Annual Report 2021
Annual Report 2021
333 Oyster Point Boulevard
South San Francisco, CA 94080
650.243.5555
Explorers on
the frontier of
life-changing
science.
DEAR NGM STOCKHOLDERS,
At NGM Bio, we pride ourselves on being
explorers on the frontier of life-changing
science. Our discovery engine was the
core of our business when NGM Bio was
founded and remains the cornerstone
of our company today.
Our ability to repeatedly produce
novel molecules precisely tuned
for pharmacological activity
continues to be our key
competitive and strategic
advantage. Our current pipeline
of seven named programs, all
discovered in-house, is a
testament to this defining
feature of our company.
Our team’s many
accomplishments in 2021,
including a surge of activity in
our wholly-owned oncology
portfolio, lays the foundation
for an exciting, inflection-rich
2022. In July, we advanced the
first product candidate from
our myeloid reprogramming
and checkpoint inhibition
portfolio, NGM707, into a Phase
1/2 clinical trial. Myeloid
checkpoint inhibition
represents a promising new
frontier of immuno-oncology
that has the potential to
enable more effective
treatment of multiple cancers,
many of which elude current
available treatments. We
anticipate an initial data
readout from the ongoing
NGM707 Phase 1/2 trial in the
second half of this year. By the
middle of this year, we expect
all three programs from our
myeloid checkpoint inhibition
portfolio to be in the clinic.
Last September, we presented
preliminary findings from our
ongoing Phase 1a/1b dose
escalation study of NGM120, a
novel GFRAL antagonist
antibody, demonstrating
encouraging initial signals of
anti-cancer activity in
patients with metastatic
pancreatic cancer. We expect
to report additional data from
this trial in the second half of
this year.
Also in 2021, we completed
enrollment in our Phase 2
CATALINA study evaluating
NGM621, an anti-complement
C3 antibody, in 320 patients
with geographic atrophy
secondary to age-related
macular degeneration, setting
us on a trajectory to report
topline findings in the fourth
quarter of this year.
Beyond our visible pipeline, our
researchers expect to continue
to generate new product
candidates at an anticipated
pace of about one new
investigational new drug
application per year. Our strategy
is to leverage the steady stream
of innovation generated by our
discovery engine and apply a
thoughtful, rigorous approach to
portfolio management and
business development designed
to build a self-sustaining
biologics powerhouse fueled by
multiple approved products.
Above all, we are driven by a
deep, enduring purpose to
make lasting scientific
contributions that improve
human life. We thank you, our
stockholders, for your
continued belief in and
support of our mission, as we
strive each day to deliver
life-saving medicines to
patients in dire need.
Sincerely,
David J. Woodhouse, Ph.D.
Chief Executive Officer
NGM BIOPHARMACEUTICALS, INC.
333 Oyster Point Boulevard
South San Francisco, California 94080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2022
Dear Stockholder:
You are cordially invited to attend the 2022 Annual Meeting of Stockholders, or the Annual Meeting, of NGM
Biopharmaceuticals, Inc., a Delaware corporation, referred to as the Company or NGM. The meeting will be held
virtually on Wednesday, May 18, 2022 at 7:30 a.m. Pacific Daylight Time. Due to the ongoing public health concerns
regarding the COVID-19 pandemic, in order to help protect the health and safety of our stockholders, directors and
employees and to help facilitate stockholder participation, this year’s Annual Meeting will be held virtually through a
live webcast at www.virtualshareholdermeeting.com/NGM2022. You will not be able to attend the Annual Meeting in
person.
At or before the Annual Meeting, stockholders are invited to consider and vote upon the following matters:
1. To elect to the Company’s Board of Directors the three nominees for Class III director named in the
accompanying Proxy Statement to hold office until the Company’s 2025 annual meeting of stockholders and
until their successors have been duly elected and qualified.
2. To approve, on an advisory basis, the compensation of the Company’s named executive officers, as
disclosed in the accompanying Proxy Statement.
3. To indicate, on an advisory basis, the preferred frequency of stockholder advisory votes on the
compensation of the Company’s named executive officers.
4. To ratify the selection by the Audit Committee of the Company’s Board of Directors of Ernst & Young LLP as
the Company’s independent registered public accounting firm for the year ending December 31, 2022.
5. To conduct any other business properly brought before the meeting.
The foregoing items of business are more fully described in the Proxy Statement accompanying this notice.
This year’s Annual Meeting will be held virtually through a live webcast. You will be able to attend the Annual
Meeting, submit questions and vote during the live webcast by visiting www.virtualshareholdermeeting.com/
NGM2022 and entering the 16-digit control number on the Notice of Internet Availability of Proxy Materials, on your
proxy card or on the instructions that accompanied your proxy materials. Please refer to the additional logistical
details in the accompanying Proxy Statement. You may log in at www.virtualshareholdermeeting.com/NGM2022
beginning at 7:15 a.m. Pacific Daylight Time on Wednesday, May 18, 2022.
Our Board of Directors has fixed the close of business on March 25, 2022 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment thereof,
referred to as the Record Date. A list of our stockholders of record as of the close of business on the Record Date
will be made available to stockholders during the Annual Meeting at www.virtualshareholdermeeting.com/NGM2022.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held on May 18, 2022, at 7:30 a.m. Pacific Daylight Time.
This Notice, the accompanying Proxy Statement and the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2021 are available at www.proxyvote.com.
By Order of the Board of Directors,
/s/ Valerie Pierce
Valerie Pierce
Secretary, Senior Vice President, General Counsel and
Chief Compliance Officer
South San Francisco, California
April 6, 2022
You are cordially invited to attend the Annual Meeting. Whether or not you expect to attend the Annual
Meeting, please complete, date, sign and return the proxy mailed to you, or vote over the telephone or via
the internet as instructed in these materials, as promptly as possible, in order to ensure your
representation at the Annual Meeting. Even if you have voted by proxy, you may still vote online if you
attend the Annual Meeting. Stockholders who attend the Annual Meeting should follow the instructions at
www.virtualshareholdermeeting.com/NGM2022 to vote online at the Annual Meeting. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the
meeting, you must obtain a proxy issued in your name from that record holder.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 1 ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE AND BOARD MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EQUITY COMPENSATION PLANS AT DECEMBER 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 3 ADVISORY VOTE ON THE FREQUENCY OF SOLICITATION OF ADVISORY
STOCKHOLDER APPROVAL OF EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 4 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRANSACTIONS WITH RELATED PERSONS AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . .
HOUSEHOLDING OF PROXY MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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NGM BIOPHARMACEUTICALS, INC.
333 Oyster Point Boulevard
South San Francisco, California 94080
PROXY STATEMENT
FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2022
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why did I receive a notice regarding the availability of proxy materials on the internet?
Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we have elected to provide
access to our proxy materials over the internet. Accordingly, we or your broker have sent you a Notice of Internet
Availability of Proxy Materials, or the Notice, because the Board of Directors of NGM Biopharmaceuticals, Inc.
(referred to in this Proxy Statement as “we,” “us,” “our,” the “Company” or “NGM”) is soliciting your proxy to vote at
the 2022 Annual Meeting of Stockholders, or the Annual Meeting, including at any adjournments or postponements
of the Annual Meeting. All stockholders will have the ability to access the proxy materials on the website referred to
in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy
materials over the internet or to request a printed copy may be found in the Notice.
We intend to mail the Notice to each of our stockholders of record entitled to vote at the Annual Meeting
beginning on or about April 7, 2022.
Will I receive any other proxy materials by mail?
No, you will not receive any other proxy materials by mail unless you request a paper copy of proxy materials.
To request that a full set of the proxy materials be sent to your specified postal address, please go to
www.proxyvote.com or call 1-800-579-1639 and follow the instructions. You may also request a full set of the proxy
materials by sending an email, referencing
to
sendmaterial@proxyvote.com.
the 16-digit control number set
the Notice,
forth
in
What am I being asked to vote on?
At the 2022 Annual Meeting of Stockholders, or the Annual Meeting, our stockholders will consider and vote on
the following matters:
➢ Proposal No. 1 - To elect to our Board of Directors the three nominees for Class III director named herein to hold
office until our 2025 annual meeting of stockholders and until their successors have been duly elected and qualified;
➢ Proposal No. 2 - To approve, on an advisory basis, the compensation of the Company’s named executive
officers, as disclosed in this Proxy Statement in accordance with SEC rules;
➢ Proposal No. 3 - To indicate, on an advisory basis, the preferred frequency of stockholder advisory votes on the
compensation of the Company’s named executive officers; and
➢ Proposal No. 4 - To ratify the selection by the Audit Committee of our Board of Directors of Ernst & Young LLP as
our independent registered public accounting firm for the year ending December 31, 2022.
At the Annual Meeting, stockholders also will be asked to transact any other business that may properly come
before the Annual Meeting other than the four items listed above. As of the date of this Proxy Statement, our Board
of Directors did not know of any other matters to be presented for consideration at the Annual Meeting other than
the four items noted above.
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How does the Board of Directors recommend that I vote?
Our Board of Directors unanimously recommends that you vote:
➢ Proposal No. 1 - FOR the election to our Board of Directors of the three nominees for Class III director named
herein to hold office until our 2025 annual meeting of stockholders and until their successors have been duly elected
and qualified;
➢ Proposal No. 2 - FOR the approval, on an advisory basis, of the compensation of the Company’s named
executive officers, as disclosed in this Proxy Statement in accordance with SEC rules;
➢ Proposal No. 3 – That the frequency of stockholder advisory votes on the compensation of the Company’s named
executive officers be every ONE YEAR; and
➢ Proposal No. 4 - FOR the ratification of the selection by the Audit Committee of our Board of Directors of Ernst &
Young LLP as our independent registered public accounting firm for the year ending December 31, 2022.
Who is entitled to vote at the Annual Meeting?
Only stockholders of record of NGM common stock as of the close of business on the Record Date, March 25,
2022, will be entitled to vote at the Annual Meeting. As of the Record Date, 78,085,283 shares of NGM common
stock were outstanding and entitled to vote.
How do I vote?
For Proposal No. 1, you may either vote “For” the nominees to the Board of Directors or you may “Withhold”
your vote for any nominee you specify. For Proposal No. 3, with regard to your advisory vote on how frequently we
should solicit stockholder advisory approval of executive compensation, you may vote for any one of the following:
one year, two years or three years, or you may abstain from voting on that matter. For both of the other proposals to
be voted on, you may vote “For” or “Against” or abstain from voting. The procedures for voting are fairly simple:
Stockholder of Record: Shares Registered in Your Name
If, on the Record Date, your shares were registered directly in your name with our transfer agent, American
Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may
vote online during the Annual Meeting, vote by proxy through the internet or by telephone or vote by proxy using a
proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the
Annual Meeting, we urge you to vote by proxy through the internet or by telephone as instructed below, or by
completing a proxy card that you may request or that we may elect to deliver at a later time.
➢ To vote online during the Annual Meeting, please go to www.virtualshareholdermeeting.com/NGM2022. You will
be asked to provide the 16-digit control number included on your Notice, your proxy card (that you may request or
that was delivered you) or the instructions that accompanied your proxy materials. Once you have logged into the
Annual Meeting, please follow the instructions to vote your shares. If you do not have your 16-digit control number,
you will be able to access and listen to the Annual Meeting, but you will not be able to vote your shares or submit
questions.
➢ To vote using a proxy card before the Annual Meeting, simply complete, sign and date the proxy card that you
may request or that was delivered to you and return it promptly in the envelope provided. If you return your signed
proxy card to us before the Annual Meeting, we will vote your shares as you direct.
➢ To vote over the telephone before the Annual Meeting, dial toll-free 1-800-690-6903 using a touch-tone phone
and follow the recorded instructions. You will be asked to provide the 16-digit control number included on your
Notice, your proxy card (that you may request or that was delivered you) or the instructions that accompanied your
proxy materials. Your vote must be received by 11:59 p.m. Eastern Daylight Time on May 17, 2022 to be counted.
➢ To vote through the internet before the Annual Meeting, go to http://www.proxyvote.com to complete an electronic
proxy card. You will be asked to provide the 16-digit control number included on your Notice, your proxy card (that
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you may request or that was delivered you) or the instructions that accompanied your proxy materials. Your vote
must be received by 11:59 p.m. Eastern Daylight Time on May 17, 2022 to be counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If, on the Record Date, your shares were held, not in your name, but rather in an account at a broker, bank or
other nominee, then you are the beneficial owner of shares held in “street name.” The organization holding your
account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial
owner, you should have received a Notice containing voting instructions from that organization rather than from us.
Simply follow the instructions in the Notice to ensure that your vote is counted. Please also note that since you are
not the stockholder of record, you may only vote your shares during the Annual Meeting if you request and obtain a
valid 16-digit control number from your broker, bank or other nominee. Beneficial owners who attend the Annual
Meeting should follow the instructions at www.virtualshareholdermeeting.com/NGM2022 to vote during the meeting.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of NGM common stock you owned as of
March 25, 2022.
What are “broker non-votes”?
As discussed above, if a beneficial owner of shares held in “street name” does not give voting instructions to his
or her broker, bank or other nominee holding his or her shares as to how to vote on matters deemed to be “non-
routine” under applicable rules, the broker, bank or other nominee does not have the authority to vote the beneficial
owner’s shares on such “non-routine” matters. These un-voted shares are generally referred to and counted as
“broker non-votes.” Since Proposals Nos. 1, 2 and 3 are considered to be “non-routine” under applicable rules, we
expect broker non-votes to exist in connection with Proposals Nos. 1, 2 and 3. Proposal No. 4 is considered to be
“routine” under applicable rules, and therefore we do not expect broker non-votes on Proposal No. 4.
As a reminder, if you are a beneficial owner of shares held in “street name,” in order to ensure your shares are
voted in the way you would prefer, you must provide voting instructions to your broker, bank or other nominee by
the deadline provided in the materials you receive from your broker, bank or other nominee.
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What is required to approve each proposal?
Proposal
Voting Options
Proposal No. 1 -
Election of directors
“FOR” or
“WITHHOLD”
Proposal No. 2 –
Advisory vote to
approve executive
compensation
“FOR,” AGAINST,” or
“ABSTAIN”
Proposal No. 3 –
Advisory vote on the
frequency of advisory
votes on executive
compensation
“ONE,” “TWO” or
“THREE” years
Proposal No. 4 –
Ratification of
retention of Ernst &
Young LLP
“FOR,” AGAINST,” or
“ABSTAIN”
Vote Required to
Adopt the Proposal
Plurality of votes
cast; the nominees
receiving the highest
number of votes
“FOR” will be elected.
Majority of the votes
cast; shares voted
“FOR” the proposal
must exceed the
number of shares
voted “AGAINST” the
proposal.
Majority of the votes
cast; if a frequency
option does not
receive the
affirmative vote of a
majority of the votes
cast, the option
receiving the greatest
number of votes will
be considered the
frequency
recommendation.
Majority of the votes
cast; shares voted
“FOR” the proposal
must exceed the
number of shares
voted “AGAINST” the
proposal.
Effect of
Abstentions
Effect of “Broker
Non-Votes”
No effect. An
abstention does not
count as a vote cast.
No effect; no broker
discretion to vote.
No effect. An
abstention does not
count as a vote cast.
No effect; no broker
discretion to vote.
No effect. An
abstention does not
count as a vote cast.
No effect; no broker
discretion to vote.
No effect. An
abstention does not
count as a vote cast.
No broker non-votes;
brokers have
discretion to vote.
If I am a stockholder of record and I do not vote, or if I return a proxy card or otherwise vote without giving
specific voting instructions, what happens?
If you are a stockholder of record and do not vote by completing a proxy card, either by telephone, through the
internet or online during the Annual Meeting, your shares will not be voted.
If you return a signed and dated proxy card or otherwise vote without marking voting selections or if you indicate
when voting on the internet or by telephone that you wish to vote as recommended by our Board of Directors, your
shares will be voted, as applicable, “For” Proposal No. 1, the election of the three nominees for director, “For”
Proposal No. 2, to approve, on an advisory basis, the compensation of the Company’s named executive officers, for
Proposal No. 3, “One Year” as the preferred frequency of advisory votes to approve executive compensation and
“For” Proposal No. 4, the ratification of the selection by the Audit Committee of our Board of Directors of Ernst &
Young LLP as our independent registered public accounting firm for the year ending December 31, 2022. If any
other matter is properly presented at the Annual Meeting, your proxyholder will vote your shares using their best
judgment.
If I am a beneficial owner of shares held in “street name” and I do not provide my broker, bank or other
nominee with voting instructions, what happens?
If you are a beneficial owner of shares held in “street name” and you do not instruct your broker, bank or other
nominee how to vote your shares, your broker, bank or other nominee may still be able to vote your shares in its
discretion. In this regard, brokers, banks and other nominees may generally vote in their discretion your
“uninstructed” shares with respect to matters considered to be “routine”, but not with respect to “non-routine”
matters. Under applicable rules and interpretations, “non-routine” matters are matters that may substantially affect
the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not
contested), executive compensation (including any advisory stockholder votes on executive compensation and on
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the frequency of stockholder votes on executive compensation) and certain corporate governance proposals, even if
management-supported. In this regard, Proposals Nos. 1, 2 and 3 are considered to be “non-routine” under
applicable rules meaning that your broker, bank or other nominee may not vote your shares on those proposals in
the absence of your voting instructions. However, Proposal No. 4 is considered to be a “routine” matter under
applicable rules, meaning that if you do not return voting instructions to your broker, bank or other nominee by its
deadline, your broker, bank or other nominee may generally vote in their discretion on Proposal No. 4. We
encourage you to provide voting instructions to your broker, bank or other nominee. This ensures that your shares
will be voted at the Annual Meeting according to your instructions. You should receive directions from your broker,
bank or other nominee about how to submit your proxy to them at the time you receive this Proxy Statement.
If you are a beneficial owner of shares held in “street name,” in order to ensure your shares are voted in the way
you would prefer, you must provide voting instructions to your broker, bank or other nominee by the deadline
provided in the materials you receive from your broker, bank or other nominee.
Can I change my vote after submitting my proxy?
Stockholder of Record: Shares Registered in Your Name
Yes. Proxies may be revoked at any time before the final vote at the Annual Meeting. If you are the stockholder
of record of your shares, you may revoke your proxy in any one of the following ways:
➢ You may submit a valid, later-dated proxy;
➢ You may submit a subsequent proxy by telephone or through the internet (only your last telephone or internet
proxy will be counted) before 11:59 p.m. Eastern Daylight Time on May 17, 2022;
➢ You may send a timely written notice that you are revoking your proxy to our Secretary at 333 Oyster Point
Boulevard, South San Francisco, California 94080; or
➢ You may attend
www.virtualshareholdermeeting.com/NGM2022.
the Annual Meeting and vote again online by
following
the
instructions at
Beneficial Owner: Shares Registered in the Name of Broker or Bank
For shares held beneficially in “street name,” you must contact the bank, broker or other nominee holding your
shares and follow its instructions for revoking or changing your vote.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if the holders of a
majority of the voting power of the outstanding shares entitled to vote are present at the Annual Meeting or
represented by proxy. On the Record Date, there were 78,085,283 shares outstanding and entitled to vote. Thus,
the holders of 39,042,642 shares must be present or represented by proxy at the Annual Meeting to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your
behalf by your broker, bank or other nominee) or if you vote online during the Annual Meeting. Abstentions and
broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of
shares present at the Annual Meeting or represented by proxy may adjourn the meeting to another date. Virtual
attendance at our Annual Meeting constitutes presence for purposes of a quorum at the meeting.
Will a list of record stockholders as of the Record Date be available?
A list of our stockholders of record as of the close of business on March 25, 2022, or the Record Date, will be
made available to stockholders during the Annual Meeting at www.virtualshareholdermeeting.com/NGM2022. In
addition, for the ten days prior to the Annual Meeting, the list will be available for examination by any stockholder of
record for a legally valid purpose at our principal executive offices located at 333 Oyster Point Boulevard, South San
Francisco, California 94080. You may email NGM at ir@ngmbio.com to coordinate arrangements to view the
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stockholder list. Due to the COVID-19 pandemic, stockholders of record must make an appointment and must
comply with our COVID-19 safety protocols.
What does it mean if I receive more than one Notice?
If you receive more than one Notice, your shares may be registered in more than one name or in different
accounts. Please follow the voting instructions on each of the Notices you receive to ensure that all your shares are
voted.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and
employees may also solicit proxies in person or by other means of communication. Directors and employees will not
be paid any additional compensation for soliciting proxies. We may also reimburse brokers, banks and other
nominees for the cost of forwarding proxy materials to beneficial owners.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be
published in a current report on Form 8-K that we expect to file within four business days after the Annual Meeting.
If final voting results are not available to us in time to file a current report on Form 8-K within four business days
after the Annual Meeting, we intend to file a current report on Form 8-K to publish preliminary results and, within four
business days after the final results are known to us, file an amended report on Form 8-K to disclose the final
results.
Why are we holding our Annual Meeting in a virtual format?
Following the successful implementation of a virtual format for our annual meeting of stockholders in the
previous two years, and in light of the ongoing public health and safety concerns related to the COVID-19
pandemic, we have decided to hold the Annual Meeting in a virtual format, which will be conducted via live webcast.
We continue to believe that a virtual format helps to protect the health and safety of our stockholders, directors and
employees and helps to facilitate stockholder participation by enabling stockholders to participate fully, and equally,
from any location around the world without person-to-person contact, at no cost (other than any costs associated
with your internet access, such as usage charges from internet access providers and telephone companies). A
virtual annual meeting makes it possible for more stockholders (regardless of size, resources or physical location) to
have direct access to information more quickly, while saving NGM and our stockholders time and resources. We
also designed the virtual format of our Annual Meeting to ensure that our stockholders who attend the Annual
Meeting will be afforded the same rights and opportunities to participate as they would at an in-person meeting. For
example, last year’s virtual format allowed our stockholders to communicate with us during the meeting, enabling
them to ask questions of our Board or management in live format. During the Annual Meeting, we will once again
answer appropriate questions submitted during the meeting to the extent relevant to the business of the meeting
and as time permits.
Whether or not you expect to attend the Annual Meeting, please vote as soon as possible by one of the
methods described in these proxy materials so that your shares will be represented and voted at the Annual
Meeting.
How do I attend the Annual Meeting?
You will be able
to attend and participate
visiting
www.virtualshareholdermeeting.com/NGM2022, where you will be able to listen to the meeting live, submit
questions and vote. You will not be able to attend the Annual Meeting in person. Information on how to vote at the
Annual Meeting is discussed below. The live Annual Meeting webcast will begin promptly at 7:30 a.m., Pacific
Daylight Time. We encourage you to access the webcast prior to the start time. Online check-in will begin at 7:15
a.m. Pacific Daylight Time, and you should allow ample time for the check-in procedures.
the Annual Meeting online by
in
6
What do I need in order to be able to participate in the Annual Meeting?
You will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that
accompanied your proxy materials in order to be able to vote your shares or submit questions during the Annual
Meeting. Instructions on how to connect to the Annual Meeting and participate via the internet will be posted at
www.virtualshareholdermeeting.com/NGM2022.
Technicians will be ready to assist you with any technical difficulties you may have accessing the virtual meeting
platform or submitting questions. If you encounter any difficulties accessing the Annual Meeting during the check-in
or meeting time, please call the technical support number that will be posted on the Annual Meeting login page.
For the Annual Meeting, how do we ask questions of management and the Board of Directors?
We plan to have a Q&A session at the Annual Meeting and will include as many stockholder questions, to the
extent relevant to the business of the meeting, as the allotted time permits. Questions may be submitted during the
Annual Meeting through www.virtualshareholdermeeting.com/NGM2022. As noted above, you will need the 16-digit
control number included in your Notice, on your proxy card or on the instructions that accompanied your proxy
materials in order to be able to submit questions during the Annual Meeting.
7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes, designated as Class I, Class II and Class III, with each
class serving a staggered three-year term. Vacancies on the Board of Directors may be filled only by persons
elected by a majority of the remaining directors unless the Board of Directors determines by resolution that any such
vacancies will be filled by stockholders. A director elected by the Board of Directors to fill a vacancy in a class,
including vacancies created by an increase in the number of directors, will serve for the remainder of the full term of
that class and until the director’s successor is duly elected and qualified.
Our Board of Directors presently has nine members, as follows: Class I directors: Shelly D. Guyer, Carole Ho,
M.D., Mark Leschly and William J. Rieflin, whose terms will expire at the annual meeting of stockholders to be held
in 2023; Class II directors: Jin-Long Chen, Ph.D. and Roger M. Perlmutter, M.D., Ph.D., whose terms will expire at
the annual meeting of stockholders to be held in 2024; and Class III directors: David V. Goeddel, Ph.D., Suzanne
Sawochka Hooper and David J. Woodhouse, Ph.D., whose terms will expire at the Annual Meeting. Mr. Leschly,
who has served on our Board of Directors since January 2008, has notified us that he is resigning from our Board of
Directors effective upon the conclusion of the Annual Meeting. At the conclusion of the Annual Meeting, the Board
intends to reduce its size to eight members in connection with Mr. Leschly’s resignation.
Dr. Goeddel, Ms. Hooper and Dr. Woodhouse, each a current Class III director, were recommended for re-
election to our Board of Directors as Class III director nominees by our Nominating and Corporate Governance
Committee and each was nominated for re-election by our Board of Directors. Dr. Goeddel, Ms. Hooper and Dr.
Woodhouse each was initially elected to our Board of Directors prior to our initial public offering pursuant to a voting
agreement entered into with certain of our stockholders prior to the initial public offering that terminated upon
completion of our initial public offering in April 2019.
If re-elected at the Annual Meeting, Dr. Goeddel, Ms. Hooper and Dr. Woodhouse would serve until the annual
meeting of stockholders to be held in 2025 and until their successors have been duly elected and qualified, or, if
sooner, until the director’s death, resignation or removal.
Directors are elected by a plurality of the votes of the holders of shares present or represented by proxy and
entitled to vote on the election of directors. Accordingly, the nominees who receive the highest number of affirmative
votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for
the election of all of the nominees named below. If any nominee becomes unavailable for election as a result of an
unexpected occurrence, the Board of Directors may designate a substitute nominee, in which event the persons
named in the enclosed proxy will vote for the election of such substitute nominee, unless the Board of Directors
chooses to reduce the number of directors serving on the Board of Directors. Each person nominated for election
has consented to being named as a nominee in this Proxy Statement and has agreed to serve if elected. We have
no reason to believe that any nominee will be unable to serve.
The following includes a brief biography of each of the Class III director nominees standing for election at the
Annual Meeting and each of our Class I and Class II directors continuing to serve on the Board of Directors,
including their respective ages, as of March 25, 2022. Each biography includes information regarding the specific
experience, qualifications, attributes or skills that led the Nominating and Corporate Governance Committee and the
Board of Directors to determine that the applicable nominee or other current director should serve as a member of
the Board of Directors.
Class III Director Nominees for Election for a Three-Year Term Expiring at the 2025 Annual Meeting of
Stockholders
David V. Goeddel, Ph.D., age 70, became Lead Independent Director of our Board of Directors in September
2018, after having served as Chairman since January 2008, and served as our Chief Executive Officer from 2008 to
2010. Dr. Goeddel has been a Managing Partner of The Column Group, or TCG, a venture capital partnership, since
2007. Dr. Goeddel co-founded Tularik Inc., or Tularik, a biotechnology company focused on the discovery and
development of product candidates based on the regulation of gene expression that was acquired by Amgen, Inc.,
or Amgen, in 2004, in November 1991. At Tularik, Dr. Goeddel served as Vice President of Research until 1996 and
Chief Executive Officer from 1996 through 2004. He served as Amgen’s first Senior Scientific Vice President until
May 2006. Prior to Tularik, he was the first scientist hired by Genentech, and from 1978 to 1993 served in various
8
positions, including Fellow, Staff Scientist and Director of Molecular Biology. Within the last five years, Dr. Goeddel
served as a director at the following publicly-traded biotechnology companies: RAPT Therapeutics, Inc., or RAPT,
from April 2015 to June 2020; and Tenaya Therapeutics, Inc., or Tenaya, where he serves as Board Chairman, from
October 2016 to the present. Dr. Goeddel currently serves as the Board Chairman of two private biotechnology
companies and served on the board of Surrozen, Inc., or Surrozen, from 2017 to 2021. He is a member of the
National Academy of Sciences and the American Academy of Arts and Sciences. Dr. Goeddel received a B.S. in
Chemistry from the University of California, San Diego and a Ph.D. from the University of Colorado. We believe that
Dr. Goeddel’s scientific background, experience in the venture capital industry, experience serving as a director of
other publicly-traded and private life sciences companies and experience in founding and serving as Chief
Executive Officer of a publicly-traded biopharmaceutical company give him the qualifications, skills and financial
expertise to serve on our Board of Directors.
Suzanne Sawochka Hooper, age 56, has served as a member of our Board of Directors since August 2018.
From March 2012 to March 2019, Ms. Hooper served as the Executive Vice President and General Counsel of Jazz
Pharmaceuticals plc. From 1999 until February 2012, she was a partner in the law firm Cooley LLP. Ms. Hooper
served as a member of the board of directors of Eidos Therapeutics, a subsidiary of BridgeBio Pharma, Inc., or
BridgeBio, from August 2020 until it was acquired by BridgeBio in January 2021. Ms. Hooper received a J.D. from
the University of California, Berkeley School of Law and a B.A. in Political Science from the University of California,
Santa Barbara. We believe that Ms. Hooper’s legal and operational background and executive experience make her
qualified to serve on our Board of Directors. In addition, Ms. Hooper’s experience as the Executive Vice President of
a publicly-traded pharmaceutical company provided her with operational expertise that is important to our Board of
Directors.
David J. Woodhouse, Ph.D., age 52, became our Chief Executive Officer and a member of our Board of
Directors in September 2018, after having served as our Chief Financial Officer from March 2015 until September
2018. He was also our Acting Chief Financial Officer from September 2018 until July 2021. From 2002 to 2015, he
was an investment banker at Goldman Sachs & Co. LLC, most recently as a managing director in the healthcare
investment banking group and co-head of biotechnology investment banking. Earlier in his career, Dr. Woodhouse
worked at Dynavax Technologies and also as a research assistant at Amgen. He currently serves on the board of
directors of Surrozen, a publicly-traded biotechnology company. Dr. Woodhouse received a B.A. in pharmacology
from the University of California, Santa Barbara, an M.B.A. from the Tuck School of Business at Dartmouth and a
Ph.D. in molecular pharmacology from the Stanford University School of Medicine. We believe that Dr.
Woodhouse’s experience with NGM, as well as his financial and executive experience, make him qualified to serve
on our Board of Directors. In addition, Dr. Woodhouse’s experience in healthcare investment banking prior to joining
us provided him with industry expertise that is important to our Board of Directors.
The Board of Directors Recommends
a Vote “For” Each of the Nominees Named Above.
Class I Directors Continuing in Office Until the 2023 Annual Meeting of Stockholders
Shelly D. Guyer, age 61, has served as a member of our Board of Directors since December 2019. Ms. Guyer
leads the sustainability and environmental, social and governance, or ESG, efforts of Invitae Corporation, a publicly-
traded leading medical genetics company, as Chief Sustainability Officer, and previously acted as Invitae’s Chief
Financial Officer from June 2017 to June 2021. Prior to that, she served as Chief Financial Officer of Veracyte, Inc.,
a genomic diagnostics company, from April 2013 to December 2016 and served as Veracyte’s Secretary from April
2013 to March 2014. From April 2008 to December 2012, she served as Chief Financial Officer and Executive Vice
President of Finance and Administration of iRhythm Technologies, Inc., a digital healthcare company. From March
2006 to August 2007, Ms. Guyer served as Vice President of Business Development and Investor Relations of
Nuvelo, Inc., a biopharmaceutical company. Prior to joining Nuvelo, Ms. Guyer worked at J.P. Morgan Securities and
its predecessor companies for over 17 years, serving in a variety of roles including in healthcare investment
banking. Ms. Guyer received an A.B. in Politics from Princeton University and an M.B.A. from the Haas School of
Business at the University of California, Berkeley. We believe that Ms. Guyer’s financial background and executive
experience make her qualified to serve on our Board of Directors.
Carole Ho, M.D., age 49, has served as a member of our Board of Directors since June 2020. Dr. Ho also
serves as Chief Medical Officer and Head of Development at Denali Therapeutics Inc., a biotechnology company,
since June 2015. Prior to joining Denali, Dr. Ho held various roles of increasing responsibility at Genentech between
9
2007 and 2015, most recently as Vice President, Non-Oncology Early Clinical Development. From November 2006
to October 2007, Dr. Ho served as Associate Medical Director at Johnson & Johnson. From June 2002 to November
2006, she was an instructor in the Department of Neurology and Neurological Sciences at Stanford University. Dr.
Ho completed a residency in neurology at Partners Neurology Residency of the Massachusetts General and
Brigham and Women’s Hospital between 2004 and 2014 and was board certified in neurology and psychiatry. She
currently serves on the board of directors of Beam Therapeutics Inc., a publicly-traded biotechnology company. Dr.
Ho received an M.D. from Cornell University and a B.S. in Biochemical Sciences from Harvard College. We believe
that Dr. Ho’s medical background, executive experience and experience serving as a director of another publicly-
traded life science company make her qualified to serve on our Board of Directors.
William J. Rieflin, age 62, became Executive Chairman of our Board of Directors in September 2018, after
having served as our Chief Executive Officer and a member of our Board of Directors since September 2010. From
2004 until 2010, he served as President of XenoPort, Inc., or XenoPort, a biotechnology company focused on the
discovery and development of transported prodrugs. From 1996 to 2004, he held various positions with Tularik,
most recently serving as Executive Vice President, Administration, Chief Financial Officer, General Counsel and
Secretary. Mr. Rieflin serves as a director of several publicly-traded biotechnology companies, including RAPT since
2015 and as chair of the board since 2019 and Lyell Immunopharma, Inc. since 2020. He has also served as chair
of the board at Lycia Therapeutics, Inc., a private biotechnology company, since 2020, and on the board of Kallyope
Inc., a private biotechnology company, since 2016. Mr. Rieflin also served as a director of Flexus Biosciences until
its acquisition in 2015, a director of XenoPort until its acquisition in 2016 and as a director of Anacor until its
acquisition in 2016. Mr. Rieflin received a B.S. from Cornell University, an M.B.A. from the University of Chicago
Graduate School of Business and a J.D. from Stanford Law School. We believe that Mr. Rieflin’s extensive
experience with NGM, including his tenure as Chief Executive Officer, brings necessary historic knowledge and
continuity to our Board of Directors. In addition, we believe that his prior experiences provided him with operational
and industry expertise that are important to our Board of Directors.
Class II Directors Continuing in Office Until the 2024 Annual Meeting of Stockholders
Jin-Long Chen, Ph.D., age 59, our founder, has served as a member of our Board of Directors and as our Chief
Scientific Officer since January 2008. He was also NGM’s President until November 2014. From 2004 to 2008, Dr.
Chen held various positions at Amgen, most recently as its Vice President, Metabolic Research. Prior to joining
Amgen, Dr. Chen was Vice President, Biology at Tularik. He has served as a director of Tenaya since 2016. Dr.
Chen received a B.S. from Fu-Jen Catholic University, an M.S. from National Taiwan University and a Ph.D. from
the University of California, Berkeley. We believe that Dr. Chen’s extensive experience with NGM, which is a
consequence of his long tenure as Chief Scientific Officer, brings necessary historic knowledge and continuity to our
Board of Directors. In addition, we believe that his experiences prior to joining us provided him with operational and
industry expertise that are important to our Board of Directors.
Roger M. Perlmutter, M.D., Ph.D., age 69, is a highly accomplished industry as well as academic leader with
over 35 years of experience. He currently serves as the President, Chief Executive Officer and Chairman of Eikon
Therapeutics, Inc., a private biotechnology company. From 2013 through 2020, he served as Executive Vice
President, Merck & Co., or Merck, and President, Merck Research Laboratories, or MRL, where he supervised the
discovery and development of numerous lifesaving medicines, and then he served as non-Executive Chairman of
MRL from January through May 2021. Before joining Merck, Dr. Perlmutter spent 12 years as Executive Vice
President and head of R&D at Amgen from January 2001 to February 2012. Prior to assuming leadership roles in
industry, Dr. Perlmutter was a professor in the Departments of Immunology, Biochemistry and Medicine at the
University of Washington, Seattle, and served as Chairman of its Department of Immunology, where he was at the
same time an investigator of the Howard Hughes Medical Institute. Prior to his role at the University of Washington,
he was a lecturer in the Division of Biology at the California Institute of Technology, Pasadena. He currently serves
on the Board of insitro, a private machine learning-driven drug discovery and development company, on the
Scientific Advisory Board of the CBC Group, a healthcare-dedicated investment platform, and as a Science Partner
at TCG. Dr. Perlmutter is a Fellow of the American Academy of Arts and Sciences and the American Association for
the Advancement of Science, and both a Distinguished Fellow and past president of the American Association of
Immunologists. Dr. Perlmutter graduated from Reed College and received his M.D. and Ph.D. degrees from
Washington University in St. Louis. We believe Dr. Perlmutter’s extensive industry, academic and executive
experience make him qualified to serve on our Board of Directors.
10
Director Not Continuing in Office Following the Annual Meeting
Mark Leschly, age 53, has served as a member of our Board of Directors since January 2008. Since July 1999,
he has been a Managing Partner at Rho Capital Partners, Inc., a venture capital management company. Since
2017, Mr. Leschly has been the Chairman and Chief Executive Officer of Universal Tennis, LLC, which is the
developer of a software platform for tennis analytics and tournament management. Since 2014, Mr. Leschly has
also been the owner and managing member of Iconica LLC, an investment firm. He currently serves on the Board of
Directors of ChargePoint, a publicly-traded electronic vehicle charging company. From 2002 to 2016, he was a
member of the board of directors of Anacor Pharmaceuticals, Inc., or Anacor, a biotechnology company acquired by
Pfizer Inc. in 2016. Mr. Leschly also serves on the boards of a number of private companies. Mr. Leschly received
an A.B. from Harvard University and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr.
Leschly’s experience in venture capital and in investing in life sciences companies is valuable to our Board of
Directors. In addition, we believe that Mr. Leschly’s prior service on the boards of several public companies has
given him experience in corporate governance matters, which is valuable in his position as a director.
Board Diversity
The Board Diversity Matrix below provides the diversity statistics for our Board of Directors.
Board Diversity Matrix (As of March 25, 2022)
Non-
Binary
Did Not
Disclose
Gender
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
-
-
Total Number of Directors
Female
Male
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
6
-
-
1
-
-
5
-
3
-
-
1
-
-
2
-
11
Overview
CORPORATE GOVERNANCE AND BOARD MATTERS
We are committed to exercising good corporate governance practices. In furtherance of this commitment, we
regularly monitor developments in the area of corporate governance and review our processes, policies and
procedures in light of such developments. Key information regarding our corporate governance initiatives can be
found on the Investors & Media section of our website, www.ngmbio.com, including our Corporate Governance
Guidelines, our Code of Business Conduct and Ethics and the charters for our Audit, Compensation and Nominating
and Corporate Governance Committees. Information contained on, or that can be accessed through, our website is
not incorporated by reference into and does not form a part of this Proxy Statement. We believe that our corporate
governance policies and practices, including the majority of independent directors on our Board of Directors and the
appointment of a Lead Independent Director, empower our independent directors to effectively oversee our
management, including the performance of our Chief Executive Officer, and provide an effective and appropriately
balanced board governance structure.
Independence of the Board of Directors
As required under the Nasdaq listing standards, a majority of the members of a listed company’s board of
directors must qualify as “independent,” as affirmatively determined by its board of directors. Our Board of Directors
has undertaken a review of its composition, the composition of its committees and the independence of each of our
directors and nominees for director. Based upon information requested from and provided by each director
concerning his or her background, employment and affiliations, including family relationships, our Board of Directors
has determined that Drs. Goeddel, Ho and Perlmutter, Mr. Leschly and Mses. Guyer and Hooper do not have any
relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a
director and that each of these directors is otherwise “independent” as that term is defined under applicable Nasdaq
listing standards.
Our Board of Directors determined that Dr. Woodhouse is not considered independent because he currently
serves as our Chief Executive Officer, Mr. Rieflin is not considered independent because he currently serves as our
Executive Chairman and Dr. Chen is not considered independent because he currently serves as our Chief
Scientific Officer. Our Board of Directors has determined that each member of the Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee meets the applicable Nasdaq and SEC rules
and regulations regarding “independence” and that each member is free of any relationship that would interfere with
his or her individual exercise of independent judgment with regard to the Company. In making these independence
determinations, our Board of Directors considered the current and prior relationships that each non-employee
director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in
determining their independence, including the beneficial ownership of our capital stock by each non-employee
director.
Board Leadership Structure
Although our bylaws and Corporate Governance Guidelines do not require that we separate the Chairman of
the Board of Directors and Chief Executive Officer positions, our Board of Directors believes that having separate
positions is the appropriate leadership structure for us at this time and, therefore, the positions of Chairman of the
Board of Directors and Chief Executive Officer are currently separated. Separating these positions allows our Chief
Executive Officer to focus on our day-to-day business, while allowing our Executive Chairman to lead our Board of
Directors in its fundamental role of providing advice to and oversight of members of management. Our Board of
Directors recognizes that, depending on the circumstances, other leadership models, such as combining the role of
Chairman of the Board of Directors with the role of Chief Executive Officer, might be appropriate. Accordingly, our
Board of Directors may periodically review its leadership structure. Our Board of Directors believes its administration
of its risk oversight function has not affected its leadership structure.
Our Corporate Governance Guidelines provide that in the event the Chairman is not an independent director,
our Board of Directors may designate one of the independent directors to serve as Lead Independent Director. Our
Board of Directors has appointed Dr. Goeddel to serve as our Lead Independent Director. Specific roles and
responsibilities of the Lead Independent Director, which are detailed in our Corporate Governance Guidelines,
include:
12
•
•
•
•
•
•
•
establishing the agenda with the Chairman and Chief Executive Officer for regular meetings of the Board of
Directors and serving as Board meeting chair in the absence of the Chairman;
establishing the agenda for meetings of the independent directors;
coordinating with the committee chairs regarding meeting agendas and informational requirements;
presiding over meetings of the independent directors;
presiding over any portions of meetings of the Board of Directors at which the evaluation or compensation
of the Chief Executive Officer or Chairman is presented or discussed;
presiding over any portions of meetings of the Board of Directors at which the performance of the Board of
Directors is presented or discussed; and
coordinating the activities of the other independent directors and performing such other duties as may be
established or delegated by the Chairman or the Board of Directors.
As discussed above, except for our Chief Executive Officer, Executive Chairman and Chief Scientific Officer, our
Board of Directors is comprised of independent directors. The active involvement of these independent directors,
combined with the qualifications and significant responsibilities of our Lead Independent Director, provide balance
on the Board of Directors and promote strong, independent oversight of our management and affairs.
Role of the Board of Directors in Risk Oversight
Our Board of Directors believes that risk management is an important part of establishing, updating and
executing our business strategy. Our Board of Directors, as a whole and through its committees, has oversight
responsibility relating to risks that could affect our corporate strategy, business objectives, compliance, operations
and the financial condition and performance of the Company. Our Board of Directors and its committees focus their
oversight on the most significant risks facing the Company and on the processes to identify, prioritize, assess,
manage and mitigate those risks. While our Board of Directors is ultimately responsible for risk oversight at the
Company, our Board of Directors has delegated to its committees the oversight of risks associated with their
respective areas of responsibility, as summarized below. In addition, while our Board of Directors and its committees
have an oversight role, management is principally tasked with direct responsibility for management and assessment
of risks and the implementation of processes and controls to mitigate their effects on the Company. In turn, the
Company’s senior management reports to the Board of Directors and its committees on areas of material risk to the
Company, including strategic, operational, financial, cybersecurity, legal and regulatory risks and, when appropriate,
the committees provide reports to the full Board of Directors on these and other areas for review.
Our Board of Directors has delegated to the Audit Committee the primary responsibility for the oversight of the
major financial and legal compliance risks facing our business. In this regard, the Audit Committee is responsible for
overseeing our financial reporting process on behalf of our Board of Directors and reviewing with management and
our auditors, as appropriate, our major financial and legal compliance risk exposures and the steps taken by
management to monitor and control these exposures, including risks relating to data privacy, technology and
information security, including cyber security and back-up of information systems. The Compensation Committee is
responsible for overseeing our practices and policies of employee compensation as they relate to risk management
and risk-taking incentives to determine whether such compensation policies and practices are reasonably likely to
have a material adverse effect on the Company. The Nominating and Corporate Governance Committee oversees
the management of risks associated with our corporate governance practices and overall board effectiveness, and
reviews senior management’s efforts to monitor compliance with the Company’s programs and policies designed to
ensure adherence to applicable laws and rules, as well as to its Code of Business Conduct and Ethics.
Meetings of the Board of Directors; Annual Meeting Attendance
The Board of Directors met five times during 2021. Each director attended 75% or more of the aggregate
number of meetings of the Board of Directors and of the committees on which he or she served, held during the
portion of 2021 for which he or she was a director or committee member. In accordance with our Corporate
Governance Guidelines, our directors are encouraged, but not required, to attend each annual meeting of
stockholders. All of our directors attended our 2021 annual meeting of stockholders held on June 8, 2021.
13
Information Regarding Committees of the Board of Directors
The Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. The following table provides membership and meeting
information for 2021 for each of these committees:
Name
David V. Goeddel, Ph.D.
Shelly D. Guyer
Carole Ho, M.D.
Suzanne Sawochka Hooper
Mark Leschly
Roger M. Perlmutter, M.D., Ph.D.
Number of Meetings
________________________________
*
Committee Chair
Audit
Compensation
Nominating and
Corporate
Governance
✓*
✓
✓
7
✓
✓*
5
✓
✓*
1
Below is a description of the Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee. The written charters of the committees are available to stockholders on the Investors &
Media section of our website at www.ngmbio.com. Each of the committees has authority to engage legal counsel or
other experts or consultants, as it deems appropriate to carry out its responsibilities.
