Affimed N.V.
Amsterdam, The Netherlands
Annual Report 2018
Affimed Annual Report 2018
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 2018
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.
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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 innate immune cells (Natural Killer cells, or NK cells and
macrophages), and T cells. Leveraging our fit-for-purpose ROCK® (Redirected Optimized Cell Killing)
platform, we focus on the development of proprietary, next-generation bispecific antibodies, so-called
innate cell engagers, which are designed to direct and establish a bridge between innate immune cells
and cancer cells, bringing them into close proximity and triggering a signal cascade that leads to the
destruction of cancer cells. The ROCK® platform can also be applied to the development of T cell
engagers. Due to their novel tetravalent architecture (which provides for four binding domains), our
immune cell engagers bind to their targets with high affinity and have half-lives that support regular
intravenous administration on convenient dosing schedules to achieve potent antitumor efficacy.
Antibodies developed from our ROCK® platform include molecules which we refer to as immune cell
engagers. We are also developing novel tetravalent, bispecific antibody formats with the potential to
tailor immune-engaging therapy to different indications and settings. Based on their mechanism of
action and the preclinical and clinical data to date, we believe that our product candidates, when used
alone or in combination, may improve clinical outcomes and survival in cancer patients and could
eventually become a cornerstone of cancer therapy.
Affimed was founded in 2000 based on technology developed by the group led by Professor Melvyn
Little at Deutsches Krebsforschungszentrum (DKFZ), the German Cancer Research Center, in
Heidelberg, Germany.
Focusing our efforts on antibodies specifically binding innate immune cells through CD16A, a key
activating receptor, we have built a clinical and preclinical pipeline of innate cell-engaging bispecific
antibodies designed to activate both innate and adaptive immunity. Compared to a variety of T cell-
engaging technologies, our innate 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 three programs, two for which
we retain global commercial rights and one licensed program. Because our tetravalent bispecific
antibodies can be engineered to bind to different antigens that are known to be present on a number
of types of cancer cells, our product candidates could be developed for the treatment of different
cancer indications. We intend to initially develop our clinical stage product candidate 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 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 75 personnel, approximately 60% of whom
have an advanced academic degree. Including AbCheck (see description below) and Affimed Inc.
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personnel, our total headcount is 116 (109 full time equivalents). We are led by experienced
executives with a track record of successful product development, approvals and launches,
specifically in the area of biologics and biopharmaceuticals. Our supervisory board is made up of
highly experienced experts from the pharmaceutical and biotech industries, including individuals with a
background and expertise in hematological malignancies.
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 naïve human antibody library combined with phage
and yeast display antibody library, a proprietary algorithm to optimize affinity, stability and
manufacturing efficiency and a 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. In 2018 AbCheck formed AbCheck Inc., a 100%
owned subsidiary.
Business Overview
Our Strategy
Our goal is to engineer targeted immunotherapies, seeking to cure patients by harnessing the power
of innate immunity (NK cells, macrophages). We are developing single and combination therapies to
treat a variety of cancers. Our novel proprietary antibody platform, ROCK® (Redirected Optimized Cell
Killing), delivers several unique types of next-generation tetravalent antibody formats, including
bispecific and trispecific Abs and immune cell engagers. Based on the distinctive properties and
mechanism of action of these products, which have demonstrated preclinical and clinical activity, we
believe that our product candidates, alone or in combination, could eventually become a key element
of cancer therapy by improving clinical outcomes in cancer patients. Key elements of our strategy to
achieve this goal are to:
• Rapidly Advance the Development of our Clinical Stage Product Candidates, including
Combinations with Other Agents and Immunotherapies. Our product development strategy
initially focuses on cancer patients with relapsed or refractory disease. Such patients have limited
therapeutic alternatives, and we believe that the results from clinical studies in these patient groups
would support expedited regulatory approval paths. In the second quarter of 2015, a phase 2a
investigator-sponsored study (IST) 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 brentuximab vedotin (Adcetris®). Due to the availability of anti-
PD-1 antibodies for the treatment of relapsed/refractory HL patients that emerged during the
conduct of the study, we experienced slower recruitment 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 is now recruiting HL patients relapsed or refractory to
treatment with both Adcetris® and anti-PD-1 antibodies to explore the efficacy of AFM13 as a single
agent in these heavily pretreated HL patients. We are also supporting a phase 1b/2a study of AFM13
as an IST in patients with relapsed or refractory CD30+ lymphoma led by investigators at Columbia
University in New York that was initiated in the third quarter of 2017. In addition to evaluating clinical
efficacy, this is also a translational study in patients with cutaneous manifestations of their disease
and is designed to evaluate serial peripheral blood and tumor samples, thereby enabling
assessment of NK cell biology and tumor cell killing within the tumor microenvironment. Interim data
were recently presented at ASH2018. Furthermore, we are conducting a phase 1b clinical study of
AFM13 in combination with Merck’s anti-PD-1 antibody pembrolizumab (Keytruda®) in HL patients
who are relapsed /refractory to chemotherapy and Adcetris® and who have not received prior anti-
PD-1 antibody therapy. In this study, enrollment was completed and 6-month data were recently
presented at ASH2018. In addition, we initiated two phase 1 clinical studies of AFM11, one in
patients with relapsed/refractory non-Hodgkin Lymphoma (NHL), and the other in patients with
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relapsed/refractory acute lymphocytic leukemia (ALL). During the fourth quarter of 2018, both trials
were placed on clinical hold and recruitment stopped after the occurrence of two life-threatening
and one fatal SAEs. In line with the strategic focus on our innate immunity portfolio, we decided to
terminate the Phase 1 clinical program of AFM11 in May 2019. This decision took into consideration
the competitive landscape of B-cell directed therapies currently in development and associated
resources needed for further development of AFM11. In addition, in May 2019, the FDA notified us
that additional data would be needed to determine whether the AFM11 clinical hold may be lifted.
• Establish R&D and Commercialization Capabilities in Europe and in the United States While
we plan to retain rights to 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 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, build our clinical development capabilities and maintain a close
relationship to the financial and pharmaceutical community to ensure our strategy can adapt in the
competitive landscape.
• Use Our Technology Platforms and Intellectual Property Portfolio to Continue to Build our
Cancer Immunotherapy Pipeline. We generate our product candidates from our proprietary
ROCK® antibody engineering technology platform. We plan to continue to leverage our platform to
develop new pipeline product candidates. We believe we can utilize our platform 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.
• Maximize the Value of our Collaboration Arrangements with Genentech, LLS, Merck and MD
Anderson. We have a research agreement with the Leukemia and Lymphoma Society (LLS) under
which LLS has committed to co-fund the development of AFM13. 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 AFM13 with Merck’s anti-PD-1
therapy, Keytruda® (pembrolizumab) for the treatment of patients with relapsed/refractory HL. In
December 2016, 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 derived from umbilical cord blood. MD Anderson
is responsible for conducting preclinical research activities, investigating this combination in
preclinical models of CD30 positive lymphoma, which are intended to be followed by a phase 1
clinical study of the combination in patients with CD30 positive, relapsed/refractory lymphomas. We
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. In
addition, in August 2018, we entered into a research collaboration and license agreement with
Genentech, a member of the Roche Group, for the development and commercialization of certain
product candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple
cancers. 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.
•
Intensify our Collaboration with Academia. We have entered into multiple collaborations with
academic partners, including the GHSG, the Mayo Clinic, Washington University in St. Louis, the
Columbia University and MD Anderson Cancer Center, amongst others. We will continue to engage
with key experts in our areas of interest.
• Utilize AbCheck to Generate and Optimize Antibodies. We formed AbCheck in 2009 to leverage
our antibody screening platform and partner with other biopharmaceutical companies in fee-for-
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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 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:
• Our Lead Product Candidate, AFM13, is a First-in-Class Innate Cell Engager. AFM13 is an
innate cell engager that is currently in development for HL and CD30-positive lymphoma in
relapsed/refractory patients. To engage and activate innate immune 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 which is
expressed on the surface of neutrophils. Neutrophils exist in such large amounts that most AFM13
would bind to this cell type and only a small part would be available for binding to CD16+ innate
immune cells. We believe that AFM13 is the only antibody in development that can specifically
engage CD16A+ cells, in particular NK cells and macrophages, with very high affinity. The LLS has
agreed to co-fund a portion of the development of AFM13. In the second quarter of 2015, a phase
2a proof of concept study of AFM13 was initiated by the GHSG in HL patients that have received all
standard therapies and have relapsed after or are refractory to Adcetris®. The study is now
recruiting HL patients who have relapsed or are refractory to treatment with both Adcetris® and anti-
PD-1 antibodies to explore the efficacy of AFM13 as a single agent in these heavily pretreated HL
patients. 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 and safety, this is a translational
study in patients with cutaneous manifestations of their disease and is designed to allow for serial
peripheral blood and tumor biopsies, thereby enabling assessment of immunobiology 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 cord-blood derived NK cell product.
• Our Innate Cell Engager Preclinical Candidate, AFM24. We are developing AFM24, an innate
cell engager targeting EGFR. AFM24 is designed to treat patients with different EGFR expressing
solid tumors with the potential for better efficacy and safety as compared to currently used
therapeutic anti-EGFR standard of care that are associated with significant toxicities and resistance
to treatment. We have successfully completed a toxicology study in cynomolgus monkeys at a range
of dose levels up to 75mg/kg over 4 weeks with no observed toxicities even at high dose levels. In
contrast, Cetuximab an approved anti-EGFR antibody, revealed significant toxicity in the same
dose-range. We anticipate completing IND-enabling studies for AFM24 by mid-year 2019 and plan
to initiate a first-in-human study in the second half of 2019.
• Our Fit-for-Purpose ROCK® (Redirected Optimized Cell Killing) Platform. We have developed
our fit-for-purpose ROCK® platform to enable the generation of first-in-class tetravalent, multi-
specific immune cell engagers. It supports innate and adaptive drug development and enables us
to tailor tetravalent, bispecific innate cell engagers with high avidity and affinity, and variable PK
profiles to different indications and settings, including generation of molecules against validated
oncology targets to address the limitations of existing standard treatments.
• Retained Global Commercial Rights for our two Product Candidates in our Pipeline. Our
pipeline product candidates AFM13 and AFM24 are unencumbered. We retain all options to derive
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value from these product candidates, including commercialization in all or select markets when and
if they are approved. To maximize the value of our platform, we will continue to explore partnerships
to support the development or commercialization of our programs in certain territories.
• 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 Chief Medical Officer Leila Alland has
played key roles in the development and approval of Tagrisso®, Opdivo®, Tasigna® and
Caelyx®/Doxil®.
• Strong Technology Base and Solid Patent Portfolio in the Field of Targeted Immuno-
Oncology. We are a leader in the field of bispecific antibody therapeutics for the treatment of
cancer. We have a patent portfolio that includes the ROCK® platform itself. Further, we have a
proprietary position in innate 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 innate cell engager designed for the treatment of certain
CD30-positive (CD30+) B- and T cell malignancies. AFM13 selectively binds to CD30, a clinically
validated target, and CD16A, an integral membrane glycoprotein receptor expressed on the surface of
NK cells and macrophages, triggering a signal cascade that leads to the destruction of CD30-positive
tumor cells. In contrast to conventional full-length antibodies, AFM13 does not bind to CD16B, which
prevents binding to other cell types, e.g. neutrophils, and binds with equal affinity to CD16A
polymorphisms at position 158. 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 monotherapy and as combination therapy in
relapsed/refractory CD30-positive lymphoma patients and relapsed/refractory HL patients.
In the completed first-in-human 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 demonstrated tumor shrinkage in patients who
had relapsed after, or were 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® experienced 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 supporting 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, seventeen patients were recruited that were relapsed/refractory to Adcetris® and
naïve to anti-PD-1 antibodies and two of these patients experienced a partial response Due to the
availability of anti-PD-1 antibodies for the treatment of relapsed/refractory HL patients, the overall
study design was revised to recruit HL patients relapsed or refractory to treatment with brentuximab
vedotin and anti-PD-1 antibodies. The study is open and recruiting under the new study design.
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, the combination was well-tolerated with most of the
adverse events observed mild to moderate in nature and manageable with standard of care. Best
response assessment data from 24 patients treated at the highest AFM13 dose level (7 mg/kg) as
reported by central read, showed an ORR of 88% (21 of 24 patients), including complete metabolic
responses (CmR) in 46% (11 of 24 patients) and partial metabolic responses (PmRs) in 42% (10 of 24
patients). One patient experienced stable disease (SD).
We are also supporting a phase 1b/2a IST of AFM13 in patients with relapsed or refractory CD30+
lymphoma led by investigators at 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 immunobiology and tumor cell killing within
the tumor microenvironment. An interim analysis of 9 treated patients was recently presented. AFM13
could be safely administered and showed therapeutic activity as a single agent, with an objective
response rate (ORR) of 44% (4/9). In detail, one complete response (CR), three partial responses
(PRs) and two stable diseases (SDs) were observed. An analysis of biomarker correlatives showed a
decrease in circulating NK cells (CD56+ CD3- , CD56+ CD16+, NKp46+) during therapy, with post-
therapy recovery. In addition, increased CD69 expression on circulating NK cells pre-therapy in
responders vs. non-responders was demonstrated. Tumor biopsies showed increased infiltration of
CD56+ NK cells in responders compared to nonresponders, while circulating CD4+ CD25+ T cells
(Tregs) decreased in responders compared to nonresponders.
