Good day and welcome to Affimed’s Second Quarter 2021 Financial Results and Corporate Update Conference Call. [Operator Instructions] As a reminder, today’s conference call is being recorded. I’d now like to introduce your host for today’s conference call, Alex Fudukidis, Head of Investor Relations at Affimed. Please go ahead..

Dr. Adi Hoess, our Chief Executive Officer; Andreas Harstrick, our Chief Medical Officer; Arndt Schottelius, our Chief Scientific Officer; Wolfgang Fischer, our Chief Operating Officer; and Angus Smith, our Chief Financial Officer. The whole team will be available for the Q&A session.

Before we start, quickly to go through the 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 call.

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 statements 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 statements – in these 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 Forward-Looking Statements in the press release that we issued today and filed with the SEC.

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

Adi?.

again, non-small-cell lung cancer, EGFR wild type, squamous cell carcinoma of the head and neck failing chemo in PD-1 and colorectal cancer failing standard of care. The indications for each of the three studies have been selected carefully based on the biology of each tumor type.

This approach allows us to investigate a broad set of solid tumors while also providing multiple shots on goal for the more prevalent tumor types such as non-small cell lung cancer and colorectal cancer. In summary, we are very satisfied with the progress of the AFM24 program.

The data show that AFM24 possesses a different mode of action compared to conventional EGFR-targeting antibody. We see pharmacological activity based on CD16A receptor binding and NK activation markets. At these pharmacologically active doses, we see no classical EGFR-related side effects like skin or mucosal toxicity.

And in addition, we were seeing disease stabilization in these heavily pretreated patients at dose levels 320 milligram and 480 milligram. We believe in the significant potential of AFM24. And with the planned expansion of the program, we are seeking to maximize this opportunity, addressing a broad set of major EGFR-expressing tumor indications.

And this strategy will allow us to provide a continuous flow of data. Now, let me move to the third program, AFM28. For AFM28, we continue to advance the IND-enabling studies and have submitted an abstract with initial preclinical data for a major medical conference later this year.

We plan to release information about the target and the indication once the abstract becomes available. We remain on track to submit the IND application in the first half of 2022 and our goal is to begin a clinical study in the second half of 2022.

In addition to moving forward – things forward in the clinic, we are continuing to publish data that appoints our work. One such example is the recently published preclinical data that supported the IND filing – IND application of our innate cell engager AFM24 in the Journal of Maps.

Arndt, our CSO, will discuss the key takeaways from the publication – from the publication.

Arndt?.

Thanks, Adi and also for me, a very warm welcome to everybody on the call. As introduced by Adi, I would like to summarize the key preclinical data for AFM24 described in the recent publication in the Journal of Maps.

In this paper, we demonstrated the high affinity binding of AFM24 to CD16A on natural killer cells and macrophages with strong binding values in the low nanomolar range.

Importantly, AFM24 binds to CD16A on NK cells and macrophages with high affinity at a site that is distinct on binding of IgG such that high concentrations of polyclonal IgG results in a minimal, only twofold reduction in binding affinity in contrast, binding of an Fc-enhanced high-affinity anti-EGFR IgG antibody was significantly inhibited.

These data again demonstrate the high surface retention of RIC molecules, 2 NK cells, enabling the earlier described pre-complexing to NK cells with card-like NK cell properties, which are not possible with normal or Fc-enhanced antibodies. We also show high affinity binding of AFM24 in the nanomolar range to various EGFR-expressing tumor cells.

AFM24 demonstrated to be highly differentiated from marketed anti-EGFR antibodies with its ability to potently and effectively kill tumor cells through antibody-dependent cell needed cytotoxicity, or ADCC, or NK cells, moreover, this ICE-mediated potent antibody-dependent cellular phagocytosis, or ADCP macrophages in vitro.

AFM24 was also shown to be effective towards a variety of EGFR-expressing tumor cells, killing these regardless of their EGFR expression level and irrespective of their KRAS or BRAF-mutational status.

