Affimed: Promising, Undervalued Immunotherapy Play With Multiple Catalysts Ahead

About: Affimed Therapeutics (AFMD), Includes: BMY, MRK, NKTR, RHHBY, SGEN
by: Overlooked and Underfollowed

Impressive list of collaborators, including Genentech, Merck, Nektar Therapeutics, Columbia University and MD Anderson Cancer Center; and strong balance sheet with ~$139 million in cash.

Breakout ASH2018 with 6 presentations, including strong Keytruda/AFM13 combo data with 42-46% Complete Responses in R/R Hodgkin Lymphoma or approximately double the complete response rate of Keytruda as monotherapy.

Upcoming R&D Day should bring to light positive FDA discussions and elucidate registrational path for AFM13, including possible expedited development paths.

$1.35 billion of $5 billion in potential milestones from recent Genentech deal come before any commercial sales. PLUS, there could be meaningful royalties as well.

Expect clinical hold to be lifted on AFM11.

Affimed is an undervalued immunotherapy company that has attracted warranted attention from several smart players in biotech

In the world of immunotherapy where finetuning and engaging the human immune system to better recognize bad actors such as cancer, superior patient outcomes are on the rise, and what was previously considered impossible is now, thankfully in many cases, quite the opposite.

This article will cover a promising immunotherapy company focused on better NK cell and T cell engagement, Affimed NV (NASDAQ:AFMD). Affimed's approach utilizes CD16A engagers to overcome dysregulation and dysfunctionality of immune cells against cancers, thereby reestablishing recognition of cancer cells and reactivating immune cells to attack tumors. At its current valuation of ~$270 million with ~$139 million in cash and equivalents (as of Oct. 2018), and on the heels of its strengthening clinical and pre-clinical data at ASH 2018, Affimed represents a compelling investment opportunity.

Source: Affimed Corporate Presentation Jefferies 2018 London Healthcare Conference

To date, Affimed has attracted a solid list of industry collaborators, including Genentech (part of Roche Group: (OTCQX:RHHBY)), Merck (NYSE:MRK), Nektar Therapeutics (NASDAQ:NKTR), Columbia University, and the MD Anderson Cancer Center. From a Wall Street perspective, several smart institutions own equity, and the company is covered by five firms (Jefferies, SunTrust, BMO, Wells Fargo, Laidlaw); all have buy ratings with targets ranging from $6 to $15 per share.

Affimed had a breakout appearance at ASH 2018 held December 1-4 with 6 presentations covering their therapeutic candidates. Several of products in their pipeline - including AFM13, AFM13/KEYTRUDA Combo, AFM11, AFM13/Cord Blood NK Cells Off-the-Shelf Combo, AFM24, AFM26 - will be covered here; starting with one of the most important, the combination therapy of Affimed's lead candidate (AFM13) with Merck's KEYTRUDA.

Source: Affimed Corporate Presentation Jefferies 2018 London Healthcare Conference

AFM13 & Keytruda Combination - Generating cross talk between adaptive (T-cell) and innate (NK cell) immunity; potentially raising immune checkpoint therapy to new levels. Success through integration of the innate/adaptive immune system should attract the interest of many large biotechs focused on the adaptive side of the equation.

One of the most heralded immunotherapies leading the paradigm shift in patient outcomes that continues to distance itself from its competition is Merck's KEYTRUDA® or pembrolizumab - a PD1 checkpoint inhibitor.

Keytruda has shown success against a wide range of cancers, and its list of approvals continues to grow. This broadening, FDA-approved patient population makes the opportunity set quite large for any combination therapies that enhance or strengthen Keytruda's effect. While Keytruda's results have been groundbreaking, many patients do not respond to anti-PD1 monotherapy and durability of response has been fleeting in many cases, so the search is on for combination approaches that can assist in the battle against cancer.

Before getting into the recent AFM13/Keytruda combination data, here is a brief overview of AFM13 from Affimed filings followed by a brief summary of encouraging single-agent-activity reported at ASH 2018 that is supportive of the positive results from the combination study.

