Affimed Annual Report 2019

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FY2019 Annual Report · Affimed

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Affimed N.V.

Amsterdam, The Netherlands

Annual Report 2019

Affimed Annual Report 2019

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

Affimed Annual Report 2019

Forward-Looking Statements

This Annual Report contains statements that constitute forward-looking statements. Many of the
forward-looking statements contained in this Annual Report can be identified by the use of forward-
looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,”
“estimate” and “potential,” among others.

Forward-looking statements appear in a number of places in this Annual Report and include, but are
not limited to, statements regarding our intent, belief or current expectations. Forward-looking
statements are based on our management’s beliefs and assumptions and on information currently
available to our management. Such statements are subject to risks and uncertainties, and actual
results may differ materially from those expressed or implied in the forward-looking statements due to
various factors, including, but not limited to, those identified under the section “Risk Management” in
this Annual Report.

Forward-looking statements speak only as of the date they are made, and we do not undertake any
obligation to update them in light of new information or future developments or to release publicly any
revisions to these statements in order to reflect later events or circumstances or to reflect the
occurrence of unanticipated events.

Affimed Annual Report 2019

Report by Affimed’s Management Board

Overview

We are a clinical-stage immuno-oncology company focused on discovering and developing highly
targeted cancer immunotherapies. Our product candidates represent 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 platform, we develop proprietary, next-generation bispecific antibodies, so-called innate cell
engagers, which are designed to direct innate immune cells and establish a bridge to cancer cells. Our
innate cell engagers have the ability to bring innate immune cells into the proximity of tumor cells and
trigger an activation cascade that leads to the destruction of cancer cells. Due to their novel tetravalent
architecture with four binding domains, our innate cell engagers bind to their targets with high affinity.
Different dosing schemes are being explored to allow for improved exposure in heavily pretreated
patient populations. Based on their mechanism of action as well as the preclinical and clinical data we
have generated to date, we believe that our product candidates as monotherapy and / or in
combination, may ultimately improve response rates, clinical outcomes and survival in cancer patients,
and could eventually become a cornerstone of modern targeted oncology care. Building on our
leadership in the innate cell engager space, we are also developing novel antibody formats with the
potential to tailor innate cell-engaging therapy to different indications and settings.

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 that specifically bind to innate 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. The safety profiles of our molecules make them suitable for development as
combination therapies (e.g. with checkpoint inhibitors, or CPIs, adoptive NK cells or cytokines).

We are focusing our research and development efforts on two programs, for which we retain full global
commercial rights, AFM13 and AFM24. Because our tetravalent bispecific antibodies can be
engineered to bind to different antigens that are known to be present on various cancer cells, our
product candidates could be developed for the treatment of different cancer indications. We intend to
clinically develop our two product candidates to treat high-medical need indications, including as a
salvage therapy for patients who have relapsed after treatment with standard therapies, or patients
who are refractory to these therapies, meaning they do not respond to treatment with standard
therapies, whom we collectively refer to as relapsed/refractory patients. These patients have a limited
life expectancy and few therapeutic options. We believe this strategy will allow for a faster path to
approval and will likely require smaller clinical studies compared to indications with more therapeutic
options and larger patient populations. We believe such specialized market segments in oncology can
be effectively targeted with a small and dedicated marketing and sales team. We currently intend to
establish a commercial sales force in the United States and/or Europe to commercialize our product
candidates when and if they are approved.

We also see an opportunity in the clinical development of our innate cell engagers in combination with
other agents that harness the immune system to fight cancer cells, such as CPIs, adoptive NK cell
transfer and cytokines. Such combinations of cancer immunotherapies may ultimately prove beneficial

Affimed Annual Report 2019

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 DKFZ in
Heidelberg, where we employ 90 people, approximately 62% of whom have an advanced academic
degree. Including AbCheck (see description below) and Affimed Inc. personnel, our total headcount is
137 (128 full time equivalents) as of end of April 2020. 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.

Business Overview

Our Strategy

Our goal is to develop new treatment options for patients in need by activating innate immunity

(e.g. NK cells and macrophages), the body’s first line of defense, to fight cancer. We are developing
single and combination therapies to treat a variety of cancers. Our novel proprietary antibody platform,
ROCK, delivers several unique types of next-generation tetravalent antibody formats, including
bispecific and trispecific innate cell engagers. Based on the distinctive properties and mechanism of
action of these products, which have demonstrated preclinical and/or clinical activity, we believe that
our product candidates, alone or in combination, could eventually become a key element of 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;

• Establish R&D and commercialization capabilities in Europe and in the United States;

• Use our technology platforms and intellectual property portfolio to continue to build our cancer

immunotherapy pipeline;

• Maximize the value of our collaboration arrangements with Genentech, LLS, Merck and MD

Anderson;

•

Intensify our collaboration with academia; and

• Utilize AbCheck to generate and optimize antibodies.

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;

• Our development candidate, AFM24, is a first-in-class innate cell engager for solid tumor

indications;

• Our modular and versatile ROCK platform;

• We retain global commercial rights for AFM13 and AFM24;

Affimed Annual Report 2019

• Our experienced management team has a strong track record in the development and

commercialization of new medicines; and

We have a strong technology base and solid patent portfolio in the field of targeted immuno-oncology.

Our research and development pipeline

We are developing a pipeline of immune-cell engagers for the treatment of cancer as shown below:

As of ending April 2020

Our lead candidate, AFM13, is a first-in-class innate cell engager designed for the treatment of certain
CD30-positive (CD30+) malignancies including T cell lymphomas. 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. 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 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 also supports 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. Due to delays in opening trial
sites and the availability of anti-PD1 antibodies for the treatment of relapsed/refractory HL patients, the
study underwent slower than anticipated recruitment during its initial stages. Consequently, the study
design was revised to adapt to the changing treatment landscape, namely the availability of anti-PD1
antibodies. The study subsequently included HL patients relapsed or refractory to treatment with both
Adcetris® (brentuximab vedotin) and anti-PD1 antibodies. The study has now completed recruitment
under the new study design.

Affimed Annual Report 2019

Furthermore, we have completed 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
observed adverse events 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) of 46% (11 of 24 patients) and partial metabolic responses (PmRs) of 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 translational study in patients with cutaneous manifestations is also designed to allow
for serial biopsies, thereby enabling assessment of immunobiology and tumor cell killing within the
tumor microenvironment. Enrollment for the study is completed. An interim analysis of this study was
recently presented. In 10 patients (dosed at 1.5-7.0 mg/kg) AFM13 was well -tolerated and showed
therapeutic activity as a single agent, with an ORR of 50% (5 of 10 patients). In detail, one complete
response (CR), four 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 from responders vs. non-responders was demonstrated. Tumor biopsies
showed increased infiltration of CD56+ NK cells pre-therapy 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
initiated the 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
committed to co-fund the development of AFM13 including its development as part of a combination
therapy in June 2016.

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. MD Anderson
is responsible for conducting preclinical research activities, investigating cord blood-derived NK cells
in combination with

AFM13, followed by a phase 1 clinical study of the combination. In December 2018, preclinical data
was presented at the American Society of Hematology Annual Meeting, outlining the successful
approach of a novel premixed product, comprised of expanded cord-blood derived NK cells loaded
with AFM13 to redirect their specificity against CD30+ tumor cells. The data 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 for exclusive worldwide rights to
develop and commercialize any product developed under the collaboration.

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 our 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 platform and more fully realize its
potential.

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 a tetravalent, bispecific epidermal growth factor receptor (EGFR)-
and CD16A-binding innate cell engager. AFM24 is designed to address limitations, such as toxicities
or treatment resistance, associated with current therapeutic anti-EGFR monoclonal antibodies, while
also offering the potential for better efficacy and safety by using activation of innate immunity to target

Affimed Annual Report 2019

EGFR-expressing solid tumors rather than inhibition of EGFR-mediated signal transduction. We have
successfully completed a toxicology study of AFM24 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, demonstrating
AFM24’s potential to have lower toxicities in humans compared to other EGFR-targeted therapeutics.
In contrast, Cetuximab, an approved anti-EGFR antibody, revealed significant toxicity in the same
dose- range as that tested in the AFM24 toxicology study. On October 15, 2019, we announced the
submission of an IND application to the FDA to initiate a first-in-human phase 1/2a study of AFM24 in
patients with advanced cancers known to express EGFR. The initial goal of the study is to determine
the maximum tolerated dose and recommended phase 2 dose of AFM24, as well as to evaluate the
safety, pharmacokinetics, pharmacodynamics and preliminary efficacy. The second part of the study
is designed to evaluate the preliminary efficacy of AFM24 in patients with select solid tumor subtypes.
On November 7, 2019, the IND application for AFM24 cleared the required 30-day review by the FDA
and is in effect. AFM24 has also received regulatory approval to commence a trial in the UK and in
Spain. On April 16, 2020, we announced the successful dosing of the first patient in the phase 1/2a
study of AFM24.

We have also developed AFM26, a tetravalent, bispecific B cell maturation antigen (BCMA)- and
CD16A-binding innate cell engager from our fit-for-purpose ROCK ® platform, as a novel approach to
treat multiple myeloma. AFM26 employs a unique mechanism of action through high affinity
engagement of NK cells that has demonstrated in vitro efficacy against cells with very low levels of
BCMA expression. 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 with an undisclosed partner, and no longer control its development.

AFM11 is a T cell engager that we designed for the treatment of certain CD19+ B cell malignancies,
including non-Hodgkin Lymphoma, or NHL and Acute Lymphocytic Leukemia, or ALL. We conducted
two phase 1 clinical studies of AFM11, one in patients with relapsed/refractory NHL and one in patients
with relapsed/refractory ALL. However, on October 8, 2018, we suspended enrollment in studies
ofAFM11 after the occurrence of life-threatening or fatal SAEs in three patients, which included two life
threatening events in the NHL study and one death in the ALL study. Subsequently, we received
notification from the FDA that the regulatory agency formally placed the AFM11 IND application on full
clinical hold. In line with the strategic focus on our innate immunity portfolio, we made the decision to
terminate the phase 1 clinical programs of AFM11. The Company took into consideration the
competitive landscape of B-cell directed therapies currently in development and associated resources
needed for further development of AFM11. In 2019, we informed the FDA of our intention to terminate
the AFM11 clinical program in its entirety.

Amphivena’s product candidate, AMV564, is a CD33/CD3-specific T cell engager derived from our
ROCK ® platform. Amphivena is clinically developing AMV564 for the treatment of acute myeloid
leukemia (AML), for which Amphivena has obtained Orphan Drug Designation, and other hematologic
malignancies. In preclinical studies, AMV564 has demonstrated potent and selective cytotoxic activity
in AML patient samples, as well as robust tumor growth inhibition and a complete elimination of
leukemic blasts in xenograft models. In July 2016, the IND application for AMV564 was accepted.
Amphivena is conducting a phase 1 clinical study of AMV564 in relapsed or refractory AML. In June
2018, Amphivena reported initial data from this study. The data showed that AMV564 engages and
activates T cells resulting in leukemic cytoreduction. Amphivena has also initiated a Phase 1 dose
escalation study of AMV564 in myelodysplastic syndrome (MDS).

In addition, we have selected two early stage innate cell engager candidates, AFM28 and AFM32, from
our ROCK ® platform for various undisclosed targets. The selection of the new development
candidates followed our evaluation of oncology indications with a high level of innate immune cell
activity, and where there was past clinical experience with therapeutic antibodies and antibody drug
conjugates. We plan to advance one of these early stage candidates into preclinical studies in 2020.

Affimed Annual Report 2019

Business impact of COVID-19

In response to the recent COVID-19 pandemic, we have implemented mitigation procedures to ensure
the safety of trial participants and healthcare professionals and that drug supply and other trial-related
materials are ready and available for the patients enrolled in our clinical trials. We are closely monitoring
and adhering to relevant federal and local guidelines on COVID-19 to ensure the safety and health of
our global workforce and help limit the spread of COVID-19, while maintaining business continuity. We
mandated a work-from-home policy for all employees not involved in preclinical research, and adjusted
operations for laboratory personnel at Affimed’s headquarters in Heidelberg, Germany. In addition, we
eliminated nonessential travel to minimize exposure to COVID-19. We will continue to work closely with
clinical sites as well as respective competent authorities to ensure the safety of trial participants and
healthcare professionals, as well as the appropriate use of healthcare resources during the COVID-19
pandemic, while preserving the conduct and data integrity of our clinical studies.

