Good day and welcome to Affimed's Second Quarter 2019 Financial Results and Corporate Update Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I'll now introduce your host for today's conference, Greg Gin, Head of Investor Relations at Affimed. Please go ahead, sir..

Thank you, Maria. Thank you for joining us for Affimed's conference call to discuss the company's second quarter 2019 financial results and operational progress. This morning, Affimed issued a press release, which is posted on the company's website at www.affimed.com.

On the call today are Adi Hoess, Chief Executive Officer of Affimed; Leila Alland, Chief Medical Officer; and Michael Wolf, Head of Finance, substituting for Florian Fischer today. We will begin today's call with opening remarks from Adi on our progress during the quarter.

Leila will provide updates on the development program, and then Mike will review the financial results. Following the prepared remarks, we will host a Q&A session. Before we start, let me review our safe harbor statement. Today's discussion contains projections and forward-looking statements regarding future events.

These statements represent our beliefs and assumptions only as of the date of this discussion.

Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statement even if new information becomes available in the future.

These forward-looking 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 entitled Risk Factors in our filings with the SEC and those identified under the section entitled cautionary statement regarding forward-looking statement in our Form 6-K filed with the SEC earlier today.

With that introduction, I will now turn the call over to Adi.

Adi?.

Thanks, Greg. Good morning, everyone, and thanks a lot for joining us. In the recent months, we have taken steps to add to our drug development capabilities to execute upon our strategy. As previously disclosed, we have -- discussed, we have focused Affimed's strategy on our CD16A-targeting innate cell engagers.

Our differentiated product candidates could transform current I-O approaches by actualizing the untapped potential of the innate immune system to give patients back their innate ability to fight cancer.

We are committed to bringing our drugs to patients, thereby addressing unmet patient needs in therapeutics in treating hematologic and solid tumor malignancies.

We have strengthened our organization, particularly in the United States and also in Germany where we have added multiple new hires with substantial clinical drug development experience to help execute the AFM13 Phase II registration-directed study and to further advance our internal and partner pipeline programs.

We are extremely pleased to have added experienced personnel to our team who previously were at Novartis, Pfizer, Abbott, Lilly and other large pharmaceutical or biotechnology companies. We are building our future on R&D, particularly on our clinical-stage pipeline.

And I need to mention in this context our key internal programs AFM13 monotherapy and AFM13 in rational combinations with other therapeutic approaches, both of which address patients with relapsed/refractory CD30-positive malignancies; also AFM24, our innate cell engager that is designed to target EGFR-expressing solid tumors by a new mechanism of action that activates innate immunity.

I will turn the call over to Leila to provide an overview on the current status of our programs.

Leila?.

the AFM13 registration-directed Phase II study in patients with relapsed or refractory peripheral T cell lymphoma and the AFM24 first-in-human study in patients with EGFR-expressing advanced malignancies.

First, as Adi mentioned, we've expanded the in-house drug development team so that we now have the resources needed not only to initiate these 2 key programs but to achieve the clinical data milestones into 2020 that we've laid out in earlier communications.

We have made substantial progress towards starting our registration-directed study of AFM13 as monotherapy in relapsed or refractory patients with peripheral T cell lymphoma or PTCL, having now reached agreement with the U.S. FDA on the details of the clinical study protocol.

Study start-up activities are well underway toward initiating the registration-directed study. Based on the progress to date, we continue to anticipate study initiation in the second half of 2019. The FDA provided detailed comments on the Phase II clinical study protocol.

And it was important to have FDA's feedback before finalization of the clinical protocol, as the results of the Phase II study in PTCL, if positive, could form the basis for a biologics license application submission and support the possibility of an accelerated approval for AFM13.

Relapsed and refractory PTCL is associated with few treatment options and poor survival and as such is well recognized as an area of high unmet medical need.

Beyond PTCL, the Phase II study will also enroll a cohort of patients with transformed mycosis fungoides, an aggressive subtype of cutaneous T cell lymphoma, again a group with high unmet need which could represent a second accelerated approval path for AFM13.

The decision to continue to invest in AFM13 in this Phase II study is bolstered by the updated data from the ongoing investigator-sponsored study of AFM13 led by Columbia University, which was reported at the 15th International Conference on Malignant Lymphoma or ICML in June.