Audit Committee
Our Audit Committee consists of Mr. Leschly and Mses. Guyer and Hooper, each of whom our Board of
Directors has determined satisfies the independence requirements under the Nasdaq listing standards and Rule
10A-3(b)(1) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Chair of our Audit
Committee is Ms. Guyer, whom our Board of Directors has determined is an “audit committee financial expert” as
defined by applicable SEC rules. Each member of our Audit Committee can read and understand fundamental
financial statements in accordance with the applicable Nasdaq listing standards. In arriving at these determinations,
our Board of Directors has examined each Audit Committee member’s scope of experience and the nature of her or
his employment. The functions of this committee include:
•
•
•
•
•
assisting our Board of Directors in overseeing our corporate accounting and financial reporting processes,
systems of internal control over financial reporting and audits of our financial statements and systems of
disclosure controls and procedures, as well as the quality and integrity of our financial statements and
reports;
assisting our Board of Directors in assessing the qualifications and independence of, and overseeing the
performance of and compensation to be paid to, our registered public accounting firm or firms engaged as
our independent outside auditors for the purpose of preparing or issuing an audit report or performing audit
services;
reviewing and considering any related party transaction for approval or disapproval, as the case may be,
and providing oversight of related party transactions;
preparing the required report of the Audit Committee for inclusion in our annual proxy statement; and
reviewing and assessing, at least annually, the performance of the Audit Committee and the adequacy of its
charter.
Report of the Audit Committee of the Board of Directors
The Audit Committee has reviewed and discussed the audited consolidated financial statements for the fiscal
year ended December 31, 2021 with management of the Company. The Audit Committee has discussed with the
independent registered public accounting firm the matters required to be discussed by the applicable requirements
14
of the Public Company Accounting Oversight Board (PCAOB) and the SEC. The Audit Committee has also received
the written disclosures and the letter from the independent registered public accounting firm required by applicable
requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee
concerning independence, and has discussed with the independent registered public accounting firm the audit firm’s
independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the
audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021.
Respectfully submitted,
The Audit Committee of the Board of Directors
Shelly D. Guyer (Chair)
Suzanne Sawochka Hooper
Mark Leschly
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be
incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the
Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language
in any such filing.
Compensation Committee
Our Compensation Committee consists of Dr. Ho and Ms. Hooper. Ms. Hooper serves as the Chair of our
Compensation Committee. Our Board of Directors has determined that each of Dr. Ho and Ms. Hooper is
independent under the Nasdaq listing standards. The functions of this committee include:
•
•
•
•
•
•
•
overseeing our overall compensation strategy;
reviewing the Company’s practices and policies of employee compensation as they relate to risk
management and risk-taking incentives;
evaluating our Chief Executive Officer’s and Executive Chairman’s performance in light of relevant
corporate performance goals and objectives and determining and approving, or reviewing and
recommending to the Board of Directors for approval, the compensation and other terms of employment of
the Chief Executive Officer and Executive Chairman;
reviewing and determining the form and amount of compensation to be paid to our other executive officers
and senior management;
reviewing and recommending to the Board of Directors the type and amount of compensation to be paid or
awarded to directors;
adopting, amending, terminating and administering our compensation plans and programs; and
reviewing and assessing, at least annually, the performance of the Compensation Committee and the
adequacy of its charter.
Compensation Committee Processes and Procedures
The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in
consultation with management. The Compensation Committee meets regularly in executive session. From time to
time, various members of management and other employees, as well as outside advisors or consultants, may be
invited by the Compensation Committee to make presentations, to provide financial or other background information
or advice or to otherwise participate in Compensation Committee meetings. The Company’s Chief Executive Officer
may not participate in, or be present during, any deliberations or determinations of the Compensation Committee
regarding his compensation or his individual performance. The Company’s Executive Chairman may also not
participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding
his compensation or his individual performance.
15
The charter of the Compensation Committee grants the Compensation Committee full access to all books,
records, facilities and personnel of the Company, as well as authority to obtain, at the expense of the Company,
advice and assistance from internal and external legal, accounting or other advisors and consultants as the
Compensation Committee deems necessary or appropriate in carrying out its duties. In particular, the
Compensation Committee has the sole authority to select, retain and terminate any compensation consultant to
assist in its evaluation of executive and director compensation, including the sole authority to approve the
consultant’s reasonable fees and other retention terms.
See “Compensation Discussion and Analysis—Process for Determining Executive Compensation” in this Proxy
Statement for additional information.
Compensation Committee Interlocks and Insider Participation
Neither Dr. Ho nor Ms. Hooper is or has been an officer or employee of our Company. None of our executive
officers currently serves, or has served during the last year, as a member of the Board of Directors or Compensation
Committee of any entity that has one or more executive officers serving as a member of our Board of Directors or
Compensation Committee.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Drs. Goeddel and Perlmutter, and Dr.
Perlmutter serves as Chair. Our Board of Directors has determined that Drs. Goeddel and Perlmutter are
independent under the applicable Nasdaq listing standards. The functions of this committee include:
•
•
•
•
developing, reviewing and assessing our corporate governance documents, including our Corporate
Governance Guidelines and Code of Business Conduct and Ethics, and reviewing management’s efforts to
monitor compliance with our programs and policies designed to ensure adherence to applicable laws and
rules;
identifying and evaluating candidates to serve as directors consistent with the criteria approved by our
Board of Directors;
recommending candidates for selection to our Board of Directors, or, to the extent required below, to serve
as nominees for director for the annual meeting of stockholders;
reviewing, discussing and assessing the performance of our Board of Directors and its committees;
• making other recommendations to our Board of Directors regarding the Board’s leadership structure and
other affairs relating to our directors;
•
•
oversee the Company’s environmental, social and governance efforts, progress and disclosures and
regularly review emerging corporate governance issues and practices, including proxy advisory firm policies
and recommendations; and
reviewing and assessing, at least annually, the performance of the Nominating and Corporate Governance
Committee and the adequacy of its charter.
The Nominating and Corporate Governance Committee believes that candidates for director should have
certain minimum qualifications, including the ability to read and understand basic financial statements, being over
21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance
Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer
advice and guidance to management, having sufficient time to devote to the affairs of the Company, having
demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the
commitment to rigorously represent the long-term interests of our stockholders. However, the Nominating and
Corporate Governance Committee retains the right to modify these qualifications from time to time.
Candidates for director nominees are reviewed in the context of the current composition of the Board of
Directors and the competencies of the individual members, the current and future operating requirements of NGM
and the long-term interests of stockholders, with the objective of having a balanced and effective Board of Directors
that reflects a variety of characteristics, perspectives, skills and professional experience. The Nominating and
Corporate Governance Committee’s review and periodic assessments of the characteristics, perspectives, skills and
16
professional experience it seeks in the Board as a whole, and in individual directors, in connection with its review of
the Board’s composition, enables it to assess the effectiveness of its goal of achieving a balanced and effective
Board comprised of a diverse set of directors. In conducting this assessment, the Nominating and Corporate
Governance Committee typically considers diversity in terms of background, perspective and experience, including
diversity with respect to race, ethnicity, gender and sexual orientation, and such other factors as it deems
appropriate, given the current needs of the Board of Directors and NGM. The Nominating and Corporate
Governance Committee and our Board of Directors are committed to actively seeking highly-qualified candidates
who are women or from underrepresented minorities to include in the pool of candidates from which director
nominees are chosen.
The Nominating and Corporate Governance Committee uses its network of contacts to compile a list of potential
candidates, but may also engage, if it deems appropriate, a professional search firm. In January 2022, the
Nominating and Corporate Governance Committee engaged Heidrich & Struggles to assist in the search for well-
qualified and credentialed director candidates. The Nominating and Corporate Governance Committee conducts
any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after
considering the function and needs of the Board of Directors. The Nominating and Corporate Governance
Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for
recommendation to the Board of Directors by majority vote.
In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate
Governance Committee reviewed these directors’ service to NGM, including the number of meetings attended, level
of participation, quality of performance and any relationships and transactions that might impair the directors’
independence, as well as the overall composition of the Board and the desire to add new skill sets, expertise and
diversity to the Company. In the case of all director candidates, the Nominating and Corporate Governance
Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is
based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if
necessary.
The Nominating and Corporate Governance Committee will consider director candidates recommended by
stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it
evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was
recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the
Nominating and Corporate Governance Committee to become nominees for election to the Board of Directors may
do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the
following address: 333 Oyster Point Boulevard, South San Francisco, California 94080, Attn: Secretary.
Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s
business experience for at least the previous five years, complete biographical information, a description of the
proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a beneficial
or record holder of our common stock and has been a holder for at least one year. Any such submission must be
accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director
if elected. The Secretary will forward such communication to the Board of Directors.
Stockholder Communications with the Board of Directors
Our Board of Directors believes that stockholders should have an opportunity to communicate with the Board of
Directors, and efforts have been made to ensure that the views of stockholders are heard by the Board of Directors
or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely
manner. We believe that our responsiveness to stockholder communications to the Board of Directors has been
excellent. Stockholders wishing to communicate with the Board of Directors or an individual director may send a
written communication to the Board of Directors or such director c/o NGM Biopharmaceuticals, Inc., 333 Oyster
Point Boulevard, South San Francisco, California 94080, Attn: Secretary. The Secretary will review each
communication. The Secretary will forward such communication to the Board of Directors or to any individual
director to whom the communication is addressed unless the communication contains advertisements or
solicitations or is unduly hostile, threatening or similarly inappropriate, in which case the Secretary shall discard the
communication.
17
Code of Business Conduct and Ethics
We adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors,
including those officers responsible for financial reporting. The full text of our Code of Business Conduct and Ethics
is posted on the Investors & Media section of our website at www.ngmbio.com. We intend to disclose future
amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions,
applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions, and our directors, on our website identified above. Information contained on,
or that can be accessed through, our website is not incorporated by reference into and does not form a part of this
Proxy Statement.
Corporate Governance Guidelines
As part of our Board of Directors’ commitment to enhancing stockholder value over the long term, our Board of
Directors has adopted a set of Corporate Governance Guidelines to provide the framework for the governance of
the Company and to assist our Board of Directors in the exercise of its responsibilities. Our Corporate Governance
Guidelines cover, among other topics, Board composition and structure, Board membership criteria, director
independence, Board and Board committee assessments, committees of the Board of Directors, Board access to
management and outside advisors and director orientation and education. The Corporate Governance Guidelines,
as well as the charters for each committee of the Board of Directors, may be viewed on the Investors & Media
section of our website at www.ngmbio.com. Information contained on, or that can be accessed through, our website
is not incorporated by reference into and does not form a part of this Proxy Statement.
Hedging and Pledging Policy
We have adopted a policy, which applies to all of our directors and employees (including officers), that prohibits,
among other things, short selling of our securities, trading derivative securities of the Company (other than
employee stock options) and purchasing our securities on margin or holding our securities in a margin account. The
policy also provides that directors and employees (including officers) are prohibited from engaging in any hedging or
monetization transactions, including through the use of financial instruments such as prepaid variable forwards,
equity swaps, collars and exchange funds. Additionally, directors, officers and employees may not engage in any
transaction in our securities without first obtaining pre-clearance of the transaction from our Chief Financial Officer,
General Counsel or their respective designees.
18
The following table sets forth certain information with respect to our executive officers as of March 25, 2022:
EXECUTIVE OFFICERS
Name
William J. Rieflin(1)
David J. Woodhouse, Ph.D. (2)
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.(3)
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
Age
62
52
41
59
51
59
Position
Executive Chairman of the Board of Directors
Chief Executive Officer and Director
Chief Financial Officer
Founder, Chief Scientific Officer and Director
Senior Vice President, Chief Medical Officer
Senior Vice President, General Counsel and Chief
Compliance Officer
(1)
(2)
(3)
Please see “Class I Directors Continuing in Office Until the 2023 Annual Meeting of Stockholders” for Mr. Rieflin’s biography.
Please see “Class III Director Nominees for Election for a Three-Year Term Expiring at the 2025 Annual Meeting of Stockholders” for
Dr. Woodhouse’s biography.
Please see “Class II Directors Continuing in Office Until the 2024 Annual Meeting of Stockholders” for Dr. Chen’s biography.
Siobhan Nolan Mangini, age 41, has served as our Chief Financial Officer since July 2020. Prior to that, Ms.
Nolan Mangini served in various roles at Castlight Health, Inc., a healthcare technology company, from 2012 to
February 2020, and most recently as President from December 2019 to February 2020 and President and Chief
Financial Officer from July 2019 to December 2019. Prior to that, she served as Chief Financial Officer from July
2016 to July 2019; Vice President, Finance & Business Operations from October 2015 to July 2016; Senior Director,
Financial Planning & Business Operations from November 2014 to September 2015; and Director, Strategy &
Business Development from February 2012 to November 2014. Prior to joining Castlight Health, Ms. Nolan Mangini
worked at Bain & Company, a management consulting company, from 2009 to January 2012, specializing in the
health care and private equity practices. She currently serves as a member of the board of directors and audit
committee chair at Marathon Health, a private healthcare technology company. Ms. Nolan Mangini holds a B.S. in
Economics from The Wharton School at the University of Pennsylvania, an M.B.A. from the Graduate School of
Business at Stanford University and an M.P.A. from The Kennedy School of Government at Harvard University.
Hsiao D. Lieu, M.D., age 51, has served as our Senior Vice President, Chief Medical Officer since March 2019.
Prior to that, Dr. Lieu worked at Genentech from November 2017 to March 2019 as Vice President of Early Clinical
Development for non-oncology molecules. He also worked at Eli Lilly and Company from July 2012 through
November 2017, where he held various leadership roles, most recently as Global Brand Development Leader,
Autoimmune, Taltz®. Prior to joining Eli Lilly, Dr. Lieu was a co-founder and Chief Executive Officer of RetinoRx,
LLC and Chief Medical Officer and Executive Vice President at Niles Therapeutics, Inc. and held clinical
development leadership roles with Portola Pharmaceuticals, Inc. and CV Therapeutics, Inc. (which was acquired by
Gilead Sciences, Inc). Dr. Lieu was an attending cardiologist at San Francisco General Hospital from 2002 to 2013
and an adjunct Associate Clinical Medical Professor at University of California, San Francisco. Dr. Lieu received his
M.D. from Albert Einstein College of Medicine and B.A. from New York University.
Valerie Pierce, age 59, has served as our Senior Vice President, General Counsel and Chief Compliance
Officer since October 2019. Prior to joining NGM, Ms. Pierce served as Senior Vice President, Associate General
Counsel at Jazz Pharmaceuticals plc from August 2017 through September 2019 and Vice President, Associate
General Counsel from September 2012 through August 2017, where she was responsible for corporate governance
and securities matters, transactional support, legal operations and a wide variety of other matters. Before Jazz, Ms.
Pierce worked in various in-house positions, including Vice President and Senior Transactional Counsel at Amyris,
Inc., Senior Vice President and General Counsel at Sunesis Pharmaceuticals, Inc., General Counsel at the Institute
for OneWorld Health and earlier roles at Tularik Inc. and ALZA Corporation. Ms. Pierce received a B.A. from Yale
University and a J.D. from Yale Law School.
19
COMPENSATION DISCUSSION AND ANALYSIS
We became a public company in April 2019, and in 2020 and 2021 we filed our proxy statements under the
scaled-down reporting rules applicable to emerging growth companies. At the end of 2021, we ceased to be an
emerging growth company as defined by applicable reporting rules, and, therefore, this Proxy Statement includes
additional detail regarding executive compensation that was previously not required, including: this Compensation
Discussion and Analysis, or CD&A; additional compensation tables for “Grants of Plan-Based Awards in 2021,”
“Option Exercises in 2021” and “Potential Payments upon Termination or Change in Control;” an advisory vote on
the compensation of our named executive officers, which is included as Proposal 2 in this Proxy Statement; and an
advisory vote on the preferred frequency of advisory votes on the compensation of our named executive officers,
which is included as Proposal 3 in this Proxy Statement.
Our named executive officers for 2021 are:
•
•
•
•
•
David J. Woodhouse, Ph.D., our Chief Executive Officer;
Siobhan Nolan Mangini, our Chief Financial Officer;
Jin-Long Chen, Ph.D., our Founder and Chief Scientific Officer;
Hsiao D. Lieu, M.D., our Senior Vice President and Chief Medical Officer; and
Valerie Pierce, our Secretary, Senior Vice President, General Counsel and Chief Compliance Officer.
This CD&A discusses the principles underlying our policies and decisions with respect to the compensation of
our named executive officers and all material factors relevant to an analysis of these policies and decisions.
Overview of Business
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-changing
medicines for people whose health and lives have been disrupted by disease. Our biology-centric drug discovery
approach aims to seamlessly integrate interrogation of complex disease-associated biology and protein engineering
expertise to unlock proprietary insights that are leveraged to generate promising product candidates and enable
their rapid advancement into proof-of-concept studies. As explorers on the frontier of life-changing science, we
aspire to operate one of the most productive research and development engines in the biopharmaceutical industry.
Currently, we have seven disclosed programs, including four in Phase 2 or 2b studies, across three therapeutic
areas: cancer, retinal diseases and liver and metabolic diseases.
2021 Accomplishments
2021 was a transformational year for us. We made significant progress advancing our pipeline, which now
includes six programs in the clinic.
Our key accomplishments in 2021 included the following:
•
•
•
•
Raised $134.6 million in net proceeds in a follow-on public offering of common stock.
Renegotiated our collaboration agreement with Merck, Sharp & Dohme, Inc, or Merck, to regain worldwide
rights to our disclosed oncology programs and to narrow the scope of the collaboration to focus primarily on
the discovery and development of novel medicines for unmet patient needs in retinal and cardiovascular
and metabolic diseases, including heart failure.
Completed enrollment of the Phase 2 CATALINA trial of NGM621, a monoclonal antibody product candidate
against complement C3, in patients with geographic atrophy, or GA, secondary to age-related macular
degeneration, totaling 320 patients at 65 sites in the United States.
Presented the results of a Phase 1 trial of NGM621 in patients with GA at the Angiogenesis, Exudation, and
Degeneration Annual Meeting and the Association for Research in Vision and Ophthalmology (ARVO) 2021
Annual Meeting and published the data in the American Journal of Ophthalmology.
20
•
•
•
•
•
•
Initiated the placebo-controlled Phase 2 portion of the PINNACLES trial of NGM120, a novel GFRAL
antagonist antibody product candidate, in combination with gemcitabine and Nab-paclitaxel as a first-line
treatment in patients with metastatic pancreatic cancer.
Presented preliminary findings from an ongoing, open-label Phase 1a/1b dose escalation trial of NGM120 in
patients with advanced solid tumors at the European Society for Medical Oncology (ESMO) Virtual
Congress.
Initiated a Phase 1/2 trial of NGM707, a dual ILT2/ILT4 antagonist antibody product candidate, as a
monotherapy and in combination with KEYTRUDA® (pembrolizumab), in patients with advanced solid
tumors and progressed the trial through multiple dose cohorts in the Phase 1a monotherapy dose
escalation.
Entered into a clinical trial collaboration and supply agreement with Merck related to our ongoing Phase 1/2
trial of NGM707 in combination with Merck’s KEYTRUDA® (pembrolizumab).
Disclosed our fourth oncology development candidate, NGM831, an ILT3 antagonist antibody product
candidate, further establishing our growing portfolio of development candidates focused on tumor stroma
biology and myeloid reprogramming.
Enrolled patients in ALPINE 4, the Phase 2b trial of aldafermin in patients with compensated non-alcoholic
steatohepatitis cirrhosis (F4 NASH), throughout 2021, enabling us to complete enrollment in January 2022.
Executive Compensation Philosophy and Pay-for-Performance Emphasis
Our overall compensation philosophy and executive officer compensation program is guided by the following
objectives and principles:
•
•
•
structure executive compensation to reward and motivate executive officers who contribute to the
achievement of our operational and strategic objectives;
attract and retain executive officers who contribute to our Company’s ongoing performance and long-term
success; and
link executive officer compensation and stockholder interests through the grant of long-term equity
incentives.
We seek to attract, motivate and retain highly qualified executive officers by compensating them competitively,
consistent with our success and their contribution to that success. Our ability to excel depends on the skills,
creativity, integrity and teamwork of all of our employees, including our executive officers, in service of not only our
short-term goals, but also our broader long-term strategic objectives. Given the long product development cycles in
the biopharmaceutical industry, our Compensation Committee believes that compensation paid to our executive
officers should be aligned with both our short- and long-term performance and results intended to create
stockholder value. Furthermore, compensation paid to our executive officers is intended to enhance our ability to
attract and retain highly qualified executives in a competitive talent market. Mindful of these principles, we have
structured our compensation program to ensure that a significant portion of our executive officers’ compensation
opportunity is related to factors that are designed to enhance stockholder value and facilitate attracting and retaining
qualified key executives who are critical to our long-term success.
A significant percentage of target compensation for our Chief Executive Officer and other named executive
officers is structured in the form of “at-risk” compensation, consisting of the opportunity to earn annual performance
bonus payments dependent upon Company and individual performance and stock option grants. We believe this
approach best aligns our executive officers’ interests with those of our stockholders for both near- and long-term
performance. Target total compensation for our named executive officers for 2021, as shown below, reflects annual
base salary, each individual’s bonus paid out at target (as further described below under the heading “Performance-
Based Bonus Program”) and the grant date fair value of equity awards granted during the year (as reported in
“Executive Compensation—Summary Compensation Table” below).
21
Key Features of our Executive Compensation Program
What We Do
✓ Design executive compensation to align pay with
performance
What We Don’t Do
X No excessive or “single-trigger” change in
control or severance payments
X No excise tax or other tax gross-ups
X No guaranteed bonuses or base salary
increases
X No executive fringe benefits or perquisites
✓ Emphasize long-term equity incentives, with the majority of
executive compensation being “at-risk”
✓ Reevaluate and adjust our program annually based on
company and market developments and stockholder
feedback
✓ Discourage inappropriate risk-taking
✓ Prohibit hedging and pledging by officers and directors
✓ Engage an independent compensation consultant who
reports directly to the Compensation Committee
✓ Have 100% independent directors on the Compensation
Committee who meet regularly in independent session
without management present
22
Process for Determining Executive Compensation
Role of Our Compensation Committee and the Chief Executive Officer
Our Compensation Committee is responsible for overseeing and approving the compensation of our executive
officers. In this capacity, our Compensation Committee designs, implements, reviews and approves all
compensation for our executive officers, except for our Chief Executive Officer and Executive Chairman, whose
respective compensation is approved by our Board of Directors based on recommendations from our Compensation
Committee. To aid the Compensation Committee in making its determination, our Chief Executive Officer provides
recommendations annually to the Compensation Committee regarding the compensation of all executive officers
(other than himself and the Executive Chairman) based on the overall corporate achievements during the period
being assessed and his knowledge of the individual contributions to our success by each of the executive officers.
The Compensation Committee takes these recommendations into consideration when determining the overall
performance of the company and each of our executive officers individually, as demonstrated by progress against
corporate goals and achievement against other corporate priorities.
Role of the Independent Compensation Consultant
For 2021, the Compensation Committee engaged Aon’s Human Capital Solutions practice, a division of Aon plc
(“Aon”), as its independent compensation consultant to examine various policies under the Compensation
Committee’s charter. Aon reports directly to the Compensation Committee, and the Compensation Committee has
the sole authority to hire, fire and direct the work of Aon. In 2021, Aon advised the Compensation Committee on a
variety of compensation-related issues, including:
•
•
•
•
•
•
identifying an updated peer group of companies for market comparison purposes;
gathering data on our executive officer cash and equity compensation relative to competitive market
practices;
gathering data on peer group short- and long-term incentive practices;
gathering data on peer group equity use and dilution;
addressing trends and best practices in executive compensation to inform the Compensation Committee’s
decisions; and
developing a market-based framework for potential changes to our compensation program for the
Compensation Committee’s review and input.
After review and consultation with Aon, our Compensation Committee determined that Aon is independent, and
that there is no conflict of interest resulting from retaining Aon currently or during 2021. In reaching these
conclusions, our Compensation Committee considered the factors set forth in the SEC rules and the Nasdaq listing
standards. Other than services provided to our Compensation Committee, Aon has not performed any other work
for us.
Defining and Comparing Compensation to Market Benchmarks
Because we aim to attract and retain the most highly qualified executive officers in an extremely competitive
market for talent, our Compensation Committee believes that it is important when making its compensation
decisions to be informed as to the current practices of comparable public companies with which we compete for top
talent. To this end, as described below, the Compensation Committee reviews certain market data compiled by Aon
for each executive officer’s position, including information relating to the mix and levels of compensation for
executive officers in the biopharmaceutical industry, with a focus on target total compensation in line with the
Compensation Committee’s holistic approach to executive compensation. The use of market data is not formulaic,
and the Compensation Committee considers market data as only one of the factors that informs its decisions, as
described below.
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Determination of 2021 Peer Group
In October 2020, our Compensation Committee, using information provided by Aon, established a peer group to
be used in connection with making compensation decisions for 2021 based on a balance of industry focus, number
of employees, state of development, complexity and market capitalization. Specifically, the selection was focused on
public biopharmaceutical companies that are pre-commercial, with an emphasis on companies that have recently
gone public and a preference for companies with product candidates in Phase 2 or Phase 3 clinical trials, as well as
preclinical platform companies where appropriate, in each case meeting at least two of the following three criteria:
•
•
•
companies with market capitalizations that range from approximately 0.3x to 3.0x our market capitalization
at the time of selecting the peer group (i.e., $400 million to $3.6 billion);
companies with 100 to 500 employees; and
companies based in the United States, with a focus on companies headquartered within the Bay Area and
other biotechnology hub locations.
Based on these criteria, in October 2020, Aon recommended, and our Compensation Committee approved, the
following companies as our peer group for 2021:
Adverum Biotechnologies, Inc.
Alector, Inc.
Allogene Therapeutics, Inc.
AnaptysBio, Inc.
Apellis Pharmaceuticals, Inc.
Arcus Biosciences, Inc.
Atara Biotherapeutics, Inc.
Constellation Pharmaceuticals, Inc.
CytomX Therapeutics, Inc.
Denali Therapeutics Inc.
Dicerna Pharmaceuticals, Inc.
Editas Medicine, Inc.
Fate Therapeutics, Inc.
Gossamer Bio, Inc.
Intellia Therapeutics, Inc.
Madrigal Pharmaceuticals, Inc.
Odonate Therapeutics, Inc.
Replimune Group, Inc.
Rubius Therapeutics, Inc.
Tricida, Inc.
Turning Point Therapeutics, Inc.
Voyager Therapeutics, Inc.
At the time of approval of the 2021 peer group, our market cap was between the 50th and 60th percentiles of
the peer companies, reflecting strong alignment with the companies selected for inclusion.
Use of Market Data
In late 2020, Aon completed an assessment of executive compensation based on our chosen 2021 peer group
to inform the Compensation Committee’s determination of executive compensation for 2021. This assessment used
market data that was compiled from multiple sources and provided by Aon to the Compensation Committee,
including: (i) data from the Aon Global Life Sciences Survey with respect to the 2021 peer group companies listed
above, or the peer survey data; (ii) the 2021 peer group companies’ publicly disclosed information, or public peer
data; and (iii) data from public biotechnology and pharmaceutical companies in the Aon Global Life Sciences
Survey, or the general survey data, which included survey data with respect to our selected 2021 peer group
companies. Generally, peer survey data and public peer data are used in establishing market data reference points,
and the general survey data is used when there is a lack of peer survey data and public peer data for an executive
officer’s position. The peer survey data, the general survey data and the public peer data are collectively referred to
in this Proxy Statement as market data.
Our Compensation Committee reviews each executive officer’s target total compensation, comprising both
target total cash compensation (consisting of base salary and annual target performance-based bonus) and equity
compensation, against the market data described above primarily to ensure that our executive compensation
program, as a whole, is positioned competitively to attract and retain the highest caliber of executive officers and
that the total compensation opportunity for the executive officer group is aligned with our corporate objectives and
strategic needs. However, the Compensation Committee recognizes that its compensation decisions may result in
24
compensation that is higher or lower than that paid by peer companies for similar positions based on the
Compensation Committee’s exercise of its discretion and its consideration of factors such as experience, scope of
position, position criticality and career arc. Our Compensation Committee believes that over-reliance on
benchmarking against market data, particularly peer survey data, can result in compensation that is unrelated to the
value delivered by our executive officers because compensation benchmarking does not take into account
company-to-company variations among actual roles with similar titles or the specific performance of the individual
executive officer. Additionally, due to the nature of our business, we compete for executive talent with many
companies that are not similar to our peer companies, including with public companies that are larger and more
established than we are or that possess greater resources than we do and, particularly for certain roles, that may be
in industries other than biotechnology, with smaller private companies that may be able to offer greater equity
compensation potential and with prestigious academic and non-profit institutions. Compensation data for such
companies and institutions is not reflected in the market data.
As a result, the Compensation Committee does not use a formulaic approach to set pay at a particular
positioning within the market data; rather, the Compensation Committee reviews a range of market data reference
points as one factor before making compensation determinations for employees generally and on an individual
basis for each executive officer. While the Compensation Committee views a range of reference points, it generally
considers the 60th percentile of market data for base salary and the 50th percentile of market data for each of
annual target bonus awards, long-term incentive compensation and target total direct compensation as appropriate
general targets to take into consideration when determining overall employee compensation.
Key Factors Used in Determining Executive Compensation
When determining the compensation of each of our executive officers, our Compensation Committee, with input
from our Chief Executive Officer and reference to the market data, generally considers a number of key factors,
including:
•
•
our overall corporate performance,
our performance against our intentionally aggressive annual corporate goals and other corporate priorities;
• market trends and pressures;
•
•
•
•
•
the experience level of the executive officer and the scope and criticality of their role;
the executive officer’s individual performance and career trajectory;
internal pay equity;
the need to attract and retain talent in a competitive market; and
the impact of aggregate compensation on the annual budget and stockholder dilution.
In making decisions regarding executive compensation, the Compensation Committee members also exercise
their independent judgment and bring to bear their experience and understanding of compensation practices in the
biopharmaceutical industry.
Elements of Executive Compensation; 2021 Compensation Decisions for our Named Executive Officers
The primary components of our executive compensation program are base salary, annual performance-based
cash bonus awards and annual option awards. We believe that these components, along with our other benefits,
foster a productive work environment that offers our employees the flexibility and opportunity to thrive in a
collaborative atmosphere and to receive meaningful rewards and recognition for their contributions to our growth
and success. We view these components of compensation as related but distinct. While annual cash bonus awards
and annual option awards are not guaranteed, we believe that, as is common in the biopharmaceutical industry,
base salary, annual cash bonuses and equity-based awards are all necessary to attract and retain employees. To
date, we have not adopted any formal policies or guidelines for allocating compensation between long- and short-
term compensation, or between cash and non-cash compensation. However, as described above, in practice the
vast majority of compensation for our named executive officers is structured in the form of “at-risk” compensation,
intentionally designed to align our executive officers’ interests with those of our stockholders for near- and long-term
performance.
25
Base Salaries
Base salary is an important element of compensation to attract and retain our executive officers. We provide
base salary as a fixed source of cash compensation to recognize each named executive officer’s day-to-day
responsibilities, while providing an appropriate and competitive base level of current cash income. Adjustments to
base salaries are generally based on the scope of the executive officer’s responsibilities, position criticality,
experience and tenure, as well as current market data regarding similar positions and other factors described
above. Base salary increases are not formulaic or guaranteed.
In early 2021, the 2021 annual base salaries of our named executive officers were determined and approved by
our Board of Directors (with respect to Dr. Woodhouse) and by our Compensation Committee (with respect to our
other named executive officers), with retroactive effect to January 1, 2021. The base salary increases principally
reflected general merit and competitive market adjustments. In particular, with respect to Dr. Woodhouse, the
adjustment was made to address the competitive positioning of his base salary, which was below the 25th percentile
of the market data collected by Aon. After giving effect to Dr. Woodhouse’s base salary increase, his base salary
was positioned at the 25th percentile of the market data. The base salary of Dr. Chen was positioned at the 75th
percentile of the market data in light of the criticality of the Chief Scientific Officer position to our Company generally,
as well as recognition of Dr. Chen’s founder status, excellent performance and significant ongoing contributions to
the culture of our Company. The base salaries of the other named executive officers were positioned between the
25th and 50th percentiles of the market data. The following table shows each named executive officer’s 2021
annual base salary:
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini (1)
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
(1)
Ms. Nolan Mangini joined the Company in July 2020.
Performance-Based Bonus Program
2020 Annual
Base Salary
($)
2021 Annual
Base Salary
($)
Percent
Increase
525,000
425,000
515,000
432,000
395,000
580,000
435,000
530,000
450,000
412,000
10.5 %
2.4 %
2.9 %
4.2 %
4.3 %
We maintain an annual cash performance-based bonus program in which all employees, including executive
officers, who are employed by us as of September 30 of the performance year are eligible to participate. The
potential for annual cash bonuses is intended to provide financial incentives to employees to drive individual and
Company performance and achievement of annual corporate goals. Whether a bonus is paid to any executive
officer in any given year is solely within the discretion of the Compensation Committee (or the Board, as
appropriate) and is dependent primarily on an assessment of Company and individual performance. As a result, we
consider annual performance bonuses to be a form of “at-risk” compensation that is designed to align our executive
officers’ interests with those of our stockholders.
The annual cash bonus targets for our executive officers are set by the Compensation Committee (or, with
respect to our Chief Executive Officer and Executive Chairman, by our Board of Directors) as a percentage of each
executive officer’s base salary. Prior to 2021, the bonus targets for our executive officers were set at below-market
levels as we gradually transitioned from the 12% target in place prior to our initial public offering to more competitive
bonus targets based on market data. Bonus targets for 2020 for our executive officers were originally set at 25% of
their respective base salaries. After reviewing peer company data with Aon, in October 2020, the Compensation
Committee decided to increase the bonus targets for employees at the vice president level and above, including our
executive officers, to 30% for 2020. In 2021, based on the Compensation Committee’s (or the Board’s, as
appropriate) analysis of the market data with respect to annual bonus targets and target total cash compensation,
the Compensation Committee (and our Board, as appropriate) determined to increase each named executive
officer’s bonus target for 2021 from 30% to the applicable percentage set forth in the table below in an effort to
26
move the opportunity to earn a bonus to, or closer to, the market 50th percentile for similar positions, while taking
into consideration internal equity and experience in role.
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.(1)
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
2021 Target Bonus Award
(percent of base salary)
2021 Target Bonus Award
Relative to Peer Data
(percentile)
55%
40%
45%
40%
40%
25th
50th
75th
25th
50th
(1)
The 2021 target bonus for Dr. Chen was positioned at the 75th percentile of the market data for his position in light of
the criticality of the Chief Scientific Officer position to our Company generally, as well as recognition of Dr. Chen’s
founder status and significant ongoing contributions to the culture of our Company.
Bonuses for all employees, including our executive officers, are allocated from a bonus pool that is determined
by the Compensation Committee each year. In determining the amount of bonus pool funding, the Compensation
Committee considers a number of factors, including the Company’s achievement of intentionally aggressive annual
corporate goals set by our Board and adopted by the Compensation Committee, the business environment in which
the Company’s results were achieved, achievements and challenges not expressly included in or contemplated by
the annual corporate goals, and market data and dynamics. The total aggregate bonus payout for all employees,
including executive officers, does not exceed the amount of the approved bonus pool.
The Company’s annual corporate goals generally fall into two broad strategic areas – advancement of research
and development (“R&D”) programs and corporate business objectives – and are intended to drive specific product
discovery objectives and preclinical and clinical development achievements across our broad pipeline and to
continue to build the foundation for the Company’s future growth. The philosophy of the Board since the inception of
the Company has been to establish very aggressive annual corporate goals, based on a belief that more progress
will be made in the exercise of striving to achieve stretch goals, even if all of the goals are not fully achieved.
Consistent with that philosophy, the 2021 corporate goals approved by our Board of Directors, or the 2021 goals,
were intentionally aggressive stretch goals designed to incentivize extraordinary performance, while recognizing
that 100% achievement of all of our stretch goals was unlikely to be achieved. Nonetheless, the Board takes the
position that to set goals at a level where all of them can realistically be achieved does not fit our culture, which
strives to incentivize extraordinary performance. As a result, the Compensation Committee determined at the
beginning of 2021 that the achievement of approximately 80% of our challenging 2021 goals could result in funding
100% of the bonus pool. The Compensation Committee recognized that achieving even 80% of the 2021 goals
would be difficult, requiring focused effort and diligence, and would represent strong positive alignment with the
Company’s business objectives.
In early 2022, in making its decision regarding the amount of the bonus pool, the Compensation Committee,
based on input from our Chief Executive Officer and other members of the Board, considered, as one factor, our
achievements against our aggressive 2021 goals, which contained both R&D and corporate business goals. The
R&D goals encompassed a number of specific development goals for aldafermin and our other product candidates
and goals related to drug discovery research activities. The corporate business goals related to recruiting and
retention efforts, corporate development and investor relations activities, cybersecurity risk assessments, financial
audit and reporting goals, including successful SOX 404(b) readiness, diversity, equity and inclusion, or DEI, and
spending control. Specifically, the Compensation Committee noted the following achievements with respect to our
2021 goals:
•
•
•
raising $134.6 million in a follow-on public offering of common stock in January 2021 at $27.00 per share;
completion of enrollment in the NGM621 CATALINA clinical trial, including enrolling approximately 30%
more subjects than the original target;
successful renegotiation of the Merck collaboration, particularly with respect to regaining ownership of all of
the product candidates in our oncology portfolio;
27
•
•
•
•
initiation of a Phase 1/2 clinical trial of NGM707;
additional progress in the development of NGM120, NGM831 and NGM438;
successful preparations for SOX 404(b) compliance; and
progress in our DEI efforts and associated goals.
In addition, in making its decision, the Compensation Committee considered notable achievements and
challenges not expressly included in or contemplated by the 2021 goals. The Compensation Committee noted that,
in May 2021, the Company’s 24-week Phase 2b ALPINE 2/3 study evaluating aldafermin in F2/F3 NASH patients
did not meet its primary endpoint of fibrosis improvement. As a result, the 2021 goals relating to the advancement of
aldafermin in F2/F3 NASH patients into Phase 3 clinical trials were no longer relevant, which led the Company to
shift resources toward advancing the Company’s other programs. In addition, in June 2021, the restructuring of our
collaboration with Merck narrowed the future scope of the collaboration requiring restructuring and refocusing of our
research efforts and making some of the 2021 goals irrelevant. As a result of both of these significant and
unexpected events, in June 2021, management, the Compensation Committee and the Board agreed upon a set of
revised priorities for the second half of the year, including:
•
•
•
•
•
building oncology-focused capabilities and talent to advance our oncology portfolio that we wholly own as a
result of the collaboration restructuring;
progressing the development of NGM707;
ramping up business development activities to be positioned to maximize the value of our broad portfolio
and access late-stage development and commercial capabilities, if appropriate;
operationalizing our amended collaboration with Merck; and
successfully navigating through the continuing and evolving impacts of the COVID-19 pandemic.
In its assessment, the Compensation Committee also considered progress made with respect to these revised
priorities to ensure that management had appropriately and successfully pivoted its focus and efforts to those
activities that were in the best interests of the Company and its stockholders in the second half of the year in light of
the changes that occurred in the first half of the year, particularly given the return of our oncology product
candidates from Merck as a result of the collaboration restructuring. Considering the totality of 2021 achievements,
responses to changed corporate priorities, financial impact and the current competitive market for talent, the
Compensation Committee determined to fund the bonus pool in an aggregate amount equal to all employee
bonuses paid at their respective targets.
In early 2022, the Compensation Committee also determined (or, with respect to Dr. Woodhouse, recommended
that the Board of Directors approve) the amount of cash bonuses for each named executive officer, taking into
account each named executive officer’s bonus target, his or her contributions to achievement of corporate goals and
other company achievements, other aspects of individual performance, total cash compensation relative to market
data and other factors. The Compensation Committee (or Board, as applicable) did not attempt to pinpoint the level
of achievement of the 2021 goals and priorities, or each named executive officer’s individual performance during
2021, in a quantitative or formulaic manner. Accordingly, we do not consider these bonuses to be “non-equity
incentive plan compensation” within the meaning of applicable SEC rules.
The Compensation Committee considered the following aspects of each named executive officer’s individual
performance, including contributions toward the corporate accomplishments noted above, when determining the
amount of his or her 2021 cash bonus payment.
•
Dr. Woodhouse: our Compensation Committee considered Dr. Woodhouse’s role in leading the company
during a challenging pandemic year, with accomplishments that included the rapid enrollment of our
CATALINA trial, the agile redeployment of resources following the ALPINE 2/3 data readout to support our
focused efforts in oncology, the advancement of our three new myeloid reprogramming product candidates,
the renegotiation of our collaboration with Merck resulting in regained rights to our oncology portfolio and
the January follow-on equity offering.
• Ms. Nolan Mangini: our Compensation Committee considered Ms. Nolan Mangini’s leadership role in
investor relations and finance including the preparation and execution of our January follow-on equity
28
offering, her leadership role in strategy and business development including the renegotiation of our
collaboration with Merck resulting in regained rights to our oncology portfolio, her leadership of the
accounting organization including successfully preparing the Company for SOX 404(b) compliance and her
successful recruitment of key new staff in each of her areas of functional oversight.
Dr. Chen: our Compensation Committee considered Dr. Chen’s leadership role in the discovery and
ongoing scientific support for our three new myeloid reprogramming product candidates, NGM707,
NGM831 and NGM438, the importance of his contributions to, and achievements under, the Merck
collaboration that enabled the favorable renegotiation of the collaboration terms, his efforts to optimize
productivity and opportunity under the revised Merck agreement, recruitment of key new staff in our
discovery research function, his expert guidance and decision making across our R&D portfolio and his role
as company-wide champion of our science-led culture.
Dr. Lieu: our Compensation Committee considered Dr. Lieu’s leadership role in the oversight and progress
of all of our product candidate clinical trials, including the rapid enrollment of our CATALINA trial with 30%
more patients than originally targeted, the rapid shifting of internal resources in our development
organization following the ALPINE 2/3 data readout to support our focus of efforts in oncology and the
recruitment of critical new staff in regulatory, clinical development and biometrics with expertise in oncology.
•
•
• Ms. Pierce: our Compensation Committee considered Ms. Pierce’s leadership role of our legal and
compliance functions in the preparation and execution of our January follow-on equity offering,
renegotiation of our collaboration with Merck and other key company contracts, timely filing of SEC
reporting documents and broader contributions to managing company growth and diversity, equity and
inclusion efforts.
In light of all the foregoing, the Compensation Committee approved (or, with respect to Dr. Woodhouse,
recommended that the Board of Directors approve) bonus payments for 2021 for each named executive officer as
set forth in the table below, all of which were approximately in line with their target bonus percentage.
Named Executive Officer
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
Equity Compensation
Actual 2021 Performance-
Based Bonus Award
($)
Actual 2021 Performance-
Based Bonus Award
(% of Base Salary)
300,000
175,000
200,000
175,000
170,000
52
40
38
39
41
We believe that our ability to grant equity awards is a valuable and necessary compensation tool that aligns the
long-term financial interests of our executive officers with the financial interests of our stockholders and is therefore
a key aspect of our pay-for-performance program. In addition, we believe that our ability to grant equity awards
helps us to attract, retain and motivate executive officers, and fosters an ownership culture, designed to encourage
them to devote their best efforts to our business and financial success. To date, all equity awards have been in the
form of stock options. Stock options provide value to our executive officers only if the market price of our common
stock appreciates over the fair market value on the stock option grant date. Vesting of options is generally tied to
continuous service with us, serving as an additional retention measure. Our executive officers are typically awarded
an initial new hire option grant upon commencement of employment, as well as annual option grants thereafter.
Annual grants historically commenced after 12 to 18 months of employment, but currently typically commence in
the year following the executive officer’s employment start date so long as the executive officer was employed by
October 1st of the preceding year (although the amount of any such grant takes into consideration the amount of
time that has passed since the new hire grant was made). However, an annual option grant is not guaranteed and is
awarded at the sole discretion of the Compensation Committee (or Board, as appropriate). We consider annual
option grants to be a form of “at-risk” compensation.
Each of our named executive officers currently holds stock options under our Amended and Restated 2018
Equity Incentive Plan, or the Restated 2018 Plan, and some hold options under our 2008 Equity Incentive Plan, or
the 2008 Plan. Such options were granted subject to the general terms of the applicable plan and the applicable
29
forms of stock option agreement thereunder. All options are granted with a per share exercise price equal to no less
than the fair market value of a share of our common stock on the grant date, and generally vest, for initial new hire
grants, as to 25% of the shares subject to the option on the first anniversary of the applicable new hire start date
with the remainder vesting on a monthly basis over 36 months thereafter and, for annual grants, on a monthly basis
over 48 months, in each case subject to continued service with us through each vesting date. All options have a
maximum term of up to 10 years from the date of grant, subject to earlier expiration following the cessation of an
executive officer’s continuous service with us. Option vesting is subject to acceleration as described below under
“Executive Compensation—Potential Payments Upon Termination or Change
in Control” and “—Equity
Compensation Plans.” Options generally remain exercisable for three months following an executive officer’s
cessation of continuous service, except in the event of a termination for cause or due to disability or death.
The specific vesting terms of each named executive officer’s stock options are described below under
“Executive Compensation—Outstanding Equity Awards at December 31, 2021.” For additional information about our
equity compensation plans, please see the section titled “Executive Compensation—Equity Compensation Plans”
below.
In February 2021, the Compensation Committee granted to each of Drs. Chen and Lieu and Mses. Nolan
Mangini and Pierce a stock option to purchase 175,000, 100,000, 50,000 and 100,000 shares of our common stock,
respectively, which vest as to 1/48th of the shares subject to the option each month from January 1, 2021, subject to
each executive’s continued service to us on each applicable vesting date. The amount of Ms. Nolan Mangini’s grant
reflected the fact that she joined the Company on July 2020. In February 2021, on the Compensation Committee’s
recommendation, the Board of Directors approved the grant of a stock option to Dr. Woodhouse to purchase
450,000 shares of our common stock, which vests as to 1/48th of the shares subject to the option each month from
January 1, 2021, subject to his continued service to us on each applicable vesting date. Such options were granted
as of the second business day following the day on which the Company’s Annual Report on Form 10-K for the year
ended December 31, 2020 was filed. Stock option grants for the named executive officers in 2021 were based on
the Compensation Committee’s consideration of a number of factors, including market data for the relevant
positions (evaluated based both on value and percent of company), management of dilution, the retention value of
existing holdings and internal equity across the senior leadership team.
Other Features of Our Executive Compensation Program
Agreements with Our Named Executive Officers
We have entered into employment agreements or offer letters with each of our named executive officers. We
designed these agreements to be part of a competitive compensation package and to keep our named executive
officers focused on our business goals and objectives. The key terms of the employment agreements or offer letters
are described below under the caption “Executive Compensation—Employment, Severance and Change-in-Control
Arrangements” below.