Overview of AFM13:

  • A first-in-class tetravalent, bispecific NK cell engager
  • High-affinity binding to CD16A and CD30, independent of polymorphism, virtually no competition with IgG and potent cytotoxicity
  • Synergy with checkpoint modulators in pre-clinical studies
  • Established clinical activity with solid safety profile

Source: Affimed Corporate Presentation Jefferies 2018 London Healthcare Conference; ASH 2018 Poster

From a monotherapy perspective, AFM13 is being administered to patients with relapsed/refractory CD30-positive cutaneous lymphoma. At ASH 2018, an analysis of the first three dose cohorts (9 patients dosed at 1.5-7.0 mg/kg) demonstrated that AFM13 could be safely administered and showed therapeutic activity as a single agent, with an objective response rate (ORR) of 44% (4/9). One complete response, three partial responses, and two stable diseases were observed. This encouraging single-agent-activity of AFM13 in CD-30 Positive Lymphoma (albeit with a limited patient population) is supportive of Affimed's CD16A immune cell engagements working to re-establish cancer recognition and subsequently kill targeted tumor cells successfully.

Dr. Ahmed Sawas, Assistant Professor of Medicine at the Columbia University College of Physicians and Surgeons and the New York-Presbyterian Hospital and Principal Investigator of this study, commented:

"Our clinical experience with AFM13 continues to be impressive. AFM13 is well-tolerated and active in patients who have failed therapy with brentuximab vedotin and, importantly, it demonstrated a high ORR of 44% in CD30-positive lymphoma patients with very limited to no treatment options. Our biomarker data indicate a possible correlation between response and tumor NK cell infiltration pre-therapy. Overall, the data presented here support the potential of AFM13 as a novel immuno-therapeutic to treat CD30-expressing lymphomas."

Dr. Sawas' observation regarding AFM13 being active in CD-30 positive lymphoma patients who have failed therapy with brentuximab vedotin (Seattle Genetics' Adcetris), an antibody-drug conjugate that targets CD30, directly relates to the AFM13 combination trial with Keytruda in Hodgkin lymphoma; as the patient population of the combination study comprises relapsed or refractory HL patients post autologous stem cell transplantation (ASCT) or ineligible for ASCT, who had failed brentuximab vedotin.

Source: Affimed December 2018 Corporate Presentation

Now onto the impressive AFM13/KEYTRUDA combination therapy data from ASH 2018 for patients with relapsed/refractory Hodgkin lymphoma, who failed brentuximab vedotin.

Data from the ASH 2018 poster shows that the combination of AFM13 and Keytruda is well tolerated and a promising regimen. Here are highlights from relapsed/refractory HL patients treated at the highest dose (N=24):

  • A complete response rate of 42-46% (approximately double the expected CR rate of Keytruda alone) and an overall response rate of 88%;
  • Deepening of responses observed in multiple patients with an NmR to CmR, not evaluable to PmR, and 2 cases of PmRs becoming CmRs;
  • Evidence of durable responses with estimated 6-month PFS rate at 77%;
  • Several patients who were previously transplant ineligible transitioned to transplant after achieving an objective response.

Source: Bartlett et al. ASH 2018 Poster Presentation - AFM13-103

It is worth mentioning that the dataset from the highest dose has moved in the right direction over the past 12 months with an increase in time (from ~3-month assessments to ~6-month) as well as an increase in patient numbers at the highest dose (from 6 patients to 24), as depicted in image below.

Source: Dec. 11th 2017, Feb. 1st 2018, June 15th 2018, Dec. 3rd 2018 Press Releases; ASH 2018 and EHA 2018 Posters

These combination results are outpacing Keytruda as single agent in a similar patient population, especially with the complete response rate (42-46%) being twice the expected complete response rate of Keytruda alone.

This innate/adoptive immune system synergy that is increasingly evident with AFM13/Keytruda could represent a breakthrough not only for patients in need with relapsed/refractory Hodgkin lymphoma, but in other cancer indications as well. Along these lines, Dr. Adi Hoess, the CEO of Affimed, stated at the Jefferies Conference in November:

"PD1 is used in so many indications {beyond Hodgkin's}, but very often has much lower efficacy. So, if we can repeat this synergy that we are seeing here with any of our other NK cell engagers then we have a very big prospect in the future because we're owning the space where many others are not active at the moment."

