Affimed N.V.
Amsterdam, The Netherlands
Annual Report 2017
Affimed Annual Report 2017
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 2017
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 2017
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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. Leveraging our
modular and versatile ROCK™ (Redirected Optimized Cell Killing) platform, we generate proprietary,
next-generation bispecific antibodies, which are designed to direct and establish a bridge between
either NK cells or T cells and cancer cells. Our tetravalent bispecific immune cell engagers 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 tetravalent bispecific immune cell engagers 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 are also
developing novel tetravalent, bispecific antibody formats with the potential to tailor immune-engaging
therapy to different indications and settings. 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 key 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 potentially 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, adoptive NK cells or
cytokines).
As of today, we have focused our research and development efforts on four proprietary programs for
which we retain global commercial rights. Because our tetravalent bispecific antibodies bind with
receptors that are known to be present on a number of types of cancer cells, each of our 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 tetravalent bispecific antibodies in
combination with other agents that harness the immune system to fight cancer cells, such as CPIs,
adoptive NK cells and cytokines. 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 main offices and laboratories are located at the Technology Park adjacent to the German Cancer
Research Center (DKFZ) in Heidelberg, where we employ 62 personnel, approximately 60% of whom
have an advanced academic degree. Including AbCheck and Affimed Inc. personnel, our total
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headcount is 91 (81 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.
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 and biotechnology companies
such as Tusk Therapeutics, bluebird bio, 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, ROCK™ (Redirected Optimized Cell Killing) platform, which delivers different
types of next-generation antibodies, bispecific and trispecific Abs, TandAbs, as well as novel
tetravalent, bispecific antibody formats. 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.
Consequently, the overall study design was revised in order to adapt to the changing
treatment landscape, namely the availability of anti-PD-1 antibodies. The study now includes
HL patients relapsed or refractory to treatment with both brentuximab vedotin (Adcetris) and
anti-PD-1 antibodies. The study is open and recruiting including patients pre-treated with both
brentuximab vedotin (B.V.) and anti-PD1. Different dosing protocols of AFM13 are being
explored to allow for improved exposure in more heavily pretreated patient populations. We
are also supporting a phase 1b/2a study of AFM13 as an IST in patients with relapsed or
refractory CD30+ lymphoma led by Columbia University in New York that was initiated in the
third quarter of 2017. In addition to determining clinical efficacy, this is also a translational
study in patients with cutaneous manifestations and is designed to allow for serial biopsies,
thereby enabling assessment of NK cell biology and tumor cell killing within the tumor
microenvironment. In this study, the first and second cohorts have been fully enrolled and
recruitment into the third cohort is ongoing. Furthermore, we are conducting a phase 1b
clinical study of AFM13 in combination with Merck’s anti-PD-1 antibody Keytruda
(pembrolizumab) in HL patients relapsed /refractory to chemotherapy and Adcetris. In this
study, we have completed recruitment into a dose escalation cohort and dose expansion
cohort. In addition, we are conducting a phase 1 clinical study of AFM11 in patients with non-
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Hodgkin Lymphoma, or NHL. The study is currently enrolling into the fourth dose cohort. We
are also conducting a phase 1 clinical study of AFM11 in patients with ALL, which is currently
enrolling into the fifth dose cohort.
(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 bi- and trispecific NK cell
and T cell engagers. 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. clinical 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,
Washington University in St. Louis, the Columbia University, MD Anderson Cancer Center and
the German Cancer Research Center (DKFZ), amongst others. We established 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
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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 bi- and Trispecific immune cell
engagers. AbCheck’s high-quality capabilities have been validated through multiple
international collaborations including a clinical research partnership with globally active
pharmaceutical and biotechnology companies such as Tusk Therapeutics, bluebird bio, Eli
Lilly, Daiichi Sankyo, Pierre Fabre and others.
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 Engager. AFM13 is a
targeted immunotherapy that is currently in development for HL and CD30-positive lymphoma
in relapsed/refractory patients. 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. As neutrophils exist in such large amounts, most AFM13 would bind to this cell type
and only a small part would be available for binding to NK cells. 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. We are also supporting a phase 1b/2a study of AFM13 in patients
with relapsed or refractory CD30+ lymphoma as an IST led by Columbia University in New
York that was initiated in the third quarter of 2017. In addition to determining clinical efficacy,
this is also a translational study in patients with cutaneous manifestations and is designed to
allow for serial biopsies, thereby enabling assessment of NK cell biology and tumor cell killing
within the tumor microenvironment. 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 we believe the PK of AFM11 will compare favorably to Amgen’s Blincyto, we are
currently exploring different dosing regimens in our clinical studies to address specific features
relating to T cell engagement, which may require longer infusion times. We are conducting a
phase 1 clinical study of AFM11 in patients with non-Hodgkin Lymphoma, or NHL as well as a
a phase 1 clinical study of AFM11 in patients with ALL.
(cid:1) Growing Pipeline of Product Candidates Focused on Key Cancer Indications. A CD16A
NK cell engager, called AFM24, targeting EGFR-wild type, a validated solid tumor target has
been engineered and characterized preclinically. In addition, we are developing AFM26
preclinically, a CD16A NK cell engager 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,
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we will continue to explore partnerships to support the development or commercialization of
our programs in certain territories.
(cid:0) 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
Firazyr®, while our Chief Operating Officer Wolfgang Fischer played a leading role in the
development of Myfortic®, Certican®, Tasigna®, Zarzio®, Erelzi® and Rixathon®. Our
recently hired Chief Medical Officer Leila Alland has played key roles in the development and
approval of Tagrisso®, Opdivo®, Tasigna® and Caelyx®/Doxil®.
(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 TandAb 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. AFM13 selectively binds with CD30, a clinically
validated target, 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. Furthermore, AFM13 binds CD16A with an approximately
1000-fold higher affinity than monoclonal antibodies thereby significantly increasing potency and
efficacy as preclinically demonstrated.
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We are currently investigating AFM13 as mono- and combination therapy in relapsed/refractory HL
and relapsed/refractory CD30-positive lymphoma patients. In a completed 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 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. 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 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.
Affimed is also currently sponsoring an IST led by GHSG. This phase 2a clinical study of AFM13 in
patients with relapsed/refractory HL started recruitment in the second quarter of 2015. Under the
original protocol, seven patients were recruited that were relapsed/refractory to Adcetris but naïve to
anti-PD-1 antibodies and two of these patients experienced a partial response showing an objective
response rate (ORR) of 29%. Due to delays in opening trial sites and the availability of anti-PD-1
antibodies for the treatment of relapsed/refractory HL patients, in the past we have experienced slower
recruitment into the study than anticipated. Consequently, the overall study design was revised in
order to adapt to the changing treatment landscape, namely the availability of anti-PD-1 antibodies.
The study now recruits HL patients relapsed or refractory to treatment with brentuximab vedotin and
anti-PD-1 antibodies. The study is open and recruiting including patients pre-treated with both
brentuximab vedotin (B.V.) and anti-PD1.
Furthermore, we are conducting a phase 1b clinical study of AFM13 with Merck’s anti-PD-1 antibody
Keytruda (pembrolizumab) in HL. In this study, we have completed recruitment of a total of 30
patients, comprising a dose escalation cohort of 12 patients as well as an expansion cohort of an
additional 18 patients, and in December 2017 and February 2018, the first data were published. Best
response preliminary assessment data from nine patients treated at the highest AFM13 dose level (7
mg/kg) as reported by central read showed an ORR of 89%, including complete metabolic responses
(CmRs) in 44% and partial metabolic responses (PmRs) in 44% of patients. One patient experienced
stable disease (SD).This ORR of 89% compared favorably to the historical ORR of Keytruda (58-63%)
as monotherapy in a similarly pretreated patient population. Namely, such patients were
relapsed/refractory HL and post autologous stem cell transplantation (ASCT) or ineligible for ASCT
and had failed brentuximab vedotin. A total of 24 patients are being treated at the highest AFM13 dose
level. The combination was well-tolerated with most of the adverse events observed mild to moderate
in nature and manageable with standard of care. We expect full 3-month data by mid-year 2018 and
intend to provide regular updates at scientific or medical conferences, with the next set of data to be
presented at the 23rd Annual Congress of the European Hematology Association (EHA) in Stockholm,
June 14-17, 2018.
We are also supporting a phase 1b/2a study of AFM13 as an IST in patients with relapsed or
refractory CD30+ lymphoma as an IST led by Columbia University in New York. In addition to
determining clinical efficacy, this is also a translational study in patients with cutaneous manifestations
and is designed to allow for serial biopsies, thereby enabling assessment of NK cell biology and tumor
cell killing within the tumor microenvironment. In this study, the first and second cohorts have been
fully enrolled and recruitment into the third cohort is ongoing. An analysis of the first dose cohort (three
patients dosed at 1.5 mg/kg) has been completed. The data demonstrated that AFM13 could be safely
administered and showed therapeutic activity as a single agent, with an ORR of 66%. In detail, one
complete response (CR), one partial response (PR) and one SD were observed, as determined by
global response score. We intend to work with the sponsor to provide regular updates on the study.
In order to prepare for further clinical development, we performed preclinical studies investigating the
combination of AFM13 with check-point modulators (CPMs) with collaboration partners. We believe
that AFM13 and CPMs administered together could lead to greater tumor cell killing because these
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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 addition, 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 immune-oncology.
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.
Together with our collaboration partner, the German Cancer Research Center (DKFZ), we recently
published data presenting evidence of AFM13 modulating NK cells by sensitizing them to IL-2 and/or
IL-15 stimulation. In this study, after exposure to AFM13, the NK cells showed improved IL-2- and IL-
15-mediated proliferation and cytotoxicity. These data support the strategy of combining our NK -cell
engagers with IL-2- or IL-15 to potentially achieve deeper clinical responses.
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 are conducting a phase 1 clinical study of AFM11 in patients with NHL. The
study is currently enrolling into the fourth dose cohort. We are also conducting a phase 1 clinical study
of AFM11 in patients with ALL, which is currently enrolling into the fifth dose cohort.
We are developing AFM24, an NK cell-engaging bispecific antibody targeting EGFR-wild type, which
represents a 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 squamous cell
carcinomas of the head and neck (HNSCC). We are generating high affinity tetravalent, bispecific lead
candidates binding to CD16A and the extracellular domain of EGFR with varying half-lives. We believe
these antibodies are differentiated from other EGFR-targeting therapies such as cetuximab due to the
very limited competition of NK cell-binding by circulating IgG. Moreover, our antibodies showed
superior potency and efficacy compared to classical or Fc-enhanced antibodies, as well as the ability
to kill tumor cells when they express mutated proto-oncogene RAS, a negative predictive biomarker
for EGFR-targeting monoclonal antibodies. We anticipate completing IND-enabling studies for AFM24
by mid-year 2019.
We are also developing AFM26, an NK cell-engaging bispecific antibody targeting B cell maturation
antigen (BCMA) to address the medical need for a novel approach to treat multiple myeloma. In
particular, we aim to leverage BCMA as a target in autologous stem cell transplant (ASCT)-eligible
patients, with treatment at or shortly after ASCT offering the potential to eliminate minimal residual
disease (MRD), avoiding relapse. We believe BCMA is a highly promising target for therapeutic
intervention based on early clinical data (CAR-T and ADCs), but low expression of BCMA is a
significant hurdle to eliminate malignant cells. NK cells are the first population of lymphocytes to
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recover post-transplant, offering the opportunity to exploit AFM26 in the ASCT setting. Preclinical
development of AFM26 is ongoing; we are developing different tetravalent bispecific antibody formats
and have selected the final candidate. AFM26 employs a unique mechanism of action through high
affinity engagement of NK cells, in vitro efficacy against cells expressing very low levels of BCMA and
NK cell binding largely unaffected by IgG competition. In addition, AFM26 offers the opportunity for
combination with adoptive NK cell transfer, as it appears to have a favorable safety profile with lower
cytokine release as compared to BiTE.
