Affimed Therapeutics’ (AFMD) CEO Adi Hoess on Q2 2017 Results – Earnings Call Transcript – Seeking Alpha

Posted: August 4, 2017 at 9:42 pm

Affimed Therapeutics (NASDAQ:AFMD)

Q2 2017 Earnings Conference Call

August 1, 2017 8:30 AM ET


Anca Alexandru Head of Communications

Adi Hoess Chief Executive Officer

Florian Fischer Chief Financial Officer


Maury Raycroft Jefferies

Do Kim BMO Capital Markets

Michael Schmidt Leerink

Peter Lawson SunTrust


Good day and welcome to the Affimed Second Quarter 2017 Financial Results and Corporate Update Conference Call. Todays conference is being recorded. At this time, I would like to turn the conference over to Anca Alexandru. Please go ahead.

Anca Alexandru

Thanks. I would like to welcome you to our investor and analyst call on the results for the second quarter of 2017. On the call with me today are Adi Hoess, CEO of Affimed, who will present the corporate update; and Florian Fischer, Affimeds CFO, who will walk you through the financials.

Slide 2, before we start, please note that this call and the Q&A session contains forward-looking statements, including statements regarding our future financial condition, business strategy, and our plans and objectives for our future operations.

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 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 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 statements regarding forward-looking statements in our Form 6-K filed with the SEC earlier today.

Thank you for your understanding. I will now hand the call over to our CEO, Adi Hoess, who will provide the corporate update.

Adi Hoess

Thanks a lot, Anca. Affimed has developed an immune cell engager and our clinical and preclinical pipeline based on tetravalent bi and trispecificantibody formats. Were an industry leader in NK cell engagement and our lead product candidate AFM13 is to our knowledge, the most advanced NK-cell engager in clinical development.

We also have a well-differentiated T-cell based approach, which includes our clinical candidate AFM11 and well provide an update on these clinical programs as well as our pre-clinical programs today. We employ about 75 full time equivalents with our headquarter located in Heidelberg, Germany, and affiliate offices in the U.S., that is Affimed Inc., as well as our subsidiary AbCheck in Plze, in the Czech Republic.

Slide 4. We have an unencumbered clinical and pre-clinical pipeline of NK and T-cell engagers, with our NK-cell engagers being developed in hematological diseases and solid tumors. Based on our NK-cell platform, we have one clinical and two pre-clinical programs in developments. And based on our T-cell platform, we have one program in our own clinical development. And second T-cell engager program based on our platform called AMV564 is being developed by Amphivena, a company of which we own about 18.5% fully diluted. AMV564 has recently entered clinical development.

Slide 5 summarizes our second quarter updates for our NK cell engager program. For AFM13, we have completed the dose escalation part of our Phase 1b combination study with Mercks Keytruda in Hodgkin Lymphoma and initiated the expansion phase. The AFM13 Phase 2a monotherapy trial in Hodgkin Lymphoma sponsored by the German Hodgkin Study Group is open to recruit under new study design, which includes patients pre-treated with both brentuximab vedotin and anti-PD1.

Columbia University has recently initiated a translational study of AFM13 in CD30-positive lymphoma with cutaneous manifestation and I will provide more detail later. We made further progress in our collaboration with MD Anderson Cancer Center to evaluate AFM13 in combination with MD Andersons NK cell product. In June, we presented new data for our NK cell engagers AFM24 and AFM26 at two conferences and I will go into detail later on this.

Slide 6 summarizes the progress, we have made with our T-cell engager. Two Phase 1 dose-escalation studies are ongoing with AFM11, which offer a significant opportunity to address the high unmet medical need in diffuse large B-Cell lymphoma and mantle cell lymphoma. We believe that both the properties of AFM11 and the design of our studies can attract, specifically, mutations of other drugs in development.

Both dose escalation studies, which are conducted in ALL and in NHL respectively are designed with accelerated titration followed by a classical 3+3 design. In both studies, AFM11 was overall well tolerated with no dose limits and toxicity observed to date. In the AFM11 study in relapsed refractory ALL, which was initiated in September 2016, patients are currently being recruited into the fourth dose cohort. 12 sites are open and recruiting in the Czech Republic, Poland, Russia, Austria and Israel.

