Affimed N.V.
Amsterdam, The Netherlands
Annual Report 2020
Affimed Annual Report 2020
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
1
14
20
40
47
82
95
Affimed Annual Report 2020
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 2020
1
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 three programs, for which we retain full
global commercial rights, AFM13, AFM24 and AFM28. 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 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 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
or larger patient populations in earlier stages of diseases, beyond the relapsed/refractory disease
setting.
Our main offices and laboratories are located at the Technology Park adjacent to the German Cancer
Research Center (DKFZ) in Heidelberg, where we employ 112 people, approximately 66% of whom
Affimed Annual Report 2020
2
have an advanced academic degree. Including AbCheck (see description below) and Affimed Inc.
personnel, our total headcount is 163 (153 full time equivalents) as of mid of April 2021. 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 using a three-pronged
development approach, including development (i) as monotherapy, (ii) in combination with
adoptive NK cells, and (iii) in combinations with immunotherapies such as checkpoint inhibitors;
• 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 LLS, The MD Anderson Cancer
Center, Genentech and Roivant, and establish new collaborations;
•
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 for hematologic cancer
indications;
• Our development candidate, AFM24, is a first-in-class innate cell engager for solid tumor
indications;
• Our modular and versatile ROCK® platform, which we believe will enable future product
candidates and collaborations with pharmaceutical companies;
• We retain global commercial rights for AFM13, AFM24 and AFM28;
• 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.
Affimed Annual Report 2020
3
Our Research and Development Pipeline
We are developing a pipeline of innate cell engagers for the treatment of cancer as shown below*:
*As of mid of April 2021
Our most advanced 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. AFM13 is currently
being investigated as monotherapy in a phase 2 registration-directed study in patients with
relapsed/refractory peripheral T-cell lymphoma (PTCL), and in combination with adoptive NK cells in a
Phase 1 clinical study in collaboration with the MD Anderson Cancer Center.
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
EGFR-expressing solid tumors rather than inhibition of EGFR-mediated signal transduction. AFM24 is
currently being investigated as monotherapy in a first-in-human phase 1/2a study, and we intend to
commence two clinical studies investigating AFM24 in combination with adoptive NK cells and a PD-
L1 inhibitor, respectively, in the second half of 2021.
Our third wholly-owned ICE® molecule, AFM28, was selected from our ROCK® platform for an
undisclosed target. The selection of AFM28 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 advanced AFM28 into preclinical studies in 2020 and
expect to submit an IND application in the first half of 2022.
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
Affimed Annual Report 2020
4
candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple cancers.
The agreement included a license to AFM26, a tetravalent, bispecific B cell maturation antigen
(BCMA)- and CD16A-binding innate cell engager from our fit-for-purpose ROCK® platform, for the
treatment of multiple myeloma. AFM26 is now known as RO7297089. RO7297089 employs a unique
mechanism of action through high affinity engagement of NK cells and has demonstrated in vitro
efficacy against cells with very low levels of BCMA expression. NK cell binding of RO7297089 is
largely unaffected by IgG competition. During 2020, Genetech initiated a phase I study for
RO7297089.
AFM32 is another ICE® candidate in preclinical development against an undisclosed target. In
November 2020, we announced a License and Strategic Collaboration with Roivant Sciences Ltd.
("Roivant"), pursuant to which we granted Roivant a license to develop and commercialize AFM32 and
options to license additional novel ICE® molecules against other targets.
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.
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 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 our 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 ongoing
AFM24 phase 1/2a monotherapy clinical study. 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
pandemic.
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, 2020, we have raised an aggregate of €332.5 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, 2020, we incurred a net loss of €41.4 million. As of December 31, 2020, we had
an accumulated deficit of €275.9 million.
Affimed Annual Report 2020
5
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.
Roivant
On November 9, 2020, we announced that we entered into a license and strategic collaboration
agreement with a subsidiary of Roivant Sciences Ltd. ("Roivant") to develop and commercialize novel
ICE® molecules, including AFM32, in oncology. Under the terms of the agreement, we received $60
million in upfront consideration, comprised of $40 million in cash and pre-paid R&D funding, and $20
million of newly issued shares in Roivant Sciences Ltd. We are eligible to receive up to an additional
$2 billion in milestones over time upon achievement of specified development, regulatory and
commercial milestones, as well as tiered royalties on net sales.
We recognized revenues of €1.4 million in 2020.
Genentech
On August 24, 2018 we entered into a research collaboration and license agreement with Genentech,
a member of the Roche Group, for the development and commercialization of certain product
candidates that contain novel NK cell engager-based immunotherapeutics to treat multiple cancers.
Under the terms of the agreement, in the fourth quarter of 2018 we received $96 million in initial
upfront payments and other funding and additional payments in 2019 for development milestones and
a final target nomination.
We recognized revenues of €26.2 million in 2020.
Financial Operations Overview
Revenue
To date, our revenues have consisted principally of collaboration and service revenue.
Collaboration revenue. Collaboration revenue of €19.7 million for the year ended December 31, 2019
was from the Genentech collaboration. Collaboration revenue for year ended December 31, 2020
amounted to €27.8 million, with €26.2 million from the Genentech collaboration and €1.4 million from
the Roivant 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
€1.7 million and €0.6 million of service revenue in 2019 and 2020, respectively. Service revenue of
AbCheck is derived from third party contracts as well as from the utilization of the entity 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.
Affimed Annual Report 2020
6
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 for years 2019 and 2020 primarily relates to foreign exchange gains and income from
government grants for research and development projects of €348,000 in 2020 and €19,000 in 2019.
Research and Development Expenses
Research and development expenses consist principally of:
salaries for research and development staff and related expenses, including benefits;
costs for production of preclinical compounds and drug substances by contract manufacturers;
fees and other costs paid to contract research organizations in connection with additional
preclinical testing and the performance of clinical trials;
costs of related facilities, materials and equipment;
costs associated with obtaining and maintaining patents and other intellectual property;
amortization and depreciation of tangible and intangible fixed assets used to develop our
product candidates; and
expenses for share-based payments.
Based on our current budget we expect that our total research and development expenses in 2021 will
increase as compared to 2020. Our research and development expenses primarily relate to the
following key programs:
AFM13. The following is a summary of completed and ongoing research and development
activities for 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). In March 2021, we announced positive results from an interim futility analysis for the
study, and accordingly the study will continue to enroll patients until we reach approximately
100 - 110 response evaluable patients.
In September 2020, a phase 1 clinical study was initiated in collaboration with the University of
Texas MD Anderson Cancer Center (MDACC), in which MDACC is investigating the
combination of AFM13 with allogeneic NK cells. MDACC is administering a stable complex of
AFM13 pre-complexed with cord blood-derived allogeneic NK cells in different doses
(numbers of pre-complexed NK cells) into patients with relapsed/refractory CD30-positive
lymphoid malignancies.
Affimed Annual Report 2020
7
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, and the study is now complete.
In 2016, we initiated a phase 1b study investigating the combination of AFM13 with Merck's
anti-PD1 antibody Keytruda® (pembrolizumab) in patients with relapsed/refractory HL and the
study is now complete..
In 2015, an investigator-initiated monotherapeutic phase 2a clinical trial of AFM13 in
relapsed/refractory Hodgkin Lymphoma was initiated and the study is now complete.
We anticipate that our research and development expenses in 2021 for AFM13 will increase
compared to those for 2020 due to the initiation of new clinical studies, pre-clinical studies with
collaboration partners and the scale-up 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 currently enrolling a phase 1/2a clinical trial in patients with advanced
cancers known to express EGFR. During 2021, we expect to initiate clinical trials evaluating the
combination of AFM24 with adoptive NK cell transfer and anti-PD-L1 therapies, subject to receipt
of FDA clearance. We anticipate that our research and development expenses in 2021 for AFM24
will increase compared to those for 2020 due to the initiation of new clinical trials.
• Other projects and infrastructure costs. Our other research and development expenses relate to
our Genentech, Roivant and Artiva collaborations, and early-stage development/discovery
activities, including those for AFM28. 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 2021 due to increased early-stage
development/discovery activities.
Since January 1, 2012, we have cumulatively spent €235.2 million on research and development. In
the years ended December 31, 2018, 2019 and 2020, we spent €35.1 million, €43.8 million and €50.0
million, respectively, on research and development; €8.7 million, €19.5 million and €19.1 million
thereof on AFM13; €5.8 million, €2.4 million and -€0.8 million thereof on AFM11 and €5.8 million, €4.3
million and €8.7 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 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:
Affimed Annual Report 2020
8
•
•
•
•
•
•
the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other
related activities;
the cost of manufacturing clinical supplies and establishing commercial supplies of our product
candidates and any products that we may develop;
the number and characteristics of product candidates that we pursue;
the cost, timing, and outcomes of regulatory approvals;
the cost and timing of establishing sales, marketing, and distribution capabilities; and
the terms and timing of any collaborative, licensing, and other arrangements that we may
establish, including any milestone and royalty payments thereunder.
A change in the outcome of any of these variables with respect to the development of AFM13, AFM24
or any other product candidate that we may develop could mean a significant change in the costs and
timing associated with the development of such product candidate. For example, if the 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 2021 will be higher compared to the
expenses in 2020 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 2020
9
Results of Operations
The numbers below have been derived from our audited consolidated financial statements for the
years ended December 31, 2019 and 2020. 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, 2019 and 2020
Year ended
December 31,
2019 2020
(in € thousand)
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
21,391
290
28,360
626
(43,791) (49,989)
(10,266) (13,715)
(32,376) (34,718)
(6,647)
(32,361) (41,365)
(1)
(32,365) (41,366)
(32,997) (41,608)
(0.50)
(0.50)
(4)
15
Revenue
Revenue increased from € 21.4 million for the year ended December 31, 2019 to €28.4 million for the
year ended December 31, 2020. Revenue for the year ended December 31, 2020 largely consisted of
revenue from the Genentech collaboration. The increase in revenue in 2020 as compared to 2019 was
primarily driven by an increase in revenues from our Genentech collaboration and revenues
recognized from our collaboration with Roivant, which was signed in November 2020.
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,
2019
2020
Change %
(in € thousand)
19,471
2,418
4,327
16,671
904
43,791
19,089
(777)
8,660
21,493
1,524
49,989
(2)%
—
100%
29%
69%
14%
Research and development expenses increased 14% from €43.8 million in the year ended December
31, 2019 to €50.0 million in the year ended December 31, 2020, due to higher expenses for AFM24
and for other projects and infrastructure. The variances in project related expenses between the year
ended December 31, 2019 and the corresponding period in 2020 are mainly due to the following
projects:
• AFM13. In the year ended December 31, 2020, we incurred lower expenses (2%) than in the year
ended December 31, 2019 primarily due to lower expenses for manufacturing activities for clinical
trial material.
• AFM11. In the year ended December 31, 2020, no significant costs were incurred, however, we
did recognize refunds from service providers following the termination of clinical trials, as well as
Affimed Annual Report 2020
10
from the reversal of provisions for possible termination costs which were initially recognized in
2019. The majority of the expenses in the year ended December 31, 2019 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, 2020, we incurred significantly higher expenses (100%)
which related to the initiation of the phase 1/2a clinical trial and manufacturing activities for the
clinical trial material. Expenses in the year ended December 31, 2019 primarily related 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, 2020, expenses
increased (29%) compared to the year ended December 31, 2019, primarily due to higher
expenses incurred in relation to our discovery/early stage development activities and infrastructure
costs.
General and administrative expenses
General and administrative expenses increased 33.6% from €10.3 million in the year ended December
31, 2019 to €13.7 million in the year ended December 31, 2020. In 2020, general and administrative
expenses were largely comprised of personnel expenses of €6.3 million (2019: €5.4 million) which
increased predominately due to higher headcount and legal, consulting and audit costs of €5.6 million
(2019: €3.1 million). Legal, consulting and audit costs increased compared to 2019 primarily due to an
increase in fees paid to outside legal firms for matters related to existing and new license agreements,
including the termination of our license agreement with Xoma and our agreement with Roivant, and an
increase in legal fees related to SEC reporting matters.
Finance income / (costs)-net
We recognized finance net costs for the year ended December 31, 2020 of €6.6 million compared to
€15,000 income for the year ended December 31, 2019. The year ended December 31, 2020 was
primarily affected by foreign exchange losses of €6.7 million primarily related to assets denominated
in U.S. dollars as a result of the weakening of the U.S. dollar compared to the Euro during 2020. The
year ended December 31, 2019 was primarily affected by interest income of €0.6 million and interest
expenses of €0.5 million.
Income tax expense
During the year ended December 31, 2020, we recorded income tax expense of €1,000 compared to
€4,000 for the year ended December 31, 2019 due to changes in deferred taxes.
Liquidity and Capital Resources
Since our inception, we have not generated any revenue from product sales and we have incurred
significant operating losses. For the years ended December 31, 2019 and 2020 we incurred net losses
of €32.4 million and €41.4 million, respectively. We have funded our operations to date with the
proceeds principally from the sales of of our common shares and payments from collaboration partners.
Our cash and cash equivalents as of December 31, 2020 consist primarily of deposits in current,
savings and deposit accounts with original maturities of three months or less. We expect to continue
this investment philosophy, though we may in the future decide to invest our available liquidity in other
financial instruments. 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 at
least into the second half of 2023.
As part of our contractual obligations, we are also bound by certain operating lease obligations.
Operating lease obligations consist of payments pursuant to non-cancellable operating lease
agreements relating to our lease of office and laboratory space. Approximately 60% of the space in
Germany is under a revolving 24-month lease period, with a 12-month termination period. The lease
could expire in 2023 if notice to terminate is provided by either party by February 2022. No such notice
has been received to date. Approximately 30% of this facility was under a fixed term lease period until
February 2021 and prolongations are currently in preparation. The remaining 10% is under a fixed term
Affimed Annual Report 2020
11
lease period until March 2025. We also lease office and laboratory space in the Czech Republic that is
contracted until December 2025 with a period of notice of three months.
During 2020, we entered into two 'at-the-market' share sale agreements which resulted in the sale of
in total approximately 20.4 million common shares primarily to new investors. In May 2020, we
implemented a $50 million at-the-market (ATM) program that resulted in the sale of 12.5 million
common shares and generated net proceeds of €34.5 million in the aggregate. In November 2020, we
entered into a new $75 million ATM program, and as of December 31, 2020 an additional 7.9 million
common shares had been sold under the new ATM program, generating net proceeds of €34.5 million.
Cash Flows
Comparison of the years ended December 31, 2019 and 2020
The table below summarizes our consolidated statement of cash flows for the years ended December
31, 2019 and 2020:
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)
2020
(29,056)
4,340
26,038
1,322
94,829
(917)
95,234
(19,400)
8,006
69,252
57,858
95,234
(6,238)
146,854
Net cash used in operating activities amounted to €29.1 million for the year ended December 31, 2019
whereas net cash used in operating activities amounted to €19.4 million in the year ended December
31, 2020. The amount in 2020 includes an initial upfront payment and committed funding of €33.3
million (USD 40 million) from the Roivant collaboration.
We generated cash from investing activities of €4.3 million in the year ended December 31, 2019,
compared to €8.0 million in the year ended December 31, 2020. 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, 2020 amounted to €69.3
million (2019: €26.0 million) and relate primarily to the net proceeds received from the at-the-market
sale of common shares amounting to €69.0 million.
Cash and Funding Sources
Our cash and cash equivalents as of December 31, 2020 were €146.9 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 SVB Credit Facility matured in November 2020.
Affimed Annual Report 2020
12
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.