Amphivena’s product candidate, AMV564, is a CD33/CD3-specific T cell TandAb. Amphivena is
clinically developing AMV564 for the treatment of acute myeloid leukemia (AML), for which Amphivena
has obtained Orphan Drug Designation, and other hematologic malignancies. 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. The IND application for AMV564 was accepted in
July 2016 and Amphivena is conducting a phase 1 clinical study of AMV564 in relapsed or refractory
AML. Amphivena also plans to launch a phase 1 clinical study in patients with myelodysplastic
syndrome (MDS) and is exploring the utility of AMV564 in solid tumors. We are continuing to support
AMV564’s clinical development.
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 novel
tetravalent, bispecific antibody formats 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, 2017, we have raised an aggregate of €201.9 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, 2017, we incurred a net loss of €30.2 million. As of December 31, 2017, we had
an accumulated deficit of €182.7 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 €14.5
million (net of our share in funding Amphivena) upon the achievement of milestones and phase
Affimed Annual Report 2017
10
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 €1.8 million, €4.8 million, €3.4 million and €0.2 million in 2014, 2015, 2016
and 2017 respectively (net of our total investments of €2.3 million).
We are paid in euros under the license and development agreement.
The license and development agreement with Amphivena expired when the IND became effective.
Following the expiration, we continued to provide services on a smaller scale to complete the
remaining deliverables (i.e. material transfer) required under the agreement, and have been financially
supporting the future clinical development of AMV564 with €1.9 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 and €0.3 million of which was invested in December 2017. As of December 31, 2017, the cash
investments in relation to the July 2013 license and development agreement and cash investments
made in October 2016, March 2017 and December 2017 totaled $3.0 million (€2.6 million), and we
owned approximately 18.5% 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 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, 2017 we have met six milestones and we recognized revenues of €1.6 million,
€0.4 million and €0.2 million in 2015, 2016 and 2017, 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 2017
11
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 has been supplying 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 NKcell product. MD Anderson will be responsible for conducting preclinical
research activities aimed at investigating its NKcells 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 2017
12
Financial Operations Overview
Revenue
To date, our revenues have consisted principally of collaboration and service revenue.
Collaboration revenue. 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). Collaboration revenue of €0.4 million for the year ended
December 31, 2017 was from research and development services under the license and development
agreement with Amphivena (€0.2 million) and from the LLS collaboration (€0.2 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
€1.3 million, €2.4 million and €1.6 million of service revenue in 2015, 2016 and 2017, 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 2016 and 2017 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 2017
13
(cid:1) expenses for share-based payments.
Based on our current budget we expect that our total research and development expenses in 2018 will
be in the range of €25 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 relapsed/refractory 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
relapsed/refractory HL, to allow for improved exposure in more heavily pretreated patient
populations. The study is open and recruiting under the new study design. In addition, we are
conducting a clinical study of AFM13 in patients with CD30+ lymphoma. We anticipate that our
research and development expenses in 2018 for AFM13 will be higher than in 2017 due to the
recruitment of additional patients in our study of AFM13 in patients with CD30+ lymphoma and
the preparation of the production of AFM13 for commercial purposes.
(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. In addition we are
expecting additional costs for AFM11 clinical trial material. Therefore, we anticipate that our
research and development expense for the AFM11 program will increase in 2018.
(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 will be on approximately the same level in 2018 as
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 €106.4 million on research and development. In
the years ended December 31, 2015, 2016 and 2017, we spent €22.0 million, €30.2 million and €21.5
million on research and development; €10.0 million, €11.8 million and €5.6 million thereof on AFM13;
and €0.8 million, €2.5 million and €2.8 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)
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 2017
14
(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 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 2018 will be on approximately the same
level compared to the expenses in 2017, 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, 2016 and 2017. 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, 2016 and 2017
Year ended December 31,
2016
2017
Affimed Annual Report 2017
15
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
(in € thousand)
6,314
145
(30,180)
(8,323)
(32,044)
(230)
(32,274)
58
(32,216)
(32,216)
(0.97)
2,010
205
(21,489)
(7,986)
(27,260)
(2,983)
(30,243)
20
(30,223)
(30,223)
(0.69)
Revenue decreased 68% from €6.3 million in the year ended December 31, 2016 to €2.0 million for
the year ended December 31, 2017, mainly due to the expiration of the Amphivena collaboration in
2016. Revenue for the year ended December 31, 2017 mainly consisted of service revenues at
AbCheck of €1.6 million (December 31, 2016: €2.4 million).
Research and development expenses
Year ended
December 31,
R&D Expenses by Project
2016
2017
Change %
Project
AFM13 ....................................................................
AFM11 ....................................................................
Other projects and infrastructure costs .................
Share-based payment expense/(credit) .................
Total .......................................................................
(in € thousand)
11,847
2,471
14,684
1,178
30,180
5,608
2,829
12,530
522
21,489
(53%)
14%
(15%)
(56%)
(29%)
Research and development expenses decreased 29% from €30.2 million in the year ended December
31, 2016 to €21.5 million in the year ended December 31, 2017, mainly due to lower expenses for
AFM13 and for other projects and infrastructure. The variances in project related expenses between
the year ended December 31, 2016 and the corresponding period in 2017 are mainly due to the
following projects:
(cid:1) AFM13. In the year ended December 31, 2017, we incurred lower expenses than in
the year ended December 31, 2016 primarily due to decreased manufacturing
activities for clinical trial material.
(cid:1) AFM11. In the year ended December 31, 2017, clinical expenses were slightly higher
than in the year ended December 31, 2016 primarily due to higher expenses for the
ongoing phase 1 clinical study in NHL and the phase 1 dose-finding study in ALL.
(cid:1) Other projects and infrastructure costs. In the year ended December 31, 2017,
expenses decreased compared to the year ended December 31, 2016 primarily due
to lower expenses incurred in relation to our discovery/early stage development
activities. We also incurred lower 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.
Affimed Annual Report 2017
16
General and administrative expenses
General and administrative expenses decreased 4% from €8.3 million in the year ended December 31,
2016 to €8.0 million in the year ended December 31, 2017. In 2017, general and administrative
expenses were largely affected by personnel expenses (€4.5 million) and legal, consulting and audit
costs (€1.9 million).
Finance income / (costs)-net
We recognized finance costs net for the year ended December 31, 2017 of €3.0 million compared with
finance costs of €0.2 million for the year ended December 31, 2016. The year ended December 31,
2017 was primarily affected by foreign exchange losses of €2.4 million (2016: foreign exchange gains
of €0.7 million).
Income tax expense
During the year ended December 31, 2017, we recorded income tax of €20,000 due to changes in
deferred taxes.
Liquidity and Capital Resources
Since inception, we have incurred significant operating losses. For the years ended December 31,
2015, 2016 and 2017, we incurred net losses of €20.2 million, €32.2 million and €30.2 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, 2017, we had cash and cash equivalents of €39.8 million.
We subsequently raised approximately $24.5 million (€19.7 million) net proceeds from a public offering
of our common shares in February 2018 and approximately $4.7 million (€3.8 million) from our sale of
2.4 million common shares pursuant to our at-the-market sales agreement as of March 15, 2018.
Our cash and cash equivalents as of December 31, 2017 consist primarily of deposits in savings and
deposit accounts with original maturities of three months or less which generate a small amount of
interest income. We expect to continue this investment philosophy.
Cash Flows
Comparison of the years ended December 31, 2016 and 2017
The table below summarizes our consolidated statement of cash flows for the years ended December
31, 2016 and 2017:
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 ............................................
2017
2016
(in € thousand)
(32,127)
(9,149)
(236)
(41,512)
76,740
179
35,407
(25,549)
8,050
23,797
6,297
35,407
(1,867)
39,837
Affimed Annual Report 2017
17
The decrease in net cash used in operating activities by 20% from €32.1 million in the year ended
December 31, 2016 to €25.5 million in the year ended December 31, 2017 was mainly due to lower
cash expenditure for research and development efforts.
Net cash used for investing activities amounted to €9.1 million in the year ended December 31, 2016,
while we generated cash from investing activities of €8.1 million in the year ended December 31,
2017. The investing activities primarily relate to investments in and proceeds from the sale or maturity
of financial assets. In the year ended December 31, 2017, we obtained net proceeds from the sale or
maturity of financial assets of €9.0 million while we had invested a net amount of €8.9 million in the
comparative period.
Net cash generated from financing activities in the year ended December 31, 2017 amounted to €23.8
million and relate to the proceeds from the public offering in January and February 2017, the
drawdown of a second tranche of the existing SVB credit facility in May 2017 and the issuance of
shares in connection with our at-the-market sales agreement.
Cash and Funding Sources
Our liquidity as of December 31, 2017 was €39.8 million. 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, 2018, we had sold 5.3 million of our common shares under the Sales
Agreement at a volume weighted-average price of $2.10 per share for net proceeds of approximately
$10.7 million. 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
provides us with a senior secured term loan facility (the “SVB Credit Facility”) for up to €10.0 million,
which agreement was amended in May 2017 to provide that such amount would be available in three
tranches.
On December 8, 2016, we drew down the initial tranche of €5.0 million, and on May 31, 2017 we drew
down the second tranche of €2.5 million; the availability of the third tranche expired in September 2017
with such amount remaining undrawn. In connection with such drawdowns, we issued SVB warrants to
purchase 219,692 of our common shares, at a weighted-average exercise price of $2.07 per common
share (€1.73 per common share).
Affimed Annual Report 2017
18
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 May 31, 2020 with
an interest-only period through December 1, 2017 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 $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 $1.1 million, after deducting underwriting discounts and commissions
and other offering expenses.
On February 15, 2018, we sold an additional 13,225,000 of our common shares at a price of $2.00 per
share in an underwritten public offering and received $24.5 million in net proceeds, 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 including the proceeds from the February
2018 offering will enable us to fund our operating expenses and capital expenditure requirements at
least until the fourth quarter of 2019. 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)
(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
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
Affimed Annual Report 2017
19
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 2017 20
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 2017 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 20, 2018,
and a copy of which is available from Affimed’s website.
Strategic and Operational Risks
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 2017 21
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 cash and cash equivalents 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
Affimed Annual Report 2017 22
part of an investment in our shares could be lost. In 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, 2016 and 2017. 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 2017 23
The cash and cash equivalents 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
the 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 2017, 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 Company
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 2016, 2017 and February 2018, Affimed raised significant funding that it estimates will enable the
Company to fund operating expenses and capital expenditure requirements at least until the fourth
quarter of 2019.
Affimed Annual Report 2017 24
The Company has entered into an at-the-market sales agreement with Cowen & Company, LLC under
which more than €5 million in net proceeds has been raised in 2017.
In the first quarter of 2017, the Company issued 10,646,762 common shares in a public offering at a
price of $1.80 per common share for net proceeds of approximately €16 million.
On November 30, 2016, the Company entered into a loan agreement with Silicon Valley Bank (the
“SVB loan”) and drew the initial tranche of €5.0 million in December 2016 and a second tranche of
€2.5 million in May 2017.
In February 2018, the Company issued 13,225,000 common shares in a public offering at a price of
$2.00 per common share for net proceeds of approximately €19.7 million. In addition, in February
2018 the Company issued 2,373,716 common shares for net proceeds of approximately €3.8 million in
connection with its at-the-market sales agreement.
The Company expects to require additional funding to complete the development of the existing
product candidates. In addition, the Company expects to require additional capital to commercialize
the products if regulatory approval is received.