Source: Affimed December 2018 Corporate Presentation

Dr. Hoess then commented on Genentech/Roche's PD-L1 checkpoint inhibitor, Tecentriq (atezolizumab). Tecentriq is a monoclonal antibody designed to bind to PD-L1 expressed on tumor cells and tumor-infiltrating immune cells, blocking its interactions with both PD-1 and B7.1 receptors. Comments from Dr. Hoess at the conference implied that the synergy potential with Affimed's ROCK platform may be at least one of reasons behind the recently announced collaboration (that deal will be covered in greater detail below). This certainly makes sense from a high level as Roche, like all other companies with PD1/PD-L1 assets, has a vested interest in making their checkpoint inhibitors differentiated from others.

While there are underlying differences between each of the PD1 checkpoint inhibitors (Keytruda, Opdivo, Libtayo, etc.) and PD-L1 checkpoint inhibitors (Tecentriq), Bavencio, Imfinzi, etc.), a combination therapy that can drive further differentiation and make checkpoint inhibitors more efficacious is a unique asset, given the explosion in PD1/PD-L1 use.

How valuable? One example comes from Bristol-Myers (NYSE:BMY), one of the leaders in the PD1 space with Opdivo. Earlier this year, Bristol signed a multi-billion-dollar deal with Nektar Therapeutics for access to its NKTR-214 asset after early clinical data indicated it boosted the efficacy of checkpoint inhibitors. The amount Bristol paid provides some insight as to the large potential of combining immunotherapies that boost the effect of Opdivo.

This example also leads to a relevant discussion around one of Affimed's collaborators, Nektar Therapeutics, which signed a collaboration with Affimed during Q2'2018 and, as mentioned above, knows first-hand the value of driving more efficacious results for checkpoint inhibitors. Established in June 2018, the preclinical research collaboration is investigating the approach of combining Affimed's NK cell engagers with Nektar's cytokine-based products NKTR-214 (IL-2) and NKTR-255 (IL-15) to potentially achieve deeper clinical responses.

In April 2017, Affimed demonstrated pre-clinically that AFM13 induced upregulation of specific interleukin receptors on NK-cells in a target-dependent manner and sensitized NK-cells for IL-2 or IL-15-mediated expansion. After exposure to AFM13, the NK-cells showed improved IL-2- and IL-15-mediated proliferation and cytotoxicity. Here are links to the: (1) 2017 AACR abstract, "The tetravalent bispecific antibody AFM13 engages and primes innate immune cells for anti-cancer immunity" and (2) ASH 2016 poster "AFM13 Is the Most Advanced Bispecific NK-Cell Engaging Antibody in Clinical Development Substantially Enhancing NK-Cell Effector Function and Proliferation" with more details. Additionally, here are related images from the poster:

AFM13 amplifies NK-cell proliferation to IL-15 and low IL-2

Recovery of AFM13-mediated NK-cell cytotoxicity after pre-activation by AFM13 upon culture in IL-2

Source: ASH 2016 Poster

These pre-clinical data seem to support the strategy of combining Affimed's NK-cell engagers with Nektar's cytokine-based products to enhance immune cell proliferation. Given Nektar's deep pipeline with NKTR-214 and its newer efforts with NKTR-255, any success here should be a catalyst for Affimed's shares.

Upcoming R&D Day should shed light on positive FDA meetings and elucidate path forward for AFM13; Should also provide color on Affimed/MDACC plans to move their AFM13-mediated off-the-shelf cord blood derived NK cell program into the clinic in 2019.

Based upon management comments at the Jefferies Conference, Q3 earnings call, and the list of scheduled attendees (Dr. Steven M. Horwitz, Associate Attending, Division of Hematologic Oncology, Memorial Sloan Kettering Cancer Center, Dr. Yago Nieto, Professor of Medicine, Department of Stem Cell Transplantation, The University of Texas MD Anderson Cancer Center, and Dr. Ahmed Sawas, Assistant Professor of Medicine, Columbia University College of Physicians and Surgeons and the New York-Presbyterian Hospital); here are some expectations for the Affimed R&D Day this week:

  1. Expect company has held positive discussions with FDA regarding path forward for AFM13, which could include accelerated approval;
  2. Expect more details around the MD Anderson Cancer Center collaboration combining AFM13 with an allogeneic NK cell product (cord blood-derived and activated NK cells) to enhance the therapeutic effect of NK cells, including a timeline for moving this innovative off-the-shelf therapy into the clinic in 2019. For more detail on this approach, here's link to MDACC's abstract for Oral Presentation at ASH 2018: Cord Blood Derived Natural Killer Cells Loaded with a Tetravalent Bispecific Antibody Construct (AFM13) As Off-the-Shelf Cell Therapy for CD30+ Malignancies; and
  3. Expect there could be discussion around an accelerated approval path with Peripheral T Cell Lymphoma

Here are some recent comments from management that support this:

  1. Q3 earnings call - CEO Dr. Adi Hoess -"…let me briefly comment on our focus moving forward. We've recently had discussions with the FDA on the AFM13 data generated to-date and future development plans for AFM13, including a potential path forward for accelerated approval. Based on feedback from the FDA, we're finalizing our plans for a registrational study for AFM13. We will review the clinical development strategy for AFM13 at an investor and analyst event planned for December 7 in New York City."
  2. Jefferies Conference - CEO Dr. Adi Hoess -"We have multiple development paths, as I said some of them have accelerated approval. We are going to have an R&D Day on December 7 th where we will detail this…where we will detail our strategy because we met with FDA recently and received feedback and that's currently being translated into where does AFM13 go. But for us, we are very positive and we look forward to being able to take this drug forward into a single arm registration study."
  3. Jefferies Conference - CEO Dr. Adi Hoess -"We have data presented on adoptive NK cell transfer. Now how does that work and why is it so intriguing? We have abundant data that shows that the number of NK cells matters for efficacy. So this is a very simple analogy…how do we make more NK cells. People independent of Affimed have developed strategies to adoptively transfer NK cells, and not just autologous but allogeneic fashion. So it's becoming an off-the-shelf product…We have shown that the addition of AFM13 to such NK cells is not just causing a little effect; it's a dramatic effect…As I said we have worked with MD Anderson pre-clinically and we're now planning to go ahead and test that clinically."

In the presentation at the Jefferies Conference, the CEO also noted that Peripheral T Cell Lymphoma is a relatively unserved T cell Lymphoma subset, meaning there is a reasonable first line treatment but everything beyond first line is not working well. He stated, "It is a high need indication… If your drug is potent enough… you can go for an accelerated approval".

Source: Affimed December 2018 Corporate Presentation

We will see where the discussion goes on Friday, but, overall, expect the R&D Day event will be a catalyst for the shares.

Genentech Utilizing Affimed's Modular "ROCK" Platform - Sizeable deal with $96 million upfront, meaningful development and regulatory approval milestones exceeding $1.3 billion, and commercial sales milestones approaching $3.6 billion; Affimed to receive royalties on commercial sales as well; Genentech collaboration also opens door to other "platform" deals utilizing AFMD's Redirected Optimized Killing Platform (ROCK) technology

Genentech (part of Roche Group: RHHBY), announced a deal with Affimed to utilize its Redirected Optimized Killing Platform ("ROCK") platform in August 2018 that includes $96 million upfront (received in October 2018), $5 billion in milestones, as well as tiered royalties.

Source: Affimed December 2018 Corporate Presentation

As per Affimed's 6K filed on August 27th, of the $5 billion in milestone payments "approximately $250 million relate to development activities, $1.1 billion relate to receipt of regulatory approvals, and $3.6 billion relate to achievement of specified thresholds of worldwide net sales". That equates to $1.35 billion in potential milestones before a dollar in commercial sales of any product that emerges from the Genentech deal.

With respect to commercial milestones plus potential royalties on net sales, the 6K states that:

  • $3.6 billion in commercial milestones relate "to achievement of specified thresholds of worldwide net sales";
  • and Affimed is also "eligible to receive tiered royalties from Genentech on net sales of licensed product candidates on a product-by-product and country-by-country basis".

While the royalty rates were not disclosed in the 6K, with ~63 million shares outstanding even if royalties are low to mid-single digits, they could be meaningful to Affimed if any of Genentech's commercial products are a success.