As mentioned, no DLTs were observed in particular no AFM11 related grade 3 or grade 4 neurotoxicity or side effects are frequently observed with T-cell engaging antibody agents observed. In our study of AFM11 in relapsed refractory NHL, patients are currently being recruited into the third dose cohort. Recall that this study has been amended in the past to enroll patients under a new revised study design.

We believe that we have addressed this lower than effective recruitment by opening further trial sites. A total of 10 sites are now opened in the Czech Republic, Poland, Germany as well as the U.S. Like in our ALL trial, no AFM11 related grade 3 or grade 4 neurotoxicity was observed to date under their revised study design. We intend to provide regular update on both the AFM11 studies in the future.

A second T-cell engager program based on our platform is AMV564, a bispecific tetravalent CD33/CD3 antibody developed by Amphivena in AML. A Phase 1 study is recruiting. However, no further updates have been provided by Amphivena.

Slide 7 shows our platform, which is very distinguished from others as, in contrast, the most comparatives were developing tetravalent bispecific molecules. The bivalent binding of two receptors on two different cells enables high-affinity binding through the avidity effect, which is advantageous to maintain high specificity at very high affinity.

We believe that this is very important in order to obtain a favorable safety profile. Furthermore, our platform allows multi-specificity in the tailored PK. Further differentiating Affimed, while most immune cell engaging approaches to date focus on T cells, our technology platform reliably generates both T and NK-cell engagers.

While increasingly NK-cells are becoming a cornerstone of cancer immunotherapy, and we're excited to be pioneering this development. There are a number of reasons why NK-cell-based approaches are very attractive and one of the reasons is that there seems to be a positive correlation between NK-cell infiltration and clinical outcome in patients.

In this context, it has been described that a low cytotoxicity is associated with higher incidence of cancer. In addition, recent clinical data show improved anti-tumor responses of ex vivo expanded and activated NK-cell populations. NK-cell-based immunotherapy has recently advanced with different treatment approaches, including engagers, check points, cytokines and adoptive cellular transfer.

To-date, it seems that NK-cell-based approaches have this strong advantage of controlling a well manageable favorable safety profile. This creates an opportunity for NK-cell redirection to address the lack of recognition of cancer cells and also allows for potential combination of NK-cells with other approaches to enhance efficacy.

A common theme in all different cancer types is the ability of the tumor cell to evade recognition by the immune system and, specifically, by NK-cells as shown on Slide 9. Normally, NK-cells are capable of killing foreign or aberrant cells, like tumor cells, have acquired mechanisms to escape the so-called immune surveillance.

As a result, such NK-cells cannot recognize tumor cells as foreign or aberrant and, therefore, cannot fight them. We believe that our platform has the potential to overcome these limitations by disabling the tumor evasion mechanisms, and I will explain on the next slide what this belief is based on.

Our expertise and leadership in natural-killer cell-based approaches is one of our key assets. As we can see here, there are a multitude of activating and inhibitory NK-cell receptors being discovered that CD16A, a dominant activating receptor on innate immune cells, is the only activating receptor that triggers the cytotoxic activity of nave human NK cells, even in the absence of costimulatory signals.

Based on these properties and on our preclinical and clinical data generated to date, we believe that targeting CD16A is key for efficient recruitment of and killing by NK cells and macrophages. We have secured a solid IP position around CD16A targets.

Slide 10. We believe that through targeting CD16A with high affinity and specificity, the significant limitations of IgGs can differ. With our tetravalent bispecific immune cell engagers, we can restore NK-cell killing in tumor immune control, and this is depicted here.

Let me explain in more detail why we believe that our approach is superior compared to IgG-based approaches. The human body is not using NK-cell engagement by IgG to eliminate cancer cells. However, this mechanism is used for cells infected by viruses or bacteria.

In this situation, the human immune system generates a collagen antibody response that highly decorates such infected cells or organisms.

Highly decorated means that many different proteins are expressed on the cell surface, which can then be found bound by antibodies. This polyclonal and high-density binding leads to NK-cells killing upon high avidity XP binding, plus antibodies for CD16A on the NK-cell and other XP gamma receptors, for example, CD32 and CD64.

