Affimed N.V. (NASDAQ: AFMD) shares rose on Monday following the announcement of a collaboration in immuno-oncology with biotech giant Merck & Co. Inc. (NYSE: MRK). Specifically, this agreement is between Affimed and Merck, through a subsidiary. It also includes a provision for the potential expansion of this collaboration to include a subsequent Phase 3 clinical trial, if all goes according to plan. This deal could very well be the turning point for this micro-cap biotech.

Under the terms of the agreement, Affimed will fund and conduct a Phase 1b clinical trial to investigate the combination of Merck’s anti-PD-1 therapy, Keytruda (pembrolizumab), with Affimed’s proprietary drug candidate AFM13 for the treatment of patients with Hodgkin lymphoma. One important thing to note is that this is in those whose disease has relapsed or is refractory to chemotherapy, including treatment with the marketed antibody-drug-conjugate Adcetris (brentuximab vedotin).

Merck will supply Affimed with Keytruda for the clinical trial. The purpose of the study is to establish a dosing regimen for this combination therapy and assess its safety and efficacy. Affimed is on track to initiate the study in the first half of 2016.

Dr. Adi Hoess, CEO of Affimed, commented:

Our development strategy is to combine our NK-cell engagers with other immunotherapies that could enhance their efficacy through the uptake of both NK-cells and T-cells, and the collaboration with Merck is an important step in executing this strategy. AFM13, a first-in-class NK-cell engager, has shown an acceptable safety profile and preliminary antitumor activity in the first-in-human Phase 1 study. Additionally, preclinical studies indicate that a combination with an anti PD-1 therapy could act synergistically and represent an additional future treatment option for patients.

Dr. Eric Rubin, vice president and therapeutic area head, oncology early-stage development, Merck Research Laboratories, added:

Evaluating the potential for innovative combination therapies through strategic collaborations in difficult-to-treat tumor types continues to be an important part of our clinical development program for KEYTRUDA. In partnering with companies such as Affimed, we continue our efforts to bring forward new scientific breakthroughs for patients with Hodgkin lymphoma and the field of immuno-oncology overall.

So far in 2016 Affimed has vastly underperformed the markets, and the stock is down nearly 50%.

Shares of Affimed were trading up 14.3% to $4.23 Monday, with a consensus analyst price target of $14.50 and a 52-week trading range of $2.95 to $24.20.

Merck shares were down nearly 1% to $50.90, with a consensus price target of $61.26 and a 52-week range of $45.69 to $63.02.

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