In May 2020, we implemented a $50 million at-the-market (ATM) program providing for the sale of
shares over time, which resulted in the sale of in total 12.5 million common shares and generated net
proceeds of €34.5 million in the aggregate. In November 2020, we entered into a new ATM program
for an amount not to exceed $75 million, and as of December 31, 2020 a further 7.9 million common
shares were sold, generating net proceeds of €34.5 million in the aggregate.
On January 8, 2021, we entered into a new loan agreement with SVB. The loan agreement provides
us with a senior secured term loan facility (the "2021 SVB Credit Facility") for up to €25.0 million, of
which €10.0 million was available at closing and drawn in February 2021, and €15.0 million of which is
available in two additional tranches of €7.5 million each, subject to the satisfaction of certain milestones
and conditions.
The interest rate on amounts borrowed under the 2021 SVB Credit Facility is calculated as the sum of
(i) the European Central Bank Base Rate plus (ii) an applicable margin of 5.5%, with European Central
Bank Base Rate deemed to equal zero percent if the European Central Bank Base Rate is less than
zero percent. The 2021 SVB Credit Facility matures in November 2025 with an interest-only period
through December 1, 2022, or June 1, 2023 if we draw on all tranches of the loan, with amortized
payments of principal and interest thereafter in equal monthly installments. Borrowings under the 2021
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 15, 2021, we closed the sale of 16,666,667 of our common shares at a price of $6.00 per
share in an underwritten public offering. Concurrent with closing, underwriters exercised an option to
purchase additional shares and we sold an additional 2,500,000 shares at a price of $6.00 per share.
We received approximately $108 million in net proceeds from the offering, 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, including
AFM13, AFM24 and AFM28. If we receive regulatory approval for AFM13, AFM24, AFM28 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 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.
Affimed Annual Report 2020
13
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 at least into the
second half of 2023. 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 have or 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 2020 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 2020 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 15, 2021, 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
Affimed Annual Report 2020 15
products, and their facilities, will continue to be subject to regulatory review and periodic inspections to
ensure adherence to applicable regulations. After receiving marketing approval, the manufacturing,
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. For example, although we are continuing to enroll patients in our phase 2 study of AFM13 as
monotherapy in relapsed or refractory patients suffering from peripheral T cell lymphoma, we have
paused enrolment in an exploratory cohort intended to investigate the initial efficacy of AFM13 as
monotherapy in patients suffering from transformed mycosis fungoides (T-MF) given the challenges
presented by the ongoing pandemic.
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. 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
Affimed Annual Report 2020 16
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
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.
Risks Related to our Financial Position and need for Additional Capital
We have incurred significant losses since inception and anticipate that we will continue to incur losses
for the foreseeable future. We have no products approved for commercial sale, and to date we have
not generated any revenue or profit from product sales. 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.
We expect to need additional funding in the future, which may not be available to us on acceptable
terms, or at all, which could force us to delay or impair our ability to develop or commercialize our
products.
Our current available cash and cash equivalents may not be sufficient to finance our long term
research, development and commercialization programs. Therefore, additional funds will be required.
There can be no assurance that additional funds will be available on a timely basis, on favorable
terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement
our long term business strategy. If we are unable to raise such additional funds through collaboration
arrangements or equity or debt financing, we may need to delay, scale back or cease expenditures for
some of our longer term research, development and commercialization programs, or grant rights to
develop and market products that we would otherwise prefer to develop and market ourselves,
thereby reducing their ultimate value to us. Our inability to obtain additional funds necessary to
operate the business could materially and adversely affect the market price of our shares and all or
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 2020 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.
Risks Related to Information Technology Systems or Infrastructure
In the ordinary course of business, we and our business partners store sensitive data, including
intellectual property and proprietary information related to our business and our business partners, on
our information technology systems. Despite the implementation of security measures, these systems
are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural
disasters, terrorism, war and telecommunication, electrical and other system failures due to employee
error, malfeasance or other disruptions. We could experience a business interruption, intentional theft
of confidential information or reputational damage, including damage to key customer and partner
relationships, from system failures, espionage attacks, malware, ransomware or other cyber-attacks.
Such cyber-security breaches may compromise our system infrastructure or lead to data leakage,
either internally or at our contractors or consultants. In particular, system failures or cyber-security
breaches could result in the loss of nonclinical or clinical trial data from completed, ongoing or planned
trials, which could cause delays in our regulatory approval efforts and significantly increase our costs
to recover or reproduce the data. The risk of a security breach or disruption, particularly through cyber-
attacks, has generally increased as the number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data
or applications, or inappropriate disclosure of confidential or proprietary information, including
protected health information or personal data of employees or former employees, we could be subject
to legal claims or proceedings, liability under laws and regulations governing the protection of health
and other personally identifiable information and related regulatory penalties. In any such event, our
business, results of operations, financial position and cash flows could be materially adversely
affected.
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 (€20.0 million, 2019: €3.2 million) cash and cash equivalents (€146.9 million, 2019:
€95.2 million), trade and other receivables (€2.4 million, 2019: €1.5 million), and certificates of deposit
(€0.0 million, 2019: €8.9 million), represents the maximum credit exposure of €169.3 million (2019:
€108.8 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.
Affimed Annual Report 2020 18
Interest rate risks
The Group's interest rate risk arises from cash accounts.
Market interest rates on cash and cash equivalents as well as on term deposits were low, and in some
cases negative, resulting in interest income of €186,000 in 2020. A shift in interest rates (increase or
decrease) could potentially have a material impact on the loss of the Group.
Other price risks
The fair value of the shares in Amphivena and Roivant depends on the estimated share price. The total
exposure of the Group amounts to €20.0 million.
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. 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 and Roivant Life Sciences Limited collaboration that will be spent in
euros according to our budget. The company does not apply additional hedging methods. Assets and
liabilities and income and expenses of Group companies, other than the euro, are translated to euro at
foreign exchange rates prevailing at the balance sheet date and the dates of the transactions
respectively.
Cash surpluses, held in a currency other than the functional currency, are not used for speculative
purposes. We do not enter into contracts that reflect the changes in the value of foreign currency
exchange rates to preserve the value of assets, commitments and anticipated transactions. Therefore,
fluctuations in exchange rates may distort year-to-year comparisons of financial performance.
In 2020, if the Euro had weakened/strengthened by 10% against the US dollar with all other variables
held constant, the loss would have been €11.2 million (2019: €5.7 million) higher/lower, mainly as a
result of foreign exchange gains/losses on remeasurement 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 2020 than in 2019 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.
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.
Affimed Annual Report 2020 19
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.
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. The Company issued approximately 12.5 million
common shares under this ATM program, generating net proceeds of approximately €34.5 million.
In November 2020, the Company implemented a new ATM program providing for additional sales over
time of up to $75,000,000 of common shares. As of December 31, 2020 the Company had issued a
further approximately 7.9 million shares, generating further approximate €34.5 million in net proceeds.
In December 2020, Affimed filed a "shelf registration statement" with the SEC in order to offer and sell
securities to the public in multiple, future offerings for up to $225,000,000.
On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per share in a
public offering resulting in gross proceeds before deducting underwriting discounts and commissions
and estimated expenses of the offering of $115 million.
In January 2021, the Group entered into a loan agreement with Sillicon Valley Bank for up to €25
million, of which the Group was drawn €10 million in February 2021.
The Group expects that further funding will be required to complete the development of the existing
product candidates. Further, funding will also be required to commercialize the products if regulatory
approval is received.
Affimed Annual Report 2020
Corporate Governance Report
I.
GENERAL
20
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
Andreas Harstrick
Arndt Schottelius
Angus Smith
Age
Position
59
57
59
54
38
Chief Executive Officer
Chief Operating Officer
Chief Medical Officer
Chief Scientific Officer
Chief Financial Officer
Affimed Annual Report 2020
21
At the 2020 general meeting of the Company held on 4 August 2020, Adi Hoess and Wolfgang
Fischer were reappointed as managing directors with the titles of Chief Executive Officer and Chief
Operating Officer, respectively. At the same general meeting, Andreas Harstrick, Arndt Schottelius
and Angus Smith were appointed as managing directors, with the titles of Chief Medical Officer,
Chief Scientific Officer and Chief Financial Officer, respectively. The term of (re)appointment of all
five managing directors will end on the date of the annual general meeting of the Company to be
held in 2023.
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.
Andreas Harstrick, M.D., Chief Medical Officer. Dr. Harstrick agreed to serve as our Chief
Medical Officer, starting in March 2020. He brings 30 years of extensive experience in cancer drug
development, including the successful designing of clinical trials leading to approval of antibody
drugs (Erbitux®; Cyramza®) and in-depth experience in setting-up and managing clinical oncology
teams. Dr. Harstrick was Chief Medical Officer at Molecular Partners AG from 2015 to 2019, where
he oversaw clinical activities, including expansion of the clinical team, and was a member of the
Management Board. Between 2012 and 2014, Dr. Harstrick was Senior Vice President Medical
Sciences at ImClone Systems, a wholly-owned subsidiary of Eli Lilly and Company, where he was
also a member of the Lilly Oncology Program Review Board and the Lilly Oncology Business Unit
Development Committee. Prior to joining ImClone in 2008, Dr. Harstrick was Senior Vice President
Global Clinical Development Unit Oncology at Merck Serono until 2008. Dr. Harstrick is an
oncologist by training. He spent his medical career at the University Hospital and Cancer Center
Hannover, Germany; the Roswell Park Cancer Institute, Buffalo NY; as well as the West German
Cancer Center, Essen, Germany. He earned his MD at Medical School Hannover, Germany, and in
1999 he became Associate Professor for Internal Medicine, University of Essen, Germany.
Arndt Schottelius, M.D. Ph.D., Chief Scientific Officer. Dr. Schottelius joined Affimed as Chief
Scientific Officer in April 2020. He brings over 20 years of deep drug discovery and development
experience in cancer and immunology with a strong track record in building therapeutic antibody
pipelines and advancing drugs through development. Most recently, Dr. Schottelius was Executive
Vice President and Head of Research & Development at Kymab Group Limited, where he was
responsible for expanding the therapeutic antibody portfolio. Dr. Schottelius previously served as
Chief Development Officer at MorphoSys AG, developing the portfolio of proprietary therapeutic
Affimed Annual Report 2020
22
antibody programs in cancer and immunology. He was instrumental in in-licensing tafasitamab
(MOR208) and drove strategic direction and development of the MOR208 program into multiple
phase 2 trials, which were the basis for a fast-to-market registration path. Prior to his role at
MorphoSys, Dr. Schottelius was a Director and Medical Director, Immunology Development at
Genentech Inc., where he directed early and late-stage development programs of therapeutic
antibodies. Before joining Genentech, Dr. Schottelius held science and management positions in
immunology research at Schering AG and Berlex Biosciences. Dr. Schottelius holds a PhD and MD
degree from the Albert Ludwigs University of Freiburg and is a lecturer at Ludwig Maximilian
University of Munich with a habilitation in Experimental Internal Medicine. He practiced medicine as
a resident physician in gastroenterology at the Charité-Universitätsmedizin in Berlin, Germany, and
completed a postdoctoral fellowship at the Lineberger Cancer Center, University of North Carolina
at Chapel Hill.
Angus Smith, Chief Financial Officer and Co-President Affimed Inc. Mr. Smith joined Affimed
in July 2020 as Chief Financial Officer. Previously, he was Chief Financial Officer at Rockwell
Medical, Inc., a biopharmaceutical company developing and commercializing anemia therapies. He
has broad biopharmaceutical industry experience including financial strategy, capital markets,
business development and operations. Prior to Rockwell, Mr. Smith served as Senior Vice
President, Chief Business Officer and Principal Financial Officer at Pernix Therapeutics, a specialty
pharmaceutical company focused on the acquisition, development and commercialization of
prescription drugs. Mr. Smith began his career in healthcare investment banking, having most
recently served as Director in the Healthcare Investment Banking Group at Cantor Fitzgerald in
New York, NY. During his nearly decade-long investment banking tenure, he focused on strategic
and financial advice for life science and healthcare companies. He has worked on a substantial
number of transactions across the healthcare sector with an aggregate transaction value of more
than $15 billion. Mr. Smith holds a Bachelor of Arts in Mathematical Economics from Colgate
University in Hamilton, NY.
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
Annalisa Jenkins
M
M
M
F
Mathieu Simon
M
Ferdinand Verdonck M
M
Harry Welten
German
German
German/US
British
French/US
Belgian
Swiss
70
66
72
55
64
78
55
August 4, 2020
June 25, 2019
June 19, 2018
August 4, 2020
June 19, 2018
August 4, 2020
August 4, 2020
2023
2022
2021
2023
2021
2023
2023
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 Chairman
of Aelix Therapeutics and of the Board of 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 AG, until 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
Affimed Annual Report 2020
23
biopharmaceutical industry, he was certified in internal medicine and served as Co-Head of
the Program for Bone Marrow Transplantation at the University of Freiburg, Germany.
Bernhard R.M. Ehmer, Director. Dr. Ehmer has been a member of our supervisory board since
2016. He also served as chairman of the board of directors at Symphogen A/S, Denmark until
June 2020 and as chairman of the board of management of Biotest AG until April 2019.
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.
Annalisa M. Jenkins, Director. Dr. Jenkins has been a member of Affimed's supervisory board
since August 2020. Dr. Jenkins serves on the Board of Directors of AgeX Therapeutics, Inc.
(NYSE American: AGE), Avrobio, Inc. (Nasdaq: AVRO), Oncimmune Holdings plc (LSE: ONC)
and a number of privately held biotechnology and life science companies and is a committee
member of the science board to the FDA, which advises FDA leadership on complex scientific and
technical issues. Earlier, Dr. Jenkins served as the Chief Executive Officer of PlaqueTec Ltd. and
Dimension Therapeutics. Previously, Dr. Jenkins held various senior management level positions
at Merck Serono Pharmaceuticals, including Executive Vice President, head of global research
and development. Prior to that, Dr. Jenkins pursued a 15-year career at Bristol- Myers Squibb
with increasing responsibilities. Dr. Jenkins graduated with a degree in medicine from St.
Bartholomew's Hospital in the University of London and subsequently trained in cardiovascular
medicine in the UK National Health Service.
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 management roles (President Managing Director of
Wyeth SMA) and senior corporate role in Philadelphia, United States (SVP / Head of
International Marketing and Medical Affairs).
Harry Welten, Director. Mr. Welten has been a member of our supervisory Board since August
2020. He serves as chairman and member of the board of directors of several biotechnology
companies in Switzerland, Germany and the USA. Over the last 20 years, Mr. Welten served as
Chief Financial Officer of both public as well as venture capital financed biotech companies. Mr.
Welten has served in senior roles at UBS in Switzerland and New York for the first 15 years of his
career. Mr. Welten has degrees in Banking, Finance and Economics as well as an MBA (honours)
from Columbia University, NY, USA.
Affimed Annual Report 2020
24
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 of
Groupe SNEF, director and member of the audit committee of J.P. Morgan European Investment
Trust and director and chairman of the audit committee of biotechnology companies: uniQure N.V.
in the Netherlands and Movetis and Galapagos in Belgium. He has previously served as chairman
of Banco Urquijo and of Nasdaq Europe and as a director of Dictaphone Corporation. From 1992
to 2003, he was the managing director of Almanij NV, a financial services company which has
since merged with KBC, and his responsibilities included company strategy, financial control,
supervision of executive management and corporate governance, including board participation in
publicly-traded and privately-held companies in many countries. Mr. Verdonck holds a law degree
from KU Leuven and degrees in economics from KU Leuven and the University of Chicago.