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
molecules may have a synergistic anti-tumor effect, involving both innate and adaptive immune cells.
Based on 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 immuno-oncology.
In December 2016, we entered into a clinical development and commercialization collaboration with
MD Anderson to evaluate AFM13 in combination with MD Anderson’s NK cell product. On
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December 3, 2018, we presented preclinical data at the American Society of Hematology Annual
Meeting, outlining the successful approach of a novel premixed product, comprising of expanded cord-
blood derived NK cells loaded with AFM13 to redirect their specificity against CD30+ tumor cells. MD
Anderson is responsible for conducting preclinical research activities, investigating cord-blood derived
NK cells in combination with AFM13, followed by a clinical phase 1 study. Data were recently
published at ASH2018 and showed that AFM13 can enhance efficacy on cord blood derived NK cells
both in vitro and in vivo. We 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 the German Cancer Research Center (DKFZ), we 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, NK cells showed improved IL-2- and IL-15-mediated proliferation and cytotoxicity.
These data support the strategy of combining our innate cell engagers with IL-2- or IL-15 to potentially
achieve stronger clinical responses.
Our second candidate, AFM24, is an innate cell-engaging bispecific antibody targeting EGFR. AFM24
is designed to treat patients with different EGFR expressing solid tumors with the potential for better
efficacy and safety as compared to current therapeutic anti-EGFR monoclonal antibodies that are
associated with significant toxicities and treatment resistance. We have successfully completed a
toxicology study in cynomolgus monkeys at a range of dose levels up to 75mg/kg over 4 weeks with
no observed toxicities even at high dose levels. In contrast, Cetuximab an approved anti-EGFR
antibody revealed significant toxicity in the same dose-range. We anticipate completing IND-enabling
studies for AFM24 by mid-year 2019 and plan to initiate a first-in-human study in the second half of
2019.
We have also developed AFM26, an innate cell-engaging bispecific antibody targeting B cell
maturation antigen (BCMA) to address the medical need for a novel approach to treat multiple
myeloma. AFM26 employs a unique mechanism of action through high affinity engagement of NK cells
which in vitro demonstrates efficacy against cells expressing even very low levels of BCMA. NK cell
binding of AFM26 is largely unaffected by IgG competition. In addition, AFM26 offers the opportunity
for a combination with adoptive NK cell transfer, as it appears to have a favorable safety profile with
lower cytokine release as compared to BiTE. In the third quarter of 2018, we successfully partnered
AFM26 and no longer control its development.
In addition, we have been exploring the generation of novel bispecific ROCK® -based innate cell
engagers and trispecific Abs for various undisclosed targets which are currently at a discovery stage
to be developed for different indications.
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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 payments for collaborative research and development services.
Through December 31, 2018, we have raised an aggregate of €227.1 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, 2018, we incurred a net loss of €19.5 million. As of December 31, 2018, we had
an accumulated deficit of €202.1 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
progressions as described under the license and development agreement. We do not expect to
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provide any additional significant services or generate significant additional revenues under the
license and development agreement.
We recognized revenues of €3.4 million, €0.2 million and €0.0 million in 2016, 2017 and 2018
respectively (net of our investments of €1.6 million in 2016 and 2017).
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 €2.8 million in financing, €1.0 million, €0.6
million, €0.3 million and €0.9 million of which was invested in Amphivena in October 2016, March
2017, December 2017 and June 2018, respectively. As of December 31, 2018, the cash investments
in relation to the July 2013 license and development agreement and cash investments made in
October 2016, March 2017, December 2017 and June 2018 totaled $4.0 million (€3.5 million), and we
owned approximately 7% 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, 2018 we have met seven milestones and we recognized revenues of €0.4 million,
€0.2 million and €0.2 million in 2016, 2017 and 2018, 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.
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
Affimed Annual Report 2018
10
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 December 2016, we entered into a clinical development and commercialization collaboration with
The University of Texas MD Anderson Cancer Center, or MD Anderson, to evaluate AFM13 in
combination with MD Anderson’s NK cell product. MD Anderson will be responsible for conducting
preclinical research activities aimed at investigating its NK cells derived from umbilical cord blood in
combination with AFM13, which are intended to be followed by a phase 1 trial. We will fund research
and development expenses for this collaboration and hold an option to exclusive worldwide rights to
develop and commercialize any product developed under the collaboration.
Genentech
On August 24, 2018 we entered into a research collaboration and license agreement with Genentech,
a member of the Roche Group, for the development and commercialization of certain product
candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple cancers.
Under the terms of the agreement, in the fourth quarter of 2018 we received $96 million in initial
upfront payments and other funding.
We recognized revenues of €21.8 million in 2018.
Financial Operations Overview
Revenue
To date, our revenues have consisted principally of collaboration and service revenue.
Collaboration revenue. 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). Collaboration revenue of €22.0 million for the year ended December 31, 2018 was from
the Genentech collaboration (€21.8 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
€2.4 million, €1.6 million and €1.7 million of service revenue in 2016, 2017 and 2018, 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 Genentech. The amount of future revenue is dependent on the services performed and
Affimed Annual Report 2018
11
milestones reached for our existing collaborations and 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 immune cell engager technology in various indication areas.
Other income in 2018 relates primarily to foreign exchange gains.
Research and Development Expenses
Research and development expenses consist principally of:
•
•
•
•
•
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;
• amortization and depreciation of tangible and intangible fixed assets used to develop our product
candidates; and
• expenses for share-based payments.
Based on our current budget we expect that our total research and development expenses in 2019 will
be in the range of €50 to €60 million. Our research and development expenses primarily relate to the
following key programs:
• 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. In this
study, enrollment is complete and interim data were recently presented. 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 2019 for AFM13 will be significantly
higher than in 2018 due to the initiation of additional clinical studies, pre-clinical studies with
collaboration partners and the preparation of the production of AFM13 for commercial purposes.
• AFM11. The phase 1 clinical trial of AFM11 in patients with non-Hodgkin Lymphoma, or NHL, was
recruiting until the beginning of October 2018. A phase 1 clinical study of AFM11 in patients with
ALL commenced in the third quarter of 2016 and was enrolling until the beginning of October 2018.
During the fourth quarter of 2018, both trials were placed on clinical hold and recruitment stopped
after the occurrence of two life-threatening and one fatal SAEs. In line with the strategic focus on
our innate immunity portfolio, we decided to terminate the Phase 1 clinical program of AFM11 in
May 2019. This decision took into consideration the competitive landscape of B-cell directed
therapies currently in development and associated resources needed for further development of
AFM11. In addition, in May 2019, the FDA notified us that additional data would be needed to
determine whether the AFM11 clinical hold may be lifted.
Affimed Annual Report 2018
12
• 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
(through the third quarter of 2018), 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, costs for pre-clinical
services and manufacturing costs for pre-clinical and clinical study material and will be significantly
higher in 2019.
•
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 in 2019 will be
higher due to additional rental space.
Since January 1, 2012, we have cumulatively spent €141.5 million on research and development. In
the years ended December 31, 2016, 2017 and 2018, we spent €30.2 million, €21.5 million and €35.1
million on research and development; €11.8 million, €5.6 million and €8.7 million thereof on AFM13;
and €2.5 million, €2.8 million and €5.8 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 certain of our other product candidates 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:
•
•
•
•
•
•
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 milestone and royalty payments thereunder.
A change in the outcome of any of these variables with respect to the development of AFM13, AFM24
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.
Affimed Annual Report 2018
13
General and Administrative Expenses
Our general and administrative expenses consist principally of:
•
salaries for employees other than research and development staff, including benefits;
• business development expenses, including travel expenses;
• professional fees for auditors and other consulting expenses not related to research and
development activities;
• professional fees for lawyers not related to the protection and maintenance of our intellectual
property;
•
•
cost of facilities, communication and office expenses;
IT expenses;
• amortization and depreciation of tangible and intangible fixed assets not related to research and
development activities; and
• expenses for share-based payments.
We expect that our general and administrative expenses in 2019 will be higher compared to the
expenses in 2018, and will further increase in the future as our business expands. These 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, 2017 and 2018. 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, 2017 and 2018
Total Revenue:
Other income/(expenses)—net
Research and development expenses
General and administrative expenses
Operating income/(loss)
Finance income/(costs)—net
Income/(Loss) before tax
Income taxes
Income/(loss) for the period
Total comprehensive income/(loss)
Earnings/(loss) per common share in € per share
Revenue
Year ended December 31,
2018
2017
(in € thousand)
2,010
205
(21,489)
(7,986)
(27,260)
(2,983)
(30,243)
20
(30,223)
(30,223)
(0.69)
23,735
1,515
(35,148)
(9,638)
(19,536)
60
(19,476)
(1)
(19,477)
(24,208)
(0.32)
Revenue significantly increased from €2.0 million in the year ended December 31, 2017 to €23.7
million for the year ended December 31, 2018, mainly due to the revenue from the Genentech
collaboration. Revenue for the year ended December 31, 2018 mainly consisted of revenue from the
Affimed Annual Report 2018
14
Genentech collaboration of €21.8 million and service revenues at AbCheck of €1.7 million
(December 31, 2017: €1.6 million).
Research and development expenses
R&D Expenses by Project
Project
AFM13
AFM11
Other projects and infrastructure costs
Share-based payment expense
Total
Year ended December 31,
2017
2018 Change %
(in € thousand)
5,608
2,829
12,530
522
21,489
8,711
5,776
19,809
852
35,148
55 %
104 %
58 %
63 %
64 %
Research and development expenses increased 64% from €21.5 million in the year ended
December 31, 2017 to €35.1 million in the year ended December 31, 2018, due to higher expenses for
AFM13, AFM11 and for other projects and infrastructure. The variances in project related expenses
between the year ended December 31, 2017 and the corresponding period in 2018 are mainly due to
the following projects:
• AFM13. In the year ended December 31, 2018, we incurred higher expenses than in the year ended
December 31, 2017 primarily due to increased expenses for manufacturing activities for clinical trial
material.
• AFM11. In the year ended December 31, 2018, clinical expenses were significantly higher than in
the year ended December 31, 2017 primarily due to higher expenses for clinical trial material.
• Other projects and infrastructure costs. In the year ended December 31, 2018, expenses increased
compared to the year ended December 31, 2017 primarily due to higher expenses incurred in
relation to our discovery/early stage development activities including manufacturing costs for pre-
clinical and clinical study material and preclinical activities for AFM24 and AFM26 (through the third
quarter of 2018). We also incurred higher costs associated with our research and development that
are non-project specific, including intellectual property-related expenses, depreciation expenses
and facility costs. Because these costs are less dependent on individual ongoing programs, they
are not allocated to specific projects.
General and administrative expenses
General and administrative expenses increased 21% from €8.0 million in the year ended
December 31, 2017 to €9.6 million in the year ended December 31, 2018. In 2018, general and
administrative expenses were largely affected by personnel expenses (€4.9 million) and legal,
consulting and audit costs (€2.9 million).
Finance income / (costs)-net
We recognized finance income net for the year ended December 31, 2018 of €60,000 compared with
finance costs of €3.0 million for the year ended December 31, 2017. The year ended December 31,
2018 was primarily affected by foreign exchange gains of €0.7 million and interest expenses of €0.8
million.
Income tax expense
During the year ended December 31, 2018, we recorded income tax expense of €1,000 due to
changes in deferred taxes.
Affimed Annual Report 2018
15
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. For the years ended December 31,
2016, 2017 and 2018, we incurred net losses of €32.2 million, €30.2 million and €19.5 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, 2018, we had cash and cash equivalents and current
financial assets, which we refer to as liquidity, of €108.8 million.
Our cash and cash equivalents and current financial assets as of December 31, 2018 consist primarily
of deposits in savings and deposit accounts with original maturities of three months or less and
certificates of deposit with original maturities of more than three months which generate a small
amount of interest income. We expect to continue this investment philosophy.
Cash Flows
Comparison of the years ended December 31, 2017 and 2018
The table below summarizes our consolidated statement of cash flows for the years ended
December 31, 2017 and 2018:
Net cash from/(used) in operating activities
Net cash from/(used) for investing activities
Net cash generated from financing activities
Net changes to cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange-rate related changes of cash and cash equivalents
Cash and cash equivalents at the end of the year
Year ended December 31,
2018
2017
(in € thousand)
(25,549)
8,050
23,797
6,297
35,407
(1,867)
39,837
49,438
(15,610)
20,495
54,323
39,837
669
94,829
Net cash used in operating activities amounted to €25.5 million in the year ended December 31, 2017,
whereas net cash from operating activities amounted to €49.4 million in the year ended December 31,
2018. The amount received in 2018 includes an initial upfront payment and committed funding of
€83.2 million from the Genentech collaboration.