In this study, treatment with AFM13 in patients with relapsed or refractory CD30-positive lymphoma with cutaneous manifestation was well tolerated and resulted in a high objective response rate of 50%, with 1 complete and 4 partial responders amongst the 10 patients, which included efficacy in post-brentuximab vedotin failure patients.

Analysis of tumor biopsies showed increased infiltration of NK cells in responders compared to non-responders and evidence of NK cell-mediated killing. At ICML we also reported the final results from the Phase Ib dose escalation study of AFM13 plus pembrolizumab in Hodgkin lymphoma.

The results showed encouraging efficacy along with a favorable safety profile in these patients with heavily pretreated relapsed or refractory Hodgkin lymphoma, including subgroups of patients who were refractory to first-line chemotherapy or who were refractory to brentuximab vedotin. A deepening of responses over time was observed in 5 patients.

And 7 patients who were previously transplant ineligible transitioned to transplants after achieving a response to the combination of AFM13 and pembrolizumab, thereby increasing their chances for a cure.

These results, taken together with the single-agent efficacy of AFM13 in patients with CD30-positive T cell lymphoma, continue to support the potential for AFM13 to demonstrate clinical benefit in the planned registration-directed study of AFM13 as monotherapy in patients with PTCL.

Now moving to AFM24, our tetravalent, bispecific EGFR and CD16A-binding innate cell engager and progress for the first-in-human clinical study. AFM24 is designed to target EGFR-expressing solid malignancies by a novel and differentiated mechanism of action, that is by activation of innate immunity.

This approach is differentiated from other EGFR-targeting approaches, including cetuximab, panitumumab or osimertinib, which all inhibit tumor growth by EGFR-mediated signal transduction.

We see strong potential for AFM24 to transform the treatment paradigm for patients with EGFR-expressing advanced solid malignancies, which include colorectal, non-small cell lung cancer, gastroesophageal cancer, glioblastoma multiforme and others, through its novel mechanism of action.

We recently presented preclinical data at the American Association for Cancer Research annual meeting that demonstrated AFM24's ability to bridge NK cells and macrophages to EGFR-expressing tumor cell lines; and to induce antibody-dependent cellular cytotoxicity or ADCC and antibody-dependent cellular phagocytosis or ADCP, respectively.

This cell-killing effect was independent of RAS mutational status, an important resistance mechanism for traditional EGFR-targeted monoclonal antibodies such as cetuximab. Compared to cetuximab, AFM24 showed markedly reduced inhibition of EGFR phosphorylation, further supporting AFM24's differentiated mode of action.

In animal models, AFM24 enhanced tumor infiltration of NK cells and elicited dose-dependent antitumor efficacy. Of note, AFM24 showed no toxicities in the cynomolgus monkey toxicity study even when the animals were treated at high dose levels, demonstrating AFM24's potential for a favorable safety profile. We have received feedback from the U.S.

FDA on our planned IND application and have also held meetings with key thought leaders and investigators in the U.S. and Europe, all of whom are excited about the preclinical profile of AFM24 and its potential to benefit patients.

We have made substantial progress toward completion of the IND application for AFM24, and we anticipate submitting the IND application around the end of the third quarter of 2019. I'd now like to briefly turn to the opportunity to combine our innate cell engagers with NK cell therapies.

As we continue to advance innate cell engagers as monotherapies, our research and development efforts are also focused on understanding whether patients who don't respond to an innate cell engager might benefit from therapeutic approaches that combine with allogeneic NK cells.

Such NK cell platforms are emerging and are in early stages of clinical testing by several groups and companies.

MD Anderson previously reported the results of a preclinical collaboration with Affimed whereby a novel product consisting of AFM13 premixed with MD Anderson's cord blood-derived allogeneic NK cells were studied in models of CD30-positive malignancies.

This AFM13 NK cell product forms a stable complex to the -- due to the high binding affinity of AFM13 to CD16A. As presented at ASH 2018, this AFM13 NK cell product showed strong antitumor efficacy in in vivo mouse experiments.

These results form the basis for a planned investigator-sponsored Phase I study by MD Anderson to treat patients with relapsed/refractory CD30-positive malignancies with a premixed AFM13 NK cell product.