Affimed Annual Report 2017
25
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 applies 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
Wolfgang Fischer
Age
56
50
54
Position
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Adi Hoess and Florian Fischer were reappointed as managing director with the title of Chief
Executive Officer and Chief Financial Officer, respectively, on 20 June 2017. Wolfgang Fischer was
appointed as managing director with the title of Chief Operating Officer on 20 June 2017. Jörg
Affimed Annual Report 2017
26
Windisch resigned as managing director with the title of Chief Operating Officer as per 30 June
2017.
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 since September 2011 has served as our Chief Executive Officer. 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.
Wolfgang Fischer, Chief Operating Officer. Dr. Fischer joined us in 2017 from Sandoz
Biopharmaceuticals (Novartis Group). He has 20 years of experience in research and drug
development with a focus on oncology, immunology and pharmacology. At Sandoz he managed the
development and registration of Sandoz’ biosimilar pipeline assets since 2012 and served as Global
Head of Program and Project Management since 2014. Prior to joining Sandoz, he held various
positions of increasing responsibility within the Novartis Group since 2003, including Medical Director
Oncology for Novartis Pharma Switzerland AG as well as Regional Medical Director Hematology
(Emerging Growth Markets), where he was responsible for the Hematology Medical Affairs program
and supported the launch of several products in various countries. Dr. Fischer holds a Ph.D. in Cancer
Research from the Swiss Federal Institute of Technology (ETH), Zurich, Switzerland. Thereafter, he
completed postdoctoral fellowships at the Swiss Institute of Experimental Cancer Research,
Lausanne, Switzerland and at the Scripps Research Institute, Department of Immunology, La Jolla,
CA, USA, followed by a state doctorate (Habilitation) in Pharmacology and Toxicology at the Medical
School of the University of Würzburg in Germany in 2003.
The following table lists the supervisory directors currently in office. Thomas Hecht is the chairman of
our supervisory board. The term of each of our supervisory directors will end 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
67
63
69
59
65
75
June 20, 2017
January 21, 2016
July 1, 2015
June 20, 2017
June 21, 2016
June 20, 2017
2020
2019
2018
2020
2019
2020
The following is a brief summary of the business experience of the Company's supervisory
directors.
Affimed Annual Report 2017
27
Thomas Hecht, Chairman. Dr. Hecht has been the chairman of our supervisory board since 2014,
and previously had been 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 member of the
board of directors of Cell Medica Ltd. and as chairman of the board of directors of Vaximm AG and
Aelix Therapeutics S.L. 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 beginning in May 2013. He has over 30 years of experience in the biotechnology and
pharmaceutical industries including in 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.
Affimed Annual Report 2017
28
Richard B. Stead, Director. Dr. Stead has been a member of our supervisory board since 2014, and
previously had been 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 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 Reparatory Theatre.
Ferdinand Verdonck, Director. Mr. Verdonck has been a member of our supervisory board since
July 2014. He is a director of Laco Information Services. In recent years he was director and member
of the audit committee of Virtus Funds and J.P. Morgan European Investment Trust, director of
Groupe SNEF, and director and chairman of the audit committee of biotechnology companies:
uniQure N.V. in the Netherlands, of which he was also the chairman, 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
strategy, financial control, supervision of executive management and corporate governance, including
board participation in publicly-traded and privately-held affiliated 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
Affimed Annual Report 2017
29
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. This aim for the best fit, in
combination with the availability of qualifying candidates, has resulted in Affimed, as of April 30,
2018, having a management board in which all three members are male. In 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 Dr. Leila Alland, the Company’s new Chief Medical Officer,
early 2018.
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 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. Under the DCGC a supervisory director may be appointed for a term of
four years and may then be reappointed for another four-year period. The supervisory director may
then subsequently be reappointed for a period of two years, which may be extended by at most two
years. The Company's supervisory directors are appointed for overlapping terms.
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
Affimed Annual Report 2017
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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
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 2.7.5 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 2017.
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 four meetings by conference call in 2017.
Affimed Annual Report 2017
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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
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 adopted 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 four meetings by conference call in
2017.
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 four meetings in person and two
meetings by conference call in 2017.
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.
Affimed Annual Report 2017
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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
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 3.3.2 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 €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.
The aggregate cash compensation including including benefits in kind, accrued or paid to our
managing directors and supervisory directors with respect to the year ended December 31, 2017,
for services in all capacities was approximately €1.4 million. As of December 31, 2017, we have no
amounts set aside or accrued to provide pension, retirement or similar benefits to our managing
directors and supervisory directors. In 2017, awards for 900,000 stock options were granted to
management and members of the supervisory board. Further details on the managing directors
and supervisory directors individual remuneration are outlined in Note 34 to the Company only
financial statements and Note 21 to the consolidated financial statements.
Affimed Annual Report 2017
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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
approximately 1.7 million common shares. On January 1 of any calendar year thereafter (including
January 1, 2018), an additional 5% of the total outstanding common shares on that date becomes
available for issuance under the 2014 Plan. As of January 1, 2018, we had approximately 4.8
million common shares available for issuance, and approximately 4.9 million common shares
subject to issuance under outstanding awards. 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, provided this falls within the framework set by the remuneration policy for the management
board and the 2014 Plan.
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
approval of the supervisory board, the management board may amend the exercise provisions of
the 2014 Plan.
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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. The
management services agreements of Adi Hoess and Florian Fischer became effective upon the
consummation of our initial public offering in September 2014. The management services
agreement of Wolfgang Fischer became effective upon his appointment by the general meeting of
shareholders on June 20, 2017. 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. Adi
Hoess and Florian Fischer were reappointed as managing directors by the general meeting of
shareholders on June 20, 2017, which prolonged their management services agreements until
2020.
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 management services
agreements following a change of control, the aforementioned severance is increased to 185%
(Adi Hoess) and to 150% (Florian Fischer and Wolfgang Fischer) of the managing director's gross
annual compensation.
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
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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
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
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. In 2017, i-novion Inc. did not receive any related payments.
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 and related
payments of €11,000 in 2017. 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. The license and development
agreement with Amphivena expired when the product candidate’s IND became effective in July
2016. Following the expiration, we continued to provide services on a smaller scale to complete the
deliverables required under the agreement, and have been financially supporting the future clinical
development of AMV564 with €1.9 million in financing, €1.0 million of which was invested in
Amphivena in October 2016, €0.6 million of which was invested in March 2017 and €0.3 million of
which was invested in December 2017.
Registration rights agreement
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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.
RISK MANAGEMENT AND CONTROL SYSTEMS
Risk Management: general methods
Affimed’s management board has implemented an Enterprise Risk Management System (ERM) to
ensure that corporate risks, including strategic and operational risks, financial and compliance risks
are managed effectively and efficiently and are aligned with the Company’s strategy.
The framework used for Enterprise Risk Management is based on guidance issued by COSO (the
Committee of Sponsoring Organizations of the Treadway Commission). The dimensions of the
ERM method and their implementation at Affimed are as follows:
•
Internal Environment, including ethical values, management philosophy, operating style
and governance (stated within Code of Conduct and respective policies)
• Objective settings: company strategy and corresponding company goals are the starting
points within the top-down approach for risk definition. Supporting by the bottom-up
processes, objectives find the appropriate consideration within the model.
• Risk assessment is conducted by the Management Board bi-annually and is based on the
FMEA (Failure Mode and Effect Analysis) method, which implicates the principle of early
Affimed Annual Report 2017
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identification and valuation of potential failures as well as mitigating actions. The FMEA
method allows to prioritise risks and define the risk appetite of the company.
• Risk response follows the risk assessment and defines the strategy for respective risks:
accept, reduce or avoid.
• Control activities on regular basis
•
• Monitoring of ongoing mitigating actions and reporting from Risk Manager to the
Information and communication of mitigating plans
management board and the audit committee.
Implementation effectiveness
The effectiveness of risk management is implemented by the three-lines-of-defence model: 1st
line: Business – management board owns, implements and operates business controls to ensure
compliance with laws, regulations and policies (including supervisory controls). 2nd line:
Compliance, Risk Management and Internal Control System functions, which identify exposed
areas and manage mitigation activities; perform monitoring to gain assurance that compliance
controls operate effectively; and report upon such activities as well as significant findings to the
management board and to the supervisory board, which present the 3rd defence lines together with
external auditors as additional control functions.
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."
Internal Control System: general methods
Affimed’s management board 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.
The main elements of our internal control and risk management system in relation to the financial
reporting process comprise the following:
- Framework for Internal Control System: Integrated Framework (2013) by the COSO
- Scoping of key business processes according to SOX Sec. 404a and continuing monitoring
status of SOX Sec. 302 process due to the listing of Affimed’s shares on NASDAQ
IT considerations
- 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
-
- Risk and control assessment (testing of control design and effectiveness)
- Evaluation of testing results, remediation action
- Continuing monitoring status of SOX Sec. 302 process
- Reporting the conclusions about the adequacy and effectiveness of internal controls incl.
any significant deficiency or material weakness over financial reporting to the audit
committee on a regular basis
Further, 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.
Monitoring of effectiveness
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, 2017, have concluded that based on the
Affimed Annual Report 2017
38
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 2017. We conclude that these systems provide a reasonable assurance that the
financial report does not contain any errors of material importance. Based on that evaluation, our
management concluded that our internal control over financial reporting was effective as of
December 31, 2017.
VII.
STATEMENT BY THE MANAGEMENT BOARD
The management board states in accordance with best practice provision 1.4.3 of the DCGC that
the management report provides sufficient insights into any failings in the effectiveness of the
internal risk management and control systems. The implemented systems provide reasonable
assurance that the financial reporting does not contain any material inaccuracies.
Based on the current state of affairs, it is justified that the financial reporting is prepared on a going
concern basis; material risks and uncertainties that are relevant to the expectation of the
company’s continuity for the period of twelve months after the preparation of the report are
disclosed.
It should be noted that these systems cannot provide absolute assurance that internal risk
management and control systems can prevent or detect all inaccuracies or errors.
VIII.
CODE OF CONDUCT
Any action, business, and scientific goal we pursue must be consistent with our core values which
consist of:
-
Integrity
- Respect
- Excellence and
- Responsibility and Accountability
Our core values serve as a basis for our 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 of the Company and
its subsidiaries.
Affimed has established suitable processes and devoted sufficient personnel resources for the
enforcement of this Code, subject to the supervision of the CEO and the Audit Committee of the
Supervisory Board, and the Company supports its supervisory directors, managing directors and
employees to maintain a culture of accountability and to facilitate compliance with this Code.
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.
Affimed Annual Report 2017
39
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 shareholders.
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
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
Affimed Annual Report 2017
40
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)
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. On June 20, 2017 the
articles of association of the Company were amended whereby the authorized capital was
increased to EUR 2,196,000 divided into 109,800,000 common shares and 109,800,000
cumulative preference shares. The amendment also resulted in the authorisation to the
management board to issue shares to increase up to the maximum number of shares which can be
issued under the current authorized share capital.
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 20, 2017, our management board was granted
the authority, for a period of 18 months, with effect from the same date (i.e., until December 20,
2018) 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
Affimed Annual Report 2017
41
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 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,
recommends the replacement of the independent auditors. On June 20, 2017, the general meeting
of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for
the financial year 2017.
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
preference shares and grant rights to subscribe for cumulative preference shares, up to the amount
of our authorized share capital. Our cumulative preference 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 deviations from the DCGC are
summarized below.
Profile of the Supervisory Board
(cid:1) The Supervisory Board is currently working on an update of its profile and the Company has
therefore not yet published such profile on its website, which qualifies as a deviation from best
practice provision 2.1.1 of the DCGC.
