Good day and welcome to Affimed Third Quarter 2019 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. 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..

Thank you, Carol. I’d like to welcome and thank everyone for joining us for Affimed's conference call to discuss the Company's third 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 with prepared remarks are Adi Hoess, Chief Executive Officer of Affimed; Cassandra Choe-Juliak, Acting Chief Medical Officer; and Florian Fischer, Chief Financial Officer.

We are also joined by Wolfgang Fischer, Chief Operating Officer and Acting Chief Scientific Officer; and Denise Mueller, Chief Business Officer, who will be available for questions and answers. We will begin today's call with opening remarks from Adi on our progress during the quarter.

Cassandra will provide updates on our clinical programs, and then Florian will review the financial results and update our financial guidance. Following which Adi will provide a few closing remarks, after his prepared remarks, we will host the 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, I will now turn the call over to Adi. .

Thank you very much, Greg, and good morning, everyone. Thank you for joining us for our third quarter earnings call. Before I begin, I would like to take a moment to introduce Dr. Cassandra Choe-Juliak, who is joining us on her first quarterly call as acting Chief Medical Officer of Affimed. She will be succeeding Dr.

Leila Alland, effective November 30, this year. [Technical Difficulty] will step down from her current role [Technical Difficulty] and will serve as a consultant for Affimed through January 2020 to ensure a smooth transition.

I want to thank Leila for her great contributions to our progress in the past two years on our programs and in particular for building an exceptionally strong clinical development organization with the focus on clinical strategy, operations, biostatistics, clinical pharmacology and drug safety.

I would also like to wish her success in her future endeavors. Cassandra has over 13 years of experience in drug development and medical affairs in immuno-oncology/oncology for both hematological and solid tumor malignancies.

Since joining Affimed in July 2017, Cassandra has made significant contributions to the clinical development strategies of all of our programs and she has served as the clinical leader for the AFM13 development program.

Cassandra’s deep expertise in drug development as well as her strong leadership skills have been, and will continue to be, a tremendous asset to Affimed and our clinical team as we continue to advance our pipeline of innate cell engagers. Now, let me turn to the business update.

As we’ve reported, we made important progress executing our clinical programs of AFM13 and AFM24. In our collaboration with Genentech and in strengthening our cash position, which allows us to fund operations, at least for another two years.

I'll start with an update on AFM13, our lead product candidate in the most advanced CD16A-binding innate cell engager in clinical development. I'm very pleased to report today that patient dosing has started in our Phase 2 registration-directed study of AFM13 monotherapy.

To achieve this important milestone has been a huge team effort and brings us one step closer to delivering a potential new treatment for relapsed and refractory patients with CD30-positive peripheral T cell lymphoma, who have very few treatment options.

The results of the Phase 2 study in pTCL, if positive, could form the basis for a Biologics License Application submission and support the possibility of an accelerated approval path for AFM13, given the unmet medical need for safe and effective new treatment in this hard-to-treat patient population.

Next, I'd like to briefly update you on the planned Phase 1 study to evaluate the combination of AFM13 with cord blood-derived allogeneic NK cells as an investigational treatment for patients with relapsed/refractory CD30-positive lymphoid malignancies.

The FDA has cleared an IND application for this trial with an IST, run by the MD Anderson Cancer Center, which will be the first ever clinical trial bringing together an innate cell engager, which is AFM13 and adoptive NK cell transfer.

The cellular therapy approach of administering NK cells pre-loaded with AFM13 could address patients that either have low NK cells numbers of dysfunctional NK cells. This study could therefore address a much broader opportunity in CD30-expressing lymphomas, including Hodgkin lymphoma, T-cell lymphoma and B-cell lymphoma.

Now, let's move onto our second clinical stage innate cell engager, AFM24, which recognizes both, epidermal growth factor receptor, EGFR and CD16A. We are pleased to report that we have received clearance of our IND in October.

We are now proceeding with the initiation of the Phase 1/2a clinical study of the first innate cell engager entering clinical development, addressing patients suffering with EGFR-expressing solid tumors.

We conducted market research with key opinion leaders, and they continued to highlight the tremendous medical need for novel therapies for such solid tumors. Based on the unique and innovative mechanism of activating the innate immune system, AFM24 has the potential to address limitations associated with other EGFR-targeted therapies.