Combining our innate cell engagers with allogeneic NK cells has the potential to increase the number of NK cells and selectively target these NK cells against the patient's tumor. This novel approach has the potential to further improve response rates and durability of responses in patients with cancer.

We believe that such an NK cell combination approach could be valuable in combination with any of our innate cell engagers in order to optimize the potential of the innate immune system to fight cancer. I will now turn the call back to Adi to continue the presentation.

Adi?.

Thanks a lot, Leila. Beyond AFM13 and AFM24, we are continuing our efforts focused on expanding our early clinical pipeline.

As we look ahead to generating additional novel innate cell engagers from our ROCK platform, we have identified a list of clinically validated tumor antigens that could be a target for the innate immune response and for which current therapies in development have shown limited efficacy and/or dose-limiting toxicity.

We are progressing our preclinical pipeline of novel innate cell engagers that represent opportunities for future IND filings. Our collaboration with Genentech continues to progress according to plan.

During the second quarter, we received a payment from Genentech in an undisclosed amount triggered by the achievement of a preclinical milestone under our collaboration. I'll now turn over the call to Michael to provide a financial overview.

Michael?.

Thank you, Adi. Affimed's consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board or IASB. The consolidated financial statements are presented in euros, which is the company's functional and presentation currency.

Therefore, all financial numbers that I will present here in this call, unless otherwise noted, will be in euros. Cash, cash equivalents and current financial assets totaled EUR87.7 million as of June 30, 2019. Cash, cash equivalents and current financial assets on December 31, 2018, were EUR108.8 million.

Based on our current operating and budget assumptions, we anticipate that our cash, cash equivalents and current financial assets as of June 30, 2019, will enable us to fund our planned clinical development and early development activities into 2021.

Net cash used in operating activities was EUR18.9 million for the 6 months ended June 30, 2019, compared to net cash used in operating activities of EUR15.2 million for the 6 months ended June 30, 2018. The increase is primarily due to higher cash expenditure for research and development efforts.

Total revenue was EUR4 million for the 3 months ended June 30, 2019, compared to EUR0.2 million for the 3 months ended June 30, 2018. The increase in revenue is attributable to the recognition of EUR3.7 million as revenue from the Genentech collaboration in the second quarter of 2019.

R&D expenses for the second quarter of 2019 were EUR11.5 million, included accrued termination costs of EUR1.4 million associated with the wind-down activities for the 2 Phase I studies of AFM11. R&D expenses for the second quarter of 2018 were EUR7.1 million.

The increase was primarily related to higher expenses related to the manufacturing activities for clinical study material for AFM13, start-up activities for the AFM13 registration study in PTCL, early-stage development and discovery activities and the termination costs for the 2 AFM11 clinical studies.

G&A expenses for the second quarter of 2019 were nearly unchanged at EUR2.3 million compared to EUR2.2 million for the second quarter of 2018. Net loss was EUR10.3 million or EUR0.17 per common share for the second quarter of 2019 compared to a net loss of EUR8 million or EUR0.13 per common share for the second quarter of 2018.

Weighted number of common shares outstanding were 62.4 million for the quarter ended June 30, 2019. And with that, we would like to turn the call back to Adi..

Thanks a lot, Michael. Let me summarize. We are continuing to advance our novel and differentiated innate cell engagers and our focus on actualizing the untapped potential of the innate immune system to give patients back their innate ability to fight cancer.

To execute the AFM13 registration study and to further advance our internal and partner pipeline, we have strengthened our organization through the addition of multiple persons who bring to Affimed substantial product development experience. Thanks a lot for listening..

Operator:.

[Operator Instructions] The first question is coming from the line of Peter Lawson..

This is Waleed [ph] on for Peter Lawson. Just a question on the Phase II registration-directed study for AFM13 monotherapy.

What are those positive end points that you would need to see in order to support the accelerated approval?.

Would you like me to answer that, Adi?.

Yes, Leila, jump in this..

So the primary end points of the study are objective response rate and durability of response. So that's what the FDA wants to see. We have to remember that other drugs that have received accelerated approval in these same populations have had objective response rates on the order of 25% to 30% generally.

And so while we don't yet have the data to see where AFM13 will land, we have the data from the investigator-sponsored study suggesting higher response rates than what's been achieved with other agents that have gotten approvals..

Got it, that's really helpful.