Net cash from investing activities amounted to €8.1 million in the year ended December 31, 2017,
while we used cash for investing activities of €15.6 million in the year ended December 31, 2018. The
investing activities primarily relate to investments in and proceeds from the sale or maturity of financial
assets.
Net cash generated from financing activities in the year ended December 31, 2018 amounted to €20.5
million and relate to primarily the proceeds from the public offering in February 2018 and the issuance
of shares in connection with our at-the-market sales agreement.
Cash and Funding Sources
Our liquidity (cash and cash equivalents and current financial assets) as of December 31, 2018 was
€108.8 million. Funding sources generally comprise proceeds from the issuance of equity instruments,
loans, payments from collaboration agreements and government grants.
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 originally
Affimed Annual Report 2018
16
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.
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.
In October 2018, we entered into an at-the-market sales agreement (“Sales Agreement”) with 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, 2019, we have not made any sales under the Sales Agreement.
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 and
AFM24. If we receive regulatory approval for AFM13 or AFM24, and if we choose not to grant any
licenses to partners, we expect to incur significant commercialization expenses related to product
manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.
We also expect to incur additional costs associated with operating as a public company. Additional
funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised,
may not be sufficient to enable us to continue to implement our long-term business strategy. If we are
not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product
development programs or commercialization efforts.
We believe that our existing cash and cash equivalents will enable us to fund our operating expenses
and capital expenditure requirements into 2021. We have based this estimate on assumptions that
Affimed Annual Report 2018
17
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:
•
•
•
•
•
•
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
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:
• not providing an auditor attestation report on our system of internal controls over financial reporting;
• 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;
• 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
• 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).
We have been, and continue to be, an “emerging growth company” for a period of five years following
the completion of our initial public offering (2019), but will no longer be an “emerging growth company”
as of December 31, 2019.
Affimed Annual Report 2018 18
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 2018 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 27, 2019,
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 2018 19
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 and current financial assets 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
Affimed Annual Report 2018 20
shares and all or 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. In addition, any testing by us
conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent
testing by our independent registered public accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses or that may require
prospective or retroactive changes to our financial statements or identify other areas for further
attention or improvement. Inferior internal controls could also 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.
We are required to disclose changes made in our internal controls and procedures and our
management is required to assess the effectiveness of these controls annually. However, for as long
as we are an “emerging growth company” under the JOBS Act, our independent registered public
accounting firm will not be required to attest to the effectiveness of our internal controls over financial
reporting pursuant to Section 404. We will continue to be an “emerging growth company” until our
fiscal year ending December 31, 2019. An independent assessment of the effectiveness of our internal
controls could detect problems that our management’s assessment might not. Undetected material
weaknesses in our internal controls could lead to financial statement restatements and require us to
incur the expense of remediation.
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
Affimed Annual Report 2018 21
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.
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.
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 Group borrowed €7.5 million with an
outstanding balance of €4.8 million as at December 31, 2018, with a variable interest rate of an annual
rate of 5.5% plus one-month EURIBOR, with EURIBOR deemed to equal zero percent if EURIBOR is
less than zero percent. The Group does not expect the EURIBOR to exceed the floor of 0% within the
foreseeable future, and considers the interest risk to be low.
Market interest rates on cash and cash equivalents as well as on term deposits were low in 2018,
resulting in interest income of €264,000 thousand in 2018. A shift in interest rates (increase or decrease)
would not have a material 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, the proceeds from our follow-on offerings and the private placement and cash
received from the Genenetech collaboration 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 2018, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €4.8 million (2017: €1.9 million) higher/lower, mainly as a
result of foreign exchange gains/losses on translation of US dollar-denominated financial assets. The
Group considers a shift in the exchange rates of 10% as a realistic scenario.
Loss is more sensitive to movement in exchange rates shifts in 2018 than in 2017 because of the
increased volume of US dollar-denominated transactions.
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.
Affimed Annual Report 2018 22
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
Group to fund operating expenses and capital expenditure requirements into 2021.
In 2015, the Company has entered into an at-the-market sales agreement with Cowen & Group, LLC
under which €5.1 million in net proceeds has been raised in 2017.
In 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 €16.4 million.
In 2018, Affimed 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 and 2,373,716 common shares in
connection with its at-the-market sales agreement for net proceeds of €3.8 million (see note 15).
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 2018
23
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
57
51
55
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.
Affimed Annual Report 2018
24
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 was also a director of Amphivena until the fourth quarter of 2018. 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
M
M
M
M
Mathieu Simon
Ferdinand Verdonck M
M
German
German
German/US
Swedish/US
French/US
Belgian
68
64
70
60
62
76
June 20, 2017
January 21, 2016
June 19, 2018
June 20, 2017
June 19, 2018
June 20, 2017
2020
2019
2021
2020
2021
2020
The following is a brief summary of the business experience of the Company's supervisory
directors.
Affimed Annual Report 2018
25
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. Since September 1, 2018 he serves as chairman of the board of directors at Symphogen
A/S, Denmark. 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 as member of the audit committee of 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 2018
26
Mathieu Simon, Director. Dr. Simon has been a member of our supervisory board since 2018. He
also serves as Senior Strategic Advisor at Messier Maris, an M&A advisory firm in the healthcare
sector, located in New York, London and Paris. He is an independent director on the Board of
Vaximm, a Swiss-based biotechnology company headquartered in Basel, Switzerland. Dr. Simon
has served as Cellectis’ Executive Vice-President since 2012 and as Chief Operating Officer since
2013. Dr. Simon also served as Chief Executive Officer of a former subsidiary of Cellectis. He has
been instrumental to the development of Cellectis and its CAR Allogenic T-Cell platform. He also
served as Chief Executive Officer of Ectycell in 2012. He served as Chairman of the Board of
Celleartis AB until 2014 before its acquisition by Takara Bio. Prior to joining Cellectis, Dr. Simon
was Managing Director, Head of Global Pharma at Pierre Fabre SA, the third largest French
Pharma Company. Beginning in 1994, he served at Wyeth Pharmaceuticals in both general
management roles (President Managing Director of Wyeth SMA) and senior corporate role in
Philadelphia, United States (SVP / Head of International Marketing and Medical Affairs).
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 2018
27
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,
2019, 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 and the promotion of Denise Mueller to Chief Business Officer in December 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 composition of the supervisory board has changed in 2018. Dr. Richard Stead left the
supervisory board and Dr. Mathieu Simon was appointed as member of the supervisory board in
the annual general meeting on June 19, 2018. Dr. Ulrich Grau was re-appointed as member of the
supervisory board in the annual general meeting on June 19, 2018.
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
Affimed Annual Report 2018
28
The composition of the supervisory board, including its members’ combined experience and
expertise, independence, and diversity of age and gender, should reflect the best fit for Affimed’s
profile and strategy. This aim for the best fit, in combination with the availability of qualified
candidates, has resulted in Affimed currently having a supervisory board in which all six members
are male. In order to increase gender diversity in the supervisory board in accordance with article
2:166 section 2 of the Dutch Civil Code, we pay close attention to gender diversity in the process of
recruiting and appointing new supervisory board candidates.
Appointment, suspension and dismissal
Supervisory directors are appointed by the general meeting of shareholders upon a binding
nomination of the supervisory board for a term of up to four years. The general meeting of
shareholders can suspend or dismiss a supervisory board member by an absolute majority of votes
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.
Diversity policy
In line with best practice provision 2.1.5 of the Code, the supervisory board has adopted a diversity
policy for the composition of the supervisory board, the management board and key leadership
positions (the "Diversity Policy"). The Diversity Policy contains specific diversity objectives to
improve the diversity within the supervisory board and the management board:
- Using best efforts to increase the gender diversity within the supervisory board whenever
one of the supervisory board members will be replaced or the supervisory board will be
extended;
- Using best efforts to increase the gender diversity within the management board whenever
one of the management board members will be replaced or the management board will be
extended.
In order to increase gender diversity, we pay close attention to gender diversity in the process of
recruiting and appointing new supervisory board or management board candidates.
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 2018.
Supervisory Board Committees
Although the supervisory board retains ultimate responsibility, the supervisory board has delegated
certain of its tasks to its committees.
Audit committee
Affimed Annual Report 2018
29
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 three meetings in person and five meetings by conference call in 2018.
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 five meetings by conference call in
2018.
Nomination and corporate governance committee
The nomination and corporate governance committee, which consists of Ulrich Grau (Chairman),
Thomas Hecht, Mathieu Simon and Bernhard Ehmer, 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 2018.
Affimed Annual Report 2018
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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 award of stock options to the supervisory board by the
general meeting of shareholders on 19 June 2018.
Compensation of Managing Directors and Supervisory Directors
Dutch law provides that we must establish a policy in respect of the remuneration of our managing
directors and supervisory directors. With respect to remuneration in the form of plans for shares or
rights to shares (such as the Equity Incentive Plan 2014 mentioned below) the policy for managing
directors must set out the maximum number of shares or rights to shares to be granted as well as
the criteria for grants and for amending existing grants. The remuneration policy for the managing
directors provides the supervisory board with a framework within which the supervisory board
determines the remuneration of the managing directors.
Our remuneration policy for our managing directors provides the supervisory board with the
authority to enter into management services agreements with managing directors that provide for
compensation consisting of base compensation, performance-related variable compensation, long-
term equity incentive compensation (as detailed in the terms of the Equity Incentive Plan 2014
described below), pension and other benefits and severance pay and benefits. The remuneration
policy for the managing directors provides that the annual cash bonus payable to managing
directors may not exceed 100% of the annual base gross salary and will be based upon the
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
Affimed Annual Report 2018
31
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 vested 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, as amended in 2018, provides that each supervisory director is entitled to an
annual grant of 20,000 stock options, with the chairman of the supervisory board entitled to an
annual grant of 35,000 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 benefits in kind, accrued or paid to our managing
directors and supervisory directors with respect to the year ended December 31, 2018, for services
in all capacities was approximately €2.2 million. As of December 31, 2018, we have no amounts
set aside or accrued to provide pension, retirement or similar benefits to our managing directors
and supervisory directors. In 2018, awards for approximately 1.2 million 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 33 to the Company only
financial statements and Note 20 to the consolidated financial statements.
In accordance with Dutch law, we are not required to disclose information regarding third party
compensation of our directors or director nominees. As a result, our practice varies from the third-
party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3).
Long-term incentive plans
Equity Incentive Plan 2014
In conjunction with the closing of our initial public offering (“IPO”), we established the Affimed N.V.
Equity Incentive Plan 2014 (“the 2014 Plan”) with the purpose of advancing the interests of our
shareholders by enhancing our ability to attract, retain and motivate individuals who are expected
to make important contributions to us. The maximum number of shares available for issuance
under the 2014 Plan equals 7% of the total outstanding common shares on September 17, 2014, or
approximately 1.7 million common shares. On January 1 of any calendar year thereafter (including
January 1, 2019), an additional 5% of the total outstanding common shares on that date becomes
available for issuance under the 2014 Plan. As of January 1, 2019, we had approximately 7.0
million common shares available for issuance, and approximately 6.6 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
Affimed Annual Report 2018
32
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.
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 certain managing directors and
certain of our supervisory directors and consultants that grant the beneficiaries the right to receive
common shares of the company. In 2019 these agreements were transferred from the pre-IPO
shareholders to an independent Trust company (“Trust GmbH”). The 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 now owned by the Trust GmbH, 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
Affimed Annual Report 2018
33
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
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 occurred in 2017 and 2018 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 2018, i-novion Inc.
did not receive any related payments.
Agreements with former Managing Directors
Affimed Annual Report 2018
34
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 2017, Dr. Marschner received related payments of €11,000. The consulting
agreement with Dr. Marschner was terminated end of May 2017.
In 2017, we entered into a consulting agreement with our former Managing Director Jörg Windisch
consisting of high level consultancy and strategic guidance in the field of clinical manufacturing. In
2018, Dr. Windisch provided no services and received no payments. The consulting agreement
with Dr. Windisch was terminated in May 2019.
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 South 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 €2.8
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, €0.3 million of which was invested in December 2017 and €0.9
million of which was invested in June 2018.
Registration rights agreement
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
Affimed Annual Report 2018
35
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 our 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
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
Affimed Annual Report 2018
36
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, 2018, have concluded that based on the
evaluation of these controls and procedures required by Rule 13a-15(b) of the Exchange Act, our
disclosure controls and procedures were effective and the risk management and control systems
worked properly in 2018. 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, 2018.
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
Affimed Annual Report 2018
37
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. These
processes also include a regular external “Compliance Health Check” to make sure the
Compliance Management System is working effectively and efficiently.
We have published our Code of Conduct on our website, www.affimed.com.
IX.
SHARES AND SHAREHOLDERS’ RIGHTS
General meeting of shareholders
Affimed shareholders exercise their rights through annual and extraordinary general meetings of
shareholders. We are required to convene an annual general meeting of shareholders in the
Netherlands each year, no later than six months after the end of the Company’s financial year.