In the setting of targetable cancer cells, however, with IgG, the situation is very different. Firstly, the therapeutic molecule targets a single epitope. Hence, it confers ammonia killing response. And secondly, there are cancer cells which express only very low numbers of the desired target.

The consequence of this very low target density is an insufficient amount of IgG, decorating the cancer cells and thereby not being able to efficiently recruit immune cells. This is shown in the middle picture. Interesting, most therapeutic monoclonal antibodies are target-modulating antibodies, such as cetuximab, polatuzumab, gevokizumab, just to mention a few of them.

We are addressing this limitation by targeting CD16A with high affinity and specificity, as shown. Indeed, our immune cell engagers has the potential to elicit a robust NK-cell killing and immune control due to multivalent and apparent high-affinity binding to CD16A even at limiting antigen densities on the target.

Slide 11, furthermore, CD16A in confers additional superior engager features. The binding of immune cells through CD16A with high affinity and specificity induces NK-cell activation, which triggers an integrated immune response that can be mediated by both innate and adaptive immune cells. In particular, our NK-cell engagers do not bind to CD16B and neutrophils, which avoids the sync effect. Their affinity has been demonstrated to be over 1,000 fold higher than that of monoclonal antibodies and our engagers bind independently of the 158 valine phenylalanine polymorphism.

Most importantly, theres virtually no competition with plasma IgG, which is shown here. In the ground stage, CD16A on innate immune cells is occupied by polyclonal plasma IgG. But there is a huge excess of plasma IgG versus therapeutic antibodies, this creates a significant threshold for FC-based therapeutic antibodies, however, not for CD16A target enhancement.

Our tetravalent and bispecific molecules, which recognize a different epitope from CD16A, are virtually unaffected by plasma IgG. All these unique features result in overall increased potency and efficacy of NK-cell engagers.

Slide 12. Our lead candidate, CD30/CD16A-specific NK-cell engager, AFM13 is a first-in-class antibody suitable for mono and combination therapy. This has demonstrated safety and clinical activity in heavily pretreated Hodgkin lymphoma patients in a Phase 1 study. In this Phase 1 study, tumor shrinkage and potential responses were observed in patients treated with four weekly doses of at least 1.5 mg/kg of AFM13. In 62% of patients, which was eight out of thirteen patients, we observed tumor shrinkage in 23% of patients, which was a total of three out of thirteen experienced partial response. None of the patients experiencing a PR had been previously treated with brentuximab vedotin.

Recall, that in our investigation the Phase 2a trial for AFM13 in relapsed and refractory Hodgkin lymphoma, which is led by the German Hodgkin Study Group, we have previously guided to change the study protocol to ensure a recruitment of a homogeneous patient population pre-treated with both BV and anti-PD1 antibodies. The study is now open to recruit under the new study design.

We had also provided some preliminary data from patients enrolled under the original study protocol, where partial responses were observed in two of seven evaluated patients who had been pre-treated with brentuximab vedotin, but were anti-PD1 naive. This suggests, now, for the first time that AFM13 is active as a single agent in this heavily pre-treated group of patients and, in particular, that AFM13 is active post brentuximab vedotin. We have learned from the study sponsor that both after-responders had failed BV as the most recent treatment prior to AFM13 therapy, with one patient experiencing stable disease and the other one partial in the progressive disease under the BV treatment.

As previously guided, full data from the ongoing study will be presented upon its anticipated completion in 2019. And prior to that, a decision of data publication time points will be made together with the German Hodgkin Study Group.

We are further developing AFM13 as a combination therapy. Preclinical affinity has been demonstrated in combination with anti-PD1 in vivo in a PDX model. This has been the basis of our Phase 1b trial in relapsed refractory Hodgkin lymphoma in combination with Mercks Keytruda. And here, we have completed the dose escalation part of the trial. In detail, three patients were enrolled into dose levels one and two, respectively, and six patients were enrolled into dose level three. While no grade three or four adverse events related to the study treatment were observed, one DLT was observed in cohort 3, which was a repeated grade two infusion-related reaction, leading to discontinuation of AFM13 treatment. This event is classified as a DLT according to the protocol definition. No further DLTs occurred.