At this time, our contract manufacturers are operating without interruption, and there is sufficient
material for the AFM13 Phase 2 registration-directed study in pTCL, the investigator sponsored trial of
cord blood-derived allogeneic natural killer (NK) cells in combination with AFM13, and the AFM24
Phase 1/2a clinical study. Additionally, we currently do not foresee any interruption in our ability to
continue to manufacture additional products to be used beyond the current ongoing clinical studies.
Our assessment of the potential impact of the COVID-19 pandemic on patient enrollment and site
activation in our clinical studies is ongoing and we will update trial timelines once we have more visibility
on the length and extent of the COVID-19 crisis.

Based on our current knowledge and available information, we do not expect COVID-19 to have an
impact on our ability to continue as a going concern in the future.

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, 2019, we have raised an aggregate of €258.4 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, 2019, we incurred a net loss of €32.4 million. As of December 31, 2019, we had
an accumulated deficit of €234.5 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.

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

Affimed Annual Report 2019

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 and additional payments in 2019 for development milestones and a final
target nomination.

We recognized revenues of €19.7 million in 2019.

Financial Operations Overview

Revenue

To date, our revenues have consisted principally of collaboration and service revenue.

Collaboration revenue. 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). Collaboration revenue of €19.7 million for the year ended
December 31, 2019 was from the Genentech collaboration.

Service revenue. Service revenue is primarily revenue from service contracts entered into by AbCheck,
our wholly owned, independently operated antibody screening platform. We recognized €1.6 million,
€1.7 million and €1.7 million of service revenue in 2017, 2018 and 2019, 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 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 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. In 2018 and 2019, other Income
primarily relates 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;

Affimed Annual Report 2019

· 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 2020 will
be in the range of €40 to €50 million. Our research and development expenses primarily relate to the
following key programs:

· AFM13. In November 2019, we initiated a registration directed phase 2 study of AFM13 as
monotherapy in relapsed or refractory patients suffering from peripheral T cell lymphoma (pTCL).
The study protocol has been agreed upon with the U.S. Food and Drug Administration (FDA). In
addition, this study will, as a separate cohort, investigate the initial efficacy of AFM13 as
monotherapy in patients suffering from transformed mycosis fungoides (T-MF). In September 2019,
the FDA cleared an investigational new drug application (IND) for an investigator-sponsored Phase
1 study, in which the University of Texas MD Anderson Cancer Center (MDACC) plans to
investigate the combination of AFM13 with allogeneic NK cells. MDACC intends to administer a
stable complex of AFM13 pre-mixed with cord blood-derived allogeneic NK cells in different doses
(numbers of pre-loaded NK cells) into patients with relapsed/refractory CD30-positive lymphoid
malignancies. In 2017, an investigator-sponsored Phase 1b/2a study was initiated by Columbia
University to investigate AFM13 as monotherapy in patients with relapsed or refractory CD30-
positive lymphoma with cutaneous manifestation. In 2016, we initiated a phase 1b study
the combination of AFM13 with Merck’s anti-PD1 antibody Keytruda®
investigating
(pembrolizumab) in patients with relapsed/refractory HL. In this study, enrollment is complete and
final 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 has now completed recruitment under the new study design. We
anticipate that our research and development expenses in 2020 for AFM13 will increase compared
to those for 2019 due to the initiation of new clinical studies, pre-clinical studies with collaboration
partners and the preparation of the production of AFM13 for commercial purposes.

· AFM11. The phase 1 clinical trials of AFM11 were placed on clinical hold and recruitment stopped
in October 2018. In May 2019, we received notification from the FDA that additional data would be
needed to determine whether the AFM11 clinical hold may be lifted. In line with the strategic focus
on our innate immunity portfolio, we have made the decision to terminate the Phase 1 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. We subsequently informed the FDA of our intention to terminate the clinical
program.

· AFM24. AFM24, a tetravalent, bispecific epidermal growth factor receptor, and CD16A-binding
innate cell engager, is in effect for a phase 1/2a clinical trial in patients with advanced cancers
known to express EGFR. We anticipate that our research and development expenses in 2020 for
AFM24 will increase compared to those for 2019 due to the beginning of the clinical trial of AFM24
in patients.

· Other projects and infrastructure costs. Our other research and development expenses relate to
our multiple myeloma program AFM26 (through the third quarter of 2018) and our Genentech
collaboration 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,
manufacturing costs for pre-clinical study material and pre-clinical studies. In addition, 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 other projects and infrastructure costs will increase in 2020 due
to increased early stage development/discovery activities.

Since January 1, 2012, we have cumulatively spent €185.3 million on research and development. In
the years ended December 31, 2017, 2018, and 2019, we spent €21.5 million, €35.1 million and €43.8
million, respectively, on research and development; €5.6 million, €8.7 million, and €19.5 million thereof
on AFM13; € 2.8 million, €5.8 million, and €2.4 million thereof on AFM11 and €2.5 million, €5.8 million,
and €4.3 million thereof on AFM24. 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

Affimed Annual Report 2019

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,
AFM24 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 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 FDA or other regulatory
authority were to require us to conduct preclinical and clinical studies beyond those which we currently
anticipate will be required for the completion of clinical development, if we experience significant delays
in enrollment in any clinical trials or if we encounter difficulties in manufacturing our clinical supplies,
we could be required to expend significant additional financial resources and time on the completion
of the clinical development.

General and Administrative Expenses

Our general and administrative expenses consist principally of:

· 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 2020 will be higher compared to the
expenses in 2019, 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.

Affimed Annual Report 2019

Results of Operations

The numbers below have been derived from our audited consolidated financial statements for the years
ended December 31, 2017, 2018 and 2019. 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, 2018 and 2019

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,
(in € thousand)

2018
23,735
1,515
(35,148)
(9,638)
(19,536)
60
(19,476)
(1)
(19,477)
(24,208)
(0.32)

2019
21,391
290
(43,791)
(10,266)
(32,376)
15
(32,361)
(4)
(32,365)
(32,997)
(0.50)

Revenue decreased from € 23.7 million for the year ended December 31, 2018 to €21.4 million for the
year ended December 31, 2019. Revenue for the year ended December 31, 2019 mainly consisted of
revenue from the Genentech collaboration.

Research and development expenses

R&D Expenses by Project
Project
AFM13
AFM11
AFM24
Other projects and infrastructure costs
Share-based payment expense
Total

Year ended December
31,
2018
(in € thousand)

2019

8,711
5,776
5,788
14,021
852
35,148

19,471
2,418
4,327
16,671
904
43,791

Change %

124 %
(58)%
(25)%
19 %
6 %
25 %

Research and development expenses increased 25% from €35.1 million in the year ended December
31, 2018 to € 43.8 million in the year ended December 31, 2019, due to higher expenses for AFM13
and for other projects and infrastructure. The variances in project related expenses between the year
ended December 31, 2018 and the corresponding period in 2019 are mainly due to the following
projects:

· AFM13. In the year ended December 31, 2019, we incurred higher expenses than in the year ended
December 31, 2018 primarily due to higher expenses for the preparation of new clinical trials and
manufacturing activities for the clinical trial material.

· AFM11. In the year ended December 31, 2019, clinical expenses were lower than in the year ended
December 31, 2018. The majority of the expenses in the year ended December 31, 2019 are related
to costs for the termination of the phase 1 dose-finding study in NHL and the phase 1 dose-finding
study in ALL.

· AFM24. In the year ended December 31, 2019, we incurred lower expenses than in the year ended
December 31, 2018. Expenses in the year ended December 31, 2019 primarily relate to the
preparation of the phase 1/2a clinical trial and manufacturing activities for the clinical trial material.

· Other projects and infrastructure costs. In the year ended December 31, 2019, expenses increased
compared to the year ended December 31, 2018, primarily due to higher expenses incurred in

Affimed Annual Report 2019

relation to our earlier stage programs and discovery/early stage development activities and
infrastructure costs.

General and administrative expenses

General and administrative expenses increased 7% from €9.6 million in the year ended December 31,
2018 to €10.3 million in the year ended December 31, 2019. In 2019, general and administrative
expenses were largely affected by personnel expenses (€5.4 million) and legal, consulting and audit
costs (€3.1 million).

Finance income / (costs)-net

We recognized finance net income for the year ended December 31, 2019 of €15,000 compared
€60,000 for the year ended December 31, 2018. The year ended December 31, 2019 was primarily
affected by interest income of €0.6 million and interest expenses of € 0.5 million. 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, 2019, we recorded income tax expense of €4,000 due to changes
in deferred taxes.

Liquidity and Capital Resources

Since inception, we have incurred significant operating losses. To date, we have not generated any
product sale revenue. We have financed our operations primarily through our public offerings of our
common shares, private placements of equity securities and loans, and grants and payments from
collaboration partners.

For the years ended December 31, 2017, 2018, and 2019 we incurred net losses of €30.2 million, €
19.5 million, and €32.4 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, 2019, we had cash and cash equivalents
and current financial assets, which we refer to as liquidity, of €104.1 million.

Our cash and cash equivalents and current financial assets as of December 31, 2019 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 interest
income. We expect to continue this investment philosophy.

Cash Flows

Comparison of the years ended December 31, 2018 and 2019

The table below summarizes our consolidated statement of cash flows for the years ended December
31, 2018 and 2019:

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,
2019

(in € thousand)

2018
49,438
(15,610)
20,495
54,323
39,837
669
94,829

(29,056)
4,340
26,038
1,322
94,829
(917)
95,234

Net cash from operating activities amounted to €49.4 million in the year ended December 31, 2018
whereas net cash used in operating activities amounted to €29.1 million in the year ended December

Affimed Annual Report 2019

31, 2019. The amount received in 2018 includes an initial upfront payment and committed funding of
€83.2 million from the Genentech collaboration.

We used cash for investing activities of €15.6 million in the year ended December 31, 2018, where net
cash from investing activities amounted to €4.3 million in the year ended December 31, 2019. 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, 2019 amounted to €26.0
million and relate primarily to the proceeds from the public offering in November 2019.

Cash and Funding Sources

Our liquidity (cash and cash equivalents and current financial assets) as of December 31, 2019 was
€104.1 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 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.

On November 13, 2019, we sold an additional 13,800,000 of our common shares at a price of $2.50
per share in an underwritten public offering and received $32.0 million in net proceeds, after deducting
underwriting discounts and commissions and other offering expenses.

Funding Requirements

We expect that we will require additional funding to complete the development of our product
candidates and to continue to advance the development of our other product candidates. In addition,
we expect that we will require additional capital to commercialize our product candidates AFM13 and
AFM24.If we receive regulatory approval for AFM13, AFM24 or other earlier programs, 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

Affimed Annual Report 2019

commercialize. We also continue to incur substantial 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.

Based on our current operating and budget assumptions, we believe that our existing liquidity, will
enable us to fund our operating expenses and capital expenditure requirements well into the first half
of 2022. We have based this estimate on assumptions that may prove to be incorrect, and we could
use our capital resources sooner than we currently expect. Our future funding requirements will depend
on many factors, including but not limited to:

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 collaboration, 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, the ownership interest of our shareholders will be diluted, and the
terms of any such securities may include liquidation or other preferences that adversely affect the rights
of holders of our common shares.

For more information as to the risks associated with our future funding needs, see “Risk
Management.”

JOBS Act Exemptions

As September 17, 2019 represented the fifth anniversary of the date of the first sale of our common
shares pursuant to an effective registration statement under the Securities Act, we no longer qualify as
an “emerging growth company” as defined in the JOBS Act, commencing December 31, 2019. As a
result, our independent registered public accounting firm is required to attest to the effectiveness of our
internal controls over financial reporting pursuant to Section 404. 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.

Affimed Annual Report 2019 14

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 2019 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 April 28, 2020, and
a copy of which is available from Affimed’s website www.affimed.com.

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

Affimed Annual Report 2019 15

ensure adherence to applicable regulations. After receiving marketing approval, the manufacturing,
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 COVID-19

The recent outbreak of COVID-19 has evolved from a regional epidemic to a global pandemic,
impacting almost every corner of the globe. The continued spread of COVID-19 is adversely impacting
clinical and preclinical trials globally and in different therapeutic areas. As a result, our clinical trials or
preclinical studies, including our ability to recruit and retain patients, principal investigators and site
staff who, as healthcare providers, may have heightened exposure to COVID-19, may be significantly
impacted. In response to the COVID-19 pandemic, we are implementing mitigation procedures
designed to enable us to address the various issues that may arise from the COVID-19 pandemic,
although there can be no assurance that these procedures will be successful or that we can avoid a
material and adverse disruption to our business. As the pandemic continues, we may experience the
prioritization of hospital resources toward the outbreak and further restrictions on travel. Furthermore,
some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols
if quarantines or travel restrictions impede patient movement or interrupt healthcare services.