Additional extraordinary general meetings of shareholders may be convened at any time by the
supervisory board and the management board. Pursuant to Dutch law, one or more shareholders,
who jointly represent at least 10% of the issued capital may, on their application, be authorized by
a Dutch district court to convene a general meeting of 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
Affimed Annual Report 2018
38
of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries.
Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such
subsidiary holds a right of use and enjoyment (vruchtgebruik) or a right of pledge. Shares which
are not entitled to voting rights pursuant to the preceding sentences will not be taken into account
for the purpose of determining the number of shareholders that vote and that are present or
represented, or the amount of the share capital that is provided or that is represented at a general
meeting of shareholders.
Decisions of the general meeting of shareholders are taken by an absolute majority of votes cast,
except where Dutch law or the articles of association provide for a qualified majority or unanimity.
In accordance with Dutch law and generally accepted business practices, our articles of
association do not provide quorum requirements generally applicable to general meetings of
shareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule
5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and
that such quorum may not be less than one-third of the outstanding voting stock.
Under our articles of association, our managing directors and supervisory directors are appointed
by the general meeting of shareholders upon a binding nomination by our supervisory board. The
general meeting of shareholders may overrule the binding nomination by a resolution adopted with
a two-thirds majority of the votes cast representing at least half of the issued share capital. If the
general meeting of shareholders overrules the binding nomination, the supervisory board shall
make a new binding nomination.
Issue of additional shares and pre-emptive rights
Shares may be issued following a resolution by the general meeting of shareholders on a proposal
of the management board made with the approval of the supervisory board. The general meeting of
shareholders may resolve to delegate this authority to the management board for a period of time
not exceeding five years. At the general meeting of shareholders held at September 12, 2014, our
management board was granted the authority, with effect from September 17, 2014 being the date
of our conversion into a Dutch public limited liability company prior to the consummation of our
initial public offering, for a period of five years (i.e., until September 17, 2019) and subject to the
approval of the supervisory board, to resolve to (i) issue common shares (either in the form of
stock dividend or otherwise) and/or grant rights to subscribe common shares in the share capital of
the Company, for a maximum of common shares that can be issued under the size of the
authorised share capital of the Company as per the date of adoption of such resolution and (ii)
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 19, 2018 the
articles of association of the Company were amended whereby the authorized capital was
increased to EUR 3,119,500 divided into 155,975,000 common shares and 155,975,000
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
Affimed Annual Report 2018
39
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 19, 2018, our management board was granted
the authority, for a period of 18 months, with effect from the same date (i.e., until December 19,
2019) and subject to the approval of the supervisory board, to cause the repurchase of common
shares by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of
the most recent closing price of a common share on any stock exchange where the common
shares are listed.
No authorization of the general meeting of shareholders is required if common shares are acquired
by us with the intention of transferring such common shares to our employees under an applicable
employee stock purchase plan.
Articles of Association
Our articles of association outline certain of the Company’s basic principles relating to corporate
governance and organization. The current text of the articles of association is available at the
Trade Register of the Chamber of Commerce and 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 19, 2018, the general meeting
of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for
the financial year 2018.
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
Affimed Annual Report 2018
40
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.
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
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 compensation 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 27, 2019 (available on our website: http://www.affimed.com/sec).
(cid:1) In the event of a termination of the management services agreement following a change of
control, the severance payment is increased to 185% for Adi Hoess and 150% for Florian
Fischer of the managing director's annual compensation. Given that such a resignation is
specifically linked to a change of control, Affimed does not consider this provision a deviation
from best practice provision 3.2.3 of the DCGC.
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 31, 2019
Affimed Annual Report 2018
41
On behalf of the Management Board,
Dr. Adi Hoess, CEO,
Dr. Florian Fischer, CFO
Dr. Wolfgang Fischer, COO
Affimed Annual Report 2018
42
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 2018.
The Company had a number of highlights and corporate updates in 2018 and early 2019.
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.
In March 2018, Leila Alland, M.D. joined Affimed as CMO. Dr. Leila Alland brings to the Company more
than 18 years of oncology experience, having held leadership roles in drug development at Tarveda
Therapeutics, AstraZeneca, Bristol-Myers Squibb and Novartis.
In May 2018, Affimed introduced its ROCK® (Redirected Optimized Cell Killing) platform. The Company’s
proprietary, unique and fit-for-purpose ROCK® platform enables the generation of first-in-class,
tetravalent, multi-specific immune cell engagers. Based on its modularity, ROCK® allows for antibody
engineering of highly customizable innate and T cell engagers to generate clinical candidates tailored to
multiple disease indications and settings, including generation of molecules against validated oncology
targets, to address the limitations of existing treatments.
In August 2018, Affimed entered into a research collaboration and license agreement with Genentech, a
member of the Roche Group, to develop and commercialize novel NK cell engager-based
immunotherapeutics based on Affimed’s ROCK® platform to treat multiple cancers. Affimed received $96
million in upfront and committed funding, and may be eligible to receive up to an additional $5 billion
including payments on achievement of certain development, regulatory and commercial milestones, plus
royalties on sales.
In October 2018, Affimed placed AFM11 on clinical hold after the occurrence of Serious Adverse Events
(SAEs) in three patients, which included a death in the ALL study and two life-threatening events in the
NHL study. In line with the strategic focus on its innate immunity portfolio, in May 2019 Affimed has made
the decision to terminate the clinical program of AFM11. This decision took into consideration the
competitive landscape of B-cell directed therapies currently in development and associated resources
needed for further development of AFM11. In May 2019, Affimed received notification from the FDA that
additional data would be needed to determine whether the AFM11 clinical hold may be lifted.
The Company presented data from an investigator-sponsored translational Phase 1b/2a study of AFM13
in patients with relapsed or refractory CD30-positive lymphoma with cutaneous manifestation led by
Columbia University at the 60th American Society of Hematology (ASH) Annual Meeting and Exposition in
December 2018. The data confirmed single-agent activity of AFM13 in CD30-positive lymphoma patients.
In addition, an analysis of biomarker correlatives showed a temporary decrease in circulating NK cells
during therapy, with post therapy recovery. Tumor biopsies showed increased infiltration of CD56+ NK
cells in responders compared to non-responders.
Affimed provided an update on its Phase 1b trial of AFM13 in combination with pembrolizumab in patients
with HL. Data from 24 patients showed that the combination of AFM13 and pembrolizumab could be
safely administered and achieved objective response and complete response (CR) rates that compare
favorably to the historical data of pembrolizumab in a similar patient population, with the CR rate
approximately double that of pembrolizumab. The data was presented at the ASH Annual Meeting 2018.
Affimed Annual Report 2018
43
In April 2019, Affimed has received a payment in an undisclosed amount triggered by the achievement of
a preclinical milestone under its collaboration with Genentech.
In May 2019, Dr. Martin Treder informed Affimed that he intends to step down from his position as Chief
Scientific Officer to pursue new opportunities. Dr. Treder will continue as a consultant to the Company.
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 has changed in
2018. Dr. Richard Stead left the Supervisory Board and Dr. Mathieu Simon was appointed as member of
the Supervisory Board in the Annual General Meeting on June 19, 2018. Dr. Ulrich Grau was re-appointed
as member of the Supervisory Board in the Annual General Meeting on June 19, 2018. The Supervisory
Board profile was amended in 2018 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
June 19, 2018
Ulrich Grau
2021
June 20, 2017
Berndt Modig
2020
Mathieu Simon
June 19, 2018
2021
2020
Ferdinand Verdonck June 20, 2017
Age Gender
68
64
70
60
62
76
M
M
M
M
M
M
Nationality
German
German
German/US
Swedish/US
French/US
Belgian
Meeting and activities
The Supervisory Board held four meetings in person in 2018. 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.
Affimed Annual Report 2018
44
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.
The Supervisory Board is responsible for the quality of its own performance and it discusses, once a year
on its own, without the members of the Management Board both its own performance and that of the
individual members. As in the previous year, in 2018 the Supervisory Board conducted an evaluation
through a self-assessment and was positive 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 2018.
During the financial year 2018 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
Mathieu Simon
Ferdinand Verdonck
member
member
chairman
Audit committee
member
chairman
member
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
Affimed Annual Report 2018
45
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 2018, 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 2018 as presented by the Management Board have been
audited by KPMG as independent external auditors. KPMG attended the audit committee meeting in
which the annual accounts and the auditor’s report were discussed. The Management Board and the audit
committee report to the Supervisory Board annually on their dealings with the external auditor, including
the auditor’s independence. The Supervisory Board takes these reports into account when deciding on the
nomination for the appointment of an external auditor that is submitted to the general meeting of
shareholders.
The audit committee held three meetings in person and five meetings by conference call in 2018.
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.
In 2018, the nomination and corporate governance committee's main areas of focus where the selection of
a new board member to replace Dr. R. Stead, reviewing and updating the profile of the Supervisory Board,
and analysing the impact of the revised Dutch corporate governance code on the Company's governance.
The nomination and corporate governance committee held four meetings in person and two meeting by
conference call in 2018.
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. In its meetings in 2018, the compensation committee mainly discussed the
remuneration of the individual members of the Management Board, pre-determined and pre-approved the
corporate goals and objectives and reviewed their progress regularly. For more information on the
remuneration policy, and the work by the compensation committee, 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 five meetings by conference call in 2018.
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
Affimed Annual Report 2018
46
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 27, 2019 (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).
Appreciation
The Supervisory Board is of the opinion that during the year 2018, 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 2018. In particular, the
Supervisory Board would very much like to thank our shareholders for their continued support.
May 31, 2019
On behalf of the Supervisory Board,
Dr. Thomas Hecht,
Chairman of the Supervisory Board
Affimed Annual Report 2018
47
Consolidated Financial Statements
Consolidated statements of comprehensive loss
Consolidated statements of financial position
Consolidated statements of cash flows
Consolidated statements of changes in equity
Notes to the consolidated financial statements
Annual Report 2018
48
Affimed N.V.
Consolidated statements of comprehensive loss
(in € thousand)
Revenue
Other income – net
Research and development expenses
General and administrative expenses
Note
5
6
7
8
2018
23,735
2017
2,010
2016
6,314
1,515
(35,148)
(9,638)
205
(21,489)
(7,986)
145
(30,180)
(8,323)
Operating loss
(19,536)
(27,260)
(32,044)
Finance income / (costs) - net
10
60
(2,983)
(230)
Loss before tax
Income taxes
Loss for the period
(19,476)
(30,243)
(32,274)
11
(1)
20
58
(19,477)
(30,223)
(32,216)
Other comprehensive income Items that will not be
reclassified to profit or loss
Equity investments at fair value OCI – net change in
fair value
Other comprehensive loss
12
(4,731)
(4,731)
—
—
—
—
Total comprehensive loss
(24,208)
(30,223)
(32,216)
Loss per share in € per share (undiluted = diluted)
(0.32)
(0.69)
(0.97)
Weighted number of common shares outstanding
60,514,407 43,746,073 33,259,505
The Notes are an integral part of these consolidated financial statements.
Annual Report 2018
49
Affimed N.V.
Consolidated statements of financial position
(in € thousand)
ASSETS
Non-current assets
Intangible assets
Leasehold improvements and equipment
Long term financial assets
Current assets
Cash and cash equivalents
Financial assets
Trade and other receivables
Inventories
Other assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Issued capital
Capital reserves
Fair value reserves
Accumulated deficit
Total equity
Non current liabilities
Borrowings
Contract liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Contract liabilities
Total current liabilities
Note
December 31, 2018
December 31, 2017
12
13
14
15
17
5
18
17
5
56
1,414
3,825
5,295
94,829
13,974
1,429
260
387
110,879
116,174
65
1,113
—
1,178
39,837
—
1,102
241
800
41,980
43,158
624
239,055
2,594
(202,144)
40,129
468
213,778
—
(182,667)
31,579
1,690
37,512
39,202
9,425
3,083
24,335
36,843
4,086
—
4,086
4,180
3,083
230
7,493
TOTAL EQUITY AND LIABILITIES
116,174
43,158
The Notes are an integral part of these consolidated financial statements.
Annual Report 2018
50
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
- 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 contract liabilities
Cash from / (used in) operating activities
Interest received
Paid interest
Paid income tax
Net cash from / (used in) operating activities
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
Cash paid for investments in long term financial assets
Net cash from / (used for) investing activities
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 / (used for) financing activities
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
Note
2018
2017
2016
(19,477)
(30,223)
(32,216)
11
16
10
14
18
13
12
15
15
17
1
403
25
2,035
(60)
(17,073)
(322)
(19)
121
66,856
49,563
218
(342)
(1)
49,438
(30)
(691)
1
—
(14,029)
—
(861)
(15,610)
25,113
(1,701)
—
—
(2,917)
20,495
669
54,323
39,837
94,829
(20)
351
(19)
1,943
2,983
(24,985)
1,140
(44)
(399)
(1,018)
(25,306)
106
(349)
—
(25,549)
(43)
(625)
35
(296)
(13,084)
22,063
—
8,050
23,123
(1,648)
2,500
(11)
(167)
23,797
(1,867)
6,297
35,407
39,837
(58)
369
—
3,545
230
(28,130)
(1,311)
31
(64)
(2,177)
(31,651)
102
(578)
—
(32,127)
(21)
(238)
—
—
(27,037)
18,147
—
(9,149)
6
—
5,000
(105)
(5,137)
(236)
179
(41,512)
76,740
35,407
The Notes are an integral part of these consolidated financial statements.