Mr. Verdonck, whose term of appointment would expire at the end of the annual general meeting of the
Company to be held in 2023, has indicated that he will step down as a supervisory director on June 14,
2021.
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 five 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 having a
management board in which all five members are male. In order to increase gender diversity of the
management board we pay close attention to gender diversity in the process of recruiting and
appointing new management board candidates, as is demonstrated by the nomination by the
supervisory board of Ms. Denise Mueller as new member to the management board (Chief
Business Officer) at the upcoming annual general meeting of shareholders.
Affimed Annual Report 2020
Appointment, suspension and dismissal
25
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 seven supervisory directors.
The composition of the supervisory board has changed in 2020. The number of members of the
supervisory board was increased from five to seven members following the appointment of Mr.
Harry Welten and Ms. Annalisa Jenkins as supervisory board members at the annual general
meeting of shareholders in 2020. At that same general meeting, Dr. Thomas Hecht and Mr.
Ferdinand Verdonck were reappointed as supervisory board members. Mr. Verdonck will step
down as supervisory board member of the Company on June 14, 2021.
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 six members are
male and one member is female. In order to increase gender diversity of 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 appointment of Dr. Annalisa Jenkins as supervisory
board member at the annual general meeting of shareholders in 2020 and by the nomination by the
supervisory board of Mrs. Uta Kemmerich-Keil as supervisory board member at the upcoming
annual general meeting of shareholders.
Affimed Annual Report 2020
Appointment, suspension and dismissal
26
Supervisory directors are appointed by the general meeting of shareholders upon a binding
nomination of the supervisory board for a term of up to four years. The general meeting of
shareholders can suspend or dismiss a supervisory board member by an absolute majority of votes
cast, upon a proposal made by the supervisory board. If another party makes the proposal, a two-
thirds majority of the votes cast, representing more than half of the issued share capital, is
required. If this qualified majority is not achieved, a second general meeting as referred to in article
2:120 section 3 of the Dutch Civil Code may not be convened.
Diversity policy
In line with best practice provision 2.1.5 of the Code, the supervisory board has adopted a diversity
policy for the composition of the supervisory board, the management board and key leadership
positions (the "Diversity Policy"). The Diversity Policy contains specific diversity objectives to
improve the diversity within the supervisory board and the management board:
- Using best efforts to increase the gender diversity within the supervisory board whenever
one of the supervisory board members will be replaced or the supervisory board will be
extended;
- Using best efforts to increase the gender diversity within the management board whenever
one of the management board members will be replaced or the management board will be
extended.
In order to increase gender diversity, we pay close attention to gender diversity in the process of
recruiting and appointing new supervisory board or management board candidates. This is
demonstrated by the appointment of Dr. Annalisa Jenkins as a supervisory director at the annual
general meeting 2020, and by the nomination by the supervisory board of Ms. Denise Mueller for
appointment as managing director and Mrs. Uta Kemmerich-Keil for appointment as supervisory
director at the upcoming annual general meeting of shareholders.
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 2020.
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), Harry Welten 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
Affimed Annual Report 2020
27
Exchange Act. The supervisory board has determined that Ferdinand Verdonck and Harry Welten
qualify as “audit committee financial experts,” as such term is defined in the rules of the SEC.
The audit committee is responsible for the selection of the registered public accounting firm that
should serve as our independent auditor, and our supervisory board is responsible for
recommending the appointment of the independent auditor to the general meeting of shareholders.
In addition, the audit committee is responsible for the compensation, retention and oversight of the
independent auditor appointed by the general meeting of shareholders; pre-approving the audit
services and non-audit services to be provided by our independent auditor before the auditor is
engaged to render such services; evaluating the independent auditor's qualifications, performance
and independence, and presenting its conclusions to the full supervisory board on at least an
annual basis and reviewing and discussing with the management board and the independent
auditor our annual audited financial statements and quarterly financial statements prior to the filing
of the respective annual and quarterly reports, among other things. The audit committee is also
responsible for the oversight of our information security management system, including the audit
results of the information security certification and material information breaches and cybersecurity
attacks.
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 reviews information security matters no less than once per year. The audit committee
held ten meetings by conference call in 2020 and no in-person meetings.
Compensation committee
The compensation committee, which consists of Bernard Ehmer (Chairman), Thomas Hecht and
Harry Welten, 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 one meeting in person and seven meetings by conference call
in 2020.
Nomination and corporate governance committee
The nomination and corporate governance committee, which consists of Ulrich Grau (Chairman),
Thomas Hecht and Mathieu Simon, 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 by conference call in
2020 and no in-person meetings.
Affimed Annual Report 2020
Research and Development Committee
28
The research and development committee, which consists of Annalisa Jenkins (Chairwoman),
Ulrich Grau and Mathieu Simon, assists our supervisory board in aligning the R&D strategy of the
Company with the overall Company strategy, to evaluate critical junctures of research and
development activities and assess the competitive landscape and the impact on the Company's
strategy and business.
The research and development committee held two meetings by conference call in 2020 and no in-
person meetings.
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
remuneration policies were last amended by the general meeting of shareholders on 4 August
2020.
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.
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 termination payments, which shall be in line
with relevant market practices, and shall not exceed 100% of the managing director’s annual base
salary, increased with the average variable compensation (the "STI Variable Compensation")
over the last full three years, or if the term of office of the managing director is shorter than three
years, the average received STI Variable Compensation over the shorter period. For a dismissal
within six months after a change of control over the Company, the severance compensation shall
not exceed 200% of the managing director’s annual base salary, increased with the STI Variable
Compensation over the last full three years, or if the term of office of the managing director is
shorter than three years, the average received STI Variable Compensation over the shorter period.
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.
Affimed Annual Report 2020
29
The remuneration policy for our supervisory directors provides that each supervisory director is
entitled to an annual retainer of €20,000, provided that the chair of the supervisory board is entitled
to an annual retainer of €75,000. In addition, the chair of the audit committee is entitled to an
additional annual retainer of €15,000 and the chairs of other committees established by the
supervisory board 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
virtual/telephonic supervisory board meeting, provided the virtual/telephonic 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 virtual/telephonic committee meeting, provided the
virtual/telephonic meeting exceeds 30 minutes.
The Company is granting each newly elected member of the supervisory board an initial award of
stock options to purchase 60,000 ordinary shares of the Company (the “Initial Board Member
Award”). The Initial Board Member Award will be made on the date of the general meeting of the
Company in which the member was initially elected to the supervisory board If such dates falls
within a so-called 'closed period' according to Affimed's Insider Trading Policy, the granting date
shall be amended for such occasion to be the 15th day after the closed period has ended. 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, provides that the Company will annually grant the supervisory
board chair options to purchase 45,000 ordinary shares of the Company, and each other
supervisory director stock options to purchase 30,000 ordinary shares of the Company (each such
award referred to as an “Annual Award”). The grant date for the Annual Awards shall be
determined by the Supervisory Board and must (i) be in the first quarter of the financial year and (ii)
compliant with the Company´s Insider Trading Policy. Annual Awards will be made to supervisory
board members under the condition that they will remain in office after the annual general meeting
of that year. If, in any given year, a Supervisory Board member will no longer be in office after the
annual general meeting, he or she will not receive an Annual Award for that year. 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
and as determined by the supervisory board of the company in accordance with the policy, based
on the approval by the shareholders of this remuneration policy and without any further decisions
or approvals by the supervisory board of 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, 2020, for services
in all capacities was approximately €2.9 million. As of December 31, 2020, we have no amounts
set aside or accrued to provide pension, retirement or similar benefits to our managing directors
and supervisory directors. In 2020, awards for approximately 1.6 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 41 to the Company only
financial statements and Note 28 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
Affimed Annual Report 2020
30
million common shares. On January 1 of any calendar year thereafter (including January 1, 2021),
an additional 5% of the total outstanding common shares on that date becomes available for
issuance under the 2014 Plan. As of January 1, 2021, we had approximately 14.4 million common
shares available for issuance, and approximately 8.0 million common shares subject to issuance
under outstanding awards. The absolute number of shares available for issuance under the 2014
Plan will increase automatically upon the issuance of additional shares by the Company. The
option exercise price for options under the 2014 Plan is the fair market value of a share as defined
in the 2014 Plan on the relevant grant date. We are following home country rules relating to the re-
pricing of stock options. Under applicable Dutch law, re-pricing is permissible, provided this falls
within the framework set by the remuneration policy for the management board and the 2014 Plan.
Plan administration. The 2014 Plan is administered by our compensation committee. Approval of
the compensation committee is required for all grants of awards under the 2014 Plan. The
compensation committee may delegate to the managing directors the authority to grant equity
awards under the 2014 Plan to our employees.
Eligibility. Managing directors, supervisory directors and other employees and consultants of the
Company are eligible for awards under the 2014 Plan.
Awards. Awards include options and restricted stock units.
Vesting period. Subject to any additional vesting conditions that may be specified in an individual
grant agreement, and the accelerated vesting conditions below, the plan provides for three year
vesting of stock options. One-third of the stock options granted to participants in connection with
the start of their employment vest on the first anniversary of the grant date, with the remainder
vesting in equal tranches at the end of each 3-month period thereafter. Stock options granted to
other participants vest in equal tranches at the end of each 3-month period after the grant date
over the course of the vesting period. The compensation committee will establish a vesting
schedule for awards granted to supervisory directors as well as for any awards in the form of
restricted stock units.
Accelerated vesting. Unless otherwise specified in an individual grant agreement, the 2014 Plan
provides that upon a change of control of the Company (as defined in the 2014 Plan) all then
outstanding equity awards will vest and become immediately exercisable. It also provides that upon
a participant’s termination of service due to (i) retirement (or after reaching the statutory retirement
age), (ii) permanent disability rendering the relevant participant incapable of continuing
employment or (iii) death, all outstanding equity awards that would have vested during a 12 month
period following such termination of service will vest and become immediately exercisable.
Otherwise at termination all unvested awards will be forfeited. If a participant experiences a
termination of service without “cause” or for “good reason” (in each case, as defined in the 2014
Plan) within six months prior to a change of control, the Company will make a cash payment
equivalent to the economic value that the participant would have realized in connection with the
change of control upon the exercise and sale of the equity awards that such participant forfeited
upon his or her termination of service. In connection with a change of control and subject to the
approval of the supervisory board, the management board may amend the exercise provisions of
the 2014 Plan.
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.
Affimed Annual Report 2020
31
Managing director and supervisory director services agreements
Our managing directors have entered into management services agreements with us or our
subsidiary, Affimed Inc. New management services agreements of Adi Hoess and Wolfgang
Fischer became effective upon their reappointment as managing directors by the general
meeting of shareholders on 4 August 2020. The management services agreements of Arndt
Schottelius and Andreas Harstrick became effective upon their appointment as managing
directors by the general meeting of shareholders on 4 August 2020. The management
services agreement of Angus Smith became effective on 13 July 2020.
The management services agreements of Adi Hoess, Wolfgang Fischer, Arndt Schottelius and
Andreas Harstrick are for a definite period of time, which period equals the term of office of the
managing director. In addition, the management services agreements of Adi Hoess, Wolfgang
Fischer, Arndt Schottelius and Andreas Harstrick provide for a termination notice period of not less
than six months, both for us and for the managing director. The management services agreement
of Angus Smith is for an indefinite period of time and provides for a termination notice period of 45
days, both for us and for Angus Smith. 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% (Adi Hoess) and 50% (Wolfgang Fischer, Arndt Schottelius and Andreas Harstrick) of the
managing director's gross annual salary increased with the average STI Variable Compensation
over the last full three years, or if the term of office of the managing director is shorter than three
years, the average received STI Variable Compensation over the shorter period. The severance for
Angus Smith is 75% of the managing director's gross annual salary and variable 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, Arndt Schottelius and Andreas Harstrick) of the
managing director's gross annual salary increased with the average STI Variable Compensation
over the last full three years, or if the term of office of the managing director is shorter than three
years, the average received STI Variable Compensation over the shorter period. The severance for
Angus Smith is increased to 125% of the managing director's gross annual salary and variable
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
Affimed Annual Report 2020
32
these individuals in any action or proceeding. In addition to such indemnification, we provide our
managing directors and supervisory directors with directors’ and officers’ liability insurance.
Insofar as indemnification of liabilities arising under the U.S. Securities Act of 1933 (the
“Securities Act”) may be permitted to supervisory directors, managing directors or persons
controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
V.
Related party transactions
The following is a description of related party transactions occurred in 2019 and 2020 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 supervisory director
Prior to his appointment as supervisory director of the Company, Harry Welten has provided
consultancy services to us and received related payments of €172,000 in 2020.
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.
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),
which is designed with the objective to:
increase Shareholder Value through well informed and thoughtful weighing of risks against
opportunities,
guide the employees in accurate management of risks, while realizing and fully exploiting
the opportunities,
address the applicable regulatory requirements,
ensure alignment across the entire Affimed organization on risk attitude, risk appetite and
risk materiality.
The ERM Policy covers:
Identification, assessment and treatment of risks by the Risk Owners, according to the
evaluation criteria and treatment strategies as defined by this Policy,
Risk consolidation and aggregation across the Affimed organization,
Continuous monitoring of identified risks and their defined treatments by the Risk Owners,
Reporting of risks, including ad-hoc risk reporting, to the Risk Committee, the management
board and supervisory board.
Affimed Annual Report 2020
Implementation effectiveness
33
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 key 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."
Information security risks
We are establishing a comprehensive Information Security Management System (ISMS) in
accordance with the VdS 10000 guideline. The key objective of our ISMS is to ensure:
Availability of data,
Confidentiality of data,
Integrity of data.
In March 2021, the Company’s ISMS was audited and re-certified in accordance with the VdS
10000 guideline without any identified deviations or findings. The sector-neutral VdS guidelines
10000 are a catalogue of measures for a management system that is specially tailored to small and
medium companies. VdS 10000 is based on good practice from BSI Grundschutz and ISO/IEC
27001.
Our ISMS consists of multiple elements ensuring security from a variety of perspectives and
regulations. We are planning further improvements to our ISMS by establishing additional elements
such as performance monitoring, supplier relationships and continual improvement processes. The
Company is implementing a plan to reach this status utilizing both internal and external expertise,
and implementation of the plan began in early 2020.
The Company has entered into an information security risk insurance policy, though to date the
Company has not experienced any security breaches.
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
- Clear assignment of responsibilities
- Segregation of duties and four eyes principle
- Appropriate financial accounting system including authorisation concepts
- Use of checklists when preparing quarterly and annual financial statements
- Use of guidelines and work procedures
Affimed Annual Report 2020
34
ITGC considerations
-
- 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, 2020, 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 2020. 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, 2020.
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, 2020, 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
The management board has implemented a Code of Conduct to ensure that we conduct our
business activities in accordance with the highest ethical, legal and professional standards. Our
Code of Conduct 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 Annual Report 2020
35
Affimed has also established suitable processes and devoted sufficient personnel resources for the
enforcement of this Code, subject to the supervision of the CEO and the nomination & corporate
governance 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 shareholders exercise their rights through annual and extraordinary general meetings of
shareholders. We are required to convene an annual general meeting of shareholders in the
Netherlands each year, no later than six months after the end of the Company’s financial year.
Additional extraordinary general meetings of shareholders may be convened at any time by the
supervisory board and the management board. Pursuant to Dutch law, one or more shareholders,
who jointly represent at least 10% of the issued capital may, on their application, be authorized by
a Dutch district court to convene a general meeting of shareholders.