COVID-19 may also negatively affect the operations of third-party contract research organizations that
we rely upon to carry out our clinical trials or the operations of our third-party manufacturers, each of
which could result in delays or disruptions in the supply of our product candidates. While we do not
currently believe our supply chain has been affected, there can be no assurances that we will not
experience supply disruptions in the future. The negative impact COVID-19 has had and may continue
to have on patient enrollment and treatment, and the timing and execution of our clinical trials could
cause costly delays to our clinical trial activities, which could adversely affect our ability to obtain
regulatory approval for and to advance towards commercialization, increase operating expenses and
have a material adverse effect on our business and financial results.

In addition, COVID-19 has resulted in significant governmental measures being implemented to
control the spread of the virus. Public health officials have recommended and mandated precautions
to mitigate the spread of COVID-19, including prohibitions on congregating, traveling across borders,
shelter-in-place orders and other similar measures. We have taken precautionary measures intended
to help minimize the risk of the virus to our employees, including temporarily requiring some or all of
our employees to work remotely, suspending all non-essential travel and discouraging employee
attendance at industry events and in-person work-related meetings. Such measures could negatively

Affimed Annual Report 2019 16

affect our business. For instance, temporarily requiring employees to work remotely may disrupt our
operations or create unforeseen issues related to the use of technology designed to allow for remote
communication and collaboration. The COVID-19 pandemic has also caused volatility in the global
financial markets and has threatened a slowdown in the global economy, which may negatively affect
our ability to raise additional capital on attractive terms or at all.

The full extent to which the COVID-19 pandemic may impact our business will depend on future
developments, which are highly uncertain and cannot be predicted at this time. As such, we cannot
presently predict the scope and severity of any potential business shutdowns or disruptions, the
impacts on our business, financing or clinical trial activities or on the healthcare system and the global
economy as a whole.

Based on our current knowledge and available information, we do not expect COVID-19 to have an
impact on our ability to continue as a going concern in the future.

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
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

Affimed Annual Report 2019 17

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.

Risk Management regarding Financial Instruments

Qualitative Disclosure about Market Risk

As a result of our operating and financing activities, we are exposed to market risks that may affect our
financial position and results of operations. Market risk is the potential to incur economic losses on risk
sensitive instruments arising from adverse changes in factors such as foreign exchange rate
fluctuations.

Our senior management is responsible for implementing and evaluating policies which govern our
funding, investments and any use of derivative financial instruments. Management monitors risk
exposure on an ongoing basis.

Credit risk

The 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. The total carrying
amount of shares (€3.2 million, 2018: €3.8 million) cash and cash equivalents (€95.2 million, 2018: €
94.8 million), trade and other receivables (€ 1.5 million, 2018: €1.4 million), and certificates of deposit
(€8.9 million, 2018: €14.0 million), represents the maximum credit exposure of €108.8 million (2018:
€114.1 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.

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 €2.0 million as at December 31, 2019, 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 2019,
resulting in interest income of € 715,000 in 2019. 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

Affimed Annual Report 2019 18

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 2019, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €5.7 million (2018: €4.8 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 2019 than in 2018 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.

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 2017 and 2018 and 2019, Affimed raised significant funding that it estimates will enable the Group
to fund operating expenses and capital expenditure requirements at least into the fourth quarter of
2021.

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.

In 2019, the Group issued 13,800,000 common shares in a public offering at a price of $2.50 per
common share resulting in aggregate net proceeds of €29.5 million.

The Group expects to require additional funding to complete the development of the existing product
candidates. In addition, the Group expects to require additional capital to commercialize the products if
regulatory approval is received.

Affimed Annual Report 2019

Corporate Governance Report

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
Wolfgang Fischer

Age

58
56

Position

Chief Executive Officer
Chief Operating Officer

Adi Hoess was reappointed as managing director with the title of Chief Executive Officer on 20 June
2017. Wolfgang Fischer was appointed as managing director with the title of Chief Operating

Affimed Annual Report 2019

Officer on 20 June 2017. The term of appointment of both Adi Hoess and Wolfgang Fischer will
end on the date of the upcoming annual general meeting of shareholders.

Dr. Florian Fischer, our former Chief Financial Officer, passed away early February 2020. The
management team, Supervisory Board, and employees of Affimed deeply mourned his passing,
and extended our heartfelt sympathy to his family.

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.

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/reappointment

Term

Thomas Hecht
Bernhard Ehmer

Ulrich Grau

Berndt Modig

M
M

Mathieu Simon
Ferdinand Verdonck M

German
German

German/US

Swedish/US

French/US
Belgian

64
77

June 20, 2017
June 25, 2019

June 19, 2018

June 20, 2017

June 19, 2018
June 20, 2017

2020

2022

2021

2020

2021
2020

The following is a brief summary of the business experience of the Company's supervisory
directors.

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 Kuur Therapeutics and as chairman of the board of directors of Aelix
Therapeutics S.L. and Orion Biotechnology. As from 3 July 2020, Dr. Hecht became a member of
the board of directors of BioInvent, Sweden. Previously, Dr. Hecht served as a director of Humabs
BioMed AG until August 2017 and he served as chairman of the board of directors of Cell Medica
Ltd. Until the beginning of June 2020, he served as chairman of the board of directors of Vaximm

Affimed Annual Report 2019

AG, until the beginning of March 2015 he served as chairman of the supervisory council of
SuppreMol GmbH and until June 2016, of Delenex AG. Dr. Hecht was previously Vice President
Marketing at Amgen Europe. A seasoned manager and industry professional, he held various
positions of increasing responsibility in clinical development, medical affairs and marketing at
Amgen between 1989 and 2002. Prior to joining the biopharmaceutical industry, he was certified
in internal medicine and served as Co-Head of the Program for Bone Marrow Transplantation at
the University of Freiburg, Germany.

Bernhard R.M. Ehmer, Director. Dr. Ehmer has been a member of our supervisory board since
2016. 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. He is member
of the supervisory board and audit committee chairman of Centogene 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.

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, headquartered in Basel, Switzerland as well as an independent director at
Idorsia Pharmaceuticals (Switzerland), Lysogene (France) and Asarina (Sweden). 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

Affimed Annual Report 2019

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

The number of managing directors is determined by the supervisory board. Currently the
management board consists of two 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 May 31,
2020, having a management board in which both members are male. In order to increase gender
diversity of the management boardwe 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 inter alia the appointment of Cassandra Choe-Juliak as
Acting Chief Medical Officer to succeed Dr. Leila Alland in November 2019.

Appointment, suspension and dismissal

Affimed Annual Report 2019

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, a 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 including the strategy and
long term value-creation for the company 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 not changed in 2019. Dr. Bernhard Ehmer was
reappointed as member of the supervisory board in the annual general meeting on June 25, 2019.

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 or her at the meeting.

The Company's supervisory board can pass resolutions outside of meetings, provided that the
resolution is adopted in writing and all supervisory directors have consented to adopting the
resolution outside of a meeting.

The Company's supervisory directors do not have a retirement age requirement under the
Company's articles of association.

Composition of the supervisory board

The composition of the supervisory board, including its members’ combined experience and
expertise, independence, and diversity of age and gender, should reflect the best fit for Affimed’s
profile and strategy. This aim for the best fit, in combination with the availability of qualified
candidates, has resulted in Affimed currently having a supervisory board in which all six members
are male. In order to increase gender diversity in the supervisory board we pay close attention to
gender diversity in the process of recruiting and appointing new supervisory board candidates, as
is demonstrated by the nomination by the supervisory board of Dr. Annalisa Jenkins as new
supervisory board member at the upcoming annual general meeting of shareholders.

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

Affimed Annual Report 2019

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. This is
demonstrated by the nomination by the supervisory board of Dr. Jenkins as a supervisory director
at the upcoming annual general meeting.

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 2019.

Supervisory Board Committees

Although the supervisory board retains ultimate responsibility, the supervisory board has delegated
certain of its tasks to its committees.

Audit committee

The audit committee, which consists of Ferdinand Verdonck (Chairman), Berndt Modig and
Bernhard Ehmer, assists the board in overseeing our accounting and financial reporting processes
and the audits of our financial statements. Our supervisory board has determined that all members
of the audit committee satisfy the “independence” requirements set forth in Rule 10A-3 under the
Exchange Act. The supervisory board has determined that Ferdinand Verdonck and Berndt Modig
qualify as “audit committee financial experts,” as such term is defined in the rules of the SEC.

The audit committee is responsible for the selection of the registered public accounting firm that
should serve as our independent auditor, and our supervisory board is responsible for
recommending the appointment of the independent auditor to the general meeting of shareholders.
In addition, the audit committee is responsible for the compensation, retention and oversight of the
independent auditor appointed by the general meeting of shareholders; pre-approving the audit
services and non-audit services to be provided by our independent auditor before the auditor is

Affimed Annual Report 2019

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 two meetings in person and seven meetings by conference call in 2019.

Compensation committee

The compensation committee, which consists of Thomas Hecht (Chairman until June 2020;
Bernard Ehmer was elected to succeed Thomas Hecht as Chairman), Ulrich Grau and Berndt
Modig, assists the supervisory board inter alia 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 two meetings in person and three meetings by conference call
in 2019.

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 five
meetings by conference call in 2019.

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 ''IPO''). The

Affimed Annual Report 2019

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.

The description of the compensation of managing directors and supervisory directors in the
following sections is based on the management and supervisory board remuneration policies which
are currently in effect and, for the avoidance of doubt, does not reflect any amendments to these
remuneration policies as are proposed to the general meeting at the upcoming annual general
meeting of shareholders in 2020..

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 accordance with the remuneration policy for the supervisory board, the Company is granting the
chairman of the supervisory board an initial award of stock options to purchase 45,000 ordinary
shares of the Company. The initial award that was granted to the chairman of the supervisory
board currently in office, Thomas Hecht, was made on the date of the IPO, and with respect to any
future chairman of the supervisory board will be made on the date of the first election as chairman
of the supervisory board. The Company is granting each member of the supervisory board other
than the chairman of the supervisory board an initial award of stock options to purchase 20,000
ordinary shares of the Company. With respect to these members of the supervisory board in office
on the date of the IPO, the initial award was granted on the date of the IPO, and with respect to

Affimed Annual Report 2019

any future supervisory board members the initial award will be granted on the date of the first
election as supervisory board member. Initial awards vest over a period of three years, with 1/3 of
the stock options 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 date
of grant.

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, 2019, for services
in all capacities was approximately €2.0 million. As of December 31, 2019, we have no amounts
set aside or accrued to provide pension, retirement or similar benefits to our managing directors
and supervisory directors. In 2019, awards for approximately 0.8 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 39 to the Company only
financial statements and Note 26 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 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, 2020),
an additional 5% of the total outstanding common shares on that date becomes available for
issuance under the 2014 Plan. As of January 1, 2020, we had approximately 9.8 million common
shares available for issuance, and approximately 8.3 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.

Affimed Annual Report 2019

Vesting period. Subject to any additional vesting conditions that may be specified in an individual
grant agreement, and the accelerated vesting conditions below, the plan provides for three year
vesting of stock options. One-third of the stock options granted to participants in connection with
the start of their employment vest on the first anniversary of the grant date, with the remainder
vesting in equal tranches at the end of each 3-month period thereafter. Stock options granted to
other participants vest in equal tranches at the end of each 3-month period after the grant date
over the course of the vesting period. The compensation committee will establish a vesting
schedule for awards granted to supervisory directors as well as for any awards in the form of
restricted stock units.

Accelerated vesting. Unless otherwise specified in an individual grant agreement, the 2014 Plan
provides that upon a change of control of the Company (as defined in the 2014 Plan) all then
outstanding equity awards will vest and become immediately exercisable. It also provides that upon
a participant’s termination of service due to (i) retirement (or after reaching the statutory retirement
age), (ii) permanent disability rendering the relevant participant incapable of continuing
employment or (iii) death, all outstanding equity awards that would have vested during a 12 month
period following such termination of service will vest and become immediately exercisable.
Otherwise at termination all unvested awards will be forfeited. If a participant experiences a
termination of service without “cause” or for “good reason” (in each case, as defined in the 2014
Plan) within six months prior to a change of control, the Company will make a cash payment
equivalent to the economic value that the participant would have realized in connection with the
change of control upon the exercise and sale of the equity awards that such participant forfeited
upon his or her termination of service. In connection with a change of control and subject to the
approval of the supervisory board, the management board may amend the exercise provisions of
the 2014 Plan.

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 IPO, all outstanding awards granted under the
2007 SOP were converted into awards exercisable for common shares of Affimed N.V., and no
additional grants were made under the 2007 SOP. On December 31, 2019, the 2007 SOP
terminated.

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 (the “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 IPO in September 2014. With the passing away of Florian Fischer early
February 2020, his management services agreement terminated. The management services
agreement of Wolfgang Fischer became effective upon his appointment by the general meeting of
shareholders on June 20, 2017.

The management services 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 was
reappointed as managing director by the general meeting of shareholders on June 20, 2017, which
prolonged his management services agreement until 2020.

