Miami, FL – December 24, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Affimed NV (NASDAQ: AFMD).
On October 8, Affimed NV (NASDAQ: AFMD)announcedthat it had placed AFM11, its second product candidate on clinical hold after threepatients experienced Severe Adverse Events (SAE) relating to neurotoxicity, resulting in one death. The market’s reaction was swift and shares shed about 20 percent by the end of trading session.
Although the stock price has since rebounded, a number of investors have had widely contrasting views as to whether the company still offers a reasonable investment opportunity in light of this development. Here’s what you need to know.
Affimed is a clinical-stage biopharmaceutical company focused on developing highly targeted cancer immunotherapies and has a market cap of about $187 million. Its product candidates are being developed in the field of immunooncology, 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 system are types of white blood cells called Natural Killer cells (NK cells) and T cells. Affimed leverages its modular and versatile ROCK™ (Redirected Optimized Cell Killing) platform, to generate proprietary, next-generation bispecific antibodies, called TandAbs for their tandem antibody structure.
These antibodies are designed to direct and establish a bridge between either NK-cells or T-cells and cancer cells, triggering a signal cascade that leads to the destruction of the cancer cells.
According to the company, its product development strategy is to initially target relapsed or refractory cancer patients who have limited therapeutic alternatives, which it believes will enable it to utilize an expedited regulatory approval process.
Clinical hold on AFM11
AFM11 is designed for the treatment of certain CD19+ B cell malignancies, including non-Hodgkin Lymphoma (NHL) and Acute Lymphocytic Leukemia (ALL).
It binds selectively with CD19, a clinically validated target in B cell malignancies and also binds to CD3, a component of the T cell receptor complex, triggering a signal cascade that leads to the destruction of tumor cells that carry CD19.
In preclinical, studies AFM11 (CD19/CD3-targeting T cell engager) has demonstrated highly specific and effective engagement of T cells, inducing rapid and potent in vitro and in vivo tumor cell killing.
According to Affimed’s presentation during ASH 2018 earlier this month, there were no dose-limiting toxicities (DLTs) in cohorts 1-5 during the Phase 1 study, and the unfortunate patient death occurred in cohort 6.
The three patients who achieved a complete response were all achieved at a lower dose while one of the complete responses was from a patient in cohort 6, although that patient’s doses were reduced to Cohort 5 dose level due to toxicity.
However, it is important to note that the neurological toxicities observed in the study appeared similar in frequency and severity compared to other CD19-targeting agents and there appears to be a strong likelihood that this patient did not die from neurotoxicity.
Affimed’s presentation at ASH 2018 goes on to further explain that 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.”
If this is the case, we strongly believe that the clinical hold won’t be in place for long and it’s likely to be lifted.
Affimed is confident that the pharmacokinetics of AFM11 will compare favorably to Amgen’s (NASDAQ: AMGN)Blincyto (blinatumomab), a bispecific antibody (also targeted against CD19 and CD3) with approval in the United States and Europe. Blinatumomab received accelerated approval in December 2014 for the treatment of Philadelphia chromosome (Ph)-negative relapsed or refractory positive B-cell precursor ALL.
Blincyto works by attaching to CD19 protein on the leukemia cells and CD3 protein found on certain immune system cells. Bringing the immune cell close to the leukemia cell allows the immune cells to attack the leukemia cells better.
Based on its molecular characteristics, in particular its molecular weight, Affimed expects that AFM11 will have a longer half-life in addition to showing 100-fold higher affinity to CD3, resulting in up to 40-fold greater cytotoxic potency at low T cell counts compared to Blincyto. As such, there is a strong possibility that AFM11 may have an efficacy advantage, especially in immunocompromised patients.
Although the pharmacokinetics of TandAbs is longer as compared to Amgen’s BiTEs such as Blincyto, AFM11 might have a convenient advantage due to its longer half-life. Affimed has been exploring different dosing regimens in the clinical studies to address specific issues relating to T cell engagement, which may require longer infusion times.