The agenda for the annual general meeting of shareholders must contain certain matters as
specified in our articles of association and under Dutch law, including the adoption of our annual
financial statements. Shareholders are entitled to propose items for the agenda of the general
meeting of shareholders provided that they hold at least 3% of the issued share capital. Proposals
for agenda items for the general meeting of shareholders must be submitted at least 60 days prior
to the date of the meeting. The general meeting of shareholders is also entitled to vote on
important decisions regarding Affimed’s identity or character, including major acquisitions and
divestments.
In accordance with our articles of association, for each general meeting of shareholders, the
management board may determine that a record date will be applied in order to establish which
shareholders are entitled to attend and vote at the general meeting of shareholders. Such record
date shall be the 28th day prior to the day of the general meeting. The record date and the manner
in which shareholders can register and exercise their rights will be set out in the notice of the
meeting.
We encourage participation in Affimed’s general meetings of shareholders. All shareholders and
others entitled to attend general meetings of shareholders are authorized to attend the general
meeting of shareholders, to address the meeting and, in so far as they have such right, to vote. In
view of the current status of the COVID-19 pandemic, Affimed has decided that the 2021 annual
general meeting of shareholders will be held entirely virtual, as permitted under the Dutch
emergency bill ''Temporary Measures in the Field of the Ministry of Justice and Security in
connection with the Outbreak of COVID 19''.
Voting rights
In accordance with Dutch law and our articles of association, each issued common 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.
Affimed Annual Report 2020
36
Nonetheless, the holders of a right of use and enjoyment (vruchtgebruik) and the holders of a right
of pledge in respect of shares held by us or our subsidiaries in our share capital are not excluded
from the right to vote on such shares, if the right of use and enjoyment (vruchtgebruik) or the right
of pledge was granted prior to the time such shares were acquired by us or any of our subsidiaries.
Neither we nor any of our subsidiaries may cast votes in respect of a share on which we or such
subsidiary holds a right of use and enjoyment (vruchtgebruik) or a right of pledge. Shares which
are not entitled to voting rights pursuant to the preceding sentences will not be taken into account
for the purpose of determining the number of shareholders that vote and that are present or
represented, or the amount of the share capital that is provided or that is represented at a general
meeting of shareholders.
Decisions of the general meeting of shareholders are taken by an absolute majority of votes cast,
except where Dutch law or the articles of association provide for a qualified majority or unanimity.
In accordance with Dutch law and generally accepted business practices, our articles of
association do not provide quorum requirements generally applicable to general meetings of
shareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule
5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and
that such quorum may not be less than one-third of the outstanding voting stock.
Under our articles of association, our managing directors and supervisory directors are appointed
by the general meeting of shareholders upon a binding nomination by our supervisory board. The
general meeting of shareholders may overrule the binding nomination by a resolution adopted with
a two-thirds majority of the votes cast representing at least half of the issued share capital. If the
general meeting of shareholders overrules the binding nomination, the supervisory board shall
make a new binding nomination.
Issue of additional shares and pre-emptive rights
Shares may be issued following a resolution by the general meeting of shareholders on a proposal
of the management board made with the approval of the supervisory board. The general meeting of
shareholders may resolve to delegate this authority to the management board for a period of time
not exceeding five years.
At the general meeting of shareholders held at 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.
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.
Affimed Annual Report 2020
Repurchase by Affimed of its own shares
37
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 4 August 2020, our management board was granted
the authority, for a period of 18 months, with effect from the same date (i.e., until 4 February 2022)
and subject to the approval of the supervisory board, to cause the repurchase of common shares
by us of up to 10% of our issued share capital, for a price per share not exceeding 110% of the
most recent closing price of a common share on any stock exchange where the common shares
are listed.
No authorization of the general meeting of shareholders is required if common shares are acquired
by us with the intention of transferring such common shares to our employees under an applicable
employee stock purchase plan.
Articles of Association
Our articles of association outline certain of the Company’s basic principles relating to corporate
governance and organization. The current text of the articles of association is available at the
Trade Register of the 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 4 August 2020, the general meeting
of shareholders appointed KPMG Accountants N.V. as independent auditor for the Company for
the financial year 2020.
Anti-Takeover Provisions
Dutch law permits us to adopt protective measures against takeovers and we have adopted several
provisions that may have the effect of making a takeover of Affimed more difficult or less attractive,
including:
the staggered four-year terms of our supervisory directors, as a result of which only
approximately one-fourth of our supervisory directors will be subject to election in any one
year;
a provision that our managing directors and supervisory directors may only be removed by
the general meeting of shareholders by a two-thirds majority of votes cast representing at
least 50% of our outstanding share capital if such removal is not proposed by our
supervisory board;
Affimed Annual Report 2020
38
requirements that certain matters, including an amendment of our articles of association,
may only be brought to our shareholders for a vote upon a proposal by our management
board that has been approved by our supervisory board; and
a statutory response period. Under Dutch law, the management board can invoke a
response period by which a shareholder is prevented from convening a general meeting
putting new items on the agenda. As per May 1, 2021, a bill took effect extending the
statutory response period from 180 to 250 days.
X.
COMPLIANCE WITH DUTCH CORPORATE GOVERNANCE CODE
As a Dutch company, the Company is subject to the DCGC and is required to disclose in this
Annual Report, filed in the Netherlands, whether the Company complies with the provisions of the
DCGC. If the Company does not comply with the provisions of the DCGC (for example, because of
a conflicting Nasdaq requirement or otherwise), the Company must list the reasons for any
deviation from the DCGC in this Annual Report. The Company's deviations from the DCGC are
summarized below.
Remuneration
The Company has granted and intends to grant options and restricted stock units in the future to
members of its management board. These options provide for vesting conditions which allow
exercise of one third of the options after the first anniversary of the grant date, which qualifies
as a deviation from best practice provision 3.1.2 of the DCGC. Such vesting conditions are
market practice among companies listed at Nasdaq. The Company is in competition with other
companies in this field and intends to maintain an attractive compensation package for its
current and any future management board members.
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.
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 15, 2021 (available on our website:
http://www.affimed.com/sec).
The severance payments for our managing directors as described above, may exceed 100% of
their annual fixed salary. This is a deviation from best practice provision 3.2.3 of the DCGC.
Board nominations and shareholder voting
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.
Affimed Annual Report 2020
Chairman of the compensation committee
39
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.
May 20, 2021
On behalf of the Management Board,
Dr. Adi Hoess, CEO,
Dr. Wolfgang Fischer, COO
Dr. Arndt Schottelius, CSO
Dr. Andreas Harstrick, CMO
Angus Smith, CFO
Affimed Annual Report 2020
40
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 2020.
The Company had a number of corporate updates in 2020 and early 2021.
Following the passing away of our Chief Financial Officer ("CFO"), Dr. Florian Fischer early 2020, the
Company announced the appointment of Angus Smith as Affimed’s new CFO, completing Affimed’s
leadership team in June 2020. Mr. Smith started his role as CFO on July 13, 2020 and has been
appointed as a member of the Management Board at the annual general meeting of shareholders of the
Company on August 4, 2020 ("2020 AGM").
In May 2020, the Company implemented a $50 million at-the-market ("ATM") program providing for the
sale of shares over time, which resulted in the sale of in total 12.5 million common shares and generated
net proceeds of €34.5 million in the aggregate. In November 2020, the Company entered into a new ATM
program for an amount not to exceed $75 million, and as of December 31, 2020 a further 7.9 million
common shares were sold, generating net proceeds of €34.5 million in the aggregate.
In addition to Mr. Smith, at the 2020 AGM, Dr. Andreas Harstrick and Dr. Arndt Schottelius were
appointed as members of the Management Board, Dr. Andreas Harstrick with the title of Chief Medical
Officer and Dr. Arndt Schottelius with the title of Chief Scientific Officer. Dr. Andreas Harstrick started his
employment in March 2020 and Dr. Arndt Schottelius started his employment in April 2020. In addition, at
the 2020 AGM, Dr. Adi Hoess and Dr. Wolfgang Fischer were reappointed as members of the
Management Board with the titles of Chief Executive Officer and Chief Operating Officer, respectively.
On November 9, 2020, the Company announced that Affimed entered into a license and strategic
collaboration agreement with a subsidiary of Roivant Sciences Ltd. ("Roivant") to develop and
commercialize novel ICE® molecules, including AFM32, in oncology. Under the terms of the agreement,
the Company received $60 million in upfront consideration, comprised of $40 million in cash and pre-paid
R&D funding, and $20 million of newly issued shares in Roivant. The Company is eligible to receive up to
an additional $2 billion in milestones over time upon achievement of specified development, regulatory
and commercial milestones, as well as tiered royalties on net sales.
On January 8, 2021, the Company entered into a new loan agreement with SVB. The loan agreement
provides the Company with a senior secured term loan facility for up to €25.0 million, of which €10.0
million was available at closing and drawn in February 2021, and €15.0 million of which is available in two
additional tranches of €7.5 million each, subject to the satisfaction of certain milestones and conditions.
On January 15, 2021, the Company closed the sale of 16,666,667 of our common shares at a price of
$6.00 per share in an underwritten public offering. Concurrent with closing, underwriters exercised an
option to purchase additional shares and we sold an additional 2,500,000 shares at a price of $6.00 per
share. The Company received approximately $108 million in net proceeds from the offering, after
Affimed Annual Report 2020
41
deducting underwriting discounts and commissions and other offering expenses.
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 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 our 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.
Composition
The Supervisory Board determines the number of its members, provided that pursuant to our articles of
association, the Supervisory Board shall always consist of at least three members. The composition of the
Supervisory Board has changed in 2020. Thomas Hecht and Ferdinand Verdonck were re-appointed and
Harry Welten and Annalisa Jenkins were newly appointed at the 2020 AGM. Berndt Modig left the
Supervisory Board effective as of the date of the 2020 AGM. 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. In relation to Ferdinand Verdonck
stepping down as member of the Supervisory Board prior to the 2021 annual general meeting of
shareholders, the Supervisory Board deems it advisable to fill the resulting vacancy. Therefore, the
Supervisory Board has nominated for appointment at the 2021 annual general meeting of shareholders
Mrs. Uta Kemmerich-Keil as member of the Supervisory Board. 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
August 4, 2020
Thomas Hecht
2023
June 25, 2019
Bernhard Ehmer
2022
June 19, 2018
Ulrich Grau
2021
August 4, 2020
Annalisa Jenkins
2023
Mathieu Simon
June 19, 2018
2021
2023
Ferdinand Verdonck August 4, 2020
2023
August 4, 2020
Harry Welten
Age Gender
70
66
72
55
65
78
55
M
M
M
F
M
M
M
Nationality
German
German
German/US
British
French/US
Belgian
Swiss
Affimed Annual Report 2020
42
Meeting and activities
The Supervisory Board held four meetings by conference call in 2020 and no in-person meetings. The
Management Board attended these meetings. During these meetings, key areas of discussion were the
progress of the various projects, the main risks of the business, the financial situation, business
development activities and the implementation and monitoring of the business strategy.
In addition, the Supervisory Board discussed the Company’s internal control system with the audit
committee and the external independent auditor. The Supervisory Board, on the advice of the audit
committee, also discussed the result of the assessment of the structure and operation of the internal risk
management and control systems as well as significant changes thereto including the need for an internal
audit function. Based on the results of the review of the audit committee the Supervisory Board currently
does not see a need for an internal audit function.
The Supervisory Board reviewed the Company's annual financial statements, including non-financial
information. The report of the external auditor to the annual financial statements is included in the annual
accounts. The Supervisory Board agrees to the contents of the annual accounts and will recommend the
adoption thereof by the annual general meeting of shareholders.
All Supervisory Board members made adequate time available to give sufficient attention to matters
concerning Affimed. Each of the members was able to frequently attend Supervisory Board meetings.
Attendance at the Supervisory Board meetings during 2020 was as follows:
Thomas
Hecht
4/4
Meeting
Supervisory
Board
Audit Committee
Compensation
committee
Nomination and
corporate
governance
committee
Research and
development
committee
8/8
4/4
Bernhard
Ehmer
Ulrich
Grau
4/4
Annalisa
Jenkins
2/2
Mathieu
Simon
4/4
Ferdinand
Verdonck
4/4
Harry
Welten
2/2
Berndt
Modig
2/2
4/4
10/10
3/3
3/3
7/7
4/4
10/10
4/4
1/1
5/6
4/5
4/4
2/2
2/2
2/2
The Supervisory Board also held several non-formal Supervisory Board meetings which are attended by
the Management Board. In addition, the members of the Supervisory Board have regular contact with the
members of the Management Board outside of the scheduled meetings of the Supervisory Board. These
informal consultations ensure that the Supervisory Board remains well-informed about the Company’s
operations.
Affimed Annual Report 2020
43
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 2020 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 2020. The conclusions from this review have been
discussed with the Management Board as well as the individual Management Board members.
During the financial year 2020 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 four 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 (as of December 31, 2020).
Name
audit committee
compensation
committee
nomination and
corporate
governance
committee
research and
development
committee
member
chairperson
member
chairperson
member
member
chairperson
member
member
member
member
chairperson
Bernhard Ehmer
Ulrich Grau
Thomas Hecht
Harry Welten
Mathieu Simon
Ferdinand Verdonck
Annalisa Jenkins
Audit committee
The audit committee assists the Supervisory Board in overseeing Affimed’s accounting and financial
reporting processes, the audits of the financial statements and information security. 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 2020, 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,
Affimed Annual Report 2020
44
discussion of the financing situation and the tax policy. In 2020 the audit committee started to oversee the
Company´s information security system. At least once a year the committee is informed about risks for the
Company and mitigating and preventive measures.
The financial statements of the Company for 2020 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 ten meetings by conference call in 2020 and no in-person meetings.
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 2020, the nomination and corporate governance committee's main areas of focus were reviewing the
profile of the Supervisory Board, preparing the self-assessments of the Supervisory Board and its
committees, composition and succession planning of the Supervisory Board and Management Board,
discussing contract extensions and new contracts of the Management Board and analysing corporate
governance topics.
The nomination and corporate governance committee held four meetings by conference call in 2020 and
no in-person meetings.
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 2020, 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 one meeting in person and seven meetings by conference call in 2020.
Research and Development Committee
The research and development committee assists the Supervisory Board in aligning the R&D strategy of
the Company with the overall Company strategy, to evaluate critical junctures of research and
Affimed Annual Report 2020
45
development activities and assess the competitive landscape and the impact on the Company's strategy
and business.
The research and development committee held two meetings by conference call in 2020 and no in-person
meetings.
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
exceptions 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 15, 2021 (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 2020, all but one of our members of the Supervisory Board
were independent in accordance with the Dutch Corporate Governance Code. Pursuant to the Dutch
Corporate Governance Code, Harry Welten is considered non-independent due to his former relationship
with Affimed as consultant prior to his appointment as member of the Supervisory Board in 2020. All
members of the Supervisory Board are considered independent pursuant to the Nasdaq listing rules.
Appreciation
The Supervisory Board is of the opinion that during the year 2020, 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.
Affimed Annual Report 2020
46
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 2020. In particular, the
Supervisory Board would very much like to thank our shareholders for their continued support.