Affimed Annual Report 2019

The management services agreements are for a definite period of time, which period equals the
term of office of the managing director. In addition, the management services agreements provide
for a termination notice period of six months, both for us and for the managing director. In the event
of an urgent cause, the management services agreements may be terminated with immediate
effect.

Each management services agreement provides for payment of severance upon pre-defined
circumstances such as a termination by us without urgent cause or the existence of certain events
posing the managing director to terminate the management services agreement for urgent cause
(including, but not limited to, a reduction of the managing director's salary) for which the severance
is 100% of the managing director's gross annual compensation.

The management services agreements provide for a lump-sum payment following a change of
control, subject to certain conditions. In the event of termination of the management services
agreements following a change of control, the aforementioned severance is increased to 185%
(Adi Hoess) and to 150% (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 IPO, 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.

Related party transactions

The following is a description of related party transactions Affimed or its direct subsidiary Affimed
GmbH occurred in 2018 and 2019 with any of our members of our supervisory board or
management board and the holders of more than 5% of our common shares.

Agreement with current supervisory director

According to a service agreement with i-noion Inc, of which Dr. Grau serves as Chairman of the
Board of Directors, i-novion Inc. conducted certain preclinical services for us. In 2016, the

Affimed Annual Report 2019

Company received the last invoice in relation to this agreement, when the project was completed
[and the agreement was terminated].

Agreement with former managing director

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
2019, Dr. Windisch provided no services and received no payments. The consulting agreement
with Dr. Windisch was terminated in July 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.

Indemnification Agreements

We have entered into indemnification agreements with our managing directors and supervisory
directors. The indemnification agreements and our articles of association require us to indemnify
our managing directors and supervisory directors to the fullest extent permitted by law.

VI.

RISK MANAGEMENT AND CONTROL SYSTEMS

Risk Management: general methods

Affimed’s management board has implemented an Enterprise Risk Management System (ERM) to
ensure that corporate risks, including strategic and operational risks, financial and compliance risks
are managed effectively and efficiently and are aligned with the Company’s strategy.

The framework used for 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.
•

Information and communication of mitigating plans.

Affimed Annual Report 2019

• Monitoring of ongoing mitigating actions and reporting from Risk Manager to the

management board and the audit committee.

Implementation effectiveness

The effectiveness of risk management is implemented by the three-lines-of-defence model: 1st
line: Business – management board owns, implements and operates business controls to ensure
compliance with laws, regulations and policies (including supervisory controls). 2nd line:
Compliance, Risk Management and Internal Control System functions, which identify exposed
areas and manage mitigation activities; perform monitoring to gain assurance that compliance
controls operate effectively; and report upon such activities as well as significant findings to the
management board and to the supervisory board, which present the 3rd defence lines together with
external auditors as additional control functions.

A description of the risk factors and the risk management approach, as well as the sensitivity of the
Company's results to external factors and variables are described in more detail in "Risk
Management."

Internal Control System: general methods

Affimed’s management board is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.

The main elements of our internal control and risk management system in relation to the financial
reporting process comprise the following:

- Framework for Internal Control System: Integrated Framework (2013) by the COSO
- Scoping of key business processes according to SOX Sec. 404a and continuing monitoring

status of SOX Sec. 302 process due to the listing of Affimed’s shares on NASDAQ

IT considerations

- Clear assignment of responsibilities
- Segregation of duties and four eyes principle
- Appropriate financial accounting system including authorisation concepts
- Use of checklists when preparing quarterly and annual financial statements
- Use of guidelines and work procedures
-
- Risk and control assessment (testing of control design and effectiveness)
- Evaluation of testing results, remediation action
- Continuing monitoring status of SOX Sec. 302 process
- Reporting the conclusions about the adequacy and effectiveness of internal controls incl.
any significant deficiency or material weakness over financial reporting to the audit
committee on a regular basis

Further, a Disclosure Committee is in place, which advises the various officers and departments
involved, including the CEO and the CFO, on the timely review, publication and filing of periodic
and current (financial) reports. In addition to the certification by the CEO and the CFO under U.S.
law, each individual member of the supervisory board and management board must under Dutch
law, sign the consolidated and the company-only financial statements being disclosed and
submitted to the general meeting of shareholders for adoption.

Monitoring of effectiveness

Our management board, 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, 2019, 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 2019. 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, 2019.

Affimed Annual Report 2019

Since 2019, our independent registered public accounting firm is required to attest the
effectiveness of our internal controls over financial reporting pursuant to Section 404. In the opinion
of our independent registered public accounting firm, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

VII.

STATEMENT BY THE MANAGEMENT BOARD

The management board states in accordance with best practice provision 1.4.3 of the DCGC that
the management report provides sufficient insights into any failings in the effectiveness of the
internal risk management and control systems. The implemented systems provide reasonable
assurance that the financial reporting does not contain any material inaccuracies.

Based on the current state of affairs, it is justified that the financial reporting is prepared on a going
concern basis; material risks and uncertainties that are relevant to the expectation of the
company’s continuity for the period of twelve months after the preparation of the report are
disclosed.

It should be noted that these systems cannot provide absolute assurance that internal risk
management and control systems can prevent or detect all inaccuracies or errors.

VIII.

CODE OF CONDUCT

Any action, business, and scientific goal we pursue must be consistent with our core values which
consist of:

-
Integrity
- Respect
- Excellence; and
- Responsibility and Accountability

Our core values serve as a basis for our Code of Conduct which covers a broad range of matters
including the handling of conflicts of interest, compliance issues and other corporate policies such
as insider trading and equal opportunity and non-discrimination standards. Our Code of Conduct
applies to all of our supervisory directors, managing directors and employees of the Company and
its subsidiaries.

Affimed has established suitable processes and devoted sufficient personnel resources for the
enforcement of this Code, subject to the supervision of the CEO and the audit committee of the
supervisory board, and the Company supports its supervisory directors, managing directors and
employees to maintain a culture of accountability and to facilitate compliance with this Code. 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:

https://www.affimed.com/investors/corporate-governance/

IX.

SHARES AND SHAREHOLDERS’ RIGHTS

General meeting of shareholders

Affimed Annual Report 2019

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. In
light of the COVID 19 pandemic the Company decided to delay the annual general meeting to be
held in 2020, thereby exceeding this six months period, which is permitted under the emergency
bill ''Temporary Measures in the Field of the Ministry of Justice and Security in connection with the
Outbreak of COVID 19'' (Tijdelijke voorzieningen op het terrein van het Ministerie van Justitie en
Veiligheid in verband met de uitbraak van COVID-19).

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. In
view of the COVID 19 pandemic, the Company encouraged shareholders not to attend the annual
general meeting to be held in 2020 in person, but instead to exercise their voting rights by written
proxy.

Voting rights

In accordance with Dutch law and our articles of association, each issued common share and each
issued cumulative preferred share confers the right to cast one vote at the general meeting of
shareholders. Each holder of shares may cast as many votes as it holds shares. Shareholders may
vote by proxy. No votes may be cast at a general meeting of shareholders on shares held by us or
our subsidiaries or on shares for which we or our subsidiaries hold depositary receipts.

Nonetheless, the holders of a right of use and enjoyment (vruchtgebruik) and the holders of a right
of pledge in respect of shares held by us or our subsidiaries in our share capital are not excluded
from the right to vote on such shares, if the right of use and enjoyment (vruchtgebruik) or the right
of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries.
Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such
subsidiary holds a right of use and enjoyment (vruchtgebruik) or a right of pledge. Shares which
are not entitled to voting rights pursuant to the preceding sentences will not be taken into account
for the purpose of determining the number of shareholders that vote and that are present or
represented, or the amount of the share capital that is provided or that is represented at a general
meeting of shareholders.

Decisions of the general meeting of shareholders are taken by an absolute majority of votes cast,
except where Dutch law or the articles of association provide for a qualified majority or unanimity.

Affimed Annual Report 2019

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 June 25, 2019, our management board was granted
the authority, with effect from that date,, for a period of five years (i.e., until June 25, 2024) and
subject to the approval of the supervisory board, to resolve to issue common shares (either in the
form of stock dividends 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. The
previous authorization of the management board, granted on September 12, 2014, with effect from
September 17, 2014, ceased to apply as per June 25, 2019.

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 June 25, 2019, with effect from that date, our
management board was granted the authority, for a period of five years (i.e., until June 25, 2024)
and subject to the approval of the supervisory board, to restrict or exclude the pre-emptive rights of
holders of common shares upon the issuance of common shares and/or upon the granting of rights
to subscribe for common shares. The previous authorization of the management board, granted on
September 12, 2014, with effect from September 17, 2014, ceased to apply as per June 25, 2019.

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 25, 2019, our management board was granted
the authority, for a period of 18 months, with effect from the same date (i.e., until December 25,
2020) and subject to the approval of the supervisory board, to cause the repurchase of common

Affimed Annual Report 2019

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 Dutch 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 25, 2019, the general meeting
of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for
the financial year 2019.

Anti-Takeover Provisions

Dutch law permits us to adopt protective measures against takeovers. Although we have not
adopted any specific takeover measures, our articles of association include, in addition to the
common shares, a class of cumulative preferred shares. Currently, our management board has not
been authorized by the general meeting of shareholder to issue (or grant the right to acquire)
cumulative preferred shares. If the general meeting of shareholders would grant such authorization
to the management board, then the management board, subject to the approval of the supervisory
board, could decide to use such cumulative preferred shares as an anti-takeover measure. The
Company has decided to not implement such mechanism at this time.

COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE

As a Dutch company, the Company is subject to the DCGC and is required to disclose in this
Annual Report, filed in the Netherlands, whether the Company complies with the provisions of the
DCGC. If the Company does not comply with the provisions of the DCGC (for example, because of
a conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any
deviation from the DCGC in this Annual Report. The Company's deviations from the DCGC are
summarized below.

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

Affimed Annual Report 2019

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. Instead 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 April 28, 2020 (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 Wolfgang
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) Until June 2020, Thomas Hecht, chairman of our supervisory board, chaired the compensation
committee, which qualified 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.

July 7, 2020

On behalf of the Management Board,

Dr. Adi Hoess, CEO,

Dr. Wolfgang Fischer, COO

Affimed Annual Report 2019

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 2019.

The Company had a number of highlights and corporate updates in 2019 and early 2020.

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 us about his intention to step down from his position as Chief
Scientific Officer to pursue new opportunities.

In line with the strategic focus on Affimed's innate immunity portfolio, it was decided to terminate the
Phase 1 clinical program of AFM11, a CD19/CD3-targeting bispecific T cell engager. 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. Affimed informed the FDA of its intention to terminate the clinical program. It was
determined that the optimal use of our resources at this time is to focus on the development of Affimed's
innate cell engagers in indications with high unmet need and the potential for a rapid path to regulatory
approval.

At the Annual General Meeting held on June, 25 2019, the shareholders of Affimed approved all agenda
items, including inter alia (a) the renewed authorization of the Management Board to, for a period of five
years as from June, 25, 2019 and subject to the approval of the Supervisory Board, (i) issue common
shares and/or grant rights to subscribe for common shares in the share capital of the Company up to the
maximum number of common shares that can be issued under the size of the authorized share capital of
the Company as per the date of adoption of such resolution and to (ii) restrict and/or exclude pre-emptive
rights accruing to holders of common shares and (b) the reappointment of Dr. Bernhard Ehmer as a
supervisory director of the Company.

In July 2019, Affimed announced that it has been added to the Russell 2000®, Russell 3000®, and
Russell Microcap® Indexes, effective after the U.S. markets closed on Friday, June 28, 2019 as part of
Russell’s annual index rebalance process.

In November 2019, Affimed's IND application for AFM24 cleared the required 30-day review by the U.S.
Food and Drug Administration or FDA and is in effect for a phase 1/2a clinical trial of AFM24, a
tetravalent, bispecific epidermal growth factor receptor, and CD16A-binding innate cell engager, in
patients with advanced cancers known to express epidermal growth factor receptor.

In November 2019, Affimed announced that Genentech exercised its final option for an exclusive target
under the companies’ collaboration agreement which triggered a milestone payment, in an undisclosed
amount, to us from Genentech.

Affimed Annual Report 2019

In November 2019, Affimed announced the closing of a public offering of 12,000,000 common shares, at
the public offering price of $2.50 per share, and the exercise in full by the underwriters of their option to
purchase an additional 1,800,000 common shares. The exercise of the option to purchase additional
shares brought the total number of common shares sold by Affimed to 13,800,000 and increased the
gross proceeds raised in the offering, before deducting underwriting discounts and commissions and
estimated expenses of the offering payable by Affimed, to $34.5 million (€31.3 million).