And when can we expect to see initial data from the study?.

So I think we've guided toward next year. And we will -- we plan to print -- to disclose data at the time of the interim analysis but not earlier than the interim analysis..

Got it. And just a question on AFM24. I know you guys have some exciting preclinical data.

Do you guys have any plans for evaluating the drug in combination with other agents? And have you seen any of that data? Perhaps have you done any of that work pre-clinically? And do you plan to incorporate any combination strategy in your plans going forward?.

Yes. So I think that's a great question. And we as a drug developer are very much in favor of doing combinations and doing them fairly early on.

At the same time, based on the mechanism of action of AFM24 as well as the ability, albeit limited, for other EGFR-targeted agents to show single-agent activity, we feel it's very important that the drug establish a single-agent activity before moving on to combinations.

So we've designed the study not only to go through dose escalation but also to have patients' group-specific cohorts in dose expansions so that we can really firmly look at the potential for AFM24 as a single agent and then look at the combination potential.

In terms of what combinations would be relevant for AFM24, it depends in part on the tumor type. So for example, for non-small cell lung cancer it might be interesting to combine with a checkpoint inhibitor. And based on the data that we've seen previously with AFM13 in combination with pembrolizumab, that would be a rational combination.

We've also spoken today about the opportunity to combine with an NK cell-based therapy, and so that's another area that we're very interested in not only for a combination with AFM13 but also with AFM24. And then other combinations would be guided by the specific tumor indication..

The next question is coming from the line of Maury Raycroft..

Congrats on the partners. Just on the registrational trial, I think you mentioned previously that the protocol for AFM13 in that trial led to some questions from FDA, some technical questions, which I assume were discussed and addressed to reach an agreement with FDA for the final trial design.

And so I'm just wondering if you can comment on what some of those technical issues were and if you can provide any more details on the final trial protocol and design..

Yes. Thanks for the question.

So the feedback was related to details of the eligibility criteria and making sure that we were in agreement about the definition of relapsed or refractory peripheral T cell lymphoma and transformed mycosis fungoides, details of the statistical analyses to make sure that we were aligned on how we were doing the statistical analyses and also around the requirements for testing and defining CD30 positivity.

So all of their comments were addressed. And that took some time, unfortunately, but I think it was important that we took that time upfront and got that detailed feedback given how important the study is..

Got it, that's helpful.

And will -- some of those details, will those be included in ClinicalTrials.gov when they potentially post?.

Yes. Definitely, yes..

Okay. And then for the combo study with AFM13 plus the cord blood cells, just wondering if there's any status update on that program and also just the time lines for it in general..

I think that our plan is that, as soon as we have confirmation that the first patient is enrolled and treated, that we would provide an update at that time. As you know, it's under the control of MD Anderson, so we can't really comment on this part of the study at this point..

Got it. Okay. And just a quick question on the QMCF licensing for the protein production technology. I'm just wondering if that's separate from the Affimed ROCK platform or if it has any meaningful implications for your engager technology in the ROCK platform..

Yes. Maury, this is Adi. This is completely separate and is broadly used by our daughter company AbCheck. AbCheck is the source of our finding moieties that recognize tumor antigens, and in that context, they are using such type of technology. So we're -- we have not yet considered using it for the ROCK platform per se in house..

The next question is coming from the line of Jim Birchenough..

How rigorously have you evaluated RAS-mutated cell lines and models? I'm thinking the numbers of cell lines; the different tumors; specific mutations, either in RAS specifically itself or downstream signaling proteins.

And are there any data on the role of RAS signaling and potential NK cell resistance?.

Leila, can you help out here?.

Yes. I believe the bulk of data that we have are the data that were included on the presentation at AACR this past year. I would have to look into what additional data has been generated by our scientists since that time, but there were multiple cell lines tested there.

And in terms of the second part of your question, in terms of evidence of NK cell resistance, I'm not aware of any data, but it's certainly something I'll look into now that you've raised that..

Okay. And then Adi, you have this now list of -- prioritized list of validated [indiscernible] targets.

And given your experience with AFM24, are you able to define line -- define a time line from nomination to IND going forward?.

So we have looked indeed on a significant number of targets in general, especially where products are in development, with a focus on antibodies and antibody drug conjugates.