Beyond AFM13 and AFM24, we are broadening our early stage pipeline with additional innate cell engagers from our ROCK platform on which we are developing internally and with Genentech. For our internal pipeline, we have selected two new CD16A-binding innate cell engager candidates, which we call AFM28 and AFM32.

We plan to advance the first candidate into preclinical studies in 2020 with the aim of supporting a future IND submission.

The selection of the new development candidates follows our comprehensive evaluation of clinically validated tumor antigens that could be a target for the innate immune response that are expressed in multiple hematologic and solid tumor malignancies and for which current development therapies have shown limited efficacy and/or dose limiting toxicity.

Switching briefly to our collaboration with Genentech, we recently announced the second milestone this year for the collaboration.

Genentech exercised its final option for an exclusive target under our multi-program agreement to develop and commercialize novel NK cell engager-based immunotherapeutics generated from our fit-for-purpose ROCK platform to treat multiple cancers. The target selection triggers a milestone payment in an undisclosed amount to us from Genentech.

Indeed, we look forward to achieving further progress with Genentech towards generating novel therapies that leverage the full potential of the innate immune system to our people living with cancer.

With an improved cash position, which Florian will elaborate on further in his prepared remarks, we have sufficient cash resources to build on our momentum and fund our operations at least into the fourth quarter of 2021.

Our available capital position as well as -- positions us well to further advance our clinical programs through milestones next year, including proof of concept data for AFM13 from our registration-directed study, and safety and preliminary efficacy data from our first in human study of AFM24.

This capital allows for the long-term investment in our earlier stage pipeline program as well. I will now turn the call over to Cassandra to provide more detail on AFM13.

Cassandra?.

Thank you very much, Adi. First, as Adi mentioned, we are very excited to initiate our Phase 2 registration-directed study of AFM13 as monotherapy in patients with relapsed or refectory CD30 positive peripheral T cell lymphoma or pTCL, with the dosing of the first patient.

This is a very important milestone for us for the relapsed/refractory patients with pTCL, their families and caregivers. These patients currently have extremely limited treatment options and poor survival and as such pTCL is in area of high unmet medical need.

This is an open label study, evaluating the efficacy of AFM13 in three treatment cohorts with each cohort receiving weekly AFM13 infusions of 200 milligrams flat dose. The first cohort includes patients with relapsed or refractory disease whose tumors have high expressions of CD30, defined as at least 10% of the tumor cells being CD30 positive.

The second cohort includes patients with relapsed or refractory pTCL whose tumors have lower CD30 expression defined as from 1% up to less than 10% CD30 positivity. And agreed with the FDA, this study is designed to allow a potential BLA filing based on treating 100 patients suffering from pTCL.

A pre-specified interim efficacy analyses will assess objective response rate in the first 20 patients in each of the two pTCL treatment groups.

If the efficacy data in the low CD30 expressing group looked similar to that of the high expressing cohort, there may be an opportunity for us to combine the two cohorts of patients and to complete the registrational study sooner with a total of 100 patients with any level of CD30-positivity.

In addition to the two pTCL cohorts, the Phase 2 study will also enroll a cohort of patients with CD30-positive transformed mycosis fungoides, an aggressive subtype of cutaneous T cell lymphoma, another group of patients with high unmet need.

In this group, we plan to enroll 20 patients on an exploratory basis and if the data are encouraging, we plan to meet with the FDA to discuss the possibility of an accelerated approval in this indication. I'll now turn to the opportunities to combine our innate cell engagers with NK cell therapies.

As we continue to advance innate cell engagers as monotherapy, our research and development efforts are also focused on understanding whether patients who don’t respond to innate NK cell engager might benefit from therapeutic approaches combined 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 pre-mixed with MD Anderson's cord blood-derived allogeneic NK cells was studied in models of CD30-positive malignancies and showed strong anti-tumor efficacy in in vivo mouse experiments.

MD Anderson has received IND clearance for investigator-sponsored Phase 1 clinical study in which MD Anderson intents to administer a stable complex of AFM13 pre-mixed with cord blood-derived allogeneic NK cells in different doses, that is different numbers of pre-loaded NK cells into patients with relapsed/refractory CD30-positive lymphoid malignancies.

Combining our innate cell engagers with allogeneic NK cells allows administration of a large number of activated NK cells and selectively target these NK cells against the patient’s tumor. This novel approach has the potential to further improve response rate 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 innate immune system to fight cancer. I'll turn the call back to Adi.

Adi, please?.