Knowing the target markets with biotech deals is one of better ways assess the potential to attain milestones tied to commercial sales, as well as compute the possible royalties from commercial sales. While there is not specific detail in terms of which cancers are being targeted, we do know the collaboration with Genentech is focused on the development novel NK cell engagers for multiple solid and hematologic tumor target and candidate products of interest to Genentech.

We also know Affimed and Genentech will collaborate on the discovery and preclinical development of ROCK-based antibodies, and Genentech will be fully responsible for clinical development and commercialization worldwide. On its Q3 earnings call in November, Affimed management stated that the "partnership is off to a great start with strong collaboration between the scientific teams from both companies".

In addition to the cash, the Genentech/Roche deal goes a long way to validate Affimed's ROCK platform for other potential partners. In the original press release, James Sabry, M.D., Ph.D., Global Head of Partnering, Roche, commented,

"This collaboration is based on Affimed's innate immune cell drug discovery and development expertise and our team's deep understanding of cancer immunology. Our partnership with Affimed provides an opportunity to enhance our existing efforts to understand how the immune system can be activated to help people living with cancer."

Notably, Genentech and Affimed reached this deal just 3 months after Affimed initially introduced its ROCK™ Platform for Tailored Immune Cell Engagers in May 2018, and this collaboration sets the stage for future plug-and-play "platform" deals with other companies. As a unique modular platform, ROCK™ enables the generation of both NK cell and T cell-engaging antibodies tailored to different indications and settings. That leaves open a wide door for future collaborations with many potential companies.

Source: Affimed December 2018 Corporate Presentation

With this said, the CEO of Affimed has said since the deal, including recently at the Jefferies Conference in November (link to webcast), Affimed's main business model is to develop drugs and bring them to market on its own as management sees that driving the most value for shareholders. This relatively new "other business model" of providing access to its ROCK platform for significant cash like the Genentech deal is certainly positive for shareholders in that it offers a potentially meaningful path for additional non-dilutive financing, coupled with large upside potential in the form of milestones and royalties.

Finding value in Affimed's remaining pipeline - AFM24, the-now-partnered AFM26, AFM11 - as well as its AbCheck subsidiary and equity stake in privately-held Amphivena

At the current valuation of ~$270 million, with close to $139 million in cash as of October 31, with a cash burn that will be at least partially offset by the $250 million in development milestones from the Genentech deal, potential milestones from the "partnered" AFM26 program, potential upfront/milestones if the data from the Nektar collaboration warrants moving into the clinical stage, and the potential for additional non-dilutive financing from other ROCK platform deals, all of the following have relevance.

AFM24 - The largest potential value generator for shareholders in the current pipeline is AFM24 (EGFR/CD16A). That statement should by no means diminish the value of the other assets in Affimed's pipeline; rather it is the size of the opportunity that leads to this view. In 2017, sales of EGFR-targeted therapies totaled $4.7 billion globally according to Affimed's presentation, and AFM24's profile is aimed to address multiple indications through improving safety or efficacy of the SOC. One of the key differentiators for AFM24 to date is the fact they have minimized toxicity while targeting EGFR. The company sees strong activation of innate immunity through AFM24 offering novel combination potential with anti-EGFR-mAbs, CPIs, or chemotherapy and novel agents in development such as IL-2 or IL-15 like Nektar has.

Source: Affimed December 2018 Corporate Presentation

Additionally, the AFM24 asset has attracted the attention of other companies, but Affimed has decided to move this forward on its own. Dr. Hoess stated at the Jefferies Conference that,

"Companies are interested in this approach, but we have decided not to partner… The reason we want to take it forward is we have abundant patients, abundant indications, and this is our next strategy… We plan to have the IND by mid next year so that we can start clinical studies."

AFM11 - With respect to Affimed's T Cell-targeting platform, AFM11 is a bispecific, tetravalent T cell-engaging antibody construct binding to CD19 on tumor cells and to CD3 on T cells. AFM11 elicits T cell-mediated killing of CD19-positive (CD19+) leukemia and lymphoma cells. There is currently a clinical hold on AFM11 due to an unfortunate patient death that will more likely than not be lifted soon. Why?