That's given us a list of a certain number of targets that we then have prioritized in terms of indications and any relevant data that would indicate involvement of innate immunity. So that has not just given us a list of targets but also a rank order.

And we have indeed already started generating such innate cell engagers, so the process of generating our leads and backups is already ongoing. So once we have identified that, then we can go back and -- so once we have done the initial analysis on those lead and backups, then we can go back and give the precise time lines..

Okay. And then last one for me. Obviously, with the Phase III starting and the EGFR program starting, I think it's reasonable to assume that cash use will accelerate next year, so can you comment on activities for additional non-dilutive financing? And I know the Genentech collaboration was obviously a major collaboration.

Those are probably not that common, but what other -- I mean, what should we be assuming about non-dilutive financing?.

Yes. So in the context, first, we have mentioned that -- specifically about cash runway is into early 2021, so there is still a substantial runway available to us.

In terms of the Genentech collaboration, as we've recently already mentioned and outlined, we are unfortunately not able to give any guidance on when these additional milestones would come in, but obviously as we have seen, that collaboration is progressing and we've already hit the first milestone.

So they will indeed only be announced at the time when we're hitting them. Not much more clarity, unfortunately, on that. And in terms of other activities related to generate some non-dilutive financing, i.e., some other type of collaborations, those discussions are advancing.

And we can update you at the time when the agreements are going to be signed..

The next question is coming from the line of Daina Graybosch..

I've got some questions. The first one, I'm just wondering if you can give us some more details on the feedback you received from the FDA on AFM13.

Specifically, what were the topics of discussion, first? Second, did you make any changes to the protocol and response? And then third, would you choose to go at risk and not make any changes that the FDA suggested?.

Thanks, Daina. This is Leila. So first of all, all of the comments that FDA raised were fully addressed, and the protocol then amended and sent back to the FDA and got their stamp of approval. So all of their comments were fully addressed.

In terms of what kinds of feedback they had, I would categorize it as largely technical details around specifically how to define the patient population and how the details of the statistical analyses would be done and also how to define CD30 positivity.

So for example, they wanted us to specify as we were already planning to use a validated CD30 test for -- to determine eligibility. So there were no outstanding comments that were not addressed..

Do you still have other gaps you'd like -- you still have open hires for? And finally, do you think there's any risks in the previous regulatory or clinical works you've done without these hires?.

So in terms of the hires, there were multiple. Many of them were on the clinical operations team, so those people working at the program level and at the trial level and in support of both the AFM13 and AFM24 programs and having a larger team based in the U.S.

and to -- in order to make sure that we are fully resourcing the needs of the study centers in the U.S. as well as the rest of world. In addition, there were some key kind of leadership roles that needed to be filled, such as a Head of Biostatistics, a Head of Drug Safety, a Head of Regulatory Affairs.

These positions had been previously filled with individuals who were working more on a consulting basis for us, and so it's really great that we now have a permanent person in place for each of those roles. And then the -- there's actually one position that we're still looking to fill, which is the Head of Clinical Pharmacology.

Again, this is a role that's been filled with a -- very good consultants, but we want to have that person in house. And hopefully, we're very close to getting that person onboard..

So Daina, as you have heard from Leila, it's mostly been internalizing certain positions that we've had recently addressed with consultants or with consultancy firms. That was our decision that we took as a consequence of now entering a registration-directed study.

And we have also done a very experienced key hire for our Head of Chemical Manufacturing and Control in that context, so also that piece has been upgraded..

And there are numerous other positions as well, like a drug supply manager, a medical writer, etcetera. So we are really trying very hard to have a filing-ready organization..

Got it. And if I were just to clarify on that; I think that means you had good quality before working with consultants but maybe not the timeliness that you now have having all these positions in house....

This is correct, Daina..

I couldn't have said it better. Thank you..

[Operator Instructions] There are no further questions at this time. I'm handing over the call to Adi. Please go ahead, sir..

Yes. Thanks a lot. So I'm now concluding the earnings call. With -- as we have outlined, we have significantly strengthened the organization. We're in a good path forward in order to initiate studies with AFM13 but also with AFM24. And we look forward to continuous updates throughout the next attendances and conferences or earnings calls.

Thanks a lot, and have a nice day..

That does conclude the conference for today. Thank you for participating. You may all disconnect..