Annual Report 2018
51
Affimed N.V.
Consolidated statements of changes in equity
(in € thousand)
Balance as of January 1, 2016
Issue of common shares1
Equity-settled share based payment
awards
Issue of warrant note (Perceptive
loan)
Loss for the period
Balance as of December 31, 2016
Balance as of January 1, 2017
Issue of common shares
Equity-settled share based payment
awards
Issue of warrant note (loan Silicon
Valley Bank)
Loss for the period
Balance as of December 31, 2017
Revaluation shares Amphivena (first
time adoption IFRS 9)
Balance as of January 1, 2018
Issue of common shares
Exercise of share based payment
awards
Equity-settled share based payment
awards
Loss for the period
Other comprehensive loss
Balance as of December 31, 2018
Issued
Capital Fair value Accumulated
Total
Note
capital
reserves
reserves
deficit
equity
333
187,169
—
(120,228) 67,274
—
6
—
—
6
—
3,545
—
—
3,545
—
142
—
—
142
—
—
—
(32,216) (32,216)
333
190,862
—
(152,444) 38,751
333
190,862
—
(152,444) 38,751
135 20,922
—
— 21,057
—
1,943
—
—
1,943
—
51
—
—
51
—
—
—
(30,223) (30,223)
468
213,778
—
(182,667) 31,579
—
—
7,325
—
7,325
468
213,778
7,325
(182,667) 38,904
15
156 23,171
—
— 23,327
16
—
71
—
—
71
16
—
2,035
—
—
2,035
12
—
—
—
—
—
(4,731)
(19,477) (19,477)
(4,731)
—
624
239,055
2,594
(202,144) 40,129
1 Issue of 3,341 shares
The Notes are an integral part of these consolidated financial statements.
Affimed Annual Report 2018
52
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. Affimed N.V. is registered in the Trade Register of the Chamber
of Commerce under the number 60673389.
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,
Affimed Inc., Delaware, USA and AbCheck Inc., Delaware, USA (together “Affimed” or the “Group”).
Affimed is a clinical-stage biopharmaceutical company focused on discovering and developing highly
targeted cancer immunotherapies. The Group’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 its own research and development
programs, strategic collaborations and service contracts, where the Group 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 as adopted in the
European Union (EU IFRSs) and with Section 2:362(9) of the Netherlands Civil Code.
With reference to the profit and loss account of the Company, use has been made of the exemption
pursuant to Section 402 of Book 2 of the Netherlands Civil Code.
The consolidated financial statements were authorized for issuance by the management board and
supervisory board on May 31, 2019.
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 12) and monetary assets and liabilities
denominated in foreign currencies which are translated at period-end exchange rates. The Group did
not opt for a valuation of liabilities at fair value through profit or loss.
The consolidated financial statements have been prepared on the basis of the going concern
assumption.
Consolidation
The Group 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
Group. 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
(abbreviated €) or million (abbreviated € million).
Affimed Annual Report 2018
53
Notes to the consolidated financial statements
(in € thousand)
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. See note 3 for the Group’s accounting policies related to revenue
recognition and research and development expenses.
These consolidated financial statements cover the year 2018, which ended at December 31, 2018.
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, except for financial instruments at fair value through other comprehensive income 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 Group generates revenues from the provision of research and development services to third
parties based on both Group 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 entered into collaborations with other companies that provides the Group
with funding or other resources such as access to technologies. From time to time, the Group 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
promises that represent separate performance obligations. Such agreements may comprise more than
one research program, platform licenses or intellectual property licenses originally generated by the
Group. Usually each of those promises is considered to meet the definition of a separate performance
obligation.
The total consideration is generally allocated to separate performance obligations based on relative
stand-alone selling prices. Usually sales prices for research and development activities and licenses
are not directly observable or highly variable across customers. Therefore, we use estimation
techniques to determine stand-alone selling prices for such services and licenses. The stand-alone
selling prices for research activities are determined based on an expected cost plus a margin
approach. For licenses of intangible assets where little or no incremental costs are incurred in
providing such licenses a residual approach is used.
Affimed Annual Report 2018
54
Notes to the consolidated financial statements
(in € thousand)
Performance obligations from research programs are satisfied over time because the work performed
by the Group either enhances a license that the customer already controls or because the work does
not result in an asset with an alternative use for the Group due to contractual restrictions.
Therefore, revenue for such performance obligations is recognized according to the stage of
completion measured by reference to costs incurred in relation to anticipated total costs of the
research program.
Platform licenses or intellectual property licenses originally generated by the Group are recognized at
a point in time if their nature is a right to use the intellectual property as it exists at the point in time at
which the license is granted. This is usually the case when there is no significant continuing
involvement by the Group. In these cases, revenue is recognized when control of the license is
transferred. Control is considered to be transferred when the customer received all necessary
documents and information to begin to use and benefit from the license.
Platform licenses or intellectual property licenses originally generated by the Group are recognized
over time if their nature is to access the intellectual property as it exists throughout the license period.
This might be the case when there is significant continuing involvement by the Group. In these cases,
revenue is recognized on a straight line basis until the use of the license by the customer ends.
Payments received from customers commonly include non-refundable upfront payments that are
initially recognized as a contract liability, and subsequently recognized as revenue as the related
performance obligation is fulfilled. The Group concluded that non-refundable upfront payments do not
include financing components because the advance payments arise for reasons other than the
provision of financing.
In addition, payment terms may also include payments to be received from customers at a later point
in time upon the achievement of certain milestones.
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. Milestone payments are included in the transaction price when it is highly
probable that a significant reversal of revenue recognized will not occur when the uncertainty
associated with the milestone is subsequently resolved. In the Group’s view uncertainty is sufficiently
resolved only when the milestone is reached. Reaching a milestone will result in a cumulative catch up
of revenue for the performance to date.
The Group distinguishes development and registration milestones and sales based milestones.
Whereas development and registration milestone payments are generally recognized on reaching the
defined milestones, revenues for sales based milestones are recognized on achievement of
contractually stipulated underlying revenues.
Research and development
Costs incurred related to research activities are expensed in the period when they are 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
Group considering its technological and commercial feasibility. Given the current stage of the
development of the Group’s candidates and technologies, no development expenditures have been
capitalized in any of the periods presented in these consolidated financial statements. Intellectual
property-related costs for patents are part of the expenditure for the research and development
projects. Therefore, registration costs for patents are recognized as expensed when incurred as long
as the research and development project concerned does not meet the criteria for capitalization.
Affimed Annual Report 2018
55
Notes to the consolidated financial statements
(in € thousand)
Employee benefits
(cid:1)(cid:2)(cid:3)
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
Group 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.
(cid:1)(cid:2)(cid:2)(cid:3)
Share-based payment transactions
The Group’s share-based payment awards outstanding as of December 31, 2017 and 2018, 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, the expected forfeiture rate and the time to maturity of the
option. The number of stock options expected to vest is estimated at each measurement date.
Government grants
The Group receives certain government grants that support its research effort in specific projects.
These grants are generally provided in the form of 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 statement of profit or loss 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 Group 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.
Affimed Annual Report 2018
56
Notes to the consolidated financial statements
(in € thousand)
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.
(cid:1)(cid:2)(cid:3)
Non-derivative financial assets
The Group’s non-derivative financial assets include preferred shares in Amphivena, trade and other
receivables, cash and cash equivalents and certificates of deposit at banks with original maturities of
more than three months.
Receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Those debt instruments are hold to collect solely payments of principal and
interest. The Group decided to not apply the fair value through OCI option for those instruments. They
are included in current assets and are subsequently carried at amortized cost.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of
three months or less.
The Group holds preferred shares in Amphivena designated at fair value through other comprehensive
income (see note 12).
(cid:1)(cid:2)(cid:2)(cid:3)
Non-derivative financial liabilities
The Group’s classes of financial liabilities are borrowings and trade and other payables. The Group
initially recognizes non-derivative financial liabilities on the date that they are originated and measures
them at amortized cost using the effective interest rate method. The Group derecognizes a financial
liability when its contractual obligations are discharged, cancelled or expire.
(cid:1)(cid:2)(cid:2)(cid:2)(cid:3)
Compound financial instruments
The Group entered into certain loan agreements pursuant to which it issued warrants to purchase
common shares of the Group 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 Group held a convertible note agreement (see note 12). The Group 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 recognized changes of fair value re-measured on a
recurring basis in ‘Finance income / (costs) – net.’ In December 2018, the notes were converted into
shares.
As at December 31, 2017, in connection with the convertible note described above, the Group
received warrants to purchase common shares of Amphivena Therapeutics Inc., South San Francisco,
USA (“Amphivena”) at a specified price (see note 12). Initially, the warrants were recognized at fair
value. Subsequently, the fair value was re-measured on a recurring basis with changes recognized in
‘Finance income / (costs) – net.’ In 2018, the warrants were cancelled.
Affimed Annual Report 2018
57
Notes to the consolidated financial statements
(in € thousand)
Impairment
(cid:1)(cid:2)(cid:3)
Trade and other receivables
Trade and other receivables at amortized cost are subject to the expected credit loss model according
to IFRS 9. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of
each customer. However, management also considers the factors that may influence the credit risk of
its customer base, including the default risk associated with the industry and country in which
customers operate.
Affimed determines the counterparties’ lifetime expected credit losses 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.
In addition, 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
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 2016, 2017 or 2018.
(cid:1)(cid:2)(cid:2)(cid:3)
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.
Affimed Annual Report 2018
58
Notes to the consolidated financial statements
(in € thousand)
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
classified in accordance with the following fair value hierarchy, based on the lowest level input
parameter that is significant on the whole for fair value measurement:
•
•
•
Level 1 – Prices for identical assets or liabilities quoted in active markets (non-adjusted)
Level 2 – Measurement procedures, in which the lowest level input parameter significant on the
whole for fair value measurement is directly or indirectly observable for on the market
Level 3 – Measurement procedures, in which the lowest level input parameter significant on the
whole for fair value measurement is not directly or indirectly observable for on the market
The carrying amount of all trade and other receivables, certificates of deposit, cash and cash
equivalents and trade and other payables is a reasonable approximation of the fair value and therefore
information about the fair values of those financial instruments has not been disclosed. The
measurement of the fair value of the shares held by the group and note disclosure for the fair value of
a loan (financial liability) is based on level 2 measurement procedures (see notes 12 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 Group 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 EU-IFRSs 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
Group’s accounting policies resulted in the following accounting estimates:
(cid:1)(cid:2)(cid:3)
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
Affimed Annual Report 2018
59
Notes to the consolidated financial statements
(in € thousand)
vesting period with a corresponding increase in equity. The number of stock options expected to vest
is estimated at each measurement date.
On April 20, 2018, Affimed issued 240,000 options under its share-based-payment program, the
vesting of which deviates from the standard 3-year vesting scheme and depends upon a market
parameter, which is the average price of Affimed shares during a certain period of time as described in
Note 16. Incorporating the market condition in the fair value estimate requires the use of a simulation
technique, which implies a higher uncertainty with regard to the estimated fair value. The Group
determined the fair value of the awards at grant date to be €133.
(cid:1)(cid:2)(cid:2)(cid:3)
Revenue recognition
The Group’s contracts with customers contain multiple performance obligations. Judgment is required
in determining whether a good or service is considered a separate performance obligation. If
standalone selling prices are not directly observable, the Group allocates the transaction price to the
performance obligations by reference to the expected cost plus a margin. In doing so, observable input
data such as internal project plans and margins are used.
Elements of consideration in collaboration and license agreements are non-refundable up-front
research funding payments, technology access fees and milestone payments. Generally, the Group
has continuing performance obligations and therefore up-front payments are initially recognized as a
contract liability, and the related revenues are subsequently recognized as the related performance
obligation is fulfilled. Technology access fees are generally initially recognized as a contract liability
and subsequently recognized over the expected term of the research service agreement on a straight-
line basis.
The Group estimates that the achievement of a milestone reflects a stage of completion under the
terms of the agreements and recognizes revenue when a milestone is achieved as then the
uncertainty is resolved. If the research service is cancelled due to technical failure, the remaining
contract liability from non-refundable upfront payments, if any, is recognized as revenue.
The determination of whether a performance obligation is satisfied at a point in time versus over time
might also requires judgment.
(cid:1)(cid:2)(cid:2)(cid:2)(cid:3)
Accrued expenses
The Group obtains services from third parties who do not always invoice their (partial) performance as
per the balance sheet date. If the Group is not invoiced or otherwise notified of the actual accrued cost
for the services as of the reporting date, the amount of the services performed as of the balance sheet
date has to be estimated. For this purpose, the Group periodically confirms the accuracy of its
estimates with the service providers.