Remuneration
(cid:1) The Company has granted and intends to grant options and restricted stock units in the future to
members of its management board. These options provide for vesting conditions which allow
exercise of one third of the options after the first anniversary of the grant date, which qualifies
as a deviation from best practice provision 3.1.2 of the DCGC. Such vesting conditions are
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 management board members.
(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
Affimed Annual Report 2017
42
3.3.2 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,
which qualifies as a deviation from best practice provision 3.4.1 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 20, 2018 (available on our website: http://www.affimed.com/sec).
Board nominations and shareholder voting
(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 4.3.3 of the DCGC. Although a deviation from the provision 4.3.3 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.
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 2.3.4 of the DCGC. We have opted out of
the director independence requirements under applicable Nasdaq rules.
May 17, 2018
On behalf of the Management Board,
Dr. Adi Hoess, CEO,
Dr. Florian Fischer, CFO
Dr. Wolfgang Fischer, COO
Affimed Annual Report 2017
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 the establishment and monitoring of
the strategy of the Company. The Supervisory Board is guided by the interests of the Company and will
also take into consideration the relevant interests of all the Company's stakeholders. We report on the
activities of the Supervisory Board in 2017.
The Company had a number of highlights and corporate updates in 2017 and early 2018.
In January and February 2017, Affimed raised approximately €16 million in net proceeds in an
underwritten follow-on financing. End of May 2017, Affimed drew down the second tranche of €2.5 million
under the existing loan agreement with Silicon Valley Bank.
In September 2017, Dr. Wolfgang Fischer, former Global Head of Program and Project Management of
Sandoz Biopharmaceuticals (Novartis Group) joined Affimed as Chief Operating Officer (COO), following
Dr. Jörg Windisch who left the Company at the end of June 2017. Dr. Fischer has over 20 years of R&D
experience with a focus on oncology, immunology and pharmacology, as well as a proven track record in
drug development.
At the beginning of February 2018, Affimed reported interim data from its two clinical studies with AFM13.
For its Phase 1b combination study of AFM13 with Merck’s Keytruda® the Company presented interim
data from a total of 9 patients in this cohort, demonstrating that AFM13 in combination with Keytruda® is
well-tolerated, with a 3-month objective response rate (ORR) of 89% comparing favorably to historical
ORR of anti-PD-1 antibodies as monotherapy in a similar patient population (58-63%). Furthermore, 4 out
of 9 patients (44%) showed complete metabolic responses, compared to complete response rates of 9-
22% reported for anti-PD-1 monotherapy in a similar patient population.
For its Phase 1b/2a study of AFM13 in patients with relapsed or refractory CD30-positive lymphoma with
cutaneous manifestation led by Columbia University Affimed reported an analysis of the first dose cohort
(3 patients dosed at 1.5 mg/kg), demonstrating that AFM13 could be safely administered and showed
therapeutic activity as a single agent, with an ORR of 66% (2 out of 3 patients). One complete response,
one partial response and one stable disease were observed, as determined by global response score.
These early data confirm the single-agent activity observed in a previous Phase 2a trial and further
suggest a new opportunity for AFM13 in CD30-positive lymphoma.
In February 2018, Affimed completed an underwritten public offering on the Nasdaq Global Market, raising
a total of approximately $24.5 million (€19.7 million) in net proceeds.
The Company entered into an agreement with Leila Alland, M.D. who joined Affimed as CMO effective
March 26, 2018. Dr. Leila Alland brings to the Company more than 20 years of oncology experience,
having held leadership roles in drug development at Tarveda Therapeutics, AstraZeneca, Bristol-Myers
Squibb and Novartis. Further strengthening Affimed’s U.S. presence, Dr. Alland is based in the
Company’s New York location.
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 was unchanged in
Affimed Annual Report 2017
44
2017. Dr Thomas Hecht, Mr. Ferdinand Verdonck and Mr. Berndt Modig were re-appointed as members
of the Supervisory Board. The Supervisory Board profile was not amended in 2017 and the Supervisory
Board is of the opinion that its composition is currently in accordance with such profile and the
Supervisory Board has sufficient experience and expertise in various fields to fulfil its statutory obligations
as Supervisory Board members of the Company.
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 Board for detailed
biographies including details on their profession, principal positions and other positions. Thomas Hecht is
the chairman 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.
Initial/re-appointment Term
Name
June 20, 2017
Thomas Hecht
2020
January 21, 2016
Bernhard Ehmer
2019
July 1, 2015
Ulrich Grau
2018
June 20, 2017
Berndt Modig
2020
Richard B. Stead
June 21, 2016
2019
2020
Ferdinand Verdonck June 20, 2017
Age Gender
67
63
69
59
65
75
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 2017. 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, business development activities and the implementation
and monitoring of the business strategy.
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.
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 Supervisory Board also held several non-formal Supervisory Board meetings which are attended by
the Management Board. In addition, 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.
Affimed Annual Report 2017
45
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. In 2017 the Supervisory Board conducted an evaluation through a self-assessment
and was positive, overall, about the performance of its committees and the collaboration with 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.
The Supervisory Board has also reviewed the performance of the Management Board as a whole and
each Management Board member for the year 2017. This includes a self-evaluation conducted by each
Management Board member and an evaluation conducted by others (e.g. employees). The process and
the outcome of these evaluations was analyzed with the assistance of external evaluation experts and will
be used to further improve individual performance and the performance of the Management Board as a
whole.
During the financial year 2017 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.
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
Audit committee
member
chairman
member
chairman
member
member
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 2017, 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, discussion of the
financing situation and the tax policy.
The financial statements of the Company for 2017 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
Affimed Annual Report 2017
46
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 four meetings by conference call in 2017.
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 four meetings in person and two meeting by
conference call in 2017.
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
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 four meetings by conference call in 2017.
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 20, 2018 (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. One of our Supervisory Board members, Dr. Ulrich Grau, does 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 2017
47
Appreciation
The Supervisory Board is of the opinion that during the year 2017, 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 2017. In particular, the
Supervisory Board would very much like to thank our shareholders for their continued support.
May 17, 2018
On behalf of the Supervisory Board,
Dr. Thomas Hecht,
Chairman of the Supervisory Board
Affimed Annual Report 2017
48
Consolidated Financial Statements
Consolidated statements of comprehensive income
Consolidated statements of financial position
Consolidated statements of cash flows
Consolidated statements of changes in equity
Notes to the consolidated financial statements
Annual Report 2017
49
Affimed N.V.
Consolidated statements of comprehensive loss
(in € thousand)
Note
2015
2016
Revenue
Other income – net
Research and
development expenses
General and
administrative expenses
5
6
7
8
7,562
651
6,314
145
(22,008)
(30,180)
(7,548)
(8,323)
Operating loss
(21,343)
(32,044)
2017
2,010
205
(21,489)
(7,986)
(27,260)
Finance income /
(costs) - net
Loss before tax
Income taxes
10
11
1,104
(230)
(2,983)
(20,239)
(32,274)
0
58
(30,243)
20
(30,223)
Loss for the period
(20,239)
(32,216)
Total comprehensive
loss
(20,239)
(32,216)
(30,223)
Loss per share in €
per share
(undiluted = diluted)
(0.71)
(0.97)
(0.69)
The Notes are an integral part of these consolidated financial statements.
Annual Report 2017
50
Affimed N.V.
Consolidated statements of financial position
(in € thousand)
ASSETS
Non-current assets
Intangible assets
Leasehold improvements and equipment
Current assets
Inventories
Trade and other receivables
Other assets
Financial assets
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Issued capital
Capital reserves
Accumulated deficit
Total equity
Non current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
Total current liabilities
TOTAL EQUITY AND LIABILITIES
Note December 31, 2016
December 31, 2017
55
822
877
197
2,255
516
9,487
35,407
47,862
48,739
333
190,862
(152,444)
38,751
3,617
3,617
5,323
973
75
6,371
48,739
12
13
14
15
17
18
17
5
65
1,113
1,178
241
1,102
800
0
39,837
41,980
43,158
468
213,778
(182,667)
31,579
4,086
4,086
4,180
3,083
230
7,493
43,158
The Notes are an integral part of these consolidated financial statements.
Annual Report 2017
51
Affimed N.V.
Consolidated statements of cash flows
(in € thousand)
Cash flow from operating activities
Loss for the period
Adjustments for the period:
- Income taxes
- Depreciation and amortisation
- Net gain from disposal of leasehold improvements and
equipment
- Share based payments
- Finance income / costs - net
Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade, other payables and deferred revenue
Note
2015
2016
2017
(20,239)
(32,216)
(30,223)
11
0
336
0
(58)
369
0
(20)
351
(19)
16
10
2,220
(1,104)
3,545
230
1,943
2,983
(18,787)
24
(29)
(452)
1,253
12
13
18
(28,130)
(1,311)
31
(64)
(2,177)
(24,985)
1,140
44
(399)
(1,018)
Cash used in operating activities
Interest received
Paid interest
(17,991)
(31,651)
10
(554)
102
(578)
(25,306)
106
(349)
Net cash used in operating activities
(18,535)
(32,127)
(25,549)
Cash flow from investing activities
Purchase of intangible assets
Purchase of leasehold improvements and equipment
Cash received from the sale of leasehold improvements and
equipment
Cash paid for investments in convertible note and warrants
Cash paid for investments in financial assets
Cash received from maturity of financial assets
(28)
(249)
(21)
(238)
(43)
(625)
13
14
14
0
0
0
0
0
0
(27,037)
18,147
35
(296)
(13,084)
22,063
Net cash used for investing activities
(277)
(9,149)
8,050
Cash flow from financing activities
Proceeds from issue of common shares
Transaction costs related to issue of common shares
Proceeds from borrowings
Transaction costs related to borrowings
Repayment of borrowings
Cash flow from financing activities
15 56,615
15
(3,117)
17
0
17
0
17
0
53,498
6
0
5,000
(105)
(5,137)
(236)
Exchange-rate related changes of cash and cash equivalents
Net changes to cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2,329
34,686
39,725
76,740
179
(41,512)
76,740
35,407
23,123
(1,648)
2,500
(11)
(167)
23,797
(1,867)
6,297
35,407
39,837
Annual Report 2017
52
Affimed N.V.
Consolidated statements of changes in equity
(in € thousand)
Note
Issued
capital
Capital
reserves
Accumulated
deficit
Total
equity
Balance as of January 1, 2015
240
131,544
(99,989)
31,795
Issue of common shares
Exercise of share based payment
awards
Equity-settled share based payment
awards
Loss for the period
Balance as of December 31, 2015
91
52,463
2
942
2,220
16
16
333
187,169
(20,239)
(120,228)
52,554
944
2,220
(20,239)
67,274
Balance as of January 1, 2016
333
187,169
(120,228)
67,274
Issue of common shares1
Equity-settled share based payment
awards
Issue of warrant note (loan Silicon
Valley Bank)
Loss for the period
15
16
17
0
6
3,545
142
6
3,545
142
(32,216)
(32,216)
Balance as of December 31, 2016
333
190,862
(152,444)
38,751
Balance as of January 1, 2017
333
190,862
(152,444)
38,751
Issue of common shares
Equity-settled share based payment
awards
Issue of warrant note (loan Silicon
Valley Bank)
Loss for the period
15
16
17
135
20,922
1,943
51
21,057
1,943
51
(30,223)
(30,223)
Balance as of December 31, 2017
468
213,778
(182,667)
31,579
Issue of 3,341 shares
The Notes are an integral part of these consolidated financial statements.
Affimed Annual Report 2017
53
Notes to the consolidated financial statements
(in € thousand)
1.
Reporting entity
Affimed N.V. is a Dutch company with limited liability (naamloze vennootschap) and has its corporate
seat in Amsterdam, the Netherlands.