May 20, 2021
On behalf of the Supervisory Board,
Dr. Thomas Hecht,
Chairman of the Supervisory Board
Affimed Annual Report 2020
47
Consolidated Financial Statements
Consolidated statements of comprehensive loss
Consolidated statements of financial position
Consolidated statements of cash flows
Consolidated statements of changes in equity
Notes to the consolidated financial statements
Affimed Annual Report 2020 48
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)
Weighted number of common shares outstanding
Note
9
10
11
12
14
15
17
2020
2019
2018
28,360
626
(49,989)
(13,715)
(34,718)
(6,647)
(41,365)
(1)
(41,366)
21,391
290
(43,791)
(10,266)
(32,376)
15
(32,361)
(4)
(32,365)
23,735
1,515
(35,148)
(9,638)
(19,536)
60
(19,476)
(1)
(19,477)
(242)
(242)
(41,608)
(0.50)
(632)
(632)
(32,997)
(0.50)
(4,731)
(4,731)
(24,208)
(0.32)
83,471,559 64,242,396
60,514,407
The Notes are an integral part of these consolidated financial statements.
Affimed Annual Report 2020 49
Affimed N.V.
Consolidated statements of financial position
(in € thousand)
ASSETS
Non-current assets
Intangible assets
Leasehold improvements and equipment
Long term financial assets
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,
2020
December 31,
2019
16
17
18
20
19
21
24
9
26
25
23
24
26
9
1,718
2,226
20,042
940
24,926
146,854
0
2,439
246
1,260
150,799
137
2,291
3,193
824
6,445
95,234
8,902
1,482
296
0
105,914
175,725
112,359
983
345,164
1,720
(275,874)
71,993
762
270,451
1,962
(234,508)
38,667
231
35,992
482
36,705
11,394
0
92
492
55,049
67,027
278
37,961
272
38,511
10,674
517
2,105
532
21,353
35,181
TOTAL EQUITY AND LIABILITIES
175,725
112,359
The Notes are an integral part of these consolidated financial statements.
Affimed Annual Report 2020 50
Affimed N.V.
Consolidated statements of cash flows
(in € thousand)
Cash flow from operating activities
Loss for the period
Adjustments for the period:
—Income taxes
—Depreciation and amortization
—Net gain/(losses) from disposal of leasehold improvements and
equipment
—Share based payments
—Finance income / costs—net
Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade, other payables, provisions and contract liabilities
Cash used in operating activities
Interest received
Paid interest
Paid income tax
Net cash flow from 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 current 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
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.
Note
2020 2019 2018
(41,366) (32,365) (19,477)
1
1,115
34
4
906
(5)
1
403
25
22
14
18
18
21
21
24
26
24
2,469
3,381
6,647
2,035
(60)
(30,188) (29,006) (17,073)
(15)
(1,065)
50
(1,260)
12,848
(322)
33
(19)
(36)
340
121
(791) 66,856
49,563
218
(342)
(1)
49,438
0
(19,615) (29,460)
628
(224)
294
(78)
(1)
(19,400) (29,056)
(9)
(431)
(150)
(1,324)
(30)
(691)
0
0
1
(8,101) (45,131) (14,029)
0
50,945
16,547
(861)
(15,610)
8,006
4,340
0
0
74,195
(2,294)
0
(521)
31,373
(2,215)
562
(405)
(2,128) (3,277) (2,917)
69,252 26,038 20,495
25,113
(1,701)
0
00
(917)
1,322
(6,238)
57,858
669
54,323
95,234 94,829 39,837
146,854 95,234 94,829
Affimed Annual Report 2020 51
Affimed N.V.
Consolidated statements of changes in equity
(in € thousand)
Note
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
Balance as of December 31, 2018
Balance as of January 1, 2019
Issue of common shares
Exercise of share based payment awards
Equity-settled share based payment
awards
Loss for the period
Other comprehensive income
Balance as of December 31, 2019
Balance as of January 1, 2020
Issue of common shares
Exercise of share based payment awards
Equity-settled share based payment
awards
Loss for the period
Other comprehensive income
Balance as of December 31, 2020
Issued
capital
468
156
Capital
reserves
213,778
Fair value
reserves
7,325
23,171
71
2,035
Accumulated
deficit
Total
equity
(182,667) 38,904
23,327
71
2,035
624
624
138
239,055
239,055
28,901
26
2,469
762
762
205
16
270,451
270,451
68,341
2,991
3,381
(4,731)
2,594
2,594
(632)
1,962
1,962
(19,477)
(19,477)
(4,731)
(202,144) 40,129
(202,144) 40,129
29,039
26
2,469
(32,365)
(32,365)
(632)
(234,508) 38,667
38,667
(234,508)
68,546
3,007
3,381
983
345,164
(242)
1,720
(41,366)
(41,366)
(242)
(275,874) 71,993
21
22
22
17
The Notes are an integral part of these consolidated financial statements.
Affimed Annual Report 2020 52
1.
Reporting entity
Affimed N.V. is a Dutch company with limited liability (naamloze vennootschap) and has its
corporate seat in Amsterdam, the Netherlands. Affimed N.V. is registered in the Trade Register
of the Chamber of Commerce under the number 60673389.
The consolidated financial statements are comprised of Affimed N.V., and its controlled (and
wholly owned) subsidiaries Affimed GmbH, Heidelberg, Germany, AbCheck s.r.o., Plzen,
Czech Republic, Affimed Inc., Delaware, USA and AbCheck Inc., Delaware, USA (together
“Affimed” or the “Group”).
Affimed is a clinical-stage biopharmaceutical company focused on discovering and developing
highly targeted cancer immunotherapies. The Group’s product candidates are developed in
the field of immuno-oncology, which represents an innovative approach to cancer treatment
that seeks to harness the body’s own immune defenses to fight tumor cells. Affimed has its
own research and development programs, strategic collaborations and service contracts,
where the Group is performing research services for third parties.
2.
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 2020. The consolidated financial statements of Affimed N.V. as of and for the
year ended 31 December 2020 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 2020.
3.
Financial reporting period
These financial statements cover the year 2020, which ended at the balance sheet date of 31
December 2020.
4. Going concern
The financial statements of the Company have been prepared on the basis of the going
concern assumption.
5.
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.
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 82 to 94.
Affimed Annual Report 2020 53
6.
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.
The consolidated financial statements were authorized for issuance by the management board
and supervisory board on May 20, 2021.
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 14) and monetary assets and
liabilities denominated in foreign currencies which are remeasured 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/losses on transactions between
group companies are eliminated.
Functional and presentation currency
The consolidated financial statements are presented in euro. The functional currency of the
Company and its’ subsidiaries is the euro. 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 2020, which ended at December 31,
2020.
Affimed Annual Report 2020 54
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’.
7.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented
in these consolidated financial statements.
Revenue recognition
The Group generates revenues from the provision of research and development services to
third parties based on both Group and third party owned intellectual property. Such services
are performed on a “best efforts” basis without a guarantee of technological or commercial
success. For some research programs, Affimed entered into collaborations with other
companies that 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
Affimed Annual Report 2020 55
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
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.
Affimed Annual Report 2020 56
Research and development
Costs incurred related to research activities are expensed in the period when they are incurred.
Costs incurred on development projects are recognized as intangible assets beginning on the
date it can be established that it is probable that future economic benefits attributable to the
asset will flow to the Group considering its technological and commercial feasibility. Given the
current stage of the development of the Group’s candidates and technologies, no development
expenditures have been capitalized in any of the periods presented in these consolidated
financial statements. Intellectual property-related costs for patents are part of the expenditure
for the research and development projects. Therefore, registration costs for patents are
recognized as expensed when incurred as long as the research and development project
concerned does not meet the criteria for capitalization.
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, 2019 and 2020,
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
Affimed Annual Report 2020 57
The Group receives certain government grants that support its research effort in specific
projects. These grants are generally provided in the form of reimbursement of approved costs
incurred as defined in the respective grants. Income in respect of grants also includes
contributions towards the costs of research and development. Income is recognized when
costs under each grant are incurred in accordance with the terms and conditions of the grant
and the collectability of the receivable is reasonably assured.
Government grants relating to costs are deferred and recognized in the income statement over
the period necessary to match them with the costs they are intended to compensate. When
the cash in relation to recognized government grants is not yet received the amount is included
as a receivable on the statement of financial position.
The 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
Affimed Annual Report 2020 58
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.
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.
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 and losses from foreign
exchange differences.
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 shares, trade and other receivables, other
assets and 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 held to collect solely payments of
principal and interest. 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 Therapeutics Inc., USA, and common shares
in Roivant Ltd, USA, designated at fair value through other comprehensive income (see note
14).
(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
derecognizes a financial liability when its contractual obligations are discharged, cancelled or
expire.
(iii) Compound financial instruments
Affimed Annual Report 2020 59
The Group entered into a loan agreement pursuant to which it issued warrants to purchase
common shares of the Group at the option of the respective holders (for warrants issued to
SVB see note 21). The number of shares to be issued does not vary with changes in their fair
value.
The liability component of the loan 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.
As of December 31, 2020 the loan was fully repaid.
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
through profit or loss. No impairments or reversals of impairments were recognized in 2018,
2019 or 2020.
(ii)
Intangible assets and leasehold improvements and equipment
Affimed Annual Report 2020 60
Intangible assets that are acquired by the Group and have finite useful lives are measured at
cost less accumulated amortization and any accumulated impairment losses. Items of
property, plant and equipment are measured at cost, which includes capitalized borrowing
costs, less accumulated depreciation and any accumulated impairment losses.
Amortization and depreciation is calculated using the straight-line method over the estimated
useful lives, and is recognized in profit or loss. Depreciation and amortization methods and
useful lives are reviewed at each reporting date and adjusted if appropriate.
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.
Subsequent events
Affimed Annual Report 2020 61
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, other assets, 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 3 measurement
procedures (see note 14 and 21).
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 21) and options
under share-based payment programs (see note 19) which potentially have a dilutive effect;
no instruments actually had a dilutive effect.
Critical judgments and accounting estimates
The preparation of the consolidated financial statements in conformity with EU-IFRSs requires
management to make judgments, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Affimed Annual Report 2020 62
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 N.V. issued 240,000 options under its share-based-payment
program, the vesting of which deviates from the standard 3 year vesting scheme and depends
upon a market parameter, which is the average price of Affimed N.V. shares during a certain
period of time as described in note 19. 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, 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.
Affimed Annual Report 2020 63
The determination of whether a performance obligation is satisfied at a point in time versus
over time might also require 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 owns preferred shares in Amphivena Therapeutics Inc. (“Amphivena”) and common
shares in Roivant Sciences Ltd. (“Roivant”) classified as long-term financial assets and
classifies them as equity instruments at fair value through other comprehensive income. As
neither Amphivena nor Roivant are public companies, substantial judgment was required in
estimating the fair values as at December 31, 2020 (see note 17).
For the valuation of the shares of Amphivena, the Group based its estimate primarily on
observable financing round valuations and considered certain other publicly available
information as well as relevant qualitative information provided by Amphivena as of the
respective valuation dates (level 3).
The fair value of the shares in Roivant was based on an observable financing round valuation,
which was adjusted as of the respective valuation dates considering certain assumptions such
as the development of quoted market prices of peer companies and other publicly available
information as well as quantitative and qualitative information provided by Roivant (level 3).
(v)
Contractual liabilities
The Group is a clinical-stage biopharmaceutical group of companies and has not yet
established a sales, marketing or product distribution infrastructure because the lead product
candidate is still at an early stage in clinical development.
Given this early development stage of the Group, management has concluded that the Group's
normal operating cycle is not clearly identifiable. Conclusively, it is assumed to be twelve
months.
A liability is classified as current if it meets any of the following conditions:
it is expected to be settled in the entity's normal operating cycle;
it is held primarily for trading purposes;
it is due to be settled within 12 months of the reporting date; or
it is not subject to an unconditional right of the entity at the reporting date to defer
settlement of the liability for at least 12 months after the reporting date.
Affimed Annual Report 2020 64
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, 2020, 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 23).
(viii)
Intangible assets
In December 2020 the group has recognized a license with acquisition cost of €1,649. The
useful life was estimated at 19 years being the current expected period in which the licence
will be used, i.e. until the expiration of the patents covered by the license.
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, 2020, and have been applied in preparing
these financial statements:
Standard/interpretation
Effective Date 1
Amendments to References to the Conceptional Framework
Amendments to IAS 1 and IAS 8: Definition of Material
Amendments to IFRS 9, IAS 39 and IFRS 7:
Interest Rate Benchmark Reform
Amendments to IFRS 3 Business Combination
Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions
January 1, 2020
January 1, 2020
January 1, 2020
January 1, 2020
June 1, 2020
None of the amendments to standards and new or amended interpretations had a material
effect on the consolidated financial statements.
1 Shall apply for periods beginning on or after the date shown in the effective date column.
Affimed Annual Report 2020 65
New standards and interpretations not yet adopted
The following new standards and amendments to standards are effective for annual periods
beginning after December 31, 2020 and have not been applied in preparing these consolidated
financial statements.
Standard/interpretation Effective Date 1
Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current
Amendments to IFRS 3 Business Combinations
Amendments to IAS 16 Property, Plant and Equipment
Amendments to AS 37 Provisions, Contingent Liabilities and
Contingent Assets
Annual Improvements 2018-2020
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and I
FRS 16 Interest Rate Benchmark Reform – Phase 2
January 1, 2023
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2022
January 1, 2021
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.
8.
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
Affimed Annual Report 2020 66
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.
Revenue for the year ended December 31:
2020
2019
2018
Germany
Europe
USA
Consolidated revenue
194
2
28,164
28,360
0
1,646
19,745
21,391
31
1,175
22,529
23,735
Non-current assets as of December 31:
2020
2019
2018
Germany
Czech Republic
USA
Total non-current assets
(iii)
Major Customers
3,796
914
20,216
24,926
2,017
870
3,558
6,445
1,224
246
3,825
5,295
In 2018, 2019 and 2020, the Group’s revenue with Genentech Inc. exceeded 10% of total
revenues.
9.
Revenue
Collaboration agreement The Leukemia & Lymphoma Society (LLS)
Affimed is party to a collaboration with LLS to fund the development of 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.
Affimed Annual Report 2020 67
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 year ended December 31, 2019, the Group recognized revenue totaling €0.2
million. In 2020 the Group achieved the final milestones and recognized €0.1 million as
revenue.
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
providing services
the development of novel NK cell engager-based
immunotherapeutics to treat multiple cancers. The Genentech agreement became effective at
the beginning of October 2018. Under the terms of the agreement, Affimed received $96.0
million (€83.2 million) in an initial upfront payment and committed funding on October 31, 2018.
related
to
The Group recognized €26.2 million as revenue in 2020 (2019: €19.7 million, 2018: €21.8
million) and €41.9 million (December 31, 2019: €59.3 million, December 31, 2018: €61.4
million) under contract liabilities, which is recognized as revenue in subsequent periods as
services are provided.
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.
Collaboration with Roivant Sciences Ltd.
On November 9, 2020 Affimed and Pharmavant 6 GmbH, a subsidiary of Roivant Sciences
Ltd. (Roivant), announced a strategic collaboration agreement which grants Roivant a license
to the preclinical molecule AFM32. Under the terms of the agreement, Affimed received €50.4
million ($60 million) in upfront consideration, comprised of €33.3 million ($40 million) in cash
and pre-funded research and development funding, and €17.1 million ($20 million) of common
shares in Roivant. Affimed is eligible to receive additional proceeds in the form of option fees
contingent on the commencement of additional programs contemplated under the agreement.
The Group is eligible to receive up to an additional $2 billion in milestones over time upon
achievement of specified development, regulatory and commercial milestones, as well as
tiered royalties on net sales.
At December 31, 2020 the Group has recognized €1.4 million as revenue and €49.0 million
under contract liabilities, which is recognized as revenue in subsequent periods as services
are provided.