Thanks a lot, Cassandra. The next program I will discuss is AFM24, our tetravalent, bispecific EGFR and CD16A-binding innate cell engager. 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 inhibition.

Earlier this month, we announced FDA clearance of our IND application to start a first-in-human Phase 1/2a clinical study of AFM24 in patients with advanced cancers known to express EGFR.

The initial goal of the planned clinical study is to determine the maximum tolerated dose and recommended a Phase 2 dose of AFM24 as well as to evaluate the safety of pharmacokinetics, pharmacodynamics and preliminary efficacy.

AFM24 is designed to bind both, tumor cells and innate immune cells with much higher affinity as described to date, particularly, the high affinity to CD16A could be an important contributor to an improved outcome, as shown for some other approaches recently. With that, I will turn the call over to Florian for the financial overview.

Florian?.

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. We ended the third quarter with €76.5 million in cash, cash equivalents and current financial assets as compared to €108.8 million as of December 31, 2018.

As we reported last week, we competed a public equity offering with net proceeds of approximately €29 million. At the end of the third quarter, this would bring our pro forma cash position including the offering proceeds to approximately €106 million.

We observed very high quality demand in this transaction enabling us to further expand our excellent shareholders base.

Based on our current operating and budget assumptions, we anticipate that our pro forma cash position as of September 30, 2019 will enable us to fund our planned clinical development and early development activities at least into the fourth quarter of 2021.

Net cash used in operating activities was €30.6 million for the nine months ended September 30, 2019 compared to net cash used in operating activities of €24.9 million for the nine months ended September 2018. The increase is primarily due to higher cash expenditure for research and development efforts.

Total revenue was €2.1 million for the three months ended September 30, 2019 compared to €300,000 for the three months ended September 30, 2018. The increase in revenue is attributable to the recognition of €1.9 million as revenue from the Genentech collaboration in the third quarter of 2019.

R&D expenses for the third quarter 2019 were €11.7 million compared to R&D expenses for the third quarter of 2018 of €9.8 million.

The increase was primarily related to higher expenses related to manufacturing activities for clinical study material for AFM13, startup activities for AFM13, registrational study in pTCL, and early stage development and discovery activities.

G&A expenses for the third quarter 2019 were €2.8 million compared to €2.4 million for the third quarter of 2018. Net loss was €10.9 million, or €0.17 per common share for the third quarter of 2019 compared to a net loss of €12 million or €0.19 per common share for the third quarter of 2018.

Weighted number of common shares outstanding were 62.4 million for the quarter ended September 30, 2019. And with that, I would like to turn the call back over to Adi for closing comments before we open up the call for questions.

Adi?.

Our differentiated CD16A binding innate cell engagers could transform current I-O approaches by actualizing the untapped potential of the innate immune system to give patients back the innate ability to fight cancer.

We're committed to bringing our drugs to patients, thereby addressing unmet patient needs in treating hematologic and solid tumor malignancies. We're working to achieve this by advancing our novel and differentiated inventions and our focus on delivering on data milestones in 2020 in all of our programs and in our collaboration with Genentech.

To that end, over the past two months, the Affimed team has delivered on a number of clinical development milestones, we have strengthend our drug development team and solidified our balance sheet, positioning us well to further execute our AFM13 and AFM24 programs as well as to advance our internal and partner pipeline.

We take great pride in the progress we have made and the advancement of our development programs. We are happy to address any questions that callers may have.

Operator?.

Thank you. [Operator Instructions] And the first question comes from the line of Maury Raycroft. Please ask your question..

Hi, everyone. Good morning. Congrats on the progress and thanks for taking my questions. So, first question is on the Phase 2 registration-directed study. You've got a lot of clinical experience with AFM13.

Just wondering if you can talk about where you are starting out with the registrational trial, how many sites do you already have up and running and how should we think about site rollout in different regions going forward?.

Sure. Thank you for your question. We just started the process of getting the study off the ground. We treated our first patient last week at Columbia University.

We are anticipating 70 plus sites in the United States, in Europe, both Western and Eastern and also in Asia Pacific, sites are in countries such as Germany, France and Spain and also in South Korea and Asia Pacific. We are working hard to get these sites off the ground as fast as possible. And we will be providing those updates in the coming months..

Got it. Okay.

And then, for the AFM13 and allogeneic NK cell combo trial, any new clarity on when you could dose -- when MD Anderson could dose the first patient there and potential timelines for that study?.