As per the ASH 2018 poster, there were no dose-limiting toxicities (DLTs) in cohorts 1-5 in this Phase 1 study. The unfortunate patient death occurred in cohort 6 along with another patient that had a DLT at that dosing level. The 3 patients who achieved a complete response (2 CRs, 1 Cri) were all achieved at lower doses. One of the complete responses was from a patient in cohort 6 but that patient's doses were reduced to Cohort 5 dose level due to toxicity.

Additionally, as per the ASH 2018 abstract the patient who died had "fatal cardio-respiratory arrest, assessed as probably related to AFM11. The patient experienced cognitive disturbance and agitation after the first 6 days of treatment, then suffered a cardio-respiratory arrest several hours later and died two days thereafter. The patient was profoundly neutropenic throughout the study and also had sepsis as confirmed by blood culture on the day of the cardio-respiratory arrest."

While the neurological toxicities observed in the study appeared similar in frequency and severity compared to other CD19-targeting agents, this patient did not die from neurotoxicity. Given other factors may have played a role in the cardio-respiratory arrest, plus the fact there were no DLTs at lower doses combined with AFM11's early signs of encouraging efficacy at lower dosing levels, it seems that it is more likely than not the clinical hold will be lifted and no further patients will be dosed at the cohort 6 level. Time will tell.

Source: Affimed December 2018 Corporate Presentation

AMV564/Amphivena - On a more positive note for Affimed's T Cell engager platform, Amphivena Therapeutics presented positive first-in-human Phase 1 clinical data on AMV564 at ASH 2018. AMV564 is a bivalent, bispecific (2:2) CD33/CD3 T cell engaging antibody for the treatment of myeloid malignancies and solid tumors, with ongoing seamless Phase 1/2 studies in AML and MDS. It was originally developed by Affimed, which currently owns ~18.5% of Amphivena.

While Amphivena's pre-ASH 2018 abstract did not reveal any complete responses in the 18 evaluable patients, it revealed reductions in bone marrow blasts, ranging from 13% to 91%, were observed in 12 of 18 evaluable patients, including a partial response after cycle 1 in 1 patient at the 100 mcg/day dose level.

The updated poster at ASH 2018 took a turn for the better with safety and efficacy data on 26 evaluable patients (versus 18 earlier), as follows:

  • Complete and partial responses (CRi, PR) observed in patients dosed at 100 mcg with a 14-day dosing regimen
  • No dose-limiting toxicity through the 150 mcg cohort, with a 0% 30-day mortality rate
  • No Grade 2+ CRS with a lead-in dose and no Grade 3+ CRS
  • Novel pharmacokinetic profile with a 2-day terminal half-life

Any success with AMV564 is an endorsement of Affimed's T Cell engager platform; expect to see more data from Amphivena moving forward into 2019.

AFM26 - The now-partnered AFM26 clinical asset had some encouraging data presented at ASH 2018 in the Redirected Optimized Cell Killing: ROCK - A next generation immune cell engager platform abstract, as shown here:

Source: ASH 2018 Poster

With respect to who AFM26 is partnered with, we do not know. What Dr. Hoess did say on the Q3 earnings call was that "we cannot go into any details of whom we've partnered with nor which targets we're actively pursuing at that stage". At this point, the who is not as important as the fact Affimed and this collaborator are "actively pursuing", at least seemingly, multiple "targets". There are clearly no disclosures around financials here; yet (1) shareholders can assume that this unnamed partner is helping bear the cost of this pursuit, and (2) shareholders can hope there are some success milestones attached to this deal.

AbCheck - The last asset that I will briefly mention is Affimed's AbCheck subsidiary. AbCheck discovers and optimizes human therapeutic antibodies with one of the industry's most versatile technology platforms which includes in vitro and in vivo techniques. This entity has multiple partnerships, including with Lilly (NYSE:LLY) (from which they received first milestone in early 2017), Daiichi Sankyo (OTCPK:DSKYF), bluebird bio (NASDAQ:BLUE), Pierre Fabre, and Molmed, among others.

In summary, I view Affimed as an undervalued immunotherapy company focused on better NK cell and T cell engagement. Its approach in driving synergy between the innate and adaptive immune system has had promising signs of success that are attracting warranted attention across the industry; and expect that trend to accelerate into 2019.

Disclosure: I am/we are long AFMD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.