The Company announced early February 2020 that Dr. Florian Fischer, Chief Financial Officer (CFO) of
Affimed, passed away. The Supervisory Board, management team, and employees of Affimed deeply
mourned his passing, and extended our heartfelt sympathy to his family.

During Affimed’s search for a new CFO, Harry Welten has provided CFO consultancy services to Affimed
on an ad hoc basis. In June 2020, the Company announced the intended appointment of Angus Smith as
Affimed’s new permanent CFO, completing Affimed’s leadership team. Mr. Smith will begin his
employment on July 13, 2020 and has been nominated for appointment as a member of the Management
Board at the Annual General Meeting of the Company to be held in 2020. Mr. Smith will be based out of
Affimed’s New York office.

In addition, the Company announced the intended appointment of Dr. Andreas Harstrick as Chief Medical
Officer and the intended appointment of Dr. Arndt Schottelius as Chief Scientific Officer. Dr Andreas
Harstrick started his employment in March 2020 and Dr. Arndt Schottelius started his employment in April
2020. Dr. Harstrick and Dr. Schottelius have both been nominated for appointment as members of the
Management Board at the Annual General Meeting of the Company to be held in 2020.

In May 2020, the Company implemented an at-the-market (“ATM”) program providing for the sales over
time of up to $50,000,000 of its common shares. As of June 30, 2020, the Company has issued
approximately 8.2 million common shares under the ATM program, generating net proceeds of
approximately $23.6 million.

As circumstances around the COVID-19 pandemic continue to rapidly evolve, Affimed is continuously
assessing possible effects on its clinical trials and adapting the risk mitigation measures it has
implemented. Affimed is closely monitoring and adhering to relevant federal and local guidelines on
COVID-19 to ensure the safety and health of its global workforce and help limit the spread of COVID-19,
while maintaining business continuity. The Company has taken mitigation steps to ensure that drug supply
and other trial-related materials are ready and available for the patients enrolled in its clinical trials. Due to
the ongoing assessment of the potential impact of the COVID-19 pandemic on patient enrollment and site
activation in its clinical studies, Affimed plans to update trial timelines after it has more visibility on the
length and extent of the COVID-19 crisis.

Based on our current knowledge and available information, we can concur with the Management Board
that we do not expect COVID-19 to have an impact on our ability to continue as a going concern in the
future.

Affimed Annual Report 2019

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 not changed in
2019. Dr. Bernhard Ehmer was re-appointed as member of the Supervisory Board in the Annual General
Meeting on June 25, 2019. 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. However, to diversify the group of Supervisory Board
members and to further strengthen the level of experience and biotech related know-how, the Supervisory
Board deems it advisable to further expand the number of its members. 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
June 25, 2019
Bernhard Ehmer
2022
June 19, 2018
Ulrich Grau
2021
June 20, 2017
Berndt Modig
2020
June 19, 2018
Mathieu Simon
2021
2020
Ferdinand Verdonck June 20, 2017

Age Gender
69
65
71
61
64
77

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 2019. The Management Board attended these
meetings. During these meetings, key areas of discussion were the progress of the various projects, the
main risks of the business, the financial situation, business development activities and the implementation
and monitoring of the business strategy.

In addition, the Supervisory Board discussed the Company’s internal control system with the audit
committee and the external independent auditor. The Supervisory Board, on the advice of the audit
committee, also discussed the result of the assessment of the structure and operation of the internal risk
management and control systems as well as significant changes thereto including the need for an internal
audit function. Based on the results of the review of the audit committee the Supervisory Board currently
does not see a need for an internal audit function.

The Supervisory Board reviewed the Company's annual financial statements, including non-financial
information. The report of the external auditor to the annual financial statements is included in the annual
accounts. The Supervisory Board agrees to the contents of the annual accounts and will recommend the
adoption thereof by the annual general meeting of shareholders.

Affimed Annual Report 2019

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.

Attendance at the Supervisory Board meetings during 2019 was as follows:

Meeting

Supervisory Board
Audit Committee
Compensation
committee
Nomination and
corporate governance
committee

Thomas
Hecht
4/4

5/5

9/9

Bernhard
Ehmer
4/4
9/9

3/4

Ulrich Grau Berndt
Modig
4/4
7/9
5/5

5/5

Mathieu
Simon
4/4

Ferdinand
Verdonck
4/4
9/9

9/9

8/9

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 2019 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 2019. The conclusions from this review have been
discussed with the Management Board as well as the individual Management Board members.

During the financial year 2019 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 currently 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.

Affimed Annual Report 2019

Name

audit committee

compensation
committee

nomination and corporate
governance committee

Bernhard Ehmer
Ulrich Grau
Thomas Hecht

Berndt Modig
Mathieu Simon
Ferdinand Verdonck

member

chairman

member
chairman*

member

member
chairman
member

member

*Effective June 23, 2020, Dr. Hecht stepped down as chairman of the compensation committee and Dr.
Ehmer was elected as new chairman.

Audit committee

The audit committee assists the Supervisory Board in overseeing Affimed’s accounting and financial
reporting processes and the audits of the financial statements. The audit committee meets at least four
times per year and during the regular meetings at least once a year with our external independent auditor,
without the Management Board being present. In 2019, the audit committee’s main areas of focus were
review of quarterly financial statements, the Company’s system of internal controls over financial reporting
and the compliance with the relevant rules and regulations (SOX), 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 2019 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 two meetings in person and seven meetings by conference call in 2019.

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 2019, the nomination and corporate governance committee's main areas of focus where reviewing the
profile of the Supervisory Board, preparing the self-assessment of the Supervisory Board, composition
and succession planning of the Supervisory Board and Management Board, discussing contract
extensions of the Management Board and analysing corporate governance topics.

The nomination and corporate governance committee held four meetings in person and five meeting by
conference call in 2019.

Affimed Annual Report 2019

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 2019, 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 and reviewed the Supervisory Board
remuneration policy. 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 two meetings in person and three meetings by conference call in 2019.

Remuneration of the Supervisory Board

The compensation of Supervisory Board members consists of a fixed annual fee in cash and an additional
meeting fee for any Supervisory Board meeting or committee meeting. Members of the Supervisory Board
are entitled to annual grants under our share-based compensation plans. Remuneration is subject to an
annual review by the Supervisory Board.

The remuneration of members of the Supervisory Board complies with almost all aspects of the provision
of the Dutch Corporate Governance Code. The exceptions are where it conforms more closely to
customary practice in the biotechnology industry worldwide, in particular in the United States. These
exemptions and further details on the remuneration of the Supervisory Board are disclosed in the
Corporate Governance section in the management report.

An overview of the implementation and planning of the remuneration of supervisory and managing
directors and in addition the remuneration policy is given in more detail in section “Item 6. Directors,
Senior Management and Employees – Compensation” in the annual report (20-F) filed with the Securities
and Exchange Commission on April 28, 2020 (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. During the financial year 2019, all of our members of the Supervisory Board were
independent in accordance with the Dutch Corporate Governance Code. Previously, one of our
Supervisory Board members, Dr. Ulrich Grau, did not meet the independence requirements according to
the Dutch Corporate Governance Code due to the service agreement between Affimed and i-novion Inc.
As this agreement is no longer in place, currently all members of the Supervisory Board meet the
independence requirements according to the Dutch Corporate Governance Code.

Affimed Annual Report 2019

Appreciation

The Supervisory Board is of the opinion that during the year 2019, 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 2019. In particular, the
Supervisory Board would very much like to thank our shareholders for their continued support.

July 7, 2020

On behalf of the Supervisory Board,

Dr. Thomas Hecht,

Chairman of the Supervisory Board

Affimed Annual Report 2019

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

Affimed Annual Report 2019

Affimed N.V.
Consolidated statements of comprehensive loss
(in € thousand)

Revenue
Other income – net
Research and development expenses
General and administrative expenses

Operating loss

Finance income / (costs) – net

Loss before tax

Income taxes

Loss for the period

Other comprehensive income / (loss) Items that will not
be reclassified to profit or loss
Equity investments at fair value OCI - net change in fair
Value

Other comprehensive income / (loss)

Total comprehensive loss

Loss per share in € per share

(undiluted = diluted)

Note
9
10
11
12

2019
21,391
290
(43,791)
(10,266)

2018
23,735
1,515
(35,148)
(9,638)

2017
2,010
205
(21,489)
(7,986)

(32,376)

(19,536)

(27,260)

(2,983)

(32,361)

(19,476)

(30,243)

(4)

(1)

(32,365)

(19,477)

(30,223)

(632)

(4,731)

(32,997)

(24,208)

(30,223)

(0.50)

(0.32)

(0.69)

Weighted number of common shares outstanding

64,242,396

60,514,407

43,746,073

The Notes are an integral part of these consolidated financial statements.

Affimed Annual Report 2019

Affimed N.V.
Consolidated statements of financial position
(in € thousand)

ASSETS
Non-current assets
Intangible assets
Leasehold improvements and equipment
Long term financial assets
Right-of-use 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
Lease liabilities
Total non-current liabilities

Current liabilities
Trade and other payables
Provisions
Borrowings
Lease liabilities
Contract liabilities
Total current liabilities

Note December 31, 2019

December 31, 2018

16
24

17
18

22
9
24

21
22
24
9

137
2,291
3,193
824
6,445

95,234
8,902
1,482
296
0
105,914

112,359

56
1,414
3,825
0
5,295

94,829
13,974
1,429
260
387
110,879

116,174

762
270,451
1,962
(234,508)
38,667

624
239,055
2,594
(202,144)
40,129

278
37,961
272
38,511

10,674
517
2,105
532
21,353
35,181

1,690
37,512
0
39,202

9,425
0
3,083
0
24,335
36,843

TOTAL EQUITY AND LIABILITIES

112,359

116,174

The Notes are an integral part of these consolidated financial statements.

Affimed Annual Report 2019

Affimed N.V.
Consolidated statements of cash flows
(in € thousand)

Cash flow from operating activities
Loss for the period
Adjustments for the period:
- Income taxes
- Depreciation and amortisation
- Net gain from disposal of leasehold improvements and equipment
- Share based payments
- Finance income / costs – net

Note

20
14

Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade, other payables, provisions and contract liabilities
Cash used in operating activities
Interest received
Paid interest
Paid income tax
Net cash 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 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 lease liabilities
Repayment of borrowings
Cash flow from 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
The Notes are an integral part of these consolidated financial statements.

19
19
22
22
24
22

2019
(32,365)

4
906
(5)
2,469
(15)
(29,006)

33
(36)
340
(791)
(29,460)
628
(224)
0
(29,056)

(150)
(1,324)
0
0
(45,131)
50,945
0
4,340

31,373
(2,215)
562
0
(405)
(3,277)
26,038
(917)
1,322
94,829
95,234

2018
(19,477)

1
403
25
2,035
(60)
(17,073)
(322)
(19)
121
66,856
49,563
218
(342)
(1)
49,438

(30)
(691)
1
0
(14,029)
0
(861)
(15,610)

25,113
(1,701)
0
0
0
(2,917)
20,495

669
54,323
39,837
94,829

2017

(30,223)

(20)
351
(19)
1,943
2,983
(24,985)

1,140
(44)
(399)
(1,018)
(25,306)
106
(349)
0
(25,549)

(43)
(625)
35
(296)
(13,084)
22,063
0
8,050

23,123
(1,648)
2,500
(11)
0
(167)
23,797

(1,867)
6,297
35,407
39,837

Affimed Annual Report 2019

Affimed N.V.
Consolidated statements of changes in equity
(in € thousand)

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 income

Note

Issued
capital

Capital
reserves

Fair value
reserves

Accumulated
deficit

Total
equity

333 190,862

135

20,922

1,943

0
0

51
0
468 213,778

0
0
0

(152,444)

38,751

21,057

1,943

0
(30,223)
(182,667)

51
(30,223)
31,579

7,325

468 213,778

7,325

(182,667)

38,904

156
0

23,171
71

0
0

23,327
71

0
0
0

2,035
0
0

0
0
(4,731)

0
(19,477)
0

2,035
(19,477)
(4,731)

Balance as of December 31, 2018

624 239,055

2,594

(202,144)

40,129

Balance as of January 1, 2019

624 239,055

2,594

(202,144)

40,129

Issue of common shares
Exercise of share based payment awards
Equity-settled share based payment
Awards
Loss for the period
Other comprehensive income

19
20

138
0

28,901
26

0
0

29,039
26

0
0
0

2,469
0
0

0
0
(632)

0
(32,365)
0

2,469
(32,365)
(632)

Balance as of December 31, 2019

762 270,451

1,962

(234,508)

38,667

The Notes are an integral part of these consolidated financial statements.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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.