Sure. This is investigator-sponsored trial sponsored by the MD Anderson. So, as such in general, as you know for ISTs, we really can't speculate or comment on the timing. We can say that we are working very closely with them on a day-by-day basis in close communication and they are working very hard to open the study as soon as possible.

And we expect to inform you when the study has treated its first patient and will be updated on, I’m sure on ClinicalTrials.gov..

Got it, great. And last question is just on AFM24, just wondering when that study could post to ClinicalTrials.gov.

And if you could provide any clarity on the types of patients you may try to enroll for that study, depending on tumor type, communication status and prior treatments? And then, what would that threshold be for you to report data from that study, I guess, how many patients will you have had to have treated?.

Hi, Maury. This is Wolfgang. Thank you for your question, I mean, many questions. So, let me start with the first one, regarding the initiation of this clinical trial. As we have heard earlier, we have the clearance of the IND and we plan to initiate this study in Q1 2020.

Regarding the indication in this Phase 1 where we have the primary objective to look for safety, recommended Phase 2 dose and then tolerability and PK. We are looking for patients with known where EGFR expression is a validated target. And also here, we include patients with and without RAS mutations.

And in terms of first data or signals, right, I mean, as you know, it depends on recruitment speed et cetera. But, we could have early safety data, maybe late 2020. And when it comes to clinical activity or clinical signs of activity, we can't comment on that because we just don’t know.

Does that answer your questions, or did I miss one?.

It was very helpful. Yes. Thank you for taking the questions..

Sure..

Thank you. And the next question comes from the line of Daina Graybosch from SVB Leerink. Please ask your question..

Hi. Thanks for taking my questions. A couple of them, first on the NK cell program with MD Anderson. MD Anderson recently licensed their CAR NK technology that’s built on the cord blood NK cells to Takeda.

I’m wondering if that licensing event has any impact on your program or if you get a good signal, how you would ultimately commercialize an NK engager with the cord blood NK cell therapy?.

Denise, can you take that question or shall I take it?.

Sure. No, I got it. I was just waiting. Hi. This is Denise Mueller. Thanks for the question. The impact of the deal with Takeda has no relevance or impact on our collaboration with our MD Anderson. While the CAR NKs come off the same platform as the NK cell product itself, they’re engineered NK cells and it’s a product by product license with Takeda.

We have continued to have full support and collaboration from MD Anderson. And there was a second part of your question, which is about commercialization.

Is that correct?.

Yes, like ultimately if we get a good single, how does it translate into actual commercial product? Is that with MD Anderson or would you look to other companies for instance..

So, we have access to this NK cell product. We are working through, if we get a good signal, what could -- what the potential is to license that and commercialize that. As you probably know, MD Anderson doesn't commercialize any products themselves.

But, we would wait to make that assessment to see activity and how it performs with AFM13, and of course to look at the status of the off-the-shelf -- the ability to make the NK cells off-the-shelf, that would also drive our decision on commercialization..

Got it. And my next question is, you mentioned some new programs coming out of discovery through new targets. I’m wondering you could talk about your plan for bringing those forward.

Is the plan to bring them forward sequencing after AFM24 internally or are you looking for some development partners to accelerate that?.

So, I can step in here. So, these were targets very carefully selected. Affimed has done a significant effort. So, we have done analysis of certain iindications where the innate immune system has been involved. And we think that these are very value target for Affimed.

And our plans are for the time being to bring two of these molecules forward to a potential IND filing. So, we are not contemplating for the time being that we will partner those. However, what we are realizing is that parties are interested discussing those opportunities.

So, we are somewhat flexible but we have a long-term look so that we at least can file the IND..

Okay. That's super helpful. That's it for me. Thank you..

Thank you. And the next question comes from the line of Jameson Kao from BMO Capital Markets. Please ask you question..

Hi. This is Jameson on for Do. Thanks for taking our questions and congrats on the progress.

So, first one, how do you see AFM24 fitting in the treatment landscape for EGFR cancers?.

Thank you. Thank you for your question. But, based on the mode of action of AFM24, which is different of currently EGFR targeting therapies, meaning that the EGFR targeting therapies mainly act through the inhibition of signal reception of EGF receptor.

AFM24 on the other side is really engaging NK cells with the tumor cells and then activating these NK cells to kill the tumors. What we also have seen in our IND-enabling studies, we tested AFM24 in cell lines with and without RAS mutations.

