IPO Report: Affimed Therapeutics B.V. (AFMD)

Affimed Therapeutics B.V. (AFMD), based in Heidelberg, Germany is a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies.

Two companies are scheduled for the week of September 8, 2014.  The complete IPO calendar is available at IPOpremium.  Alibaba is scheduled for next week.

Manager, Co-Managers: Jefferies & Co., Leerink Partners, BMO Capital Markets

Joint Managers: Trout Capital

AFMD scheduled a $75 million IPO with a market capitalization of $267 million at a price range midpoint of $12 for Friday, Sept. 12, 2014, on the Nasdaq.  SEC filings

Overview

AFMD's cash burn rate relative to the market capitalization  is relatively low:  price-earnings ration of -44.4 (lower absolute number is worse).

The Leukemia and Lymphoma Society, or LLS, has agreed to co-fund a phase 2a study

Valuation

Glossary

Conclusion

The rating on AFMDS is neutral to slightly plus.
Has very good potential. 
Is dependent on further clinical success

Business

AFMD is a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies. AFMD’s product candidates are being developed in the field of immuno-oncology, which represents an innovative approach to cancer treatment that seeks to harness the body’s own immune defenses to fight tumor cells.

The most potent cells of the human defense arsenal are types of white blood cells called Natural Killer cells, or NK-cells, and T-cells. AFMD’s proprietary, next-generation bispecific antibodies, which AFMD calls TandAbs because of their tandem antibody structure, are designed to direct and establish a bridge between either NK-cells or T-cells and cancer cells. AFMD’s TandAbs have the ability to bring NK-cells or T-cells into proximity and trigger a signal cascade that leads to the destruction of cancer cells.

Due to their novel tetravalent architecture (which provides for four binding domains), AFMD’s TandAbs bind to their targets with high affinity and have half-lives that allow intravenous administration.

AFMD believes, based on their mechanism of action and the preclinical and clinical data AFMD has generated to date, that its product candidates may ultimately improve response rates, clinical outcomes and survival in cancer patients and could eventually become a cornerstone of modern targeted oncology care.

AFMD has focused its research and development efforts on three proprietary programs for which AFMD retains global commercial rights. Because AFMD’s TandAbs bind with receptors that are known to be present on a number of types of cancer cells, each of AFMD’s TandAb product candidates could be developed for the treatment of several different cancers.

AFMD intends to initially develop AFMD’s two clinical stage product candidates in orphan or high-medical need indications, including as a salvage therapy for patients who have relapsed after, or are refractory to, that is who do not respond to treatment with, standard therapies.

These patients have a limited life expectancy and few therapeutic options. AFMD believes this strategy will allow for a faster path to approval and will likely require smaller clinical trials compared to indications with more therapeutic options and larger patient populations.

AFMD believes such specialized market segments in oncology can be effectively targeted with a small and dedicated marketing and sales team.

AFMD currently intends to establish a commercial sales force in the United States and/or Europe to commercialize its product candidates when and if they are approved. AFMD is also conducting research with its collaborator Amphivena Therapeutics, Inc., which Janssen has an option to buy upon IND acceptance by the FDA.

AFM13

AFMD’s lead candidate, AFM13, is a first-in-class NK-cell TandAb designed for the treatment of certain CD30-positive (CD30+) B- and T-cell malignancies, including Hodgkin Lymphoma, or HL. AFM13 selectively binds with CD30, a clinically validated target in HL patients, and CD16A, an integral membrane glycoprotein receptor expressed on the surface of NK-cells, triggering a signal cascade that leads to the destruction of tumor cells that carry CD30.

AFMD is initially developing AFM13 for HL in the salvage setting for patients who have relapsed after, or are refractory to, Adcetris® (brentuximab vedotin), a CD30-targeted chemotherapy approved by the U.S. Food and Drug Administration, or FDA, in August 2011 as a salvage therapy for HL. Half of the patients treated with Adcetris experience disease progression in less than half a year after initiation of therapy.

In a recent phase 1 dose-escalation clinical trial, AFM13 was well-tolerated and demonstrated tumor shrinkage or slowing of tumor growth, with disease control shown in 16 of 26 patients eligible for efficacy evaluation.

AFM13 also stopped tumor growth in patients who are refractory to Adcetris. Six out of seven patients who became refractory to Adcetris as the immediate prior therapy experienced stabilization of disease under AFM13 treatment according Cheson’s criteria, standard criteria for assessing treatment response in lymphoma.

AFMD  believes that based on its novel mode of action, AFM13 may be beneficial to patients who have relapsed after or are refractory to treatment with Adcetris and may provide more durable clinical benefit.

In the fourth quarter of 2014, AFMD plans to initiate a phase 2a proof of concept trial of AFM13 in HL patients that have received all standard therapies and have relapsed after or are refractory to Adcetris.