Local exemption rules applied by subsidiaries of the Group

Affimed GmbH, Heidelberg, Germany, makes use of the exemption clause, available under
§ 264 (3) HGB in 2019. The consolidated financial statements of Affimed N.V. as of and for
the year ended 31 December 2019 will be filed in Germany as a supplement to the financial
statements of Affimed GmbH, in order to meet the requirements of the exemption clause
available under § 264 (3) HGB in 2019.

Financial reporting period

These financial statements cover the year 2019, which ended at the balance sheet date of 31
December 2019.

Going concern

The financial statements of the Company have been prepared on the basis of the going
concern assumption.

Application of Section 402, Book 2 of the Dutch Civil Code

The financial information of the Company is included in the consolidated financial statements.
For this reason, in accordance with Section 402, Book 2 of the Dutch Civil Code, the separate
statement of profit and loss of the Company exclusively states the share of the result of
participating interests after tax and the other income and expenses after tax.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

For an appropriate interpretation of these statutory financial statements, the consolidated
financial statements of the Company should be read in conjunction with the Company financial
statements, as included under pages 85 to 97.

Basis of preparation – consolidated financial statements

Statement of compliance

The consolidated financial statements of the Company are part of the statutory financial
statements of the Company. These 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.

This is the first set of the Group’s annual financial statements in which IFRS 16 Leases has
been applied. The related changes to significant accounting policies are described as part of
the significant accounting policies.

The consolidated financial statements were authorized for issuance by the management board
and supervisory board on July 7, 2020.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except
for financial instruments measured at fair value (see note 13) and monetary assets and
liabilities denominated in foreign currencies which are translated at period-end exchange
rates. The Group did not opt for a valuation of liabilities at fair value through profit or loss.

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.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

Functional and presentation currency

The consolidated financial statements are presented in euro, which is also the Company’s
functional currency. All financial information presented in euro unless otherwise noted has
been rounded to the nearest thousand (abbreviated €) or million (abbreviated € million).

Presentation of consolidated statements of comprehensive loss

As a clinical-stage biopharmaceutical company with a primary focus on research and
development activities, cost of sales and gross profit are not considered meaningful measures
for Affimed and therefore are not presented. See note 4 for the Group’s accounting policies
related to revenue recognition and research and development expenses.

These consolidated financial statements cover the year 2019, which ended at December 31,
2019.

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’.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented
in these consolidated financial statements, except for lease accounting. The Group has initially
applied IFRS 16 Leases from 1 January 2019. Affimed has applied IFRS 16 using the modified
retrospective approach, under which the cumulative effect of initial application is recognized

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

in retained earnings as of January 1, 2019. Accordingly, any comparative information
presented for any periods in 2018 and 2017 has not been restated – i.e. it is presented, as
previously reported, under IAS 17 and related interpretations. The effect of the application of
IFRS 16 Leases is explained below. A number of other new standards and amendments are
also effective from 1 January 2019 but they do not have a material effect on the Group’s
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 provide 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.

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

recognized as expensed when incurred as long as the research and development project
concerned does not meet the criteria for capitalization.

Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under a short-term cash bonus, if
(a) the 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.

(ii) Share-based payment transactions

The Group’s share-based payment awards outstanding as of December 31, 2018 and 2019,
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.

(iii) Termination benefits

Termination benefits are expensed when the Group can no longer withdraw the offer of those
benefits. If benefits are not expected to be settled wholly within 12 months of the reporting
date, then they are discounted.

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.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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.

Leases

Policy applicable from 1 January 2019

Affimed recognizes a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred. Subsequently, the right-of-use asset is depreciated using
the straight-line method from the commencement date to the end of the lease term. In addition,
the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for
certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, Affimed’s incremental borrowing rate. Generally,
Affimed uses its incremental borrowing rate as the discount rate.

The Group determines the incremental borrowing rate by obtaining interest rates from various
external financing sources and makes certain adjustments to reflect the terms of the lease and
the type of the asset leased.

The lease liability is subsequently measured at amortized cost using the effective interest
method. It is re-measured when there is a change in future lease payments arising from a
change in an index or rate, a change in the estimate of the amount expected to be payable
under a residual value guarantee, or as appropriate, changes in the assessment of whether a
purchase or extension option is reasonably certain to be exercised or a termination option is
reasonably certain not to be exercised.

Affimed has elected not to recognize right-of-use assets and lease liabilities for some short-
term leases (leases with less than 12 months of lease term) and right-of-use assets and
liabilities for leases of low value assets. Lease payments associated with these leases are
recognized as an expense on a straight-line basis over the lease term.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

Policy applicable before 1 January 2019

Payments made under operating leases are recognized in profit or loss on a straight-line basis
over the term of the lease.

For impact on transition please refer to “New standards and interpretations applied for the first
time” below.

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 primarily interest expense on borrowings.

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.

(i)

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 13).

(ii)

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

derecognizes a financial liability when its contractual obligations are discharged, cancelled or
expire.

(iii) 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 19).
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.
.
Impairment

(i)

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

through profit or loss. No impairments or reversals of impairments were recognized in 2017,
2018 or 2019.

(ii)

Intangible assets and leasehold improvements and equipment

Assets that are subject to depreciation or amortization are reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount may not be recoverable. An
impairment loss is recognized as the amount by which an asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs
of disposal and value in use. Non- financial assets that were previously impaired are reviewed
for possible reversal of the impairment at each reporting date.

Income taxes

Income taxes comprise current and deferred tax. Current and deferred taxes are recognized
in profit or loss except to the extent that it relates to items recognized directly in equity or in
other comprehensive loss.

Current tax is the expected tax payable or receivable on the taxable income or loss for
the year, using tax rates enacted or substantively enacted at the reporting date, and
adjustments to taxes payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for temporary differences associated with assets and
liabilities if the transaction which led to their initial recognition is a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss.

Deferred tax is measured at tax rates that are expected to be applied to temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the
reporting date.

Deferred tax assets and liabilities are presented net if there is a legally enforceable right to
offset.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

Subsequent events
Events that provide further information on the actual situation at the balance sheet date and
that appear before the financial statements are being prepared, are recognised in the financial
statements.

Events that provide no information on the actual situation at the balance sheet date are not
recognised in the financial statements. When those events are relevant for the economic
decisions of users of the financial statements, the nature and the estimated financial effects of
the events are disclosed in the financial statements.

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 13 and 19).

Loss per share

Loss per common share is calculated by dividing the loss of the period by the weighted
average number of common shares outstanding during the period.

The Group has granted warrants under certain loan agreements (see note 19) and options
under share-based payment programs (see note 17) which potentially have a dilutive effect;
no instruments actually had a dilutive effect.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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:

(i)

Share-based payments

The fair value of stock options issued by Affimed N.V. is estimated using the Black-Scholes-
Merton formula. The formula determines the value of an option based on input parameters like
the value of the underlying instrument, the exercise price, the expected volatility of share price
returns, dividends, the risk-free interest rate and the time to maturity of the option. The fair
value of share-based equity-settled compensation plans is measured at grant date and
compensation cost is recognized over the vesting period with a corresponding increase in
equity. The number of stock options expected to vest is estimated at each measurement date.

On April 20, 2018, Affimed issued 240,000 options under its share-based-payment program,
the vesting of which deviates from the standard 3year 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 17. Incorporating the market condition in the fair value estimate requires
the use of a simulation technique (Monte Carlo simulation), 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.

(ii)

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,

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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.

(iii)

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.

(iv)

Financial instruments

The Group holds preferred shares in Amphivena classified as equity instruments at fair value
through other comprehensive income (level 2) and recognized 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, 2019 (see note 13). The Group based its judgment on
information available for the valuation of the shares of Amphivena in its latest private financing
in September 2019.

Contractual liabilities

(v)
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:

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

•
•
•
•

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.

(vi)

Lease payments

Affimed has applied judgement to determine the lease term for some lease contracts in which
it is a lessee that include renewal options. The assessment of whether Affimed is reasonably
certain to exercise such options impacts the lease term, which significantly affects the amount
of lease liabilities and right-of-use assets recognized. As at December 31, 2019, no renewal
options were incorporated into the determining the lease term.

(vii)

Provisions

In the second quarter of 2019, Affimed decided to terminate the Phase 1 clinical program of
AFM11, a CD19/CD3-targeting bispecific T cell engager as a part of its strategic plans (see
note 18).

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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 before January 1, 2019, and have been applied in preparing
these financial statements:

Standard/interpretation

Effective Date 1

IFRS 16 Leases
Amendments to IFRS 9: Prepayment Features with
Negative Compensation
Amendments to IAS 28: Long-term Interests in
January 1, 2019
Associates and Joint Ventures
Annual Improvements to IFRS Standards 2015-2017 Cycle
January 1, 2019
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement January 1, 2019
IFRIC 23 Uncertainty over Income Tax Treatments

January 1, 2019

1 Shall apply for periods beginning on or after the date shown in the effective date column.

Affimed has applied IFRS 16 using the modified retrospective approach, under which the
cumulative effect of initial application is recognized in retained earnings as of January 1, 2019.
Accordingly, any comparative information presented for any periods in 2018 and 2017 has not
been restated – i.e. it is presented, as previously reported, under IAS 17 and related
interpretations. The nature and effect of the application of IFRS 16 are summarized below.
The other amendments had no effect on the consolidated financial statements of the
Company.

The new standard specifies how to recognize, measure, present and disclose lease
agreements. The standard provides a single lessee accounting model, requiring lessees to
recognize right-of-use assets representing its rights to use the underlying assets and lease
liabilities representing its obligation to make lease payments. Lessor accounting remains
similar to previous accounting policies.

Under IAS 17, Affimed determined at contract inception whether an arrangement was or
contained a lease under IFRIC 4 ´Determining Whether an Arrangement contains a Lease´.
Under IFRS 16, Affimed now assesses whether a contract is or contains a lease based on the
new definition of a lease. This definition says that a contract is or contains a lease if the
contract conveys a right to control the use of an identified asset for a period of time in exchange
for consideration.

Transition

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

On transition to IFRS 16, Affimed elected to apply the practical expedient to grandfather the
assessment of which transactions are leases. It applied IFRS 16 only to contracts that were
previously identified as leases. Contracts that were previously not identified as leases were
not reassessed.

As a lessee, Affimed previously classified leases as operating or finance leases based on its
assessment of whether the lease transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, Affimed recognizes right-of-use assets and lease liabilities for most
leases – i.e. these leases are on-balance sheet.

At transition, for leases classified as operating leases under IAS 17, lease liabilities were
measured at the present value of the remaining lease payments, discounted at the Company’s
incremental borrowing rates for similar assets as of January 1, 2019. Right-of-use assets are
measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments.

On transition to IFRS 16, the Company recognized additional right-of-use assets, including
property, plant and equipment and additional lease liabilities. The impact on transition is
summarized below.

Right-of-use assets
Lease liabilities

January 1, 2019

717
717

The Group discounted lease payments using a weighted average discount rate of 4.05% as
of January 1, 2019.

In relation to those leases under IFRS 16, Affimed has recognized depreciation and interest
costs, instead of operating lease expense. In 2019, the Group recognized depreciation
expense for right-of-use assets of €385 and interest cost related to the lease liability of €24
instead of operating lease expense of €406.

The transition between operating lease commitments disclosed applying IAS 17 as of
December 31, 2018 and the lease liabilities recognized in the statement of financial position
at the date of initial application, January 1, 2019, is shown below.

Operating lease commitment as of December 31, 2018
Recognition exemption for short-term leases

January 1,
2019

1,154
(98)

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

for

incidental

Payments
(Not part of the lease)
Discounting using the incremental borrowing rate as of January 1, 2019
Lease liabilities as of January 1, 2019

costs and other

rental

rental payments

(312)

(27)
717

New standards and interpretations not yet adopted

The following new standards and amendments to standards are effective for annual periods
beginning after December 31, 2019, and have not been applied in preparing these
consolidated financial statements.

Standard/interpretation Effective Date 1

Amendments to References to the Conceptional Framework January 1, 2020
Amendments to IAS 1 and IAS 8: Definition of Material January 1, 2020
Amendments to IFRS 9, IAS 39 and IFRS 7:
Interest Rate Benchmark Reform January 1, 2020
Amendments to IFRS 3 Business Combination January 1, 2020

1 Shall apply for periods beginning on or after the date shown in the effective date column.

The amended standards are not expected to have a significant effect on the consolidated
financial statements of the Group.

Segment reporting

(i)

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.

(ii)

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 2019

Notes to the consolidated financial statements
(in € thousand)

Revenue:

Germany

Europe

USA

2019

2018

2017

1,646

1,175

1,236

19,745

22,529

694

Consolidated revenue

21,391

23,735

2,010

Non-current assets as of December, 31:

Germany

Czech Republic

USA

2,017

1,224

870

246

3,558

3,825

957

221

Total non-current assets

6,445

5,295

1,178

(iii) Major Customers

In 2018 and 2019, the Group’s revenue with Genentech Inc. exceeded 10% of total revenues.
For the year ended December 31, 2017, the Group’s revenue with four customers exceeded
10% of total revenues.

