Affimed NV (NASDAQ: AFMD) has several clinical and preclinical programs in progress. The company’s lead clinical candidate is AFM13, which is being developed as a treatment for hematological malignancies that include HL. But, does the company have what it takes to develop its drug candidates to marketable products?
Developing a drug until it is launched on the market takes time and costs money. The management of Affimed NV (NASDAQ: AFMD) has repeatedly stated its commitment to not only accelerate pipeline development, but also pipeline expansion. That explains why R&D division of the company has seen a spike in spending in the recent years.
In 1Q2016, for instance, Affimed NV (NASDAQ: AFMD) funneled €7.1 million to R&D. That compared with €2.9 million in 1Q2015. The company said that the lead candidate AFM13 was responsible for the sharp increase in R&D spending in the latest quarter compared to a year ago.
Balance sheet flexibility – Affimed NV (NASDAQ: AFMD)
Now that it is clear that Affimed’s R&D programs are consuming much money, the question that immediately comes to mind is whether the company can sustain its cash consumption.
Looking at the balance sheet, you get the impression that Affimed NV (NASDAQ: AFMD) stands on solid financial grounds. The company finished 1Q2016 with cash and equivalents totaling €66.8 million. Although that’s a drop from cash position of €76.7 million in the prior quarter, it is nearly double the company’s cash position of €37 million in the year-ago quarter.
What caused the decline in cash balance?
The decline in Affimed NV (NASDAQ: AFMD)’s cash balance between 1Q2016 and 4Q2015 was largely attributed to a spike in operational expenses. Higher R&D spending was a major cause for the decrease in cash balance level. G&A expenses also shot up to €2.1 million compared to €1.8 million in the year-ago quarter. While Affimed might not want to starve its R&D department of cash, it can drive more internal efficiency to lower G&A costs so that it can preserve cash.