Pursuant to their employments agreements or offer letters, each of Dr. Woodhouse and Mses. Nolan Mangini
and Pierce is eligible to receive severance payments and benefits upon an involuntary termination of employment
without cause (and other than as a result of death or disability) or upon a resignation for good reason, in either case
on or within 18 months following a change in control of our Company. We believe that this protection serves to
encourage continued attention and dedication to duties without distraction arising from the possibility of a change in
control for executive officers in positions not likely to be continued in role by the acquiror in the event of a change in
control, and provides the business with a smooth transition in the event of such a termination of employment of
these named executive officers in connection with a transaction. This severance and change-in-control arrangement
is also designed to retain these named executive officers in their key positions as we compete for talented
executives in the marketplace where such protections are commonly offered. The key terms of these change-in-
control severance arrangements are described below under the caption “Executive Compensation—Employment,
Severance and Change-in-Control Arrangements” below.
In addition, each of our named executive officers holds stock options under our equity incentive plans that were
granted subject to our form of stock option agreements. A description of the termination and change-in-control
provisions in such equity incentive plans and form of stock option agreements is provided below under “Executive
Compensation—Equity Compensation Plans.”
30
Other Benefits and Perquisites
Our named executive officers are eligible to participate in all of our benefit plans, such as our 401(k) plan and
our NGM Biopharmaceuticals Matching Plan, or the 401(k) Matching Plan (see “Executive Compensation—401(k)
Plan and Matching Plan” below), medical, dental, vision, short-term disability, long-term disability and group life
insurance, in each case generally on the same basis as other employees. In 2021, for all of our full-time employees
in the United States, including our named executive officers, we made a matching contribution in our common stock
under our 401(k) Matching Plan equal to 50% of the employee’s 401(k) plan contribution, up to a maximum annual
Company contribution of $750 worth of our common stock. Beginning in fiscal year 2022, the matching contribution
in our common stock will continue to be equal to 50% of the employee’s 401(k) plan contribution but will be matched
by a maximum annual Company contribution of up to $3,500 worth of our common stock.
We do not currently have qualified or nonqualified defined benefit plans or deferred compensation plans, nor do
we offer pension or other retirement benefits other than our 401(k) plan. We generally do not offer perquisites or
personal benefits to our named executive officers.
Additional Compensation Information, Policies and Practices
Accounting and Tax Considerations
Under FASB Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC 718,
we are required to estimate and record an expense for each award of equity compensation (including stock options)
over the vesting period of the award. We record share-based compensation expense on an ongoing basis according
to ASC 718. The Compensation Committee has considered, and may in the future consider, the grant of
performance-based or other types of stock awards to executive officers in lieu of or in addition to stock option grants
in light of the accounting impact of ASC 718 and other considerations.
Under Section 162(m) of the Internal Revenue Code, or Section 162(m), compensation paid to each of our
“covered employees” that exceeds $1 million per taxable year is generally non-deductible unless the compensation
qualifies for (i) certain grandfathered exceptions (including the “performance-based compensation” exception) for
certain compensation paid pursuant to a written binding contract in effect on November 2, 2017 and not materially
modified on or after such date or (ii) the reliance period exception for certain compensation paid by corporations that
became publicly held on or before December 20, 2019.
Although the Compensation Committee considers tax implications as one factor in determining executive
compensation, the Compensation Committee also looks at other factors in making its decisions and retains the
flexibility to provide compensation for our named executive officers in a manner consistent with the goals of our
executive compensation program and the best interests of NGM and of our stockholders, which may include
providing for compensation that is not deductible by us due to the deduction limit under Section 162(m). The
Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt
from the deduction limit under Section 162(m) if it determines that such modifications are consistent with our
business needs.
Insider Trading Policy and Hedging and Pledging Prohibitions
We maintain an insider trading policy that prohibits our officers, directors, employees, consultants and
contractors from, among other things, engaging in speculative transactions in our securities, including by way of the
purchase or sale of “put” or “call” options or other derivative securities directly linked to our equity, short sales of our
equity or purchases of our securities on margin. In addition, no officer, director or employee may engage in any
transaction in our securities, including any purchase or sale in the open market, loan, pledge, hedge or other
transfer, without first obtaining pre-clearance of the transaction from our Chief Financial Officer, General Counsel or
their respective designees.
Clawbacks
As a public company, if we are required to restate our financial results due to our material noncompliance with
any financial reporting requirements under the federal securities laws as a result of misconduct, the Chief Executive
Officer and Chief Financial Officer may be legally required to reimburse our Company for any bonus or other
31
incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the
Sarbanes-Oxley Act of 2002. Additionally, we intend to implement a Dodd-Frank Act-compliant clawback policy as
soon as, and to the extent that, the requirements of such clawbacks are finalized by the SEC.
Risk Assessment Concerning Compensation Practices and Policies
With the assistance of the Compensation Committee’s compensation consultant and our outside legal counsel,
in December 2021, the Compensation Committee reviewed our compensation policies and practices to assess
whether they encourage employees to take excessive or inappropriate risks. After reviewing and assessing our
compensation philosophy, policies and practices, including the mix of fixed and variable, short- and long-term
incentives and overall compensation, incentive plan structures and risk mitigation features, and oversight of each
plan and arrangement, the Compensation Committee determined that any risks arising from our compensation
policies and practices for our employees are not reasonably likely to have a material adverse effect on our
Company as a whole. The Compensation Committee believes that the mix and design of the elements of executive
compensation do not encourage management to assume excessive or inappropriate risks; and the mix of short-term
compensation (in the form of base salary and annual bonus, if any, which is based on the achievement of multiple
performance goals), and long-term compensation (in the form of stock options) prevents undue focus on short-term
results and helps align the interests of our named executive officers with the interests of our stockholders.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
contained in this Proxy Statement with the Company’s management. Based on this review and discussion, the
Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in Company’s Proxy Statement and incorporated by reference into the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2021.
Respectfully submitted,
The Compensation Committee of the Board of Directors
Suzanne Sawochka Hooper (Chairperson)
Carole Ho, M.D.
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated
by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act,
whether made before or after the date hereof and irrespective of any general incorporation language in any such
filing.
32
Summary Compensation Table
EXECUTIVE COMPENSATION
The following table shows, for the years ended December 31, 2019, 2020 and 2021, the compensation awarded
to or paid to, or earned by, our named executive officers.
Name and Principal Position
David J. Woodhouse, Ph.D.
Chief Executive Officer
Siobhan Nolan Mangini (4)
Chief Financial Officer
Jin-Long Chen, Ph.D.
Founder and Chief Scientific
Officer
Hsiao D. Lieu, M.D.(5)
Senior Vice President and Chief
Medical Officer
Valerie Pierce(6)
Senior Vice President, General
Counsel and Chief Compliance
Officer
Salary
($)
Year
2021 580,000
2020 525,000
2019 490,000
2021 435,000
2020 199,695
2021 530,000
2020 515,000
2019 500,000
2021 450,000
2020 432,000
Bonus
($)(1)
300,000
200,000
125,000
175,000
155,000
200,000
175,000
125,000
175,000
150,000
Option
Awards
($)(2)
9,031,230
3,833,880
1,476,400
1,003,470
3,458,520
3,512,145
1,677,323
1,291,850
2,006,940
239,618
All Other
Compensation
($)(3)
750
750
750
750
750
750
750
750
750
750
Total
($)
9,911,980
4,559,630
2,092,150
1,614,220
3,813,965
4,242,895
2,368,073
1,917,600
2,632,690
822,368
2021 412,000
170,000
2,006,940
750
2,589,690
_______________________________
(1)
(2)
(3)
(4)
(5)
(6)
Amounts represent discretionary annual performance-based bonuses awarded for the year indicated. For a description of the
Company’s discretionary annual performance-based bonus program for 2021, see “Compensation Discussion and Analysis—Elements
of Executive Compensation; 2021 Compensation Decisions for our Named Executive Officers—Performance-Based Bonus Program.”
Amounts represent the aggregate grant date fair value of stock options granted to our named executive officers during 2019, 2020 and
2021, as applicable, computed in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included
in Note 9 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the named executive
officers.
Amounts shown in this column represent defined contribution retirement matching contributions (made in the form of shares of our
common stock) provided to the named executive officers on the same terms as provided to all of our regular full-time employees in the
United States. For more information regarding these benefits, see below under “—401(k) Plan and Matching Plan.”
Ms. Nolan Mangini joined the Company in July 2020.
Dr. Lieu was not a named executive officer in 2019 and, thus, only 2020 and 2021 compensation information is shown for Dr. Lieu in
this table.
Ms. Pierce was not a named executive officer in 2019 or 2020 and, thus, only 2021 compensation information is shown for Ms. Pierce
in this table.
33
Grants of Plan-Based Awards in 2021
Award Type
Grant Date (1)
Approval
Date
All Other Option
Awards: Number
of Securities
Underlying
Options (#)(2)
Exercise
Price of
Option
Awards ($/
Share)
Grant Date Fair
Value of Option
Awards ($)(3)
Stock Option
3/17/2021
2/5/2021
450,000
31.93
9,031,230
Stock Option
3/17/2021
2/5/2021
50,000
31.93
1,003,470
Stock Option
3/17/2021
2/5/2021
175,000
31.93
3,512,145
Stock Option
Stock Option
3/17/2021
3/17/2021
2/5/2021
2/5/2021
100,000
100,000
31.93
31.93
2,006,940
2,006,940
Name
David J.
Woodhouse,
Ph.D.
Siobhan Nolan
Mangini
Jin-Long Chen,
Ph.D.
Hsiao D. Lieu,
M.D.
Valerie Pierce
_______________________________
(1)
(2)
(3)
Grant date is the second business day following the day on which the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020 was filed.
Annual options awarded under the Restated 2018 Plan. Options vest as to 1/48th of the shares subject to the option each month from
January 1, 2021, subject to each executive’s continued service to us on each applicable vesting date. Options may be exercised when
vested following the grant date.
Amounts represent the grant date fair value of stock options granted to our named executive officers during 2021 computed in
accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 9 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. These amounts do not
necessarily correspond to the actual value recognized or that may be recognized by the named executive officers.
34
Outstanding Equity Awards at December 31, 2021
The following table shows certain information regarding outstanding equity awards at December 31, 2021
for our named executive officers.
Option Awards(1)(2)
Grant
Date
Vesting
Commencement
Date
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price ($)
Option
Expiration
Date
4/22/2015
1/20/2017
1/31/2018
7/25/2018
2/7/2019
2/4/2020
3/17/2021
8/3/2020
3/17/2021
1/24/2013
1/24/2014
1/31/2015
1/27/2016
1/20/2017
1/31/2018
2/7/2019
2/4/2020
3/17/2021
3/19/2019
2/4/2020
3/17/2021
10/1/2019
3/17/2021
3/2/2015
1/1/2017
1/1/2018
7/13/2018
1/1/2019
1/1/2020
1/1/2021
7/13/2020
1/1/2021
1/1/2013
1/1/2014
1/1/2015
1/1/2016
1/1/2017
1/1/2018
1/1/2019
1/1/2020
1/1/2021
3/19/2019
1/1/2020
1/1/2021
9/30/2019
1/1/2021
255,000 (3)
87,013
57,833
500,000
200,000
400,000
103,125 (4)
300,000 (3)
11,458 (4)
85,082
175,000
200,000
225,000
225,000
200,000
175,000
175,000
40,104 (4)
190,000 (3)
25,000
22,916 (4)
200,000 (3)
22,916 (4)
—
—
—
—
—
—
346,875
—
38,542
—
—
—
—
—
—
—
—
134,896
—
—
77,084
—
77,084
7.54
7.70
8.14
11.00
12.06
16.47
31.93
18.88
31.93
1.44
2.16
4.00
7.64
7.70
8.14
12.06
16.47
31.93
12.06
16.47
31.93
13.42
31.93
4/21/2025
1/19/2027
1/30/2028
7/24/2028
2/6/2029
2/3/2030
3/16/2031
8/2/2030
3/16/2031
1/23/2023
1/23/2024
1/30/2025
1/26/2026
1/19/2027
1/30/2028
2/6/2029
2/3/2030
3/16/2031
3/18/2029
2/3/2030
3/16/2031
9/30/2029
3/16/2031
Name
David J. Woodhouse,
Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
(1)
(2)
(3)
Except as otherwise noted, option may be exercised at any time following the date of grant (including early exercise of unvested
options), with any acquired shares that remain unvested as of the officer’s termination date subject to the Company’s right of
repurchase.
Except as otherwise noted, option vests in substantially equal monthly installments over 48 months of continuous service following the
vesting commencement date set forth above.
Option vests over four years of continuous service following the vesting commencement date set forth above, with 25% of the option
vesting after completion of 12 months of continuous service and the remainder vesting in substantially equal monthly installments
following the completion of each month of continuous service thereafter.
(4)
Option may be exercised when vested following the date of grant.
35
Option Exercises in 2021
The following table shows certain information regarding option exercises by our named executive officers in
2021.
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
Option Awards
Number of Shares
Acquired on Exercise
(#)
Value Realized on
Exercise
($)(1)
32,654
—
288,888
10,000
—
356,189
—
6,275,153
111,400
—
(1)
Amounts shown do not reflect amounts actually received by our named executive officers. The value realized on exercise is equal to
the difference between the option exercise price and the market price of our common stock on the date of exercise, multiplied by the
number of shares subject to the option, regardless of whether the individual actually sold any of the shares received upon exercise or
the amount received in connection with any such sale, and without taking into account any taxes that may be payable in connection
with the transaction.
Employment, Severance and Change-in-Control Arrangements
We have entered into employment agreements or offer letters with each of our named executive officers. We
designed these agreements to be part of a competitive compensation package and to keep our named executive
officers focused on our business goals and objectives. These agreements or offer letters provide for base salaries
and incentive compensation, and each component reflects the scope of each named executive officer’s anticipated
responsibilities and the individual experience he or she brings to the Company. In addition, Dr. Woodhouse’s
employment agreement and Ms. Nolan Mangini’s and Ms. Pierce’s respective offer letters provide for double-trigger
change-in-control benefits. Each named executive officer is also eligible to participate in our employee benefit plans
on the same terms as other regular, full-time employees. The key terms of the offer letters or employment
agreements are described below. See also “Equity Compensation Plans” below for a description of certain vesting
acceleration and extended post-termination exercise period benefits in connection with certain termination events
and corporate transactions.
David J. Woodhouse, Ph.D.
We entered into an employment agreement with Dr. Woodhouse on July 25, 2018. Pursuant to Dr.
Woodhouse’s employment agreement, he was entitled to an annual base salary of $475,000 (most recently
increased to $610,000 for 2022). Pursuant to Dr. Woodhouse’s employment agreement with us, in the event of a
termination without cause (and other than as a result of death or disability) or resignation for good reason, in either
case on or within 18 months after the effective date of a change in control, and contingent on execution of an
effective release of claims against us and satisfaction of certain other conditions, Dr. Woodhouse will be entitled to
(i) continued payment of his base salary for 12 months; (ii) payment or reimbursement of COBRA premiums for him
and his eligible dependents for up to 12 months; and (iii) full vesting of any unvested equity awards held by Dr.
Woodhouse.
Siobhan Nolan Mangini
We entered into an employment offer letter with Ms. Nolan Mangini on May 20, 2020. Pursuant to Ms. Nolan
Mangini’s employment offer letter, she was entitled to an annual base salary of $425,000 (most recently increased
to $460,000 for 2022). Further, Ms. Nolan was paid a one-time sign-on bonus of $75,000, repayable on a prorated
basis to us if she voluntarily resigns her employment within two years of her employment commencement date. Ms.
Nolan Mangini was also entitled to an option to purchase 300,000 shares of our common stock, which was granted
in August 2020. Pursuant to Ms. Nolan Mangini’s employment offer letter, in the event of a termination without cause
(and other than as a result of death or disability) or resignation for good reason, in either case on or within 18
36
months after the effective date of a change in control, and contingent on execution of an effective release of claims
against us and satisfaction of certain other conditions, Ms. Nolan Mangini will be entitled to (i) continued payment of
her base salary for 6 months; (ii) payment or reimbursement of COBRA premiums for her and her eligible
dependents for up to 6 months; and (iii) full vesting of any unvested equity awards held by Ms. Nolan Mangini.
Jin-Long Chen, Ph.D.
We entered into an employment offer letter with Dr. Chen on January 7, 2008. Pursuant to Dr. Chen’s
employment offer letter, he was entitled to an initial annual base salary of $300,000 (most recently increased to
$550,000 for 2022) and a hiring bonus of $50,000.
Hsiao D. Lieu, M.D.
We entered into an employment offer letter with Dr. Lieu on January 16, 2019. Pursuant to Dr. Lieu’s
employment offer letter, he was entitled to an initial annual base salary of $420,000 (most recently increased to
$475,000 for 2022). Further, Dr. Lieu was paid a one-time sign-on bonus of $225,000. Dr. Lieu was also entitled to
an option to purchase 200,000 shares of our common stock, which was granted in March 2019.
Valerie Pierce
We entered into an employment offer letter with Ms. Pierce on August 6, 2019. Pursuant to Ms. Pierce’s
employment offer letter, she was entitled to an initial annual base salary of $390,000 (most recently increased to
$440,000 for 2022). Further, Ms. Pierce was paid a one-time sign-on bonus of $75,000. Ms. Pierce was also entitled
to an option to purchase 200,000 shares of our common stock, which was granted in October 2019. Pursuant to an
amendment to Ms. Pierce’s employment offer letter in May 2020, in the event of a termination without cause (and
other than as a result of death or disability) or resignation for good reason, in either case on or within 18 months
after the effective date of a change in control, and contingent on execution of an effective release of claims against
us and satisfaction of certain other conditions, Ms. Pierce will be entitled to (i) continued payment of her base salary
for 6 months; (ii) payment or reimbursement of COBRA premiums for her and her eligible dependents for up to 6
months; and (iii) full vesting of any unvested equity awards held by Ms. Pierce.
Equity Compensation Plans
The principal features of our equity compensation plans are summarized below.
Amended and Restated 2018 Equity Incentive Plan
In January 2018, our Board of Directors adopted, and in May 2018, our stockholders approved, our 2018 Equity
Incentive Plan. In March 2019, our Board of Directors and our stockholders approved the Restated 2018 Plan.
The Restated 2018 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and
other forms of equity-based awards, all of which may be granted to employees, including officers, non-employee
directors and consultants of us and our affiliates. Incentive stock options may be granted only to employees. All
other awards may be granted to employees, including officers, and to non-employee directors and consultants. To
date, only stock options have been granted under the Restated 2018 Plan.
Except as otherwise provided in the applicable award agreement, upon a participant’s termination of continuous
service, stock options that have not vested will be forfeited. Except as otherwise provided in the Restated 2018 Plan
and applicable award agreement, options will remain exercisable for a three-month period following a participant’s
termination of services, except that, in general, (i) options terminate immediately upon a termination for cause, (ii)
options remain exercisable for 12 months following a termination due to disability, (iii) options remain exercisable for
18 months following a termination due to death and (iv) if a participant dies during the three-month period or the 12-
month period described in (ii), options shall not expire until the earlier of 18 months after the participant’s death, any
termination in connection with a change in control, the expiration date of the option or the day before the tenth
anniversary of the grant date. The equity awards held by certain of our named executive officers are also subject to
the double-trigger vesting acceleration benefits described above under “Employment, Severance and Change-in-
Control Arrangements.”
37
Our Restated 2018 Plan provides that in the event of a corporate transaction, the successor corporation may
assume each outstanding award or may substitute similar awards for each outstanding award. If outstanding
awards are not assumed or substituted, the vesting of such awards held by current service providers will accelerate
in full prior to the consummation of the transaction, and any awards not exercised will terminate upon closing of the
corporate transaction. In addition, the plan administrator may provide for unexercised awards that will otherwise
terminate upon closing of the corporate transaction to be cancelled at closing in exchange for a payment equal in
value to the amount such award holder would have received in such transaction upon exercise of the award, minus
the exercise price.
Under the Restated 2018 Plan, a corporate transaction is generally the consummation of (1) a sale or other
disposition of all or substantially all of our consolidated assets, (2) a sale or other disposition of at least 50% of our
outstanding securities, (3) a merger, consolidation or similar transaction following which we are not the surviving
corporation or (4) a merger, consolidation or similar transaction following which we are the surviving corporation but
the shares of our common stock outstanding immediately prior to such transaction are converted or exchanged into
other property by virtue of the transaction.
2008 Equity Incentive Plan
In January 2008, our Board of Directors adopted, and our stockholders approved, our 2008 Plan. Our 2008 Plan
provided for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted
stock awards and restricted stock unit awards to our employees, directors and consultants and those of our
affiliates. Only stock options were granted under the 2008 Plan.
Our 2008 Plan expired pursuant to its terms in January 2018, and therefore no new awards may be issued from
this plan. However, outstanding options granted under the 2008 Plan will remain outstanding, subject to the terms of
the 2008 Plan and the relevant award agreement, until such options are exercised or they terminate or expire by
their terms. Our Board of Directors, or a duly authorized committee thereof, has the authority to administer the 2008
Plan.
Except as otherwise provided in the 2008 Plan and applicable award agreement, options granted under the
2008 Plan will remain exercisable for a three-month period following a participant’s termination of services, except
that, in general, (i) options terminate immediately upon a termination for cause, (ii) options remain exercisable for 12
months following a termination due to disability and (iii) options remain exercisable for 18 months following a
termination due to death.
Our 2008 Plan provides that in the event of a corporate transaction, the successor corporation may assume
each outstanding award or may substitute similar awards for each outstanding award. If outstanding awards are not
assumed or substituted, the vesting of such awards held by current service providers will accelerate in full prior to
the consummation of the transaction, and any awards not exercised will terminate upon closing of the corporate
transaction. In addition, the plan administrator may provide for unexercised awards that will otherwise terminate
upon closing of the corporate transaction to be cancelled at closing in exchange for a payment equal in value to the
amount such award holder would have received in such transaction upon exercise of the award, minus the exercise
price.
Under the 2008 Plan, a corporate transaction is generally the consummation of (1) a sale or other disposition of
all or substantially all of our consolidated assets, (2) a sale or other disposition of at least 90% of our outstanding
securities, (3) a merger, consolidation or similar transaction following which we are not the surviving corporation or
(4) a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of
our common stock outstanding immediately prior to such transaction are converted or exchanged into other property
by virtue of the transaction.
2019 Employee Stock Purchase Plan
In March 2019, our Board of Directors adopted, and our stockholders approved, the 2019 Employee Stock
Purchase Plan, or the ESPP. The purpose of the ESPP is to enable our eligible employees, through payroll
deductions or cash contributions, to purchase shares of our common stock, to increase our employees’ interest in
our growth and success and encourage employees to remain in our employment.
38
The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the
Internal Revenue Code, or the Code, for our U.S. employees. In addition, the ESPP authorizes grants of purchase
rights that do not comply with Section 423 of the Code under a separate non-Section 423 component. In particular,
where such purchase rights are granted to employees who are employed or located outside the United States, our
Board of Directors may adopt rules that are beyond the scope of Section 423 of the Code.
Generally, all regular employees, including executive officers, employed by us or by any of our designated
affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their
earnings for the purchase of our common stock under the ESPP. Under the ESPP, we may specify offerings with
durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering
will have one or more purchase dates on which shares of our common stock will be purchased for employees
participating in the offering. An offering may be terminated under certain circumstances. Unless otherwise
determined by our Board of Directors, common stock will be purchased for accounts of employees participating in
the ESPP at a price per share equal to the lower of (1) 85% of the fair market value of a share of our common stock
on the first date of an offering or (2) 85% of the fair market value of a share of our common stock on the date of
purchase.
In the event of certain significant corporate transactions, including the consummation of: (1) a sale of all our
assets, (2) the sale or disposition of 90% of our outstanding securities, (3) a merger or consolidation where we do
not survive the transaction and (4) a merger or consolidation where we do survive the transaction but the shares of
our common stock outstanding immediately prior to such transaction are converted or exchanged into other property
by virtue of the transaction, any then-outstanding rights to purchase our stock under the ESPP may be assumed,
continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring
entity (or its parent company) elects not to assume, continue or substitute for such purchase rights, then the
participants’ accumulated payroll contributions will be used to purchase shares of our common stock within ten
business days prior to such corporate transaction, and such purchase rights will terminate immediately.
401(k) Plan and Matching Plan
We maintain a defined contribution employee retirement plan for our employees, including our named executive
officers. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that
contributions to our 401(k) plan and income earned on such contributions are not taxable to participants until
withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to
100% of his or her pre-tax compensation, up to a statutory limit of $19,500 for 2020 and 2021. Participants who are
at least 50 years old can also make “catch-up” contributions, which in 2020 and 2021 may be up to an additional
$6,500 above the statutory limit. Under our 401(k) plan, each employee is fully vested in his or her deferred salary
contributions. Employee contributions are held and invested by the plan’s trustee. Our 401(k) plan also permits us to
make discretionary and matching contributions, subject to established limits and a vesting schedule.
Our 401(k) Matching Plan, effective January 1, 2011, is intended to be a tax-qualified defined contribution plan
under Subsections 401(a) and 401(m) of the Code. All employees are eligible to participate and may enter the
401(k) Matching Plan as of the date they become eligible to participate in the 401(k) plan. Each participant who
makes pre-tax contributions to the 401(k) plan is eligible to have a matching contribution in our common stock made
by us to his or her 401(k) Matching Plan account, which through December 31, 2021 was generally equal to 50% of
the participant’s plan contribution up to a maximum employer contribution of $750 worth of our common stock per
year. Beginning in fiscal year 2022, the matching contribution in our common stock under our 401(k) Matching Plan
will continue to be equal to 50% of the employee’s 401(k) plan contribution but will be matched by a maximum
annual Company contribution of up to $3,500 worth of our common stock. In 2022, we also intend to merge the
401(k) Matching Plan into our 401(k) plan for ease of administration. In the future, we may make additional
discretionary contributions for all participants to the 401(k) plan. Each participant’s contributions, and the
corresponding investment earnings, are generally not taxable to the participants until withdrawn. Participant
contributions are held in trust as required by law. Individual participants may direct the trustee to invest their
accounts in authorized investment alternatives.
39
Potential Payments Upon Termination or Change in Control
The tables below show estimates of the compensation payable to each of our named executive officers upon
their termination of employment with the Company and/or upon a change in control, calculated as if the triggering
event had occurred effective December 31, 2021. The actual amounts due to any one of the named executive
officers upon termination of employment can only be determined at the time of the termination. There can be no
assurance that a termination or change in control would produce the same or similar results as those described
below if it occurs on any other date or at any other stock price, or if any assumption is not, in fact, correct.
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
Involuntary Termination
Without Cause or
Resignation for Good
Reason in Connection with a
Change of Control ($)(1)
Restated 2018 Plan and 2008
Plan – Certain Corporate
Transactions ($)(2)
Benefit
Cash Severance $
COBRA Payments
Vesting Acceleration(3)
Total $
Cash Severance $
COBRA Payments
Vesting Acceleration(3)
Total $
Cash Severance $
COBRA Payments
Vesting Acceleration(3)
Total $
Cash Severance $
COBRA Payments
Vesting Acceleration(3)
Total $
Cash Severance $
COBRA Payments
Vesting Acceleration(3)
Total $
580,000 $
36,856
1,066,120
1,682,976 $
217,500 $
18,428
—
235,928 $
— $
—
420,687
420,687 $
— $
—
369,271
369,271 $
206,000 $
18,428
375,375
599,803 $
—
—
1,066,120
1,066,120
—
—
—
—
—
—
420,687
420,687
—
—
369,271
369,271
—
—
375,375
375,375
_______________________________
(1)
(2)
(3)
These benefits would be payable under the terms of the employment agreements or offer letters, as applicable, if the termination
without cause or termination for good reason occurring within 18 months following a change in control and assuming such termination
took place on December 31, 2021. See “Employment, Severance and Change-in-Control Agreements” above for further information.
These benefits would be payable under the Restated 2018 Plan and 2008 Plan upon a corporate transaction event, assuming the
vesting acceleration took place on December 31, 2021. See “Equity Compensation Plans” above for further information.
The value of stock option acceleration is based on the closing price of $17.71 on December 31, 2021, minus the exercise price of the
unvested stock option shares subject to acceleration.
Other Elements of Compensation
Health, Welfare and Retirement Benefits
Our named executive officers are eligible to participate in all of our employee benefit plans on the same basis
as other employees, as described in “Compensation Discussion and Analysis—Other Features of Our Executive
Compensation Program—Other Benefits and Perquisites.” We do not provide a pension plan for our employees,
and none of our named executive officers participated in a nonqualified deferred compensation plan in 2021.
40
Perquisites and Other Personal Benefits
We do not provide perquisites or other personal benefits to our named executive officers.
No Tax Gross-Ups
In 2021, we did not make gross-up payments to cover our named executive officers’ personal income taxes that
pertained to any of the compensation or perquisites paid or provided by the Company.
41
EQUITY COMPENSATION PLANS AT DECEMBER 31, 2021
The following table shows certain information with respect to all of our equity compensation plans in effect as of
December 31, 2021.
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Stock Options (a)(1)
Weighted-
Average
Exercise
Price of
Outstanding
Stock
Options (b)
Number of
Securities
Remaining
Available for
Issuance Under
Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column (a))
2,519,744 $
7,964,809 $
—
—
10,484,553 $
5.76
18.97
—
—
15.79
—
6,698,538
506,978
—
7,205,516
Plan Category
Equity compensation plans approved by
stockholders
2008 Equity Incentive Plan
Restated 2018 Plan(2)
2019 Employee Stock Purchase Plan(3)
Equity compensation plans not approved by
stockholders
Total
___________________________________
(1)
(2)
(3)
The table does not include information regarding the 401(k) Matching Plan. Under the 401(k) Matching Plan, all participating
employees may contribute up to the annual Internal Revenue Service contribution limit. The 401(k) Matching Plan permits us to make
matching contributions on behalf of plan participants, which matching contributions can be made in common stock. As of December 31,
2021, there were 17,813 shares of common stock reserved under this plan.
The number of shares remaining available for future issuance under the Restated 2018 Plan automatically increases on January 1st
each year, through and including January 1, 2029, in an amount equal to 4% of the total number of shares of our capital stock
outstanding on the last day of the preceding fiscal year, or a lesser number of shares as determined by the Board of Directors.
The number of shares remaining available for future issuance under the ESPP automatically increases on January 1st of each year
through and including January 1, 2029, in an amount equal to the lesser of (i) 1% of the total number of shares of common stock
outstanding on such December 31, (ii) 1,000,000 shares of common stock or (iii) a number of shares as determined by the Board of
Directors prior to the beginning of each year, which shall be the lesser of (i) or (ii) above unless the Board of Directors determines not
to increase the number of shares available for issuance under the ESPP.
42
The following table shows for the year ended December 31, 2021 certain information with respect to the
compensation of our non-employee directors:
DIRECTOR COMPENSATION
Name
David V. Goeddel, Ph.D.
Shelly D. Guyer
Carole Ho, M.D.
Suzanne Sawochka Hooper
Mark Leschly(3)
Roger M. Perlmutter, M.D., Ph. D.(4)
David Schnell, M.D.(5)
McHenry T. Tichenor, Jr.(6)
_________________________________
Fees
Earned or
Paid in
Cash
($)
73,363
70,000
43,363
62,802
50,000
28,022
24,176
24,615
Option
Awards
($)(1)(2)
200,000
200,000
200,000
200,000
200,000
499,999
—
—
Total
($)
273,363
270,000
243,363
262,802
250,000
528,021
24,176
24,615
(1)
(2)
(3)
(4)
(5)
(6)
Amounts represent the aggregate grant date fair value of stock options granted to our non-employee directors during 2021, computed
in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 9 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. These amounts do not
necessarily correspond to the actual value recognized or that may be recognized by the non-employee directors.
The aggregate number of shares outstanding under all options held by our non-employee directors as of December 31, 2021 are set
forth in the table below. As of December 31, 2021, none of our non-employee directors held unvested stock awards other than options.
Mr. Leschly has notified us that he is resigning from our Board of Directors effective upon the conclusion of the Annual Meeting.
Dr. Perlmutter was appointed to our Board of Directors in June 2021.
Dr. Schnell ceased to be a director upon the expiration of his term in June 2021.
Mr. Tichenor ceased to be a director upon the expiration of his term in June 2021.
While cash fees are earned by the individual directors, in some instances the directors request that such
compensation be paid to bank accounts of their respective funds.
Name
David V. Goeddel, Ph.D.
Shelly D. Guyer
Carole Ho, M.D.
Suzanne Sawochka Hooper
Mark Leschly
Roger M. Perlmutter, M.D., Ph.D.
Number of Shares
Underlying Option
Awards
19,619
19,619
19,619
19,619
19,619
46,238
The tables above do not include Dr. Woodhouse, Mr. Rieflin or Dr. Chen because each of Dr. Woodhouse, Mr.
Rieflin and Dr. Chen receive no additional compensation for services provided as a director. Drs. Woodhouse and
Chen are named executive officers in this Proxy Statement and Mr. Rieflin is an executive officer who is not a
named executive officer.
Non-Employee Director Compensation Policy
We have adopted a non-employee director compensation policy, pursuant to which our non-employee directors
will be eligible to receive cash compensation for service on our Board of Directors and committees of our Board of
Directors.
43
Each non-employee director receives an annual cash retainer of $40,000 for serving on our Board of Directors.
The Lead Independent Director is entitled to an additional cash retainer of $25,000 in addition to the annual
retainer received by other non-employee directors for serving as our Lead Independent Director.
The Chairs and members of the three committees of our Board of Directors are entitled to the following
additional annual cash retainers:
Board Committee
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Chair Fee
($)
Member Fee
($)
30,000
15,000
10,000
10,000
6,000
5,000
All annual cash compensation amounts are payable in equal quarterly installments in advance within the first 30
days of each fiscal quarter in which the service will occur, prorated based on the days remaining in the calendar
quarter.
Newly appointed non-employee directors will receive a one-time initial award of options with a grant date fair
value of approximately $500,000, which will vest one-third after the first year, with the remaining shares vesting
quarterly in years two and three following the grant date, such that the shares will be fully vested on the third
anniversary of the date of grant, subject to the director’s continued service on the Board of Directors. Thereafter,
each non-employee director will receive an annual award of options on the date of each annual meeting of
stockholders with a grant date fair value of approximately $200,000, which will vest quarterly over one year from the
grant date, such that the shares will be fully vested on the earlier of the first anniversary of the date of grant and the
day prior to the next annual meeting of stockholders, subject to the director’s continued service on the Board of
Directors. In addition, in the event of a change in control (as defined in the Restated 2018 Plan) of the Company, the
shares underlying such grants will vest and become exercisable immediately prior to the effectiveness of such
change in control.
The exercise price per share of each stock option granted under the non-employee director compensation
policy will be equal to 100% of the fair market value of the underlying common stock on the date of grant. Each
stock option will have a term of ten years from the date of grant, subject to earlier termination in connection with a
termination of the non-employee director’s continuous service with us or a corporate transaction, each as provided
under the Restated 2018 Plan.
44
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and Section
14A of the Exchange Act, our stockholders are entitled to vote to approve, on an advisory basis, the compensation
of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. This is referred
to as a “say-on-pay” vote.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of
our named executive officers and the philosophy, policies and practices described in this Proxy Statement. The
compensation of our named executive officers subject to the vote is disclosed in the Compensation Discussion and
Analysis, the compensation tables, and the related narrative disclosure contained in this Proxy Statement. As
discussed in those disclosures, we believe that our compensation policies and decisions are focused on pay-for-
performance principles and strongly aligned with our stockholders’ interests and consistent with current market
practices. Compensation of our named executive officers is designed to enable us to attract and retain talented and
experienced executives to lead us successfully in a competitive environment.
Accordingly, the Board is asking the stockholders to indicate their support for the compensation of our named
executive officers as described in this Proxy Statement by casting a non-binding advisory vote “FOR” the following
resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed
pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis,
compensation tables and narrative discussion included in this Proxy Statement, is hereby
APPROVED.”
Because the vote is advisory, it is not binding on the Board of Directors or the Company. Nevertheless, the
views expressed by the stockholders, whether through this vote or otherwise, are important to management and the
Board and, accordingly, the Board and the Compensation Committee intend to consider the results of this vote in
making determinations in the future regarding executive compensation arrangements.
Advisory approval of this proposal requires the vote of the holders of a majority of the shares present or
represented by proxy and entitled to vote on the matter at the Annual Meeting.
The Board of Directors Recommends
a Vote “For” Proposal No. 2.
45
PROPOSAL NO. 3
ADVISORY VOTE ON THE FREQUENCY OF SOLICITATION OF
ADVISORY STOCKHOLDER APPROVAL OF EXECUTIVE COMPENSATION
The Dodd-Frank Act and Section 14A of the Exchange Act also enable our stockholders, at least once every six
years, to indicate their preference regarding how frequently the Company should solicit a “say-on-pay” vote. In
accordance with the Dodd-Frank Act, we are asking stockholders to indicate whether they would prefer an advisory
“say-on-pay” vote every year, every other year or every three years. Alternatively, stockholders may abstain from
casting a vote.
After considering the benefits and consequences of each alternative, the Board recommends that the advisory
vote on the compensation of our named executive officers be submitted to the stockholders annually. The Board
believes that an annual advisory vote on the compensation of our named executive officers is the most appropriate
option for the Company because it will allow our stockholders to provide us with their input on our compensation
philosophy, policies and practices as disclosed in this Proxy Statement on an annual basis. While the Board
believes that its recommendation is appropriate at this time, the stockholders are not voting to approve or
disapprove that recommendation, but are instead asked to indicate their preferences, on an advisory basis, as to
whether the non-binding advisory vote on the approval of the Company’s executive officer compensation practices
should be held every year, every other year or every three years. The option among those choices that receives the
votes of the holders of a majority of shares present or represented by proxy and entitled to vote at the annual
meeting will be deemed to be the frequency preferred by the stockholders.
Accordingly, the Board is asking stockholders to indicate their preferred voting frequency by voting for one, two
or three years. The alternative among one year, two years or three years that receives the votes of the holders of a
majority of shares present or represented by proxy and entitled to vote on the matter at the Annual Meeting will be
deemed to be the frequency preferred by the stockholders.
The Board and the Compensation Committee value the opinions of the stockholders in this matter and, to the
extent there is any significant vote in favor of one frequency over the other options, even if less than a majority, the
Board will consider the stockholders’ concerns and evaluate any appropriate next steps. However, because this
vote is advisory and, therefore, not binding on the Board of Directors or the Company, the Board of Directors may
decide that it is in the best interests of the stockholders that the Company hold an advisory vote on executive
compensation more or less frequently than the option preferred by the stockholders. The vote will not be construed
to create or imply any change or addition to the fiduciary duties of the Company or the Board.
The Board of Directors Recommends
A Vote In Favor Of “One Year” On Proposal 3.
46
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2022 and has directed that management submit the
selection of its independent registered public accounting firm for ratification by the stockholders at the Annual
Meeting. Ernst & Young LLP was engaged in 2008 and has audited our consolidated financial statements since
2008. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an
opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of
Ernst & Young LLP as our independent registered public accounting firm. However, the Audit Committee of the
Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the
appointment of different independent auditors at any time during the year if they determine that such a change
would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present or represented by proxy and entitled to
vote on the matter at the Annual Meeting will be required to approve this Proposal No. 4.
The Board of Directors Recommends
a Vote “For” Proposal No. 4.
Principal Accountant Fees and Services
The following table represents aggregate fees billed to NGM by Ernst & Young LLP, our independent
registered public accounting firm, for the years ended December 31, 2020 and 2021:
Audit Fees(1)
Audit-Related Fees(2)
All Other Fees(3)
Total Fees
_______________________________
Year Ended December 31,
2020
2021
$ 1,113,550 $ 2,261,822
230,000
2,510
52,388
2,965
$ 1,346,060 $ 2,317,175
(1)
(2)
(3)
Audit Fees consisted of fees billed for professional services performed by Ernst & Young LLP for the audit of our annual consolidated
financial statements and the effectiveness of our internal control over financial reporting as of December 31, 2021, the review of interim
financial statements, and related services.
Audit-Related Fees consisted of fees for assurance and related services that are reasonably related to the performance of the audit or
review of our consolidated financial statements and are not reported under “Audit Fees.”
All other fees for services that are not included under the “Audit” or “Audit-Related” categories were associated with fees related to an
on-line subscription to an Ernst & Young LLP database.
All services performed for us by Ernst & Young LLP, our independent registered public accounting firm, and
related fees incurred, were pre-approved by our Audit Committee.
Pre-Approval Procedures
The Audit Committee has procedures in place for the pre-approval of audit and non-audit services rendered by
the Company’s independent registered public accounting firm, Ernst & Young LLP. The Audit Committee generally
pre-approves specified services in the defined categories of audit services, audit-related services and tax services
up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of
the engagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent
auditor is engaged to provide each service. The pre-approval of services may be delegated to one or more of the
47
Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled
meeting.
The Audit Committee has determined that the rendering of services other than audit services by Ernst & Young
LLP is compatible with maintaining the principal accountant’s independence.
48
TRANSACTIONS WITH RELATED PERSONS AND INDEMNIFICATION
The following is a summary of transactions since January 1, 2021 to which we have been a participant in which
the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or
holders of more than five percent of our capital stock, or any member of the immediate family of the foregoing
persons, had or will have a direct or indirect material interest, other than compensation arrangements that are
described in the sections titled “Compensation Discussion and Analysis,” “Executive Compensation” and “Director
Compensation,” and other than compensation arrangements with respect to our executive officers who are not
named executive officers. In this regard, the compensation arrangements for 2021 and 2022 for our executive
officers who are not named executive officers were in each case approved by our Compensation Committee (or in
the case of our Executive Chairman, the Board).
Related-Person Transactions & SEC Compliance Policy
In connection with our initial public offering, we adopted a written Related Person Transactions & SEC
Compliance Policy that sets forth our policies and procedures regarding the identification, review, consideration and
approval or ratification of “related-person transactions.” For purposes of our policy only, a “related-person
transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or
relationships) in which we and any “related person” are, were or will be participants involving an amount that
exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director,
consultant or similar capacity by a related person are not covered by this policy. A related person is any executive
officer, director or holder of 5% or more of our capital stock, including any of their immediate family members, and
any entity owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must
present information regarding the proposed related-person transaction to the Audit Committee (or, where Audit
Committee approval would be inappropriate, to another independent body of the Board of Directors) for
consideration and approval or ratification. The presentation must include a description of, among other things, the
material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and
whether any alternative transactions were available. To identify related-person transactions in advance, we rely on
information supplied by our executive officers, directors and certain significant stockholders. In considering related-
person transactions, the Audit Committee takes into account the relevant available facts and circumstances
including, but not limited to (a) the risks, costs and benefits to us, (b) the impact on a director’s independence in the
event the related person is a director, immediate family member of a director or an entity with which a director is
affiliated, (c) the terms of the transaction, (d) the availability of other sources for comparable services or products
and (e) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.
In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from
the deliberations and approval. The policy requires that, in determining whether to approve, ratify or reject a related-
person transaction, the Audit Committee consider, in light of known circumstances, whether the transaction is in, or
is not inconsistent with, the best interests of us and our stockholders, as the Audit Committee determines in the
good faith exercise of its discretion.
Certain Transactions With or Involving Related Persons
Merck Collaboration
In 2015, we entered into a research collaboration, product development and license agreement with Merck
Sharp & Dohme Corp., or Merck, which together with amendments made prior to June 30, 2021, is referred to as
the Original Collaboration Agreement, covering the discovery, development and commercialization of novel
therapies across a range of therapeutic areas including a broad, multi-year drug discovery and early development
program financially supported by Merck, but scientifically directed by us with input from Merck. The original research
phase of the collaboration was for five years and was extended for an additional two years by Merck through March
2022. As part of that extension, Merck agreed to continue to fund up to $75.0 million of our R&D efforts each year
consistent with the initial five-year research term and, in lieu of a $20.0 million extension fee payable to us, Merck
agreed to make additional payments totaling up to $20.0 million in support of our R&D activities during 2021 through
the first quarter of 2022.
49
On June 30, 2021, we entered into an amended and restated research collaboration, product development and
license agreement with Merck, or the Amended Collaboration Agreement, replacing the Original Collaboration
Agreement and extending the research phase of the collaboration, but with a narrower scope than in the Original
Collaboration Agreement. Under the Amended Collaboration Agreement, the collaboration is focused primarily on
the identification, R&D of collaboration compounds directed to targets of interest to Merck in the fields of
ophthalmology and cardiovascular or metabolic disease, including heart failure. The research phase will now
continue generally through March 31, 2024, with possible extensions for each of the various programs to allow us or
Merck to complete ongoing development. In addition, we have certain obligations to conduct R&D related to
collaboration compounds that will not be reimbursed by Merck.
For the year ended December 31, 2021, we recognized collaboration and license revenue of $77.9 million
under our collaboration with Merck. See “Business - Our Collaboration with Merck - Description of Amended
Collaboration Agreement” in Part I, Item 1, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Overview” in Part II, Item 7 and “Research Collaboration and License Agreements,” in Note
5 to the consolidated financial statements in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021 for additional information on our collaboration with Merck.
Dr. Perlmutter, who is a Class II director, served as Executive Vice President of Merck & Co., Inc. and President
of MRL from April 2013 until his retirement from such positions effective December 31, 2020. From January 2021
through May 2021, Dr. Perlmutter acted as chairman of MRL and as a member of the Executive Committee of
Merck & Co., Inc., in each case in a non-executive, advisory position. Each of Merck Sharp & Dohme Corp. and
MRL is a subsidiary of Merck & Co., Inc.
Merck Clinical Trial Collaboration and Supply Agreement
On December 2, 2021, we entered into a clinical trial collaboration and supply agreement with MSD
International GmbH and MSD International Business GmbH, which are referred together as MSD and are affiliates
of Merck, pursuant to which, among other things, MSD agreed to supply KEYTRUDA® (pembrolizumab), at no cost
to us, for our Phase 1/2 clinical trial evaluating NGM707 as a monotherapy and in combination with KEYTRUDA for
the treatment of patients with advanced solid tumors, subject to, among other things, certain clinical trial data joint
ownership rights of the parties under the agreement.
Indemnification Agreements
We have entered into separate indemnification agreements with our directors and executive officers in addition
to the indemnification provided for in our bylaws. These indemnification agreements provide, among other things,
that we will indemnify our directors and executive officers for certain expenses, including damages, judgments,
fines, penalties, settlements and costs and attorneys’ fees and disbursements, incurred by a director or executive
officer in any claim, action or proceeding arising in his or her capacity as a director or executive officer of the
Company or in connection with service at our request for another corporation or entity. The indemnification
agreements also provide for procedures that will apply in the event that a director or executive officer makes a claim
for indemnification.