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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 year ended December 31, 2017, the Company recognized revenue upon
achievement of milestones and for the performance of research and development services
totaling €0.2 million.

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, 2017 and 2018, the Group achieved several milestones
and recognized revenue totaling €0.2 million and €0.2 million, respectively. Open milestones
as at December 31, 2019 are expected to have no significant impact on future revenues.

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 is
the development of novel NK cell engager-based
providing services
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 €19.7 million as revenue in 2019 (2018: €21.8 million) and €59.3 million
(December 31, 2018: €61.4 million) under contract liabilities, which will be recognized as
revenue in subsequent periods as services are provided.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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

The Group, through its subsidiary 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 €1.7 million, €1.7 million and €1.6 million during the years
ended December 31, 2019, 2018 and 2017 respectively.

Contract balances

The following table provides information about receivables and contract liabilities from
contracts with customers.

Receivables
Contract liabilities

December 31,
2019

December 31, 2018
210
61,847

204
59,314

An amount of €14,795 that was recognized in contract liabilities at the beginning of the period
was recognized as revenue during the year ended December 31, 2019 (2018: €230).

The remaining performance obligations at December 31, 2019 are approximately €59.3 million
and are expected to be recognized as revenue to a large extent over the next two years.

Disaggregation of revenue

Major service lines:
Collaboration revenue
Service revenue

Revenue:
Point in time
Over time

2019

19,685
1,706
21,391

5,783
15,608
21,391

2018

22,018
1,717
23,735

21,863
1,872
23,735

2017

390
1,620
2,010

233
1,777
2,010

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

10. Other income and expenses - net

Other income and expenses, net mainly comprises foreign exchange gains of €251 (2018:
€1,523, 2017: losses of €7). Income from government grants for research and development
projects amounted to €19 in 2019, €10 in 2018 and €195 in 2017.

11. 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:

2019

2018

2017

Third-party services

27,338

22,127

12,299

Personnel expenses

10,154

8,055

5,639

Legal, consulting and patent
expenses

1,983

1,672

890

Cost of Materials

1,547

1,140

Amortisation and depreciation

725

351

994

309

Other expenses

2,044

1,804

1,358

43,791

35,148

21,489

12. 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:

2019

2018

2017

Personnel expenses

5,357

4,929

4,521

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

Legal, consulting and audit expenses

3,055

2,881

1,945

Other expenses

1,853

1,828

1,520

10,266

9,638

7,986

13. Employee benefits

The following table shows the items of employee benefits for the years ended December 31:

2019

2018

2017

Wages and salaries

11,587

10,027

7,475

Social security costs

1,620

1,092

931

13,207

11,119

8,406

The employer’s contributions to pension insurance plans of €696 (2018: €502, 2017: €438)
are classified as payments under a defined contribution plan, and are recognized as an
expense.

14. Finance income and finance costs

The following table shows the items of finance income and costs for the years ended
December 31:

2019

2018

2017

Interest SVB Loan Agreement (see note 19)

-483

-847

-690

Foreign exchange differences

-175

651

-2,378

Interest on certificates of deposit with maturities
of more than three months

602

Other finance income/finance costs - net

251

-2,983

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

15.

Income taxes

The Group did not incur any material income tax in the periods presented. As of December
31, 2019, deferred tax assets from differences resulting from intangible assets (€283; 2018:
€415), trade and other receivables (€243; 2018: €334), borrowings (€70; 2018: €0), lease
liabilities (€121; 2018: €0) and trade and other payables (€23; 2018: €27) have not been
recognized as deferred tax assets as no sufficient future taxable profits or offsetting deferred
tax liabilities are available. As of December 31, 2019 deferred tax liabilities from temporary
differences result mainly leasehold improvements and equipment and right-of-use assets
(€226; 2018: €0), long term financial assets (1,218; 2018: €774) and contract liabilities (€308;
2018: €0). Deferred tax liabilities are not recognized as there is an excess of deferred tax
assets over deferred tax liabilities.

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:

2019

2018

2017

Loss before tax

(32,361)

(19,476)

(30,243)

Income tax benefit at tax rate of
29.825 %

9,652

5,809

9,020

Adjustments of deferred tax assets

(9,822)

(5,318)

(9,036)

Permanent differences

(29)

(462)

Adjustments for local tax rates

Non deductible expenses

Other

Income taxes

(43)

233

(4)

(34)

(53)

(1)

(93)

195

(82)

In Germany, Affimed has tax losses carried forward of €199.2 million (2018: €166.2 million)
for corporate income tax purposes and of €198.4 million (2018: €165.4 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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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 s.r.o. amount to €296 as at December 31, 2019 (2018: €423).

16. Long term financial assets

The Company holds preferred shares in Amphivena recognized at their fair value of €3.2
million (2018: €3.8 million). The Company recognized losses from the change in fair value of
€0.6 million in other comprehensive income in 2019 (2018: €4.7 million).

17. Financial assets

Financial assets contain of U.S. Dollar denominated certificates of deposit with original
maturities of more than three months. As of December 31, 2019, the fair value (level 1) of the
financial assets did not differ significantly from its carrying amount.

18. Trade and other receivables

The trade receivables as of December 31, 2019 and 2018, of €204 and €210, respectively,
are all due in the short-term, do not bear interest and are not impaired. Other receivables are
all due short-term and mainly comprise value-added tax receivables of €453 (2018: €839).

19. Equity

As of December 31, 2019, the share capital of €762 (2018: €624) is composed of 76,249,901
(2018: 62,430,106) common shares with a par value of €0.01.

On November 13, 2019, the Group issued 13,800,000 common shares in a public offering at
a price of $2.50 per common share resulting in aggregate net proceeds of €29.5 million.

As at 31, December 2019 and 2018, the authorized share capital amounted to €3,120
consisting of 155,975,000 common shares and 155,975,000 cumulative preference shares,
each with a par value of €0.01 per share.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

20. 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.

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. In 2019 and 2018, the Group granted 1,736,803 awards and
2,332,296 awards to employees, the Management Board and Supervisory Board.

In 2019, 357,879 ESOP 2014 awards were cancelled or forfeited due to termination of
employment or termination of consulting agreements with non-employees (2018: 424,688),
and 19,795 options were exercised at an average exercise price of $1.54 (2018: 40,038 ESOP
2014 awards at an average exercise price of $1.98).

As of December 31, 2019, 7,307,567 ESOP 2014 awards were outstanding (December 31,
2018: 5,948,438), 4,773,840 awards (December 31, 2018: 2,814,547) were vested. The
options outstanding at December 31, 2019 had an exercise price in the range of $1.30 to
$13.47 (2018: $1.30 to $13.47) and weighted average remaining contractual life of 8.9 years
(2018: 9.3 years). In 2019 and 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, 2019
no options were exercisable. Fair value was determined using the Monte Carlo Simulation.

Share based payment expense

In 2019, an expense of €2,469 was recognized affecting research and development expenses
(€904) and general and administrative expenses (€1,565). 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).

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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

2019

2018

$2,10

$1,20

$1,44

$1,91

$1,44

$1,92

82 %

72 %

5,9

0,00

5,9

0,00

2,09 %

0,34 %

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.

21. Provisions

In 2019, the group recognized costs related to the termination of the AFM 11 program totalling
to €1.4 million, whereof €0.9 million were already incurred in 2019 and estimated costs of €0.5
million expected to incur in 2020 were recognized in provisions.

22. Borrowings

Silicon Valley Bank

On November 30, 2016, Affimed 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 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.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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, 2019

Book value as of December 31,
2018

Consolidated
financial
statements

thereof assets
pledged

Consolidated
financial
statements

thereof assets
pledged

2,291

296

1,482

1.503

247

864

8,902

8.902

95,234

93.606

108,205

105,122

1,414

1,174

260

1,429

387

13,974

235

1,007

13,974

94,829

92,933

112,293

109,323

As of December 31, 2019 and 2018, the fair value of the liability did not differ significantly from
its carrying amount (€2,013 and €4,773). 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, 2019, €2,013 (2018: €3,083) were classified
as current liabilities.

UniCredit Leasing CZ

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

In April 2019, the Group entered into a loan agreement with UniCredit Leasing CZ for €562.
After an initial instalment of €127 in the second quarter of 2019, repayment is effected in
monthly instalments of €8 until November 2023. As at December 31, 2019, an amount of €368
was outstanding, of which €91 was classified as current liabilities. As of December 31, 2019,
the fair value of the liability did not differ significantly from its carrying amount.

Reconciliation to cash flows from financing

Movements of liabilities reconcile to cash flows arising from financing activities as
follows:

Balance as of January 1
Changes from financing cash flows
Proceeds from borrowings
Repayment of borrowings

Other Changes
Capitalized borrowing costs
Interest paid

Balance as of December 31, 2019

23. Trade and other payables

2019

2018

4,773

562
-3,277
-2,715

489
-164
325
2,383

7,169

0
-2,917
-2,917

847
-326
531
4,773

Trade and other payables comprise trade payables of €10,249 (2018: €8,482). Other payables
mainly comprise payroll and employee related liabilities for withholding taxes and social
security contributions of €801 (2018: €885) and payables due to employees for unused
holidays and other accruals. Other payables are normally settled within 30 days.

24. Leases

Affimed presents right-of-use assets for offices, laboratories and vehicles leased in a separate
line item from the line item “Leasehold improvements and equipment” that presents other
assets of the same nature that Affimed owns. The agreements have an average non-
cancellable term of between one and four years with renewal options included in some
contracts. For equipment leased with contract terms that are short term and/or leases of low-
value items the Group has elected not to recognize right-of-use assets and lease liabilities for
these leases.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

The carrying amounts of right-of-use assets reconcile as follows:

Balance as of January 1, 2019
Depreciation charge for the year
Additions to right-of-use assets
Balance as of December 31, 2019

Cash outflow related to leases are as follows:

Repayment of lease liabilities
Interest on lease liabilities

Short-term lease payments

Cash outflow from leasing

Carrying amount
Cars
22
-13
0
9

Buildings
695
-371
492
816

Total
717
-384
492
824

2019
405

495

In 2018 and 2017, lease expenses of €562 and €472 have been recognized in the consolidated
statement of comprehensive income.

Future contractually agreed undiscounted lease payments are as follows:

Payments within one year

Payments between one and five years

2019: Leases
under IFRS
16

2018:
Operating
Leases under
IAS 17

553

276

829

675

541

1,216

Movements of lease liabilities reconcile to cash flows arising from financing activities
as follows:

Balance as of January 1
Changes from financing cash flows
Repayment of lease liabilities

2019

717

-405

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

Other Changes
New lease contracts

Balance as of December 31, 2019

25. Other commitments and contingencies

Commitments

-405

492
492
804

The Group has entered into agreements for the use of licenses. In 2019, license fees of €92
have been recognized in consolidated statement of comprehensive income (2018: €124, 2017:
€174), related future payment obligations under non-cancellable fees amount to €25.

Contingencies

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.

26. Related parties

(i) Shareholders

As of December 31, 2019 and 2018, no shareholder holds more than 20% of the voting rights.

(ii) Transactions with key management personnel

The compensation of managing directors and other key management personnel comprised of
the following:

Short-term employee benefits

Termination benefits

Share-based payments

2019

2018

2017

2,598

264

1,738

4,600

2,683

1,229

3,912

1,538

1,379

2,917

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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 (2018: €382; 2017: €375). In 2019, the Group recognized expenses
for share-based payments for supervisory board members of €243 (2018: €117, 2017: €144).

The following table provides the total amounts of outstanding balances for supervisory board
compensation and expense reimbursement related to key management personnel:

Adi Hoess

Wolfgang Fischer

Martin Treder

Leila Alland

Thomas Hecht

Mathieu Simon

Berndt Modig

Ferdinand Verdonck

Ulrich Grau

Bernhard Ehmer

Outstanding balances

December
31, 2019

December
31, 2018

27. Financial risk management

(i)

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

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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.

(ii)

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. The total
carrying amount of shares (€3.2 million, 2018: €3.8 million) cash and cash equivalents (€95.2
million, 2018: €94.8 million), trade and other receivables (€1.5 million, 2018: €1.4 million), and
certificates of deposit (8.9 million, 2018: €14.0 million), represents the maximum credit
exposure of €108.8 million (2018: €114.1 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.

(iii)

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 €2.0 million as at December 31, 2019, 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
2019, resulting in interest income of €715 in 2019. A shift in interest rates (increase or
decrease) would not have a material impact on the loss of the Group.

