2015
Other KPMG
network
Total
KPMG
2015
2015
36
0
0
0
36
106
180
0
14
300
142
180
0
14
336
Affimed Annual Report 2016
88
Signing of the financial statements
May 21, 2017
Originally signed by:
Management Board:
Dr. Adi Hoess, CEO
Dr. Florian Fischer, CFO
Dr. Jörg Windisch, COO
Supervisory Board:
Dr. Thomas Hecht, Chairman
Dr. Bernhard Ehmer
Dr. Ulrich Grau
Berndt Modig
Dr. Richard B. Stead
Ferdinand Verdonck
Affimed Annual Report 2016
89
Other information
Provisions in the Articles of Association governing the appropriation of profit
The company’s Articles of Association provide under chapter 10 provisions about the appropriation
of profit, the full text is as follows:
Chapter 10
Profit and loss. Distributions on shares.
Article 10.1.
10.1.1. The management board will keep a share premium reserve and profit reserve for the
common shares to which only the holders of the common shares are entitled.
10.1.2. The company may make distributions on shares only to the extent that its shareholders'
equity exceeds the sum of the paid-up and called-up part of the capital and the reserves which
must be maintained by law.
10.1.3. Distributions of profit, meaning the net earnings after taxes shown by the adopted annual
accounts, shall be made after the adoption of the annual accounts from which it appears that they
are permitted, entirely without prejudice to any of the other provisions of the articles of
association.
10.1.4.
a. A dividend shall be paid out of the profit, if available for distribution, first of all on the
cumulative preference shares in accordance with this paragraph.
b. The dividend paid on the cumulative preference shares shall be based on the percentage,
mentioned immediately below, of the amount called up and paid-up on those shares. The
percentage referred to in the previous sentence shall be equal to the average of the EURIBOR
interest charged for cash loans with a term of twelve months as set by the European Central
Bank - weighted by the number of days to which this interest was applicable - during the financial
year for which this distribution is made, increased by a maximum margin of five hundred (500)
basis points to be fixed upon issue by the management board; EURIBOR shall mean the Euro
Interbank Offered Rate.
c. If in the financial year over which the aforesaid dividend is paid the amount called up and paid-
up on the cumulative preference shares has been reduced or, pursuant to a resolution to make a
further call on said shares, has been increased, the dividend shall be reduced or, if applicable,
increased by an amount equal to the aforesaid percentage of the amount of such reduction or
increase, as the case may be, calculated from the date of the reduction or, as the case may be,
from the date when the further call on the shares was made.
d. If and to the extent that the profit is not sufficient to pay in full the dividend referred to under a
of this paragraph, the deficit shall be paid to the debit of the reserves provided that doing so shall
not be in violation of article 10.1.2. If and to the extent that the dividend referred to under a. of
this article 10.1.4 cannot be paid to the debit of the reserves, the profits earned in subsequent
years shall be applied first towards making to the holders of cumulative preference shares such
payment as will fully clear the deficit, before the provisions of the following paragraphs of this
article can be applied. No further dividends on the cumulative preference shares shall be paid
than as stipulated in this article 10.1.4, in article 10.2 and in article 11.2. Interim dividends paid
over any financial year in accordance with article 10.2 shall be deducted from the dividend paid
by virtue of this article 10.1.4.
e. If the profit earned in any financial year has been determined and in that financial year one or
more cumulative preference shares have been cancelled against repayment, the persons who
Affimed Annual Report 2016
90
were the holders of those shares shall have an inalienable right to payment of dividend as
described below. The amount of profit, if available for distribution, to be distributed to the
aforesaid persons shall be equal to the amount of the dividend to which by virtue of the provision
under a. of this paragraph they would have been entitled if on the date of determination of the
profit they had still been the holders of the aforesaid cumulative preference shares, calculated on
the basis of the period during which in the financial year concerned said persons were holders of
said shares, such dividend shall be reduced by the amount of any interim dividend paid in
accordance with article 10.2.
f. If in the course of any financial year cumulative preference shares have been issued, with
respect to that financial year the dividend to be paid on the shares concerned shall be reduced
pro rata to the day of issue of said shares.
g. If the dividend percentage has been adjusted in the course of a financial year, then for the
purposes of calculating the dividend over that financial year the applicable rate until the date of
adjustment shall be the percentage in force prior to that adjustment and the applicable rate after
the date of adjustment shall be the altered percentage.