In addition, as AFM24 has a lower affinity for EGFR and binds to a different epitope than cetuximab, it exerts an over 1,000-fold lower inhibitory activity on EGFR signaling, further underscoring its highly differentiated mechanism of action.

Now in terms of in vivo data in tumor mouse models, we have published at AACR, this year’s AACR, showing dose-dependent antitumor activity of AFM24 in combination with freshly isolated NK cells.

This antitumor activity for AFM24 in combination with NK cells has now also been demonstrated with pre-complex and cryopreserved NK cells in vitro and in vivo within one of our preclinical collaborations.

This exciting data gives us confidence that the NK cell product, we used in combination with AFM24 retains its potent antitumor activity after cryopreservation in vitro and in vivo.

Now coming to the toxicology studies, in cyno-monkey is also described in the paper, AFM24 was well tolerated up to the highest dose of 75 mg per kg when administered once weekly for 28 days.

Remarkably, skin and other cytotoxicities, which had been observed in these dose levels with cetuximab and comparable cyno-monkey studies, were not observed here. Only transient elevation of interleukin-6 levels was detected at all dose levels, which returned to baseline after 24 hours.

Moreover, an increase in circulating CD40 monocytes was observed after the first dose of AFM24, concurrent with a decrease of circulating NK cells with doses of greater or equal to 8 kilograms per kg. And all of you showing the expected pharmacodynamic effect of this drug candidates.

But taken together, these results emphasize the promise of our bispecific innate cell engagers as an alternative cancer therapy, and demonstrate the potential for AFM24 to effectively target tumors expressing various varying levels of EGFR regardless of their mutational status. Happy to answer any questions you may have about this in our Q&A.

And for now, I will hand the call over to Angus to review the financials.

Angus?.

Thank you, Arndt. Affimed’s consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standard 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 in this call, unless otherwise noted, will be in euros. We ended the second quarter of 2021 with cash and cash equivalents of €222.7 million compared to €146.9 million on December 31, 2020.

Based on our current operating plan and assumptions, we anticipate that our cash and cash equivalents will support operations into the second half of 2023. Net cash used in operating activities for the quarter ended June 30, 2021, was €17.3 million compared to €15 million in the second quarter of 2020.

Total revenue for the second quarter ended June 30, 2021, was €9.7 million compared with €2.9 million for the quarter ended June 30, 2020. Revenue for the second quarter of 2021 mainly comprised of collaboration revenue from Genentech and Roivant.

Research and development expense for the second quarter of 2021 was €21.8 million compared to €11.7 million for the second quarter of 2020.

The increase in R&D expenses compared to the same period last year were driven primarily by increased expenses for AFM24, including costs for the production of clinical trial material as well as an increase in costs associated with our other early-stage programs and infrastructure and an increase in share-based payment expense.

General and administrative expenses for the second quarter of 2021 increased by 109% to €5.4 million from €2.6 million in the second quarter ended June 30, 2020.

The increase relates largely to higher personnel expenses, higher premiums for our Directors and officers liability insurance, higher consulting expenses and increased share-based payment expenses.

Net finance costs for the quarter ended June 30, 2021, increased by 63% from €1 million in the quarter ended June 30, 2020, to €1.6 million during the second quarter of 2021. The increase is largely due to foreign exchange losses related to assets denominated in U.S. dollars as a result of the weakening of the U.S.

dollar against the euro during the quarter. Net loss for the quarter ended June 30, 2021, was €18.8 million or €0.16 per common share compared with a net loss of €12.2 million or €0.16 per common share for the quarter ended June 30, 2020. The weighted number of common shares outstanding for the quarter ended June 30, 2021, was 119.6 million.

I will now turn the call back to Adi for closing remarks.

Adi?.

Thanks a lot, Angus. As just explained, our company is making significant strides forward by advancing signs and demonstrating that our innate cell engagers can play a leading role in enabling innate immune cells to identify and eliminate the cancer cells.