The consolidated financial statements are comprised of Affimed N.V, and its controlled (and wholly
owned) subsidiaries Affimed GmbH, Heidelberg, Germany, AbCheck s.r.o., Plzen, Czech Republic and
Affimed Inc., Delaware, USA (together “Affimed” or the “Company”).
Affimed is a clinical-stage biopharmaceutical company focused on discovering and developing highly
targeted cancer immunotherapies. The Company’s product candidates are 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. Affimed has own research and development
programs and collaborations, where the Company is performing research services for third parties.
2.
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 (IFRS).
The consolidated financial statements were authorized for issuance by the management board and
supervisory board on May 17, 2018.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for
financial instruments measured at fair value (see note 13) and monetary assets and liabilities
denominated in foreign currencies, which are translated at period-end exchange rates. The Company
did not opt for a valuation of liabilities at fair value through profit or loss.
Consolidation
The Company controls an entity when it 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 obtained by 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
The 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
Affimed Annual Report 2017
54
Notes to the consolidated financial statements
(in € thousand)
(abbreviated €) or million (abbreviated € million).
Presentation of consolidated statements of comprehensive loss
As a clinical-stage biopharmaceutical company with a primary focus on research and development
activities, cost of sales and gross profit are not considered meaningful measures for Affimed and
therefore are not presented.
Foreign currency transactions
Transactions denominated in currencies other than the euro are translated at exchange rates at the
date of the transaction. Monetary assets and liabilities denominated in currencies other than the euro
are translated at the exchange rate at the date of the consolidated statement of financial position.
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.
Foreign currency 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 – net’.
3.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements.
Revenue recognition
The Company provides research and development services to third parties based on both Company
and third party owned intellectual property. Such services are performed on a “best efforts” basis
without a guarantee of technological or commercial success. For some research programs, Affimed
has entered into collaborations with other companies that provide the Company with funding or other
resources such as access to technologies. From time to time, the Company also licenses its
intellectual property to third parties who use it to develop product candidates.
Collaboration and license agreements are evaluated to determine whether they involve multiple
elements that can be considered separate units of accounting. To date, the Company has not licensed
or sold its intellectual property without continuing involvement by providing the related research and
development services. Accordingly, the results under the Company’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.
Affimed Annual Report 2017
55
Notes to the consolidated financial statements
(in € thousand)
Milestone payments are contingent upon the achievement of contractually stipulated targets. The
achievement of these targets or milestones depends largely on meeting specific requirements laid out
in the respective agreement. 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 considered
substantive, the consideration earned by achieving the milestone must (i) be commensurate with the
Company’s performance to achieve the milestone, (ii) relate solely to past performance, and (iii) be
reasonable relative to all results and payment terms subject to the respective agreement.
Non-refundable upfront research funding that generally has no stand-alone value to the customer and
requires continuing involvement in the form of research and development services or other efforts by
the Company is recognized as revenue ratably over the term of the service agreement which is the
period of performance.
Research and development
Costs incurred related to research activities are expensed in the period incurred. Costs incurred on
development projects are recognized as intangible assets beginning on the date it can be established
that it is probable that future economic benefits attributable to the asset will flow to the Company
considering its technological and commercial feasibility. Given the current stage of the development of
the Company’s product candidates and technologies, 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.
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 (a) the
Company has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee, and (b) the obligation can be estimated reliably.
(ii)
Share-based payment transactions
The Company’s share-based payment awards outstanding as of December 31, 2016 and 2017, are
classified as equity-settled share-based plans. The fair value of share-based equity-settled awards
granted to employees is measured at grant date and compensation cost is recognized over the vesting
period with a corresponding increase in equity. Share-based payment awards with non-employees are
measured and recognized when services are received. 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
Affimed Annual Report 2017
56
Notes to the consolidated financial statements
(in € thousand)
stock options expected to vest is estimated at each measurement date.
Government grants
The Company receives certain government grants that support its research effort in specific 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.
The Company recognizes income from government grants under ‘Other income - net’ 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 using the effective interest method.
Finance costs comprise interest expense on borrowings and, in 2016, includes losses from early
extinguishment of debt.
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 Company’s non-derivative financial assets include trade and other receivables, cash and cash
equivalents and, in 2016, certificates of deposit at banks with original maturities of more than three
months.
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 are subsequently carried at
amortized cost using the effective interest method.
Affimed Annual Report 2017
57
Notes to the consolidated financial statements
(in € thousand)
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three
months or less.
(iv) Non-derivative financial liabilities
The Company’s classes of financial liabilities are borrowings and trade and other payables. The
Company 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 Company 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
shares to be issued does not vary with changes in their fair value.
The liability component of the loans was recognized initially at the fair value of a similar liability without
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.
In 2017, the Company entered into a convertible note agreement (see note 13). The Company
designated the combined contract consisting of the loan component and the conversion feature
embedded in the loan agreement at fair value through profit and loss and recognizes changes of fair
value re-measured on a recurring basis in ‘Finance income / (costs) – net.’
(vi) Derivatives
The Company acquired warrants to purchase common shares of Amphivena Therapeutics Inc.
(“Amphivena”) at a specified price (see note 13). Initially, the warrants were recognized at fair value.
Subsequently the fair value is re-measured on a recurring basis with changes recognized in ‘Finance
income / (costs) – net.’
Impairment
(vii) 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
such loss event had a negative effect on the estimated future cash flows of that receivable that can be
estimated reliably. Loss events include indications that a debtor is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganization.
All receivables are assessed for specific impairment. Losses are recognized in profit or loss and
Affimed Annual Report 2017
58
Notes to the consolidated financial statements
(in € thousand)
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 2015, 2016 or 2017.
(viii)
Intangible assets and leasehold improvements and equipment
Assets that are subject to depreciation or 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 an 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.
Income taxes
Income taxes comprise current and deferred tax. Current and deferred taxes 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 adjustments to taxes 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.
Deferred tax is measured at 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)
Affimed Annual Report 2017
59
Notes to the consolidated financial statements
(in € thousand)
•
•
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
measurement of warrants and the convertible note designated at fair value through profit as well as the
note disclosure for the fair value of a loan (financial liability) is based on level 2 measurement
procedures (see notes 13 and 17).
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.
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.
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
Company'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
Affimed Annual Report 2017
60
Notes to the consolidated financial statements
(in € thousand)
Elements of consideration in collaboration and license agreements are non-refundable up-front
research funding payments, technology access fees and milestone payments. Generally, the
Company 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 Company 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.
(iii)
Accrued expenses
The Company estimates its accrued expenses 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 as necessary.
New standards and interpretations applied for the first time
No new accounting standards adopted in 2017 had a material impact on Affimed’s consolidated
financial statements.
New standards and interpretations not yet adopted
The following new standards and amendments to standards are effective for annual periods beginning
after December 31, 2017, and have not been applied in preparing these consolidated financial
statements.
Standard / Amendment
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments (2014)
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 (IFRS 1, IAS 28)
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures
Annual Improvements to IFRS Standards 2015-2017 Cycle
Effective Date 1
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2019
January 1, 2019
January 1, 2019
Affimed Annual Report 2017
61
Notes to the consolidated financial statements
(in € thousand)
1 Shall apply for periods beginning on or after the effective date.
The Company assessed the potential impact that IFRS 9, 15 or 16 will have on its consolidated
financial statements. The other amended standards are not expected to have a significant effect on the
consolidated financial statements of the Company.
IFRS 9 (Financial Instruments)
Classification
The standard contains a new classification and measurement approach for financial instruments that
reflects the business model in which assets are managed and their cash flow characteristics. Based on
the new measurement requirements, Affimed will recognize its preferred shares in Amphivena at fair
value and will increase retained earnings by approximately €7 million before taxes as of January 1,
2018.
Hedge Accounting
The new hedge accounting requirements will not have an impact on the consolidated financial
statements as the Company does not have contracts or transactions which qualify for hedge
accounting.
Impairment
The new introduced impairment rules replace the ‘incurred loss’ model in IAS 39 with a forward looking
‘expected credit loss’ (“ECL”) model. This requires considerable judgement as to how changes in
economic factors affect ECLs, which will be determined on a probability-weighted basis. Under IFRS 9,
the Company has decided to measure loss allowances on the following basis:
- Cash and cash equivalents and financial assets: The Company determines the counterparties’
12-month ECLs that result from possible default events within the 12 months after the
reporting date based on the probability of default according to the Bloomberg database.
- Trade receivables: The Company determines the counterparties’ lifetime ECLs that result from
all possible default events over the expected life of a financial instrument based on an
estimated rating and corresponding probability of default rates according to the Bloomberg
database.
Based on this methodology, incurred losses on cash and cash equivalents and on trade and other
receivables as of December 31, 2017 would have no material impact on the consolidated financial
statements.
IFRS 15 (Revenue from contracts with customers)
IFRS 15 (Revenue from contracts with customers) establishes a comprehensive framework for
determining whether, how much and when revenue is recognized. It replaces existing revenue
recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13
Customer Loyalty Programs. IFRS 15 has not been applied yet by Affimed but application will be
required for periods beginning on or after January 1, 2018.
Affimed has finalized the assessment of all contracts with customers and IFRS 15 has no impact on
the revenue recognition policy and revenue from current collaboration and service agreements which
is recognized according to the stage of completion.
Affimed Annual Report 2017
62
Notes to the consolidated financial statements
(in € thousand)
IFRS 16 (Leases)
The new standard specifies how to recognize, measure, present and disclose lease agreements. The
standard provides a single lessee accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low
value. Affimed will be required to recognize “right-of-use” assets related to its premises rented and
certain equipment leased. During the next year, the Company will gather and update information
related to leases, assess extension and termination options as well as possible exemptions and
identify the appropriate discount rate.
4.
Segment reporting
(i)
Information about reportable segment
The Company is active in the discovery, pre-clinical and clinical development of antibodies based on
its core technology. The activities are either conducted as own project development or for third party
companies. Management of resources and reporting to the chief operating decision maker is based on
the Company as a whole.
(ii)
Geographic information
The geographic information below analyzes the Company’s revenue and non-current assets by
country. 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.
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
2015
2016
2017
125
711
6,725
7,562
6
1,397
4,911
6,314
618
259
877
80
1,236
694
2,010
957
221
1,178
Affimed Annual Report 2017
63
Notes to the consolidated financial statements
(in € thousand)
For the years ended December 31, 2015, 2016 and 2017, the Company’s revenue with two, three and
four customers, respectively, exceeded 10% of total revenues.
5.
Revenue
Collaboration agreement with Amphivena
Until July 2016, Affimed was party to a collaboration with 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 ended December 31, 2015, 2016 and 2017, the Company recognized revenue upon
achievement of milestones and for the performance of research and development services (net of
Affimed’s share in funding Amphivena) totaling €4.8 million, €3.4 million and €0.2 million, respectively.
Amphivena has obtained funding solely by issuing preferred stock and convertible notes to investors.
Through December 31, 2017, Affimed participated in the financing of Amphivena with cash
investments in stock of €2.3 million and in convertible notes of €0.3 million ( see note 13).
Collaboration agreement with The Leukemia & Lymphoma Society (LLS)
Affimed is party to a collaboration with LLS to fund the development of a specific product candidate
(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 Company’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.
Affimed Annual Report 2017
64
Notes to the consolidated financial statements
(in € thousand)
During the years ended December 31, 2015, 2016 and 2017, the Company achieved several
milestones and recognized revenue totaling €1.6 million, €0.4 million and €0.2 million, respectively.
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 Company recognized revenue of €1.1 million, €2.4 million and €1.6
million during the years ended December 31, 2015, 2016 and 2017, respectively.
6.
Other income and expenses - net
Other income and expenses, net mainly comprises income from government grants for research and
development projects of €195 (2016: €171, 2015: €716).