10.1.5. The management board may determine, with the approval of the supervisory board, that
any amount remaining out of the profit, after application of article 10.1.4 shall be added to the
reserves.
10.1.6. The profit remaining after application of article 10.1.4 and 10.1.5 shall be at the disposal
of the general meeting, provided that no further distribution shall be made on the cumulative
preference shares. The general meeting may resolve to carry it to the reserves or to distribute it
among the holders of common shares.
10.1.7. On a proposal of the management board - which proposal must be approved by the
supervisory board -, the general meeting may resolve to distribute to the holders of common
shares a dividend in the form of common shares in the capital of the company.
10.1.8. Subject to the other provisions of this article 10.1 the general meeting may, on a proposal
made by the management board which proposal is approved by the supervisory board, resolve to
make distributions to the holders of common shares to the debit of one or several reserves which
the company is not prohibited from distributing by virtue of the law.
10.1.9. No dividends on shares shall be paid to the company on shares which the company itself
holds in its own capital or the depositary receipts issued for which are held by the company,
unless such shares are encumbered with a right of use and enjoyment or pledge.
10.1.10. Any change to an addition as referred to in article 10.1.4 under b and g shall require the
approval of the meeting of holders of cumulative preference shares. If the approval is withheld
the previously determined addition shall remain in force.
10.1.11. The management board is authorised to determine how a deficit appearing from the
annual accounts will be accounted for.
Interim distributions.
Article 10.2.
10.2.1. The management board may resolve with the approval of the supervisory board, to make
interim distributions to the shareholders or to holders of shares of a particular class if an interim
statement of assets and liabilities shows that the requirement of article 10.1.2 has been met.
10.2.2. The interim statement of assets and liabilities shall relate to the condition of the assets
and liabilities on a date no earlier than the first day of the third month preceding the month in
which the resolution to distribute is published. It shall be prepared on the basis of generally
acceptable valuation methods. The amounts to be reserved under the law and the articles of
Affimed Annual Report 2016
91
association shall be included in the statement of assets and liabilities. It shall be signed by the
managing directors and supervisory directors. If one or more of their signatures are missing, this
absence and the reason for this absence shall be stated.
10.2.3. In the event that all cumulative preference shares are cancelled against repayment, on
the day of such repayment a dividend shall be paid, this dividend to be equal to the premium paid
on the share concerned at its issue increased by a distribution to be calculated in accordance
with the provisions of article 10.1.4 and over the period over which until the date of repayment no
earlier distribution as referred to in the first sentence of article 10.1.4 has been made, all this
provided that the requirement of article 10.1.2 has been met as demonstrated by an interim
statement of assets and liabilities as referred to article 10.2.2.
10.2.4. Any proposal for distribution of a dividend on common shares and any resolution to
distribute an interim dividend on common shares shall immediately be published by the
management board in accordance with the applicable stock exchange regulations at the
company's request. The notification shall specify the date when and the place where the dividend
shall be payable or - in the case of a proposal for distribution of dividend - is expected to be made
payable.
10.2.5. Dividends shall be payable no later than thirty (30) days after the date when they were
declared, unless the body declaring the dividend determines a different date.
10.2.6. Dividends which have not been claimed upon the expiry of five (5) years and one (1) day
after the date when they became payable shall be forfeited to the company and shall be carried
to the reserves.
10.2.7. The management board may determine that distributions on shares shall be made
payable either in euro or in another currency.
Proposal for result appropriation for the Financial Year 2016
The General Meeting of Shareholders will be asked to approve the following appropriation of the
2016 loss for the period, amounting to EUR 32,216,000, to be added to the accumulated losses.