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
Affimed Annual Report 2020 68
technology access research funding or capacity reservation fees and milestone payments. The
Group recognized revenue of €0.6 million, €1.7 million and €1.7 million during the years ended
December 31, 2020, 2019 and 2018 respectively.
Contract balances
The following table provides information about receivables and contract liabilities from
contracts with customers.
Receivables
Contract liabilities
December 31, 2020 December 31, 2019
204
59,314
0
91,041
An amount of €17.5 million that was recognized in contract liabilities at the beginning of the
period was recognized as revenue during the period ended December 31, 2020 (2019: €14.8
million; 2018: €0.2 million).
The remaining performance obligations at December 31, 2020 are approximately €91.0 million
and are expected to be recognized as revenue to a large extent over the next two years.
Disaggregation of revenue
For the year ended December 31:
Major service lines:
Collaboration revenue
Service revenue
Revenue:
Point in time
Over time
2020
2019
2018
27,755
605
28,360
9,180
19,180
28,360
19,685
1,706
21,391
5,783
15,608
21,391
22,018
1,717
23,735
21,863
1,872
23,735
10. Other income and expenses - net
Other income and expenses, net primarily comprises foreign exchange gains of €129 in 2020
(2019: €251, 2018: €1,523) and income from government grants for research and development
projects of €348 in 2020, €19 in 2019, and €10 in 2018.
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:
Third-party services
2020
2019
2018
29,324
27,338
22,126
Affimed Annual Report 2020 69
Personnel expenses
Legal, consulting and patent expenses
Cost of materials
Amortisation and depreciation
Other expenses
13,638
2,380
1,730
834
2,083
49,989
10,154
1,983
1,547
725
2,044
43,791
8,055
1,672
1,140
351
1,804
35,148
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:
Personnel expenses
Legal, consulting and audit expenses
Other expenses
13. Employee benefits
2020
2019
2018
6,319
5,601
1,795
13,715
5,358
3,055
1,853
10,266
4,929
2,881
1,828
9,638
The following table shows the items of employee benefits for the years ended December 31:
Wages and salaries
Social security costs
2020
2019
2018
15,081
1,847
16,928
11,587
1,620
13,207
10,027
1,092
11,119
The employer’s contributions to pension insurance plans of €795 (2019: €696, 2018: €502) 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:
Interest SVB Loan Agreement (see note 21)
Foreign exchange differences
(95)
(6,693)
(483)
(175)
(847)
651
2020
2019
2018
Affimed Annual Report 2020 70
Interest on certificates of deposit with
maturities of more than three months
Other finance income/finance costs – net
15.
Income taxes
186
(45)
(6,647)
602
71
15
5
251
60
The Group did not incur any material income tax in the periods presented. As of December 31,
2020, deferred tax assets from differences resulting from intangible assets (€303; 2019: €283
trade and other receivables (€463; 2019: €243), borrowings (€61; 2019: €70), lease liabilities
(€194; 2019: €121), trade and other payables (€7; 2019: €23) and contract liabilities (€556;
2019: €0). 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, 2020 deferred tax
liabilities from temporary differences result mainly leasehold improvements and equipment and
right-of-use assets (€280; 2019: €226), long term financial assets (€1,146; 2019: €1,218), other
assets (€316; 2019: €0), trade and other payables (€60; 2019: €0) and contract liabilities (€0;
2019: €308). 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:
2020
2019
2018
Loss before tax
Income tax benefit at tax rate of 29.825 %
Adjustments of deferred tax assets
Adjustments for local tax rates
Non-deductible expenses
Other
Income taxes
(41,365)
12,337
(11,196)
(41)
(803)
(298)
(1)
(32,361)
9,652
(9,822)
5
(72)
233
(4)
(19,476)
5,809
(5,318)
(34)
(515)
57
(1)
In Germany, Affimed N.V. and GmbH has tax losses carried forward of €233.7 million (2019:
€199.2 million) for corporate income tax purposes and of €234.6 million (2019: €198.4 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 N.V. and GmbH were mitigated by the enactment of the Economic
Growth Acceleration Act (Wachstumsbeschleunigungsgesetz 2009). According to the
provisions of this act unused tax losses of a corporation as at the date of a qualified change in
ownership are preserved to the extent they are compensated by an excess of the fair value of
equity for tax purposes above its carrying amount. 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.
Affimed Annual Report 2020 71
16.
Intangible assets
In December 2020, Affimed entered into a Patent and Technology license agreement providing
the Group with an exclusive development and commercialization license. The Group
recognized the non-refundable license fee of $2 million (€1.6 million) as an intangible asset
and amortizes the acquisition cost over an estimated useful life of 19 years.
17. Long term financial assets
The Company holds preferred shares in Amphivena recognized at their fair value of €2.9 million
(2019: €3.2 million) and common shares in Roivant Sciences Ltd (acquired in 2020) at their
fair value of €17.1 million. The Company recognized losses from the change in fair values of
€0.2 million in other comprehensive income in 2020 (2019: €0.6 million).
18. Financial assets
The financial assets consist of U.S. Dollar denominated certificates of deposit with original
maturities of more than three months. As of December 31, 2020, no term deposits were held;
for 2019, the fair value (level 1) of the financial assets did not differ significantly from their
carrying amount.
19. Other assets
The other assets as of December 31, 2020 of €1.3 million (2019: €0 million) are short-term in
nature, do not bear interest and are not impaired. These assets mainly comprise a deferred
prepayment of €1 million in respect of a research project where certain milestone payments
are due.
20. Trade and other receivables
The trade receivables as of December 31, 2020 and 2019, of €0 and €204, respectively, are
all due in the short-term, do not bear interest and are not impaired. Other receivables are all
due within the short-term and mainly comprise value-added tax receivables of €1.321 (2019:
€453).
21. Equity
As of December 31, 2020, the share capital of €983 (2019: €762) is composed of 98,287,333
(2019: 76,249,901) common shares with a par value of €0.01.
Affimed Annual Report 2020 72
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. The Company issued
approximately 12.5 million common shares under this ATM program, generating net proceeds
of approximately €34.5 million. In November 2020, the Company implemented a new ATM
program providing for additional sales over time of up to $75,000,000 of its common shares.
As of December 31, 2020, the Company had issued a further approximately 7.9 million shares,
generating further approximate €34.5 million in net proceeds.
In connection with common share issuances in 2020 an amount of €2.4 million (2019: €2.3
million) of direct and incremental transaction cost was deducted from equity.
In the Annual General Meeting of Affimed N.V. held on August 4, 2020 the structure of the
authorized share capital was changed as cumulative preference shares were abolished. As of
December 31, 2020, authorized share capital of the Affimed N.V. amounts to €3,120 and is
divided into 311,950,000 shares, each with a nominal value of €0.01 per share. As at
December 31, 2019, the authorized share capital consisted of 155,975,000 common shares
and 155,975,000 cumulative preference shares, each with a par value of €0.01 per share.
22. 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 2020 and 2019, the Group granted 2,607,809 and 1,736,803
awards, respectively, to employees, the Management Board and Supervisory Board.
In 2020, 247,684 ESOP 2014 awards were cancelled or forfeited due to termination of
employment or termination of consulting agreements with non-employees (2019: 357,879),
and 1,624,351 options were exercised at an average exercise price of $2.19 (2019: 19,795
ESOP 2014 awards at an average exercise price of $1.54).
As of December 31, 2020, 8,043,341 ESOP 2014 awards were outstanding (December 31,
2019: 7,307,567), 4,712,122 awards (December 31, 2019: 4,773,840) were vested. The
options outstanding at December 31, 2020 had an exercise price in the range of $1.30 to
$13.47 (2019: $1.30 to $13.47) and weighted average remaining contractual life of 7.4 years
(2019: 8.9 years). In 2020 and 2019, the Group estimated an annual forfeiture rate of 4.0% for
unvested options.
Share based payments with market condition
Affimed Annual Report 2020 73
On April 20, 2018, Affimed N.V. 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 N.V. 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 lifetime of the options is two years. As at December 31,
2020 no options were exercisable and the term of the options has expired. Fair value was
determined using the Monte Carlo Simulation.
Share based payment expense
In 2020, an expense of €3,381 was recognized affecting research and development expenses
(€1,524) and general and administrative expenses (€1,857). 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).
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
2020
2019
$2.38
$3.18
$3.18
93%
5.9
0.00
0.89%
$2.10
$1.44
$1.44
82%
5.9
0.00
2.09%
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.
23. Provisions
In 2019, the Group decided to terminate the AFM 11 program and recognized related costs
totalling to €1.4 million, whereof €0.9 million were incurred in 2019 and €0.5 million were
expected in 2020. As of December 31, 2020, since previously anticipated services did not
transpire and no further costs are expected, the balance of the provision of €478 was released
within the research and development expenses.
24. Borrowings
Silicon Valley Bank
Affimed Annual Report 2020 74
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.
Finance costs comprised 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 N.V. 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 was secured by a pledge of 100% of the 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.
As of December 31, 2020, the loan was fully repaid.
UniCredit Leasing CZ
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, 2020, an amount of €323
(December 31, 2019: €368) was outstanding, of which €92 (December 31, 2019: €91) was
classified as current liabilities. As of December 31, 2020 and 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
Changes in capitalized borrowing costs, net
2020
2019
2,383
4,773
0
(2,128)
(2,128)
562
(3,277)
(2,715)
68
325
Affimed Annual Report 2020 75
Balance as of December 31
323
2,383
25. Trade and other payables
Trade and other payables comprise trade payables of €7,986 (2019: €10,249). Other payables
mainly comprise payroll and employee related liabilities for withholding taxes and social
security contributions of €2,144 (2019: €801) and payables due to employees for unused
holidays and other accruals. Other payables are normally settled within 30 days.
26. 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.
The carrying amounts of right-of-use assets reconcile as follows:
Balance as of January 1, 2020
Depreciation charge for the year
Additions to right-of-use assets
Balance as of December 31, 2020
Buildings
Cars
Carrying amount
Office
equipment
815
(568)
676
923
9
(7)
0
2
0
(2)
17
15
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:
Carrying amount
Cars
Buildings
694
(371)
492
815
22
(13)
0
9
Total
824
(577)
693
940
Total
716
(384)
492
824
Repayment of lease liabilities
2020
2019
521
405
Affimed Annual Report 2020 76
Interest on lease liabilities
Short-term lease payments
Cash outflow from leasing
34
70
625
24
66
495
In 2018, lease expenses of €562 had 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
2020
2019
519
515
1,034
553
276
829
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
Other Changes
New lease contracts
Balance as of December 31
27. Other commitments and contingencies
Commitments
2020
2019
804
(521)
(521)
691
691
974
717
(405)
(405)
492
492
804
The Group has entered into agreements for the use of licenses. The fees recognized in the
consolidated statement of comprehensive income for 2020, 2019 and 2018, as well as future
related payment obligations under any non-cancellable fees are not considered material.
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.
28. Related parties
(i) Shareholders
As of December 31, 2020 and 2019, no shareholder holds more than 20% of the voting rights.
Affimed Annual Report 2020 77
(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
2020
2019
2018
2,936
0
1,848
4,784
2,598
264
1,738
4,600
2,683
0
1,229
3,912
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 a cash compensation for their services on
the supervisory board of €364 (2019: €382; 2018: €382). In 2020, the Group recognized
expenses for share-based payments for supervisory board members of €293 (2019: €243,
2018: €117).
The following table provides the total amounts of outstanding balances for supervisory board
compensation and expense reimbursement related to key management personnel:
Outstanding balances
December 31,
2020
2
0
16
7
0
10
14
15
8
8
December 31,
2019
5
1
26
9
9
11
21
20
0
0
Adi Hoess
Wolfgang Fischer
Thomas Hecht
Mathieu Simon
Berndt Modig
Ferdinand Verdonck
Ulrich Grau
Bernhard Ehmer
Harry Welten
Annalisa Jenkins
29. Financial risk management
Affimed Annual Report 2020 78
(i)
Financial risk management objectives and policies
The Group’s principal financial instruments comprise cash and cash equivalents, certificates
of deposit at commercial banks, warrants and investor loans presented in borrowings. The
main purpose of these financial instruments is to raise funds for the Group's operations. The
Group has various other financial assets and liabilities such as trade and other receivables and
trade and other payables, which arise directly from its operations.
The main risks arising from the Group's financial instruments are credit risk, interest rate risk,
liquidity risk and foreign currency 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 (€20.0 million, 2019: €3.2 million) cash and cash equivalents
(€146.9 million, 2019: € 95.2 million), trade and other receivables (€2.4 million, 2019: €1.5
million), and certificates of deposit (€0.0 million, 2019: €8.9 million), represents the maximum
credit exposure of €169.3 million (2019: €108.8 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.
Market interest rates on cash and cash equivalents as well as on term deposits were low, and
in some cases negative, resulting in interest income of €186 in 2020. A shift in interest rates
(increase or decrease) could potentially have a material impact on the loss of the Group.
(iv) Other price risks
The fair value of the shares in Amphivena and Roivant depends on the estimated share price.
The total exposure of the Group amounts to €20.0 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 2020 79
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, 2020 was €122,322 (2019: €56,531) and
mainly relates to US Dollars.
In 2020, if the Euro had weakened/strengthened by 10% against the US dollar with all other
variables held constant, the loss would have been €11,155 (2019: €5,677) higher/lower, mainly
as a result of foreign exchange gains/losses on remeasurement 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 2020 than in 2019 because of
the increased volume of US dollar-denominated transactions.
The following significant exchange rates have been applied during the year:
2020
CZK or USD
or GBP/EUR
0.03780
0.03811
CZK - Average Rate
CZK - Spot rate
0.03896
0.03936
2019
CZK or USD
or GBP/EUR
2018
CZK or USD or
GBP/EUR
USD - Average Rate
USD - Spot rate
0.87550
0.81493
0.89326
0.89015
GBP - Average Rate
GBP - Spot rate
1.12397
1.11231
1.1393
1.1754
(vi)
Liquidity risk
0.03899
0.03887
0.84674
0.87336
1.13031
1.11791
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 2018 and 2019 and 2020, Affimed raised significant funding that it estimates will enable the
Group to fund operating expenses and capital expenditure requirements at least into the
second half of 2023.
Affimed Annual Report 2020 80
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.
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. The Company issued
approximately 12.5 million common shares under this ATM program, generating net proceeds
of approximately €34.5 million.
In November 2020, the Company implemented a new ATM program providing for additional
sales over time of up to $75,000,000 of common shares. As of December 31, 2020 the
Company had issued a further approximately 7.9 million shares, generating further
approximate €34.5 million in net proceeds.
In December 2020, Affimed N.V. filed a “shelf registration statement” with the SEC in order to
offer and sell securities to the public in multiple, future offerings for up to $225,000,000.
On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per
share in a public offering resulting in gross proceeds before deducting underwriting discounts
and commissions and estimated expenses of the offering of $115 million.
In January 2021, the Group entered into a loan agreement with Sillicon Valley Bank for up to
€25 million, of which the Group was drawn €10 million in February 2021.
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.
30. Subsequent events
In January 2021, the Group entered into a loan agreement with Silicon Valley Bank German
Branch (SVB) which provides Affimed with up to €25 million in term loans in three tranches:
€10 million available at closing, an additional €7.5 million upon the achievement of certain
conditions, including milestones related to Affimed’s pipeline and market capitalization, and a
third tranche of €7.5 million upon the achievement of certain additional conditions related to
Affimed’s pipeline and liquidity. The first tranche of €10 million was drawn in February 2021.