The dose expansion cohort has been initiated with the highest dose explored during dose escalation. Data readout is ongoing in the treated cohort and we intend to present data from the dose escalation at a scientific medical conference in the second half of 2017.

Another update this quarter is that Columbia University has initiated a translational Phase 1b/2a study to evaluate the validity of activity of AFM13 in patients with relapsed and refractory CD30-positive lymphoma with cutaneous manifestation. Affirmed is supporting this trial which is designed to allow for serial biopsies, thereby enabling assessment of NK-cell biology and tumor cell killing within the tumor environment. The first patient was enrolled into the study in July 2017. In general, we view CD30-positive lymphoma as an attractive indication that may broaden the potential of AFM13. In terms of further guidance, we will work together with Columbia University to provide update on this study.

Slide 13. Additional opportunities for our NK-cell engagers include combinations with adoptive NK-cell transfer. Patients on NK cells can be stimulated by monotherapy using NK-cell engagers to overcome tumor immune evasion and immunosuppression. Ex vivo expansion and stimulation of autologous NK-cells followed by reinfusion alone or in combination with NK cell engager, is a viable therapeutic approach providing increased numbers of activated NK cells. Alternatively, NK cells can be derived from peripheral blood, cord blood or IPS cells from healthy donors, which is an allogeneic setting, or from immortalized cells. After ex vivo stimulation and expansion, the NK cells are infused into the patients in combination with NK cell engagers.

We are investigating this approach with our partner MD Anderson. Initially, we plan to investigate AFM13 with MDACCs NK-cell product in the transplant setting. Preclinical research activities are on track and these are intended to be followed by Phase 1 clinical trial. Proof-of-concept for this combination would also pave the way for combinations of other pipeline product such as for AFM23.

Affimed holds an option to exclusive worldwide rights to develop and commercialize any product developed under the collaboration. In addition to our clinical product candidates, we have created a strong preclinical pipeline. Over the last quarter we have further characterized our most advanced preclinical candidates, AFM24 and AFM26, which we are developing for three solid tumors and multiple myeloma respectively.

Despite several marketed agents such as cetuximab and tyrosine kinase inhibitor or TKIs, there is a significant medical need for a novel approach to treat EGF receptor-positive tumor. Both efficacy and toxicity can be addressed. EGFR-blocking drugs have been described to have side-effects including serious skin toxicity which might impact physicians willingness to prescribe a drug. In terms of efficacy, there is a need to overcome intrinsic or acquired resistance. For example, there is no clear indication of efficacy of EGFR-blocking antibodies in patients with RAS mutation.

We are developing a first-in-class NK cell engager designed to overcome the limitations of conventional therapy. AFM24 is designed to effectively treat EGFR-expressing solid tumors, such as lung and neck, or colon cancers. It is an EGFR/CD16A targeting tetravalent bispecific antibody that is well differentiated from cetuximab, it is more potent cytotoxicity in vitro and in vivo including a potential to kill RAS-mutant cell lines. There is novel mechanism of action in safety profile and it has the potential to overcome intrinsic or acquired resistance, which is described by many patients with EGFR positive tumors.

AFM24s potent NK cell recruitment may enable the shift of the validated target EGF receptor, primary receptor block toward immuno-oncology. We have identified several development candidates for which we have initiated IND-enabling studies.

Slide 15, there are several factors which differentiate AFM24 from other therapy. Firstly, AFM24 is differentiated through its efficacy. Here you can see that in vitro, our NK cell engager which is highly potent tumor cell killing independent of RAS mutational status. In vivo, we have demonstrated efficacy in tumors resistant to EGFR targeting agents. Importantly, as shown in the graphs on the right hand side, AFM24 was similarly efficacious in a cetuximab-sensitive model.

Secondly, AFM24 is differentiated through safety, Slide 16. We have completed pilot toxicity studies in cynomolgus monkeys with no major safety findings. At the EACR-AACR-SIC Special Conference, we presented data on a dose-range binder study in which AFM24 was dosed up to 93.75 mg/kg and a repeated dose study in which AFM24 was dosed up to 30 mg/kg in 4 weeks.