Branch offices
Affimed N.V. operates through the following branch offices (direct or indirect wholly owned
subsidiaries):
- Affimed GmbH, Germany
- AbCheck s.r.o., Czech Republic
- Affimed Inc., USA
Other participation
- Amphivena Therapeutics Inc., USA (participation of 23%)
Independent auditor’s report
The independent auditor’s report is set forth on the following page.
Affimed Annual Report 2016
92
Independent auditor’s report
To: the General Meeting of Shareholders of Affimed N.V.
Report on the accompanying financial statements
Our opinion
We have audited the financial statements 2016 of Affimed N.V., based in Amsterdam. The
financial statements include the consolidated financial statements and the company financial
statements.
In our opinion:
— the accompanying consolidated financial statements give a true and fair view of the financial
position of Affimed N.V. as at 31 December 2016 and of its result and its cash flows 2016 in
accordance with International Financial Reporting Standards as adopted by the European
Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code;
— the accompanying company financial statements give a true and fair view of the financial
position of Affimed N.V. as at 31 December 2016 and of its result 2016 in accordance with
Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements comprise:
1
2
3
the consolidated statement of financial position as at 31 December 2016;
the following consolidated statements 2016: the statement of comprehensive loss, changes in
equity and cash flows; and
the notes comprising a summary of the significant accounting policies and other explanatory
information.
The company financial statements comprise:
1
2
3
the company balance sheet as at 31 December 2016;
the company income statement 2016; and
the notes comprising a summary of the accounting policies and other explanatory information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on
Auditing. Our responsibilities under those standards are further described in the ‘Our
responsibilities for the audit of the financial statements’ section of our report.
We are independent of Affimed N.V. in accordance with the Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore, we have complied with the
Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Affimed Annual Report 2016
93
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains
other information that consists of:
— Report by Affimed’s Management Board;
— Report by Affimed’s Supervisory Board;
— other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
Based on the following procedures performed, we conclude that the other information:
— is consistent with the financial statements and does not contain material misstatements;
— contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the financial statements or otherwise, we have considered whether the other
information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less
than the scope of those performed in our audit of the financial statements.
The Board of Directors is responsible for the preparation of the other information, including the
management board’s report, in accordance with Part 9 of Book 2 of the Dutch Civil Code, and
other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
Description of the responsibilities for the financial statements
Responsibilities of the Board of Directors for the financial statements
The Board of Directors is responsible for the preparation and fair presentation of the financial
statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code.
Furthermore, the Board of Directors is responsible for such internal control as they determine is
necessary to enable the preparation of the financial statements that are free from material
misstatement, whether due to errors or fraud.
As part of the preparation of the financial statements, the Board of Directors is responsible for
assessing the company’s ability to continue as a going concern. Based on the financial reporting
frameworks mentioned, the Board of Directors should prepare the financial statements using the
going concern basis of accounting unless the Board of Directors either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so. The Board of
Directors should disclose events and circumstances that may cast significant doubt on the
company’s ability to continue as a going concern in the financial statements.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain
sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we
may not have detected all material errors and fraud during our audit.
Misstatements can arise from fraud or errors and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements. The materiality affects the nature, timing and extent of
our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
Affimed Annual Report 2016
94
We have exercised professional judgement and have maintained professional scepticism
throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and
independence requirements. Our audit included e.g.:
— identifying and assessing the risks of material misstatement of the financial statements,
whether due to errors or fraud, designing and performing audit procedures responsive to
those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from errors, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control;
— obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control;
— evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Board of Directors;
— evaluating the overall presentation, structure and content of the financial statements, including
the disclosures; and
— evaluating whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
Because we are ultimately responsible for the opinion, we are also responsible for directing,
supervising and performing the group audit. In this respect we have determined the nature and
extent of the audit procedures to be carried out for group entities. Decisive were the size and the
risk profile of the group entities or operations. On this basis, we selected group entities for which
an audit or review had to be carried out on the complete set of financial information or specific
items.
We communicate with Audit Committee regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant findings in internal
control that we identify during our audit.
Utrecht, 23 May 2017
KPMG Accountants N.V.
J.G.R. Wilmink RA