Pursuant to the terms of the agreement, the loans will bear interest at the greater of the
European Central Bank Base Rate and 0%, plus 5.5%, and Affimed is entitled to make interest
Affimed Annual Report 2020 81
only payments through December 1, 2022, or June 1, 2023 if Affimed draws on the third
tranche of the loans. The loans will mature at the end of November 2025.
On January 15, 2021 the Group issued 19,166,667 common shares at a price of $6.00 per
share in a public offering and achieved gross proceeds before deducting underwriting
discounts and commissions and estimated expenses of the offering of $115 million.
In the first quarter of 2021, based upon information available as of the date of this filing,
including information regarding the share prices of publicly listed companies, we expect, on a
preliminary basis, that the value of our investment in Roivant will decline by between $2.5
million and $3.5 million, before the impact of foreign exchange fluctuations. This estimate is
subject to change based upon the completion of our procedures related to valuation of the
investment. On May 3, 2021, Roivant announced a merger with Montes Archimedes
Acquisition Corp. with a fully committed, concurrent $200 million PIPE financing transaction.
Both transactions are expected to close in the third quarter of 2021. Based on the terms of the
transactions, we expect to further reduce the value of the investment in Roivant.
Affimed Annual Report 2020 82
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 2020 83
Company balance sheet as at December 31, 2020
(before appropriation of result of the year)
In € thousand
Note
2020
2019
December 31,
December 31,
Assets
Non current assets
Financial fixed assets
Total non current assets
Current assets
Receivables from subsidiaries
Other receivables
Other assets
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
33
34
35
36
37
34
38
16,735
16,735
1,240
1,312
201
57,604
60,357
77,092
983
235,625
(114,046)
1,720
(52,289)
71,993
1,611
3,488
5,099
5,099
77,092
0
0
643
475
0
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
Affimed Annual Report 2020 84
Company profit and loss account
(before appropriation of result of the year)
In € thousand
For the year ended
December 31,
2020
For the year ended
December 31,
2019
Note
Share in results from participating
interests after taxation
Other result after taxation
39
(39,904)
(12,385)
(14,321)
(7,121)
Net result
(52,289)
(21,442)
Affimed Annual Report 2020 85
Notes to the Company financial statements for the year ended 31 December
2020
31. General information
Affimed N.V. (in the following ‘Affimed N.V.’ or the ‘Company’) has its corporate seat in
Amsterdam. The Company was founded as Affimed Therapeutics B.V. in 2014.
Affimed N.V. 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
N.V. 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 N.V.. The financial information of the
Company is included in the Company’s consolidated financial statements, as presented on
pages 48 to 81.
32. 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 second half of 2023.
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
Affimed Annual Report 2020 86
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.
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.
33. 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.
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, 2020
Capital contribution
Effect of change in fair value of Amphivena and Roivant shares held by Affimed
GmbH
Unrecognised loss from prior year
Share in result of Affimed GmbH, net of tax
Net asset value as at December 31, 2020
-
56,880
(242)
(10,924)
(28,979)
16,735
Affimed Annual Report 2020 87
Affimed GmbH holds preferred shares in Amphivena and common shares in Roivant Ltd which
are both recognized at fair value through other comprehensive income (see note 33).
The subsidiary Affimed GmbH had a negative net asset value of €10,924 thousand for the year
ended 31 December 2019 and was valued at nil because the Company did not fully or partially
guarantee the debts of this participating interest, and had no constructive obligation to support
Affimed GmbH to pay its debt. The Company’s share in the negative equity value of Affimed
GmbH also represented the accumulated losses of this participating interest on the reporting
date. Following the capital contribution of €56,880 thousand which was financed by proceeds
from the equity issuance (see note 37) the unrecognised loss from 2019 is recognised in 2020.
34. Receivables from/payables to subsidiaries
These receivables and payables relate to Affimed GmbH and do not bear interest.
35. Other receivables
These receivables relate primarily to VAT refunding.
36. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities
of three months or less.
37. Equity
As of December 31, 2020 the number of issued common shares is 98,287,333 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, 2019
624
135,365
(78,977)
2,594
(19,477)
40,129
Issue of common shares
138
31,208
Share issuance costs
Exercise of share-based
payments awards
Allocation of accumulated losses
-
-
-
(2,306)
26
-
-
-
-
-
-
-
-
-
31,346
(2,306)
26
-
-
(19,477)
-
19,477
Affimed Annual Report 2020 88
Net result
Other comprehensive income
Share-based payments
-
-
-
-
-
-
-
-
2,469
-
(21,442)
(21,442)
(632)
-
-
(632)
-
2,469
December 31, 2019
762
164,293
(95,985)
1,962 (21,442)
49,590
January 1, 2020
762
164,293
(95,985)
1,962 (21,442)
49,590
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
205
70,782
-
16
(2,441)
2,991
-
-
-
(21,442)
-
-
-
-
-
-
-
70,987
(2,441)
3,007
21,442
-
-
-
-
-
-
-
-
-
-
-
3,381
- (52,289)
(52,289)
(242)
-
-
-
(242)
3,381
December 31, 2020
983
235,625 (114,046)
1,720 (52,289)
71,993
Issued capital and share premium
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. The Company issued
approximately 12,5 million common shares under this ATM program, generating net proceeds
of approximately €34,5 million.
In November 2020, the Company implemented a new ATM program providing for additional
sales over time of up to $75,000,000 of common shares. As of December 31, 2020 the
Company had issued a further approximately 7.9 million shares, generating further
approximate €34.5 million in net proceeds.
In December 2020, Affimed filed a “shelf registration statement” with the SEC in order to offer
and sell securities to the public in multiple, future offerings for up to $225,000,000.
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 19 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.
Affimed Annual Report 2020 89
Revaluation reserves
Affimed GmbH holds preferred shares in Amphivena and common shares in Roivant Ltd, both
these investments are recognized at their fair value through other comprehensive income. The
initial recognition as of January 1, 2018 amounted to €7,325 thousand for Amphivena. The
initial recognition as of November 3, 2020 amounted to € 17.1 million for Roivant Ltd. As of
December 31, 2020, the accumulated changes in fair value amounted to a decrease of €5,633
thousand and an increase of €28 thousand, respectively. The Company uses “Revaluation
reserves” as the equity classification (see also note 33).
Unappropriated result
The result after tax for 2020 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.
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
As a result of the recording of the unrecognized prior year losses of Affimed GmbH (see note
33) there is a difference between the net result per the consolidated financial statements with
the net result per the Company financial statements in 2020.
These can be explained as follows:
In € thousand
Net result according to the consolidated profit and loss account
Unrecognized share of the losses Affimed GmbH
Total result according to the Affimed N.V. financial statements
In € thousand
Shareholders’ equity of Affimed N.V. according to the consolidated statement
of financial position
Differences
Shareholders’ equity of Affimed N.V. according to the company-only statement
of financial position
December 31,
2020
(41,366)
(10 923)
(52,289)
December 31,
2020
71.993
-
71,993
Affimed Annual Report 2020 90
38. Other current payables
In € thousand
Trade payables
Social security and wage tax
Payables due from the sale of carve out shares
Other liabilities
Total
All current payables are short-term.
December
31, 2020
December
31, 2019
1,133
1,122
1,147
86
3,488
909
201
-
43
1,153
The amount due from the sale of carve out shares relate to common shares transferred to
certain beneficiaries in connection with a carve-out plan of Affimed N.V. outstanding
immediately prior to the initial public offering.
39. 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
2020
2019
1,304
(9,935)
10
(8,621)
-
(3,764)
(3,764)
(12,385)
-
(12,385)
1,086
(7,676)
23
(6,567)
400
(954)
(554)
(7,121)
-
(7,121)
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.
40. Employee benefits and number of employees
The average number of employees during 2020 was approximately four 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 41.
Affimed Annual Report 2020 91
41. Related-party transactions
Director’s remuneration 2020
Managing directors
(in € thousand)
Adi
Hoess
Wolfgang
Fischer
Florian
Fischer
Andreas
Harstrick
Arndt
Schottelius
Angus
Smith
Total
Periodically paid compensation
Bonuses
Total cash compensation
2014 Plan share-based payment
expense1
Total share-based payment expense
493
237
730
625
625
419
155
574
324
324
90
60
150
76
76
256
101
357
159
159
306
116
422
179
183
76
1,747
745
259 2,492
291 1,654
179
291 1,654
Thomas
Hecht
Bernhard
Ehmer
Ulrich
Grau
103
103
69
69
50
50
39
39
52
52
39
39
Annalisa
Jenkins
18
18
Berndt
Modig
27
27
28
28
7
7
Mathieu
Simon
39
39
43
43
Ferdinand
Verdonck
57
57
Harry
Welten
18
18
Total
364
364
39
39
28
292
28
292
Supervisory directors
(in € thousand)
Periodically paid compensation
Total cash compensation
2014 Plan share-based payment
expense1
Total share-based payment
expense
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
474
156
630
686
686
360
94
454
317
317
402
103
505
367
367
Total
1,236
353
1,589
1,370
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
116
61
61
56
56
35
35
58
58
35
35
46
46
35
35
48
48
42
42
58
58
35
35
382
382
243
243
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 25 of the
consolidated financial statements.
Affimed Annual Report 2020 92
Stock options granted under the Equity Incentive Plan 2014
Awards granted in 2020
Managing directors
Beneficiary
Grant date
Number of
options
Strike price
USD
Expiration date
Adi Hoess
Wolfgang Fischer
Andreas Harstrick
Arndt Schottelius
Angus Smith
Total
Supervisory directors
August 4, 2020
August 4, 2020
March 1, 2020
April 20, 2020
July 13, 2020
350,000
190,000
200,000
275,000
350,000
1,365,000
3.80
3.80
2.36
2.30
4.41
August 4, 2030
August 4, 2030
March 1, 2030
April 20, 2030
July 13, 2030
Beneficiary
Grant date
Number of
options
Strike price
USD
Expiration date
August 4, 2020
August 4, 2020
August 4, 2020
August 31, 2020
August 4, 2020
August 4, 2020
August 31, 2020
35,000
20,000
20,000
60,000
20,000
20,000
60,000
235,000
3.80
3.80
3.80
3.45
3.80
3.80
3.45
August 4, 2030
August 4, 2030
August 4, 2030
August 31, 2030
August 4, 2030
August 4, 2030
August 31, 2030
Thomas Hecht
Bernhard Ehmer
Ulrich M. Grau
Annalisa Jenkins
Mathieu Simon
Ferdinand Verdonck
Harry Welten
Total
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 June 25, 2029
2.91 June 25, 2029
2.91 June 25, 2029
2.91 June 25, 2029
2.91 June 25, 2029
2.91 June 25, 2029
Affimed Annual Report 2020 93
For further disclosure related to the stock options we refer to note 19 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).
42. Audit fees
With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, the following fees for the
financial year have been charged by KPMG Accountants N.V. to the Company, its subsidiaries and other
consolidated entities.
(in € thousand)
Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services
(in € thousand)
Audit of the financial statements
Other audit engagements
Tax-related advisory services
Other non-audit services
43. Subsequent events
KPMG
Accountants
N.V.
Other KPMG
network
Total
KPMG
2020
2020
2020
60
-
-
-
60
302
68
-
1
371
362
68
-
1
431
KPMG
Accountants
N.V.
Other KPMG
network
Total
KPMG
2019
2019
2019
62
-
-
-
62
293
75
-
-
368
355
75
-
-
430
On January 15, 2021 Affimed N.V. issued 19,166,667 common shares at a price of $6.00 per
share in a public offering and achieved gross proceeds before deducting underwriting
discounts and commissions and estimated expenses of the offering of $115 million.
In the first quarter of 2021, based upon information available as of the date of this filing,
including information regarding the share prices of publicly listed companies, we expect, on a
preliminary basis, that the value of Affimed GmbH’s investment in Roivant will decline by
between $2.5 million and $3.5 million, before the impact of foreign exchange fluctuations. This
estimate is subject to change based upon the completion of our procedures related to valuation
of the investment. On May 3, 2021, Roivant announced a merger with Montes Archimedes
Acquisition Corp. with a fully committed, concurrent $200 million PIPE financing transaction.
Both transactions are expected to close in the third quarter of 2021. Based on the terms of the
transactions, Affimed GmbH expects to further reduce the value of its investment in Roivant.
Affimed Annual Report 2020 94
Signing of the financial statements
May 20, 2021
Originally signed by:
Management Board:
Dr. Adi Hoess, CEO
Dr. Wolfgang Fischer, COO
Andreas Harstrick, CMO
Arndt Schottelius, CSO
Angus Smith, CFO
Supervisory Board:
Dr. Thomas Hecht, Chairman
Dr. Bernhard Ehmer
Dr. Ulrich Grau
Dr. Annalisa Jenkins
Dr. Mathieu Simon
Ferdinand Verdonck
Harry Welten
Affimed Annual Report 2020
95
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
to which the shareholders 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. The management board may resolve, with the approval of the supervisory
board, to reserve the profits or part of the profits.
10.1.5. The profit remaining after application of article 10.1.4 shall be at the disposal of
the general meeting. The general meeting may resolve to carry it to the
reserves or to distribute it among the shareholders.
10.1.6. 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
shareholders a dividend in the form of shares in the capital of the company
instead of a cash payment.
10.1.7. 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 shareholders to the
debit of one or several reserves which the company is not prohibited from
distributing by virtue of the law.
10.1.8. 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.
10.1.9. 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 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
Affimed Annual Report 2020
96
prepared on the basis of generally acceptable valuation methods. The amounts
to be reserved under the law and the articles of 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. Any proposal for distribution of a dividend on shares and any resolution to
distribute an interim dividend on 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.
10.2.4. 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.
10.2.5. 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.
10.2.6. 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
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.
Independent auditor's report
To: the General Meeting of Shareholders and the Supervisory Board of Affimed N.V.
Report on the audit of the financial statements 2020 included in the annual report
Our opinion
In our opinion:
— the accompanying consolidated financial statements give a true and fair view of the financial
position of Affimed N.V. as at 31 December 2020 and of its result and its cash flows for the
year 2020, in accordance with International Financial Reporting Standards as adopted by the
European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
— the accompanying company financial statements give a true and fair view of the financial
position of Affimed N.V.as at 31 December 2020 and of its result for the year 2020 then
ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the financial statements 2020 of Affimed N.V. based in Amsterdam. The
financial statements include the consolidated financial statements and the company financial
statements.
The consolidated financial statements comprise:
1
2
3
the consolidated statement of financial position as at 31 December 2020;
the following consolidated statements for the year 2020: the statements of comprehensive
loss, the statement of cash flows and the statement of changes in equity; and
the notes comprising a summary of the significant accounting policies and other explanatory
information.
The company financial statements comprise:
1
2
3
the company balance sheet as at 31 December 2020;
the company profit and loss account for the year 2020; and
the notes comprising a summary of the accounting policies and other explanatory
information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on
Auditing. Our responsibilities under those standards are further described in the ‘Our
responsibilities for the audit of the financial statements’ section of our report.
We are independent of Affimed N.V. in accordance with the ‘Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore, we have complied with the
‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Audit approach
Summary
Materiality
— Materiality of EUR 648 thousand
— 0,4% of total assets
Group audit
— 99% of total assets
— 98% of revenue
Key audit matters
— Revenue recognition of the collaboration agreement with Genentech Inc. and Roivant
Sciences Ltd.
— Valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and
Amphivena Therapeutics Inc.