(cid:1)(cid:2)(cid:4)(cid:3)
Financial instruments
The Group recognized its preferred shares in Amphivena at fair value (level 2) as a long-term financial
asset. As Amphivena is not a public company substantial judgment was required in estimating the fair
value as at December 31, 2018 (see note 12). The Group based its judgment on information available
for the valuation of the shares of Amphivena in its latest private financing in December 2018.
Affimed Annual Report 2018
60
Notes to the consolidated financial statements
(in € thousand)
(cid:1)(cid:4)(cid:3)
Contractual liabilities
The Group is a clinical-stage biopharmaceutical group of companies and has not yet established a
sales, marketing or product distribution infrastructure because the lead product candidate is still at an
early stage in clinical development.
Given this early development stage of the Group, management has concluded that the Group's normal
operating cycle is not clearly identifiable. Conclusively, it is assumed to be twelve months.
A liability is classified as current if it meets any of the following conditions:
•
•
•
•
it is expected to be settled in the entity's normal operating cycle;
it is held primarily for trading purposes;
it is due to be settled within 12 months of the reporting date; or
it is not subject to an unconditional right of the entity at the reporting date to defer settlement
of the liability for at least 12 months after the reporting date.
Consequently, the Group determined the amounts of contract liabilities that are expected to be settled
within 12 months of the reporting date vs. after 12 months from the reporting date, respectively. The
amounts that are expected to be settled within 12 months are classified as current liabilities, whereas
the amounts that are expected to be settled after 12 months from the reporting date are classified as
non-current.
New standards and interpretations applied for the first time
The following amendments to standards and new or amended interpretations are effective for annual
periods beginning on or after January 1, 2018, and have been applied in preparing these consolidated
financial statements:
Standard/interpretation
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments (2014)
Amendments to IFRS 2: Classification and Measurement of Share- based Payment
Transactions
Annual Improvements to IFRS Standards 2014(cid:0)2016 Cycle (IFRS 1, IAS 28)
Effective Date 1
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
1. Shall apply for periods beginning on or after the date shown in the effective date column.
The nature and effect of the application of IFRS 9 and IFRS 15 are summarized below. The other
amendments had no effect on the interim consolidated financial statements of the Group.
IFRS 9 (Financial Instruments)
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied
retrospectively with any differences in the carrying amounts arising from the transition being
recognized in equity as at January 1, 2018.
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 recognized its shares in Amphivena at fair value, which
were previously recognized at amortized cost according to IAS 39. The transition effect increased
other comprehensive income by €7.3 million as of January 1, 2018 (see note 12). The Group classified
the shares as at fair value through other comprehensive income (FVOCI). Future changes in fair value
Affimed Annual Report 2018
61
Notes to the consolidated financial statements
(in € thousand)
will be recognized in other comprehensive income, dividends will be recognized as income in profit or
loss.
Combined financial instruments are measured at fair value with changes therein recognized as finance
income / (costs).
Impairment
The newly 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 Group has decided to measure loss allowances on the following basis:
- Cash and cash equivalents and financial assets: The Group 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 Group 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 January 1, 2018 had 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.
The Group analyzed its collaboration agreements and service contracts in the scope of IFRS 15 to
identify performance obligations and an appropriate revenue recognition pattern. The Group concluded
that 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. No differences
between the previously applied IASs and IFRS 15 for all open contracts as of December 31, 2017
were noted. Therefore, no transition effect as of January 1, 2018 was recorded.
New standards and interpretations not yet adopted
The following new standards and amendments to standards are effective for annual periods beginning
after December 31, 2018, and have not been applied in preparing these consolidated financial
statements.
Standard/Amendment
IFRS 16 Leases
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(cid:5)2017 Cycle
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
IFRIC 23: Uncertainty over Income Tax Treatments
Amendments to IAS 1 and IAS 8: Definition of Material
Effective Date 1
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2020
1. Shall apply for periods beginning on or after the date shown in the effective date column.
Affimed Annual Report 2018
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.
Affimed will be required to recognize “right-of-use” assets related to its premises rented and certain
equipment leased.
The Group has completed an assessment of the impact of IFRS 16 on its consolidated financial
statements and has identified the Group’s leases including contractual payments, renewal options, and
other terms. The most significant impact identified is that the Group will recognize new assets and
liabilities for its operating leases of office space and research and development facilities. Based on the
information currently available, the Group estimates that it will recognize right-of-use assets and
corresponding lease liabilities of approximately €0.7 million as at January 1, 2019. In accordance with
the standard, the Group makes use of recognition exemption on transition for lessee. On transition, the
Group elects to not apply the lessee accounting model to short-term leases and leases of low-value
items.
The Group plans to apply IFRS 16 initially on January 1, 2019, using the modified retrospective
approach. Therefore, the cumulative effect of adopting IFRS 16 – if any – will be recognised as an
adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of
comparative information. For periods beginning on January 1, 2019, the Group will recognise
depreciation expense for right-of-use assets and interest cost related to future lease liabilities instead
of operating lease expenses. In addition, repayments of lease liabilities will be shown separately within
the statements of cash flow.
The other amended standards are not expected to have a significant effect on the consolidated
financial statements of the Group.
4. Segment reporting
(cid:6)(cid:7)(cid:8)
Information about reportable segment
The Group 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 Group as a whole.
(cid:6)(cid:7)(cid:7)(cid:8)
Geographic information
The geographic information below analyses the Group’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.
Affimed Annual Report 2018
63
Notes to the consolidated financial statements
(in € thousand)
Revenue:
Germany
Europe
USA
Non-current assets as of December 31:
Germany
Czech Republic
USA
(cid:6)(cid:7)(cid:7)(cid:7)(cid:8)
Other revenue information
Major service lines:
Collaboration revenue
Service revenue
Revenue:
Point in time
Over time
(cid:6)(cid:7)(cid:9)(cid:8)
Major Customers
2018
2017
2016
31
1,175
22,529
23,735
80
1,236
694
2,010
6
1,397
4,911
6,314
1,224
246
3,825
5,295
957
221
—
1,178
618
259
—
877
2018
2017
2016
22,018
1,717
23,735
390
1,620
2,010
3,866
2,448
6,314
21,863
1,872
23,735
233
1,777
2,010
1,191
5,123
6,314
For the years ended December 31, 2016 and 2017, the Group’s revenue with three and four
customers, respectively, exceeded 10% of total revenues. In 2018, the Group’s revenue with
Genentech Inc. 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 U.S.
Food and Drug Administration (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, 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 €3.4 million and €0.2 million, respectively.
Affimed Annual Report 2018
64
Notes to the consolidated financial statements
(in € thousand)
Collaboration agreement The Leukemia & Lymphoma Society (LLS)
Affimed is party to a collaboration with LLS to fund the development of a specific product candidates
(immune cell engagers). Under the terms of the agreement, LLS has agreed to contribute up to $4.4
million contingent upon the achievement of certain milestones.
In the event that the research and development is successful, Affimed must proceed with
commercialization of the licensed product. If Affimed decides for business reasons not to continue the
commercialization, Affimed must at its option either repay the amount funded or grant a license to LLS
to enable LLS to continue with the development program. In addition, LLS is entitled to receive
royalties from Affimed based on the Group’s future revenue from any licensed product, with the
amount of royalties not to exceed three times the amount funded.
In June 2016, the research funding agreement with LLS was amended to reflect a shift to the
development of combination therapeutic approaches so that the milestones now relate primarily to the
development of a combination therapy.
During the years ended December 31, 2016, 2017 and 2018, the Group achieved several milestones
and recognized revenue totaling €0.4 million, €0.2 million and €0.2 million, respectively.
Collaboration with Genentech Inc.
In August 2018, Affimed entered into a strategic collaboration agreement with Genentech Inc.,
headquartered in South San Francisco, USA. Under the terms of the agreement Affimed will develop
novel NK cell engager-based immunotherapeutics to treat multiple cancers. The Genentech
agreement became effective at the beginning of October 2018. Under the terms of the agreement,
Affimed received $96.0 million (€83.2 million) in an initial upfront payment and committed funding on
October 31, 2018. The Group recognized €21.8 million as revenue in 2018 and €61.4 million under
contract liabilities, which will be recognized as revenue in subsequent periods.
Under the terms of the agreement, Affimed is eligible to receive up to an additional $5.0 billion over
time, including payments upon achievement of specified development, regulatory and commercial
milestones. Affimed is also eligible to receive royalties on any potential sales.
Research service agreements
AbCheck has entered into certain research service agreements. These research service agreements
provide for non-refundable upfront technology access research funding or capacity reservation fees
and milestone payments. The Group recognized revenue of €2.4 million, €1.6 million and €1.7 million
during the years ended December 31, 2016, 2017 and 2018, respectively.
Contract balances
The following table provides information about receivables and contract liabilities from contracts with
customers.
Receivables
Contract liabilities
December 31, 2017 December 31, 2018
580
61,847
210
230
The total amount of €230 recognized in contract liabilities at the beginning of the period has been
recognized as revenue for the year ended December 31, 2018.
The remaining performance obligations at December 31, 2018 are approximately €61.8 million and are
expected to be recognized as revenue to a large extent over the next two years.
Affimed Annual Report 2018
65
Notes to the consolidated financial statements
(in € thousand)
6. Other income and expenses - net
Other income and expenses, net mainly comprises income from government grants for research and
development projects of €10 (2017: €195, 2016: €171) and foreign exchange gains of €1,523 (2017:
losses of €7, 2016: losses of €29).
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
Amortisation and depreciation
Operating lease expenses
Other expenses
2018
2017
22,127
8,055
1,672
1,140
351
401
1,402
35,148
12,299
5,639
890
994
309
345
1,013
21,489
2016
20,170
6,648
758
1,028
322
297
957
30,180
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
9. Employee benefits
2018
2017
4,929
2,881
162
1,666
9,638
4,521
1,945
126
1,394
7,986
2016
4,729
2,210
111
1,273
8,323
The following table shows the items of employee benefits for the years ended December 31:
Wages and salaries
Social security costs
2018
2017
10,027
1,092
11,119
7,475
931
8,406
2016
7,445
807
8,252
The employer’s contributions to pension insurance plans of €502 (2017: €438, 2016: €362) are
classified as payments under a defined contribution plan, and are recognized as an expense.
Affimed Annual Report 2018
66
Notes to the consolidated financial statements
(in € thousand)
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 13)
Other finance income/finance costs
Finance income/costs - net
2018
—
—
(847)
651
2017
—
—
(690)
(2,378)
5
251
60
77
8
(2,983)
2016
(762)
(242)
(41)
691
122
2
(230)
11. Income taxes
The Group did not incur any material income tax in the periods presented. As of December 31, 2018
deferred tax liabilities from temporary differences result mainly from borrowings (€75; 2017: €152) and
long term financial assets (€774). Deferred tax assets from differences resulting from trade and other
receivables (€334; 2017: €259), intangible assets (€415; 2017: €405) and trade and other payables
(€27; 2017: €17) 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 Group’s applicable tax rate is presented below for the years ended December 31:
Loss before tax
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
2017
2018
2016
(19,476) (30,243) (32,274)
9,626
(8,747)
(948)
12
154
(38)
58
5,809
(5,318)
(462)
(34)
(53)
57
(1)
9,020
(9,036)
(93)
195
16
(82)
20
In Germany, Affimed has tax losses carried forward of €163.8 million (2017: €146.8 million) for
corporate income tax purposes and of €163.4 million (2017: €146.4 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 Group. 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.
Tax losses of Abcheck amount to €423 as at December 31, 2018.
12. Long term financial assets
As of January 1, 2018, the Group held preferred shares in Amphivena, which were previously
recognized at amortized costs according to IAS 39. Due to the first-time adoption of IFRS 9 these
shares are recognized at fair value through other comprehensive income. The initial recognition as of
Affimed Annual Report 2018
67
Notes to the consolidated financial statements
(in € thousand)
January 1, 2018 amounted to €7.3 million. As at December 5, 2018, following a reverse stock-split, the
preferred shares were converted into 831,071 preferred shares at a conversion price of $3.59.
On December 27, 2017, the Group signed a note purchase agreement with Amphivena (the “2017
note purchase agreement”) pursuant to which Amphivena issued to the Group a convertible note with
a principal amount of $0.35 million (the “2017 note”) and warrants to purchase 46,667 common shares
of Amphivena with an exercise price of $0.01 per common share.
On June 22, 2018, the Group signed a second note purchase agreement with Amphivena (the “2018
note purchase agreement”) pursuant to which Amphivena issued to the Group a new convertible note
with a principal amount of $1.0 million, and cancelled all warrants previously issued to the Group under
the 2017 note purchase agreement. In December 2018, the principal amount of the convertible notes
plus accrued interest totaling $1.4 million was converted at a conversion rate of $3.59 per share into
389,484 Class C preferred shares of Amphivena.