AFMD expects interim data in the second half of 2015 and final data in the second half of 2016. The Leukemia and Lymphoma Society, or LLS, has agreed to co-fund this phase 2a study, a further indication of the promise this development candidate holds.

Dividend Policy

No dividends are planned.

Intellectual Property

AFM13

AFMD owns and/or controls its AFM13 (CD30 NK-cell TandAb) patent portfolio, which includes three patent families.

AFMD’s first patent family is issued and relates to the engineered antibody format, which is called TandAb, and the methods of making or using such bispecific, tetravalent domain antibodies.

This patent family will expire in 2019. The patents are granted in several major markets, including Australia, Canada, Europe (Austria, Belgium, Denmark, France, Germany, Great Britain, Italy, the Netherlands, Spain, Sweden and Switzerland/Liechtenstein), Japan and the United States.

The second patent family on AFM13 is granted for the use of the specific target combination for the treatment of cancer using a bispecific molecule.

This patent family is granted in Europe (Austria, Belgium, France, Germany, Great Britain, Ireland, Italy, the Netherlands, Spain and Switzerland/Liechtenstein) and will expire in 2020. AFMD’s third patent family relates to the mode of action of AFM13, the recruitment of immune effector cells via a specific receptor.

If issued, these patents will expire in 2026. AFMD filed a related PCT application which entered the national phases in Australia, Brazil, Canada, China, Europe, Japan, Russia and the United States. Any patents resulting from these patent applications, if issued, also will expire in 2026. Patents have been granted in Australia, India and Russia and claims have been allowed in Europe.

AFM11

AFMD owns and/or controls its AFM11 patent portfolio. This portfolio includes one patent family granted in Australia, Canada, Europe, Japan and the United States and one patent family pending in Australia, Brazil, Canada, China, Europe, Japan, Mexico, Russia and the United States.

As in the case of AFM13, AFMD’s issued patents relate to the engineered antibody format, which is called TandAb, and on which the AFM11 compound is based upon. These patents will expire in 2019. The pending patent application family claims a new TandAb structure which was specifically used in AFM11 to increase its potency. If issued, such patents will expire in 2030.

EGFRvIII T-cell TandAb (AFM21)

Competition

There is a large number of companies developing or marketing treatments for cancer disorders, including many major pharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, as well as biologic therapeutics that work, among others, by using next-generation antibody technology platforms to address specific cancer targets.

These treatments are often combined with one another in an attempt to maximize the response rate. In addition, several companies are developing therapeutics that work by targeting multiple specificities using a single recombinant molecule, as AFMD is.

In the HL salvage setting, Adcetris is an antibody-drug conjugate approved by the FDA in 2011 that targets CD30, the same target as AFM13.

If and when AFM13 were to be approved for patients refractory to Adcetris, AFMD would not compete directly with Adcetris.

However, as AFMD develops AFM13 for earlier-line therapies, for example in combination with other therapies as a second- or even first-line treatment, AFMD would compete with Adcetris, which is in development for such indications.

Further, AFMD would be in competition with any therapies or combination regimens that currently comprise the standard of care for the treatment of HL that AFM13 could potentially displace.

Other agents that have reached phase 2 clinical trials in HL include 4SC201 (4SC AG), Afinitor (Novartis AG), ferritarg (MABLife), iratumumab (Bristol-Myers Squibb) and PLX 3397 (Daiichi Sankyo).

As of this date, definitive proof of the efficacy and safety of any of these agents in relapsed/refractory HL has yet to be obtained, leaving a substantial unmet need in this area for AFM13 to fill. Recently, Bristol-Myers Squibb announced that nivolumab, an anti-PD-1 antibody (checkpoint inhibitor), has been granted breakthrough designation by the FDA for relapsed/refractory HL.

5% stockholders

Entities affiliated with Aeris Capital AG 32.2%

Entities affiliated with OrbiMed Advisors LLC      30.7%

Novo Nordisk A/S         14.3%

BioMedInvest I Ltd.       9.2%

Entities affiliated with Life Sciences Partners  9.2 %

Frank Mühlenbeck         32.2%

Michael B. Sheffery       30.7%                               

Use of Proceeds

AFMD intends to use the $67 million in proceeds from its IPO with its cash as follows:

$35 million to fund research and development expenses for AFM13, including phase 2a trials of AFM13 for the treatment of HL and one additional study for the treatment of other forms of CD30+ malignancies, as well as CMC (chemistry, manufacturing and control) work in preparation for a potential pivotal trial of AFM13 for the treatment of HL;

$8 million to fund research and development expenses for AFM11, including phase 1 trials of AFM11 for the treatment of NHL and ALL;

$10 million to fund research and development expenses for AFM21, including preclinical development of AFM21;

the remainder to fund other research and development activities, for working capital, repayment of debt and general corporate purposes.