Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Is Affimed Affordable?

|About: Affimed Therapeutics (AFMD), Includes: AMGN, MRK, SGEN

Summary

A minimum of six quarters of cash burn remain on the balance sheet

Leading product Clinical Trial updates in 2H '17

A demonstrated history of 15-20% gains on favorable data updates.

Secondary product Clinical Trial update should come soon.

Thesis:

Affimed (AFMD) is an immunoncology company that works by binding cancer fighting cells to cancer cells enabling the patient to shrink tumors. The company is expecting data readouts for it's leading candidate AFM-13 in a phase 2 standalone treatment and a phase 1 in conjunction with Merck's KEYTRUDA during the second half of 2017.

An earnings report is due August 1, that could show up to a 40% R&D spending increase, after lower than expected Q1 expenditures, which could push share price down, if investors update their cash burn in their economic models. 

Historically, favorable results of their preclinical trials, AFM26 and AFM 24, at ASCO June 2017 pushed the share price 16% higher than current levels, and 20% from post issuance lows. 

If the companies R&D spending ticks up, investors could see a decrease in the share price which would present a buying opportunity before the trial updates for AFM-13. This "sell the news" cataylst is augmented by the relatively low float for retail investors. 

Shares:

I'm putting Affimed, ticker (AFMD) on my watchlist. As of July 30, the company is trading at $2.15 a share. Which is up about 20% from their $1.80 Jan/Feb offering of 10,646,762 shares.

A share price of 2.15 and a market cap of 93.01 million tells me there are 43,302,326 shares outstanding. Institutions hold 34,031,213 shares (https://fintel.io/so/us/afmd). The average volume is 180,xxx. That's a low float for retail investors. 

Cash:

As of May 31, 2017 AFMD has 53.7 euros in cash and credit on the balance sheet. They burned 7.2 million (down from 8.5 million), 5.4 of which was R&D. The company expected to burn between 22-30 million euros in R&D for the year. If you take the 2016 Q1 Cash burn (8.5 million euro) and assume a 10% quarterly increase, AFMD has a 6 quarter runway. R&D can increase, meaning a future dilution can wait for a more favorable share price.

Product/Competition:

Currently Affimed has no products. 

Affimed hopes to engineer immunotherapies to target Hodgkins/Refractory Lymphoma (AFM13) The current standard of care here is Acedtris (approved in 2015, created by Seattle Genetics (SGEN), listened to Takada) which costs 100-120 thousand per first line patient.

AFM11 (Phase 1) for relapsed/refractory ALL and NHL. The current standard of care here is Blincyto, created by a German pharma Micromet, and purchased by Amgen. (AMGN) Costs of Blincyto was priced at 178,000 per patient.

Pipeline/Patent:

AFM13 -Expires 2026: Leading Candidate. It provides a bond between Hodgkin's lymphoma cells and the body's natural killer cells. It connects cancer fighting cells to cancer cells, making the fight easier. Phase 1 studies showed a max dosage of 7 mg per kg. Phase 1 also has shown tumor shrinkage in 63% of patients. We will be hearing information about how AMF13 works as a standalone and with Keytruda (MRK) sometime in the next 6 months. 

AFM11 -Expires 2019 (with updated mechanism patent pending until 2030). Provides a bond between CD 19 receptor on certain tumor cells and CD3, which is found on T-cells. It connects cancer fighting cells to cancer cells, making the fight easier. Phase 1 trials are showing a complete response rate of 40% and a partial response rate of 53%. The trial was checking to see if the drug would provide a T-Cell response in patients who have already received treatment. As of the Q1 conference call/company update there was no further information on the P1 Study. However Affimed expected an update sometime during the first half of the year. We are still waiting on that update.

Preclinical Pipeline:

AFM 24 - Expires 2026: 

AFM 26 - Pending 2037:

The preclinical pipeline was received favorably at ASCO 2017. If I initiate a position I will investigate further. But for now, this company is only on my watch list. 

Management/Institutions:

Management: 

Management and the board of directors own about 2% of the company. There are 6 supervisors and 3 from management on the board of directors. If I initiated a position, I will look into their employment history.

Institutions: (Source 20-f and fintel.io)

Calibrium owns 20% of the Affimed

Wellington owns about 9.5% of the Affimed

NEA owns about 8.9% of the Affimed

Growth Equities Opportunities owns about 8.9% of Affimed

Brookside Capital owns about 7% of Affimed

NovoNordisk owns about 6.5% of Affimed

That's a big portion of the company locked up by insiders at this point. 

Conclusion:

Affimed presents an interesting binary play over the next 6 months of 2017. I don't think I would hold the ticker long term at this point, as it is far away from commercialization and will have to generate more cash. But I will definitely be watching the ticker.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AFMD over the next 72 hours.