As at December 31, 2018 the Group holds 1,220,555 preferred shares in Amphivena with a fair value
of €3.8 million. The Group recognized losses from the change in fair value of €4.7 million including €32
exchange rate losses in other comprehensive income (OCI). Interest gains of €13 and exchange rate
gains of €39 related to the convertible notes were recognized in profit and loss.
13. Financial assets
As of December 31, 2018, financial assets consisted of U.S. Dollar denominated certificates of deposit
with original maturities of more than three months.
14. Trade and other receivables
The trade receivables as of December 31, 2018 and 2017, of €210 and €580, respectively, are all due
in the short-term, do not bear interest and are not impaired. As of December 31, 2017, receivables of
€219 were overdue. Other receivables are all due short-term and mainly comprise value-added tax
receivables of €839 (2017: €186).
15. Equity
As of December 31, 2018, the share capital of €624 (2017: €468) is composed of 62,430,106 (2017:
46,791,352) common shares with a par value of €0.01.
In the first quarter of 2018, the Group issued 2,373,716 common shares in connection with its at-the-
market sales agreement for net proceeds of €3.75 million.
On February 15, 2018, the Group issued 13,225,000 common shares in a public offering at a price of
$2.00 per common share resulting in aggregate net proceeds of €19.65 million.
On June 19, 2018, the authorized share capital was increased from €2,196 to €3,120 to consisting of
155,975,000 common shares and 155,975,000 cumulative preference shares, each with a par value of
€0.01 per share.
16. Share based payments
In 2014, an equity-settled share-based payment program was established by Affimed N.V. (ESOP
2014).
Under this program, the Group granted awards to certain members of the Management Board, the
Supervisory Board, non-employee consultants and employees.
Affimed Annual Report 2018
68
Notes to the consolidated financial statements
(in € thousand)
Share based payments with service condition
The majority of the awards vest in installments over three years and can be exercised up to 10 years
after the grant date. The Group granted 1,436,075 awards in 2017 and 2,332,296 awards in 2018 to
employees, the Management Board and others providing similar services (certain consultants).
In 2018, 424,688 ESOP 2014 awards were cancelled or forfeited due to termination of employment or
termination of consulting agreements with non-employees (2017: 399,552), and 40,038 ESOP 2014
awards were exercised in 2018 at an average exercise price of $1.98.
As of December 31, 2018, 5,948,438 ESOP 2014 awards were outstanding (December 31, 2017:
4,080,868), 2,814,547 awards (December 31, 2017: 2,001,264) were vested. The options outstanding
at December 31, 2018 had an exercise price in the range of $1.30 to $13.47 (2017: $1.80 to $13.47)
and weighted average remaining contractual life of 9.3 years (2017: 8.4 years). In 2018, the Group
estimated an annual forfeiture rate of 4.0% for unvested options.
Share based payments with market condition
On April 20, 2018, Affimed issued 240,000 options, of which each grant consists of three tranches that
vest when the volume-weighted average share price (measured based on Affimed closing share prices
over the preceding fifteen trading days) reaches a certain hurdle ($6.15, $8.20 and $10.25). Fair value
of the awards at grant date amounts to €133 ($164 thousand) and the contractual life time of the
options is two years. As at December 31, 2018 no options were exercisable.
Share based payment expense
In 2018, an expense of €2,035 was recognized affecting research and development expenses (€852)
and general and administrative expenses (€1,183). 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).
Fair value measurement
The fair value of options was determined using the Black-Scholes valuation model. The significant
inputs into the valuation model of share based payment grants with service conditions 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
$
$
$
2018
1.20
1.91
1.92
$
$
$
72 %
5.90
0.00
0.34 %
2017
1.10
2.00
2.03
70 %
5.90
0.00
(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.
17. Borrowings
Silicon Valley Bank
On November 30, 2016, the Group entered into a loan agreement with Silicon Valley Bank (the “SVB
loan”) which provides the Group with a senior secured term loan facility originally for up to €10.0
Affimed Annual Report 2018
69
Notes to the consolidated financial statements
(in € thousand)
million, which agreement was amended in May 2017 to provide that such amount would be available in
three tranches. In December 2016, the Group 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 Group 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 grant date. 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 equity. 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.
The loan is secured by a pledge of 100% of Group’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:
Leasehold improvements and equipment
Inventories
Trade and other receivables
Other assets
Financial assets
Cash and cash equivalents
Book value as of December 31, Book value as of December 31,
2018
2017
Consolidated
financial
thereof Consolidated
financial
assets
thereof assets
statements
1,414
260
1,429
387
13,974
94,829
112,293
pledged
1,174
235
1,007
—
13,974
92,933
109,323
statements
1,113
241
1,102
800
—
39,837
43,093
pledged
891
219
328
292
—
38,726
40,456
As of December 31, 2018 and 2017, the fair value of the liability did not differ significantly from its
carrying amount (€4,773 and €7,169). The loan has a maturity date of May 31, 2020, repayment
started in December 2017 with amortized payments of principal and interest in equal monthly
installments. As of December 31, 2018, €3,083 (2017: €3,083) were classified as current liabilities.
18. Trade and other payables
Trade and other payables comprise trade payables of €8,482 (2017: €3,380). Other payables mainly
comprise payroll and employee related liabilities for withholding taxes and social security contributions
of €885 (2017: €514) and payables due to employees for outstanding bonus, unused holidays and
other accruals. Other payables are normally settled within 30 days.
19. Operating leases and other commitments and contingencies
(cid:6)(cid:7)(cid:8)
Lease and other commitments
The Group has entered into rental agreements for premises as well as into leases for vehicles and the
use of licenses. These agreements have an average non-cancellable term of between one and
four years with renewal options included in some contracts. In 2018, lease expenses of €562 and
license fees of €124 have been recognized in consolidated statement of comprehensive loss (2017:
€472 and €174; 2016: €409 and €405).
Affimed Annual Report 2018
70
Notes to the consolidated financial statements
(in € thousand)
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
(cid:6)(cid:7)(cid:7)(cid:8)
Contingencies
2018
637
517
1,154
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.
20. Related parties
(cid:6)(cid:7)(cid:8)
Shareholders
As of December 31, 2018 and 2017, no shareholder holds more than 20% of the voting rights.
(cid:6)(cid:7)(cid:7)(cid:8)
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
2018
2017
2,683
—
1,229
3,912
1,538
—
1,379
2,917
2016
1,879
430
2,292
4,601
Remuneration of Affimed’s managing directors comprises fixed and variable components and share-
based payment awards. In addition, the managing directors receive supplementary benefits such as
fringe benefits and allowances. In the case of an early termination, the managing directors receive a
severance.
Compensation for other key management personnel comprises fixed and variable components and
share-based payment awards.
The supervisory directors of Affimed N.V. received compensation for their services on the supervisory
board of €382 (2017: €375; 2016: €350). In 2018, the Group recognized expenses for share-based
payments for supervisory board members of €117 (2017: €144, 2016: €381).
Selected managing directors and supervisory directors entered into service and consulting agreements
with the Group:
Dr. Ulrich Grau is a significant shareholder and Chairman of the Board of Directors of i-novion Inc.,
which was engaged by the Group to conduct preclinical services. In 2016, i-novion Inc. received
related payments of €86.
Jens-Peter Marschner rendered consulting services amounting to €29 in 2016.
Affimed Annual Report 2018
71
Notes to the consolidated financial statements
(in € thousand)
The following table provides the total amounts of outstanding balances related to key management
personnel and supervisory directors:
Outstanding balances
Martin Treder
Leila Alland
Thomas Hecht
Richard Stead
Berndt Modig
Ferdinand Verdonck
Ulrich Grau
Bernhard Ehmer
December 31,
December 31,
2017
—
—
19
12
9
10
17
10
2018
9
40
21
—
10
11
21
17
21. Financial risk management
(cid:6)(cid:7)(cid:8)
Financial risk management objectives and policies
The Group’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 Group’s operations. The Group
has various other financial assets and liabilities such as trade and other receivables and trade and
other payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are credit risk and liquidity risk. The
measures taken by management to manage each of these risks are summarized below.
(cid:6)(cid:7)(cid:7)(cid:8)
Credit risk
The Group’s financial assets comprise to a large extent cash and cash equivalents. In addition,
financial assets include shares, certificates of deposit, trade and other receivables and in 2017, a
convertible loan and warrants. The total carrying amount of shares (€3.8 million), cash and cash
equivalents (€94.8 million, 2017: €39.8 million), trade and other receivables (€1.4 million, 2017: €1.1
million), certificates of deposit (€14.0 million) and in 2017, convertible notes and warrants of
Amphivena (€0.3 million), represents the maximum credit exposure of €114.1 million (2017: €41.2
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.
(cid:6)(cid:7)(cid:7)(cid:7)(cid:8)
Interest rate risk
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 Group borrowed €7.5 million with an
outstanding balance of €4.8 million as at December 31, 2018, with a variable interest rate of an annual
rate of 5.5% plus one-month EURIBOR, with EURIBOR deemed to equal zero percent if EURIBOR is
less than zero percent. The Group does not expect the EURIBOR to exceed the floor of 0% within the
foreseeable future, and considers the interest risk to be low.
Market interest rates on cash and cash equivalents as well as on term deposits were low in 2018,
resulting in interest income of €264 in 2018. A shift in interest rates (increase or decrease) would not
have a material impact on the loss of the Group.
Affimed Annual Report 2018
72
Notes to the consolidated financial statements
(in € thousand)
(cid:6)(cid:7)(cid:9)(cid:8)
Other price risks
The fair value of the shares in Amphivena depends on the share price. The total exposure of the
Group amounts to €3.8 million.
(cid:6)(cid:9)(cid:8)
Foreign currency risk
Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities
are denominated in a currency that is not the entity’s functional currency.
The Group’s entities are exposed to Czech Koruna (CZK) and US Dollars (USD) and British Pound
(GBP). The net exposure as of December 31, 2018 was €47,524 (2017: €18,768) and mainly relates to
US Dollars.
In 2018, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €4,787 (2017: €1,887) higher/lower, mainly as a result of
foreign exchange gains/losses on translation of US dollar-denominated financial assets. The Group
considers a shift in the exchange rates of 10% as a realistic scenario.
Loss is more sensitive to movement in exchange rates shifts in 2018 than in 2017 because of the
increased volume of US dollar-denominated transactions.
The following significant exchange rates have been applied during the year:
CZK - Average Rate
CZK - Spot rate
USD - Average Rate
USD - Spot rate
(cid:6)(cid:9)(cid:7)(cid:8)
Liquidity risk
2018
2017
CZK or
2016
CZK or
USD/EUR USD/EUR USD/EUR
0.03899 0.03799 0.03699
0.03887 0.03916 0.03701
CZK or
0.84674 0.88519 0.90404
0.87336 0.83382 0.94868
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
Group to fund operating expenses and capital expenditure requirements into 2021.
In 2015, the Group has entered into an at-the-market sales agreement with Cowen & Group, LLC
under which €5.1 million in net proceeds has been raised in 2017.
In 2017, the Group issued 10,646,762 common shares in a public offering at a price of $1.80 per
common share for net proceeds of €16.4 million.
In 2018, the Group 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 and 2,373,716 common shares in
connection with its at-the-market sales agreement for net proceeds of €3.8 million (see note 15).
Affimed Annual Report 2018
73
Notes to the consolidated financial statements
(in € thousand)
The Group expects to require additional funding to complete the development of the existing product
candidates. In addition, the Group expects to require additional capital to commercialize the products if
regulatory approval is received.
(cid:6)(cid:9)(cid:7)(cid:7)(cid:8)
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains its liquidity in
order to finance its operating activities and meet its liabilities when due.
The Group manages its capital structure primarily through equity.
22. Subsequent events
In March 2019, Affimed has announced the achievement of a preclinical milestone under its ongoing
strategic collaboration with Genentech. This triggered a milestone payment which amount may not be
disclosed under the regulations of the Genentech collaboration.
In line with the strategic focus on the Company’s innate immunity portfolio, Affimed made the decision
to terminate the Phase 1 clinical program of AFM11, a CD19/CD3-targeting bispecific T cell engager,
in May 2019. This decision took into consideration the competitive landscape of B-cell directed
therapies currently in development and associated resources needed for further development of
AFM11. In May 2019, the Company received notification from the FDA that additional data would be
needed to determine whether the AFM11 clinical hold may be lifted. Affimed has informed the FDA of
its intention to terminate the clinical program.
Affimed Annual Report 2018
74
Company Financial Statements
Balance sheet of Affimed N.V.
Profit and loss account of Affimed N.V.
Notes to the financial statements of Affimed N.V.