No AFM24-related macro or microscopic changes were seen in tissues including vital organs, skin and injection site. Importantly, there was no evidence of skin toxicity in those studies. Also no signs of delayed toxicity was observed in the repeated dose study recovery animals. On a molecular level, we learned from in vitro toxicology studies but there was no cytokine release or NK cell proliferation in the absence of target cells. This further substantiates AFM24s potential beneficial safety profile.

Slide 17, like for EGFR targeted tumors, there is a significant need for a novel approach to treat multiple myeloma. Even though, new therapies have significant improved outcomes, cure still remains elusive and the medical need to achieve minimal residual disease negativity is not yet addressed.

MRD positivity is associated with a poorer prognosis, and it has been recorded that persistent MRD by predictive marker of unsustained complete response. A particular hurdle for therapeutics aimed at immune cell engagement are very high M-protein serum levels up to 170mg/mL. Indeed the competition by serum IgG is known to strongly impair antibody-dependent cell-mediated cytotoxicity, the activity of monoclonal antibodies.

We are developing AFM26 to overcome the limitations of conventional therapies in multiple myeloma. AFM26 is a first-in-class tetravalent bispecific antibody targeting BCMA/CD16A. Targeting BCMA and employing NK cell engagement offers the potential to achieve MRD-negativity. For AFM26, NK cell binding is largely unaffected by circulating IgG, which creates the potential of NK cell activation in the presence of M-protein.

Indeed, the high affinity binding to both target and NK cells leads to a prolonged cell retention. This is shown on the right on the slide on the right bottom. AFM26 shows high cytotoxicity cytotoxic activity towards both low and high BCMA-expressing myeloma cells. AFM26 may be potentially safer than T cell-based approaches, which would allow for faster development timelines. Based on these characteristics, AFM26 might be positioned in first line of combination with adoptive NK-cell transfer during ASCT or in a salvage setting.

AFM26 binds the B-cell maturation antigen, which is an antigen ubiquitously expressed on malignant plasma cells. Its expression on healthy tissues is limited to plasma cells and peripheral dendritic cells. We believe the BCMA is an ideal target for immunotherapy of multiple myeloma.

At ASCO and at the EACR-AACR-SIC, both in June, well present the data on AFM26 NK-cell binding properties and activity. As shown here, these data underscore that compared to native and FC-enhanced IgG. AFM26 shows improved binding and cell surface retention.

Slide 20, we also show that AFM26 is well differentiated through target cell binding in potent NK-cell mediated tumor cell lysis. And this is shown here in comparison with two marketed agents, daratumumab and anti-CD38 antibody and elotuzumab, which targets PS1. Importantly, other than described for daratumumab and elotuzumab, AFM26 did not induce NK-cell mutation.

Slide 21, like our other NK-cell engagers, AFM26 is also well differentiated for other agents [indiscernible] safety. Here you can see that compared to a T-cell engager, AFM26 is similarly potent that shows a reduced cytokine release pattern. This point is going to improve safety profile, making AFM26 uniquely suited to engage NK-cells with multiple myeloma.

I will now hand over the call to our CFO, Florian Fischer, who will provide further details on the financial figures.

Florian Fischer

Thank you, Adi. Affimeds 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 euro, which is the companys functional and presentation currency. Therefore, all financial numbers that I will present here in this call unless otherwise noted will be in euros. Any numbers referring to Q2 2017 and Q2 2016 are unaudited.

Cash and cash equivalents and financial assets totaled 48.9 million as of June 2017 compared to 44.9 million as of December 31, 2016. The increase was primarily attributable to the net proceeds of 16.4 million from a public offering of common shares in the first quarter, and of 2.5 million from the drawdown of the second tranche of the loan from Silicon Valley Bank, largely offset by operational expenses.

Net cash used in operating activities was 13.1 million for the six months ended June 30, 2017compared to 17 million for the six months ended June 30, 2016. The decrease was primarily related to lower cash expenditure for research and development in connection with Affimeds development and collaboration programs and to the expiration of the Amphivena collaboration.

Affimed expects to have cash to fund our operations at least until the end of 2018. This provides runway for the planned development of our clinical programs, as well as for product discovery and early development activity.