Now for AFM13, our strategy – development strategy allows us to target a broad set of CD30-positive lymphoma, indeed including various types of non-Hodgkin and Hodgkin lymphoma. We are very excited about the potential and market opportunity for AFM13 in these indications.

And we will have additional data for the NK cell combination study by the end of the year. For AFM24, we are now executing a strategy that we believe gives us the highest probability of success.

We have reached active dose levels in our dose escalation study, and we will now use this to initiate this three-pronged development approach in parallel, indeed, across a broad set of solid tumor indications. We expect that these three studies will generate a continuous flow of data.

Finally, we are executing on our preclinical pipeline to bring additional product candidates into the clinic. Our development progress for AFM28 is indicative of our ability to further expand our pipeline by leveraging the unique ROCK platform, and we are working on additional early candidates from the platform.

Many, many people have contributed to bring our innovative therapies to patients who need additional options in their fight cancer. These include patients and their families who entrust us with the lives of their loved ones, our employees and the investors who over the years have supported our efforts.

As always, I am very thankful for the trust you put into our efforts. Thank you. We are now ready to take any questions that you may have.

Operator?.

[Operator Instructions] Our first question comes from Daina Graybosch with SVB Leerink..

Hi all. Thanks for the question and for the pretty comprehensive call. Two for me on AFM24. The first is I believe you mentioned, and I just want to confirm, that you saw stable disease in several patients beyond eight weeks. And in that same sentence, you mentioned that you are recruiting any EGFR-expressing solid tumors.

I am wondering if you could clarify whether you saw the stable disease in patients that had more EGFR expression. Was there any correlation with that, or even if you could tell us of these patients recruited at cohort 5 and cohort 6, what proportion of them did have high EGFR, and which ended up with low EGFR? That’s the first question.

And the second question is, can you confirm how you ultimately will select the dose given you haven’t hit any dose-limiting toxicities? Can you – will you be going off pharmacodynamic activation and periphery? What gives you confidence that that will track with your activity in the tumor? Will you be going off of occupancy of CD16 or EGFR or will you continue to try to dose as high as possible until you do understand your highest tolerable growth? Thank you very much..

Thank you, Daina. I have to check it, Andreas is still on the phone, Andreas. Could you follow the questions and....

Hello..

Okay. Very good, Andreas..

Yes. I am on the phone, I still apologize. I am in rural Italy. So, if I break up at some point, it’s just due to technology reasons, but I try to stay as long as I can. So, let’s start with the second part of your question first, and Arndt also chime in.

So as we always said, the selection of our recommended Phase 2 dose will be based on pharmacodynamic markers. As Arndt mentioned, our mechanism of action is completely different from EGFR pathway targeting agents like cetuximab or TKI. So, we were not expecting to see any dose-limiting toxicity like skin or mucosa.

And what we have in fact seen clinically is this really reconfirming this assumption. So, IRRs remain the side effect, which were manageable, but we are not seeing any skin toxicity and mucosa toxicity. As we have said in terms of pharmacodynamic markers, we have a whole array of parameters that we look at.

The most leading parameters are markers of the activation of circulating NK cells as well as the occupancy of the CD16A receptor where we see values that are well above those needed for experimental activity in vitro and in vivo. So, we feel very confident that we are currently working at pharmacodynamically active doses.

And this is our doses that we will take forward into Phase 2 testing both as a single agent as well as in combinations.

Irrespective of this, we may escalate one or two additional dose steps just to confirm that we have very good safety profile, a very good safety in, but not necessarily to use these higher doses for further evaluation of clinical activity. In terms of EGFR expression, we are collecting the data.

Again, for the highest dose levels, we have not all data in-house for the lower dose levels. We could not see any correlation between the degree of EGFR expression and any of the clinical parameters. But again, with the data for the two highest dose levels in terms of EGFR quantification are still pending..