Affimed Annual Report 2017
65
Notes to the consolidated financial statements
(in € thousand)
7.
Research and development expenses
The following table shows the different types of expenses allocated to research and development
costs for the years ended December 31:
Third-party services
Personnel expenses
Legal, consulting and patent expenses
Cost of Materials
Amortization and depreciation
Operating lease expenses
Other expenses
2015
2016
15,386
3,637
902
902
308
267
606
22,008
20,170
6,648
758
1,028
322
297
957
30,180
2017
12,299
5,639
890
994
309
345
1,013
21,489
8.
General and administrative expenses
The following table shows the different types of expenses allocated to general and administrative costs
for the years ended December 31:
Personnel expenses
Legal, consulting and audit fees
Operating lease expenses
Other expenses
2015
2016
3,658
2,468
89
1,333
7,548
4,729
2,210
111
1,273
8,323
2017
4,521
1,945
126
1,394
7,986
9.
Employee benefits
The following table shows the items of employee benefits for the years ended December 31:
Wages and salaries
Social security costs
2015
5,066
583
2016
7,445
807
5,649
8,252
2017
7,475
931
8,406
Affimed Annual Report 2017
66
Notes to the consolidated financial statements
(in € thousand)
The employer's contributions to pension insurance plans of €438 (2016: €362, 2015: €269) are
classified as payments under a defined contribution plan, and are recognized as an expense.
10. Finance income and finance costs
The following table shows the items of finance income and costs for the years ended December 31:
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 on certificates of deposit with maturities of more than
three months (see note 14)
Other finance income/finance costs
Finance income/costs - net
2015
2016
2017
(703)
0
0
1,808
0
(1)
(762)
(242)
(41)
691
122
2
0
0
(690)
(2,378)
77
8
1,104
(230)
(2,983)
11.
Income taxes
The Company did not incur any material income tax in the periods presented. As of December 31,
2017 deferred tax liabilities from temporary differences result mainly from borrowings (€152; 2016:
€129) and in 2016 from other assets (€121). Deferred tax assets from differences mainly resulting from
trade and other receivables (€259; 2016: €292) and intangible assets (€405; 2016: €49) 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 for the years ended December 31:
Affimed Annual Report 2017
67
Notes to the consolidated financial statements
(in € thousand)
Loss before tax
(20,239)
(32,274)
(30,243)
2015
2016
2017
Income tax benefit at tax rate of
29.825 %
Adjustments due to impairment of
deferred tax assets
Permanent differences
Adjustments for local tax rates
Non deductible expenses
Other
Income taxes
6,036
9,626
9,020
(6,251)
(8,747)
(9,036)
199
18
163
(165)
0
(948)
12
154
(38)
58
(93)
195
16
(82)
20
In Germany, Affimed has tax losses carried forward of €146.8 million (2016: €117.4 million) for
corporate income tax purposes and of €146.4 million (2016: €117.0 million) for trade tax purposes that
are available indefinitely for offsetting against future taxable profits of that entity. Restrictions on the
utilization of tax losses in case of a change of control of ownership in Affimed were mitigated by the
enactment of the Economic Growth Acceleration Act (Wachstumsbeschleunigungsgesetz 2009).
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.
12. Trade and other receivables
The trade receivables as of December 31, 2017 and 2016, of €580 and €970, respectively, are all due
in the short-term, do not bear interest and are not impaired. As of December 31, 2017 and 2016, €260
and €219, respectively were overdue. Other receivables are all due short-term and mainly comprise
receivables for research and development grants and other government subsidies of €20 (2016: €14),
value-added tax receivables of €186 (2016: €642) and in 2016 receivables related to refunding of
research and development costs (€385).
Affimed Annual Report 2017
68
Notes to the consolidated financial statements
(in € thousand)
13. Other assets
On December 27, 2017, the Company signed a note purchase agreement with Amphivena pursuant to
which Amphivena issued the Company a convertible note with a principal amount of USD 0.35 million
(€0.29 million) and warrants to purchase 46,667 common shares of Amphivena with an exercise price
of USD 0.01 per common share.
The loan matures on December 27, 2018 and bears interest at a rate of 6% per annum payable at
maturity. The convertible note allows for a conversion into common shares of Amphivena during the
term of the note at a conversion price which is contingent on various conversion triggers. If no
conversion occurs prior to the maturity date the note will be converted into shares of Amphivena at a
conversion price of USD 1.5 per common share.
The contractual life of the warrants is five years or until the date of certain transactions, e.g. the
transfer of the majority of the voting rights in Amphivena, the transfer of substantially all of the assets
of Amphivena, or an initial public offering covering the offering and sale of Amphivena’s common
stock.
The Company recognized the note and the warrants in the consolidated financial statements as of
December 31, 2017 at their respective fair values.
14. Financial assets
As of December 31, 2016, financial assets consisted of U.S. Dollar denominated certificates of deposit
with original maturities of more than three months.
15. Equity
As of December 31, 2017, the share capital of €468 (2016: €333) is composed of 46,791,352 (2016:
33,262,745) common shares with a par value of €0.01.
In the first quarter of 2017, the Company issued 10,646,762 common shares in a public offering at a
price of $1.80 per common share for net proceeds of approximately €16 million. In connection with its
at-the-market sales agreement, the Company issued 2,881,845 common shares for net proceeds of
€5.1 million in 2017.
On June 20, 2017, the authorized share capital was increased from €1,100 to €2,196, consisting of
109,800,000 common shares and 109,800,000 cumulative preference shares, each with a par value of
€0.01 per share. As of December 31, 2017, 46,791,352 (December 31, 2016: 33,262,745) common
shares have been issued and are outstanding. Preferred shareholders are entitled to receive a fixed
dividend per year in arrears prior to any distributions to common shareholders. As of December 31,
2017, no preferred shares have been issued.
16. Share based payments
Affimed Annual Report 2017
69
Notes to the consolidated financial statements
(in € thousand)
In 2014, an equity-settled share-based payment program was established by Affimed N.V. (ESOP
2014).
Under this program, the Company granted awards to certain members of the Management Board, the
Supervisory Board, non-employee consultants and employees. The awards vest in installments over
three years and can be exercised up to 10 years after the grant date.
Share based payments with employees
The Company granted 1,778,095 ESOP 2014 awards in 2016 and 1,436,075 awards in 2017 to
employees, members of the Management Board and others providing similar services (certain
consultants).
In 2017, 399,552 ESOP 2014 awards were cancelled or forfeited due to termination of employment
(2016: 83,750), and no options were exercised. As of December 31, 2017, 4,080,868 ESOP 2014
awards were outstanding (December 31, 2016: 3,044,345), 2,001,264 awards (December 31, 2016:
952,458) were vested. The options outstanding as of December 31, 2017 had an exercise price in the
range of $1.80 to $13.47 (2016: $2.51 to $13.47) and weighted average remaining contractual life of
8.4 years (2016: 8.9 years).
In 2017, an expense of €1.943 was recognized affecting research and development expenses (€522)
and general and administrative expenses (€1,421). 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).
The fair value of options was determined using the Black-Scholes valuation model. The significant
inputs into the valuation 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
2016
$1.99
$3.55
$3.57
69%
5.90
0.00
2017
$1.10
$2.00
$2.03
70%
5.90
0.00
-0.32%
-0.23%
Expected volatility is estimated based on the observed daily share price returns of a peer group
measured over a historic period equal to the expected life of the awards.
Share based payments with non-employees
Affimed Annual Report 2017
70
Notes to the consolidated financial statements
(in € thousand)
On December 27, 2017, Affimed entered into a consulting agreement for business development
services with a non-employee consultant. Pursuant to the agreement the consultant received an initial
award of 60,000 options to purchase common shares of Affimed N.V. with an exercise price of USD
1.25. These options only vest with the achievement of a future event as defined in the consulting
agreement. Affimed recognizes the expense related to the awards on the conclusion of such an event
which was not concluded as of December 31, 2017.
17. Borrowings
Perceptive
In July 2014, the Company entered into a loan agreement with an affiliate of Perceptive Advisors LLC
(the “Perceptive loan”), drawing an amount of $5.5 million. Finance costs included interest, an
arrangement fee and 106,250 warrants 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 2016 the Company repaid all outstanding amounts under the Perceptive loan. The Company
recognized early repayment fees of €110 and extinguishment losses of €132.
The loan was measured at amortized cost using the effective interest method. In 2016, interest costs
of €762 (2015: €703) and foreign exchange losses of €86 (2015: €527) were recognized in profit or
loss.
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, which agreement was amended in May 2017 to provide that such amount would be available in
three tranches. In December 2016, the Company drew an initial tranche of €5.0 million and in May
2017, a second tranche of €2.5 million; the availability of a third tranche of €2.5 million expired in
September 2017 with such amount remaining undrawn.
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 €236 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 Company also granted the lender 166,297 and 53,395 warrants with an exercise price
of $2.00 and $2.30 per share, respectively. Each warrant can be used to purchase common shares of
Affimed at the respective exercise price for a period of ten years from the date of grant. The fair value
of the warrants of €192 less deferred taxes and transaction costs of €81 and €8, respectively, was
recorded as an addition to capital reserves in the equity of Affimed. The fair value of the warrants was
determined using the Black-Scholes-Merton valuation model, with an expected volatility of 75-80% and
an expected exercise period of five years to exercise of the warrant. The contractual maturity of the
warrants is ten years.
In 2017, the Company adjusted the carrying amount of its financial liability and recorded a gain of €0.2
million upon the drawing of the second tranche due to a change in timing of the cash flows under the
Affimed Annual Report 2017
71
Notes to the consolidated financial statements
(in € thousand)
original terms of the existing credit facility.
The loan is secured by a pledge of 100% of Company’s ownership interest in Affimed GmbH, all
intercompany claims owed to Affimed N.V. by its subsidiaries, and collateral agreements for all bank
accounts, inventory, trade receivables and other receivables of Affimed N.V. and Affimed GmbH
recognized in the consolidated financial statements with the following book values:
Affimed Annual Report 2017
72
Notes to the consolidated financial statements
(in € thousand)
Book value as of December
31, 2016
Book value as of December
31, 2017
Consolidated
financial
statements
thereof
assets
pledged
Consolidated
financial
statements
thereof
assets
pledged
Leasehold improvements and equipment
Inventories
Trade and other receivables
Other assets
Financial assets
Cash and cash equivalents
822
197
542
177
2,255
1,217
516
0
9,487
9,487
35,407
34,674
48,684
46,096
1,113
241
1,102
800
0
39,837
43,093
891
219
328
292
0
38,726
40,457
As of December 31, 2017 and 2016, the fair value of the liability did not differ significantly from its
carrying amount (€7,169 and €4,590). The loan has a maturity date of May 31, 2020, and repayment
started in December 2017 with amortized payments of principal in equal monthly installments. As of
December 31, 2017, €3,083 (2016: €973) of such amount was classified as current liabilities.
18. Trade and other payables
Trade and other payables comprise trade payables of €3,380 (2016: €4,506). Other payables mainly
comprise payroll and employee related liabilities for withholding taxes and social security contributions
of €514 (2016: €471) 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.
Affimed Annual Report 2017
73
Notes to the consolidated financial statements
(in € thousand)
2015
2016
2017
Net loss
(20,239)
(32,216)
(30,223)
Weighted number of common
shares outstanding
28,477,438
33,259,505
43,746,073
Loss per share in € per share
(0.71)
(0.97)
(0.69)
No instruments had a dilutive effect.
20. Operating leases and other commitments and contingencies
(ix) Lease and other commitments
The Company has entered into rental agreements for premises as well as into leases for vehicles and
the use of licenses. These agreements have an average non-cancellable term of between one and
four years with renewal options included in some contracts. In 2017, lease expenses of €472 and
license fees of €174 have been recognized in consolidated statement of comprehensive income (2016:
€409 and €405; 2015: €356 and €278).