Revenue for the second quarter of 2017 was 0.5 million compared to 2.1 million for the second quarter 2016. Revenue in the 2017 period was primarily derived from AbCheck services, while revenue in 2016 period predominantly to Affimeds collaboration with Amphivena.

R&D expenses for the second quarter of 2017 were 5.4 million compared to 8.6 million for the second quarter of 2016. The decrease was primarily related to lower expenses for AFM13 and our discovery and early stage development activities and the expiration of the Amphivena collaboration.

G&A expenses for the second quarter of 2017 were unchanged at 2.0 million compared to the second quarter of 2016. Net loss for the second quarter of 2017 was 7.9 million, or 0.18 per common share, compared to a net loss of 8 million or 0.24 per common share for the second quarter of 2016.

The decrease of operating expenses was offset by lower revenue. In addition, the result was affected by finance costs of 1.2 million in the second quarter of 2017, whereas finance income of 0.5 million was shown in the second quarter of 2016.

I will now turn the call back over to Adi for a summary of our two clinical programs and our pipeline. Adi?

Adi Hoess

Thanks a lot Florian. Our strategy is to maximize the value of our unencumbered clinical and preclinical pipeline of NK-cell and T-cell engagers, as well as from our platform. Were leveraging our lead product, AFM13, for CD30-positive lymphoma initially focusing on the Hodgkin Lymphoma salvage setting enabling a fast development path and allowing the establishment of a cost efficient marketing and sales structure.

In addition, we believe investigating AFM13, both as monotherapy and in combination with Keytruda, reduces its development. Overall, our preclinical and clinical strategy is designed from the scientific leadership of our NK-cell platform with CD16A as proprietary target. We are expanding the preclinical and clinical activities of our tetravalent and bispecific NK-cell engager platform in solid tumors with our preclinical candidate AFM24 and in hematologic diseases, where we intend to leverage additional opportunities for AFM13 and AFM26, for example, in combination with adoptive NK-cells. We also develop T-cell engagers and our lead T-cell engager, AFM11, is being investigated in two ongoing ALL and NHL trials. BMV564, a T-cell engager derived from our technology platform, is in clinical development through Amphivena to treat AML.

In addition, as mentioned earlier, moving beyond our standard format, we are developing different tetravalent bispecific antibody formats tailored to specific indications and patient populations. And as outlined in previous earnings calls, we have more projects ongoing at the discovery stage and preclinically, including molecules developed from our MHD type complex targeting platform.

Thank you very much for your interest. The call is now open for questions.

Question-and-Answer Session


Thank you. [Operator Instructions] Our first question now comes from Maury Raycroft from Jefferies. Please go ahead.

Maury Raycroft

Good morning. Thanks for taking my questions. So I was wondering if you can mention what the AFM13 dose was that the DLT patient received in the combo trial? And then what youre going to use in the expansion cohort? And then is this dose higher, lower or in line with your predictions?

Adi Hoess

Hi, Maury, this is Adi. What we have done is we have used or given a PD-1 as its active dose and have dosed up AFM13 under the following strategy, under the following regime. We always are initially giving AFM13 three times per week for two weeks. Then, we give AFM13 once weekly for six weeks and, subsequently, we dose AFM13 every three weeks. The starting dose was 0.15 mg/kg and then switching to 0.5 mg/kg, the next one was 0.5 mg/kg going to 1.5 mg/kg, and the highest dose was 3 mg/kg going then to 7 mg/kg. So the three is always three times per week, and the seven is the weekly or every three weeks. We have seen 1 DLT in the highest dose. So at three times 3 mg/kg and once 7 mg/kg then have included an additional three patients and have not observed another DLT. So thats why we decided to go with the highest dose of 3 mg/kg three times per week subsequently given and then subsequently followed by 7 mg/kg.

Maury Raycroft

Got it, okay. And you also mentioned earlier about the two PRs generated with the monotherapy treatment? And I think you said there is a stable disease, but I missed some of the additional context, and I was just wondering if you can recap that for me?

Adi Hoess

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Affimed Therapeutics' (AFMD) CEO Adi Hoess on Q2 2017 Results - Earnings Call Transcript - Seeking Alpha

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