Got it. Thank you very much..

Our next question comes from Maury Raycroft with Jefferies..

Hi, good morning everyone, good afternoon and congrats on the progress and thanks for taking my questions. Also one question on AFM24, you mentioned additional inflection points for the program by the end of the year.

Just wondering if you can recap what those inflection points are?.

Yes. So, the – as we have mentioned, we are now planning to start the dose expansion cohorts. So, that’s an important milestone. And we have also mentioned that there are two additional studies that are being initiated. The one is the combination study with natural killer cells and the other one is the study with atezolizumab.

So, these are three very important inflection points in our mind. And in addition, we can provide updates as we proceed with the dose escalation study. You have heard from Andreas that we have expanded the cohorts 5 and 6 to include more patients. Those data will be collected and analyzed. And once available, we plan to share this data with you..

Got it. That’s helpful..

Maury?.

Yes. I am still here.

And just wondering if you are saying anything additional about any more specifics on the activation markers and cytokine secretion that you are seeing, you are providing any more…?.

Arndt?.

Yes. Thanks, Maury. Good question. At this point, not specifically, we would like to share that. I mean we have said, just to repeat maybe what Andres already said. We look at activation and exhaustion markers on circulating NK cells. We look at infiltration of the cells in some of the biopsies we have.

We will look at the cytokine levels and of course as we have reported in addition to exposure, so PK parameters also at receptor occupancy. And we will share that in more detail once all the data is – as Adi also mentioned, will be collected together and then we will also share the specific markers used..

Got it. Okay. And then also I wanted to ask about the AFM13 plus NK cell combo.

Can you say if you have responses at the highest dose at this point? And how many patients total at the highest dose are planned for the study?.

So, we haven’t disclosed any such details for the time being as we are preparing for a presentation later in the year as I outlined, so that we can see the composite.

But in short, what the plan has been is that we have, in each cohort initially three patients, and a cohort is always a certain number of NK cells, which has increased by a factor of 10 when the safety is warranted. And as I said, it’s 106 cells per kilogram, we moved to 107 and 108.

In these patients, we haven’t seen any dose-limiting toxicities or any episodic effect. So, it appears quite safe. And overall, what I can say here is that we’re also very encouraged by the responses that we’re seeing after the first assessment. Currently, additional patients are treated.

So we have continued to enroll patients – or MD Anderson has continued to enroll patients at the highest dose cohort, and that’s currently ongoing..

Got it. Okay. That’s helpful. And then my last question, and then I’ll hop in the queue. In the prepared remarks, you said the program the AFM13 NK cell combo program would be robust and could enable discussions with regulators for approval strategies.

Just wondering if you think you will have enough data by year end ‘21 to enable these discussions?.

In terms of timing, we’ve been – we will let you know as soon as we have such data. It’s an IST. So we are dependent on MD Anderson to enroll these patients. And so I would say that we have to wait for a little while before we can confirm any of these next activities.

This is an important activity, but as we feel it’s not the only very important activity.

The other one is that we can proceed with the NK cells, and its manufacturing and I was sharing two news today that we have made good progress on this front as well, first we are now working with the CDMO for the manufacturing of the copilot-derived NK cells and we have generated first data of a cryopreserved AFM13, pre-complexd NK cells and determined activities in preclinical experiment..

Got it, okay. Thanks for taking my questions..

Thank you..

Our next question comes from Nick Abbott with Wells Fargo..

Good morning. Thanks for taking our questions. And rural Italy sounds delightful, I have to say. Just starting off maybe on AFM13, you mentioned the CDMO, Adi.

Is this using cord blood from MD Anderson? Obviously, I know that you’ve licensed the technology from them, but are you restricted to where the cord blood cells come from, which bank they come from?.

So yes, we have a license to the entire technology, and this would also include indeed any work on craft preservation that’s been conducted by and the MD Anderson. In terms of cord blood cells, we’re not restricted to any specific source. So we can sort this from MD Anderson, but also independent places. And – so in essence, that’s how we have set up.