(iv) Other price risks

The fair value of the shares in Amphivena depends on the share price. The total exposure of
the Group amounts to €3.2 million.

(v)

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.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

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, 2019 was €56,531 (2018: €47,524) and
mainly relates to US Dollars.

In 2019, if the Euro had weakened/strengthened by 10% against the US dollar with all other
variables held constant, the loss would have been €5,677 (2018: €4,787) 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 2019 than in 2018 because of
the increased volume of US dollar-denominated transactions.

The following significant exchange rates have been applied during the year:

2019

2018

2017

CZK or USD
or GBP/EUR

CZK or USD or
GBP/EUR

CZK - Average Rate

0.03896

0.03899

0.03799

CZK - Spot rate

0.03936

0.03887

0.03916

USD - Average Rate

0.89326

0.84674

USD - Spot rate

0.89015

0.87336

0.88519

0.83382

GBP - Average Rate

1.1393

1.13031

GBP - Spot rate

1.1754

1.11791

(vi)

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations
associated with its financial liabilities which are normally settled by delivering cash. The
Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

In 2017 and 2018 and 2019, Affimed raised significant funding that it estimates will enable the
Group to fund operating expenses and capital expenditure requirements at least into the fourth
quarter of 2021.

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.

In 2019, the Group issued 13,800,000 common shares in a public offering at a price of $2.50
per common share resulting in aggregate net proceeds of €29.5 million (see note 16).

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.

(vii) 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.

28. Subsequent events

The Company announced early February 2020 that Dr. Florian Fischer, Chief Financial Officer
(CFO) of Affimed, passed away. During Affimed’s search for a new CFO, Harry Welten is
acting as CFO advisor to Affimed. In June 2020, the Company announced the appointment of
Angus Smith as Affimed’s new permanent CFO, completing Affimed’s leadership team. Mr.
Smith will begin his employment on July 13, 2020 and will be based in Affimed’s New York
office.

In addition, the Company announced the appointment of Dr. Andreas Harstrick as Chief
Medical Officer, starting in March 2020 and the appointment of Dr. Arndt Schottelius as Chief
Scientific Officer, effective April 2020.

Affimed Annual Report 2019

Notes to the consolidated financial statements
(in € thousand)

As circumstances around the COVID-19 pandemic continue to rapidly evolve, the Group is
continuously assessing possible effects on its clinical trials and adapting the risk mitigation
measures implemented. Affimed is closely monitoring and adhering to relevant federal and
local guidelines on COVID-19 to ensure the safety and health of its global workforce and help
limit the spread of COVID-19, while maintaining business continuity. The Group has taken
mitigation steps to ensure that drug supply and other trial-related materials are ready and
available for the patients enrolled in its clinical trials. Due to the ongoing assessment of the
potential impact of the COVID-19 pandemic on patient enrollment and site activation in its
clinical studies, Affimed will update trial timelines after it has more visibility on the length and
extent of the COVID-19 crisis.

At this time, the impact of the outbreak on our business has been limited as research at our
facilities is uninterrupted and our liquidity remains healthy. We will take all necessary actions
to keep our operations running and, most importantly, protect our employees, suppliers,
customers and all other stakeholders.

Based on our current knowledge and available information, we do not expect COVID-19 to
have an impact on our ability to continue as a going concern in the future.

In May 2020, the Company filed a prospectus supplement and an open market sale agreement
with Jefferies LLC. Under this sale agreement the Company can issue shares during at-the-
market offerings. The Company has made use of this and issued approximately 8.4 million
shares and received net proceeds of approximately USD 24.7 million up to now.
(cid:1)

Affimed Annual Report 2019

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 2019

Company balance sheet as at December 31, 2019

(before appropriation of result of the year)

In € thousand

Note

2019

2018

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

32
35

0
0

643
475
50.566
51.684
51.684

762
164.293
(95.985)
1.962
(21.442)
49.590

941
1.153
2.094
2.094
51.684

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

Affimed Annual Report 2019

Company profit and loss account

In € thousand

Note

Share in results from participating
interests after taxation

Other result after taxation

Net result

For the year ended
December 31,
2019

For the year ended
December 31,
2018

(14.321)

(7.121)

(21.442)

(14.329)

(5.148)

(19.477)

Affimed Annual Report 2019

Notes to the Company financial statements for the year ended 31 December
2019

29. 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 45 to 84.

30. 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 well into the first half of 2022.

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 2019

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.

31. 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 36 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, 2019
Effect of change in fair value of Amphivena shares held by Affimed GmbH
Share in result of Affimed GmbH

Net asset value as at December 31, 2019

14,953
(632)
(14,321)

Affimed GmbH holds preferred shares in Amphivena which are recognized at fair value through other
comprehensive income (see note 34).

The subsidiary Affimed GmbH has a negative net asset value and is valued at nil because the Company
does not fully or partially guarantee the debts of this participating interest, and has no constructive
obligation to support Affimed GmbH to pay its debt. The Company’s share in the negative equity value
of Affimed GmbH amounts to €10,924 thousand. The unrecognized share of the losses during the
financial year amounts to €10,924 thousand, which are also the accumulated losses of this participating
interest on the reporting date.

Affimed Annual Report 2019

32. Receivables from/payables to subsidiaries

These receivables and payables relate to Affimed GmbH and do not bear interest.

33. Cash and cash equivalents

Cash and cash equivalents have been fully pledged. We refer to note 36.

34. Equity

As of December 31, 2019 the number of issued common shares is 76,249,901 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, 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)

-
-
-
-
-

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

January 1, 2019

624

135,365

(78,977)

2,594

(19,477)

40,129

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

138
-

31,208
(2,306)

-
-

-
-
-
-
-
55

26
-
-
-
-

-
(19,477)
-
-
2,469

-
-

-
-
-
(632)
-

-
-

31,346
(2,306)

-
19,477
(21,442)
-
-

26
-
(21,442)
(632)
2,469

December 31, 2019

762

164,293

(95,985)

1,962

(21,442)

49,590

Affimed Annual Report 2019

Issued capital and share premium

On November 13, 2019, the Company issued 13,800,000 common shares in a public offering at a price
of $2.50 per common share resulting in aggregate net proceeds of €29.5 million.

According to the articles of association of the Company 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, 2019 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 20 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, 2019, changes in fair value amounted to
€5,363 thousand. The Company uses “Revaluation reserves” as the equity classification for these
changes resulting in a fair value of these shares of €1,962 thousand as of December 31, 2019 (see also
note 31).

Unappropriated result

The result after tax for 2019 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 2019

Reconciliation of shareholder’s equity and net result per the consolidated financial statements
with shareholder’s equity and net result per the Company financial statements

In 2019 there are differences between the shareholder’s equity and net result per the consolidated
financial statements with the shareholder’s equity and net result per the Company financial statements.
These can be explained as follows:

In € thousand

December 31, 2019

Shareholders’ equity according to the consolidated statement of financial

position

Unrecognized share of the losses Affimed GmbH

Shareholders’ equity according to the Company statement of financial position

In € thousand

Net result according to the consolidated profit and loss account
Unrecognized share of the losses Affimed GmbH

Net result according to the Company profit and loss account

38,667
10,923

49,590

2019

(32,365)
10,923

(21,442)

35. Other current payables

In € thousand

Trade payables
Social security and wage tax
Other liabilities

Total

All current payables are short-term.

36. Off balance sheet commitments

December
31, 2019

December
31, 2018

909
201
43

1,153

602
333
46

981

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

Affimed Annual Report 2019

financial statements (total value of €51.7 million in the Company’s financial statements at December 31,
2019).

37. 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

2019

1,086
(7,676)
23
(6,567)

400
(954)
(554)

(7,121)
-
(7,121)

2018

958
(7,618)
53
(6,607)

2,117
(658)
1,459

(5,148)
-
(5,148)

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 2019

38. Employee benefits and number of employees

The average number of employees during 2019 was 3 employees and consisted of managing directors
only. One managing director (Florian Fischer) passed away on February 1, 2020. The managing
director’s compensation is shown in note 39.

39. Related-party transactions

Director’s remuneration 2019

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

474
156
630

686

360
94
454

317

402
103
505

367

1,236
353
1,589

1,370

367

1,370

(in € thousand)

Hecht Ehmer Grau Modig Simon Verdonck

Total

Periodically paid
compensation

Total cash

compensation

2014 Plan share-based
payment expense1

Total share-based

payment expense

116

382

243

Director’s remuneration 2018

Managing directors

(in € thousand)

Hoess F. Fischer W. Fischer

Total

Periodically paid compensation
Bonuses
Total cash compensation

2014 Plan share-based payment

expense1

Total share-based payment

expense

462
315
777

575

351
180
531

249

351
182
533

153

1,164
677
1,841

977

Affimed Annual Report 2019

Supervisory directors

(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

382

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.

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 26 of the consolidated financial
statements.

Stock options granted under the Equity Incentive Plan 2014

Awards granted in 2019

Managing directors

Beneficiary

Grant date

Number of
options

Strike
price USD Expiration date

Adi Hoess ........................
Florian Fischer ................
Wolfgang Fischer ............
Total

June 25, 2019
June 25, 2019
June 25, 2019

360,000
160,000
160,000
680,000

2.91
2.91
2.91

June 25, 2029
June 25, 2029
June 25, 2029

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 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019
June 25, 2019

35,000
20,000
20,000
20,000
20,000
20,000
135,000

2.91
2.91
2.91
2.91
2.91
2.91

June 25, 2029
June 25, 2029
June 25, 2029
June 25, 2029
June 25, 2029
June 25, 2029

Affimed Annual Report 2019

Awards granted in 2018

Managing directors

Beneficiary

Grant date

Number of
options

Strike
price USD Expiration date

Adi Hoess ........................
April 20, 2018
April 20, 2018
Adi Hoess ........................
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

2.15
April 20, 2028
April 20, 2020
2.15
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

For further disclosure related to the stock options we refer to note 20 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).

40. 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.
2019

Other KPMG
network

Total
KPMG

2019

62
-
-
-

293
75
-
-

368

355
75
-
-

430

Affimed Annual Report 2019

(in € thousand)

Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services

41. Subsequent events

KPMG
Accountants
N.V.
2018

Other KPMG
network

Total
KPMG

2018

42
-
-
-

104
186
-
6

296

146
186
-
6

338

The Company announced early February 2020 that Dr. Florian Fischer, Chief Financial Officer (CFO) of
Affimed, passed away. During Affimed’s search for a new CFO, Harry Welten is acting as CFO advisor
to Affimed. In June 2020, the Company announced the appointment of Angus Smith as Affimed’s new
permanent CFO, completing Affimed’s leadership team. Mr. Smith will begin his employment on July
13, 2020 and will be based in Affimed’s New York office.

In addition, the Company announced the appointment of Dr. Andreas Harstrick as Chief Medical Officer,
starting in March 2020 and the appointment of Dr. Arndt Schottelius as Chief Scientific Officer, effective
April 2020.

As circumstances around the COVID-19 pandemic continue to rapidly evolve, the Group is continuously
assessing possible effects on its clinical trials and adapting the risk mitigation measures implemented.
Affimed is closely monitoring and adhering to relevant federal and local guidelines on COVID-19 to
ensure the safety and health of its global workforce and help limit the spread of COVID-19, while
maintaining business continuity. The Group has taken mitigation steps to ensure that drug supply and
other trial-related materials are ready and available for the patients enrolled in its clinical trials. Due to
the ongoing assessment of the potential impact of the COVID-19 pandemic on patient enrollment and
site activation in its clinical studies, Affimed will update trial timelines after it has more visibility on the
length and extent of the COVID-19 crisis.

At this time, the impact of the outbreak on our business has been limited as research at our facilities is
uninterrupted and our liquidity remains healthy. We will take all necessary actions to keep our operations
running and, most importantly, protect our employees, suppliers, customers and all other stakeholders.

Based on our current knowledge and available information, we do not expect COVID-19 to have an
impact on our ability to continue as a going concern in the future.

In May 2020, the Company filed a prospectus supplement and an open market sale agreement with
Jefferies LLC. Under this sale agreement the Company can issue shares during at-the-market offerings.
The Company has made use of this and issued approximately 8.4 million shares and received net
proceeds of approximately USD 24.7 million up to now.

Affimed Annual Report 2019

Signing of the financial statements

July 7, 2020

Originally signed by:

Management Board:

Dr. Adi Hoess, CEO

Dr. Wolfgang Fischer, COO

Supervisory Board:

Dr. Thomas Hecht, Chairman

Dr. Bernhard Ehmer

Dr. Ulrich Grau

Berndt Modig

Dr. Mathieu Simon

Ferdinand Verdonck

Affimed Annual Report 2019

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 2019

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 2019

100

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. 4%)

Independent auditor’s report

The independent auditor’s report is set forth on the following pages.