December6,2016 | 02:45 ET | 02:45 ET~

Affimed N.V.
AFMD-NSDQ

Rating

Outperform

Price: Dec-5

$2.15

Target

$6.00

Total Rtn

179%

Biotechnology
DoKim, CFA

Analyst
(212) 885-4091

do.kim@bmo.com

BCMA Bispecific AFM26 Could Be Hidden Gem

Legal Entity:

25

Bottom Line: At ASH, Affimed presented preclinical data for its trispecific antibody
(Ab) targeting BCMA, CD200, and CD16A in multiple myeloma (MM), which should draw
attention to its lead BCMA drug, AFM26, a bispecific Ab. We believe stellar Phase I data
from bluebird bio's bb2121 (BCMA CAR-T) could place a premium on BCMA assets given
the strong target validation and paucity of unpartnered BCMA drugs. BMO estimates
bb2121 peak sales of $3.6b just in 3rd line+ MM. AFM26 could enter Phase I by end-2017
and represents significant upside to our estimates.
Key Points
BCMA target validated by bb2121. Phase I data for bluebird bio's (covered by Matthew
Luchini) bb2121, a CAR-T therapy targeting the b-cell maturation antigen (BCMA),
showed unprecedented efficacy in heavily pre-treated MM patients, achieving 100%
ORR, including 33% stringent CRs, in the two higher-dose groups (N=6). In comparison,
recently-approved daratumumab showed a 29% ORR in its pivotal salvage line MM trial.
We believe the patient population for bb2121 is even more severe, as 64% had failed
daratumumab.
AFM26 could be in Phase I by 2017 year end. We believe Affimed's AFM26, a BCMA/
CD16A bispecific Ab could enter clinical development within 12-18 months, placing it
about two years behind bluebird bio. AFM26 has demonstrated potent antigen-specific
cytotoxicity with NK-cell binding, even in the presence of high levels of IgG. BCMA is
commonly expressed on the surface of malignant MM cell, which makes it an ideal
immuno-oncology or ADCC target.
Limited BCMA field may narrow further. There are a handful of BCMA drugs in
development, including those being developed by Novartis/UPenn, GSK, Pfizer/
Cellectis, Janssen, and Celgene. We believe the number of unpartnered BCMA assets is
even smaller, with Affimed's AFM26 and a CAR-T by the NCI. We believe the BMCA field
could shrink, as the Novartis/UPenn CART-BCMA has shown high incidences of severe
cytokine release syndrome (vs. 0 for bb2121), with lower efficacy compared to bb2121.

BMO Capital Markets Corp.

2YR Price Volume Chart

20
15
4
10

3
2

Jun
LHS: Price ($) / RHS: Volume (mm)

Dec

0
Dec
Source: FactSet

Jun

Company Data

in $

Dividend

$0.00

Market Cap (mm)

Yield

0.0%

AD Vol. (mm)

Shares O/S

$72
0.30

33.3

(mm)
BMO Estimates

in $
2015A

2016E

2017E

EPS

$(0.63)

$(0.96)

$(0.93)

Revenue

$7,562

$6,818

$7,000

(FY-Dec.)

Consensus Estimates

2015A

EPS

2016E

2017E

$(1.14)

$(1.05)

Valuation

2015A

2016E

2017E

NM

NM

NM

P/E
QTR. EPS

Q1

Q2

Q3

Q4

2015A

$(0.05)

$(0.17)

$(0.22)

$(0.17)

2016E

$(0.19)a

$(0.23)a

$(0.28)

$(0.26)

Unpartnered AFM26 could draw pharma attention. Given bb2121's strong data, we
believe pharma and large cap biotech could have increasing interest in BCMA targeting
drugs, like AFM26. If BCMA therapies maintain bb2121 efficacy in larger studies, we
believe this drug class could disrupt the MM market, with Celgene's (covered by Ian
Somaiya) Revlimid expected to have peak sales of $13B.

Our Thesis

Please refer to pages 5 to 7 for Important Disclosures, including Analyst's Certification.

We believe Affimeds novel bispecific, tetravalent

TandAb drug platform could be at the forefront of
the next stage of immuno-oncology with targeting of
the innate immune system and NK-cell. We believe
positive data from Affimed's lead candidate, AFM13,
would not only validate the TandAb drug technology
platform, but also NK cell immuno-oncology as the
next direction of cancer therapies.