50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock as of March 10,
2022 (except as noted) by:
•
•
•
•
each director and nominee for director;
each of the named executive officers;
all current executive officers and directors as a group; and
all those known by us to be beneficial owners of more than five percent of our outstanding common stock.
This table is based upon information supplied by officers and directors, as well as Schedules 13G or 13D filed
with the SEC by beneficial owners of more than five percent of our common stock. Unless otherwise indicated in the
footnotes to this table and subject to community property laws, where applicable, we believe that each of the
stockholders named in this table has sole voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 78,057,840 shares outstanding on March 10, 2022,
adjusted as required by rules promulgated by the SEC.
Beneficial Owner
5% Stockholders
Entities affiliated with The Column Group(1)
Merck Sharp & Dohme Corp.(2)
Named Executive Officers and Directors
Jin-Long Chen, Ph.D.(3)
David V. Goeddel, Ph.D.(4)
Shelly D. Guyer(5)
Carole Ho, M.D.(6)
Suzanne Sawochka Hooper(7)
Mark Leschly(8)
Hsaio D. Lieu, M.D.(9)
Siobhan Nolan Mangini(10)
Roger M. Perlmutter, M.D., Ph.D.
Valerie Pierce(11)
William J. Rieflin(12)
David J. Woodhouse, Ph.D.(13)
All executive officers and directors as a group (12 persons)(14)
_______________________________
*
Represents beneficial ownership of less than 1%.
Beneficial Ownership
Number of
Shares
Percent of
Total
18,843,633
12,955,016
2,652,308
19,089,153
80,717
54,229
125,520
3,822,186
249,685
316,666
—
238,748
3,151,006
1,747,500
31,527,718
24.1%
16.6%
3.3%
24.4%
*
*
*
4.9%
*
*
—%
*
4.0%
2.2%
38.1%
(1)
The indicated ownership is based solely on a Schedule 13D/A filed with the SEC by the reporting person on February 3, 2022. The
Schedule 13D/A provides information as of January 24, 2022. Consists of (i) 11,103,333 shares held of record by The Column Group,
LP, (ii) 100,000 shares held of record by The Column Group GP, LP, (iii) 2,265,758 shares held of record by The Column Group II, LP,
(iv) 100,000 shares held of record by The Column Group Management, LP, (v) 1,298,908 shares held of record by Ponoi Capital, LP,
(vi) 1,298,908 shares held of record by Ponoi Capital II, LP, (vii) 858,035 shares held of record by The Column Group III, LP, (viii)
968,990 shares held of record by The Column Group III-A, LP, (ix) 821,660 shares held of record by The Column Group IV, LP and (x)
28,041 shares held of record by The Column Group IV-A, LP. Mr. Peter Svennilson and Dr. Goeddel are managing partners of The
Column Group GP, LP and The Column Group II GP, LP, which are the general partners of The Column Group, LP and The Column
Group II, LP, respectively, and the Column Group Management, LP and share voting and investment power with respect to such
shares. Mr. Svennilson, Dr. Goeddel and Dr. Tim Kutzkey are managing partners of Ponoi Management, LLC and Ponoi II
Management, LLC, which are the general partners of Ponoi Capital, LP and Ponoi Capital II, LP, respectively, and share voting and
investment power with respect to such shares. Mr. Svennilson, Dr. Goeddel and Dr. Kutzkey are managing partners of The Column
Group III GP, LP, which is the general partner of The Column Group III, LP and The Column Group III-A, LP, and share voting and
investment power with respect to such shares. Mr. Svennilson, Dr. Goeddel and Dr. Kutzkey are managing partners of The Column
Group IV GP, LP, which is the general partner of The Column Group IV, LP and The Column Group IV-A, LP, and share voting and
51
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
investment power with respect to such shares. The principal address of The Column Group, LP is 1 Letterman Drive, Building D, Suite
DM-900, San Francisco, California 94129.
The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on April 9, 2019. The Schedule
13G provides information as of April 8, 2019. The principal address of Merck Sharp & Dohme Corp. is One Merck Drive, Whitehouse
Station, New Jersey 08889.
Consists of (i) 908,893 shares, (ii) 225,000 shares held in trusts for which Dr. Chen shares voting and investment control and (iii)
1,518,415 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 1,401,747 shares have vested
as of March 10, 2022.
Consists of (i) 80,000 shares held in the David V. Goeddel and Alena Z. Goeddel 2004 Trust, (ii) 110,000 shares held in the Alena Z.
Goeddel Irrevocable Trust, (iii) 55,520 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which
55,520 shares have vested as of March 10, 2022 and (iv) the shares described in footnote (1) above.
Consists of 80,717 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 68,417 shares have
vested as of March 10, 2022.
Consists of 54,229 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 37,763 shares have
vested as of March 10, 2022.
Consists of (i) 7,000 shares and (ii) 118,520 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of
which 118,520 shares have vested as of March 10, 2022.
Consists of (i) 3,462,648 shares held of record by Rho Ventures V, L.P., (ii) 304,018 shares held of record by Rho Ventures V Affiliates
L.L.C. and (iii) 55,520 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 55,520 shares have
vested as of March 10, 2022. Mr. Leschly is a managing member of Rho Capital Partners LLC, which is the managing member of the
general partner of Rho Ventures V, L.P. and of the managing member of Rho Ventures V Affiliates L.L.C.
Consists of 248,333 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 184,790 shares have
vested as of March 10, 2022.
Consists of 316,666 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 141,666 shares have
vested as of March 10, 2022.
Consists of 233,333 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 156,249 shares have
vested as of March 10, 2022.
Consists of (i) 2,769,168 shares held in trust for which Mr. Rieflin serves as trustee and shares voting and investment control, (ii) 5,172
shares purchased under the Company’s ESPP and (iii) 376,666 shares issuable pursuant to options exercisable within 60 days of
March 10, 2022, of which 332,082 shares have vested as of March 10, 2022.
Consists of (i) 97,654 shares held in trust for which Dr. Woodhouse serves as trustee and shares voting and investment control and (ii)
1,649,846 shares issuable pursuant to options exercisable within 60 days of March 10, 2022, of which 1,374,844 shares have vested
as of March 10, 2022.
Consists of (i) 26,819,953 shares held of record or beneficially owned by our executive officers and directors as a group and (ii)
4,707,765 shares issuable pursuant to options exercisable by our executive officers and directors as a group within 60 days of March
10, 2022, of which 3,927,118 shares have vested as of March 10, 2022.
52
HOUSEHOLDING OF PROXY MATERIALS
We have adopted a procedure commonly referred to as “householding.” Under this procedure, we may deliver a
single copy of the Notice of Internet Availability and, if you requested printed versions by mail, this Proxy Statement
and the Annual Report on Form 10-K for the year ended December 31, 2021 to multiple stockholders who share the
same mailing address. This delivery method will not be used if we receive contrary instructions from one or more of
the stockholders sharing a mailing address. This procedure reduces the environmental impact of our annual
meetings, reduces our printing and mailing costs and potentially means extra convenience for stockholders. Upon
written or oral request, we will deliver promptly a separate copy of the Notice of Internet Availability and, if you
requested printed versions by mail, this Proxy Statement and the Annual Report on Form 10-K for the year ended
December 31, 2021 to any stockholder that elects not to participate in householding.
To receive, free of charge, a separate copy of the Notice of Internet Availability and, if you requested printed
versions by mail, this Proxy Statement or the Annual Report on Form 10-K for the year ended December 31, 2021,
or separate copies of any future notice, proxy statement or annual report, you may write or call us at the following
mailing address or phone number:
Secretary
NGM Biopharmaceuticals, Inc.
333 Oyster Point Boulevard
South San Francisco
California 94080
Phone: (650) 392-1768
If you are receiving more than one copy of the proxy materials at a single mailing address and would like to
participate in householding, please contact the bank, broker or other nominee that holds your shares to request
information about eliminating duplicate mailings.
53
STOCKHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING
To be considered for inclusion in our proxy materials for our 2023 annual meeting of stockholders, your proposal
must be submitted in writing by December 8, 2022 to our Secretary at 333 Oyster Point Boulevard, South San
Francisco, California 94080, and you must comply with all applicable requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended, or the Exchange Act. However, if the 2023 annual meeting
of stockholders is advanced by more than 30 days prior to or delayed by more than 30 days after May 18, 2023,
then the deadline will be a reasonable time prior to the time we begin to print and send our proxy materials.
Pursuant to our bylaws, if you wish to submit a proposal (including a director nomination) at the 2023 annual
meeting of stockholders that is not to be included in next year’s proxy materials, you must do so not later than the
close of business on February 17, 2023 and no earlier than the close of business on January 18, 2023; provided,
however, that if next year’s annual meeting is advanced by more than 30 days prior to or delayed by more than 30
days after May 18, 2023 your proposal must be submitted not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of business on the 90th day prior to such annual meeting
or the 10th day following the day on which public announcement of such meeting is first made. You are advised to
review our bylaws, which contain additional requirements about advance notice of stockholder proposals and
director nominations. In addition, as to any proposal that a stockholder intends to present at the 2023 annual
meeting other than by inclusion in our proxy statement for the 2023 annual meeting of stockholders, the proxy
solicited by our Board of Directors for the 2023 annual meeting will confer discretionary voting authority with respect
to (i) any proposal for which we have not been provided with timely notice pursuant to the bylaws and (ii) any
proposal for which we have been provided with timely notice pursuant to the bylaws, unless the stockholder solicits
proxies with respect to the proposal to the extent required by Rule 14a-4(c)(2) promulgated under the Exchange
Act.
In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules
(once effective), stockholders who intend to solicit proxies in support of director nominees other than the Company’s
nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no
later than March 19, 2023. Please note that the notice requirement under Rule 14a-19 is in addition to the
applicable notice requirements under the advance notice provisions of our bylaws as described above.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting.
If any other matters are properly brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Valerie Pierce
Valerie Pierce
Secretary, Senior Vice President, General Counsel and
Chief Compliance Officer
April 6, 2022
A copy of our Annual Report on Form 10-K for the year ended December 31, 2021 is available without
charge upon written request to: Secretary, NGM Biopharmaceuticals, Inc., 333 Oyster Point Boulevard,
South San Francisco, California 94080. CARD IS VALID fiduciary, please
ch. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
54
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number: 001-38853
NGM BIOPHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
26-1679911
(I.R.S. Employer Identification No.)
333 Oyster Point Boulevard
South San Francisco, California 94080
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (650) 243-5555
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class of Securities Registered
Trading Symbol
Name of Each Exchange on Which
Registered
Common Stock, par value $0.001 per share
NGM
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2021, the last business day of the registrant’s most
recently completed second fiscal quarter, was approximately $755 million, calculated based on the closing price of the registrant’s common stock as reported by the
Nasdaq Global Select Market. Excludes an aggregate of 39,014,460 shares of the registrant’s common stock held as of such date by officers, directors and
stockholders that the registrant has concluded are or were affiliates of the registrant. Exclusion of such shares should not be construed to indicate that the holder of
any such shares possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is
controlled by or under common control with the registrant.
As of February 23, 2022, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 78,049,340.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders to be filed with the U.S. Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference in Part
III, Items 10-14 of this Annual Report on Form 10-K.
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NGM BIOPHARMACEUTICALS, INC.
2021 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . .
Principal Accounting Fees and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits, Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Unless the context suggests otherwise, references in this Annual Report on Form 10-K (the “Annual
Report”) to “us,” “our,” “NGM,” “NGM Biopharmaceuticals,” “we,” the “Company” and similar designations refer to
NGM Biopharmaceuticals, Inc. and, where appropriate, its subsidiary.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve risks, uncertainties and
assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those
expressed or implied by such forward-looking statements. The statements contained in this Annual Report on Form
10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but
not limited to, "aim," “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” "seek," “should,” “will,” “would” or the negative of those terms, and similar expressions that convey
uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained
herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking
statements in this Annual Report include, but are not limited to, statements about:
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the success, cost and timing of our product development activities and clinical trials and those of our
collaboration partner, Merck Sharp & Dohme Corp., or Merck, and the initiation of, enrollment in, availability
of data for and other events related to such clinical trials;
our (and in the case of any product candidate licensed by Merck, Merck’s) ability to obtain and maintain
regulatory approvals for aldafermin, MK-3655, NGM621, NGM707, NGM831, NGM438, NGM120 and any
of our future product candidates, and any related restrictions, limitations and/or warnings in the label of an
approved product candidate;
our belief that aldafermin may have the potential to be a treatment for non-alcoholic steatohepatitis, or
NASH, patients with moderate to advanced fibrosis;
our belief that NGM707 has the potential to reprogram ILT4- and ILT2-expressing myeloid cells to shift them
from a suppressive state that restricts anti-tumor immunity to a stimulatory state that may promote anti-
tumor immunity;
our belief that NGM831 has the potential to fight tumors by shifting myeloid cells from a suppressive state to
a stimulatory state and promote anti-tumor activity;
our belief that NGM438 has the potential to potently block the binding of all collagens to LAIR1 and to
address a key resistance mechanism that limits tumor responses to current immunotherapies;
our belief that NGM120 may reduce tumor growth and improve survival in syngeneic orthotopic pancreatic
tumor models;
our belief that NGM621 has the potential to reduce diseases progression in patients with geographic
atrophy;
our belief that MK-3655 has the potential to be a treatment for patients with NASH with early to moderate
fibrosis;
our belief regarding the impact of our product candidates’ side effects and our ability to effectively manage
these side effects;
our ability to obtain funding for our operations;
our plans to research, develop and commercialize our product candidates;
the commercialization of our product candidates, if approved;
our ability to attract additional collaborators with development, regulatory and commercialization expertise;
current and future agreements with third parties in connection with the potential commercialization of
aldafermin, NGM621, NGM120, NGM707, NGM831, NGM438 or any other future approved product;
the size and growth potential of the markets for our product candidates, and our ability to serve those
markets;
the rate and degree of market acceptance of our product candidates, as well as the reimbursement
coverage for our product candidates;
our beliefs with respect to the availability of the accelerated approval pathway for any marketing
applications that we and/or Merck may submit to the U.S. Food and Drug Administration;
the performance of, and our ability to obtain sufficient supply of clinical trial material in a timely manner
from, third-party suppliers and manufacturers;
our beliefs around the competitive landscape for our product candidates and the success of competing
therapies that are or may become available;
our ability to attract and retain key scientific, development and management personnel;
our estimates regarding future expenses, revenue, capital requirements and needs for additional financing,
particularly in light of Merck providing significantly more limited annual research funding beginning in 2022;
our expectations regarding our ability to obtain, maintain, protect and enforce intellectual property protection
for our product candidates; and
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the risks, uncertainties and other factors we identify elsewhere in this Annual Report on Form 10-K and in
our other filings with the U.S. Securities and Exchange Commission.
RISK FACTOR SUMMARY
Below is a summary of material factors that make an investment in our common stock speculative or risky.
Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of
the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we
face, can be found under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. The below summary
is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully
consider the risks and uncertainties described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form
10-K as part of your evaluation of an investment in our common stock.
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we have incurred net losses every year since our inception, we have no source of product revenue, we
expect to continue to incur significant and increasing operating losses and we may never become profitable;
all of our revenue for recent periods has been received from a single collaboration partner, Merck Sharp &
Dohme Corp., or Merck, and that revenue will be substantially lower beginning in 2022;
in order to complete the development and commercialization of our current and potential future product
candidates and to finance our other operations, we will require substantial additional capital that may not be
available to us on acceptable terms, or at all, and as a result, we may be required to delay, scale back or
discontinue development of our product candidates;
we need to successfully complete rigorous preclinical and clinical testing of our product candidates before
we can seek regulatory approval, and the regulatory approval processes of the U.S. Food and Drug
Administration and comparable foreign health authorities are lengthy and inherently unpredictable, and if we
are not successful at each step of the process, commercialization of our product candidates will be delayed
or prevented;
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our most advanced product candidates, NGM621, NGM120, aldafermin and MK-3655, are only in
Phase 2 development, may fail to demonstrate safety and efficacy in ongoing and future clinical
trials, may never achieve regulatory approval and may not be able to be successfully
commercialized due to competition or other factors;
similarly, clinical trials of our other product candidates, including the ongoing trial of NGM707, may
fail to produce positive results or to demonstrate safety and efficacy to the satisfaction of health
authorities;
aldafermin and MK-3655 are being developed for the treatment of nonalcoholic steatohepatitis, or NASH,
an indication for which there are no approved products, which makes it difficult to predict the timing, cost
and potential success of their clinical development and regulatory approval for the treatment of NASH, as
evidenced by the fact that our previously completed Phase 2b ALPINE 2/3 trial of aldafermin in patients with
NASH and liver fibrosis stage 2 or 3, or F2 or F3, did not meet its primary endpoint and, as a result, we
decided to suspend further development of aldafermin in patients with F2/F3 NASH;
we may not be able to obtain and maintain the relationships with our current collaborator, Merck, potential
future collaborators and other third parties that are necessary to develop, manufacture and commercialize
some or all of our product candidates;
◦ we depend on our collaboration with Merck for revenue and for the development and
commercialization of our product candidates that remain within the scope of the collaboration;
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in the future we may depend on collaborations with other third parties for revenue and for the
development and commercialization of our product candidates and such collaborations involve
numerous risks, any of which could materially and adversely affect our business and financial
condition; and
we rely completely on contract manufacturers for the manufacture of our product candidates and
the process of manufacturing, and conducting release testing for, our biologic product candidates is
complex, highly regulated and subject to many risks, including our current reliance on single source
manufacturers and suppliers, difficulties in supply chain, including procuring raw materials and
components and the availability of manufacturing slots, and difficulties in production, including
scaling up and validating initial production, contamination, equipment failure, improper installation
or operation of equipment, vendor or operator error, turnover of qualified staff or improper storage
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conditions, or difficulties with quality control, product stability or quality assurance testing, any of
which could substantially increase our costs and limit supply of our product candidates and any
future products needed for clinical trials and commercialization;
the COVID-19 pandemic continues to adversely impact our business and operations, as well as the
businesses or operations of our contract manufacturers, clinical research organizations, clinical trial sites or
other third parties with whom we conduct business;
our future success depends in part on our ability to attract and retain highly skilled employees, including
members of our current senior management team, especially our Chief Scientific Officer, Dr. Jin-Long Chen,
and during the ongoing COVID-19 pandemic we have experienced employee attrition at rates higher than
we have experienced historically, which may continue or be exacerbated and could have a negative impact
on our productivity;
our product candidates other than aldafermin and MK-3655 are currently manufactured at a facility in
Lithuania. The invasion of Ukraine by Russia and the retaliatory measures taken or that may be taken by
the United States, NATO and others create global security concerns, including the possibility of expanded
regional or global conflict, and are likely to have short-term and likely longer-term negative impacts on
regional and global economies, any or all of which could disrupt our supply chain and adversely affect our
ability to conduct ongoing and future clinical trials of our product candidates and our ability to raise capital
on favorable terms;
we face substantial competition, which may result in others discovering, developing or commercializing
products before, or more successfully than, us;
our success depends in significant part upon our ability to obtain and maintain intellectual property
protection for our products and technologies;
we may not successfully identify new product candidates to expand our development pipeline;
our principal stockholders, including entities affiliated with The Column Group, Merck and our management,
own a substantial percentage of our stock and will be able to exert significant control over matters subject to
stockholder approval;
we or third parties we rely on or partner with could experience a cybersecurity incident that could harm our
business;
the market price of our common stock has been and may continue to be volatile, and you could lose all or
part of your investment; and
we continue to incur increased costs as a result of operating as a public company and our management
devotes substantial time to public company compliance initiatives. We are obligated to develop and
maintain proper and effective internal control over financial reporting, and, beginning with this Annual Report
on Form 10-K, we are required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act. If we are not able to comply with the requirements of Section 404 of the
Sarbanes-Oxley Act in a timely manner, or if we or our independent registered public accounting firm
identify deficiencies in our internal control over financial reporting that are deemed to be material
weaknesses, investors may lose confidence in our operating results and the price of our common stock
could decline.
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Item 1.
Business.
PART I
Overview of Our Business
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-
changing medicines for people whose health and lives have been disrupted by disease. Our biology-centric drug
discovery approach aims to seamlessly integrate interrogation of complex disease-associated biology and protein
engineering expertise to unlock proprietary insights that are leveraged to generate promising product candidates
and enable their rapid advancement into proof-of-concept studies. As explorers on the frontier of life-changing
science, we aspire to operate one of the most productive research and development engines in the
biopharmaceutical industry. Currently, we have seven disclosed programs, including four in Phase 2 or 2b studies,
across three therapeutic areas: cancer, retinal diseases and liver and metabolic diseases. Our seven most
advanced product candidates and their stages of development are presented below:
1 Phase 1a cohort = monotherapy; Phase 1b cohort = in combination with standard-of-care treatment of gemcitabine + Nab-paclitaxel
2 At NGM’s option at Phase 3
NASH = non-alcoholic steatohepatitis; FGF = fibroblast growth factor; KLB = klotho beta; GFRAL = glial cell-derived neurotrophic factor receptor
alpha-like; ILT2 = immunoglobulin-like transcript 2; ILT4 = immunoglobulin-like transcript 4; ILT3 = immunoglobulin-like transcript 3; LAIR1 =
Leukocyte-associated immunoglobulin-like receptor 1; F2/F3/F4 = stage 2 or 3 or 4 liver fibrosis; PoC = proof of concept
For more detailed information about our product candidate pipeline and targeted therapeutic areas, see “ —
Key Therapeutic Areas and Our Pipeline Programs.”
Our Mission and Strategy
Our mission is to translate complex, powerful biology with rigor and urgency into life-changing medicines.
Our strategy is built on a straightforward central premise: create an environment that both allows drug discovery
research to thrive by focusing on powerful human biology unconstrained by therapeutic area or technology
approach and remain grounded in the singular motivation of delivering impactful medicines to address critical unmet
or underserved needs of patients suffering from grievous diseases. All therapeutic candidates in our pipeline have
been generated by our in-house discovery engine, with a therapeutic area-agnostic mindset, always led by biology
and motivated by patient need.
Key elements of our strategy are:
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Systematically and empirically interrogate complex disease-associated biology. We employ
unbiased, systematic investigations of complex disease-associated biology in pursuit of uncovering novel
mechanisms of action and identifying proprietary insights into critical biological processes and pathways
demonstrating powerful biological effects.
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Remain biologics-focused, but modality flexible, leveraging a versatile approach to designing
unique solutions for complex problems. Building on these biological insights, we deploy our protein and
antibody engineering expertise to create product candidates designed to be highly specific, to modulate
targeted processes and to boost therapeutic potential. We have an unbiased antibody generation approach
and use an array of modalities and technologies to optimize the properties of our antibody product
candidates and native proteins.
Urgently advance therapies to meet unmet needs. We seek to move promising product candidates we
have discovered and developed rapidly into proof-of-concept clinical studies and, if warranted, late-stage
development.
Build a diversified pipeline, honed with disciplined prioritization. We seek to allocate our capital
efficiently and strategically and fund our portfolio based on each program’s scientific and other merits. Our
discipline has been demonstrated by our decision not to proceed with development activities on multiple
potentially viable product candidates for portfolio management reasons to concentrate our resources on
what we consider our most promising product candidates.
Recruit and retain industry-leading research and development talent. Our talented and experienced
team is the foundation of our company. We aim to attract outstanding individuals with expertise in discovery
sciences, protein and antibody engineering, pharmacology, translational medicine and preclinical and
clinical development who are committed to sustaining and enhancing our scientific excellence, rigor and
innovation, our creative clinical development and our high level of productivity.
Pursue collaborations with strategic partners when beneficial. Partnering has been and is expected to
continue to be a key component of our strategy. For example, our collaboration with Merck Sharp & Dohme
Corp., or Merck, described in more detail below, has historically provided us with robust financial support
that enabled us to broaden and accelerate our research efforts and to develop more product candidates for
major indications than we could have advanced on our own. Given the breadth of opportunities that have
been, and may in the future be, produced by our prolific discovery engine, we may decide to pursue
additional strategic partners to progress, in whole or in part, some of our wholly-owned product candidates
and/or commercialize any resulting approved products.
COVID-19 Business Update
For information about risks and uncertainties related to the COVID-19 pandemic that may impact our
business, financial condition and results of operations, see the section titled “Risk Factors” in Part I, Item 1A of this
Annual Report on Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Overview” in Part II, Item 7 of this Annual Report on Form 10-K.
Key Therapeutic Areas and Pipeline Programs
Our discovery engine supports our ability to span multiple therapeutic areas. Our current diverse pipeline of
seven product candidates can be divided into three therapeutic areas: oncology, retinal diseases and liver and
metabolic diseases.
Therapeutic Area: Oncology
Cancer Disease Overview
Cancer is a leading cause of death globally and was responsible for an estimated almost ten million deaths
in 2020. There were an estimated over 19 million newly diagnosed cancer cases around the world in 2020,
excluding non-melanoma skin cancer. By 2040, the number of new cancer cases globally per year is expected to
rise to 29.5 million and the number of cancer-related deaths per year to grow to 16.4 million. Cancer was the
second leading cause of death in the United States in 2020, causing approximately 600,000 deaths that year.
The unmet medical need for pancreatic cancer is high. About 60,000 patients were estimated to be
diagnosed with pancreatic cancer in the United States in 2021. Pancreatic cancer is seldom detected early when it
is most curable because symptoms often do not develop until after it has spread to other organs. The one-year
survival rate across all stages of pancreatic ductal adenocarcinoma, which accounts for more than 90% of all
pancreatic tumors, is 18%, reflecting the fact that tumors progress rapidly and the advanced stage of disease at
diagnosis. Prognosis is also impacted by the high incidence of cancer-related cachexia in pancreatic cancer
patients.
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Cancer-related cachexia is a disorder that causes extreme weight loss and muscle wasting that is
debilitating and life-threatening and for which there is no therapy approved by the U.S. Food and Drug
Administration, or FDA, or the European Medicines Agency, or EMA. Cachexia is a common co-morbidity linked to
many cancers and is associated with increased hospitalization and shortened survival compared to patients with
cancer who do not exhibit cachexia. Cachexia is estimated to be the direct cause of approximately 30% of cancer
deaths globally and is estimated to affect 60 to 80% of advanced cancer patients. Furthermore, studies have shown
that patients with cancer who do not experience body weight loss have an improved prognosis. While cachexia can
occur in all types of cancer, particularly high incidence rates are observed in pancreatic, non-small cell lung and
gastric cancers, at 54%, 36% and 67% of patients, respectively.
NGM707, NGM831 and NGM438: Our Myeloid Reprogramming and Checkpoint Inhibition Portfolio Designed
to Enhance Anti-Tumor Immunity
Over the past decade, advances in cancer immunotherapy have driven significant improvements in clinical
outcomes, especially in certain cancer types that are immunogenic, or capable of provoking an immune response.
In particular, T cell checkpoint inhibitors, including immune checkpoint inhibitors targeting Programmed Cell Death
Protein 1 and Programmed Cell Death Protein Ligand 1, or PD-1 and PD-L1, respectively, are designed to inhibit
immune checkpoint pathways. When turned “on,” these pathways act as “brakes” on anti-tumor immune responses,
enabling tumors to evade detection and destruction by the immune system, and T cell checkpoint inhibitors
essentially work to “release” the “brakes” by turning off those pathways. However, the overall response rate to PD-1/
PD-L1 inhibitors is typically only 20% to 30% and many cancer patients who initially experience a full or partial
response using T cell checkpoint inhibitors may eventually experience cancer progression.
We have focused our cancer research on an emerging area of immuno-oncology research known as
myeloid checkpoint inhibition. The tumor microenvironment, or TME, is composed of both cancerous and non-
malignant cells. There is an abundance of myeloid cells present in the TME of many tumor types. While myeloid
cells play a critical role in the immune system, in the tumor they can contribute to the inhibition of anti-tumor immune
responses using multiple mechanisms, including suboptimal T-cell priming, T-cell suppression and physical
exclusion of immune cells from the cancer cells. In essence, they serve as myeloid checkpoints, keeping the
“brakes on” and enabling tumors to evade the immune system and drive resistance to cancer therapies. Our focus
is on promoting myeloid reprogramming - switching myeloid cells in the TME from an immunosuppressive state to a
stimulatory state that enhances anti-tumor immunity by releasing the “brake” and allowing these myeloid cells to
potentially play a pivotal role in anti-tumor activity by acting to both kill cancer cells directly as well through the
recruitment and activation of tumor-directed T cells.
We have built a portfolio of three myeloid checkpoint inhibitor product candidates, NGM707, NGM831 and
NGM438, targeting four receptors whose elevated expression in myeloid cells in the TME has been associated with
poor patient responses to T cell checkpoint inhibitors. NGM707, NGM831 and NGM438 are wholly-owned
programs. Although all three programs were originally researched and developed under a collaboration agreement
with funding from Merck, we have the sole right, at our sole discretion, to independently research, develop and
commercialize each of them, at our sole expense after March 2022, subject to the payment to Merck of low single-
digit royalties on commercial sales of any resulting products. See “—Our Collaboration with Merck.”
NGM707: ILT2/ILT4 Dual Antagonist Antibody
Overview of NGM707
NGM707 is a novel dual antagonist monoclonal antibody that is designed to improve patient immune
responses to tumors by inhibiting both Immunoglobulin-like transcript 2, or ILT2 (also known as LILRB1), and
Immunoglobulin-like transcript 4, or ILT4 (also known as LILRB2). ILT2 and ILT4 are expressed on myeloid cells in
the TME and are upregulated on macrophages in the TME of certain patients with cancer who are non-responders
to T cell checkpoint inhibitor therapy and, therefore, may serve as T cell checkpoint inhibitor resistance
mechanisms. We believe NGM707 has the potential to reprogram ILT4- and ILT2-expressing myeloid cells to shift
them from a suppressive state that restricts anti-tumor immunity to a stimulatory state that may promote anti-tumor
immunity. Blocking ILT2 also may reverse inhibition of ILT2-expressing lymphoid cells to further stimulate anti-tumor
immune responses.
Clinical Development of NGM707
In June 2021, we initiated a Phase 1/2 clinical trial that will evaluate NGM707 as a monotherapy and in
combination with KEYTRUDA® (pembrolizumab) for the treatment of patients with advanced solid tumors. We
expect to enroll approximately 180 patients in this trial. The open-label, Phase 1 portion of the trial is designed to
evaluate the safety, tolerability and pharmacokinetics of NGM707 and to obtain preliminary evidence of any anti-
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tumor activity. The Phase 1a cohort of the trial is evaluating NGM707 as a monotherapy. The Phase 1b cohort will
evaluate NGM707 in combination with pembrolizumab in patients with advanced solid tumors. Initial data from the
Phase 1a portion of the trial is expected in the second half of 2022. The Phase 1 portion of the trial is expected to
be followed by a Phase 2 dose-expansion in cohorts of specific tumor types.
NGM707 Patent Portfolio
As of December 31, 2021, we did not own or have a license to any issued patent that covers NGM707.
However, NGM707 and related compositions-of-matter and methods of use are disclosed in pending U.S. and
international patent applications we have filed. Any patent that may issue from these applications or any related
applications we file is expected to expire no earlier than 2041, including any patent issued in the United States, if
any, not including any patent term adjustments and any patent term extensions.
NGM707 Competition
We believe NGM707 is the first and only candidate currently in development targeting both ILT2 and ILT4.
However, there are several products in development that target either ILT4 or ILT2. We are aware of three clinical
stage anti-ILT4 programs from Merck, Jounce Therapeutics, Inc., or Jounce, and Immune-Onc Therapeutics, Inc., or
Immune-Onc. In September 2020, Merck presented interim findings from a Phase 1 dose-escalation study
evaluating its investigational anti-ILT4 therapeutic candidate, MK-4830. Jounce is developing an anti-ILT4
monoclonal antibody, JTX-8064, and expects to have clinical data from its Phase 1 trial in 2022. Immune-Onc
initiated a Phase 1 study of its anti-ILT4 therapeutic candidate, IO-108, in September 2021. OncoResponse, Inc.,
ImmunOS Therapeutics AG, Celldex Therapeutics, Inc. and Invectys Inc. have preclinical programs targeting ILT4.
Biond Biologics Ltd., or Biond, has an antagonist antibody targeting ILT2, BND-22, which has been licensed by
Sanofi, and a Phase 1 trial commenced in 2021. Jounce also has a preclinical program targeting ILT2. Finally,
Adanate has an antibody, ADA-01, in preclinical development targeting LILRB family receptors that may include
ILT4 and ILT2.
NGM831: ILT3 Antagonist Antibody
Overview of NGM831
NGM831 is a novel antagonist antibody that is designed to block the interaction of Immunoglobulin-like
transcript 3, or ILT3 (also known as LILRB4), with fibronectin, a key component of the tumor stroma, as well as other
cognate ligands. The tumor stroma refers to the non-malignant, non-immune components of the tumor. ILT3 is a
fibronectin-binding inhibitory immune receptor that receives signals from the extracellular matrix to directly promote
myeloid cell suppression. ILT3 is expressed on a variety of immune cells including tumor-associated myeloid cells,
with particularly high expression on tolerogenic dendritic cells, or DCs, myeloid-derived suppressor cells and M2
macrophages, and high ILT3 expression is associated with poor survival. Moreover, fibronectin has been shown to
be upregulated in multiple cancers and associated with tumor progression. For tumors in which both ILT3 and
fibronectin are upregulated, the ILT3-fibronectin pathway may act as a stromal checkpoint to repress myeloid cell
function and inhibit anti-tumor immunity. By inhibiting ILT3's interaction with fibronectin and its other ligands, we
believe NGM831 has the potential to mobilize a patient's own immune system to fight tumors by shifting myeloid
cells from a suppressive state to a stimulatory state and promoting anti-tumor activity. Our scientists have made
discoveries related to this pathway, including the discovery of fibronectin as ILT3’s functional ligand, as described in
a publication in Cancer Immunology Research, a journal of the American Association for Cancer Research.
Clinical Development of NGM831
We anticipate initiating first-in-human testing of NGM831 in patients with advanced solid tumors in the first
quarter of 2022.
NGM831 Patent Portfolio
As of December 31, 2021, we did not own or have a license to any issued patent that covers NGM831.
However, NGM831 and related compositions-of-matter and methods of use are disclosed in pending U.S. and
international patent applications we have filed. Any patent that may issue from these or related applications or any
related applications we file is expected to expire no earlier than 2040, including any patent issued in the United
States, if any, not including any patent term adjustments and any patent term extensions.
NGM831 Competition
We believe NGM831 is the only antibody being pursued clinically for the treatment of solid tumors that is
intended to block the interaction of Immunoglobulin-like transcript 3, or ILT3, with fibronectin, as well as other
cognate ligands. However, there are other programs that target ILT3 in the clinic. Merck, Immune-Onc and
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Carbiogene Therapeutics Co. Ltd., or Carbiogene, all have clinical stage anti-ILT3 programs. Merck’s anti-ILT3
program, MK-0482, is currently in Phase 2 development. Both Immune-Onc and Carbiogene’s ILT3 programs,
IO-202 and ILT3 CAR-T, are in Phase 1 development for acute myeloid leukemia. We are aware of four additional
preclinical anti-ILT3 candidates in development: Biond has BND-35, Jounce has JTX-1484, and Immune-Onc has
both an ILT3 CAR-T and an ILT3 bispecific under development.
NGM438: LAIR1 Antagonist Antibody
Overview of NGM438
NGM438 is a novel antagonist antibody that is designed to inhibit leukocyte-associated immunoglobulin-like
receptor 1, or LAIR1, and thereby promote anti-tumor immune responses. NGM438 has the potential to potently
block the binding of all collagens to LAIR1, including tumor-derived collagens. Collagens produced by the tumor
stroma are believed to bind LAIR1 to create an immuno-suppressive TME. The interaction of collagens from the
tumor stroma with LAIR1 on immune cells represents a stromal checkpoint that restrains anti-tumor immune
responses. Reinvigoration of these collagen-suppressed immune cells by blocking the binding of collagens to LAIR1
may address a key resistance mechanism that limits tumor responses to current immunotherapies.
Clinical Development of NGM438
We anticipate initiating first-in-human testing of NGM438 in patients with advanced solid tumors in the
second quarter of 2022.
NGM438 Patent Portfolio
As of December 31, 2021, we did not own or have a license to any issued patent that covers NGM438.
However, NGM438 and related compositions-of-matter and methods of use are disclosed in pending U.S. and
international patent applications we have filed. Any patent that may issue from these applications or any related
applications we file is expected to expire no earlier than 2041, including any patent issued in the United States, if
any, not including any patent term adjustments and any patent term extensions.
NGM438 Competition
We are aware of only two other anti-LAIR1 antibodies currently in development, Immune-Onc’s preclinical-
stage asset, IO-106, and NextCure, Inc.'s, or NextCure's, NC525. Nextcure also has a Phase 1 product candidate in
the clinic, NC410, a LAIR2 fusion protein designed to mimic the natural decoy effects of LAIR2, which binds to
collagens and blocks the activity of LAIR1.
NGM120: The Potential of GDF15/GFRAL Inhibition to Treat Cancer and Cancer-Related Cachexia
Our scientists have made several discoveries related to growth differentiation factor 15, or GDF15, including
identifying its cognate receptor glial cell-derived neurotrophic factor receptor alpha-like, or GFRAL. GFRAL is
expressed in a specific region of the hindbrain, partially outside the blood brain barrier. Our preclinical research
suggests the central role of the GDF15/GFRAL pathway in promoting tumor-associated appetite suppression,
metabolic regulation and immune modulation. In vivo screening of human genes shows that GDF15 expression
leads to an outsized effect on weight loss and, in animal models, elevated serum levels of GDF15 are a regulator of
immune function, metabolism and feeding. In addition, elevated serum levels of GDF15 have been shown to be
associated with cachexia. Evidence has shown that serum levels of GDF15 are elevated in patients across a
number of tumor types and are associated with a worse prognosis in prostate, colorectal, esophageal and ovarian
cancers. As a result of our identification of GFRAL, we developed novel insights into the mechanism of action of
GDF15 and the structure and function of the GDF15/GFRAL interaction.
Overview of NGM120
NGM120 is an antagonist antibody that binds GFRAL and is designed to block the effects of elevated serum
levels of GDF15. We designed NGM120 as a potent, humanized monoclonal antibody inhibitor of GFRAL with the
potential for once-monthly or less frequent dosing. Preclinical studies suggest that NGM120 may reduce tumor
growth and improve survival in syngeneic orthotopic pancreatic tumor models.
Although NGM120 was originally researched and developed under a collaboration agreement with funding
from Merck, we have the sole right, at our sole discretion, to independently research, develop and commercialize
NGM120, at our sole expense after March 2022, subject to the payment to Merck of low single-digit royalties on
commercial sales of any resulting products. See “—Our Collaboration with Merck.”
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Clinical Development of NGM120
We are currently conducting the Phase 1/2 PINNACLES clinical trial to assess NGM120’s effect on cancer
and cancer-related cachexia in patients with select advanced solid tumors and metastatic pancreatic cancer. In
September 2021, at the European Society for Medical Oncology, or ESMO, Virtual Congress, we reported
preliminary findings from two Phase 1 dose-escalation cohorts of the PINNACLES trial, including a Phase 1a cohort
evaluating NGM120 as a monotherapy in patients with select advanced solid tumors and a Phase 1b cohort
evaluating NGM120 in combination with gemcitabine and Nab-paclitaxel in patients with metastatic pancreatic
cancer. The preliminary results reported at ESMO showed that NGM120 was well tolerated with no dose-limiting
toxicities and provided encouraging initial signals of anti-cancer activity in patients with advanced solid tumors. We
plan to report additional data from the Phase 1a and Phase 1b cohorts of the PINNACLES trial in the second half of
2022.
We are continuing enrollment in the Phase 2 portion of the ongoing PINNACLES trial. This Phase 2 portion
of the PINNACLES trial is to assess NGM120 in combination with gemcitabine and Nab-paclitaxel as first-line
treatment in patients with metastatic pancreatic cancer.
NGM120 Patent Portfolio
As of December 31, 2021, we owned two issued patents in the United States, as well as one issued foreign
patent covering NGM120 and related compositions-of-matter and methods of use. We also own pending patent
applications covering similar subject matter in the United States and multiple jurisdictions outside of the United
States. The issued patents are expected to expire in 2037, not including any patent term adjustments and any
patent term extensions.
NGM120 Competition
Given the recent identification of GFRAL, we are not aware of any publicly disclosed program other than
NGM120 that targets GFRAL. There are three recently initiated Phase 1 programs we are aware of that target
GDF15: AVEO Pharmaceuticals, Inc.’s AV-380 is in a Phase 1 trial in healthy volunteers, Pfizer’s monoclonal
antibody PF-06946860 is in Phase 1 trials in solid tumors assessing various cachexia-related measures and anti-
tumor effects and CatalYm GmbH, or CatalYm, has initiated a Phase 1 clinical trial of CTL-002 in Europe to explore
the treatment of cancer in solid tumors. AstraZeneca also has a preclinical program, AZD8853, an antibody
targeting GDF15, and CatalYm has an additional discovery program targeting the GDF-15 pathway.
The current standard of care for first-line metastatic pancreatic cancer is chemotherapy with gemcitabine
and Nab-paclitaxel or a combination chemotherapy regimen referred to as FOLFIRINOX. No new treatments have
been FDA-approved for this population since Abraxane® (paclitaxel protein bound), or Nab-paclitaxel, in 2013 and
several programs have failed in Phase 3 development in recent years. We are aware of three programs in Phase 3
trials in combination with chemotherapy in first-line metastatic pancreatic cancer: Novartis’ NIS793, a monoclonal
antibody targeting transforming growth factor beta, or TGFβ, FibroGen Inc.’s pamrevlumab targeting connective
tissue growth factor, and Novocure GmbH’s Tumor Treating Fields device. Earlier in the pipeline, over 50 therapies
are in Phase 1 and Phase 2 trials for pancreatic cancer, spanning multiple mechanisms of action, including immune
checkpoint inhibitors, cancer vaccines, tyrosine kinase inhibitors and chemokine receptor antagonists.
Therapeutic Area: Retinal Diseases
Geographic Atrophy Disease Overview
Geographic atrophy, or GA, is an advanced form of age-related, dry macular degeneration characterized by
progressive retinal degeneration associated with irreversible loss of vision and is a major cause of blindness for
elderly patients. GA afflicts over one million patients in the United States and approximately five million patients
worldwide. One in six people with GA becomes legally blind within six years of diagnosis. The decline in visual
function experienced by patients with GA is typically bilateral and directly related to the progressive loss of retinal
photoreceptors, retinal pigment epithelium, or RPE, and choriocapillaris in the macular, or central, region of the
retina. GA disease progression, and the patient’s accompanying visual decline, can have significant consequences
for the patient, which can include the inability to drive, read and perform activities of daily living, a reduction in
quality of life and increased likelihood of accidents or injuries and loss of independence. Dysregulated activation of
the complement system, a key component of the immune system, including complement C3, has been implicated in
the onset and progression of GA. There are currently no medicines approved by the FDA or the EMA for the
treatment of GA.
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NGM621: A Potential Treatment for Geographic Atrophy
NGM621 is a proprietary humanized Immunoglobulin 1, or IgG1, monoclonal antibody engineered to
potently bind to, and be a long-acting inhibitor of, complement C3 activity. Human genetics and histopathological
data strongly suggest that overactivation of the complement system is linked to the development and progression of
GA and causes chronic inflammation, cell injury and death of retinal photoreceptors, RPE and choriocapillaris,
leading to irreversible vision loss. The evidence suggests that variants in the complement pathway account for the
majority of the known genetic risk for GA. In humans, histopathological analysis of eyes afflicted with GA show a
deposition of complement proteins, including C3, on and around photoreceptors and RPE cells preceding their
degeneration. In addition, encouraging preclinical and clinical data support inhibition of complement C3 as a
promising therapeutic strategy in GA.
Complement C3 is the most upstream point of convergence for all three main complement activation
pathways, the classical, lectin and alternative pathways, and acts as a key substance to promote the complement
cascade downstream activation. NGM621 inhibits complement activation at the level of C3, which affords the
opportunity to block an array of potentially detrimental downstream effects.
NGM621 is within the scope of our current collaboration with Merck, and Merck has a one-time option to
license NGM621 and its related compounds upon completion of the Phase 2 CATALINA trial described below (either
alone or bundled with all of the other ophthalmology compounds and their respective related compounds included
within the scope of the current collaboration with Merck). See “—Our Collaboration with Merck.”
In February 2022, NGM621 received Fast Track designation from the FDA for GA secondary to age-related
macular degeneration.
Clinical Development of NGM621
NGM621 is being tested in the ongoing Phase 2 CATALINA clinical trial to evaluate its effects on disease
progression in patients with GA. In 2021, we completed enrollment in the CATALINA trial, enrolling 320 patients.
The CATALINA trial was designed to be a Phase 3-supportive or -enabling study. The primary objectives of this
multicenter, randomized, double-masked, sham-controlled trial are to evaluate the efficacy and safety of NGM621
when given every four weeks or every eight weeks via IVT injections compared to sham control. Patients are
randomized to one of four treatment groups in a ratio of 2:1:2:1 to receive IVT injections of NGM621 or sham every
four weeks or every eight weeks for a total of 52 weeks and then monitored for an additional four weeks upon
treatment completion for a total study duration of 56 weeks.
The primary efficacy endpoint is the rate of change in GA lesion area, as measured by fundus
autofluorescence imaging, over 52 weeks of treatment. The primary safety endpoints will evaluate the incidence and
severity of ocular and systemic adverse events from treatment with NGM621 compared to sham control. We expect
to report topline data from the CATALINA trial in the fourth quarter of 2022. We plan to use the CATALINA trial
results and guidance from the FDA to inform NGM621 Phase 3 planning and design.
Data from a Phase 1 trial we conducted showed that NGM621 was well tolerated, with no patients
experiencing serious adverse events, or SAEs, drug-related adverse events,
inflammation,
endophthalmitis or choroidal neovascularization. Ocular adverse events observed were mild in severity and
representative of those commonly associated with IVT injections. No vision-related safety signals were detected.
intraocular
NGM621 Patent Portfolio
As of December 31, 2021, we owned one issued United States patent covering NGM621, and the product
and related compositions-of-matter and methods of use are disclosed and claimed in other patent applications
pending in the United States and in multiple jurisdictions outside of the United States. The current patent and any
patent that may issue from any of the pending applications would be expected to expire no earlier than 2039, not
including any patent term adjustments and any patent term extensions.