Is there a specific reason why you’re asking?.

No, not at all. No. So I’m just thinking if you are going to be I don’t – we don’t know where the CDMO is, but if you’re going to have a CDMO in Germany, for example, and shipping cord blood from MD Anderson when he is convenient assessing it from somewhere in Germany..

Yes. Yes. No, no. it’s an international CDMO. So that has footprint all over the world. It’s obviously one of the very experienced one that was important to us, again, on the CDMO that has already worked and developed NK cell products. So we’re tapping into a specific know-how already with this joint.

And at the moment, our focus is to work with site in the U.S..

Okay. Great, thank you. And then just on AFM24, and terrific now to finally get all the details of those expansion cohorts. One thing that struck me in the monotherapy, there is not a KRAS-mutated colorectal cohort. The NK combo would appear to allow for KRAS-mutated colorectal.

But did you consider – is there a reason why there isn’t a KRAS-muted cohort? Obviously, it couldn’t be EGFR pretreated, and that’s probably the reason that I thought I’d ask..

Andreas, can you hop out here..

Yes. This a good pick. As we said, our selection on the expansion cohorts are based on a pretty thorough analysis of the underlying tumor biology and the makeup of the different players of the innate immune system.

When we look specifically at KRAS-muted colorectal cancer, it is just not due to the KRAS mutation, but there appears to be a coincidence that many KRAS-mutated colorectal cancers have very limited NK cell numbers and then some other factors that indicated to KRAS-mutated colorectal cancer would be one of these indications where the patient would need support of an external NK cell source, and that’s the reason why they ended up basically in Study 103.

We believe that once you are able to supply these KRAS-mutant colorectal cancers with NK cells and with an appropriate engager or that you pose an immune system in the best position to direct against this very difficult to treat tumors..

Great. Thank you very much. I will hop back in the queue..

[Operator Instructions] Our next question comes from Yale Jen with Laidlaw..

Good morning and afternoon, and thanks for taking the question.

The first question is that for the AFM13 plus the cord blood NK cell, which that according to clinical trial gap that you have – you expect to include about 30 patients – Is this target still – or do you anticipate or how has any modification on that? And would that potentially would be a critical mass for potential sort of registration discussion with FDA?.

Andreas, you may want to take that?.

Yes. The first thing I can confirm is that the protocol is written in a way that we, in fact, can recruit somewhere between 30 and 40 patients at a recommended dose level. Or this could be a mixture of Hodgkin’s and non-Hodgkin’s CD30-expressing lymphomas.

Again, whether this mass or will this number will be sufficient for any registration package, of course, will depend on the effect level. And definitely, the study will allow us probably even earlier than going up to the full recruitment to engage in discussions with FDA.

And I think during these discussions, we will learn what kind of patient numbers are expecting. So I think it’s a robust study. It will give you a pretty good data set, will enable us also to look at different biologies within the CD30 expressing lymphoma space, everything else will really depend on our initial discussions with FDA..

Great. That’s very helpful.

And maybe just a quick follow-up on this, which is that is the data anticipated reporting at ASH or other venues?.

Again, the disclosure policy is mainly driven by MD Anderson. Our expectation is that by will submit some of the data for ASH..

Okay, great. And maybe one general question for the AFM24, you have the monotherapy as well as the combo specifically with NK cell combo. Noticed that the renal cell carcinoma was only monotherapy, but not on the combo.

Is there any reason behind that? Or maybe more specific reason behind that?.

Yes. The answer is – listen, again, it’s based on the analysis of biology and the setup of the different players of the innate immune system.

Clear cell carcinoma cell – carcinoma, we know already since the – for your own time that this is a tumor there where the immune systems can exert some tumor control when we specifically looked at the players in the innate immune system, we found that RCC is a good candidate that could benefit from monotherapy.