Affimed N.V. - Block Summary Model

Income Statement

2015A

2016E

2017E

7,562

6,818

7,000

R&D

22,008

33,391

38,400

Valuation

SG&A

7,548

8,464

10,580

Operating Income

(21,343)

(34,894)

(41,979)

Net Income (non-GAAP)

(18,019)

(31,962)

(38,219)

Diluted EPS (non-GAAP)

$(0.63)

$(0.96)

$(0.93)

Diluted Shares Outstanding

28,477

33,341

40,909

We rate AFMD Outperform with a $6 PT. We estimate

$400mn WW peak sales for AFM13 in HL, risk-adjusted with
a 35% probability of success, $1bn WW peak sales for AFM11
in NHL, risk-adjusted with a 15% probability of success,
and $500mn in ALL, risk-adjusted with a 30% probability of
success. We see AFM26 BCMA/CD16A bispecific antibody as
upside to our estimates.

Cash Flow Statement

2015A

2016E

2017E

(18,535)

(31,476)

(39,146)

(277)

(13,808)

(305)

Cash Flow From Financing

53,498

(1,079)

65,800

Starting Cash Balance

39,725

76,740

29,722

Ending Cash Balance

76,740

30,377

56,071

Balance Sheet

2015A

2016E

2017E

Total Current Assets

78,335

44,594

70,981

Downside Scenario

Total Assets

79,322

45,459

71,831

8,944

9,111

7,902

Total Liabilities

12,048

10,796

9,587

Downside scenario models: AFM13 fails in Phase Ib trial,

raising concern over viability of platform. Uncertainty of
pipeline would lead shares to trade near cash, supporting a
price target of $1.

Total Shareholders' Equity

67,274

34,663

62,244

Total Liabilities and Share Equity

79,322

45,459

71,831

Total Cash

76,740

29,722

56,071

Total Debt

3,104

1,685

1,685

Total Revenues

Cash From Operating Activities

Cash Flow From Investments

Total Current Liabilities

Source: BMO Capital Markets, Company Reports

Upside Scenario

$11.00

Upside scenario models: AFM13 meets Phase Ib clinical trial

endpoint with a clean safety profile. We model an increased
probability of AFM13 success at 55% (up from 35%) and
increased probability of AFM11 success to 35% in ALL and
20% in NHL, in addition to 20% increases in R&D and SG&A
expenses. Resulting risk-adjusted revenue streams support
a price target of $11.

$1.00

in USD
-53%

+179%

Downside Current
Scenario Price
1.00
2.15

Target
Price
6.00

+412%
Upside
Scenario
11.00

Company Description
Affimed is a clinical-stage biotechnology company focused
on the discovery and development of immunotherapies
for blood and solid tumors. The company has three
platform technologies: NK-cell TandAbs, T-cell TandAbs,
and Trispecific Abs. Affimed was founded in 2000 and is
headquartered in Heidelberg, Germany.

AFMD-NSDQ
Research

Affimed N.V. | Page 2

Industry
Research

Company
Models

December 6, 2016

Trispecific Data Provides Clues to AFM 26

At the 2016 American Society of Hematology (ASH) conference, Affimed presented preclinical in-vitro
data for its trispecific antibody targeting BCMA, CD200, and CD16A. While we expect Affimed to mainly
focus on AFM26, its bispecific (BCMA/CD16A) antibody, given the robust target validation data from
bluebird bios bb2121, we believe the preclinical data for the trispecific antibody supports Affimeds
engineering capabilities to design an anti-BCMA specific arm for AFM26.
The asymmetric trispecific Flexibody (aTriFlex) is bivalent for CD16A and monovalent for both BCMA and
CD200. The ASH data showed two trispecifics achieved up to 20-fold increase in cytotoxic potency with
BCMA+/CD200+ cells versus targeting one antigen alone. In addition, aTriFlex_105 showed an EC50 of
~100pM for BCMA+ cells, which we believe points to AFM26s potential in targeting BCMA.

Exhibit 1: Potency of BCMA and CD200 Targeting For Trispecifics

Source: Company Data

Other BCMA Drugs Not As Impressive

Presentation of clinical data for other BCMA therapies confirmed that safety profiles will be a major
factor for this drug class. The Phase I results for Novartis/UPenns CART-BCMA showed eight of nine
patients experienced cytokine release syndrome, including two Grade 3 and one Grade 4 (bb2121 had
zero Grade 3/4. We believe CART-BCMA has a much narrower therapeutic window compared to
bluebirds bb2121, as efficacy also fell short with only a 44% ORR (11% sCR). GSKs BCMA ADCC drug,
GSK2857916, fared slightly better on the safety side, with Grade 3/4 AEs of ocular toxicity (7%), anemia
(20%), hypercalcemia (10%), and neutropenia (13%) being the chief concerns. However, efficacy was
the lowest at 27% ORR (3% sCR), albeit with more suboptimal dose levels. We believe AFM26s NK cell
mediated mechanism of action could compete with bb2121s benign safety, given the mild AE profile
known with NK cell activity. We expect NK-cell derived efficacy to be confirmed by the Phase Ib study of
AFM13 (Keytruda combo) in cHL, which has interim data expected in 1Q17 and final data by 2H17.