And we clearly can see that most cells, carrying mutations or not carrying mutations are killed by AFM24 in the presence of NK cells. So, it seems that some of the limitations or potential limitations could be overcome by AFM24.

On the second -- the second point is here that when we look at toxicology and tolerability, we have seen in cyno studies that AFM24 is very tolerable and very safe, and we have seen in our GLP tox study, no toxicity and we use similar dosing compared to the historic tox studies which have been with cetuximab.

So overall, we have a molecule which could overcome RAS mutations on one side and also a molecule which is very tolerable and safe.

Does that answer your question?.

Yes. That was very, very helpful.

Just a quick follow-up for your earlier pipeline assets, when you guys think about -- think are going to disclose the targets for AFM28 and 32?.

Indeed we haven't decided on that. We’ve outlined. So, this was quite an extensive work in order to reduce the many potential targets out there, just at the moment two or three different ones. We do not want to share that in the public domain. So, it could also be -- as we haven't taken any decision, could take a while until we will disclose those. .

Thank you. And the next question comes from the line of Jim Birchenough from Wells Fargo. Please ask your question..

Good morning. This is Nick on for Jim this morning.

First on AFM24, do you plan to file a CTA so that you can engage, I’m assuming some very enthusiastic European investigators, in the EGFR space?.

Yes. So, for the -- thank you for your question. For the Phase 1 study, which we're going to initiate, we have four sites, two of them in the U.S, one of them in Spain and one of them in the UK. In the UK, it’s de Bono [ph] and in Spain it’s [indiscernible], and then, we have UCLA and UCI. .

You mentioned pharmacodynamics.

So, will the study acquire mandatory treatment tumor biopsies?.

Yes. We're looking into tumor biopsies. And we have a comprehensive correlative science program associated to our study.

And this includes on one side biopsies and the analysis of biopsies, and on the other side we're evaluating markers in the innate immunity but also in to see how the phenotype of these cells is changing et cetera in order to detect changes during the treatment with AFM24.

Does that answer your question?.

Yes, it does. And last on 24. We had to only think activation of adaptive immunity is going to be in these solid tumors and how you think about deployment of T cell checkpoint inhibitors, particularly in colorectal cancer where they have no role currently..

Sorry. Jim, could you please repeat? I didn’t get it. I didn’t hear you well. Sorry..

When you think about the activation of adaptive immunity by AFM24, it’s important -- and that leads to the possibility of deployment of T cell checkpoint inhibitors, which may be reasonable in lung or head and neck, but they have no roll in colorectal cancer currently. .

Yes. So, thank you for your question. And yes, correct, right. As we think about the innate immunity and we have seen that also in experiments we have done with AFM13 that once we can activate the innate immunity, right, there is a cross-talk to the adaptive immunity.

And to indicate -- or not indicate, to trigger the adaptability, right, as you mentioned, that opens the space for several combination, right, for example inhibitors. And we are thinking along the same lines.

When it comes to the different indications, yes, we have done analysis and look into the science and the biology of these tumors where we have checked whether there is a prevalence of NK cells -- whether the prevalence of NK cell is associated with beneficial outcome.

We have also checked whether these -- in these tumor types ADCC plays a role, et cetera, and have analyzed and selected the indications accordingly. However, in the first part of the Phase 1, we have no limitations regarding the indication because what we allow is patients having tumors where it's known that EGFR is a target value..

Okay. Thank you. And then just a last one, and going back to the pTCL trail. I think, initially, Adi, you guided to having data on patients right about mid2020.

Do you still think that's a feasible goal?.

Well, what we are guiding now is to the second half of 2020, so it might be a little later. We’re just in the startup phases. And to make any more concrete predictions is a little challenging as it’s a rare disease.

However, utilizing the outlined and some of the answers before, we have identified a significant number of sites in so many different countries, all the startup activities are all progressing.

So, I’d say that we have much clearer idea on when exactly we can show some update on the AFM13 registration or RD study is maybe already in the next earnings call end of March..

Okay, great. Thank you very much. Good luck, and look forward to further updates..

Thank you. There are no further questions at this time. You can continue..

Yes. Thanks a lot. Thanks so a lot of for all this interest and for taking the time to join us today and the continuous interest and support of Affimed. We look forward to speaking with you again on the fourth quarter update call, as I just mentioned that’s going to be around end of March. Thanks so much and wish you all a very nice day. Good bye..

And that does conclude our conference call today. Thank you for participating. You may all disconnect..