Opinion
Unqualified
Materiality
Based on our professional judgement we determined the materiality for the financial statements
as a whole at EUR 648 thousand (2019: EUR 460 thousand). The materiality is determined with
reference to the total assets (0,4%). We consider total assets as the most appropriate
benchmark because Affimed N.V. (hereafter: the Company) is currently in its research and
development phase and thus is predominantly focussed on asset development/capital
expenditure. Materiality increased compared to last year due to the increase of the total assets
which relates to the additional funding’s received in current year.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the Management Board and the Supervisory Board that misstatements in
excess of EUR 32 thousand which are identified during the audit, would be reported to them, as
well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
Affimed N.V. is at the head of a group of components. The financial information of this group is
included in the financial statements of Affimed N.V.
Our group audit mainly focused on significant components that are (i) of individual financial
significance to the group, or (ii) that, due to their specific nature or circumstances, are likely to
include significant risks of material misstatement of the financial statements.
We have:
— performed audit procedures at group level in respect of the company financial statements;
— made use of the work of KPMG Germany for the audit of the components that are significant
to the group. We have sent detailed instructions to KPMG Germany, covering significant
areas including the relevant risks of material misstatement and set out the information
required to be reported to the group audit team. In order to be sufficiently involved in the
several component auditor’s phases, we had communication with KPMG Germany to our
satisfaction through instructions, exchange of mails and virtual meetings (conference calls)
and also performed a remote file review.
By performing the procedures mentioned above at group components, together with additional
procedures at group level, we have been able to obtain sufficient and appropriate audit evidence
about the group’s financial information to provide an opinion about the financial statements. By
performing the audit of the complete reporting package we covered 99% of total assets and 98%
of revenue.
Our focus on the risk of fraud and non-compliance with laws and regulations
Our objectives
The objectives of our audit with respect to fraud and non-compliance with laws and regulations
are:
With respect to fraud:
— to identify and assess the risks of material misstatement of the financial statements due to
fraud;
— to obtain sufficient appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate audit responses;
and
— to respond appropriately to fraud or suspected fraud identified during the audit.
With respect to non-compliance with laws and regulations:
— to identify and assess the risk of material misstatement of the financial statements due to
non-compliance with laws and regulations; and
— to obtain a high (but not absolute) level of assurance that the financial statements, taken as a
whole, are free from material misstatement, whether due to fraud or error when considering
the applicable legal and regulatory framework.
The primary responsibility for the prevention and detection of fraud and non-compliance with
laws and regulations lies with the Management Board with oversight by the Supervisory Board.
Our risk assessment
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to
financial reporting fraud, misappropriation of assets and bribery and corruption. We, together
with our forensics specialists evaluated the fraud risk factors to consider whether those factors
indicated a risk of material misstatement due to fraud.
In addition, we performed procedures to obtain an understanding of the legal and regulatory
frameworks that are applicable to the Company and we inquired the Management Board and the
Supervisory Board as to whether the entity is in compliance with such laws and regulations and
inspected correspondence, if any, with relevant licensing and regulatory authorities.
The potential effect of the identified laws and regulations on the financial statements varies
considerably.
Firstly, the Company is subject to laws and regulations that directly affect the financial
statements, including taxation and financial reporting. We assessed the extent of compliance
with these laws and regulations as part of our procedures on the related financial statement
items and therefore no additional audit response is necessary.
Secondly, the Company is subject to many other laws and regulations where the consequences
of non-compliance could have an indirect material effect on amounts recognized or disclosures
provided in the financial statements, or both, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely to have such an indirect effect:
— sector specific laws and regulations (reflecting the healthcare legislation including various
drug approval processes);
— employment legislation (reflecting the Company’s significant and geographically diverse work
force);
— health and safety regulation (reflecting the nature of the Company’s (R&D) operations);
— environmental regulation (reflecting environmental impact restrictions, waste and
contamination related to the Company’s (R&D) operations).
In accordance with the auditing standards we evaluated the following fraud and non-compliance
risks that are relevant to our audit, including the relevant presumed risks:
— revenue recognition of collaboration agreement with Genentech Inc. and
Roivant Sciences Ltd.;
— valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and
Amphivena Therapeutics Inc.;
— management override of controls (a presumed risk).
We communicated the identified risks of fraud and non-compliance with laws and regulations
throughout our team and remained alert to any indications of fraud and/or non-compliance
throughout the audit. This included communication from the group to component audit teams of
relevant risks of fraud and/or non-compliance with laws and regulations identified at group level.
In all of our audits, we addressed the risk of management override of internal controls, including
evaluating whether there was evidence of bias by management that may represent a risk of
material misstatement due to fraud. We refer to the key audit matters (revenue recognition and
valuation of shares held in unlisted equity investments), that are examples of our approach
related to areas of higher risk due to accounting estimates where management makes significant
judgements.
We communicated our risk assessment and audit response to the Board of Management and the
Supervisory Board. Our audit procedures differ from a specific forensic fraud investigation, which
investigation often has a more in-depth character.
Our response
We performed the following audit procedures (not limited) to respond to the assessed risks:
— we evaluated the design and the implementation and, where considered appropriate, tested
the operating effectiveness of internal controls that mitigate fraud risks;
— we performed data analysis of high-risk journal entries and evaluated key estimates and
judgements for bias by the Company, including retrospective reviews of prior year's
estimates. Where we identified instances of unexpected journal entries or other risks through
our data analytics, we performed additional audit procedures to address each identified risk.
These procedures also included testing of transactions back to source information;
— assessment of matters reported on the Company’s complaints procedures and results of
management's investigation of such matters;
— with respect to the risk of fraud in revenue recognition we refer to the first key audit matter;
— with respect to the risk of bribery and corruption across various countries, we evaluated the
Company's controls and procedures such as due diligence procedures on third parties. We
considered the possibility of fraudulent or corrupt payments made through third parties
including agents and conducted detailed testing on third-party vendors in high-risk
jurisdictions;
— we considered the outcome of our other audit procedures and evaluated whether any
findings or misstatements were indicative of fraud or non-compliance. If so, we re-evaluated
our assessment of relevant risks and its resulting impact on our audit procedures;
— we obtained audit evidence regarding compliance with the provisions of those laws and
regulations generally recognized to have a direct effect on the determination of material
amounts and disclosures in the financial statements;
— we assessed side functions of the Board of Directors with special attention to procedures,
governance and payments done (also in view of possible conflicting interests).
We do note that our audit is based on the procedures described in line with applicable auditing
standards. In addition to the requirements of the auditing standards we have performed the
following additional procedures:
— investigation into publicly held information in relation to negative publicity.
Our procedures to address identified risks of fraud and related to non-compliance with laws and
regulations resulted in the two key audit matters reported in our auditor’s report.
We do note that our audit is not primarily designed to detect fraud and non-compliance with laws
and regulations and that management is responsible for such internal control as management
determines is necessary to enable the preparation of the financial statements that are free from
material misstatement, whether due to errors or fraud, including compliance with laws and
regulations.
The more distant non-compliance with indirect laws and regulations (irregularities) is from the
events and transactions reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it. In addition, as with any audit, there
remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements. We have communicated the key audit
matters to the Board of Directors and the Supervisory Board. The key audit matters are not a
comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Compared to last year the key audit matter with respect to completeness of accruals and related
research and development expenses is not included considering the limited amount of suppliers
involved and the application of detailed research plans. Furthermore, compared to last year the
key audit matter with respect to the valuation of shares held in unlisted equity investments has
been added related to the fact the Company obtained shares of Roivant Sciences Ltd. in 2020.
Revenue recognition of collaboration agreement with Genentech Inc. and
Roivant Sciences Ltd.
Description
There is a risk due to fraud and error that collaboration agreements with Genentech Inc.
(hereafter: Genentech) and Roivant Sciences Ltd. (hereafter: Roivant), as disclosed in note
9 (Revenue), were not accounted for properly which could lead to inappropriate financial
reporting.
According to the existing collaboration agreement Affimed N.V. may be eligible to receive up to
USD 5.0 billion in additional milestone payments over time, including payments upon
achievement of specified development, regulatory and commercial milestones, and royalties
on sales.
Furthermore Affimed N.V. entered in 2020 into a new licensing and strategic collaboration with
Roivant Sciences under which Affimed N.V. has received USD 60 million in upfront
consideration, comprised of USD 40 million in cash and pre-paid R&D funding, and
USD 20 million of newly issued shares in Roivant. Pursuant to the agreement, Affimed N.V.
will be primarily responsible for driving the discovery and research phases of molecule
development through filing of the IND.
Accounting for both the Genentech as Roivant collaboration agreements involves amounts that
are very material to the Company’s financial statements, and will require the appropriate
technical expertise and the application of significant judgment and estimates by management.
Furthermore, there is a general presumption in auditing standards that a material misstatement
due to fraudulent financial reporting relating to revenue recognition may result from an
overstatement of revenues through, for example, premature revenue recognition.
The significant risk on fraud and error due to revenue recognition relating to the Genentech
and Roivant collaboration agreement relates to the:
— identification of the performance obligation – risk of error that performance obligation in a
contract are not completely and accurately identified;
— allocation of the transaction price to performance obligations – risk of error that the
transaction price, including variable considerations and discounts, is not accurately
allocated to each performance obligation;
— furthermore, we identified a significant risk of fraud and error that revenues from
Genentech and Roivant collaboration agreement may be overstated. The risk of fraud
results from the pressure that management may have to achieve performance targets at
the reporting period-end, due to manipulation of the timing of revenue recognition on the
method and the measure of progress used to recognized revenue for each identified
performance obligation. The risk of error relates to the significant estimate on measuring
the progress of a performance obligation satisfied over time in which the risk arises that
incurred costs that do not contribute to the progress in satisfying the performance
obligations are improperly included in measuring the progress. The employee costs to
complete the exclusive targets is a key estimation that give rise to a significant risk on
inappropriate revenue recognition in order to overstate the percentage of completion
calculation.
Our response
In order to address the identified risk of error and risk of fraud as described above, we
obtained an understanding from the collaboration agreements of Roivant and Genentech and
of the developments over the year of the agreement as well as the progress of the activities.
Further, we obtained an understanding of the design of controls implemented and tested the
effectiveness of certain controls to ensure proper accounting for the agreement in accordance
with the applicable financial reporting framework.
Our substantive audit procedures comprised, amongst others, of obtaining and evaluating the
audit evidence of the Company’s:
— identification of the parties respective performance obligations;
— determination of the transaction price, including potential variable considerations and
discount;
— assumptions used to allocate the transaction price to separate performance obligations;
— determination of when performance obligations have been satisfied and timing of revenue
should be recognized, including the analysis of related journal entries;
— assessment and evaluation of the accounting regarding the in 2020 settled Roivant
agreement based on five-steps model of IFRS 15 prepared by Company’s specialist;
— obtaining external confirmation from Genentech and Roivant regarding the budget and
stage of progress of the targets in order to determine if the performance obligations is fully
satisfied and that we can agree with the recognized revenue in the reporting period
associated with this performance obligation; determination the accuracy of the remaining
contractual liabilities;
— assessing the disclosures in the consolidated financial statements in respect of the
revenue recognition principles with reference to the requirements of the prevailing
accounting standards.
Our observation
The results of our procedures were satisfactory.
Valuation of shares held in unlisted equity investments in Roivant Sciences Ltd. and
Amphivena Therapeutics Inc.
Description
As disclosed in note 7 the valuation of the unlisted shares of Roivant and Amphivena is based
on external input parameters (level 3), including information obtained from Roivant/Amphivena
and from publicly available sources. As a result we identified the following significant risk of
error that:
— an inaccurate amount is estimated and recorded for the fair value of financial assets at fair
value through OCI at or subsequent to initial recognition;
— subsequent changes to Roivant’s and/or Amphivena’s identifiable assets and liabilities are
not appropriately identified;
— an inappropriate amount is estimated for Affimed’s share in the net fair value of Roivant’s
either Amphivena’s identifiable assets and liabilities.
Specifically, the following elements included within the estimate give rise to a significant risk:
— assumptions and parameters used in deriving the initial fair value;
— data, assumptions and parameters used in rolling forward their fair value from the initial
valuation to the balance sheet data (including changes in fair value of Roivant’s and/or
Amphivena’s identifiable assets).
Our response
In order to address the identified risk, we evaluated the design and tested the operating
effectiveness of certain internal controls over the Company’s fair value valuation process on
the shares held in Roivant and Amphivena. This included controls related to the:
— significant observable model inputs and assumptions, including their development and
application, and the monitoring of changes to the inputs and assumptions; and
— the relevance and reliability of observables inputs available at the time.
Furthermore, we tested management’s ability to produce a fair value estimate compliant with
IFRS.
This was accomplished by:
— testing the Company’s process for developing the estimate, including inputs and
assumptions;
— testing the source and the reliability of evidence used in determining the Company’s
assumptions, and
— evaluating this assumptions in the light of historical and market information.
Finally, we assess the disclosures in the consolidated financial statements in respect of the
relevant estimate with reference to the requirements of the prevailing accounting standards.
Our observation
The results of our testing were satisfactory.
Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report
contains other information.
Based on the following procedures performed, we conclude that the other information:
— is consistent with the financial statements and does not contain material misstatements; and
— contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the financial statements or otherwise, we have considered whether the other
information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less
than the scope of those performed in our audit of the financial statements.
Affimed N.V. is responsible for the preparation of the other information, including the information
as required by Part 9 of Book 2 of the Dutch Civil Code.
Engagement
We were engaged by the general meeting of shareholders as auditor of Affimed N.V. on
4 August 2020, as of the audit for the year 2020 and have operated as statutory auditor ever
since that financial year 2014.
Description of responsibilities regarding the financial statements
Responsibilities of the Board of Directors and the Supervisory Board for the
financial statements
The Board of Directors is responsible for the preparation and fair presentation of the financial
statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code.
Furthermore, the Board of Directors is responsible for such internal control as management
determines is necessary to enable the preparation of the financial statements that are free from
material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Directors is responsible for
assessing the Company’s ability to continue as a going concern. Based on the financial reporting
frameworks mentioned, the Board of Directors should prepare the financial statements using the
going concern basis of accounting unless the Board of Directors either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so. The Board of
Directors should disclose events and circumstances that may cast significant doubt on the
company’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain
sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we
may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements. The materiality affects the nature, timing and
extent of our audit procedures and the evaluation of the effect of identified misstatements on our
opinion.
A further description of our responsibilities for the audit of the financial statements is included in
appendix of this auditor's report. This description forms part of our auditor’s report.
Zwolle, 21 May 2021
KPMG Accountants N.V.
J.J. van den Berg RA
Appendix:
Description of our responsibilities for the audit of the financial statements
Appendix
Description of our responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism
throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and
independence requirements. Our audit included among others:
— identifying and assessing the risks of material misstatement of the financial statements,
whether due to fraud or error, designing and performing audit procedures responsive to those
risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
the risk resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control;
— obtaining an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control;
— evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the Board of Directors;
— concluding on the appropriateness of the Board of Director’s use of the going concern basis
of accounting, and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Board of
Director’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in
the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause a company to cease to continue as a going
concern;
— evaluating the overall presentation, structure and content of the financial statements,
including the disclosures; and
— evaluating whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We are solely responsible for the opinion and therefore responsible to obtain sufficient
appropriate audit evidence regarding the financial information of the entities or business activities
within the group to express an opinion on the financial statements. In this respect we are also
responsible for directing, supervising and performing the group audit.
We communicate with the Supervisory Board regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant findings in
internal control that we identify during our audit.
We provide the Supervisory Board with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the Supervisory Board, we determine the key audit
matters: those matters that were of most significance in the audit of the financial statements. We
describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, not communicating the
matter is in the public interest.