So our first step here is to test monotherapy AFM24. We believe that several important pieces are in place in RCC that an innate cell engager could work as a monotherapy. Of course, if we should see good data that would not preclude that at some point, we may add combination with an NK cell or PD-1.

But again, for the first evaluation RCC looks as well as to where monotherapy could be quite beneficial for these patients..

Okay, great. And maybe the last question, which is a housekeeping one that the – in the second quarter of this year, the R&D expenditure as well as revenue has increased, particularly R&D expenditure increased quite significantly compared to the prior quarter.

So should we – for modeling purposes, should we anticipate the second quarter R&D expenditure will be something more as a base moving – going forward for – at least for the remaining of the year? And thanks..

Yes. Thanks, Yale. So I mean a couple of comments there. I mean, one, we haven’t provided specific guidance on our expenses. But we have provided guidance on our cash runway. And what we’ve said is that we expect our existing cash, which is about a little over €220 million, will last us into the second half of 2023.

So if you do the math on that, again, that’s kind of eight to 10 quarters out. That implies a cash burn in the low to mid-20s, excluding any impact of additional proceeds from loans or milestones, etcetera.

So just doing – based on that math, you can assume that the expenditure level that you’re seeing in Q2 of this year is probably more relevant as we go forward than expenses you’ve seen in previous quarters, in particular in the second quarter of last year.

But having said that, we do expect that R&D expense will be lumpy, right? This quarter, we’ve had, as I said on the call, we had an increase in AFM24. A lot of that’s associated with production of clinical trial material for our ongoing study and upcoming studies. We’ve also had ramp up in our earlier stage programs like AFM28 and AFM32.

And when it comes to CMC investments, so those can be a little bit lumpy, but long story short, fair to assume that the R&D expenditure this quarter, it’s probably more in line with where we will be in the future than where we’ve been in the past..

Okay, great. Thanks a lot and again congrats for lot of progress here..

Thank you..

We have a follow-up question from the line of Nick Abbott with Wells Fargo..

Great. Thanks for taking the follow-up. Just going back to the AFM24 trial, I believe that currently, the trial is being conducted at four sites in the U.S., UK and Spain, and Adi you mentioned a U.S. CDMO.

So can you talk maybe a little bit about the – for the three expansion cohorts? How many sites that you expect to be running those trials at and whether they are going to be international or all in the U.S.? And will this be Simon sort of two-stage design for each of the cohorts? Thanks..

Okay. Yes, thanks for this question. Nick, I’ll have either Wolfgang or Andreas jump in here, if they can..

Yes. I can. So for the expansion cohorts of the monotherapy trial, we are looking to increase the number of sites from four that we are currently having probably to somewhere between 10 and 15, 16 sites, will continue to be a mixture of our U.S. side, international sites.

And you imagine currently, we have in Europe, we will add a couple of sites in Southeast Asia, mainly Korea, especially to recruit EGFR-mutant patients. Now, the same is true for the PD1, Pr1 study where we will have also a mixture of U.S. and ex U.S. sites. Our Study 103, the SNK01 study will initially be a U.S.

only study with up to four sites for the initial part and then expanding a couple of more sites. But currently, the plans for this specific study ought to be a U.S. only study. Now in terms of the study design, all studies are designed according to Simon two-stage principles.

We will have an initial phase with a defined number of patients, of course, as we are enrolling different disease types. We go, no-go criteria will vary by disease type – and then also the definition of response rate of interest will be a little bit different.

But in general, I just with the improved safety signs with initial cohort of probably around 12 to 15 patients looking at a predefined success criteria and then having the ability to enroll up to 30 to 35 patients per cohort to verify the initial assumption of the Simon 2-stage design..

Very terrific. Thank you very much..

And that concludes today’s question-and-answer session. Ladies and gentlemen, thank you for participating in Affimed’s second quarter 2021 financial results and corporate update conference call. This concludes the program, and you may now disconnect. Everyone, have a great day..