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
(x) Contingencies
2016
700
541
1,241
2017
470
363
833
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.
Affimed Annual Report 2017
74
Notes to the consolidated financial statements
(in € thousand)
21. Related parties
(i) Shareholders
As of December 31, 2017, no shareholder (December 31, 2016: one shareholder) holds more than
20% of the voting rights.
(ii) Transactions with key management personnel
The compensation of managing directors and other key management personnel comprised of the
following:
Short-term employee benefits
Termination benefits
Share-based payments
2015
2016
2017
1,633
0
1,474
3,107
1,879
430
2,292
4,601
1,538
0
1,379
2,917
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
severance.
Compensation for other key management personnel comprises fixed and variable components and
share-based payment awards.
The supervisory directors of Affimed N.V. received compensation for their services on the supervisory
board of €375 (2016: €350; 2015: €296). In 2017, the Company recognized expenses for share-based
payments for supervisory board members of €144 (2016: €381, 2015: €478).
Selected managing directors and supervisory directors entered into service and consulting agreements
with the Company:
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.
Jens-Peter Marschner rendered consulting services amounting to €11 in 2017 and €29 in 2016.
The following table provides the total amounts of outstanding balances related to key management
personnel:
Affimed Annual Report 2017
75
Notes to the consolidated financial statements
(in € thousand)
Affimed Annual Report 2017
76
Notes to the consolidated financial statements
(in € thousand)
Thomas Hecht
Richard Stead
Berndt Modig
Ferdinand Verdonck
Ulrich Grau
Bernhard Ehmer
Jens-Peter Marschner
Outstanding balances
December
31, 2016
December
31, 2017
23
14
8
10
17
11
2
19
12
9
10
17
10
0
22. Financial risk management
(xi) Financial risk management objectives and policies
The Company’s principal financial instruments comprise cash and cash equivalents, certificates of
deposit at commercial banks, a convertible loan, warrants and investor loans presented in borrowings.
The main purpose of these financial instruments is to raise funds for the Company's operations. The
Company 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 Company's financial instruments are credit risk and liquidity risk. The
measures taken by management to manage each of these risks are summarized below.
(xii) Credit risk
The Company’s financial assets comprise to a large extent cash and cash equivalents. In addition,
financial assets include certificates of deposit, a convertible loan, warrants and trade and other
receivables. The total carrying amount of cash and cash equivalents (€39.8 million, 2016: €35.4
million), trade and other receivables (€1.1 million, 2016: €2.3 million), convertible note and warrants of
Amphivena (€0.3 million) and in 2016, certificates of deposit (€9.5 million) represents the maximum
credit exposure of €41.2 million (2016: €47.2 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.
(xiii)
Interest rate risk
The Company’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 €7.5 million with a
Affimed Annual Report 2017
77
Notes to the consolidated financial statements
(in € thousand)
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 Company 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 as well as on term deposits were low in 2017,
resulting in interest income of €93 in 2017. A shift in interest rates (increase or decrease) would not
have a material impact on the loss of the Company.
(xiv) Other price risks
The Company holds warrants and a convertible loan of Amphivena. The fair value of the convertible
loan and the warrants depends on the share price. The total exposure of the Company amounts to
€292.
(xv) 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 Company’s entities are exposed to Czech Koruna (CZK) and US Dollars (USD). The net exposure
as of December 31, 2017 was €18,768 (2016: €18,974) and mainly relates to US Dollars.
In 2017, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €1,877 (2016: €1,897) higher/lower, mainly as a result of
foreign exchange gains/losses on translation of US dollar-denominated financial assets. The Company
considers a shift in the exchange rates of 10% as a realistic scenario.
Loss is less sensitive to movement in exchange rates shifts in 2017 than in 2016 because of the
decreased volume of US dollar-denominated transactions.
The following significant exchange rates have been applied during the year:
2015
CZK or
USD/EUR
2016
CZK or
USD/EUR
2017
CZK or
USD/EUR
0.03666
0.03701
0.90190
0.91853
0.03699
0.03701
0.90404
0.94868
0.03799
0.03916
0.88519
0.83382
CZK - Average Rate
CZK - Spot rate
USD - Average Rate
USD - Spot rate
(xvi) Liquidity risk
Affimed Annual Report 2017
78
Notes to the consolidated financial statements
(in € thousand)
Liquidity risk is the risk that the Company will encounter difficulties in meeting the obligations
associated with its financial liabilities which are normally settled by delivering cash. The Company’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 Company 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 2016, 2017 and February 2018, Affimed raised significant funding that it estimates will enable the
Company to fund operating expenses and capital expenditure requirements at least until the fourth
quarter of 2019.
The Company has entered into an at-the-market sales agreement with Cowen & Company, LLC under
which more than €5 million in net proceeds has been raised (see note 15).
In the first quarter of 2017, the Company issued 10,646,762 common shares in a public offering at a
price of $1.80 per common share for net proceeds of approximately €16 million.
On November 30, 2016, the Company entered into a loan agreement with Silicon Valley Bank (the
“SVB loan”) and drew the initial tranche of €5.0 million in December 2016 and a second tranche of
€2.5 million in May 2017.
In February 2018, the Company issued 13,225,000 common shares in a public offering at a price of
$2.00 per common share for net proceeds of approximately €19.7 million. In addition, in February 2018
the Company issued 2,373,716 common shares for net proceeds of approximately €3.8 million in
connection with its at-the-market sales agreement.
The Company expects to require additional funding to complete the development of the existing
product candidates. In addition, the Company expects to require additional capital to commercialize
the products if regulatory approval is received.
(xvii) Capital management
The primary objective of the Company'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 Company manages its capital structure primarily through equity.
23. Subsequent events
In February 2018, the Company issued 13,225,000 common shares in a public offering at a price of
$2.00 per common share for net proceeds of approximately €19.7 million.
Affimed Annual Report 2017
79
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 2017
80
Company balance sheet as at December 31, 2017
(before appropriation of result of the year)
In € thousand
Note
2016
2017
December 31,
December 31,
Assets
Non current assets
Financial fixed assets
Total non current assets
Current assets
Other receivables
Financial assets
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Shareholders’ equity
Issued capital
Other reserves
Accumulated deficit
Total equity
Current liabilities
Payables to subsidiaries
Other current payables
Total current liabilities
Total liabilities
Total equity and liabilities
26
27
28
29
30
1.158
1.158
409
9.487
28.797
38.693
39.851
333
98.447
(60.029)
38.751
188
912
1.100
1.100
39.851
3.852
3.852
5
0
28.429
28.434
32.286
468
121.363
(90.252)
31.579
100
607
707
707
32.286
Affimed Annual Report 2017
81
Company income statement
In € thousand
Note
Share in results from participating
interests after taxation
Other result after taxation
26
32
Net result
For the year ended
December 31,
2016
For the year ended
December 31,
2017
(25.976)
(6.240)
(32.216)
(22.812)
(7.411)
(30.223)
Affimed Annual Report 2017
82
Notes to the Company financial statements for the year ended 31 December
2017
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 2017 financial statements of Affimed N.V.
25. Basis of preparation
The financial statements of Affimed N.V. have been prepared on the basis that the Company will be
able to continue as a going concern. Following the continuing research’s cash outflows the Company
raised additional funding to be able to cover its expected cash out flows at least until the fourth quarter
of 2019.
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.
Affimed Annual Report 2017
83
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.
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 relate to the investment of the Company in its fully owned subsidiary Affimed
GmbH, with statutory seat in Heidelberg, Germany. We refer to note 32 for the pledge of the shares in
Affimed GmbH.
Movements in the net asset value of Affimed GmbH during the year were as follows:
In € thousand
Affimed GmbH
Total
Net asset value as at January 1, 2017
Capital contribution
Fair value of warrant note (net of taxes)
Share in result of participating interest
1,158
25,455
51
(22,812)
1,158
25,455
51
(22,812)
Net asset value as at December 31, 2017
3,852
3,852
The Company has issued a warrant note in consideration of the loan agreement between Affimed GmbH
and SVB (see note 29).
27. Cash and cash equivalents
Cash and cash equivalents have been fully pledged. We refer to note 31.
Affimed Annual Report 2017
84
28. Equity
As of December 31, 2017 the number of issued common shares is 46,791,352 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, 2016
333
94,754
(27,813)
67,274
Issue of common shares
Issue of warrant note
Net result
Share-based payments
-
-
-
-
6
142
-
3,545
-
-
(32,216)
-
6
142
(32,216)
3,545
December 31, 2016
333
98,447
(60,029)
38,751
January 1, 2017
Issue of common shares
Share issuance costs
Issue of warrant note
Net result
Share-based payments
December 31, 2017
333
135
-
-
-
-
55
468
98,447
(60,029)
38,751
22,988
(2,066)
51
-
1,943
-
-
-
(30,223)
-
23,123
(2,066)
51
(30,223)
1,943
121,363
(90,252)
31,579
Issued capital
In the first quarter of 2017, the Company issued 10,646,762 common shares at $1.80 per share resulting
in a total net proceeds of approximately €16 million. In connection with its at-the-market sales
agreement, the Company issued 2,881,845 common shares for net proceeds of €5.1 million in 2017.
According to the articles of association of the Company, up to 109,800,000 common shares and
109,800,000 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, 2017 no preferred shares have been issued.
Other reserves
In 2017, the Company granted 53,395 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 31). Affimed recognized the fair value of the warrant of €51,000 in equity, net of tax of €21,000 and
net of transaction costs of €1,000. Fair value was determined using the Black-Scholes-Merton formula,
Affimed Annual Report 2017
85
with an expected volatility of 75% and an expected time of six 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.
Unappropriated result
The result after tax for 2017 is included in the item unappropriated result within equity.
Proposal for profit appropriation
The General Meeting will be proposed to appropriate the result after tax for 2017 as follows: to deduct
€30.2 million from the retained earnings. The 2017 result after tax is presented as unappropriated profit
in shareholders' equity.
The company can only make payments to the shareholders and other parties entitled to the distributable
profit in so far as the shareholders’ equity exceeds the paid-up and called-up part of the capital plus the
legal reserves and statutory reserves under the articles of association to be maintained.
29. Payables to subsidiaries
These payables relate to Affimed GmbH and do not bear interest.
30. Other current payables
In € thousand
Trade payables
Social security and wage tax
Other liabilities
Total
December
31, 2017
December
31, 2016
117
170
320
607
305
187
420
912
31. 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, which agreement was amended in May 2017 to provide that such amount would be
available in three tranches. As of December 31, 2017 Affimed GmbH has drawn the first two tranches
totaling €7.5 million; the availability of a third tranche of €2.5 million expired in September 2017 with
such amount remaining undrawn. Pursuant to the loan agreement, the Company granted 219,692
warrants to SVB to purchase Affimed’s common shares.
Affimed Annual Report 2017
86
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 €32.3 million in the Company’s financial statements at December 31,
2017).
32. 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
2017
705
(6,070)
3
(5,362)
247
(2,296)
(2,049)
(7,411)
0
(7,411)
2016
1,408
(8,381)
(8)
(6,981)
2,148
(1,407)
741
(6,240)
0
(6,240)
The Company has entered into a service agreement with 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.
33. Employee benefits and number of employees
The average number of employees during 2017 was 3 employees and consisted of managing directors
only. The managing director’s compensation is shown in note 34.