Geographic Atrophy Competition
Current Treatments
There are currently no medicines approved by the FDA or the EMA for the treatment of GA. Patients with
GA have very limited options outside of clinical trial participation. They are observed by their ophthalmologist or
retina specialist for the purposes of documenting disease worsening, through imaging and visual acuity testing, and
to monitor for any conversion to wet age-related macular degeneration, or wet AMD (which is treatable with anti-
VEGFs). Some patients with GA take AREDS formula vitamins which have been shown to reduce the risk of
progression to advanced forms of AMD; however, results from the AREDS trials have shown that there is no benefit
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to reducing the rate of existing GA progression. As their vision declines, patients with GA can receive visual
rehabilitation and instruction on adaptive tools, like magnifiers, to help manage their disability as well as possible.
Treatments in Development
Given the large market opportunity in GA, there are multiple programs in clinical development for GA. The
landscape can be subdivided into either agents targeting the complement pathway or agents targeting other
pathways implicated in AMD pathogenesis and different modes of action. Most treatment approaches for GA have
focused on reducing the rate of GA lesion area progression, as assessed by retinal imaging. For the complement-
targeted approaches, some therapeutics focus on inhibiting key points in the complement pathway with targeted
inhibitors, while others are replacing regulatory proteins that modulate the complement cascade activity. Additionally,
the product administration approaches vary and include oral pills, subcutaneous injections, IVT injections and
surgical approaches like gene therapy. GA is a chronic, progressive disease and, currently, many believe that
slowing the progression of disease requires treatment periods of at least 12 months to show a meaningful treatment
benefit relative to sham control.
Multiple complement inhibition therapies are under clinical evaluation in patients with GA, although to date
no GA treatment has received regulatory approval from the FDA or the EMA. Apellis Pharmaceuticals, Inc., or
Apellis, recently presented top-line results from two Phase 3 clinical trials of its product candidate, pegcetacoplan
(an anti-complement C3 PEGylated peptide), in patients with GA secondary to AMD. One trial met the primary
endpoint of significantly reducing GA progression at a one-year time point in the pegcetacoplan arm versus the
sham arm, while the other trial did not meet its primary endpoint. Apellis reported that it plans to submit a new drug
application for pegcetacoplan for GA to the FDA in the first half of 2022 that will include its statistically significant
Phase 2 results as supportive of approval. IVERIC bio, Inc.’s, or IVERIC's, Zimura®, a PEGylated aptamer inhibitor
of complement C5, completed a Phase 2/3 clinical trial that demonstrated statistically significant reductions in the
rate of GA lesion area growth in the Zimura arm versus the sham arm. IVERIC is in a second confirmatory Phase 3
trial of Zimura and expects Phase 3 trial results in the second half of 2022. Other agents in development targeting
the complement pathway include: Ionis Pharmaceuticals, Inc.’s IONIS-FB-LRx, a factor B inhibitor in Phase 2
development; Hemera Biosciences, LLC’s HMR59, a gene therapy in development that produces CD59 to inhibit
the complement membrane attack complex formation; Gemini Therapeutics, Inc.’s complement factor H
replacement agent in Phase 2 development, GEM103; and Gyroscope Therapeutics Holdings plc’s gene therapy
GT-005, replacing complement factor I in patients with genetically defined GA in Phase 2 development; and Alexion
Pharmaceuticals, Inc.’s ALXN2040 and Annexon, Inc.'s ANX007, both in Phase 2 development.
There are multiple product candidates in development that target other pathways implicated in AMD
pathogenesis, including HtrA1 inhibition (for example, RG6147 in Phase 2 development by Roche) and visual cycle
modulators (for example, ALK001 in Phase 3 development by Alkeus Pharmaceuticals, Inc.). Additionally, there are
stem cell products being developed with the potential to replace RPE cells in late-stage GA and with the intent of
preserving or improving visual function (for example, OpRegen in development by Lineage Cell Therapeutics, Inc.;
CPCB-RPE1 in development by Regenerative Patch Technologies LLC; and ASP7217 in development by Astellas
Pharma Inc.).
Therapeutic Area: Liver and Metabolic Diseases
We have spent more than a decade discovering and developing a portfolio of clinical-stage drug candidates
that target various forms of cardio-metabolic and liver diseases, most specifically nonalcoholic steatohepatitis, or
NASH. We have identified multiple hormonal pathways of interest and our drug candidates stem from novel insights
we have made in the regulation of cardio-metabolic processes and liver function.
NASH Disease Overview
NASH and metabolic diseases are among the largest unmet medical needs globally and represent a
leading cause of morbidity and mortality and a significant burden for patients and healthcare systems. They also
represent areas of underinvestment by the pharmaceutical industry, driven in part by the biological complexity of the
diseases and the substantial costs necessary to develop new therapeutics. Metabolic syndrome is exhibited by
approximately 35% of adults in the United States and comprises a constellation of co-morbid conditions, including
type 2 diabetes, obesity, high blood pressure, poorly regulated lipids and non-alcoholic fatty liver disease, or
NAFLD, a precursor to NASH. NAFLD is characterized by abnormal amounts of fat in the liver, a condition known as
steatosis. This abnormal fat in the liver contributes to the progression in certain NAFLD patients to NASH by
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developing a necroinflammatory state in the liver that ultimately drives scarring, also known as fibrosis, and, for
many, progresses to cirrhosis, liver cancer and liver failure.
The estimated global prevalence of NAFLD and NASH has risen rapidly in parallel with the dramatic rise in
obesity and diabetes. In the United States alone, the prevalence of NASH was estimated to total 19.3 million cases
in 2020 and is expected to reach 27 million cases in the United States by 2030, with similar trends occurring
globally. Patients with NASH with F2, F3 or F4 fibrosis were believed to encompass approximately 8.3 million
patients in the United States in 2020 and that number is expected to grow to 14.1 million by 2030. The population of
cirrhotic patients with NASH in the United States is expected to reach 3.5 million in 2030.
In addition to living with the burden of illness, NASH with advanced fibrosis can be very expensive for
patients, their families and society. Advanced liver fibrosis is generally considered fibrosis stages F3 and F4. The
annual economic burden associated with NAFLD and NASH in the United States was estimated to be over $100
billion in 2016. If a patient progresses through the earlier stages of fibrosis to F4 fibrosis, or cirrhosis, there is an
increased occurrence of negative liver-related outcomes, including a more than 60% risk of cirrhosis-related
complications such as ascites, jaundice, hepatic encephalopathy, variceal bleeds, liver cancer or liver transplant.
The median survival for a cirrhotic NASH patient is approximately seven years.
Our NASH Product Candidates
Aldafermin
Aldafermin is an engineered analog of human hormone fibroblast growth factor 19, or FGF19, that is
administered through a once-daily subcutaneous injection using a pre-filled, single-use, glass syringe. Aldafermin
has demonstrated the ability to rapidly improve NASH and reverse liver fibrosis in preclinical and clinical studies.
FGF19 is a highly specific and potent regulator of liver fat metabolism and bile acid synthesis that we believe is
responsible for some of the beneficial effects of gastric bypass surgery on NASH.
Aldafermin is wholly-owned by us.
Clinical Development of Aldafermin
To date, aldafermin has been dosed in over 700 patients and healthy volunteers across multiple liver and
metabolic diseases, including more than 300 patients with NASH. In May 2021, we announced that the Phase 2b
ALPINE 2/3 trial of aldafermin in patients with NASH and liver fibrosis stage 2 or 3, or F2 or F3, did not meet its
primary endpoint evaluating a dose response at week 24 on liver fibrosis improvement by >1 stage with no
worsening of NASH. As a result, we decided to suspend further development of aldafermin in patients with F2/F3
NASH, allowing for the reallocation of resources to advancing our other programs.
Aldafermin remains in Phase 2b development for the treatment of patients with compensated NASH
cirrhosis (liver fibrosis stage 4, or F4). The Phase 2b ALPINE 4 clinical trial is designed to evaluate the treatment
effect of aldafermin over 48 weeks in a population of patients with NASH with F4 liver fibrosis and well-
compensated cirrhosis. We initiated the ALPINE 4 trial in February 2020 and completed enrollment of 160 patients
across 80 sites in the United States, Europe, Hong Kong and Australia in January 2022. The objective of the trial is
to evaluate whether fibrosis regression can be achieved in compensated cirrhotic patients with NASH, for whom
liver mortality rates are high and liver transplant is the only option. We recently updated the design of the ALPINE 4
trial, elevating the Enhanced Liver Fibrosis, or ELF, test, a reproducible, quantitative non-invasive liver prognostic
test that evaluates liver fibrosis and correlates to liver-related outcomes, to be the primary endpoint for the trial. The
ELF test is a composite blood test measuring the presence of three biomarkers associated with liver matrix
metabolism. Liver biopsy data will also be measured and reported as a secondary endpoint upon completion of the
trial. We expect to report topline data from the ALPINE 4 trial in the first half of 2023.
Aldafermin has been generally well tolerated in clinical trials to date. In patients with NASH receiving
various doses of aldafermin (between 0.3 mg and 6 mg) in our completed Phase 2 trials, the most common reported
adverse events occurring in more than 10% of patients across all four cohorts included diarrhea, headache,
abdominal distension, nausea, fatigue, vomiting, constipation, frequent bowel movements, injection site bruising,
urinary tract infection, nasopharyngitis, abdominal pain, injection site reaction, vitamin D deficiency, injection site
symptoms (such as pruritus, erythema or swelling), cough, fecal color discoloration, cholesterol and low-density
lipoprotein cholesterol increase, with the majority of adverse events classified as mild or moderate. SAEs included
one case of acute pancreatitis, as well as pleurisy, vertigo, headache, hypertension, cardiac arrest, chest pain,
pneumonia, kidney mass, rectal bleeding and liver biopsy complication, none of which were considered related to
study drug.
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In patients with NASH and stage 2 or 3 liver fibrosis receiving various doses of aldafermin (between 0.3 mg
and 3 mg) in the completed Phase 2b ALPINE 2/3 trial, topline results showed that the most common reported
adverse events occurring in more than 10% of patients across all four cohorts included diarrhea, nausea, headache,
upper abdominal pain, injection site erythema, constipation and sinusitis with the majority of adverse events
classified as mild or moderate. SAEs included osteoarthritis, uterine cancer, suicide attempt, small bowel
obstruction, cholecystitis, cardiac hypertrophy and obesity, none of which were considered related to study drug.
Aldafermin Patent Portfolio
As of December 31, 2021, we owned 27 issued patents in the United States, as well as issued patents in
more than 40 foreign countries, including various member states of the European Patent Office, or EPO, covering
aldafermin, related compositions-of-matter and methods of use. We also own patent applications covering similar
subject matter in the United States and multiple foreign jurisdictions including Europe. The earliest issued patents in
the United States are expected to expire in 2032, not including any patent term adjustments and any patent term
extensions.
MK-3655: An Insulin Sensitizer for the Treatment of NASH
MK-3655, previously known as NGM313, is a long-acting agonistic antibody discovered by us that
selectively activates fibroblast growth factor receptor 1c-beta-klotho, or FGFR1c/KLB, which regulates insulin
sensitivity, blood glucose and liver fat and is administered every four weeks through a subcutaneous injection. We
believe that MK-3655 has the potential to be a treatment for those patients with NASH with early to moderate
fibrosis with or without type 2 diabetes.
In November 2018, Merck exercised its option for a license to conduct research upon, develop and
commercialize MK-3655 and other FGFR1c/KLB agonists. As a result, Merck is responsible for further MK-3655
development activities. See “—Our Collaboration with Merck.”
Clinical Development of MK-3655
At the end of 2020, Merck initiated a Phase 2b clinical trial of MK-3655 for the treatment of patients with
NASH with F2 or F3 fibrosis and is continuing to enroll patients in the trial. The trial is a multi-center, double-blind,
placebo-controlled trial administering 50 mg, 100 mg and 300 mg doses of MK-3655 every four weeks compared to
placebo for 52 weeks. Merck designed the trial to enroll approximately 320 patients across 137 sites globally.
Patients receive liver biopsies to qualify for the trial and at the end of the 52-week treatment. The primary objective
of the Phase 2b trial is NASH resolution without worsening of fibrosis at 52 weeks.
In the Phase 1 and Phase 1b clinical trials we conducted, MK-3655 was generally well tolerated and data
has shown the agent is capable of reducing liver fat content and improving metabolic biomarkers in obese, insulin
resistant subjects with NAFLD after a single dose. In the Phase 1 trial, there were two SAEs reported in the
MK-3655 treatment group, lower gastrointestinal, or GI, hemorrhage due to hemorrhoids and cholecystitis, both of
which were deemed by the investigators to be unrelated to treatment with MK-3655. The majority of adverse events
were mild to moderate in severity, and treatment-related events with the greatest proportion of subjects were GI
disorders, injection site reactions, upper respiratory tract infections, headache and increased appetite. In the Phase
1b trial, all adverse events observed during the course of the study were deemed mild, with increased appetite
(12%) and injection site reaction (12%) being the only adverse events reported in at least 10% of MK-3655-treated
subjects.
MK-3655 Patent Portfolio
As of December 31, 2021, we owned three issued patents in the United States, which were licensed to
Merck in connection with Merck's exercise of its license option for MK-3655, as well as pending patent applications
in the United States and granted patents and pending patent applications in multiple jurisdictions outside of the
United States covering MK-3655, related compositions-of-matter and methods of use. The earliest issued patents in
the United States are expected to expire in 2035, not including any patent term adjustments and any patent term
extensions.
NASH Competition
Current Treatments
Currently, there are no therapeutic agents approved by the FDA or the EMA for the treatment of NASH.
Weight loss through diet and lifestyle management is currently considered the first-line treatment strategy for NASH
and is associated with improvement in liver histology and a reduction in cardiovascular and metabolic complications.
However, fewer than 10% of patients are successful in achieving or maintaining at least a 10% total body weight
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loss that is sufficient to improve fibrosis and, therefore, require other interventions. In cases of morbid obesity,
gastric bypass surgery has been successful in resolving NASH in a majority of patients; however, the effect on
fibrosis improvement was less substantial and the risk of complications and expense of the surgery limit more
widespread use.
In the absence of approved products, some physicians utilize agents approved for other indications,
including Vitamin E and pioglitazone; however, the evidence of their effect on NASH is modest and/or they have
safety issues that limit acceptance. Given the increasing disease burden and lack of approved treatment options,
the development of novel pharmacologic therapies to treat NASH is critical.
Treatments in Development
Certain NASH drug development candidates are focused on the metabolic components of the disease, such
as insulin resistance and lipotoxicity, that are associated with the inception and early stages of the disease
pathology. Metabolically-oriented mechanism of action classes that have product candidates with histological proof-
of-concept data include: Madrigal Therapeutic, Inc.’s resmetirom and Viking Therapeutic Inc.’s VK2809, both thyroid
hormone receptor β-selective (THRβ) agonists; Novo Nordisk AS’s glucagon-like peptide (GLP)-1 agonist,
semaglutide; the stearyl-CoA desaturase inhibitor aramchol from Galmed Pharmaceuticals Ltd.; Inventiva SA’s pan-
peroxisome proliferator-activated receptors (PPAR) agonist, lanifibranor; Akero Therapeutics, Inc.’s efruxifermin and
89 Bio Inc.'s BIO89-100, both analogs of fibroblast growth factor 21 (FGF21); and Genentech/Roche’s BFKB8488A,
an FGFR1c/KLB bi-specific agonistic antibody.
Product candidates targeting various mechanisms with possible anti-inflammatory and anti-fibrotic effects
are also in clinical testing for NASH. These classes of compounds have shown mixed results in meaningfully
improving the fibrosis score of patients. Where fibrosis improvements have been shown, results have either been
transient or not accompanied by significant improvements in other histological measures of the disease, which may
reflect the difficulty in treating the disease without removing the underlying insult of lipotoxicity or the challenge of
impinging on the complex process of hepatocellular death and fibrosis from collagen deposition by intervention
through a single pathway. Members of the “anti-inflammatory” or “anti-fibrotic” mechanism of action classes with
compounds that have histological proof-of-concept data include farnesoid X receptor, or FXR, agonists, such as
Intercept Pharmaceuticals, Inc.’s, or Intercept’s, obeticholic acid. A new drug application for obeticholic acid was
filed with the FDA by Intercept in September 2019 and received a complete response letter in June 2020. In
December 2021, Intercept withdrew its marketing authorization application from the EMA. Intercept has indicated
that it is in the process of generating additional efficacy and safety data and that it intends to resubmit its new drug
application for obeticholic acid.
An ongoing consideration in NASH clinical development is pursuing combination treatments in an attempt to
combine agents with less than optimal activity on their own to achieve a more clinically meaningful result.
Combinations currently being evaluated in proof-of-concept trials include: metabolic/anti-fibrotic combinations such
as semaglutide/cilofexor/firsocostat and tropifexor/licogliflozin (FXR agonist/SGLT-2, both from Novartis AG) and
anti-inflammatory/anti-fibrotic duos such as cenicriviroc/tropifexor.
Collaboration Overview
Our Collaboration with Merck
In 2015, we entered into a research collaboration, product development and license agreement with Merck,
which, together with amendments made prior to June 30, 2021, is referred to as the Original Collaboration
Agreement, covering the discovery, development and commercialization of novel therapies across a range of
therapeutic areas, including a broad, multi-year drug discovery and early development program financially
supported by Merck, but scientifically directed by us with input from Merck. The original research phase of the
collaboration was for five years and was extended for an additional two years by Merck through March 2022. Under
the Original Collaboration Agreement, upon the completion of each proof-of-concept clinical trial under the program,
Merck would have a one-time option to obtain a worldwide, exclusive license to the product candidate tested in the
trial and compounds related to it, referred to as a License Option. If Merck exercised a License Option and paid the
applicable option exercise
further development and
commercialization activities for the licensed compounds and we would have the option, when a licensed compound
has advanced to Phase 3 clinical trials, to receive milestones and royalty payments or, in certain cases, to co-fund
development and participate in a global cost and profit share arrangement of up to 50%, with an additional option to
co-detail any such licensed compounds in the United States. If Merck did not exercise a License Option within the
specified time period, then we would be free to develop and commercialize the product candidate tested in the
it would be solely responsible
for any
then
fee,
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proof-of-concept trial and its related compounds independently or with third-party partners, subject to an obligation
to make low single-digit royalty payments to Merck.
Under the terms of the Original Collaboration Agreement, Merck paid us an upfront cash licensing fee of
$94.0 million, purchased approximately $106.0 million of our Series E convertible preferred stock, and reimbursed
us for approximately $427.9 million of research and development expenses that we incurred over the first six years
of the collaboration under the Original Collaboration Agreement. In addition, in November 2018, Merck exercised its
License Option under the Original Collaboration Agreement for MK-3655 (and its related compounds). Merck is
currently conducting a Phase 2b randomized, double-blind study of MK-3655 in patients with NASH with F2 or F3
liver fibrosis.
On June 30, 2021, we entered into an amended and restated research collaboration, product development
and license agreement with Merck, or the Amended Collaboration Agreement, replacing the Original Collaboration
Agreement and extending the research phase of the collaboration, but with a narrower scope than in the Original
Collaboration Agreement. Under the Amended Collaboration Agreement, the collaboration is focused primarily on
the identification, research and development of collaboration compounds directed to targets of interest to Merck in
the fields of ophthalmology and cardiovascular or metabolic, or CVM, disease, including heart failure. The
ophthalmology compounds in the collaboration include NGM621 (and its related compounds) and compounds
directed against two other undisclosed ophthalmology targets (and their related compounds). The collaboration
scope also includes certain laboratory testing and other activities on compounds that are directed to one of up to
two undisclosed targets outside of the fields of ophthalmology and CVM disease, or the Lab Programs.
Under the Amended Collaboration Agreement, Merck continues to have a License Option to each
continuing collaboration compound (and its related compounds); the specific License Option exercise point and the
fees to be paid upon exercise of each License Option are described below. For each program for which Merck
exercises its License Option, Merck is responsible, at its own cost, for any further development and
commercialization activities for the licensed compounds and we have the option, when a licensed compound has
advanced to Phase 3 clinical trials, to receive milestones and royalty payments or, in certain cases, to co-fund
development and participate in a global cost and profit share arrangement of up to 50%. The parties’ rights and
obligations remain the same with respect to MK-3655 and its related FGFR1c/KLB agonists.
Under the Amended Collaboration Agreement, Merck is providing significantly more limited annual research
and development funding beginning in 2022 and we have certain obligations to conduct research and development
related to collaboration compounds that will not be reimbursed by Merck.
As a result of entering into the Amended Collaboration Agreement, we have the right to independently
research, develop and commercialize all the clinical, preclinical and research assets that we researched or
developed under the Original Collaboration Agreement that are now outside the narrower scope of the collaboration,
including NGM707, NGM831, NGM438 and NGM120, subject to the payment to Merck of low single-digit royalties
on commercial sales of any resulting products. We also have full rights to all future programs we pursue that fall
outside of the scope of the specific therapeutic areas and programs included in Amended Collaboration Agreement.
Description of Amended Collaboration Agreement
The Original Collaboration Agreement contemplated an initial five-year term for the research and early
development phase of the collaboration, which was extended for two additional years through March 16, 2022 by
Merck’s exercise of an extension option. Under the Amended Collaboration Agreement, the research and early
development phase for the ophthalmology programs will continue until March 31, 2024 unless Merck exercises the
Bundle Option described below, in which case it will end shortly after Merck exercises the Bundle Option, a decision
which is expected to occur in late 2022 or early 2023. The research phase for the CVM-related programs will also
continue until March 31, 2024, unless the parties mutually agree to extend the research phase to March 31, 2026.
New CVM-related programs may be added to the collaboration if recommended by us and selected by Merck. The
research phase for the Lab Programs will end no later than December 31, 2022.
Under the Amended Collaboration Agreement, Merck is providing an aggregate of approximately $125.0
million in research and development funding through March 31, 2024. This includes up to $86.0 million in research
and development funding for the four calendar quarters ending March 31, 2022. We were obligated to use
commercially reasonable efforts to expend $35.0 million of such $86.0 million in funding on programs of interest to
Merck remaining in the scope of the collaboration during such four calendar quarters and we were permitted to use
the remainder of the $86 million in funding provided by Merck during such four calendar quarters to advance those
product candidates from the Original Collaboration Agreement for which Merck’s License Option was terminated
upon entry into the Amended Collaboration Agreement.
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For the period starting on April 1, 2022 and ending on March 31, 2024, Merck will provide up to $20.0
million of research and development funding for the ophthalmology programs (other than NGM621), the CVM-
related programs and the Lab Programs. If the parties mutually agree to extend the research phase for the CVM-
related programs from March 31, 2024 to March 31, 2026, then Merck will provide up to a total of $20.0 million in
research and development funding during the additional two years of the CVM program research phase. Merck will
also fund certain research and development costs related to NGM621 in an amount expected to be up to
approximately $20.0 million, until the earlier of Merck's decision to exercise, or not to exercise, its License Option
with respect to NGM621 alone or as part of the Bundle Option or, March 31, 2024.
In addition, we have certain obligations to conduct research and development related to collaboration
compounds that will not be reimbursed by Merck. We are required to use commercially reasonable efforts to
research and develop a specific product candidate directed to an ophthalmology target to be ready by March 31,
2023 for starting investigational new drug application-, or IND-, enabling studies, and we are responsible for the cost
of such work after March 2022. We will have additional research and development funding obligations under the
collaboration of up to $5.0 million or $15.0 million in the event that Merck, as described in greater detail below,
exercises its License Option to NGM621 alone or bundled with the other continuing ophthalmology compounds,
respectively, and pays us the applicable option exercise fee. We also may spend more than the amounts we will be
reimbursed by Merck for activities related to collaboration compounds, including certain NGM621 costs necessary
to avoid delays in Phase 3 readiness.
During the three-month period before the end of the research and early development phase for the
ophthalmology programs and the research phase for the CVM-related programs, Merck has the right to review the
product candidates from each applicable program and to elect to have research and development activities continue
on them under the collaboration for an additional period, referred to as a Tail Period. If Merck makes such an
election, then the applicable Tail Period will begin at the end of the research, or research and early development,
phase for the applicable program and will end on the earlier of achievement of the License Option exercise point or
three years, except that in certain circumstances a Tail Period may continue beyond three years if the License
Option exercise point has not been achieved by such time. Merck may elect for us to conduct research and early
development on ophthalmology programs during the applicable Tail Period, if any, with funding from Merck that is
significantly reduced from Merck’s funding levels during the research and early development phase. Alternatively,
Merck may conduct such work itself or engage third-party contractors to do so, in each case at Merck’s expense.
All research and development work on CVM-related programs during the applicable Tail Period, if any, will be
conducted by Merck or its third-party contractors at Merck’s expense. Each Lab Program will enter a Tail Period if
Merck elects to continue work on it after we complete specified laboratory and other activities.
Under the Amended Collaboration Agreement, Merck retains License Options to obtain an exclusive,
worldwide license, on specified terms, to each collaboration compound (and its related compounds) that remains
within the scope of the continuing collaboration. Merck generally has a one-time right to exercise its License Option
for any product candidate when we or Merck achieve the specified License Option exercise point. The License
Option exercise point for collaboration compounds that are directed to ophthalmology targets, including NGM621
(and its related compounds) and all of the collaboration compounds from two other ophthalmology programs
directed against undisclosed ophthalmology targets (and their related compounds), is after the completion of the
first proof-of-concept clinical trial for such collaboration compound. In addition, upon the completion of the first
proof-of-concept clinical trial for NGM621, Merck will have an additional one-time option to license all of the
ophthalmology collaboration compounds together, referred to as the Bundle Option, even though no product
candidate from the two other ophthalmology programs is expected to have completed human proof-of-concept trials
at such time. If Merck does not exercise this one-time Bundle Option for all of the ophthalmology collaboration
compounds, it may nevertheless exercise its regular License Option with respect to NGM621 (and its related
compounds) at such time, and it may also exercise its regular License Option for each of the other two
ophthalmology programs if a collaboration compound from such program completes a human proof-of-concept trial.
If Merck exercises the Bundle Option, it will pay us an option exercise fee of either $40.0 million or $45.0 million,
depending upon the stage of development of one of the two earlier-stage ophthalmology programs included in the
Bundle Option. If Merck does not exercise the Bundle Option, Merck may nevertheless exercise its regular License
Option with respect to NGM621 (and its related compounds) at such time, in which case it will pay us an option
exercise fee of $20.0 million, and when a product candidate from either of the other two ophthalmology programs
completes a human proof-of-concept trial, Merck may exercise its License Option for such product candidate (and
its related compounds) and pay a $20.0 million option exercise fee upon each such exercise.
The License Option exercise point for a collaboration compound from the CVM-related programs or the Lab
Programs will be the designation by Merck of such collaboration compound as a research program development
candidate that Merck intends to progress into preclinical development. Upon Merck’s exercise of a License Option
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for any CVM-related program or Lab Program, Merck will pay us an option exercise fee of $6.0 million and we will
be eligible to receive a milestone payment of $10.0 million if Merck subsequently completes a proof-of-concept trial
for a product candidate from such program.
If Merck exercises its License Option to a product candidate and its related compounds, referred to as a
Licensed Program, we will have the option to receive milestones and royalty payments or, in certain cases, prior to
Merck initiating any Phase 3 clinical trial of such licensed compound, to co-fund development and participate in a
global cost and profit share arrangement of up to 50%, with an additional option to co-detail any such licensed
compound in the United States. If we do not elect to exercise our cost and profit share option for a particular
licensed compound, we are eligible to receive an aggregate of up to $469.0 million in milestone payments upon the
achievement of specific clinical development and regulatory events, commercial milestone payments of up to
$125.0 million and royalties from low-double digit to mid-teen percentages of worldwide net sales of such licensed
compound.
Merck will be responsible, at its own cost, for all development and commercialization of product candidates
from each Licensed Program, subject to our options to cost and profit share worldwide, and to co-detail those
compounds in the United States as described above. If Merck does not exercise its License Option with respect to a
particular candidate and its related compounds within the applicable time period, in most instances we retain all
rights to research, develop and commercialize that candidate and those compounds on a worldwide basis, either
alone or in partnership with a third party, subject to the payment to Merck of low single-digit royalties on commercial
sales of any resulting products.
Under the Amended Collaboration Agreement we also granted Merck a worldwide, exclusive right to
conduct research and development on, and to manufacture, use and commercialize, small molecule compounds
identified or developed by Merck that have specified activity against any target that we are researching or
developing under the research phase of the collaboration. Merck’s research license for its own small molecule
program will become non-exclusive if Merck does not exercise its option to a product candidate against a target at
its option exercise point, but Merck will retain an exclusive license to any small molecule compounds that it has
already identified and developed. Merck has sole responsibility for research and development of any of these small
molecule compounds, at its own cost. We are eligible to receive milestone and royalty payments on small molecule
compounds that are developed by Merck under such a license from us.
In addition to the options and exclusive licenses that we granted or are obligated to grant to Merck, we have
the following exclusivity obligations to Merck under the Amended Collaboration Agreement. During the applicable
research phase and Tail Period, if any, for the ophthalmology programs, CVM-related programs and Lab Programs,
we may not directly or indirectly research, develop, manufacture or commercialize, outside of our collaboration with
Merck, any product with specified activity against any target that is being researched or developed under the
applicable programs and, if Merck exercises its License Option for a program, we may not directly or indirectly
research, develop, manufacture or commercialize any product with specified activity against the target that is the
subject of that Licensed Program for so long as Merck’s license to it remains in effect. In addition, we are prohibited
from directly or indirectly researching, developing or commercializing any product for the treatment of heart failure
with preserved ejection fraction, or HFpEF, during the research phase for the CVM-related programs.
After the research phase, Merck may terminate the overall Amended Collaboration Agreement for
convenience upon written notice. Subject to certain limitations, Merck may partially terminate the Amended
Collaboration Agreement for convenience as it relates to any Licensed Program or any of its rights to research and
develop small molecule compounds.
Either we or Merck may terminate the Amended Collaboration Agreement with respect to a specific
Licensed Program or any particular licensed small molecule compound if the other party is in material breach of its
obligations regarding that specific program and fails to cure the breach within the specified cure period. If Merck
terminates a Licensed Program as a result of our uncured material breach, then we would lose our option to
participate in a global cost and profit share if not yet exercised as of the time of termination and lose our co-detailing
option (whether or not exercised as of that time) for candidates arising from the relevant Licensed Program. If
Merck terminates a licensed small molecule compound program for our uncured material breach, we would continue
to receive the full amount of milestones and royalties we were otherwise eligible for with respect to the relevant
small molecule compounds.
If we terminate a Licensed Program for uncured breach, or if Merck terminates for convenience, all licenses
granted to Merck with respect to such program will terminate and Merck will assign to us all related regulatory filings
and approvals and grant us an exclusive license under Merck’s intellectual property related to the terminated
program, subject to the payment of a modest royalty back to Merck.
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If Merck terminates for convenience, or we terminate for such breach by Merck, all licenses to Merck with
respect to the relevant small molecule compound terminate, but Merck retains all interest in and to the actual small
molecule compound it had developed.
If we undergo any change in control, Merck has the right to terminate the Amended Collaboration
Agreement, in its entirety, or only with respect to certain of the research programs then being pursued. If our
change in control involves another pharmaceutical company with significant annual sales of pharmaceutical
products, Merck would have certain additional rights that could only be exercised within the first year following such
change in control, including, but are not limited to limiting our right to cost and profit share and terminating our co-
detailing rights.
If our acquirer is, at the time of the change of control, pursuing research, development, commercialization or
manufacturing of, or otherwise has any rights to, any compounds that modulate a target that is the subject of a
Licensed Program, Merck also has certain rights, unless our acquirer elects to cease those research, development
and commercialization activities, including but not limited to terminating our co-detailing rights with respect to the
relevant compounds and restrictions on the information we receive from Merck with respect to the compounds.
However, our rights to share in costs and profits with respect to any such compounds, if exercised, would remain in
effect, as would any milestone or royalty payment obligations of Merck with respect to the compounds.
In addition, if our acquirer is, at the time of the change in control, researching, developing, manufacturing or
otherwise has rights to any compounds that modulate a target that is also being actively pursued under our
research and early development program, and which has not reached the proof-of-concept study stage but is ready
for preclinical development, Merck has the right to require us to either provide information demonstrating that the
competing program does not actually modulate the relevant target in the same manner as our candidate, contribute
the competing program to our collaboration with Merck or divest the competing program.
Equity Investment by Merck
Concurrently with the execution of our Original Collaboration Agreement with Merck, we entered into a stock
purchase agreement with Merck for the purchase of 8,833,333 shares of our Series E convertible preferred stock,
for an aggregate purchase price of approximately $106.0 million. In addition, concurrently with the closing of our
initial public offering in April 2019, we issued 4,121,683 shares of our common stock to Merck in a private placement
at a price of $16.00 per share for proceeds of $65.9 million. Merck owned approximately 16.6% of our outstanding
shares as of December 31, 2021.
Manufacturing
We do not own, and have no plans to establish, any manufacturing facilities. We currently use third-party
contract development and manufacturing organizations or contract manufacturing organizations, which we refer to
collectively as CMOs, to manufacture and supply all of the raw materials, drug substances and drug products for our
research and development programs, including all the clinical trial materials used in the clinical trials of our clinical-
stage product candidates. We have established relationships with several CMOs, including Lonza Ltd and
Biotechpharma UAB. The activities of our CMOs are overseen by an experienced group of employees and third-
party consultants.
We plan to continue to rely on CMOs to manufacture commercial quantities of any products for which we
successfully obtain regulatory approval, as well as to provide packaging, storage and distribution of any approved
products. We have not entered into long-term clinical or commercial supply agreements with any of our CMOs. In
addition, each of our product candidates relies on a single contract manufacturer for supplies of its drug substance
and drug product.
Competition
The biopharmaceutical industry is characterized by intense competition and rapid innovation. Although we
believe that we hold a strong position in research in certain areas of cancer, retinal diseases and liver and metabolic
diseases, our competitors may be able to develop other compounds or drugs that are able to achieve similar or
better results. Our competitors include multinational pharmaceutical companies, specialized biotechnology
companies, universities and other research institutions. Smaller or earlier-stage companies also may prove to be
significant competitors, particularly through collaborative arrangements with large, established companies. We
believe the key competitive factors that will affect the development and commercial success of our product
candidates are their efficacy, safety and tolerability profile, and reliability.
There are many pharmaceutical companies, biotechnology companies, public and private universities and
research organizations actively engaged in the research and development of products that may be competitive to
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our products. A number of pharmaceutical companies, including AbbVie, Allergan, AstraZeneca, Bayer, Boehringer
Ingelheim, Bristol-Myers Squibb, Eisai, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck, Novartis, Novo
Nordisk, Pfizer, Roche, Sanofi and Takeda, as well as large and small biotechnology companies such as 89Bio,
Akero, Albireo, Alentis, Amgen, Apellis, Ascletis, Axcella, AVEO, Biond, Bird Rock, Can-Fite, CatalYm GmbH, Cirius,
Enanta, Galectin, Galmed, Genfit, Gilead, Glympse, Immune-Onc, ImmunOS, Immuron, Intercept, Inventiva, Iveric,
Jounce, Madrigal, MannKind, MediciNova, Mirum, Nalpropion, NextCure, North Sea, Promethera, Salix, Scholar
Rock, Seal Rock, Terns, Tiziana, Tizona, Viking and Vivus, are pursuing the development or marketing of
pharmaceuticals that target the same diseases that we are targeting. It is probable that the number of companies
seeking to develop products and therapies for the treatment of cancer, retinal diseases and liver and metabolic
diseases will increase.
For example, Apellis recently reported that it plans to submit a new drug application for pegcetacoplan for
GA to the FDA in the first half of 2022. Many of these and other existing or potential competitors have substantially
greater financial, technical, human and other resources than we have and may be better equipped to develop,
manufacture and market technologically superior products. In addition, many of these competitors have significantly
greater experience than we have in undertaking preclinical studies and human clinical trials of new pharmaceutical
products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may
succeed in obtaining FDA approval for superior products or for other products that would compete with our product
candidates. In addition, other technologies or products may be developed that have an entirely different approach or
means of accomplishing the intended purposes of our products, which might render our technology and products
noncompetitive or obsolete.
For more information regarding the competition that our disclosed product candidates face, or may face,
see the discussion of specific competition for each product candidate see “—Key Therapeutic Areas and Pipeline
Programs.”
Intellectual Property
Our intellectual property is critical to our business and our success depends, in part, on our ability to obtain
and maintain intellectual property protection for our product candidates, technology and know-how, to defend and
enforce our intellectual property rights, in particular, our patent rights, to preserve the confidentiality of our trade
secrets and to operate without infringing the proprietary rights of others.
We seek to protect the proprietary technology that we believe is important to our business through a variety
of methods, including seeking and maintaining patents and patent applications intended to cover our product
candidates, their compositions-of-matter, their methods of use and the processes for their manufacture and any
other aspects of inventions that are commercially important to the success of our business. We seek to obtain
domestic and international patent protection and, in addition to filing and prosecuting patent applications in the
United States, we may file counterpart patent applications in additional countries where we believe such foreign
filing is likely to be beneficial.
As of December 31, 2021, our patent portfolio includes over 500 patents and applications, including over 50
issued U.S. patents and over 30 pending U.S. patent applications covering our product candidates, certain aspects
of our proprietary technology, and related inventions and improvements. Our patent portfolio also includes over 400
patents and patent applications in jurisdictions outside of the United States that, in many cases, are counterparts to
our U.S. patents and patent applications. For more information regarding the patents and patent applications
relating to our seven most advanced product candidates, see the discussion of intellectual property protection for
each product candidate in “—Key Therapeutic Areas and Pipeline Programs.” The patent landscape surrounding our
product candidates is crowded, and we do not know if our pending patent applications will be issued with the claims
we are seeking or if our issued patents will withstand challenges from third parties.
Not all patent applications result in the issuance of patents. Patent applications in the United States and
certain other jurisdictions are maintained in secrecy for 18 months or potentially longer, so public disclosure of
discoveries via the publication of patent applications or in the scientific literature is often delayed. As a result, we
cannot be certain of the priority of inventions covered by our patent applications and may be subject to claims of
priority from third parties or the United States Patent and Trademark Office, or USPTO, against which we will need
to defend ourselves.
In addition, the scope of claims that may be allowed in any granted patent may be significantly reduced
from the coverage claimed in the initial patent application. Further, the scope of the claims in an issued patent may
be reinterpreted and, in some cases, narrowed or even cancelled after issuance by courts upon review. In addition,
many jurisdictions allow third parties to challenge issued patents in administrative proceedings that may result in
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further narrowing or cancellation of patent claims. As a result, even issued patents may not provide sufficient
protection from competitors.
When patents are issued, the term of each individual patent will depend on the legal term for patents in the
countries in which it is granted. In most countries, including the United States, the patent term is 20 years from the
earliest claimed filing date of a non-provisional patent application in the applicable country. The actual term of any
patent that may issue from the above-described patent applications claiming one of our product candidates could be
longer than described above due to patent term adjustment or patent term extension, if available, or shorter if we
are required to file terminal disclaimers.
Any changes we make to the composition, formulation, method of delivery or other attributes of our current
and future product candidates to cause them to have what we view as more advantageous properties may not be
covered by our existing patents and patent applications, and we may be required to file new applications and/or
seek other forms of protection.
Even if patents are issued, if a third party engages in activities covered by valid claims of our patents, we
may be required to engage in enforcement actions in the courts to enforce our patents. Not all enforcement
proceedings are successful. We also must take care not to infringe the valid patents of third parties. Third-party
patent rights that purport to cover our product candidates or their discovery, use or manufacture may require us to
challenge their validity in court or administrative proceedings and prevail in such challenges, to alter our
development or commercial strategy or our product candidates or their uses and manufacture, to obtain licenses to
such patents and/or to stop certain activities altogether. We hold various licenses with third parties to their
intellectual property, including those with Horizon Discovery Ltd., or Horizon, and Lonza Sales AG, or Lonza,
described below. The patent positions of biotechnology companies like ours are generally uncertain and involve
complex legal, scientific and factual questions. We may not obtain or maintain adequate patent protection for any of
our programs and product candidates.
In addition to patent protection, we also rely on trademark registration, trade secrets, know-how, other
proprietary information and continuing scientific innovation to develop and maintain our competitive position. We
seek to maintain the confidentiality of proprietary information to protect aspects of our business that are not
amenable to, or that we do not consider appropriate for, patent protection. As a part of these efforts, it is our policy
to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to
execute confidentiality agreements upon the commencement of their respective relationships with us. These
agreements provide that all confidential information concerning our business or financial affairs developed or made
known to the individual during the course of the individual’s relationship with us is to be kept confidential and not
disclosed to third parties except in specific circumstances. Our agreements with employees also provide that all
inventions conceived by the employee in the course of employment with us or from the employee’s use of our
confidential information are our exclusive property. Although we take these and other steps to safeguard our
proprietary information and trade secrets, these agreements may be breached or third parties may independently
develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade
secrets or disclose our technology. Thus, we may not be able to meaningfully protect our proprietary information that
is not otherwise protected by patent.
See “Risk Factors - Risks Related to Our Intellectual Property” for information regarding the risks related to
our intellectual property.
Horizon License
Licensing Arrangements
In September 2019, we entered into a license agreement with Horizon, or the Horizon License, in which we
obtained a non-exclusive, non-transferable and non-sublicensable license to use their proprietary GS knockout
CHO K1 manufacturing cell line. The Horizon License will continue for ten years and allows us to manufacture and
commercialize any current or future product candidates within the contractual term, including our product candidates
that are currently subject to our collaboration with Merck.
Pursuant to the Horizon License, we paid Horizon a one-time, non-creditable and non-refundable license
fee of $1.2 million, of which 50% was reimbursed by Merck. We are also subject to a license fee of $200,000 for
each future strategic partner. We have the right to terminate the Horizon License upon written notice to Horizon and
each party may also terminate the Horizon License in the event of the other party’s uncured material breach.
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Lonza License
In October 2014, we entered into a Multi-Product License Agreement, or the Lonza License, with Lonza
under which we obtained a worldwide, non-exclusive license to use Lonza’s glutamine synthetase gene expression
system, known as GS Xceed™, to manufacture and commercialize our proprietary products, including our product
candidates that are currently subject to our collaboration with Merck.
Pursuant to the Lonza License, we paid Lonza an upfront fee of £250,000. Upon the initiation of the first
Phase 2 clinical trial, the first Phase 3 clinical trial and the first commercial sale of any product manufactured using
GS Xceed™, we are required to pay Lonza one-time milestone payments of £100,000, £100,000 and £150,000,
respectively. We are also required to pay low single-digit royalties to Lonza based on net sales of any product
manufactured using GS Xceed™. Our royalty obligation to Lonza continues on a product-by-product basis until the
later of the expiration of the last-to-expire licensed patent or ten years after the first commercial sale of the product.
We are also required to pay an annual license fee to Lonza of up to £300,000 per product if a party other than
Lonza, we, our affiliates or our strategic partners (including Merck) manufactures certain product candidates for
commercial activities. We are currently required to pay this fee for MK-3655 and NGM120. In accordance with the
Lonza License, for certain additional product candidates, we are instead required to pay an annual license fee to
Lonza of £25,000 per product candidate prior to the initiation of clinical development, and following the initiation of
clinical development, £100,000, £150,000 or £300,000 annually per product candidate, respectively, if such product
candidate is in a Phase 1, Phase 2 and Phase 3 clinical trial. We are currently required to pay this fee for NGM621.
The Lonza License continues until the expiration of the royalty term. We have the right to terminate the
Lonza License upon written notice to Lonza. Each party may terminate the Lonza License for the other party’s
uncured material breach or bankruptcy. In addition, Lonza may terminate the Lonza License if we participate in the
opposition or challenge of any Lonza patent or patent application licensed to us under the Lonza License.
Product Approval in the United States
Government Regulation
The FDA and other regulatory health authorities at federal, state and local levels, as well as in foreign
countries, extensively regulate, among other things, the research, development, testing, manufacture, quality
control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval,
advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics, such as those
we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical
and commercial approval requirements of the governing regulatory agencies and health authorities of the countries
in which we wish to conduct studies or seek approval or licensure of our product candidates.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal,
state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure
to comply with the applicable U.S. requirements at any time during the product development process, approval
process or following approval may subject an applicant to administrative actions or judicial sanctions. These actions
and sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of
an approval, license revocation, a clinical hold, untitled or warning letters, voluntary or mandatory product recalls or
market withdrawals, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement and civil or criminal fines or penalties. Any agency or
judicial enforcement action could have a material adverse effect on our business, the market acceptance of our
products and our reputation.
Preclinical and Clinical Development
in vitro studies assessing
Prior to beginning the first clinical trial with a product candidate, a sponsor must submit an IND to the FDA.
An IND is a request for authorization from the FDA to administer an IND product to humans. The central focus of an
IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes
toxicology, pharmacology, pharmacokinetics and
results of animal and
pharmacodynamic characteristics of the product; chemistry, manufacturing and controls information; and any
available human data or literature to support the use of the investigational product. An IND must become effective
before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA,
unless the FDA, within the 30-day time period, raises concerns or questions regarding safety or conduct of the
proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA
must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND
therefore may or may not result in FDA authorization to begin a clinical trial.
the
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Clinical trials involve the administration of the investigational product to human subjects under the
supervision of qualified investigators in accordance with current Good Clinical Practices, or cGCPs, which include
the requirement that all research subjects provide their informed consent for their participation in any clinical study.
Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the
parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to
the existing IND must be made for each successive clinical trial conducted during product development and for any
subsequent protocol amendments. Furthermore, an institutional review board, or IRB, for each site proposing to
conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before
the clinical trial begins at that site and must monitor the study until completed.
The FDA, an IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a
finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its
stated objectives. Some trials also include oversight by an independent group of qualified experts organized by the
clinical study sponsor, known as a data safety monitoring board or committee, which provides authorization for
whether a trial may move forward at designated checkpoints based on access to certain data from the trial and may
halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as
no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and
clinical study results to public registries.
For purposes of biologics license application, BLA, approval, human clinical trials are typically conducted in
three sequential phases that may overlap.
•
•
•
Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the
target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption,
metabolism and distribution of the investigational product in humans, the side effects associated with
increasing doses and, if possible, to gain early evidence on effectiveness.
Phase 2—The investigational product is administered to a limited patient population with a specified
disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to
identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to
obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3—The investigational product is administered to an expanded patient population to further evaluate
dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally
at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the
overall risk/benefit ratio of the investigational product and to provide an adequate basis for product
approval.
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a
product is approved to gain more information about the product. These are called Phase 4 studies and may be
made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal
studies and develop additional information about the biological characteristics of the product candidate and must
finalize a process for manufacturing the product in commercial quantities in accordance with current Good
Manufacturing Practices, or cGMP, requirements. The manufacturing process must be capable of consistently
producing quality batches of the product candidate and, among other things, for biologics, must develop methods
for testing the identity, strength, quality, purity and potency of the product. Additionally, appropriate packaging must
be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not
undergo unacceptable deterioration over its shelf life.