To illustrate just how massive an opportunity for Affimed’s AFM11 there is, Amgen’s Blincyto raked in approximately $175 million in 2017, a 52 percent increase compared to the prior year as a result of higher unit demand.
According to the most recent estimatesfrom the American Cancer Society, there were about 5,960 new cases of ALL reported last year with 1,470 resulting in death. Although ALL is one of the rarer forms of cancer, its cost of treatment and economic burden is quite significant.The results of this studygive deeper insight into the costs associated with treating ALL and highlight the following: “The average total cost of inpatient ALL treatment (induction phase) was $31,694 for both adults and children. The cost for consolidation therapy was $29,244 and $12,753 in adults and children, respectively. The maintenance therapy cost was $7,288 and $3,452 in adults and children, respectively. The high-risk therapy following relapse was $17,100 and $12,000 in adults and children, respectively. The total treatment cost for ALL is estimated at $85,326 in adults and $59,899 in children.”
Leaving aside the controversy of AFM11 for a bit, it is quite clear from the illustration above that Affimed’s pipeline has a lot more to offer. For instance, the company’s lead product candidate AFM13, currently under development as mono and combination therapy for refractory Hodgkin lymphoma (HL) and CD30-positive lymphoma patients looks quite promising.
Recently, Affimed provided an update on the Phase 1b trial of AFM13 in combination with Merck’s (NYSE: MRK)Keytruda® (pembrolizumab) for patients with HL which showed the combination was well-tolerated, with most of the adverse events observed being mild to moderate in nature and manageable with standard of care.
In the collaboration with Merck, each party is responsible for its own internal costs and expenses to support the clinical trial (including the costs for the respective trial compound), while Affimed is supposed to bear all the other costs associated with the trial.
In addition to this, the company also has a number of impressive collaborations and partnerships such as the research funding agreement with the Leukemia & Lymphoma Society (LLS) for the clinical development of AFM13 as well as a clinical development and commercialization collaboration with The University of Texas MD Anderson Cancer Center, to evaluate AFM13 in combination with MD Anderson’s NK cell product.
Most important of all, these partnerships have been instrumental in bringing in much needed non-dilutive financing.
Financials and analyst commentaryTo date, Affimed’s revenues have consisted primarily of collaboration and service revenue. According to its most recent annual filings, collaboration revenue of €0.4 million for the year ended December 31, 2017 was from research and development services under the license and development agreement with Amphivena (€0.2 million) and from the LLS collaboration (€0.2 million). On the other hand, service revenue is primarily derived from service contracts entered into by AbCheck, the company’s wholly owned, independently operated antibody screening platform.
With regards to research and development, in the years ended December 31, 2015, 2016 and 2017, Affimed spent €0.8 million, €2.5 million and €2.8 million on AFM11. Clinical expenses were slightly higher in the year ended December 31, 2017 than in the preceding year primarily due to higher expenses for the ongoing phase 1 clinical study in NHL and the phase 1 dose-finding study in ALL.
At the moment the company expects that its existing cash and cash equivalents including the $24.5 million in proceeds from the February 2018 public offering of 13.2 million shares will enable it to fund operating expenses and capital expenditure requirements, at least until the fourth quarter of 2019.
Based on three analysts who have offered 12-month price targets for Affimed’s stock in the past quarter according to tipranks, the average price target is $6.33 which would indicate probable upside of more than 100 percent. While this price target would be on the high end of the spectrum, we expect that the resolution of AFM11’s clinical hold in combination with positive data from AFM13’s phase 2 clinical trials will certainly propel the stock price higher.
Hedge funds also appear to believe that the company’s future looks bright with Renaissance Technologies boosting its stake by 38 percent to 177,510 shares valued at $293,000 while EAM Investors LLC bought shares worth $656,000 in the third quarter of 2018. Currently hedge funds own about 42.3 percent of the company’s shares and though mirroring institutional money isn’t always a great investing strategy, we recommend buying Affimed shares to any investor looking to get in on the ground stages of a promising imunooncology concern at a reasonable valuation.
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