34. Related-party transactions
Director’s remuneration 2017
Managing directors
(in € thousand)
Periodically paid compensation
Bonuses
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
Hoess F. Fischer W. Fischer1
Total
443
94
537
867
867
336
59
395
348
348
106
19
125
54
54
885
172
1,057
1,269
1,269
Dr. Jörg Windisch served as COO until June 30, 2017. He received a cash compensation of a total of
€ 213,000 in 2017 and a share-based payment credit of € 24,000 was recorded for him in 2017.
Affimed Annual Report 2017
87
Supervisory directors
(in € thousand)
Hecht Ehmer Grau Modig Stead Verdonck
Total
Periodically paid compensation
Total cash compensation
2014 Plan share-based payment
expense2
Total share-based payment
expense
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
Supervisory directors
116
116
34
34
42
42
24
24
57
57
35
35
54
54
17
17
44
44
17
17
62
62
17
17
375
375
144
144
Hoess
Fischer
Marschner4 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
1,295
29
317
430
2,071
162
2,038
162
2,038
(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
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
1 Dr. Wolfgang Fischer serves as COO since September 11, 2017.
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.
4 Dr. Jens-Peter Marschner served as CMO until August 10, 2016.
Affimed Annual Report 2017
88
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.
Stock options granted under the Equity Incentive Plan 2014
Awards granted in 2017
Managing directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
June 20, 2017
Adi Hoess ........................
Florian Fischer ................
June 20, 2017
Wolfgang Fischer ............ September 11, 2017
Total
400,000
180,000
250,000
830,000
June 20, 2027
2.05
2.05
June 20, 2027
2.05 September 11, 2027
Supervisory directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Thomas Hecht .................
Bernhard Ehmer…………
Ulrich Grau ......................
Berndt Modig ...................
Richard Stead .................
Ferdinand Verdonck ........
Total
June 20, 2017
June 20, 2017
June 20, 2017
June 20, 2017
June 20, 2017
June 20, 2017
20,000
10,000
10,000
10,000
10,000
10,000
70,000
2.05
2.05
2.05
2.05
2.05
2.05
June 20, 2027
June 20, 2027
June 20, 2027
June 20, 2027
June 20, 2027
June 20, 2027
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…………
June 21, 2016
January 21, 2016
June 21, 2016
40,000
20,000
20,000
3.05
3.34
3.05
June 21, 2026
January 21, 2026
June 21, 2026
Affimed Annual Report 2017
89
Beneficiary
Ulrich Grau ......................
Berndt Modig ...................
Richard Stead .................
Ferdinand Verdonck ........
Total
Grant date
Number of
options
Strike
price USD Expiration date
June 21, 2016
June 21, 2016
June 21, 2016
June 21, 2016
20,000
20,000
20,000
20,000
160,000
3.05
3.05
3.05
3.05
June 21, 2026
June 21, 2026
June 21, 2026
June 21, 2026
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).
35. 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.
2017
Other KPMG
network
Total
KPMG
2017
2017
39
0
0
0
39
103
99
0
3
205
142
99
0
3
244
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
Affimed Annual Report 2017
90
Signing of the financial statements
May 17, 2018
Originally signed by:
Management Board:
Dr. Adi Hoess, CEO
Dr. Florian Fischer, CFO
Dr. Wolfgang Fischer, COO
Supervisory Board:
Dr. Thomas Hecht, Chairman
Dr. Bernhard Ehmer
Dr. Ulrich Grau
Berndt Modig
Dr. Richard B. Stead
Ferdinand Verdonck
Affimed Annual Report 2017
91
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 2017
92
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 2017
93
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.
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 18.5%)
Independent auditor’s report
The independent auditor’s report is set forth on the following page.
Independent auditor’s report
To: the General Meeting of Shareholders and the Supervisory Board of Affimed N.V.
Report on the audit of the financial statements 2017 included in the
annual report
Our opinion
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 2017 and of its result and its cash
flows for the year then ended, 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 only financial statements give a true and fair view of the
financial position of Affimed N.V. as at 31 December 2017 and of its result for the for the
year then ended, in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the financial statements for the period ended 31 December 2017 of
Affimed N.V. (‘the company’), based in Amsterdam. The financial statements include the
consolidated financial statements for the year ended 31 December 2017 and the company
only financial statements for the year ended 31 December 2017.
The consolidated financial statements comprise:
1. the consolidated statement of financial position as at 31 December 2017;
2. the following consolidated and company statements for 2017: the statements of compre-
hensive loss, changes in equity and cash flows; and
3. the notes comprising a summary of the significant accounting policies and other explana-
tory information.
The company only financial statements comprise:
1. the company only balance sheet as at 31 December 2017;
2. the company only income statement for the year ended 31 December 2017; and
3. the notes comprising a summary of the accounting policies and other explanatory infor-
mation.
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 Wet toezicht accountants-
organisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid
van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accoun-
tants, a regulation with respect to independence) and other relevant independence regu-
lations in the Netherlands. Furthermore, we have complied with the Verordening gedrags-
en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Audit approach
Summary
MATERIALITY
- Materiality of EUR 225 thousand
- 0.5% of total assets
GROUP AUDIT
- 100% of total assets
- 100% of loss before income taxes
KEY AUDIT MATTER
- Completeness of research and development costs
UNQUALIFIED OPINION
Materiality
Based on our professional judgement we determined the materiality for the financial state-
ments as a whole at EUR 225 thousand. The materiality is determined with reference to total
assets (0.5%). We consider total assets as the most appropriate benchmark because the
company is currently in its research and development phase and thus is predominantly
focused on asset development/capital expenditure.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the Supervisory Board that misstatements in excess of EUR 11 thousand
which are identified during the audit, would be reported to them, as well as smaller misstate-
ments that in our view must be reported on qualitative grounds.
KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the
KPMG network of independent companies affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.
Scope of the group audit
Affimed N.V. is at the head of a group of components. The financial information of this group
is included in the financial statements of Affimed N.V.
Our group audit mainly focused on significant components. Of the group’s 4 reporting com-
ponents, we subjected 2 to full-scope audit for group purposes, 1 to audit of account balance.
These components were selected based on their individual financial significance or because
they are likely to include significant risks of material misstatement due to their specific nature
or circumstances. ‘Full scope components’ were subject to an audit of the complete reporting
package. ‘Audit of account balance scope component’ was not individually financially
significant enough to require an audit for group reporting purposes but was included in the
scope of our group reporting work in order to provide additional coverage. These 3
components are accounted for 100% of total consolidated assets and 100% of consolidated
loss before income taxes. For the one remaining component, we performed an analysis at an
aggregated group level to corroborate the group engagement team’s conclusions that there
were no significant risks of material misstatement within this component.
The group audit team provided detailed instructions to the component auditor, KPMG
Germany, who was part of the group audit, covering the significant audit areas, including the
relevant risks of material misstatement and set out the information required to be reported
back to the group audit team. During the communication with KPMG Germany, the planning
of our audit, our risk assessment, our audit approach and the key audit findings and objec-
tives were discussed. Telephone conference meetings were also held with the component
auditor, in which, amongst others, the findings reported to the group team were discussed
in more detail, and any further work required by the group team was then performed by the
component auditor. The group audit team has reviewed the files of KPMG Germany.
By performing the procedures mentioned above at group components, together with additio-
nal procedures at group level, we have been able to obtain sufficient and appropriate audit
evidence about the group’s financial information to provide an opinion about the financial
statements.
Our key audit matter
Key audit matters are those matters that, in our professional judgement, were of most signifi-
cance in our audit of the financial statements. We have communicated the key audit matter
to the Supervisory Board of Affimed N.V. The key audit matter is not a comprehensive reflec-
tion of all matters discussed.
KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the
KPMG network of independent companies affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.
This matter was addressed in the context of our audit of the financial statements as a whole
and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Completeness of accruals related to research and development
Description
The company is dependent on the timely invoicing of suppliers, mainly for clinical trials, for the proper accoun-
ting of accruals related to research and developments. As suppliers of clinical trials have not timely invoiced
their services rendered in the past, those accruals need to be estimated based on management judgement,
which amongst others is dependent on appropriate communication from suppliers. An overly optimistic assess-
ment of costs incurred by suppliers of clinical trial-related products and services and inappropriate feedback
from suppliers may result in incomplete accruals at year end. Therefore, in our audit planning we identified a
risk that the accruals related to clinical trials could be underestimated, which could lead to inappropriate finan-
cial reporting.
Our response
In order to address the identified risk, we obtained a thorough understanding of the relevant developments
programs as well as an understanding on the timing and the suppliers engaged in clinical trials. Further,
we obtained an understanding of the design of controls implemented to ensure completeness of clinical
trial-related accruals and tested controls for operating effectiveness where deemed necessary and efficient
in our audit.
Our substantive audit procedures comprised, amongst others:
•
•
•
obtaining management’s position on the progress of the scientific programs;
inspection of contracts;
obtaining confirmations from suppliers and agreeing to recognized accruals to determine completeness of
such accruals;
search for unrecorded liabilities by inspecting invoices received and payments made after year end to
determine completeness of such accruals.
•
Our observation
The results of our testing were satisfactory and we found the amount of accruals related to research and
development recognized to be acceptable.
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:
•
•
•
the report by Affimed’s Management Board;
the report by Affimed’s Supervisory Board;
the 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:
•
• contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
is consistent with the financial statements and does not contain material misstatements;
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
substantially less than the scope of those performed in our audit of the financial statements.
The Management Board is responsible for the preparation of the other information, including
the Affimed’s Management Board report in accordance with Part 9 of Book 2 of the Dutch
Civil Code and the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the
KPMG network of independent companies affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.
Report on other legal and regulatory requirements
Engagement
We were re-engaged on 20 December 2017 by the Board of Directors as auditor of the 2017
financial statements of Affimed N.V., and have operated as statutory auditor ever since the
2014 financial year.
Description of responsibilities regarding the financial statements
Responsibilities of the Management Board and the Supervisory Board for the
financial statements
The Management Board is responsible for the preparation and fair presentation of the finan-
cial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code.
Furthermore, the Management Board is responsible for such internal control as the
Management Board determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Management Board is responsible
for assessing Affimed N.V.’s ability to continue as a going concern. Based on the financial
reporting frameworks mentioned, the Management Board should prepare the financial
statements using the going concern basis of accounting, unless the Management Board
either intends to liquidate Affimed N.V. or to cease operations, or has no realistic alternative
but to do so. The Management Board 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.
The Supervisory Board is responsible for overseeing the Affimed N.V.’s financial reporting
process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement 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 detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error 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 these financial statements. The materiality affects the nature,
timing and extent of our audit procedures and the evaluation of the effect of identified mis-
statements on our opinion.
A further description of our responsibilities for the audit of the financial statements is included
in the appendix of this auditor's report. This description forms part of our auditor’s report.
Utrecht, 18 May 2018
KPMG Accountants N.V.
J.G.R. Wilmink RA
Appendix: Description of our responsibilities for the audit of the financial statements
KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the
KPMG network of independent companies affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.
Appendix
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 among others:
•
identifying and assessing the risks of material misstatement of the financial statements,
whether due to fraud or error, 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 the risk resulting from error, 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 expres-
sing an opinion on the effectiveness of the Affimed N.V.’s internal control;
• evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Management Board;
• concluding on the appropriateness of the Management Board’ use of the going concern
basis of accounting, and based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
Affimed N.V.’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause a company to cease
to continue as a going concern;
• 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 components. Decisive were the
size and/or the risk profile of the group components or operations. On this basis, we selected
group components for which an audit or review had to be carried out on the complete set of
financial information or specific items.
We communicate with the Supervisory Board 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.
We provide the Supervisory Board with a statement that we have complied with relevant ethi-
cal requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the Supervisory Board, we determine the key audit
matters: those matters that were of most significance in the audit of the financial statements.
We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, not communicating the
matter is in the public interest.
KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the
KPMG network of independent companies affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.