Affimed N.V. | Page 3

December 6, 2016

AFM13 Improves NK-Cell Killing of CD30+ Cells (e.g. Hodgkin)

Also presented at ASH was preclinical data for AFM13, Affimeds lead pipeline drug for Hodgkin
lymphoma. Data showed that AFM13 activated NK-cells and increased sensitivity to IL-15 and IL-2,
leading to greater NK-cell proliferation. These properties of AFM13 resulted in enhanced NK-cell
cytotoxicity for both Hodgkin lymphoma (L428) and non-Hodgkin lymphoma (Karpas-299) CD30+ cell
lines.
Exhibit 2: AFM13 Even Better Than Anti-CD30 IgG

Source: Company Data

Companies mentioned (priced as of the close on December 5, 2016):

Novartis AG (NVS; $68.97; Not Rated)
bluebird bio (BLUE; $72.15; Market Perform by Matthew Luchini)
GlaxoSmithKline PLC (GSK; $37.67; Not Rated)
Pfizer (PFE; $31.59; Market Perform by Alex Arfaei)
Cellectis SA (PINX: CMVLF; $17.89; Not Rated)
Celgene (CELG; $116.56; Outperform by Ian Somaiya)

Affimed N.V. | Page 4

December 6, 2016

AffimedN.V.RatingHistoryasof12/05/2016
NR:NA
10/01/14

OP:US$13
10/06/14

R:NA
04/27/15

OP:US$13
05/06/15

NR:NA
08/06/15

OP:US$7
04/11/16

OP:US$6
11/02/16

25
20
15
10
5
0
Jan2014

Apr2014

Jul2014

Oct2014

Jan2015

Apr2015

Jul2015

ClosingPrice

Oct2015

Jan2016

Apr2016

Jul2016

Oct2016

TargetPrice

Outperform(OP);MarketPerform(Mkt);Underperform(Und);Speculative(S);Suspended(Spd);NotRated(NR);Restricted(R)
Source:FactSet,BMOCapitalMarkets

IMPORTANT DISCLOSURES
Analyst's Certification
I, Do Kim, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and
their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in
generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service
to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA (exception:
Brodie Woods). These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule
2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Methodology and Risks to Price Target/Valuation for Affimed N.V.(AFMD-NSDQ)
Methodology:Our 12-month price target of $6 is based on our DCF of 2017E2025E free cash flows discounted at 18% (WACC of 14.7%) with a
2% terminal growth rate. We rate AFMD shares Outperform.
Risks:Risks to forecast include downward pressure on cancer drug prices, safety signal in larger trials, and no efficacy in Adcetris-refractory
HL patients.
Distribution of Ratings (December 05, 2016)
Rating category

BMO rating

BMOCM US
Universe*

BMOCM US IB
Clients**

BMOCM US IB
Clients***

BMOCM
Universe****

BMOCM IB
Clients*****

StarMine
Universe

Buy

Outperform

41.0%

18.9%

51.2%

42.4%

53.0%

52.9%

Hold

Market Perform

55.0%

12.8%

46.4%

54.0%

44.9%

41.4%

Sell

Underperform

4.0%

9.1%

2.4%

3.3%

2.1%

5.7%

* Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts.
** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services
as percentage within ratings category.
*** Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking
services as percentage of Investment Banking clients.
**** Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services
as percentage of Investment Banking clients.
Ratings Key (as of October 2016)
We use the following ratings system definitions:
OP = Outperform - Forecast to outperform the analysts coverage universe on a total return basis;
Mkt = Market Perform - Forecast to perform roughly in line with the analysts coverage universe on a total return basis;

Affimed N.V. | Page 5

December 6, 2016

Und = Underperform - Forecast to underperform the analysts coverage universe on a total return basis;
(S) = Speculative investment;
Spd = Suspended - Coverage and rating suspended until coverage is reinstated;
NR = No Rated - No rating at this time; and
R = Restricted - Dissemination of research is currently restricted.
BMO Capital Markets' seven Top 15 lists guide investors to our best ideas according to different objectives (CDN Large Cap, CDN Small Cap, US
Large Cap, US Small Cap, Income, CDN Quant, and US Quant have replaced the Top Pick rating).
Prior BMO Capital Markets Rating System
(April 2013 October 2016)
http://researchglobal.bmocapitalmarkets.com/documents/2013/rating_key_2013_to_2016.pdf
(January 2010 April 2013)
http://researchglobal.bmocapitalmarkets.com/documents/2013/prior_rating_system.pdf
Other Important Disclosures
For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/
Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial
Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3.
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Affimed N.V. | Page 6

December 6, 2016

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Affimed N.V. | Page 7

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December 6, 2016