BLA Submission and Review
Assuming successful completion of all required testing in accordance with all applicable regulatory
requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as
part of a BLA requesting approval to market the product for one or more indications. The submission of a BLA
requires payment of a substantial application user fee to FDA, unless a waiver or exemption applies.
Once a BLA has been submitted, the FDA generally makes a decision on the acceptance of the application
for filing within 60 days of receipt. The FDA’s goal is to review standard applications within ten months after it
accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts
the application for filing. In both standard and priority reviews, the review process is often significantly extended by
FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things,
whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held
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meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene an
advisory committee to provide clinical insight on application review questions. Before approving a BLA, the FDA will
typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application
unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and
adequate to assure consistent production of the product within required specifications. Additionally, before
approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCPs. If the
FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will
outline the deficiencies in the submission and often will request additional testing or information.
The FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes
commercial marketing of the product with specific prescribing information for specific indications. A Complete
Response letter will describe all of the deficiencies that the FDA has identified in the BLA. In issuing the Complete
Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for
approval, including requests for additional information or clarification, completion of other significant and time-
consuming requirements related to clinical trials, and/or conduct of additional preclinical studies or manufacturing
activities. Even if such data and information are submitted, the FDA may determine that the BLA does not satisfy the
criteria for approval. FDA approval of a BLA must be obtained before a biologic may be marketed in the United
States. The FDA may delay or refuse approval of a BLA, require additional testing or information and/or require
post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will be granted for particular indications and
may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may
approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product
outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a
product and to enable patients to have continued access to such medicines by managing their safe use, and could
include medication guides, physician communication plans or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on,
among other things, changes to proposed labeling or the development of adequate controls and specifications.
Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing
requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may
require one or more Phase 4 post-marketing studies and surveillance to further assess and monitor the product’s
safety and effectiveness after commercialization and may limit further marketing of the product based on the results
of these post-marketing studies.
Expedited Programs
A sponsor may seek to develop and obtain approval of its product candidates under programs designed to
accelerate the FDA review and approval of marketing applications for new drugs and biologics that meet certain
criteria, such as the Fast Track program, priority review, accelerated approval, breakthrough therapy designation
and Real-Time Oncology Review, or ROTR, Pilot Program.
Fast Track Designation
The FDA Fast Track program is intended to facilitate development and expedite review of new drugs and
biologics that are intended to treat a serious or life-threatening disease or condition and that demonstrate potential
to address an unmet medical need. For a Fast Track-designated product, there may be more frequent meetings and
communication with the FDA, and early and frequent communication between the FDA and sponsor is encouraged
throughout the entire development and review process. The FDA may consider sections of a BLA for review on a
rolling basis if certain conditions are satisfied, including an agreement with the FDA on the proposed schedule for
submission of portions of the application and the payment of applicable user fees before the FDA may initiate a
review. The product may also be eligible for priority review and accelerated approval. The sponsor can request the
FDA to designate the product for Fast Track status any time before receiving BLA approval, but ideally no later than
the pre-BLA meeting.
Priority Review
Generally, the FDA follows a two-tiered system of review times, standard review and priority review. For a
product that receives priority review designation, the FDA has the goal of taking action on the marketing application
within six months of the 60-day filing date, compared to ten months under standard review. However, the FDA does
not always meet its PDUFA goal dates for standard and priority BLAs, and the review process is often extended by
FDA requests for additional information or clarification. A priority review designation is applicable for products that, if
approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or
prevention of serious conditions when compared to marketed products. The FDA decides on the review designation
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for every application; however, an applicant may expressly request priority review. The FDA informs the applicant of
a priority review designation within 60 days of the receipt of the original marketing application. If criteria are not met
for priority review, the application is subject to the standard FDA review period of ten months after FDA accepts the
application for filing. Priority review designation does not change the scientific or medical standard for approval, or
the quality of evidence necessary to support approval.
Accelerated Approval
In addition, the FDA may base accelerated approval for drugs and biologics for serious conditions that fill an
unmet medical need on whether the drug or biologic has an effect on a surrogate or an intermediate clinical
endpoint. A surrogate endpoint used for accelerated approval is a marker, such as a laboratory measurement,
radiographic image, physical sign or other measure that is thought to predict clinical benefit but is not itself a
measure of clinical benefit. Likewise, an intermediate clinical endpoint is a measure of a therapeutic effect that is
considered reasonably likely to predict the clinical benefit of a product, such as an effect on irreversible morbidity
and mortality, or IMM. The FDA bases its decision on whether to accept the proposed surrogate or intermediate
clinical endpoint on the scientific support for that endpoint. As a condition of accelerated approval, the FDA will
generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and
describe the anticipated effect on IMM or other clinical benefit. Where confirmatory trials verify clinical benefit, the
FDA will generally terminate the requirement. Approval of a product may be withdrawn or the labeled indication of
the product changed, if trials fail to verify clinical benefit or do not demonstrate sufficient clinical benefit to justify the
risks associated with the product, for example, if the product shows a significantly smaller magnitude or duration of
benefit than was anticipated based on the observed effect on the surrogate endpoint. In addition, the FDA currently
requires as a condition for accelerated approval the pre-approval of promotional materials, which could adversely
impact the timing of the commercial launch of the product.
Breakthrough Therapy Designation
Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is
intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening
condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement
over currently approved therapies on one or more clinically significant endpoints, such as substantial treatment
effects observed early in clinical development. If the FDA designates a breakthrough therapy, it may take actions
appropriate to expedite the development and review of the application, which may include holding meetings with the
sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive
communication with, the sponsor regarding the development of the drug to ensure that the development program to
gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior
managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a
cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program
and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical
trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less
time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment.
Breakthrough therapy designation comes with all of the benefits of Fast Track designation, which means that the
sponsor may file sections of the BLA for review on a rolling basis if certain conditions are satisfied, including an
agreement with the FDA on the proposed schedule for submission of portions of the application and the payment of
applicable user fees before the FDA may initiate a review.
Real-Time Oncology Review (ROTR) Pilot Program
The FDA has announced the availability of the RTOR pilot program for oncology product candidates that are
likely to demonstrate substantial improvements over available therapy, which may include drugs previously granted
breakthrough therapy designation for the same or other indications and candidates meeting other criteria for other
expedited programs, such as Fast Track and priority review. Submissions for RTOR consideration should also have
straightforward study designs and endpoints that can be easily interpreted (such as overall survival or progression
free survival). Acceptance into the RTOR pilot does not guarantee or influence approvability of the application,
which is subject to the usual benefit-risk evaluation by FDA reviewers, but the program allows FDA to review data
earlier, before an applicant formally submits a complete application. The RTOR pilot program does not affect FDA’s
PDUFA timelines.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no
longer meets the conditions for qualification or the time period for FDA review or approval may not be shortened.
Furthermore, Fast Track designation, priority review, accelerated approval, breakthrough therapy designation and
ROTR pilot program do not change the standards for product approval.
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Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a
rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United
States, or more than 200,000 individuals in the United States for which there is no reasonable expectation that the
cost of developing and making available in the United States a drug or biologic for this type of disease or condition
will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be
requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the
therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does
not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease
for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which
means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for
the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the
product with orphan drug exclusivity by means of greater effectiveness, greater safety or providing a major
contribution to patient care or in instances of drug supply issues. Orphan drug exclusivity does not prevent FDA
from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a
different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain
research and a waiver of the BLA application fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader
than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United
States may be lost if the FDA later determines that the request for designation was materially defective or if the
manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare
disease or condition.
Rare Pediatric Disease Designation and Priority Review Vouchers
Under the Federal Food, Drug and Cosmetic Act, or FDCA, as amended, the FDA incentivizes the
development of drugs and biologics that meet the definition of a “rare pediatric disease,” defined to mean a serious
or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged
from birth to 18 years and the disease affects fewer than 200,000 individuals in the United States or affects more
than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and
making in the United States a drug for such disease or condition will be recovered from sales in the United States of
such drug. The sponsor of a product candidate for a rare pediatric disease may be eligible for a voucher that can be
used to obtain a priority review for a subsequent human drug or biologic application after the date of approval of the
rare pediatric disease drug product, referred to as a priority review voucher, or PRV. A sponsor may request rare
pediatric disease designation from the FDA prior to the submission of its BLA. A rare pediatric disease designation
does not guarantee that a sponsor will receive a PRV upon approval of its BLA. Moreover, a sponsor who chooses
not to submit a rare pediatric disease designation request may nonetheless receive a PRV upon approval of its
marketing application if it requests such a voucher in its original marketing application and meets all of the eligibility
criteria. If a PRV is received, it may be sold or transferred an unlimited number of times. Congress has extended the
PRV program through September 30, 2024, with the potential for PRVs to be granted through September 30, 2026.
Pediatric Information and Pediatric Exclusivity
Under the Pediatric Research Equity Act, or PREA, certain BLAs and certain supplements to a BLA must
contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric
subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is
safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. The Food
and Drug Administration Safety and Innovation Act, or FDASIA, amended the FDCA to require that a sponsor who is
planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new
dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP. The
initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including
study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not
including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver
of the requirement to provide data from pediatric studies along with supporting information. The FDA and the
sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at
any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies,
early phase clinical trials and/or other clinical development programs.
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A drug or biologic product can also obtain pediatric market exclusivity in the United States. Pediatric
exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity,
which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary
completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
Post-Approval Requirements
Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and
continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting
of adverse experiences, periodic reporting, product sampling and distribution and advertising and promotion of the
product. After approval, most changes to the approved product, such as adding new indications or other labeling
claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which
FDA assesses an annual program fee for each product identified in an approved BLA.
FDA regulations require that products be manufactured in specific approved facilities and in accordance
with cGMP regulations. We rely, and expect to continue to rely, on third parties for the production of clinical and
commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with
FDA regulations that require, among other things, quality control and quality assurance, the maintenance of records
and documentation and the obligation to investigate and correct any deviations from cGMP. FDA regulations also
impose reporting requirements upon sponsors and their third-party manufacturers. Manufacturers and other entities
involved in the manufacture and distribution of approved biologics are required to register their establishments with
the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain
state agencies for compliance with cGMP requirements and other laws, which impose certain procedural and
documentation requirements upon sponsors and their third-party manufacturers. The discovery of violative
conditions, including failure to conform to cGMP regulations, could result in enforcement actions, and the discovery
of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an
approved BLA, including recall. Biologic manufacturers and their subcontractors are required to register their
establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the
FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation
requirements upon sponsors and their third-party manufacturers. Changes to the manufacturing process are strictly
regulated, and, depending on the significance of the change, may require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose
reporting requirements upon sponsors and their third-party manufacturers.
The FDA may also place other conditions on approvals including the requirement for a REMS, to assure the
safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed
REMS. The FDA will not approve the BLA without an approved REMS, if required. A REMS could include medication
guides, physician communication plans or elements to assure safe use, such as restricted distribution methods,
patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict
the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn
for non-compliance with regulatory standards or if problems occur following initial marketing. The FDA may withdraw
approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the
product reaches the market. Later discovery of previously unknown problems with a product, including adverse
events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in: revisions to the approved labeling to add new safety information; imposition of post-
market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other
restrictions under a REMS program. Other potential consequences include, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the
market or product recalls;
fines, warning letters or holds on post-approval clinical studies;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension
or revocation of existing product approvals;
product seizure or detention, or refusal of the FDA to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can
make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in
accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses and misbranding. Failure to comply with these requirements
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can result in, among other things, adverse publicity, warning letters, corrective actions, including corrective
advertising, and potential civil and criminal penalties, including monetary penalties. Physicians may prescribe legally
available products for uses that are not described in the product’s labeling and that differ from those tested and
approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that
such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the
behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s
communications on the subject of off-label use of their products, and a company that is found to have improperly
promoted off-label uses may be subject to significant liability, including investigation by federal and state authorities.
Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use or first
publication (or thirty days in advance of their first use if approved via the accelerated approval pathway). Further, if
there are any modifications to the drug or biologic, including changes in indications, labeling or manufacturing
processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA
supplement, which may require the development of additional data or preclinical studies and clinical trials.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our current and future operations are subject to regulation by various federal, state and
local authorities. For example, our clinical research, sales, marketing and scientific/educational grant programs may
have to comply with the anti-fraud and abuse provisions of the Social Security Act, the federal Anti-Kickback Statute,
the false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act,
or HIPAA, and similar state laws, each as amended, as applicable.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and
willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or
in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any
item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and
safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to
induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or
safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe
harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the
arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and
circumstances. Our practices may not in all cases meet all of the criteria for protection under a statutory exception
or regulatory safe harbor.
Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively referred to as
the ACA, to impose a stricter standard such that a person or entity no longer needs to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law
that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a
false or fraudulent claim for purposes of the federal False Claims Act, or FCA.
The federal false claims and civil monetary penalty laws, including the FCA, which imposes significant
penalties and can be enforced by private citizens through civil qui tam actions, prohibit any person or entity from,
among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or
approval by, the federal government, including federal healthcare programs, such as Medicare and Medicaid,
knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent
claim to the federal government, or knowingly making a false statement to improperly avoid, decrease or conceal an
obligation to pay money to the federal government. A claim includes “any request or demand” for money or property
presented to the U.S. government.
HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully
executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses,
representations or promises, any money or property owned by, or under the control or custody of, any healthcare
benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare
offense and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or
making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services. Like the Anti-Kickback Statute, the ACA amended the intent standard for
certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual
knowledge of the statute or specific intent to violate it in order to have committed a violation.
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Also, many states have similar, and typically more prohibitive, fraud and abuse statutes or regulations that
apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply
regardless of the payor.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or
HITECH, and its implementing regulations, imposes requirements on covered entities (including certain health care
providers, health plans and health care clearinghouses, business associates and their covered subcontractors)
relating to the privacy, security and transmission of individually identifiable health information. HIPAA may be
enforced by several federal agencies as well as state attorneys general. In addition, many state laws govern the
privacy and security of health information in specified circumstances, many of which differ from each other in
significant ways, are often not pre-empted by HIPAA and may have a more prohibitive effect than HIPAA, thus
complicating compliance efforts.
Our physician-administered products, once approved, may be eligible for coverage under Medicare through
Medicare Part B. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the
manufacturer is required to participate in other government healthcare programs, including the Medicaid Drug
Rebate Program and the 340B Drug Pricing Program, and would be subject to those requirements as well.
In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to
the government, such as average sales price and best price. Penalties may apply in some cases when such metrics
are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or
rebates required by government healthcare programs or private payors and by any future relaxation of laws that
presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Additionally, the federal Physician Payments Sunshine Act, or the Sunshine Act, as amended, and its
implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for
which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain
exceptions) report annually to CMS information related to certain payments or other transfers of value made or
distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other
health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as
information regarding ownership and investment interests held by physicians and their immediate family members.
In addition, many states also govern the reporting of such payments or other transfers of value, many of
which differ from each other in significant ways, are often not pre-empted and may have a more prohibitive effect
than the Sunshine Act, thus further complicating compliance efforts.
In order to distribute products commercially, we must comply with state laws that require the registration of
manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states,
manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no
place of business within the state. Some states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including some states that require manufacturers and
others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.
Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish
marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales,
marketing, pricing, clinical trials and other activities and/or register their sales representatives, as well as to prohibit
pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and
biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing
practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition
laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current
environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Ensuring
business arrangements with third parties comply with applicable healthcare laws and regulations is a costly
endeavor. If our operations are found to be in violation of any of the federal and state healthcare laws described
above or any other current or future governmental regulations that apply to us, we may be subject to penalties,
including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, individual
imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions,
private qui tam actions brought by individual whistleblowers in the name of the government, refusal to allow us to
enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits
and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity
agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or
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restructuring of our operations, any of which could adversely affect our ability to operate our business and our
results of operations.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering
or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or
candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or
business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the
United States to comply with accounting provisions requiring us to maintain books and records that accurately and
fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an
adequate system of internal accounting controls for international operations.
Environmental, Health and Safety Regulation
In addition to the foregoing, state and federal laws regarding safe working conditions, environmental
protection and hazardous substances, including the Occupational Safety and Health Act, the Resource
Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws
govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and
wastes generated by, our operations. We may incur significant costs to comply with such laws and regulations now
or in the future. If our operations result in contamination of the environment or expose individuals to hazardous
substances, we could be liable for damages and governmental fines. We believe that we are in material compliance
with applicable environmental laws and regulations and that continued compliance therewith will not have a material
adverse effect on our business. We cannot predict, however, how changes in these laws and regulations may affect
our future operations.
Privacy and Data Security Laws and Compliance Obligations
We are subject to certain U.S. federal and state, as well as foreign, data privacy and security laws,
regulations and other legal obligations. The regulatory framework with respect to data privacy and security is
stringent and constantly evolving. For example, in addition to laws such as HIPAA that govern the processing of
health information, we are or may become subject to numerous other data privacy and security laws and legal
obligations, which may include laws such as the California Consumer Privacy Act of 2018, or CCPA, the European
Union's, or EU’s, General Data Protection Regulation 2016/679, or EU GDPR and the EU GDPR as it forms part of
United Kingdom, or UK, law, or UK GDPR. These laws and obligations impose on subject entities extensive, costly
and complex compliance obligations, which may conflict or be inconsistent with one another, and violations may
result in significant fines, penalties and other adverse consequences. See “Risk Factors – Risks Related to Our
Business and Industry” for additional information about the privacy and data security risks we may face, including in
relation to the laws and regulations to which we are or may become subject.
European Union Drug Development
In the EU, our future products may be subject to extensive regulatory requirements. As in the United States,
medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has
been obtained.
The various phases of preclinical and clinical research in the EU are currently regulated by Clinical Trials
Regulation (EU) No 536/2014, which went into effect on January 31, 2022. The regulation, which is directly
applicable in all EU Member States, overhauls the current system of approvals for clinical trials in the EU in an effort
to simplify and streamline the approval of clinical trials in the EU.
European Union Drug Review and Approval
In the European Economic Area, or EEA, which consists of the 27 Member States of the EU, as well as
Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a marketing
authorization, or MA. There are two types of marketing authorizations.
The EU MA is issued by the European Commission through the Centralized Procedure, based on the
opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA, and is valid throughout the
entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as
biotechnology medicinal products, orphan medicinal products, advanced-therapy medicines such as gene-therapy,
somatic cell-therapy or tissue-engineered medicines and medicinal products containing a new active substance
indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune and other
immune dysfunctions and viral diseases. The Centralized Procedure is optional for products containing a new active
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substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or
technical innovation or which are in the interest of public health in the EU.
National MAs, which are issued by the competent authorities of the Member States of the EEA and only
cover their respective territory, are available for products not falling within the mandatory scope of the Centralized
Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National
MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not
received a National MA in any Member State at the time of application, it can be approved simultaneously in various
Member States through the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is
submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is
selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a
draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and
package leaflet, which are sent to the other Member States (referred to as the Concerned Member States) for their
approval. If the Concerned Member States raise no objections, based on a potential serious risk to public health, to
the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national
MA in the RMS and the Concerned Member States
A MA governed by EU rules may be granted only to a Marketing Authorization Applicant, or MAA, that is
established within the EEA.
In principle, an MA has an initial validity of five years. The MA may be renewed after five years on the basis
of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU member state in
which the original MA was granted. The European Commission or the competent authorities of the EU member
states may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five year renewal
period for the MA. Once subsequently definitively renewed, the MA is valid for an unlimited period. Any authorization
that is not followed by the actual placing of the medicinal product on the EU market (in case of centralized
procedure) or on the market of the authorizing EU member state within three years after authorization ceases to be
valid (the so-called sunset clause).
Innovative products that target an unmet medical need and are expected to be of major public health
interest may be eligible for a number of expedited development and review programs, such as the Priority
Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the
U.S.
In the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are
not yet available. The conditional MA is subject to conditions to be fulfilled for generating the missing data or
ensuring increased safety measures. It is valid for one year and must be renewed annually until all related
conditions have been fulfilled.
An MA may also be granted “under exceptional circumstances” where the applicant can show that it is
unable to provide comprehensive data on the efficacy and safety under normal conditions of use even after the
product has been authorized and subject to specific procedures being introduced. These circumstances may arise
in particular when the intended indications are very rare and, in the state of scientific knowledge at that time, it is not
possible to provide comprehensive information, or when generating data may be contrary to generally accepted
ethical principles. An MA granted in exceptional circumstances is reserved to medicinal products intended to be
authorized for treatment of rare diseases or unmet medical needs for which the applicant does not hold a complete
data set that is required for the grant of a standard MA.
Data and Market Exclusivity
The EU provides opportunities for data and market exclusivity related to MAs. Upon receiving an MA,
innovative medicinal products are generally entitled to receive eight years of data exclusivity and ten years of
market exclusivity. Data exclusivity, if granted, prevents regulatory authorities in the EU from referencing the
innovator’s data to assess a generic application or biosimilar application for eight years from the date of
authorization of the innovative product, after which a generic or biosimilar MAA can be submitted, and the
innovator’s data may be referenced. The market exclusivity period prevents a successful generic or biosimilar
applicant from commercializing its product in the EU until ten years have elapsed from the initial MA of the reference
product in the EU. The overall ten-year period may, occasionally, be extended for a further year to a maximum of
eleven years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or
more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring
a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will
be considered by the EU’s regulatory authorities to be a new chemical/biological entity, and products may not qualify
for data exclusivity.
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Pediatric Development
Regulation (EC) No 1901/2006 provides that all MAAs for new medicinal products have to include the
results of trials conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP,
agreed with the EMA’s Pediatric Committee (PDCO). The PDCO can grant a deferral of the obligation to implement
some or all of the measures provided in the PIP until there are sufficient data to demonstrate the efficacy and safety
of the product in adults. The obligation to provide pediatric clinical trial data can be waived entirely by the PDCO
when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children,
the disease or condition for which the product is intended occurs only in adult populations, or when the product does
not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is
obtained in all EU member states and study results are included in the product information, even when negative, the
product is eligible for a six-month extension to the Supplementary Protection Certificate (SPC) if any is in effect at
the time of authorization or, in the case of orphan medicinal products, a two-year extension of orphan market
exclusivity.
Post-Approval Requirements
Where an MA is granted in relation to a medicinal product in the EU, the holder of the MA is required to
comply with a range of regulatory requirements applicable to the manufacturing, marketing, promotion and sale of
medicinal products.
Similar to the United States, both MA holders and manufacturers of medicinal products are subject to
comprehensive regulatory oversight by the EMA, the European Commission and/or the competent regulatory
authorities of the individual EU member states. The holder of an MA must establish and maintain a
pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for
oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and
submission of periodic safety update reports, or PSURs.
All new MAAs must include a risk management plan, or RMP, describing the risk management system that
the company will put in place and documenting measures to prevent or minimize the risks associated with the
product. The regulatory authorities may also impose specific obligations as a condition of the MA. Such risk-
minimization measures or post-authorization obligations may include additional safety monitoring, more frequent
submission of PSURs or the conduct of additional clinical trials or post-authorization safety studies.
European Union Drug Marketing
Marketed products in the EU are subject to substantial continuing regulation, including, among other things,
requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and
distribution and advertising and promotion of the product. For example, much like the Anti-Kickback Statute
prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the
prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited
in the EU. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of EU
Member States, and infringement of these laws could result in substantial fines and imprisonment. Payments made
to physicians in certain EU Member States must also be publicly disclosed, and agreements with physicians often
must be the subject of prior notification and approval by the physician’s employer, his or her competent professional
organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided
in the national laws, industry codes or professional codes of conduct applicable in the EU Member States. Failure to
comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or
imprisonment.
EU regulations applicable to marketed products exist at the regional, national and local levels, and
regulations applicable at the EU level may be adopted and implemented differently by individual Member States.
These regulations, and their differing implementations in Member States, increase our legal and financial
compliance costs and may make some activities more time-consuming and expensive.
Before products become available to patients in the EU, they are generally subject to decisions on pricing
and reimbursement by the applicable authorities in a Member State. Key criteria to determine the reimbursement
status and pricing of a product may include the product’s therapeutic value, medical need, safety and cost
effectiveness. Obtaining pricing and reimbursement approval of a product from a government is a time-consuming
and costly process, and significant uncertainty exists as to the pricing and reimbursement status of any product
candidates for which we may seek marketing approval in the EU. Our ability to commercialize any such products
successfully in the EU will depend, in part, on the outcome of these decisions.
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Regulation in the United Kingdom Following Brexit
The UK’s withdrawal from the EU on January 31, 2020, commonly referred to as Brexit, has created
significant uncertainty concerning the future relationship between the UK and the EU. The Medicines and
Healthcare products Regulatory Agency (MHRA) is now the UK’s standalone regulator.
Among the changes resulting from Brexit is that Great Britain (England, Scotland and Wales) will be treated
as a third country. Northern Ireland will, with regard to EU regulations, continue to follow the EU regulatory rules.
Brexit may influence the attractiveness of the UK as a place to conduct clinical trials. Harmonization of the
current EU regulatory environment for clinical trials will increase with the entry into application of the Clinical Trials
Regulation on January 31, 2022. It is currently unclear to what extent the UK will seek to align its regulations with
the EU. A decision by the UK not to closely align its regulations with the new approach that will be adopted in the EU
following entry into application of the Clinical Trials Regulation in January 2022 may have an effect on the cost of
conducting clinical trials in the UK as opposed to other countries and/or make it harder to seek an MA in the EU for
our product candidates on the basis of clinical trials conducted in the UK.
From January 1, 2021, an applicant for a centralized procedure MA can no longer be established in the UK.
After this date, companies established in the UK cannot use the centralized procedure and instead must follow one
of the UK national authorization procedures to obtain an MA to market products in the UK.
Rest of the World Regulation
For other countries outside of the EU and the United States, such as the United Kingdom and countries in
Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary from country to country. Additionally, clinical trials must be conducted in accordance
with cGCP requirements and the applicable regulatory requirements and the ethical principles that have their origin
in the Declaration of Helsinki. Failure to comply with applicable foreign laws and regulatory requirements may result
in, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products
and operating restrictions.
Additional Laws and Regulations Governing International Operations
If we further expand our operations outside of the United States, we must dedicate additional resources to
comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The FCPA prohibits any
U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or
indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the
foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates
companies whose securities are listed in the United States to comply with certain accounting provisions requiring
the company to maintain books and records that accurately and fairly reflect all transactions of the corporation,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls
for international operations. Likewise, the UK Bribery Act of 2010 applies to companies that carry on all or part of
their business in the UK, and prohibits bribing another person or being bribed, bribing a foreign public official with
the intent to influence and obtain or retain business or an advantage, and failure by a commercial party to prevent
bribery, including where the prohibited conduct or its effects occurred entirely outside the UK.
Compliance with the FCPA and anti-corruption and anti-bribery laws in other countries is expensive and
difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents
particular challenges in the pharmaceutical industry because, in many countries, hospitals are operated by the
government and doctors and other hospital employees are considered foreign officials. Certain payments to
hospitals in connection with clinical trials and other work have been deemed to be improper payments to
government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United
States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well
as certain products and technical data relating to those products. If we expand our presence outside of the United
States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us
from developing, manufacturing or selling certain products and product candidates outside of the United States,
which could limit our growth potential and increase our development costs.
The failure to comply with laws governing international business practices may result in substantial civil and
criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar
issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
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Coverage, Pricing and Reimbursement
In the United States and in foreign markets, sales of any products for which we receive regulatory approval
for commercial sale will depend, in part, on the extent to which third-party payors provide coverage and establish
adequate reimbursement levels for such products. In the United States, third-party payors include federal and state
healthcare programs, private managed care providers, health insurers and other organizations. Adequate coverage
and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States,
and commercial payors are critical to new product acceptance.
Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the
third-party payor’s determination that use of a therapeutic is:
•
•
•
•
•
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Coverage may also be more limited than the purposes for which the product is approved by the FDA or
comparable foreign regulatory authorities. Reimbursement may impact the demand for, or the price of, any product
for which we obtain regulatory approval.
Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing
the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and
efficacy. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often
associated with branded drugs and drugs administered under the supervision of a physician. We may need to
conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-
effectiveness of our products. Obtaining coverage and reimbursement approval of a product from a government or
other third-party payor is a time-consuming and costly process that could require us to provide to each payor
supporting scientific, clinical and cost-effectiveness data for the use of our product on a payor-by-payor basis, with
no assurance that coverage and adequate reimbursement will be obtained. A payor’s decision to provide coverage
for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party
reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return
on our investment in product development. If reimbursement is not available or is available only at limited levels, we
may not be able to successfully commercialize any product candidate that we successfully develop.
Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the
price of pharmaceutical products through their pricing and reimbursement rules and control of national health care
systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and
negative list systems under which products may only be marketed once a reimbursement price has been agreed. To
obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that
compare the cost effectiveness of a particular product candidate to currently available therapies. Other member
states allow companies to fix their own prices for medicines but monitor and control company profits. The downward
pressure on health care costs has become intense. As a result, increasingly high barriers are being erected to the
entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a
commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale
may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In
addition, emphasis on managed care, the increasing influence of health maintenance organizations and additional
legislative changes in the United States have increased, and we expect will continue to increase, the pressure on
healthcare pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription
medicines, medical devices and surgical procedures and other treatments, has become very intense. Coverage
policies and third-party reimbursement rates may change at any time. Even if favorable coverage and
reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative
and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay
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marketing approval of product candidates, restrict or regulate post-approval activities and affect the ability to
profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors in the
United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the
stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the
pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major
legislative initiatives.
For example, the ACA has substantially changed healthcare financing and delivery by both governmental
and private insurers. Among the ACA provisions of importance to the pharmaceutical and biotechnology industries
are those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled,
implanted or injected and annual fees based on pharmaceutical companies’ share of sales to federal healthcare
programs.
There have been legal and political challenges to certain aspects of the ACA. For example, former
President Trump signed several executive orders and other directives designed to delay, circumvent or loosen
certain requirements mandated by the ACA. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on
procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was
repealed by Congress. Thus, the ACA remains in effect in its current form, although it may be subject to judicial or
Congressional challenges in the future. Additionally, on January 28, 2021, President Biden issued an executive
order instructing certain governmental agencies to review and reconsider their existing policies and rules that limit
access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs
that include work requirements, and policies that create unnecessary barriers to obtaining access to health
insurance coverage through Medicaid or the ACA. The ultimate content, timing or effect of any healthcare reform
legislation on the U.S. healthcare industry is also unclear.
We anticipate that the ACA, if substantially maintained in its current form, will continue to result in additional
downward pressure on coverage and the price that we receive for any approved product, and could seriously harm
our business. Any reduction in reimbursement from Medicare and other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other
healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our
products.
Further legislation or regulation could be passed that could harm our business, financial condition and
results of operations. Other legislative changes have been proposed and adopted since the ACA was enacted.
Aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect
beginning on April 1, 2013, will stay in effect through 2031 unless additional Congressional action is taken.
However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through
March 31, 2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up
to 3% in the final fiscal year of this sequester.
Additionally, there has been increasing legislative and enforcement interest in the United States with respect
to specialty drug pricing practices. Specifically, there have been several U.S. Congressional inquiries, presidential
executive orders and proposed and enacted federal legislation designed to, among other things, bring more
transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between
pricing and manufacturer-patient programs and reform government program reimbursement methodologies for
drugs. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in
the American Economy,” with multiple provisions aimed at prescription drugs. In response to President Biden’s
executive order, on September 9, 2021, the United States Department of Health and Human Services, or HHS,
released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and
sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative
actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to
implement these principles. Individual states in the United States have also become increasingly active in passing
legislation and implementing regulations designed to control pharmaceutical product pricing, including price or
patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk
purchasing. Further, it is possible that additional governmental action is taken in response to COVID-19.
Our team of talented scientists and industry professionals is the foundation of our company and fuels our
historical and prospective achievements for patients. We consider the intellectual capital of our employees to be an
Human Capital
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essential driver of our business and key to our future opportunities. As of December 31, 2021, we had 225
employees, of which approximately 147 (65%) were engaged in research and development activities, 83 hold Ph.D.
and/or M.D. degrees and an additional 55 hold a masters or other post-graduate degree. Every NGM team member
plays a vital role in furthering our goals and impacting our progress towards fully realizing our mission to develop
transformative therapies for patients.
To succeed in our mission, we must attract, recruit, retain, develop and motivate qualified clinical,
nonclinical, scientific, manufacturing, regulatory, management and other personnel needed to support our business
and operations. Based in the San Francisco Bay Area, we face significant competition for experienced employees
from a large and diverse group of biotechnology and pharmaceutical companies. As a result of intense recruitment
efforts within biotech, we face higher turnover rates than other industries. In 2021, particularly as the COVID-19
pandemic necessitated remote work for most employees, we continued to experience a higher-than-normal rate of
employees leaving the company to pursue other opportunities. This turnover was mitigated by a robust recruiting
effort. We maintain a comprehensive dashboard of measurements, including recruitment productivity, diversity,
equity and inclusion metrics, employee engagement scores, total rewards benchmarking, participation rates and
satisfaction scores for internal training, turnover rates and exit interview results, to guide our human capital
management efforts.
We believe that we can best address competitive challenges by enhancing the reputation of NGM as a
great place to work, which includes nurturing our workplace culture, providing competitive compensation and
benefits programs and supporting employee career development and related management training. To that end, we
continue to invest resources and energy into being an employer of choice – attracting and engaging individuals who
are innovative, curious, driven, diligent, collaborative and of the highest scientific integrity and ethics. Some of our
key efforts in this area and management of our human capital assets generally are described here.
Compensation and Benefits
Our compensation philosophy is to provide pay and benefits that are competitive in the biotechnology and
pharmaceutical industry where we compete for talent. We monitor our compensation programs closely and review
them throughout the year to provide what we consider a very competitive mix of compensation and health, welfare
and retirement benefits for all our employees. Our compensation package for all employees includes market-
competitive base salaries, annual performance bonuses and stock option grants. Our benefits programs include
company sponsored medical, dental and vision health care coverage, life and AD&D insurance, a 401(k) plan with a
matching employer contribution, paid time off and family leave and an employee stock purchase plan, among others
benefits. Every year, we undertake a detailed review of our compensation by position and level and make
adjustments necessary to ensure that we continue to provide competitive compensation. Our hiring practices and
annual compensation reviews are designed to ensure fairness in pay equity across gender and ethnicity among
similar roles and responsibilities throughout our organization, after accounting for legitimate business factors that
can explain differences, such as performance, time at grade level, education and tenure. Our efforts extend beyond
pay equity to include fairness in gender and ethnic representation at all levels in the organization.
Diversity, Equity and Inclusion
Our goal is to have a diverse, equitable and inclusive workforce – not just because it is the right thing to do,
but because we believe this is key to our long-term success. As of December 31, 2021, NGM employed 113 women
(50%) and 112 men (50%), and 56% of our employees self-identify as non-white, including 10% that are from
traditionally underrepresented groups. Our leadership, including employees at or above the vice president level and
members of our board of directors, includes 41% women and 27% who self-identify as non-white. To champion our
efforts in this area, we formed a cross functional team of employees to drive our diversity, equity and inclusion
initiatives that are organized around five pillars: awareness and understanding; diverse candidate pipelines;
community outreach; advocacy and career advancement; and business impact. Beginning in 2020, we have
focused on anti-black racism. Our efforts have included mandatory unconscious bias and discrimination training, an
employee-led diversity page on our intranet, voluntary participation in a program to encourage allyship through
exercises in conjunction with Black History Month and conducting a survey to understand employee sentiment
around race-related issues to establish a baseline for tracking future progress. In 2021, we implemented a pilot
internship program and specific efforts to provide the company with a more diverse candidate pipeline. In addition to
internal efforts, our research employees volunteered to teach elementary school students various topics in biology.
We are also continuing our practice of quantifying racial, ethnic and gender diversity within completed clinical
studies, and in 2021 began publishing those metrics internally and educating ourselves on industry best-practices to
improve recruitment and retention of women and minorities in our clinical trials.
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Communication and Engagement
We believe that part of what sets NGM apart from other companies is our culture and, in particular, our
focus on providing timely and transparent communications and creating a strong sense of belonging and
inclusiveness. The COVID-19 pandemic made it unsafe for us to provide the many traditions and celebrations that
contribute to what makes NGM a special place to work: monthly themed happy hours; weekly group lunch
programs, often with scientific updates of interest; and events including an annual anniversary party, summer family
picnic, Thanksgiving potluck and holiday white elephant party, among many others. In 2020, we shifted to a virtual
setting for many employees and continued to emphasize communication and employee engagement through
quarterly all-employee virtual town halls; weekly emails from the CEO through the first year of the pandemic;
reflection emails from a different employee each week; regular, virtual coffee chats for small groups with our CEO
and other members of senior management; our annual employee engagement survey; and company-wide virtual
celebrations.
We survey our employees each year to measure their level of engagement at NGM. Our employee
engagement score improved in 2021 over 2020 and affirmed that we are focusing our engagement efforts in the
right areas. These surveys provide rich feedback each year that helps us to continue to grow our culture and make
NGM a great place to work.
Health, Wellness and Safety
We are committed to the health and safety of our employees. Early in 2020, we formed the CARE, or
COVID Awareness and Re-Entry, team to handle issues related to the ongoing COVID-19 pandemic. In addition to
advising the company on matters related to compliance with federal, state and local guidance, the CARE team
engages in ongoing, frequent communications with employees on matters related to personal safety – particularly
for those essential workers required to work on site. We also partner with a third-party provider to administer daily
symptom screenings and contact tracing, and to provide the support of medical professionals when warranted.
Ongoing activities that continue to promote employee wellness include external support from our employee
assistance program as well as recently added mental wellness and health advocacy services. We look forward to
resuming all-employee access to our on-site gym, boot camp and other exercise-related options when conditions
permit.
None of our employees is subject to a collective bargaining agreement or represented by a trade or labor
union. We consider our relations with our employees to be good.
Corporate and Available Information
We were incorporated in Delaware in December 2007 and commenced operations in 2008. Our principal
executive offices are located at 333 Oyster Point Blvd., South San Francisco, CA 94080-7014, and our telephone
number is (650) 243-5555. Our website address is http://www.ngmbio.com.
We file or furnish electronically with the U.S. Securities and Exchange Commission, or the SEC, annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make copies of these reports
available free of charge through the “SEC Filings” tab on the “Investors & Media” page of our website as soon as
reasonably practicable after we file or furnish them with the SEC.
Information contained on or accessible through our websites is not incorporated into, and does not form a
part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites
are intended to be inactive textual references only.
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Item 1A.
Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks
and uncertainties described below before deciding whether to make an investment decision with respect to our
common stock. You should also refer to the other information contained in this Annual Report on Form 10-K,
including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
financial statements and related notes, as well as our other filings with the U.S. Securities and Exchange
Commission, or SEC. Our business, financial condition, results of operations, stock price and prospects could be
materially and adversely affected by any of these risks or uncertainties. In any such case, the trading price of our
common stock could decline, and you could lose all or part of your investment. We caution you that the risks,
uncertainties and other factors referred to below and elsewhere in this Annual Report on Form 10-K may not contain
all of the risks, uncertainties and other factors that may affect our future results and operations. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also impair our business
operations and the market price of our common stock. Moreover, new risks will emerge from time to time. It is not
possible for our management to predict all risks.
Risks Related to Our Financial Condition and Capital Needs
We have incurred net losses every year since our inception and have no source of product revenue. We
expect to continue to incur significant and increasing operating losses and may never become profitable.
We have no products approved for commercial sale and have not generated any revenue from product
sales to date. As a result, we are not profitable and have incurred losses in each year since commencing
operations. Our net losses were $120.3 million, $102.5 million and $42.8 million for the years ended December 31,
2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $419.0 million.
We expect to continue to incur significant and increasing research and development, or R&D, and other
expenses related to our ongoing operations for the foreseeable future, particularly to fund R&D of, and seek
regulatory approvals for, our product candidates. We further expect to incur substantial and increasing operating
losses in 2022 and over the next several years as our research, development, manufacturing, preclinical studies,
clinical trial and related activities and related expenses increase and we expect our accumulated deficit will also
increase significantly in future periods. The size of our future net losses will depend, in part, on the rate of future
growth of our expenses and our ability to generate revenue outside of our collaboration with Merck Sharp & Dohme
Corp., or Merck. Our prior losses and expected future losses have had and will continue to have an adverse effect
on our stockholders’ equity and working capital.
In addition, we will not be able to generate product revenue unless and until one of our product candidates
successfully completes clinical trials, receives regulatory approval and is successfully commercialized. As our
product candidates are in Phase 2 trials or in earlier stages of development, we do not expect to receive product
revenue from our product candidates for a number of years, if ever. For example, in May 2021, we announced
topline results from our Phase 2b ALPINE 2/3 trial evaluating aldafermin in patients with nonalcoholic
steatohepatitis, or NASH, and liver fibrosis stage 2 or 3, or F2 or F3. The study did not meet its primary endpoint,
and, as a result, we decided to suspend further development of aldafermin in patients with F2/F3 NASH, allowing for
the reallocation of resources to advancing our other programs.
Our ability to generate any product revenue from our current or future product candidates also depends on
a number of additional factors, including our or our current collaborator’s and potential future collaborators’ ability to:
•
•
•
•
successfully complete research and clinical development of current and future product candidates and
obtain regulatory approval for those product candidates;
establish and maintain supply and manufacturing relationships with third parties, and ensure adequate,
scaled up and legally compliant manufacturing of bulk drug substances and drug products to maintain
sufficient supply;
launch and commercialize any product candidates for which we obtain marketing approval, if any, and, if
launched independently by us without a collaborator, successfully establish a sales force and marketing and
distribution infrastructure;
demonstrate the necessary safety data (and, if accelerated approval is obtained, verify the clinical benefit)
post-approval to ensure continued regulatory approval;
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•
•
•
•
obtain coverage and adequate product reimbursement from third-party payors, including government
payors, for any approved products;
achieve market acceptance for any approved products;
establish, maintain, protect and enforce our intellectual property rights; and
attract, hire and retain qualified personnel.
Because of the numerous risks and uncertainties associated with pharmaceutical product development,
including that our product candidates may not advance through development or be approved for commercial sale,
we are unable to predict if or when we will generate product revenue or achieve or maintain profitability. Even if we
successfully complete development and regulatory processes, we anticipate incurring significant costs associated
with launching and commercializing any products. If we fail to become profitable or do not sustain profitability on a
continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or cease
our operations.
All of our revenue for recent periods has been received from a single collaboration partner, and that
revenue will be substantially lower beginning in 2022.
We do not have any committed external source of funds, other than pursuant to our ongoing collaboration
with Merck, which has provided us with substantial financial support since 2015. However, as described under
“Overview of Our Business - Our Collaboration with Merck” in Part I, Item 1 of this Annual Report on Form 10-K,
beginning in 2022, the R&D funding we receive from Merck under the collaboration will be substantially lower on an
annual and overall basis than the research funding previously provided by Merck due to the narrower scope of the
amended and restated research collaboration, product development and license agreement we entered into with
Merck on June 30, 2021, or the Amended Collaboration Agreement, which amended and restated our then-existing
collaboration agreement with Merck, originally entered into in 2015, which, together with amendments made prior to
June 30, 2021, we refer to as the Original Collaboration Agreement.
In this regard, for the period starting on April 1, 2022 and ending on March 31, 2024, Merck is committed to
fund up to $20.0 million in R&D funding for the ophthalmology programs (other than NGM621), the cardiovascular or
metabolic -, or CVM-, related programs and other smaller laboratory programs subject to the collaboration. Merck is
also obligated to fund certain R&D costs related to NGM621 in an amount expected to be up to approximately $20.0
million, until the earlier of Merck's decision to exercise, or not to exercise, its license option with respect to NGM621
and its related compounds (either alone or bundled with all of the other continuing ophthalmology compounds and
their respective related compounds) or, March 31, 2024. As a result, beginning in 2022, we will need to devote a
substantial amount of our own financial resources to our R&D programs, particularly with respect to our wholly-
owned programs and, to a lesser extent, with respect to programs that are within the scope of the current
collaboration under the Amended Collaboration Agreement that we are required to fund (and our failure to allocate
funding to meet such requirements may be deemed a breach of the Amended Collaboration Agreement). In
addition, our funding requirements would increase for any programs that are within the scope of the current
collaboration in the event Merck does not elect to license these programs and we decide to continue them, in the
event Merck elects to terminate its license to any program it licenses and we decide to continue it or in the event we
opt to co-develop any Merck-licensed programs.
Other than our Amended Collaboration Agreement with Merck, which is limited in scope and duration, and
may be unilaterally terminated by Merck under certain circumstances, we are not party to any agreements that
could provide us with future revenue. Accordingly, we will need to raise significant additional capital and/or we will
need to enter into additional collaborations in order to proceed with development through regulatory approval and
commercialization of our current and potential future product candidates. Neither may be possible and, as a result, if
adequate funds are not available when we need them, we may need to significantly delay, scale back or discontinue
development of some or all of our product candidates or scale back or discontinue discovery efforts, which could
have a material adverse effect on our business, operating results and prospects, or we may be required to cease
operations altogether.
We will need significant additional capital to proceed with development and commercialization of our
current and potential future product candidates and our other operations. We may not be able to access
sufficient capital on acceptable terms, if at all, and, as a result, we may be required to delay, scale back or
discontinue development of such product candidates.
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As an R&D company, our operations have consumed substantial amounts of cash since inception, and we
will require substantial additional capital to finance our operations and pursue our strategy, both in the short and the
long term, and the amount of funding we will need depends on many factors, including:
•
•
•
•
•
•
•
•
the initiation, progress, timing, delays, costs and results of preclinical studies and clinical trials for our
current and future product candidates;
whether Merck exercises its option to license product candidates upon completion of human proof-of-
concept studies or at the earlier license option point as specified in the Amended Collaboration Agreement
for each such candidate;
whether Merck terminates the research phase of the collaboration under pre-specified circumstances set
forth in the Amended Collaboration Agreement or terminates a program that it has licensed;
the amount of our financial resources that we will need to devote to our obligations under the Amended
Collaboration Agreement;
the outcome, timing and cost of seeking and obtaining regulatory approvals from the U.S. Food and Drug
Administration, or FDA, and comparable foreign health authorities, including the potential for such
authorities to require that we perform more studies than those that we currently expect or to change their
requirements on studies that had previously been agreed to;
the cost to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio,
including the amount and timing of any payments we may be required to make, or that we may receive, in
connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other
intellectual property rights;
the cost and timing of selecting, auditing and potentially validating a manufacturing site for later-stage
clinical and commercial-scale manufacturing;
the effect of products that may compete with our product candidates or other market developments;
• market acceptance of any approved product candidates,
including product pricing and product
reimbursement by third-party payors;
•
•
the cost of potentially acquiring, licensing or investing in additional businesses, products, product
candidates and technologies; and
the cost of establishing sales, marketing and distribution capabilities for any of our product candidates for
which we may receive regulatory approval and that we determine to commercialize ourselves or in
collaboration with partners.
We believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient to
fund our operations for at least the twelve months from the date of filing of this Annual Report on Form 10-K. We
have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital
resources sooner than we currently expect. In addition, our forecast of the period of time through which our financial
resources will be adequate to support our operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary materially as a result of a number of factors, including the factors
discussed elsewhere in this “Risk Factors” section.
We plan to finance our future cash needs through public or private equity or debt offerings, including under
the Open Market Sale AgreementSM, or the Sales Agreement, we entered into with Jefferies LLC in June 2020,
product collaborations, strategic alliances, licensing arrangements or a combination of these potential financing
sources. Additional capital may not be available in sufficient amounts, on reasonable terms or when we need it, if at
all. Our ability to raise additional capital through public or private equity or debt offerings may be adversely impacted
by worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in
the United States and worldwide, and the biotechnology industry specifically, resulting from, among other things, the
continuing effects of the COVID-19 pandemic and geopolitical instability.
If adequate funds are not available from public or private equity or debt offerings on acceptable terms when
needed, in order to continue the development of product candidates outside of the scope of the collaboration with
Merck we may need to:
•
seek strategic alliances for R&D programs when we otherwise would not, at an earlier stage than we would
otherwise desire or on terms less favorable than might otherwise be available; or
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•
enter into product collaborations that could require us to relinquish, or license, on potentially unfavorable
terms, our rights to intellectual property, product candidates or products that we otherwise would develop or
seek to commercialize ourselves.
Even if we decide we want to collaborate with other pharmaceutical and biotechnology companies for the
development and potential commercialization of such product candidates, we may not be able to enter into
agreements on acceptable terms, if at all. We face significant competition in seeking appropriate collaborators.
Whether we reach a definitive agreement for a collaboration will depend, among other things, upon the potential
collaborator’s evaluation of the subject product candidate and its market opportunity, our assessment of the
collaborator’s resources and expertise and the terms and conditions of the potential collaboration.
We are also restricted under our existing Amended Collaboration Agreement with Merck, and may be
restricted under future collaboration agreements, from entering into additional agreements on certain terms with
potential collaborators. For example, under the current terms of the Amended Collaboration Agreement, we may not
directly or indirectly research, develop, manufacture or commercialize, except pursuant to the Amended
Collaboration Agreement, any medicine or product candidate that modulates a target then subject to the
collaboration with specified activity, including, if Merck exercises its option to license a program, we may not directly
or indirectly research, develop, manufacture or commercialize any product with specified activity against the target
that is the subject of that program for so long as Merck’s license to that program remains in effect. The human
hormone fibroblast growth factor 19, or FGF19 program, including aldafermin, is excluded from this provision,
notwithstanding that both aldafermin and MK-3655 signal, in part, through the fibroblast growth factor receptor 1c, or
FGFR1c, pathway. In addition, under the Amended Collaboration Agreement, we are prohibited from, directly or
indirectly, researching, developing or commercializing any product for the treatment of heart failure with preserved
ejection fraction, or HFpEF, during the research phase for the CVM-related programs.
We may not be able to raise adequate additional capital or negotiate potential future collaborations on a
timely basis, on acceptable terms or at all. If we are unable to do so, we may have to delay, scale back or
discontinue our research, the development of any product candidate for which we are seeking a collaboration or one
or more of our other development programs, delay a product candidate's potential commercialization or reduce the
scope of any sales or marketing activities or increase our expenditures and undertake development or
commercialization activities at our own expense, or we may be prevented from pursuing research, development and
commercialization efforts, which will have a material adverse effect on our business, operating results and
prospects.
Raising additional capital may cause dilution to our existing stockholders, lead to restrictions on our
operations or require us to relinquish rights to our product candidates or intellectual property.
If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt
financing, if available, may involve restrictive covenants. Any debt financing or additional equity that we raise may
contain terms that are not favorable to us or our stockholders. Furthermore, any securities that we may issue may
have rights senior to those of our common stock and could contain covenants or protective rights that would lead to
restrictions on our operations and potentially impair our competitiveness, such as limitations on our ability to incur
additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct our business.
Risks Related to Our Dependence on Third Parties
We depend on our collaboration with Merck for the development and commercialization of our product
candidates within the scope of the collaboration. Our collaboration with Merck involves numerous risks,
any of which could materially and adversely affect our business and financial condition.
As described in more detail under “Business - Overview of Our Business – Our Collaboration with Merck” in
Part I, Item 1 of this Annual Report on Form 10-K, our continuing Merck collaboration involves a complex allocation
of rights, provides for certain R&D funding and, for products for which Merck exercises its license option, if any,
provides us with either milestone payments based on the achievement of specified clinical development, regulatory
and commercial milestones and royalty-based revenue
if certain product candidates are successfully
commercialized or a cost and profit share arrangement with the possibility that we would provide sales
representatives to co-detail the product candidates that Merck elects to advance in the United States. Under the
Amended Collaboration Agreement, the research phase of the collaboration continues generally through March
2024, with possible extensions for each of the various programs to allow us or Merck to complete ongoing
development during designated tail periods. The level of R&D funding we expect to receive from Merck going
42
forward will be substantially lower on an annual and overall basis than the R&D funding previously provided by
Merck. In addition, we do not know whether Merck will exercise its option to license additional product candidates or
whether Merck will terminate its license to a licensed program under the terms of the Amended Collaboration
Agreement or otherwise.
Under the Amended Collaboration Agreement, Merck has the unilateral right to terminate all or part of the
agreement at certain times and under certain circumstances. Merck also may unilaterally terminate its R&D funding
for programs within the scope of the collaboration if we are acquired by a third party or in the event of an uncured
material breach by us. Subject to certain limitations, Merck may partially terminate the Amended Collaboration
Agreement for convenience as it relates to MK-3655 or any future licensed program, as it did in 2019 when it
terminated its license to our growth differentiation factor 15, or GDF15, agonist program, which included currently
suspended product candidates NGM395 and NGM386. Merck may also unilaterally terminate the Amended
Collaboration Agreement as it relates to its rights to research and develop small molecule compounds. It may also
unilaterally terminate the Amended Collaboration Agreement with respect to a specific licensed program in the event
of an uncured material breach by us. If Merck terminates a program as a result of our uncured material breach, then
we would lose our option to participate in a global cost and profit share arrangement if not yet exercised as of the
time of termination and lose our co-detailing option (whether or not exercised as of that time) for the relevant
licensed program.
If Merck terminates funding or terminates the Amended Collaboration Agreement, it could delay or preclude
our ability to complete certain of our research and development programs, which would materially and adversely
affect our business and our stock price would likely decline. In addition, in the event that Merck decides to take over
any product candidates included in the scope of the collaboration for development during any tail period, or
exercises it license option for any such product candidate, we could be subject to disputes with Merck with respect
to their obligation to use commercially reasonable efforts with respect to the development and commercialization of
the affected product candidate, and we could otherwise be subject to disputes with Merck over the scope of the
parties’ respective rights under the Amended Collaboration Agreement, any of which could delay or preclude the
development or commercialization of the affected product candidate and involve us in costly and time-consuming
arbitration and litigation, which could divert management attention and resources and otherwise negatively affect
our business and operations.
We may depend in the future on collaborations with third parties other than Merck for the development and
commercialization of our product candidates and for revenue. If those collaborations are not successful, we
may not be able to capitalize on the market potential of our product candidates.
We may seek other third-party collaborators for the development and commercialization of any product
candidates that are not within the scope of the collaboration with Merck or if Merck elects not to proceed with
development of any product candidates that are within the scope of the current collaboration. If we decide to enter
into any such arrangements with any third parties, and are successful in doing so, we will likely have limited control
over the amount and timing of resources that our collaborators dedicate to the development or commercialization of
our product candidates. Our ability to generate revenue from any such arrangement will depend on the specific
financial terms we reach with any collaborator, as well as each of our collaborators’ abilities to successfully perform
the functions assigned to them in such arrangement towards developing, seeking regulatory approval for and
commercializing our product candidates.
Collaborations involving our product candidates, including our collaboration with Merck, pose risks to us,
including the following:
•
•
Collaborators have significant discretion in determining the efforts and resources that they will apply to
these collaborations. For example, under the terms of the collaboration with Merck, if Merck exercises its
option to acquire an exclusive license for a product candidate that is within the scope of the collaboration,
our ability to influence the resources Merck devotes to such product candidate are substantially reduced
until such time, if any, that we exercise our right to participate in a cost and profit share arrangement. Even
after we exercise that right to participate in a cost and profit share arrangement, our ability to influence
Merck will be limited.
Collaborators might opt not to pursue development and commercialization of our product candidates or not
to continue or renew development or commercialization programs based on clinical trial results, changes in
the collaborator’s strategic focus or available funding or external factors, such as an acquisition that diverts
resources or creates competing priorities. For example, in June 2021, we and Merck entered into the
Amended Collaboration Agreement that covers a narrower scope, focused primarily on ophthalmology- and
CVM-related therapeutic areas, than had been covered under the Original Collaboration Agreement. In
43
addition, under the terms of the Amended Collaboration Agreement, it is possible for Merck to unilaterally
terminate the MK-3655 program and any other program (whether or not we have exercised our cost and
profit share option) upon prior written notice, such as it did for NGM386 and NGM395, without triggering a
termination of the remainder of the Amended Collaboration Agreement. Moreover, Merck might also opt not
to designate any collaboration product candidates for further development during the tail period following
the end of the research phase or exercise any of its options to acquire a license to a product candidate.
Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, request the
suspension or termination of a clinical trial or abandon a product candidate, repeat or conduct new clinical
trials or require a new formulation of a product candidate for clinical testing.
Collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our product candidates if the collaborators believe that competitive products are more likely to
be successfully developed or can be commercialized under terms that are more economically attractive
than ours.
A collaborator with marketing and distribution rights might not commit sufficient resources to the marketing
and distribution of our product candidates.
Collaborators might not properly maintain or defend our intellectual property rights or may use our
proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary
information or expose us to potential litigation.
Disputes may arise between the collaborators and us that result in the delay or termination of the research,
development or commercialization of our product candidates or that result in costly litigation or arbitration
that diverts management attention and resources.
•
•
•
•
•
• We may lose certain valuable rights under circumstances identified in our collaborations, including, in the
case of our collaboration with Merck, if we undergo a change in control.
•
Collaborations might be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates.
Collaboration agreements might not lead to development or commercialization of product candidates in the
most efficient manner, or at all. If a present or future collaborator of ours were to be involved in a business
combination, the continued pursuit and emphasis on our product development or commercialization program under
such collaboration could be delayed, diminished or terminated.
We may not be able to obtain and maintain the relationships with third parties that are necessary to
develop, commercialize and manufacture some or all of our product candidates.
In addition to our dependence on our collaboration with Merck and any potential future collaborators, we
expect to depend on other third parties, including contract research organizations, or CROs, clinical data
management organizations, clinical investigators, contract manufacturing organizations/contract development and
manufacturing organizations, or CMOs, and other third-party partners and service providers to support our
discovery efforts, to formulate product candidates, to conduct our clinical trials and certain aspects of our research
and preclinical studies, to manufacture clinical and commercial-scale quantities of our drug substances and drug
products and to market, sell and distribute any products we successfully develop and for which we obtain regulatory
approval. Any problems we experience with any of these third parties could delay our research efforts or the
development, manufacturing or commercialization of our product candidates or any future products, which could
harm our results of operations. For more information, see the risk factors titled “We rely completely on CMOs for the
manufacture of our product candidates, and are subject to many manufacturing risks, any of which could
substantially increase our costs and limit supply of our product candidates and any future products" and “We have
no experience in sales, marketing and distribution and may have to enter into agreements with third parties to
perform these functions, which could prevent us from successfully commercializing our product candidates.”
We cannot guarantee that we or, as applicable, any of our collaborators will be able to successfully
negotiate agreements for, and maintain relationships with, third-party partners and service providers on favorable
terms, if at all. If we or any of our collaborators are unable to obtain and maintain these agreements, we may not be
able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize our product
candidates, which will, in turn, adversely affect our business. If we or any of our collaborators need to enter into
alternative arrangements, it would delay our product development and, if applicable, commercialization activities
and such alternative arrangements may not be available on terms acceptable to us.
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We expect to continue to expend substantial management time and effort to enter into relationships with
third parties and, if we successfully enter into such relationships, to manage these relationships. In addition, our
reliance on these third parties for R&D activities reduces our control over these activities but does not relieve us of
our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in
accordance with the general investigational plan and protocols for the trial. However, we cannot control the amount
or timing of resources our collaborators will devote to our R&D programs, product candidates or potential product
candidates, and we cannot guarantee that these parties will fulfill their obligations to us under these arrangements
in a timely fashion, if at all. If these third parties do not successfully carry out their contractual duties, meet expected
deadlines or conduct our clinical trials or other R&D activities in accordance with regulatory requirements, we will
not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not
be able to, or may be delayed in our efforts to, successfully commercialize any approved products. In addition, we
base our expense accruals related to clinical trials on our estimates of the services received and efforts expended
pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our
behalf and, if their estimates are not accurate, it could negatively affect the accuracy of our financial statements.
Any agreements we have or may enter into with third-party partners and service providers may give rise to
disputes regarding the rights and obligations of the parties. Disagreements could develop over contract
interpretation, rights to ownership or use of intellectual property, the scope and direction of R&D, the approach for
regulatory approvals or commercialization strategy. We are conducting research programs in a range of therapeutic
areas, and our pursuit of these opportunities could result in conflicts with the other parties to these agreements that
may be developing or selling pharmaceuticals or conducting other activities in these same therapeutic areas. Any
disputes or commercial conflicts could lead to the termination of our agreements, delay progress of our product
development programs, compromise our ability to renew agreements or obtain future agreements, lead to the loss
of intellectual property rights, result in increased financial obligations for us or result in costly and time-consuming
arbitration or litigation.
In addition, we are less knowledgeable about the reputation and quality of third-party contractors in
countries outside of the United States where we conduct discovery research or preclinical and clinical development
and manufacturing of our product candidates and, therefore, we may not choose the best parties for these
relationships.
We rely completely on CMOs for the manufacture of our product candidates, and are subject to many
manufacturing risks, any of which could substantially increase our costs and limit supply of our product
candidates and any future products.
We have limited process development capabilities and require the services of third-party CMOs to provide
additional process development and manufacturing capabilities. We do not have, and we do not currently plan to
acquire or develop, the facilities or capabilities to manufacture bulk drug substance or filled drug product for use in
clinical trials or commercialization. As a result, we rely completely on CMOs, which entails risks to which we would
not be subject if we manufactured product candidates or products ourselves, including risks related to reliance on
third parties for availability of drug product to use in our clinical trials and for regulatory compliance and quality
assurance with respect to such drug product, the possibility of breach of the manufacturing agreement by third
parties because of factors beyond our control (including a failure to manufacture our product candidates or any
products we may eventually commercialize in accordance with our specifications) and the possibility of termination
or nonrenewal of agreements by third parties, based on their own business priorities, at a time that is costly or
damaging to us.
Our product candidates are biologics, and the manufacture of biologic products is complex, highly regulated
and requires significant expertise and capital investment, including the development of advanced manufacturing
techniques and process controls. As a result, the manufacture of our product candidates is subject to many risks,
including the following, some of which we have experienced:
•
•
•
product loss or other negative consequences due to contamination, equipment failure, improper installation
or operation of equipment, vendor or operator error, shortages of qualified personnel or improper delivery or
storage conditions;
difficulties with production costs and yields, quality control, product stability and quality assurance testing,
including challenges related to bioanalytical method development and the qualification and implementation
of those methods for release testing, which can delay availability of clinical trial materials;
the negative consequences of failure to comply with strictly enforced federal, state and foreign regulations;
45
• minor deviations from normal manufacturing processes, which have in the past and may in the future result
in reduced production yields, product defects and other supply disruptions;
•
•
•
•
the presence of microbial, viral or other contaminants discovered in our product candidates or in the
manufacturing facilities in which they are made, which can necessitate closure of facilities for an extended
period of time to investigate and eliminate the contamination;
the negative consequences of our CMOs’ failure to qualify upon an audit by regulatory authorities, by us or
by our collaborators;
our CMOs’ changing strategies and business priorities, which can affect the availability of facilities where we
intended to manufacture our product candidates; and
our CMOs’ manufacturing facilities being adversely affected by labor, raw material and component
shortages, turnover of qualified staff or financial difficulties of their owners or operators, including as a result
of the evolving effects of the COVID-19 pandemic, or by natural disasters, power failures, local political
unrest or other factors.
We cannot ensure that issues relating to the manufacture or testing of our product candidates, such as
those described above, will not occur or continue to occur in the future and if we or our CMOs experience any such
issues there could be a shortage of drug substance or drug product for use in our clinical trials, which could delay
clinical and regulatory timelines significantly and have an adverse effect on our business.
In addition, to date our product candidates have been manufactured by CMOs solely for preclinical studies
and relatively small clinical trials. We intend to continue to use CMOs for these purposes, and also for the supply of
larger quantities that may be required to conduct accelerated or expanded early clinical trials or larger, later clinical
trials and for commercialization if we advance any of our product candidates through regulatory approval and to
commercialization. For MK-3655 and any other product candidates licensed by Merck, we will rely on Merck’s
internal manufacturing capacity or a third-party manufacturer engaged by Merck. These manufacturers may not
have sufficient manufacturing capacity and may not be able to scale up the production of drug substance or drug
product in the quantities we need and at the level of quality required in a timely or effective manner, or at all. In
particular, there is increased competition in the biotechnology industry for CMO manufacturing slots and other
capabilities generally, which has had, and may continue to have, a negative impact on the availability of
manufacturing capacity and therefore our ability to supply clinical trial materials for planned, ongoing or expanded
clinical trials.
The transfer of our small-scale manufacturing processes to CMOs for scale up and validation, such as our
ongoing activities with a CMO to transfer the process for the manufacture of NGM621 in anticipation of a potential
Phase 3 trial, and any later scale up and validation of the manufacturing process in the CMOs’ facilities to
manufacture larger quantities, involve difficult and complex processes. We may not be successful in transferring our
production system to a CMO, either because it is unable to implement the process successfully in its facilities or for
other reasons. Later scale-up activities are also difficult and costly and entail risks such as process reproducibility,
stability, consistency and other technical challenges. If we are unable to adequately validate or scale up the
manufacturing processes for our product candidates, we would need to undertake a transfer to another third party
and repeat the manufacturing validation process, which can be expensive and time-consuming and could delay the
initiation or completion of our clinical trials.
Similarly, we or our CMOs may make changes to our product candidates’ manufacturing processes at
various points in product development for many reasons, including scaling up, facility fit, raw material or component
availability, decreasing costs or timing of production, improving processing robustness and reliability, decreasing
processing times or others. Such changes require further validation and may have unintended consequences, which
could include causing our product candidates to perform differently when administered in clinical trials and affecting
clinical trial results. In some circumstances, we may be required to perform comparability or other studies to
demonstrate that the product used in earlier clinical trials or at earlier stages of a trial are comparable to the product
we intend to use in later trials or later stages of an ongoing trial. These efforts are expensive and there is no
assurance that they will be successful, which could impact our ability to continue or initiate clinical trials in a timely
manner, or at all.
Any future adverse developments affecting manufacturing operations or the scale up or validation of
manufacturing processes for our product candidates may result in shipment delays, lot failures, clinical trial delays
or discontinuations, or, if we are commercializing products, inventory shortages, product withdrawals or recalls or
other interruptions in supply. We may also have to record inventory write-offs and incur other charges and expenses
for drug substance or drug product that fails to meet specifications or cannot be used before its expiration date. In
46
addition, for out of specification materials, we may need to undertake costly remediation efforts or manufacture new
batches at considerable cost and time delays or, in the longer run, seek more expensive manufacturing alternatives.
We also have a single source of supply for most of our product candidates, including the drug substances
used in manufacturing them. Single sourcing minimizes our leverage with our CMOs, who may take advantage of
our reliance on them to increase the pricing of their manufacturing services or require us to change our intended
manufacturing plans based on their strategies and priorities. Single sourcing also imposes a risk of interruption or
delays in supply in the event of manufacturing, quality or compliance difficulties and/or other difficulties in timely
supplying us with materials. For example, our planned individual new drug application submissions for NGM438 and
NGM831 were delayed due to challenges at one of our CMOs, primarily related to analytical method qualification
and release testing for those product candidates. It is possible that we could experience further supply-related
delays that would adversely affect our ability to commence first-in-human testing of product candidates on our
anticipated timing. Moreover, we do not currently have arrangements in place for redundant supply for drug
substance or drug product. If one of our suppliers fails or refuses to supply us for any reason or we otherwise
choose to engage a new supplier for one or more of our product candidates, including a second source supplier to
mitigate the risks of single-source supply, it would take a significant amount of time and cost to implement and
execute the necessary technology transfer to, and qualification of, a new supplier. The FDA or comparable foreign
health authority must approve manufacturers of drug substance and drug product. If there are any delays in
qualifying new suppliers or facilities or a new supplier is unable to meet the requirements of the FDA or comparable
foreign health authority for approval, there could be a shortage of drug substance or drug product for use in clinical
trials with respect to the affected product candidates.
Our product candidates use certain raw materials for their production, such as reagents that support cell
growth, purification materials and testing and manufacturing supplies. Some of these materials only have a single
supplier and are purchased as necessary without a long-term supply agreement in place. In addition, our drug
products may require the use of syringe or other components, some of which have been the subject of shortages
amplified by the COVID-19 pandemic due to their use in, among other things, COVID-19 vaccine production. If our
CMOs are required to obtain an alternative source of certain raw materials and components, additional testing,
validation activities and regulatory approvals may be required, which may negatively impact manufacturing and
other development timelines. For example, one of our CMOs recently experienced shortages of the specific cell
culture media used to manufacture one of our products due to global supply chain challenges and, while we have
been successful in obtaining a replacement product, these types of substitutions may require additional and
unplanned testing, qualification or validation activities. Any significant delay in the acquisition or decrease in the
availability of these materials, components or other items, or failure to successfully qualify or validate alternative
materials or components, could considerably delay the manufacture of our product candidates, which could
adversely impact the timing or completion of any ongoing and planned trials or the timing of regulatory approvals, if
any, of our product candidates.
In addition, our CMOs’ facilities and operations have been adversely affected by labor, raw material and
component shortages, high turnover of staff and difficulties in hiring trained and qualified replacement staff and the
operations of our CMOs may be requisitioned, diverted or allocated by U.S. or foreign government orders such as
under emergency, disaster and civil defense declarations in connection with the COVID-19 pandemic or otherwise.
For a discussion of how the COVID-19 pandemic has affected or may affect drug or related component supplies for
our clinical trials, refer to the risk factor titled “The COVID-19 pandemic continues to adversely impact our business
and operations, as well as the businesses or operations of our manufacturers, CROs or other third parties with
whom we conduct business. Our business could be materially and adversely affected in the future by the effects of
other disease outbreaks, epidemics and pandemics, including by the evolving effects of the COVID-19 pandemic.”
Changes in economic conditions, supply chain constraints, labor, raw material and component shortages and steps
taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other
stimulus and spending programs, could also lead to higher inflation than previously experienced or expected, which
could, in turn, lead to an increase in costs.
Our product candidates other than aldafermin and MK-3655 are currently manufactured at a facility in
Lithuania. At the end of 2021 and into 2022, tensions between Russia and the United States and its allies escalated
when Russia amassed large numbers of military ground forces and support personnel on the Ukraine-Russia border
and, in February 2022, Russia invaded Ukraine. While the situation is evolving and fluid at the time of filing of this
Annual Report on Form 10-K, the response from the United States and its allies has included both economic
sanctions and NATO's deployment of additional military forces to Eastern Europe, including to Lithuania. The
invasion of Ukraine and the retaliatory measures taken or that may be taken by the United States, NATO and others
create global security concerns, including the possibility of expanded regional or global conflict, and are likely to
have short-term and likely longer-term negative impacts on regional and global economies, any or all of which could
47
disrupt our supply chain and adversely affect our ability to conduct ongoing and future clinical trials of our product
candidates and our ability to raise capital on favorable terms.
Any further delays or interruptions in the supply of clinical trial material could delay the completion or
initiation of our clinical trials, increase the costs associated with maintaining clinical trial programs and, depending
upon the period of delay, require us to commence new clinical trials at additional expense, terminate ongoing clinical
trials or abandon planned clinical trials or expansions or accelerations of clinical trials completely.
We have no experience in sales, marketing and distribution and may have to enter into agreements with
third parties to perform these functions, which could prevent us from successfully commercializing our
product candidates.
We currently have no sales, marketing or distribution capabilities. To commercialize our product candidates
outside of the Merck collaboration, or to commercialize products subject to the Merck collaboration for which we
may in the future exercise our co-detailing rights in the United States or for which Merck decides not to exercise its
license option, we must either develop our own sales, marketing and distribution capabilities or make arrangements
with third parties to perform these services for us. If we exercise our co-detailing rights in the United States with
respect to the Merck collaboration, we will be responsible for the costs of fielding such a sales force, subject to
partial offset pursuant to the formula by which profits are allocated, and the risks of attracting, retaining, motivating
and ensuring the compliance of such a sales force with the various requirements of the Merck collaboration and
applicable law. If we decide to market any of our products on our own, we will have to commit significant resources
to developing a marketing and sales force and supporting distribution capabilities. If we decide to enter into
arrangements with third parties for performance of these services, we may find that they are not available on terms
acceptable to us, or at all. If we are not able to establish and maintain successful arrangements with third parties or
build our own sales and marketing infrastructure, we may not be able to commercialize our product candidates,
which would adversely affect our business, operating results and prospects.
Risks Related to Our Business and Industry
The COVID-19 pandemic continues to adversely impact our business and operations, as well as the
businesses or operations of our manufacturers, CROs or other third parties with whom we conduct
business. Our business could be materially and adversely affected in the future by the effects of other
disease outbreaks, epidemics and pandemics, including by the evolving effects of the COVID-19 pandemic.
Disease outbreaks and epidemics in regions where we have concentrations of clinical trial sites or other
business operations or pandemics, such as the COVID-19 pandemic, could adversely affect our business, including
by causing significant disruptions in our operations and/or in the operations of third-party manufacturers and CROs
upon whom we rely. For example, the COVID-19 pandemic has presented a substantial public health and economic
challenge around the world and is affecting employees, patients, communities and business operations, as well as
the United States and international economy and financial markets. In this regard, the COVID-19 pandemic and
government measures taken in response have had a significant impact, both direct and indirect, on businesses and
commerce, as significant reductions in business-related activities have occurred, supply chains have been disrupted
and manufacturing and clinical development activities have been curtailed or suspended.
Remote work policies, quarantines, shelter-in-place and similar government orders, shutdowns or other
restrictions on the conduct of business operations related to the COVID-19 pandemic could materially and adversely
affect our operations. After reopening our offices to a fully hybrid work model in October 2021, with the increased
rate of transmission experienced with the Omicron SARS-CoV-2 variant in early 2022, we returned to a more
restrictive model, temporarily discouraging in-person meetings and presence on site unless necessary to perform
one’s job responsibilities. Although we have re-opened our facilities under heightened safety measures, we may be
forced to, or determine that we should, resume a more restrictive remote work model. In connection with these
measures, we may be subject to claims based upon, arising out of or related to COVID-19 and our actions and
responses thereto, including any determinations that we have made and may make in the future with respect to our
onsite operations.
Further, the effects of current and future governmental shelter-in-place orders and our remote work policies
may materially and adversely impact productivity, disrupt our business and delay our clinical programs and
timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other
limitations on our ability to conduct our business in the ordinary course. For example, since the beginning of the
COVID-19 pandemic, the labor market has tightened significantly and we have experienced employee attrition at
rates higher than we have experienced historically, together with an increased rate of hiring new employees. We
cannot predict whether these trends will continue or be exacerbated, the impact of COVID-19 on future productivity
48
or whether or when we may be required to return to a more restrictive work model as the COVID-19 pandemic
continues to evolve. Future similar, and perhaps more severe, disruptions in our operations could materially and
adversely impact our business, financial condition, results of operations and growth prospects.
As the COVID-19 pandemic continues to evolve, there may be additional negative impacts in the future on
our ability to initiate new clinical trial sites, to enroll new patients and to maintain existing patients who are
participating in our clinical trials, which may include increased clinical trial costs, longer timelines and delay in our
ability to obtain regulatory approvals of our product candidates, if at all. Our ability to attract additional clinical trial
sites and principal investigators to conduct our clinical trials and to conduct the necessary clinical trial site initiation
procedures has been and may continue to be impacted by quarantines, shelter-in-place and similar restrictions
imposed by federal, state and local governments. These restrictions may also continue to prohibit or discourage
patients from enrolling in, or continuing to participate in, our clinical trials. Principal investigators and clinical trial site
staff, as healthcare providers, may have heightened exposure to COVID-19 and if their health is impacted by
COVID-19, it could adversely impact the conduct of our clinical trials at their sites. Similarly, potential participants in
our clinical trials, many of whom are particularly vulnerable, may be unwilling to enroll in, and enrolled patients may
be unwilling to continue to participate in, our clinical trials due to concerns about traveling to sites for required
screening and clinical trial visits and procedures. In this regard, during the COVID-19 pandemic, we have
experienced, from time to time, a slower pace of clinical site initiation and clinical trial enrollment than originally
anticipated in certain of our clinical trials, and we experienced a higher subject dropout rate in our aldafermin
ALPINE 2/3 trial than we had anticipated based on our previous trials in patients with NASH. We believe this may
be due to factors such as the vulnerability of our studied patient populations, site staff shortages, clinical trial site
suspensions, reallocation of medical resources and the challenges of working remotely due to shelter-in-place and
similar government orders and guidelines, among other factors.
Enrolled patients may also be unable to comply with clinical trial protocols if quarantines, shelter-in-place
and similar restrictions continue to impede patient movement or interrupt healthcare services. Accordingly, we have
developed and implemented additional clinical study policies and procedures designed to help protect trial
participants from exposure to COVID-19 as a result of their trial participation, which include the use of telemedicine
visits with trial participants, remote monitoring of clinical trial sites and other measures, as appropriate, designed to
ensure that data from our clinical trials that may be temporarily disrupted as a result of safety measures during the
COVID-19 pandemic are collected pursuant to the study protocol and consistent with current Good Clinical
Practices, or cGCPs, with any material protocol deviation reviewed and approved by the clinical trial sites'
institutional review boards, or IRBs, or ethics committees. We may be required to develop and implement additional
clinical study policies and procedures to mitigate the evolving effects of the COVID-19 pandemic, which could
significantly increase our R&D expenses. If any of the foregoing efforts to mitigate the impact of the COVID-19
pandemic on our clinical trials are not successful, or if the effects of the COVID-19 pandemic persist or become
more severe, it could materially and adversely affect our clinical development timelines and our ability to obtain
regulatory approvals of our product candidates and could significantly increase our costs.
We also could see an adverse impact on our ability to report clinical trial results, or interact with regulators,
IRBs and ethics committees or other important agencies due to limitations in health authority employee resources or
otherwise. Moreover, we rely on CROs and other third parties to assist us with clinical development activities, and
we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner
as a result of the COVID-19 pandemic.
Quarantines, shelter-in-place and similar government orders and guidelines could impact personnel at third-
party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which
would disrupt our supply chain and delay our clinical development efforts. Our CMOs’ facilities and operations have
been adversely affected by labor, raw material and component shortages, high turnover of staff and difficulties in
hiring trained and qualified replacement staff. These difficulties have resulted in some delays in early development
timelines and we could experience more significant disruptions to our supply chain and operations as a result of the
evolving effects of the continuing COVID-19 pandemic. If our CMOs are required to obtain an alternative source of
certain raw materials and components, for example, additional testing, validation activities and regulatory approvals
may be required which can also have a negative impact on timelines. Any associated delays in the manufacturing
and supply of drug substance and drug product for our clinical trials could adversely affect our ability to conduct
ongoing and future clinical trials of our product candidates on our anticipated development timelines. Likewise, the
operations of our third-party manufacturers may be requisitioned, diverted or allocated by U.S. or foreign
government orders such as under emergency, disaster and civil defense declarations in connection with the
COVID-19 pandemic or otherwise. As an example, in 2020, the Defense Production Act was invoked pursuant to
which the U.S. government may, among other things, require domestic industries to provide essential goods and
services needed for the national defense, such as drug material or other supplies needed to treat COVID-19
49
patients or to produce or distribute vaccines, which could require our third-party manufacturers to allocate
manufacturing capacity or raw materials or components in a way that delays or interrupts our supply of clinical trial
material. For example, early in the pandemic, our aldafermin drug product CMO advised us that it could be required
under orders of the U.S. government to allocate manufacturing capacity to the manufacture or distribution of
COVID-19 vaccines. If any of our CMOs or raw materials or components suppliers become subject to acts or orders
of U.S. or foreign government entities to allocate or prioritize manufacturing capacity, raw materials or components
to the manufacture or distribution of COVID-19 vaccines or medical supplies needed to treat COVID-19 patients,
this could delay our clinical trials, perhaps substantially, which could materially and adversely affect our business.
In any event, if the effects of the COVID-19 pandemic persist or become more severe or more acutely
impact geographies with particular relevance to our business, we could experience significant disruptions to our
current and potential future clinical development timelines, impacts on our ability to obtain regulatory approvals of
our product candidates and increases in our costs, all or any of which would adversely affect our business, financial
condition, results of operations and growth prospects.
While the potential economic impact caused by, and the duration of, the COVID-19 pandemic is difficult to
assess or predict, the COVID-19 pandemic could result in significant and prolonged disruption of global financial
markets, reducing our ability to access capital, which could in the future negatively affect the financial resources
available to us. In addition, economic recession or additional market corrections resulting from, among other things,
the spread of COVID-19 could materially affect our business and the value of our common stock. We also cannot
predict how the evolving effects of the COVID-19 pandemic may influence the future decisions of Merck to license
any programs available to it under the Amended Collaboration Agreement.
While we expect the COVID-19 pandemic to continue to affect our business operations, the extent of the
impact on our clinical development and regulatory efforts, our ability to raise sufficient additional capital on
acceptable terms, if at all, the decisions of Merck and the value of and market for our common stock will depend on
future developments that are highly uncertain and cannot be predicted with confidence at this time. Such
developments include the continued spread of the Delta variant in the United States and other countries, the
emergence and spread of the Omicron SARS-CoV-2 variant in the United States and other countries and the
potential emergence of additional SARS-CoV-2 variants that may prove especially contagious or virulent, the
ultimate duration and severity of the COVID-19 pandemic, government actions, such as travel restrictions,
quarantines and social distancing requirements in the United States and in other countries, business closures or
business disruptions, and the effectiveness of vaccination programs and other actions taken globally to contain and
treat COVID-19. To the extent the evolving effects of the COVID-19 pandemic adversely affects our business and
results of operations, it also may have the effect of heightening many of the other risks and uncertainties described
elsewhere in this ‘‘Risk Factors’’ section.
Our product candidates must undergo rigorous clinical trials before seeking regulatory approvals, and
clinical trials may be delayed, suspended or terminated at any time for many reasons, any of which could
delay or prevent regulatory approval and, if approval is granted, commercialization of our product
candidates.
All of our product candidates are subject to rigorous and extensive clinical trials before we can seek
regulatory approval from the FDA and comparable foreign health authorities such as the European Commission.
Clinical trials may be delayed, suspended or terminated at any time for reasons including but not limited to:
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•
•
•
ongoing discussions with the FDA or comparable foreign health authorities regarding the scope or design of
our clinical trials;
delays in obtaining, or the inability to obtain, required approvals from IRBs and ethics committees or other
governing entities at clinical trial sites selected for participation in our clinical trials;
delays in patient enrollment and other key trial activities, including as a result of the evolving effects of the
COVID-19 pandemic and of the significant competition for recruiting patients with cancer in clinical trials;
delays in reaching agreement on acceptable terms with prospective CROs and the failure of CROs, testing
laboratories and other third parties to satisfy their contractual duties to us or meet expected deadlines;
deviations from the trial protocol by clinical trial sites and investigators, or failures to conduct the trial in
accordance with regulatory requirements;
lower than anticipated retention rates of participants in clinical trials, including patients dropping out due to
side effects, disease progression or concerns about the COVID-19 pandemic;
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•
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•
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failure of enrolled patients to complete treatment or to return for post-treatment follow-up;
for clinical trials in selected patient populations, delays in identification and auditing of central or other
laboratories and the transfer and validation of assays or tests to be used to identify selected patients and
test any patient samples;
implementation of new, or changes to, guidance or interpretations from the FDA or comparable foreign
health authorities with respect to approval pathways for product candidates we are pursuing;
the need to repeat clinical trials as a result of inconclusive or negative results, poorly executed testing or
changes in required endpoints;
insufficient supply or deficient quality of drug substance, drug product or other clinical trial material
necessary to conduct our clinical trials, as well as delays in the testing, validation, manufacturing and
delivery to clinical trial sites of such material;
withdrawal of clinical trial sites or investigators from our clinical trials for any reason, including as a result of
changing standards of care or the ineligibility of a site to participate in our clinical trials;
unfavorable FDA or comparable foreign health authority inspection or review of a clinical trial site or records
of any clinical or preclinical investigation;
drug-related adverse effects or tolerability issues experienced by participants in our clinical trials;
changes in government regulations or administrative actions;
lack of adequate funding to continue the clinical trials;
our ability to hire and retain key research and development personnel; or
the placement of a clinical hold on a trial by the FDA or comparable foreign health authorities.
For example, in the third quarter of 2021, the manufacturer of Abraxane® (paclitaxel protein bound), or
Abraxane, reported a shortage of Abraxane to the FDA due to manufacturing delays. Abraxane, also referred to as
Nab-paclitaxel, is required for treatment of patients in our ongoing Phase 1/2 NGM120 PINNACLES clinical trial.
The Phase 2 portion of our PINNACLES clinical trial is studying NGM120 in combination with gemcitabine and Nab-
paclitaxel as first-line treatment in patients with metastatic pancreatic cancer to assess NGM120’s effect on both
cancer and cancer-related cachexia. It is possible that if our clinical trial sites are unable to obtain Nab-paclitaxel in
a timely fashion, or at all, that enrollment in the PINNACLES trial could substantially be delayed or precluded
altogether.
We cannot guarantee that we will be able to successfully accomplish required regulatory and/or
manufacturing activities or all of the other activities necessary to initiate and complete clinical trials in a timely
fashion, if at all. As a result, our preclinical studies and clinical trials may be extended, delayed or terminated, and
we may be unable to obtain regulatory approvals or successfully commercialize our products. In addition, we have
only limited experience in conducting late-stage clinical trials required to obtain regulatory approval. In any event,
we do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be
completed on schedule, or at all.
Our product development costs will increase if we continue to experience delays in clinical testing.
Significant clinical trial delays could also shorten any periods during which we may have the exclusive right to
commercialize our product candidates or allow our competitors to bring products to market before we do, which
would impair our ability to successfully commercialize our product candidates and may harm our business, results of
operations and prospects. Our or our collaborators’ inability to timely complete clinical development could result in
additional costs
to generate product revenue or development, regulatory,
impair our ability
commercialization and sales milestone payments and royalties on product sales.
to us or
If clinical trials of our product candidates fail to produce positive results or to demonstrate safety and
efficacy to the satisfaction of the FDA or comparable health authorities, we may incur additional costs or
experience delays
the development and
commercialization of our product candidates.
in completing, or ultimately be unable
to complete,
Our product candidates are in early stages of development, with our most advanced product candidates
only in Phase 2 development. Before obtaining marketing approval from health authorities for the sale of our product
candidates, we or our collaborators must conduct extensive preclinical studies and clinical trials to demonstrate the
safety and efficacy of the product candidates in humans. Preclinical studies and clinical trials are expensive, take
51
several years to complete and may not yield results that support further clinical development or product approvals.
The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the
design of a clinical trial may not become apparent until the clinical trial is well advanced. Because we have limited
experience designing clinical trials, we may be unable to design and execute a clinical trial to support regulatory
approval.
In addition, there is a high failure rate for drugs and biologic products proceeding through clinical trials and
failure can occur at any stage of testing. For example, our Phase 2b ALPINE 2/3 trial evaluating aldafermin in
patients with NASH and F2 or F3 liver fibrosis did not meet its primary endpoint and, as a result, we decided to
suspend further development of aldafermin in patients with F2/F3 NASH, allowing for the reallocation of resources
to advancing our other programs. While we continued, and have completed, enrollment in our Phase 2b ALPINE 4
clinical trial of aldafermin in patients with compensated NASH cirrhosis (F4 liver fibrosis), we recently updated the
design of the ALPINE 4 trial, elevating the Enhanced Liver Fibrosis, or ELF, test, a reproducible, quantitative non-
invasive liver prognostic test that evaluates liver fibrosis and correlates to liver-related outcomes, to be the primary
endpoint for the trial. The ELF test is a composite blood test measuring the presence of three biomarkers
associated with liver matrix metabolism. Liver biopsy data will also be measured and reported as a secondary
endpoint upon completion of the trial. For more information, see the risk factor titled “Aldafermin, which is wholly-
owned by us, as well as MK-3655, which is being developed by our collaborator, Merck, are being developed for the
treatment of NASH, an indication for which there are no approved products. This makes it difficult to predict the
timing, cost and potential success of their clinical development and regulatory approval for the treatment of NASH.”
We may determine to discontinue any further development of aldafermin in the future, in which case, we will not
receive any return on our investment in aldafermin.
Further, we expect that certain of our current product candidates will, and future product candidates may,
require chronic administration. The need for chronic administration increases the risk that participants in our clinical
trials will fail to comply with our dosing regimens. If participants fail to comply, we may not be able to generate
clinical data in our trials acceptable to the FDA or comparable foreign health authorities. The need for chronic
administration also increases the risk that our clinical drug development programs may not uncover all possible
adverse events that patients who take our products may eventually experience. The number of patients exposed to
treatment with, and the average exposure time to, our product candidates in clinical development programs may be
inadequate to detect rare adverse events or chance findings that may only be detected once our products are
administered to more patients and for longer periods of time.
In addition, data obtained from preclinical and clinical activities are subject to varying interpretations, which
may delay, limit or prevent regulatory approval. In any event, it is impossible to predict when or if any of our product
candidates will prove safe and effective in humans or will receive regulatory approval. If we are unable to
successfully discover, develop or enable our collaborators to develop drugs that regulatory authorities deem
effective and safe in humans, we will not have a viable business.
Success in preclinical studies or earlier-stage clinical trials may not be indicative of results in future clinical
trials.
To date, the data supporting our drug discovery and development programs are derived from laboratory and
preclinical studies and earlier-stage clinical trials. Owing in part to the complexity of biological pathways, when used
to treat human patients, our product candidates might not demonstrate the biochemical and pharmacological
properties we anticipate based on laboratory studies or earlier-stage clinical trials, and they may interact with human
biological systems or other drugs in unforeseen, ineffective or harmful ways. Success in preclinical studies and
earlier-stage clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide
adequate data to demonstrate the effectiveness and safety of our product candidates. In this regard, despite the
results reported in our Phase 1 and 2 clinical trials for aldafermin, in Phase 1 clinical trials for MK-3655, NGM621
and NGM120 and in preclinical studies for our other product candidates, including three of our oncology product
candidates, NGM707, NGM831 and NGM438, future clinical trials in humans may show that one or more of our
product candidates are not safe and effective, in which event we may need to abandon development of such
product candidates. In fact, many companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in late-stage clinical trials even after achieving promising results in preclinical studies and
earlier-stage clinical trials. Similarly, preliminary data and interim results from clinical trials may not be predictive of
final results. For example, in spite of the results we had obtained in our Phase 1 trials of aldafermin and in our first
Phase 2 trial, in May 2021, we announced that our Phase 2b ALPINE 2/3 trial evaluating aldafermin in patients with
NASH and F2 or F3 liver fibrosis did not meet its primary endpoint.
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In addition, some of our earlier-stage clinical trials involve small patient populations, sometimes at single
sites, and the results of these clinical trials may be subject to substantial variability and may not be indicative of
either future interim results or final results.
Our product candidates may cause undesirable side effects or adverse events or have other properties or
safety risks, which could delay or prevent continued clinical development or their regulatory approval or
limit the commercial profile of any approved label.
Adverse events, undesirable side effects or similar safety issues caused by our product candidates could
cause us or health authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or
the delay or denial of regulatory approval by the FDA or other comparable foreign health authorities. Additional
clinical trials may be required to further evaluate the safety profile of our product candidates. Patients in certain of
our ongoing or planned clinical trials, particularly patients with cancer or with NASH with more advanced fibrosis,
often enter our trials with significant comorbidities or advanced life-threatening illness and/or are treated in the trial
with our product candidate in combination with other medications, including, in cancer patients, chemotherapy or
other approved cancer treatments. As a result, patients in our clinical trials can be expected to experience some
adverse events, including death, or side effects that are not or may not be related to treatment with our product
candidates. Nonetheless, the occurrence of adverse events or side effects, whether or not related to our product
candidates, could impact the success of our clinical trials.
Patients have experienced, and we have reported, serious adverse events, or SAEs, in the treatment arms
of our completed trials of MK-3655, NGM621 and aldafermin. Ocular SAEs reported in our ongoing Phase 2
CATALINA trial of NGM621, which remains masked to treatment assignment, include retinal detachment in the non-
study eye, development of choroidal neovascularization in the study eye, visual worsening due to arterial occlusive
disease in the study eye and decreases of vision, or visual acuity loss, due to worsening geographic atrophy, or GA,
in the study and non-study eye. We expect that patients in our clinical trials, including those that are sham- or
placebo-controlled with some patients not receiving study drug, will continue to experience adverse events and
SAEs and we will continue to monitor those SAEs for any signals of concern regarding the safety and tolerability of
our product candidates. For example, cancer patients enrolled in our ongoing clinical trials of NGM120 and
NGM707, many of whom are suffering from advanced life-threatening illness, have experienced, and we expect will
continue to experience, SAEs and other adverse events, which may or may not be drug related. If patients in any of
our clinical trials experience a high or unacceptable severity and prevalence of side effects, including particularly
SAEs, it could affect patient recruitment or the ability of enrolled patients to complete their treatment in a clinical trial
or result in failure to obtain regulatory approval for our product candidates or product liability claims.