Affimed Annual Report 2018
75
Company balance sheet as at December 31, 2018
(before appropriation of result of the year)
In € thousand
Note
2018
2017
December 31,
December 31,
Assets
Non current assets
Financial fixed assets
Total non current assets
Current assets
Receivables from subsidiaries
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Shareholders’ equity
Issued capital
Share premium
Other reserves
Revaluation reserve
Unappropriated result
Total equity
Current liabilities
Payables to subsidiaries
Other current payables
Total current liabilities
Total liabilities
Total equity and liabilities
25
26
27
28
26
29
14.953
14.953
902
922
24.971
26.795
41.748
624
135.365
(78.977)
2.594
(19.477)
40.129
638
981
1.619
1.619
41.748
3.852
3.852
0
5
28.429
28.434
32.286
468
112.123
9.240
0
(90.252)
31.579
100
607
707
707
32.286
Affimed Annual Report 2018
76
Company profit and loss account
In € thousand
Note
Share in results from participating
interests after taxation
Other result after taxation
25
31
Net result
For the year ended
December 31,
2018
For the year ended
December 31,
2017
(14.329)
(5.148)
(19.477)
(22.812)
(7.411)
(30.223)
Affimed Annual Report 2018
77
Notes to the Company financial statements for the year ended 31 December
2018
23. 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. in 2014.
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 its own research and development
programs, strategic collaborations and service contracts, where the Company is performing research
services for third parties.
These Company financial statements and the consolidated financial statements together constitute the
statutory financial statements of Affimed. The financial information of the Company is included in the
Company’s consolidated financial statements, as presented on pages 47 to 73.
24. Basis of preparation
The Company financial statements of Affimed N.V. have been prepared on the basis that the Company
will be able to continue as a going concern. Affimed believes that the existing cash and cash equivalents
and financial assets will enable the Company to fund its operating expenses and capital expenditure
requirements into 2021.
These 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 results 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 are the
same as those applied for the consolidated EU-IFRS financial statements. These principles also include
the classification and presentation of financial instruments, being equity instruments or financial
liabilities. In case no other principles are mentioned, refer to the accounting principles as described in
the consolidated financial statements. For an appropriate interpretation of these statutory financial
statements, the Company financial statements should be read in conjunction with the consolidated
financial statements.
Information on the use of financial instruments and on related risks for the group is provided in the notes
to the consolidated financial statements of the group.
All amounts in the company financial statements are presented in EUR thousand, unless stated
otherwise.
Participating interests in group companies
Group companies are all entities in which the Company has directly or indirectly control. The Company
controls an entity when it is exposed, or has rights, to variable returns from its involvement with the
group company and has the ability to affect those returns through its power over the group company.
Group companies are recognised from the date on which control is obtained by the Company and
derecognised from the date that control by the Company over the group company ceases. Participating
interests in group companies are accounted for in the Company financial statements according to the
equity method, with the principles for the recognition and measurement of assets and liabilities and
determination of results as set out in the notes to the consolidated financial statements.
Affimed Annual Report 2018
78
Participating interests with a negative net asset value are valued at nil. This measurement also covers
any receivables provided to the participating interests that are, in substance, an extension of the net
investment. In particular, this relates to loans for which settlement is neither planned nor likely to occur
in the foreseeable future. A share in the profits of the participating interest in subsequent years will only
be recognised if and to the extent that the cumulative unrecognised share of loss has been absorbed. If
the Company fully or partially guarantees the debts of the relevant participating interest, or if has the
constructive obligation to enable the participating interest to pay its debts (for its share therein), then a
provision is recognised accordingly to the amount of the estimated payments by the Company on behalf
of the participating interest.
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 Company makes use of the option to eliminate intragroup expected credit losses against the book
value of loans and receivables from the Company to participating interests, instead of elimination against
the equity value of the participating interests.
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 profit and loss account of
the Company exclusively states the share in the result of participating interests after taxation and the
other result after taxation.
25. 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 30 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
Net asset value as at January 1, 2018
Capital contribution
Effect of change in fair value of Amphivena shares
Share in result of participating interest
Net asset value as at December 31, 2018
3,852
22,836
2,594
(14,329)
14,953
During the year 2018 a capital contribution of € 22,836 thousand was made, financed by the issuance
of shares (see note 28).
Affimed GmbH holds preferred shares in Amphivena, which were previously recognized at amortized
costs according to IAS 39. Due to the first-time adoption of IFRS 9 these shares are recognized at fair
value through other comprehensive income. The effect of first-time adoption of IFRS 9 with regard to
the valuation of these shares and the change in value during the year 2018 amount to € 2,594 thousand
(see note 28).
Affimed Annual Report 2018
79
26. Receivables from/payables to subsidiaries
These receivables and payables relate to Affimed GmbH and do not bear interest.
27. Cash and cash equivalents
Cash and cash equivalents have been fully pledged. We refer to note 30.
28. Equity
As of December 31, 2018 the number of issued common shares is 62,430,106 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 the 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
Share
premium
Other
reserves
Revalu-
ation
reserve
Unappro-
priated
result
Total
equity
January 1, 2017
333
91,201
7,246
Issue of common shares
Share issuance costs
Issue of warrant note
Net result
Share-based payments
135
-
-
-
-
22,988
(2,066)
-
-
-
-
-
51
-
1,943
December 31, 2017
468
112,123
9,240
-
-
-
-
-
-
-
(60,029)
38,751
-
-
-
(30,223)
-
23,123
(2,066)
51
(30,223)
1,943
(90,252)
31,579
Revaluation shares
Amphivena (first time
adoption IFRS 9)
-
-
-
7,325
-
7,325
January 1, 2018
468
112,123
9,240
7,325
(90,252)
38,904
Issue of common shares
Share issuance costs
Exercise of share-based
payments awards
Allocation of accumulated losses
Net result
Other comprehensive income
Share-based payments
156
-
24,886
(1,715)
-
-
-
-
-
-
25,042
(1,715)
-
-
-
-
-
55
71
-
-
-
-
-
(90,252)
-
-
2,035
-
-
-
(4,731)
-
-
90,252
(19,477)
-
-
71
-
(19,477)
(4,731)
2,035
December 31, 2018
624
135,365
(78,977)
2,594
(19,477)
40,129
Affimed Annual Report 2018
80
Issued capital and share premium
In the first quarter of 2018, Affimed issued 2,373,716 common shares in connection with its at-the-
market sales agreement for net proceeds of €3.8 million.
On February 15, 2018, the Company issued 13,225,000 common shares in a public offering at a price
of $2.00 per common share resulting in aggregate net proceeds of €19.7 million.
According to the articles of association of the Company, which were amended on June 19, 2018, up to
155,975,000 common shares and 155,975,000 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, 2018 no preferred shares
have been issued.
The share premium concerns the net proceeds (less issuance costs) from the issuance of shares insofar
as these exceed the nominal value of the shares (above par value).
Other reserves
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 profit and loss account. 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.
Revaluation reserves
As of January 1, 2018, Affimed GmbH held preferred shares in Amphivena, which were previously
recognized at amortized costs according to IAS 39. Due to the first-time adoption of IFRS 9 these shares
are recognized at fair value through other comprehensive income. The initial recognition as of January 1,
2018 amounted to €7,325 thousand. As of December 31, 2018, an impairment loss was recognized of
€4,731 thousand. The Company uses “Revaluation reserves” as the equity classification for these
changes totaling €2,594 thousand in fair value of these shares (see also note 25).
Unappropriated result
The result after tax for 2018 is included in the unappropriated result. 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.
Affimed Annual Report 2018
81
29. Other current payables
In € thousand
Trade payables
Social security and wage tax
Other liabilities
Total
All current payables are short-term.
30. Off balance sheet commitments
December
31, 2018
December
31, 2017
602
333
46
981
117
170
320
607
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.
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 €41.7 million in the Company’s financial statements at December 31,
2018).
31. 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
2018
958
(7,618)
53
(6,607)
2,117
(658)
1,459
(5,148)
-
(5,148)
2017
705
(6,070)
3
(5,362)
247
(2,296)
(2,049)
(7,411)
-
(7,411)
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.
Affimed Annual Report 2018
82
32. Employee benefits and number of employees
The average number of employees during 2018 was 3 employees and consisted of managing directors
only. The managing director’s compensation is shown in note 33.
33. Related-party transactions
Director’s remuneration 2018
Managing directors
(in € thousand)
Periodically paid compensation
Bonuses
Total cash compensation
2014 Plan share-based payment
expense1
Total share-based payment
expense
Supervisory directors
Hoess F. Fischer W. Fischer
Total
462
315
777
575
575
351
180
531
249
249
351
182
533
153
153
1,164
677
1,841
977
977
(in € thousand)
Hecht Ehmer Grau Modig Simon Stead Verdonck
Total
Periodically paid
compensation
Total cash
compensation
2014 Plan share-based
payment expense1
Total share-based
payment expense
120
120
32
32
48
48
21
21
64
64
21
21
49
49
18
18
21
21
7
7
21
21
-
-
59
59
18
18
382
382
117
117
Dr. Simon was appointed as supervisory director on June 19, 2018.
Dr. Stead left the supervisory board on June 19, 2018. He received a cash compensation of €21
thousand in 2018.
Director’s remuneration 2017
Managing directors
(in € thousand)
Periodically paid compensation
Bonuses
Total cash compensation
2014 Plan share-based payment
expense1
Total share-based payment
expense
Hoess F. Fischer W. Fischer
Total
443
94
537
867
867
336
59
395
348
348
106
19
125
54
54
885
172
1,057
1,269
1,269
Affimed Annual Report 2018
83
Dr. Wolfgang Fischer serves as COO since September 11, 2017.
Supervisory directors
(in € thousand)
Hecht Ehmer Grau Modig Stead Verdonck
Total
Periodically paid compensation
Total cash compensation
2014 Plan share-based payment
expense1
Total share-based payment
expense
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
1 Expense related to the issuance of options under the 2014 Plan. Details of options granted are
summarized in the table below.
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 20 of the consolidated financial
statements.
Stock options granted under the Equity Incentive Plan 2014
Awards granted in 2018
Managing directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
April 20, 2018
Adi Hoess ........................
Adi Hoess ........................
April 20, 2018
Adi Hoess ........................ December 19, 2018
April 20, 2018
Florian Fischer ................
Florian Fischer ................
April 20, 2018
Florian Fischer ................ December 19, 2018
April 20, 2018
Wolfgang Fischer ............
Wolfgang Fischer ............
April 20, 2018
Wolfgang Fischer ............ December 19, 2018
Total
425,000
120,000
35,091
190,000
72,000
19,905
150,000
48,000
19,959
1,079,955
April 20, 2028
2.15
2.15
April 20, 2020
3.12 December 19, 2028
April 20, 2028
2.15
2.15
April 20, 2020
3.12 December 19, 2028
April 20, 2028
2.15
2.15
April 20, 2020
3.12 December 19, 2028
Supervisory directors
Beneficiary
Grant date
Number of
options
Strike
price USD Expiration date
Thomas Hecht .................
Bernhard Ehmer…………
Ulrich Grau ......................
Berndt Modig ...................
Mathieu Simon ................
Ferdinand Verdonck ........
Total
June 19, 2018
June 19, 2018
June 19, 2018
June 19, 2018
June 19, 2018
June 19, 2018
35,000
20,000
20,000
20,000
20,000
20,000
135,000
2.03
2.03
2.03
2.03
2.03
2.03
June 19, 2028
June 19, 2028
June 19, 2028
June 19, 2028
June 19, 2028
June 19, 2028
Affimed Annual Report 2018
84
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
For further disclosure related to the stock 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).
34. 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
KPMG
Accountants
N.V.
2018
Other KPMG
network
Total
KPMG
2018
2018
42
-
-
-
42
104
186
-
6
296
146
186
-
6
338
Affimed Annual Report 2018
85
(in € thousand)
Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services
35. Subsequent events
KPMG
Accountants
N.V.
2017
Other KPMG
network
Total
KPMG
2017
2017
39
-
-
-
39
103
99
-
3
205
142
99
-
3
244
In March 2019, Affimed has announced the achievement of a preclinical milestone under its ongoing
strategic collaboration with Genentech. This triggered a milestone payment which amount may not be
disclosed under the regulations of the Genentech collaboration.
In line with the strategic focus on the Company’s innate immunity portfolio, Affimed made the decision
to terminate the Phase 1 clinical program of AFM11, a CD19/CD3-targeting bispecific T cell engager, in
May 2019. This decision took into consideration the competitive landscape of B-cell directed therapies
currently in development and associated resources needed for further development of AFM11. In May
2019, the Company received notification from the FDA that additional data would be needed to
determine whether the AFM11 clinical hold may be lifted. Affimed has informed the FDA of its intention
to terminate the clinical program.
Signing of the financial statements
May 31, 2019
Originally signed by:
Management Board:
Dr. Adi Hoess, CEO
Dr. Florian Fischer, CFO
Dr. Wolfgang Fischer, COO
Affimed Annual Report 2018
86
Supervisory Board:
Dr. Thomas Hecht, Chairman
Dr. Bernhard Ehmer
Dr. Ulrich Grau
Berndt Modig
Dr. Mathieu Simon
Ferdinand Verdonck
Affimed Annual Report 2018
87
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 2018
88
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 2018
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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
- Affimed Inc., USA
- AbCheck s.r.o., Czech Republic
- AbCheck Inc., USA
Other participation
- Amphivena Therapeutics Inc., USA (participation of ca. 7%)
Independent auditor’s report
The independent auditor’s report is set forth on the following pages.