In addition, significant increases in serum levels of low-density lipoprotein cholesterol, or LDL-C, were
observed in clinical trials of aldafermin in patients with NASH and type 2 diabetes. Serum levels of LDL-C were
brought back to baseline levels with concomitant statin use in patients with NASH; however, the impact of these
drug-induced changes in LDL-C are unknown. Generally, sustained and prolonged LDL-C elevations in untreated
patients are associated with cardiovascular disease through atherosclerotic plaque development. While data from
our completed Phase 2b ALPINE 2/3 clinical trial and earlier trials of aldafermin demonstrated the ability of
concomitant statin use to mitigate the serum LDL-C elevations driven by aldafermin activity, aldafermin’s impact on
LDL-C may negatively impact market acceptance of an approved aldafermin product.
Our product candidates are protein or antibody therapeutics. Protein and antibody therapeutics can
sometimes induce host immune responses that can cause the production of anti-drug antibodies, or ADAs. In some
cases, ADAs have no effect. In other cases, ADAs may neutralize the effectiveness of the product candidate, can
require that higher doses be used to obtain a therapeutic effect or can cross react with substances naturally
occurring in a subject’s body, which can cause unintended effects, including potential impacts on efficacy and
adverse events. Some patients treated with aldafermin in our completed clinical trials have developed ADAs against
aldafermin and, in some cases, those antibodies were neutralizing or appeared to cross react with the patient’s
naturally occurring FGF19. We developed an assay to measure the presence of ADAs against aldafermin for our
ongoing NASH program, which we are using to test patient samples and which will need to be evaluated by
regulatory agencies. The presence of ADAs was also observed in our Phase 1 MK-3655 trial. If we or Merck, as
appropriate, are required to undertake substantial additional testing as a result of the detection of ADAs in subjects
using aldafermin, MK-3655 or any other product candidate, the costs of our clinical trials may increase. If we or
Merck determine that ADAs are causing safety or efficacy concerns when using any of our product candidates, we
or Merck may need to delay or halt clinical trials of our product candidates and the affected product candidates may
never obtain regulatory approval. We cannot provide assurance that the detection of ADAs will not be higher than
we have observed historically or that observed rates will not later be found to limit drug exposure or cause adverse
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safety events, or that the detection of ADAs will not otherwise result in the non-approvability of any of our product
candidates.
In clinical trials to date, NGM621 has been delivered to clinical sites in vials and then administered to
patients using commercially available single-use syringes. The manufacturer of a commercially available single-use
syringe widely used by ophthalmologists for intravitreal, or IVT, injections, including investigators in the Phase 2
CATALINA trial, issued a notice that such single-use syringes should not be used for ocular medications due to an
increased potential for adverse eye conditions. We have not experienced any safety concerns in our ongoing or
completed NGM621 clinical trials relating to syringe use; however, we communicated with the FDA and our study
investigators regarding this issue and are evaluating alternative syringes that may be suitable for intraocular use.
However, if any patient in our clinical trials experiences a safety event due to the use of these commercially
available single-use syringes, we could be required to delay or halt our clinical trials or may be subject to product
liability claims.
Future results of our trials could reveal a high and unacceptable severity and prevalence of side effects,
SAEs, ADAs, safety issues or other negative or otherwise unexpected characteristics. The occurrence of those
issues could affect patient recruitment or the ability of enrolled patients to complete their treatment in a clinical trial,
result in failure to obtain regulatory approval for our product candidates or product liability claims or impact market
acceptance of our products. Any of these occurrences could materially and adversely affect our business, financial
condition and prospects.
Aldafermin, which is wholly-owned by us, as well as MK-3655, which is being developed by our
collaborator, Merck, are being developed for the treatment of NASH, an indication for which there are no
approved products. This makes it difficult to predict the timing, cost and potential success of their clinical
development and regulatory approval for the treatment of NASH.
We are developing aldafermin, and Merck is developing MK-3655, for the treatment of NASH, an indication
for which there are no approved products. Implementation of new, or changes to, guidance or interpretations from
the FDA or comparable foreign health authorities with respect to approval pathways, such as draft guidance
documents from the FDA for the development of products for the treatment of NASH that issued in 2018 and 2019
and from the European Medicines Agency, or EMA, that issued in 2018, may impact the path for regulatory approval
for NASH therapies. Further, as we and other companies advance clinical trials for potential NASH therapies, we
expect that the path for regulatory approval for NASH therapies may continue to evolve as companies refine their
regulatory approval strategies and interact with health authorities. Such evolution may impact our future clinical trial
designs, including trial size and endpoints, in ways that we cannot currently predict. We recently updated the design
of the ALPINE 4 trial of aldafermin, elevating the ELF test to be the primary endpoint for the trial. Neither the ELF
test, nor any other surrogate biomarker endpoints, are currently endorsed by the FDA or EMA as sufficient for
granting regulatory approval of products being developed for the treatment of F4 (cirrhotic) NASH and therefore
may not be able to be used as a primary endpoint in potential future Phase 3 trials to support regulatory approval for
aldafermin for F4 NASH.
In addition, certain of our competitors have recently experienced regulatory setbacks for NASH therapies
following communications from the FDA. We currently do not know the impact, if any, that these setbacks could
have on the path for regulatory approval for NASH therapies generally or for aldafermin and MK-3655 in particular. If
the clinical trials for aldafermin and MK-3655 are not designed in a manner that, even if successful, support
regulatory approval due to shifting approval pathways or for other reasons, those product candidates may be
delayed in obtaining approval or may never be approved, which could have a material adverse effect on our
business, operating results and prospects.
Aldafermin is a modified version of a human hormone that has been associated with liver cancer in rodent
testing.
The IND application we filed for aldafermin in February 2014 for type 2 diabetes was placed on clinical hold
by the FDA Division of Metabolism and Endocrinology Products pending receipt of additional information relating to
the potential risk of proliferative effects of aldafermin in the livers of non-human primates and mice based on
concerns relating to the observation that human FGF19 can induce hepatocellular proliferation in rodents. We
withdrew this IND in January 2015, as we determined that we would not further study aldafermin in type 2 diabetes
after we analyzed the results of the Phase 2 clinical trial of aldafermin in type 2 diabetes and made the
determination to pursue NASH and other liver indications. To date, the FDA Division of Hepatology and Nutrition,
which is responsible for the NASH indication, has not requested any additional information regarding the potential
for aldafermin to induce hepatocellular proliferation. We have received feedback from the FDA Carcinogenicity
Assessment Committee that our preclinical data through six-month chronic toxicology studies in mice and monkeys
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support a single species, two-year carcinogenicity assessment in rats. The human hormone and the rodent ortholog
for FGF19 share a sequence identity of approximately 50%, which means that the results of these studies of
aldafermin in rats are not necessarily predictive of the potential risk of carcinogenicity in humans. To our knowledge,
neither FGF19 nor any variant thereof other than aldafermin has ever been tested in humans. Concerns about the
association between FGF19 and liver cancer could have an adverse effect on our ability to develop and
commercialize aldafermin.
We may not successfully identify new product candidates to expand our development pipeline.
The success of our business over the longer term depends upon our ability to identify and validate new
potential protein and antibody therapeutics. Research programs to identify new product candidates require
substantial technical, financial and human resources, and our research methodology may not successfully identify
medically relevant protein or antibody therapeutics to be developed as product candidates. In addition, our drug
discovery efforts often identify and select novel, untested proteins in the particular disease indication we are
pursuing, which we may fail to validate after further research work. Moreover, our research efforts may initially show
promise in discovering potential new protein and antibody therapeutics yet fail to yield product candidates for clinical
development for multiple reasons. For example, potential product candidates may, on further study, be shown to
have inadequate efficacy, harmful side effects, suboptimal drug profiles or other characteristics suggesting that they
are unlikely to be commercially viable products. Our inability to successfully identify additional new product
candidates to advance into clinical trials could have a material adverse effect on our business, operating results and
prospects.
We may fail to select or capitalize on the most scientifically, clinically and commercially promising or
profitable product candidates.
We have limited technical, managerial and financial resources to determine which of our product candidates
should proceed to initial clinical trials, later-stage clinical development and potential commercialization. We may
make incorrect determinations in allocating resources among these product candidates. Our decisions to allocate
our R&D, management and financial resources toward particular product candidates or therapeutic areas may not
lead to the development of viable commercial products and may divert resources from better opportunities.
Similarly, our decisions to delay or terminate drug development programs, such as our decision to suspend
development activities related to multiple metabolic disease product candidates and for aldafermin in patients with
F2 or F3 NASH to concentrate our resources elsewhere, also may be incorrect and could cause us to miss valuable
opportunities.
Under the terms of our Amended Collaboration Agreement with Merck, we have the right, exercisable during
a specified period prior to the commencement of Phase 3 clinical testing of the applicable product candidate, to
convert our economic participation from a milestones and net sales royalty arrangement into a cost and profit share
arrangement. If we exercise the cost and profit share right, we have the ability to participate in a co-detailing
relationship in the United States. Due to the limited exercise period, we may have to choose whether a product
candidate will be subject to a cost and profit share arrangement before we have as much information as we would
like, including whether and when such program may receive FDA approval of the applicable biologics license
application, or BLA. As a result of such incomplete information or due to incorrect analysis by us, we may select a
cost and profit share program that later proves to have less commercial potential than an alternative, or none at all,
or may pass on a cost and profit share program that proves commercially successful.
We must attract and retain highly skilled employees in order to succeed. If we are not able to retain our
current senior management team, especially our Chief Scientific Officer, Dr. Jin-Long Chen, or to continue
to attract and retain qualified scientific, technical and business personnel, our business will suffer.
To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and
management personnel and we face significant competition for experienced personnel. If we do not succeed in
attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability
to execute our business plan and harm our operating results. An important element of our strategy is to take
advantage of the R&D and other expertise of our current management. The loss of any one of our executive
officers, including, in particular, Dr. Jin-Long Chen, our Chief Scientific Officer, could result in a significant loss in the
knowledge and experience that we, as an organization, possess and could cause significant delays, or outright
failure, in the development and further commercialization of our product candidates.
There is intense competition for qualified personnel, including management, in the technical fields in which
we operate, particularly in the oncology field, and we may not be able to attract and retain qualified personnel
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necessary for the successful research, development and future commercialization, if any, of our product candidates.
In particular, the hiring environment in the San Francisco Bay Area, where we are headquartered, is extremely
competitive. Many of the other pharmaceutical companies that we compete against for qualified personnel have
greater financial and other resources, different risk profiles and a longer history in the industry than we do. They
also may provide more diverse opportunities and better chances for career advancement. Some of these
characteristics may be more appealing to high-quality candidates than what we have to offer. The labor market has
tightened significantly since the beginning of the ongoing COVID-19 pandemic, and we have experienced employee
attrition at rates higher than we experienced historically, which may continue and could have a negative impact on
our productivity. If we are unable to continue to attract and retain high-quality personnel, the rate and success with
which we can discover and develop product candidates and our business will be limited.
We face substantial competition, which may result in others discovering, developing or commercializing
products before or more successfully than us.
The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological
change. Our competitors include multinational pharmaceutical companies, specialized biotechnology companies
and universities and other research institutions. A number of pharmaceutical and biotechnology companies are
pursuing the development or marketing of pharmaceuticals that target the same diseases that are targeted by our
most advanced product candidates, particularly in the oncology field. It is probable that the number of companies
seeking to develop products and therapies for the treatment of cancer, retinal diseases and liver and metabolic
diseases will increase. Many of our competitors have substantially greater financial, technical, human and other
resources than we do and may be better equipped to develop, manufacture and market technologically superior
products. In addition, many of these competitors have significantly greater experience than we have in undertaking
preclinical studies and human clinical trials of new pharmaceutical products and in obtaining regulatory approvals of
human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval and approval or
marketing authorization from comparable health authorities such as the European Commission for superior products
or for other products that would compete with our product candidates. Many of our competitors have established
distribution channels and commercial infrastructure to support the commercialization of their products, whereas we
have no such channel or capabilities. In addition, many competitors have greater name recognition and more
extensive collaborative relationships. Smaller and earlier-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large, established companies.
Our competitors may obtain regulatory approval of their products more rapidly than us or may obtain patent
protection or other intellectual property rights that limit our ability to develop or commercialize our product
candidates. Our competitors may also develop drugs that are more effective, more convenient, more widely used
and less costly or have a better safety profile than our products and these competitors may also be more successful
than us in manufacturing and marketing their products. If we are unable to compete effectively against these
companies, then we may not be able to commercialize our product candidates or achieve a competitive position in
the market. These companies also compete with us in recruiting and retaining qualified scientific, management and
commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs.
Although we believe there are no FDA- or EMA-approved therapies that specifically target the signaling
pathways that our current product candidates are designed to modulate or inhibit, there are numerous currently
approved therapies for treating the same diseases or indications (other than NASH or GA) for which our product
candidates may be useful and many of these currently approved therapies act through mechanisms similar to our
product candidates. Many of these approved drugs are well-established therapies or products and are widely
accepted by physicians, patients and third-party payors. Some of these drugs are branded and subject to patent
protection, and others are available on a generic basis. Insurers and other third-party payors may also encourage
the use of generic products or specific branded products. We expect that if our product candidates are approved,
they will be priced at a significant premium over competitive generic products, including branded generic products.
This may make it difficult for us to differentiate our products from currently approved therapies, which may adversely
impact our business strategy. In addition, many companies are developing new therapeutics, and we cannot predict
what the standard of care will be as our product candidates progress through clinical development. For more
information regarding the competition that our most advanced product candidates face, or may face, see the
discussion of specific competition for each product candidate in “Business-Key Therapeutic Areas and Pipeline
Programs” above.
In addition, in the third quarter of 2021, Apellis Pharmaceuticals, Inc., or Apellis, presented top-line results
from two Phase 3 clinical trials of its product candidate, pegcetacoplan (an anti-complement C3), in patients with GA
secondary to age-related macular degeneration. One trial met the primary endpoint of significantly reducing GA
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progression at a one-year time point in the pegcetacoplan arm versus the sham arm, while the other trial did not
meet its primary endpoint. Apellis reported that it plans to submit a new drug application for pegcetacoplan for GA to
the FDA in the first half of 2022. If Apellis obtains regulatory approval of pegcetacoplan, it may affect our future late-
stage clinical trial designs and require added clinical development expense. Additionally, if we obtain regulatory
approval of NGM621, we may not be able to compete effectively against pegcetacoplan, which may adversely affect
our future revenues and business prospects.
We may encounter difficulties in managing our growth, which could adversely affect our operations.
Over the past few years, we have significantly increased our headcount and advanced our pipeline and the
complexity of our operations, which has placed a strain on our administrative and operational infrastructure. We
expect this strain to continue as we seek to maintain our growth and seek to obtain and manage relationships with
third parties. Our ability to manage our operations and growth effectively depends upon the continual improvement
of our procedures, hybrid and remote work policies, reporting systems and operational, financial and management
controls, particularly in light of the evolving effects of the COVID-19 pandemic. We also may not be able to expand
or identify and access sufficient facilities to accommodate our growth, particularly given our location in South San
Francisco, California and the current high demand for, and restricted supply of, R&D facilities in this market. The
current lease for our facilities in South San Francisco is scheduled to expire in December 2023. While we believe
we will be able to extend our lease or obtain new and/or additional space, as needed, on commercially reasonable
terms, based on current market conditions our lease obligations will likely be higher in the future. We may not be
able to implement administrative and operational improvements in an efficient or timely manner and may discover
deficiencies in existing systems and controls. If we do not meet these challenges, we may be unable to take
advantage of market opportunities, execute our business strategies or respond to competitive pressures, which in
turn may slow our growth or give rise to inefficiencies that would increase our losses.
Our product candidates may not achieve adequate market acceptance among physicians, patients,
healthcare payors and others in the medical community necessary for commercial success.
Demonstrating the safety and efficacy of our product candidates and obtaining regulatory approvals will not
guarantee future revenue. Even if our product candidates receive regulatory approval, they may not gain adequate
market acceptance among physicians, patients, healthcare payors and others in the medical community. The
degree of market acceptance of any of our approved product candidates will depend on a number of factors,
including:
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the efficacy and safety profile of the product candidate as demonstrated in clinical trials;
the timing of market introduction of the product candidate, as well as competitive products;
the clinical indications for which the product candidate is approved;
acceptance of the product candidate as a safe and effective treatment by physicians and patients;
the actual and perceived advantages of the product candidate over alternative treatments, including any
similar generic treatments;
the viewpoints of influential physicians with respect to the product candidate;
the inclusion or exclusion of the product candidate from treatment guidelines established by various
physician groups;
the cost of treatment relative to alternative treatments;
our pricing and the availability of coverage and adequate reimbursement by third parties and government
authorities as described in the risk factor titled “Even if we obtain approval to market our products, these
products may become subject to unfavorable pricing regulations, reimbursement practices from third-party
payors or healthcare reform initiatives in the United States and abroad, which could harm our business”;
the relative convenience and ease of administration;
the frequency and severity of adverse events;
the effectiveness of sales and marketing efforts; and
any unfavorable publicity relating to the product candidate.
For example, aldafermin is currently administered via a once-daily subcutaneous injection. While we are
undertaking efforts to develop formulations and presentations of aldafermin that allow for more convenient or less
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frequent dosing, there is no assurance that these efforts will be successful, which may negatively impact market
acceptance of an approved aldafermin product, if any. In addition, see the risk factor titled “Our product candidates
may cause undesirable side effects or adverse events or have other properties or safety risks, which could delay or
prevent continued clinical development or their regulatory approval or limit the commercial profile of any approved
label." If any product candidate is approved but does not achieve an adequate level of acceptance by such parties,
we may not generate or derive sufficient revenue from that product candidate and may not become or remain
profitable.
Even if we obtain approval to market our products, these products may become subject to unfavorable
pricing regulations, reimbursement practices from third-party payors or healthcare reform initiatives in the
United States and abroad, which could harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary
widely from country to country. Current and future legislation may significantly change the approval requirements in
ways that could involve additional costs and cause delays in obtaining approvals. In many regions, including the EU,
Japan and Canada, the pricing of prescription drugs is controlled by the government and some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins
after regulatory approval for the product is granted. Regulatory agencies in those countries could determine that the
pricing for our products should be based on prices of other commercially available drugs for the same disease,
rather than allowing us to market our products at a premium as new drugs. As a result, we might obtain marketing
approval for a product in a particular country, but then be subject to price regulations that delay or limit our
commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenue we
generate from the sale of the product in that particular country. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even
if our product candidates obtain marketing approval.
Our commercial success also depends on coverage and adequate reimbursement of our product
candidates by third-party payors, including government payors, private health insurers, health maintenance
organizations and other organizations, which may be difficult or time-consuming to obtain, may be limited in scope
and may not be obtained in all jurisdictions in which we may seek to market our products. Governments and private
insurers closely examine medical products to determine whether they should be covered by reimbursement and, if
so, the level of reimbursement that will apply. Government authorities and other third-party payors have attempted
to control costs by limiting coverage and the amount of reimbursement for particular drugs. Increasingly, third-party
payors are requiring that drug companies provide them with predetermined discounts from list prices and are
challenging the prices charged for drug products. We cannot be sure that coverage and reimbursement will be
available for any product that we or our partners commercialize and, if reimbursement is available, what the level of
reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product
candidate for which we or our collaborators obtain regulatory approval. If coverage and reimbursement are not
available or reimbursement is available only to limited levels, we and our collaborators may not be able to
successfully commercialize any product candidate for which marketing approval is obtained.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and
coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign
health authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in
all cases or at a rate that covers our costs, including costs of research, development, manufacture, sale and
distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs
and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting
in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be
incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts
or rebates required by government healthcare programs or private payors and by any future relaxation of laws that
presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and
private payors for any approved products that we develop could have a material adverse effect on our operating
results, our ability to raise capital needed to commercialize products and our overall financial condition.
The advancement of healthcare reform may negatively impact our ability to profitably sell our product
candidates, if approved.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing
increasingly sophisticated methods of controlling healthcare costs. The United States and many foreign jurisdictions
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have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or
delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability
to profitably sell any product for which we obtain marketing approval.
For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act, collectively referred to as the ACA, was enacted, which includes measures
that have significantly changed the way health care is financed by both governmental and private insurers. There
have been executive, judicial and congressional challenges to certain aspects of the ACA. While Congress has not
passed comprehensive legislation repealing the ACA, such legislation may be reintroduced. Members of Congress
have introduced legislation to modify or replace certain provisions of the ACA. It is unclear how these efforts to
repeal and/or replace the ACA will impact the ACA and our business. For example, the Tax Cuts and JOBS Act, or
the 2017 Tax Act, repealed the tax-based shared responsibility payment imposed by the ACA on certain individuals
who fail to maintain qualifying health coverage that is commonly referred to as the “individual mandate.” In
December 2019, a U.S. District Court upheld a ruling that the ACA is unconstitutional in its entirety because the
“individual mandate” was repealed by Congress. On June 17, 2021, the U.S. Supreme Court dismissed a challenge
on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was
repealed by Congress. Thus, the ACA remains in effect in its current form, although it may be subject to judicial or
Congressional challenges in the future. Any such challenges to the ACA and the healthcare reform measures of the
administration of President Biden may increase the pressure on drug pricing or limit the availability of coverage and
adequate reimbursement for our product candidates, which would adversely affect our business.
There has also been increasing executive, legislative and enforcement interest in the United States with
respect to drug pricing practices. There have been U.S. congressional inquiries, presidential executive orders and
proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, reduce
the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient
programs and reform government program reimbursement methodologies for drugs. For example, in an executive
order, the administration of President Biden expressed its intent to pursue certain policy initiatives to reduce drug
prices and, in response, the United States Department of Health and Human Services, or HHS, released a
Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a
variety of potential legislative policies that Congress could pursue to lower drug prices. We expect that the
healthcare reform measures that have been adopted and may be adopted in the future may result in more rigorous
coverage criteria and additional downward pressure on the price that we receive for any approved product and
could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government
programs may result in a similar reduction in payments from private payors. The implementation of cost
containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain
profitability or commercialize our products.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal
and state levels directed at broadening the availability of healthcare and containing or lowering the cost of
healthcare. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may
successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition
and ability to develop product candidates.
In many countries outside the United States, government-sponsored healthcare systems are the primary
payors for drugs. With increasing budgetary constraints and/or difficulty in understanding the value of medicines,
governments and payors in many countries are applying a variety of measures to exert downward price pressure.
These measures include: mandatory price controls; price referencing; therapeutic-reference pricing; increases in
mandates; incentives for generic substitution and biosimilar usage and government-mandated price cuts. Many
countries have health technology assessment agencies that use formal economic metrics such as cost-
effectiveness to determine prices, coverage and reimbursement of new therapies. These agencies are expanding in
both established and emerging markets and are expected to become law in EU member states in the near future
with the adoption of the Health Technology Assessment Regulation. Many countries also limit coverage to
populations narrower than those specified on product labels or impose volume caps to limit utilization. We expect
that countries will continue taking aggressive actions to seek to reduce expenditures on drugs. Similarly, fiscal
constraints may also affect the extent to which countries are willing to approve new and innovative therapies and/or
allow access to new technologies.
We cannot predict the likelihood, nature or extent of healthcare reform initiatives that may arise from future
legislation or administrative action. If we or any third parties we may engage are slow or unable to adapt to changes
in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to
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maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been
obtained and we may not achieve or sustain profitability.
Our international operations may expose us to business, regulatory, political, operational, financial, pricing
and reimbursement risks associated with doing business outside of the United States.
Our business is subject to risks associated with conducting business internationally. Some of our suppliers
and clinical trial sites are located outside of the United States. Furthermore, if we, Merck or any future collaborator
succeeds in developing any of our product candidates, we intend to market them in the European Union, or the EU,
and other jurisdictions in addition to the United States. If approved, we, Merck or any future collaborator may hire
sales representatives and conduct physician and patient association outreach activities outside of the United States.
Doing business internationally involves a number of challenges and risks, including but not limited to:
• multiple, conflicting and changing laws and regulations, such as privacy and data protection regulations, tax
laws, export and import restrictions, employment laws, regulatory requirements and other governmental
approvals, permits and licenses;
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failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;
rejection or qualification of foreign clinical trial data by the competent authorities of other countries;
delays or interruptions in the supply of clinical trial material resulting from any events affecting raw material
or component supply or manufacturing capabilities abroad, including those that may result from the ongoing
COVID-19 pandemic;
additional potentially relevant third-party patent rights;
complexities and difficulties in obtaining, maintaining, protecting and enforcing our intellectual property;
difficulties in staffing and managing foreign operations;
complexities associated with managing multiple payor reimbursement regimes, government payors or
patient self-pay systems;
limits on our ability to penetrate international markets;
financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local
and regional financial crises on demand and payment for our products and exposure to foreign currency
exchange rate fluctuations;
natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of
disease, including COVID-19 and related shelter-in-place orders, travel, social distancing and quarantine
policies, boycotts, curtailment of trade and other business restrictions; and
regulatory and compliance risks that relate to anti-corruption compliance and record-keeping that may fall
within the purview of the U.S. Foreign Corrupt Practices Act, its accounting provisions or its anti-bribery
provisions or provisions of anti-corruption or anti-bribery laws in other countries.
Any of these factors could harm our ongoing international clinical operations and supply chain, as well as
any future international expansion and operations and, consequently, our business, financial condition, prospects
and results of operations.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit
commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in
human clinical trials and will face an even greater risk if we or our collaborator commercializes any resulting
products. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients,
healthcare providers or others using, administering or selling our products. If we cannot successfully defend
ourselves against claims that our product candidates or products that we may develop caused injuries, we could
incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any product candidates or products that we may develop;
termination of clinical trial sites or entire trial programs;
injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
significant costs to defend the related litigation;
substantial monetary awards to trial subjects or patients;
loss of revenue;
diversion of management and scientific resources from our business operations; and
the inability to commercialize any products that we may develop.
Our clinical trial liability insurance coverage may not adequately cover all liabilities that we may incur. We
may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any
liability that may arise. Our inability to obtain product liability insurance at an acceptable cost or to otherwise protect
against potential product liability claims could prevent or delay the commercialization of any products or product
candidates that we develop. We intend to expand our insurance coverage for products to include the sale of
commercial products if we obtain marketing approval for our product candidates in development, but we may be
unable to obtain commercially reasonable product liability insurance for any products approved for marketing. Large
judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. If we are
sued for any injury caused by our products, product candidates or processes, our liability could exceed our product
liability insurance coverage and our total assets. Claims against us, regardless of their merit or potential outcome,
may also generate negative publicity or hurt our ability to obtain physician endorsement of our products or expand
our business.
Our relationships with healthcare providers, customers and third-party payors will be subject to applicable
anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which, if violated,
could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm,
administrative burdens and diminished profits and future earnings.
Healthcare providers, including physicians, and third-party payors will play a primary role in the
recommendation and prescription of any product candidates for which we or our collaborator obtains marketing
approval. Our arrangements with healthcare providers, third-party payors and customers may expose us to broadly
applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial
arrangements and relationships through which we research, market, sell and distribute our products for which we or
our collaborator obtain marketing approval. Restrictions under applicable federal and state healthcare laws and
regulations, include the following:
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the federal Anti-Kickback Statute prohibits persons from, among other things, knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward, or in return for, the referral of an individual for the furnishing or arranging for the furnishing, or the
purchase, lease or order, or arranging for or recommending purchase, lease or order, of any good or service
for which payment may be made under a federal healthcare program, such as Medicare and Medicaid;
the federal False Claims Act, or FCA, imposes criminal and civil penalties, including through civil
whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be
presented, to the federal government, claims for payment that are false or fraudulent or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act, or HIPAA, imposes criminal liability for
knowingly and willfully executing a scheme to defraud any healthcare benefit program, knowingly and
willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal
investigation of a healthcare offense or knowingly and willfully making false statements relating to
healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and
its implementing regulations, or HITECH, also imposes obligations on certain covered entity healthcare
providers, health plans and healthcare clearinghouses, and their business associates that perform certain
services involving the use or disclosure of individually identifiable health information as well as their covered
subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security,
processing and transmission of individually identifiable health information;
the federal Physician Payments Sunshine Act, as amended, and its implementing regulations, requires
manufacturers of drugs, devices, biologics and medical supplies for which payment is available under
Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually
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to the HHS information related to “payments or other transfers of value” made to physicians (defined to
include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such
as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding
ownership and investment interests held by physicians and their immediate family members; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which
may apply to sales or marketing arrangements and claims involving healthcare items or services
reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that
require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant compliance guidance promulgated by the federal government or otherwise
restrict payments that may be made to healthcare providers; state and local laws requiring the registration
of pharmaceutical sales representatives; state and foreign laws that require drug manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers,
marketing expenditures or pricing; and state and foreign laws that govern the privacy and security and other
processing of health information in certain circumstances, many of which differ from each other in significant
ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare
laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our
business practices may not comply with current or future statutes, regulations or case law interpreting applicable
fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of
these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, additional regulatory oversight, litigation, imprisonment,
exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or
restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we
expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to
criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Outside the United States, interactions between pharmaceutical companies and health care professionals
are also governed by strict laws, such as national anti-bribery laws of EU member states, national sunshine rules,
regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct. Failure to
comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or
imprisonment.
Risks Related to Regulatory Approvals
The regulatory approval processes of the FDA and comparable foreign health authorities are lengthy and
inherently unpredictable. Our inability to obtain regulatory approval for our product candidates would
substantially harm our business.
Currently, none of our product candidates has received regulatory approval and we do not expect our
product candidates to be commercially available for several years, if at all. The time required to obtain approval from
the FDA and comparable foreign health authorities is unpredictable but typically takes many years following the
commencement of preclinical studies and clinical trials and depends upon numerous factors, including the
substantial discretion of the health authorities. In addition, approval policies, regulations or the type and amount of
preclinical and clinical data necessary to gain approval may change during the course of a product candidate’s
development and may vary among jurisdictions. It is possible that none of our existing or future product candidates
will ever obtain regulatory approval.
Our product candidates could fail to receive regulatory approval from the FDA or a comparable foreign
health authority for many reasons, including:
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disagreement with the design or implementation of our clinical trials;
failure to demonstrate that a product candidate is safe and effective for its proposed indication;
failure of results of clinical trials to meet the level of statistical significance required for approval;
failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
disagreement with our interpretation of data from preclinical studies or clinical trials;
the insufficiency of data collected from clinical trials to support the submission and filing of a BLA or other
submission or to obtain regulatory approval;
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failure to obtain approval of the manufacturing processes or facilities of third-party manufacturers with
whom we contract for clinical and commercial supplies;
unfavorable quality review or audit findings; or
changes in the approval policies or regulations that render our preclinical and clinical data insufficient for
approval.
The FDA or a comparable foreign health authority may require more information, including additional
preclinical or clinical data, to support approval, which may delay or prevent approval and commercialization, or we
may decide to abandon the development program for other reasons. If we obtain approval, regulatory authorities
may approve any of our product candidates for fewer or more limited indications than we request, may grant
accelerated approval based on a surrogate endpoint and contingent on the successful outcome of costly post-
marketing confirmatory clinical trials or may approve a product candidate with a label that does not include the
labeling claims necessary or desirable for the successful commercialization of that product candidate.
In some jurisdictions such as the United States and the EU, initiating phase 3 clinical trials and clinical trials
in the pediatric population is subject to a requirement to obtain approval or a waiver from the FDA, the competent
authorities of the EU member states and/or the EMA. If we do not obtain such waivers or approval, our ability to
conduct clinical trials and obtain marketing authorizations or approvals may be severely impaired, and our business
may be adversely impacted.
The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new
drug products that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are
intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet
medical needs for the disease or condition, and the FDA may grant accelerated approval based on a surrogate
endpoint reasonably likely to predict clinical benefit. However, Fast Track designation does not guarantee, or in any
way change the standards for, full product approval. Accordingly, although NGM621 has received Fast Track
designation from the FDA for GA secondary to age-related macular degeneration and aldafermin has received Fast
Track designation from the FDA for NASH, we may not necessarily experience faster development timelines or
achieve faster review or approval compared to conventional FDA procedures.
Many agents in development for NASH have, or are expected to, opt for an accelerated approval pathway
and rely on surrogate endpoints for initial approval. If we seek accelerated approval for one of our product
candidates based on a surrogate endpoint, the FDA may not accept such endpoint, may require additional studies
or analysis or may not approve our product candidate on an accelerated basis, or at all. For example, in June 2020,
Intercept Pharmaceuticals, Inc., or Intercept, announced that it had received a complete response letter regarding
its New Drug Application for obeticholic acid for the treatment of NASH, in which the FDA indicated that it had
determined that the predicted benefit of obeticholic acid based on a surrogate histopathologic endpoint was
uncertain and did not sufficiently outweigh the potential risks to support accelerated approval for the treatment of
patients with liver fibrosis due to NASH. The FDA recommended that Intercept submit additional post-interim
analysis efficacy and safety data from its ongoing Phase 3 study in support of potential accelerated approval and
that the long-term outcomes phase of the study should continue. In addition, if full approval is granted for another
product in the same indication for which we are seeking accelerated approval for one of our product candidates, the
accelerated approval pathway may no longer be available to us for our product candidate.
In the EU, innovative products that target an unmet medical need and are expected to be of major public
health interest may be eligible for a number of expedited development and review programs, such as the Priority
Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the
United States. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of
medicinal products that target unmet medical needs. It permits increased interaction and early dialogue between
regulatory authorities and companies developing promising medicinal products, to optimize their product
development plans and speed up their evaluation to help the product potentially reach patients sooner than under
the normal review timelines. Product developers that benefit from PRIME designation are potentially eligible for
accelerated assessment of their marketing authorization applications, or MAA, although this is not guaranteed.
Benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and
proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development
program elements, and potentially accelerated MAA assessment once a dossier has been submitted.
Our failure to obtain health authority approval in international jurisdictions would prevent us from
marketing our product candidates outside the United States.
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If we or our collaborators succeed in developing any products, we intend to market them in the EU and
other foreign jurisdictions in addition to the United States. In order to market and sell our products in other
jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory
requirements. The approval procedure varies among countries and can involve additional testing. The time required
to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval
process outside the United States generally includes all of the risks associated with obtaining FDA approval. In
addition, in many countries outside the United States, we must secure product pricing and reimbursement approvals
before health authorities will approve the product for sale in that country. Obtaining foreign regulatory approvals and
compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and
could delay or prevent the introduction of our products in certain countries. Further, clinical trials conducted in one
country may not be accepted by health authorities in other countries and regulatory approval in one country does
not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may
have a negative effect on the regulatory approval process in others. If we fail to obtain approval of any of our
product candidates by health authorities in another country, we will be unable to commercialize our product in that
country, and the commercial prospects of that product candidate and our business prospects could decline.
Even if our product candidates receive regulatory approval, they may still face future development and
regulatory difficulties.
Even if we obtain regulatory approval for a product candidate, it would be subject to ongoing requirements
by the FDA and comparable foreign health authorities governing the manufacture, quality control, further
development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion,
recordkeeping and reporting of safety and other post-market information. The FDA and comparable foreign health
authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or
comparable foreign health authorities become aware of new safety information after approval of any of our product
candidates, they may require labeling changes or establishment of a Risk Evaluation and Mitigation Strategy, or
REMS, or similar strategy, impose significant restrictions on a product’s indicated uses or marketing or impose
ongoing requirements for potentially costly post-approval studies or post-market surveillance. Failure to comply with
any related obligations may result in the suspension or withdrawal of an obtained approval and in civil and/or
criminal penalties. Receipt of approval for narrower indications than sought, restrictions on marketing through a
REMS or similar strategy imposed in an EU member state or other foreign country, or significant labeling restrictions
or requirements in an approved label such as a boxed warning, could have a negative impact on our ability to
recoup our research and development costs and to successfully commercialize that product, any of which could
materially and adversely affect our business, financial condition, results of operations and growth prospects. In any
event, if we are unable to comply with our post-marketing obligations imposed as part of the marketing approvals in
the United States, the EU, or other countries, our approval may be varied, suspended or revoked, product supply
may be delayed and our sales of our products could be materially adversely affected.
In addition, manufacturers of drug substance and drug products and their facilities are subject to continual
review and periodic inspections by the FDA and comparable foreign health authorities for compliance with current
Good Manufacturing Practices, or cGMP, regulations. If we or a regulatory agency discover previously unknown
problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility
where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing
facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.
If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable
regulatory requirements, or undesirable side effects caused by such products are identified, a regulatory agency
may:
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issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing
warnings about such product;
• mandate modifications to promotional materials or require us to provide corrective information to healthcare
practitioners;
require that we conduct post-marketing studies;
require us to enter into a consent decree, which can include imposition of various fines, reimbursements for
inspection costs, required due dates for specific actions and penalties for noncompliance;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend marketing of, withdraw regulatory approval of or initiate a recall of such product;
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suspend any ongoing clinical trials;
refuse to approve pending applications or supplements to applications filed by us;
suspend or impose restrictions on operations, including costly new manufacturing requirements; or
seize or detain products or refuse to permit the import or export of products.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our
products and generate revenue.
Advertising and promotion of any product candidate that obtains approval in the United States will be
heavily scrutinized by the FDA, Department of Justice, HHS, Office of Inspector General, state attorneys general,
members of Congress and the public. Violations, including promotion of our products for unapproved (or off-label)
uses, are subject to enforcement letters, inquiries and investigations and civil and criminal sanctions by the
government. Additionally, comparable foreign health authorities, public prosecutors, industry associations,
healthcare professionals and other members of the public will heavily scrutinize advertising and promotion of any
product candidate outside of the United States.
In the United States, engaging in the impermissible promotion of our products for off-label uses can subject
us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines
and agreements that materially restrict the manner in which a company promotes or distributes drug products.
These false claims statutes include the federal FCA, which allows any individual to bring a lawsuit against a
pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or
causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid.
If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. Since 2004, these
FCA lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to
several substantial civil and criminal settlements regarding certain sales practices promoting off-label drug uses
involving fines in excess of $1 billion. This growth in litigation has increased the risk that a pharmaceutical company
will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome
reporting and compliance obligations and be excluded from Medicare, Medicaid and other federal and state
healthcare programs. If we do not lawfully promote our approved products, we may become subject to such
litigation and, if we do not successfully defend against such actions, those actions may have a material adverse
effect on our business, financial condition and results of operations.
The FDA’s policies may change, and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory
compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our
business, prospects and ability to achieve or sustain profitability.
Failure to comply with EU and EU member state laws that apply to the conduct of clinical trials,
manufacturing approval, marketing authorization of medicinal products and marketing of such products, both before
and after grant of a marketing authorization, or with other applicable regulatory requirements, may result in
administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of
clinical trials, or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension,
withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution,
manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal
penalties.
Many EU member states periodically review their reimbursement of medicinal products, which could have
an adverse impact on reimbursement status. In addition, we expect that legislators, policymakers and healthcare
insurance funds in the EU member states will continue to propose and implement cost-containing measures, such
as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic,
products as an alternative to branded products, and/or branded products available through parallel import to keep
healthcare costs down. Moreover, in order to obtain reimbursement for our products in some EU member states, we
may be required to compile additional data comparing the cost-effectiveness of our products to other available
therapies. Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part
of the pricing and reimbursement procedures in some EU member states, including those representing the larger
markets. The HTA process, which is currently governed by national laws in each EU member state, is the procedure
to assess therapeutic, economic and societal impact of a given medicinal product in the national healthcare systems
of the individual country. The outcome of an HTA will often influence the pricing and reimbursement status granted
to these medicinal products by the competent authorities of individual EU member states. The extent to which
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pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies
between EU member states. In June 2021, the European Parliament and Council reached a provisional agreement
on a draft HTA regulation that aims to harmonize the clinical benefit assessment of HTA across the EU. Entry into
application of the Regulation could impose stricter and more detailed procedures to be followed by marketing
authorization holders concerning conduct of HTA in relation to their products that may influence related pricing and
reimbursement decisions. If we are unable to maintain favorable pricing and reimbursement status in EU member
states that represent significant markets, our anticipated revenue from and growth prospects for our products in the
EU could be negatively affected.
Legislators, policymakers and healthcare insurance funds in the EU may continue to propose and
implement cost-containing measures to keep healthcare costs down; particularly due to the financial strain that the
COVID-19 pandemic has placed on national healthcare systems of the EU member states. These measures could
include limitations on the prices we will be able to charge for our products or the level of reimbursement available for
these products from governmental authorities or third-party payors. Further, an increasing number of EU and other
foreign countries use prices for medicinal products established in other countries as “reference prices” to help
determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal
products in some countries could contribute to similar downward trends elsewhere.
Even if we are able to obtain regulatory approvals for any of our product candidates, if they exhibit harmful
side effects after approval, our regulatory approvals could be revoked or otherwise negatively impacted.
Even if we receive regulatory approval for any of our product candidates, we will have tested them in only a
small number of patients during our clinical trials. If an application for marketing is approved for any of our product
candidates and more patients begin to use our product, new risks and side effects associated with our products may
be discovered. As a result, health authorities may revoke their approvals. If aldafermin is approved by the FDA
based on a surrogate endpoint pursuant to accelerated approval regulations (Subpart E regulations), we will be
required to conduct additional clinical trials establishing clinical benefit on the ultimate outcome of NASH.
Additionally, we may be required to conduct additional clinical trials, make changes in labeling of our product,
reformulate our product or make changes and obtain new approvals for our and our suppliers’ manufacturing
facilities for our product candidates. We might have to withdraw or recall our products from the marketplace. We
may also experience a significant drop in the potential sales of our product if and when regulatory approvals for
such product are obtained, experience harm to our reputation in the marketplace or become subject to lawsuits,
including class actions. Any of these results could decrease or prevent any sales of our approved product or
substantially increase the costs and expenses of commercializing and marketing our product.
Risks Related to Our Intellectual Property
Our success depends in significant part upon our ability to obtain and maintain intellectual property
protection for our products and technologies.
Our success depends in significant part on our ability and the ability of our current or future licensors,
licensees or collaborators to establish and maintain adequate intellectual property covering the product candidates
that we plan to develop. In addition to taking other steps designed to protect our intellectual property, we have
applied for, and intend to continue applying for, patents with claims covering our technologies, processes and
product candidates when and where we deem it appropriate to do so. However, the patent prosecution process is
expensive and time-consuming, and we and our current or future licensors, licensees or collaborators may not be
able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. It is also possible that we or our current or future licensors, licensees or collaborators will fail to identify
patentable aspects of inventions made in the course of development and commercialization activities before it is too
late to obtain patent protection for them. Pending and future patent applications filed by us or our current or future
licensors’, licensees’ or collaborators’ may not result in patents being issued that protect our technology or product
candidates, or products resulting therefrom, in whole or in part, or that effectively prevent others from
commercializing competitive technologies and products.
We have filed numerous patent applications both in the United States and in certain foreign jurisdictions to
obtain patent rights to our inventions, with claims directed to compositions-of-matter, methods of use, formulations,
combination therapy and other technologies relating to our product candidates. There can be no assurance that any
of these patent applications will issue as patents or, for those applications that do mature into patents, whether the
claims of the patents will exclude others from making, using or selling our product or product candidates, or
products or product candidates that are substantially similar to ours. In countries where we have not and do not
seek patent protection, third parties may be able to manufacture and sell products that are substantially similar or
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identical to our products or product candidates without our permission, and we may not be able to stop them from
doing so.
Similar to other biotechnology companies, our patent position is generally highly uncertain and involves
complex legal and factual questions. In this regard, we cannot be certain that we or our current or future licensors,
licensees or collaborators were the first to make an invention, or the first inventors to file a patent application
claiming an invention in our owned or licensed patents or pending patent applications. In addition, even if patents
are issued, given the amount of time required for the development, testing and regulatory review of our product
candidates, any patents protecting such candidates might expire before or shortly after the resulting products are
commercialized. Moreover, the laws and regulations governing patents could change in unpredictable ways that
could weaken the ability of us and our current or future licensors, licensees or collaborators to obtain new patents or
to enforce existing patents and patents we may obtain in the future. In any event, the issuance, scope, validity,
enforceability and commercial value of our patent rights and those of our current or future licensors, licensees or
collaborators are highly uncertain and may not effectively prevent others from commercializing competitive
technologies and products.
In some circumstances, we may not have the right to control the preparation, filing and prosecution of
patent applications, or to maintain or enforce the patents, covering technology that we license from or license to
third parties and may be reliant on our current or future licensors, licensees or collaborators to perform these
activities, which means that these patent applications may not be prosecuted, and these patents may not be
enforced, in a manner consistent with the best interests of our business. If our current or future licensors, licensees
or collaborators fail to establish, maintain, protect or enforce such patents and other intellectual property rights, such
rights may be reduced or eliminated. If our current or future licensors, licensees or collaborators are not fully
cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent
rights could be compromised.
In addition, the legal protection afforded to inventors and owners of intellectual property in countries outside
of the United States may not be as broad or effective as that in the United States and we may be unable to acquire
and enforce intellectual property rights outside the United States to the same extent as in the United States, if at all.
Accordingly, our efforts, and those of our licensors, licensees or collaborators, to enforce intellectual property rights
around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that
we own or license.
We own one issued United States patent that covers our NGM621 product candidate, although the product
and related compositions-of-matter and methods of use are disclosed and claimed in other pending U.S. non-
provisional and/or national stage applications in particular foreign countries. We do not currently own or have a
license to any issued patents that cover our NGM707, NGM831 and NGM438 product candidates, although these
product candidates are disclosed and claimed in our pending U.S. non-provisional and international applications.
The patent landscape surrounding all of our product candidates is crowded, and there can be no assurance that we
will be able to secure patent protection that would adequately cover such product candidates, that we will obtain
sufficiently broad claims to be able to prevent others from selling competing products or that we will be able to
protect and maintain any patent protection that we initially secure.
Any changes we make to our product candidates to cause them to have what we view as more
advantageous properties may not be covered by our existing patents and patent applications, and we may be
required to file new patent applications and/or seek other forms of protection for any such altered product
candidates. The patent landscape surrounding the technology underlying our product candidates is crowded, and
there can be no assurance that we would be able to secure patent protection that would adequately cover an
alternative to any of our product candidates.
We may be unable to obtain intellectual property rights or technologies necessary to develop and
commercialize our product candidates.
Several third parties are actively researching and seeking and obtaining patent protection in the fields of
cancer, retinal diseases, CVM-related diseases, including heart failure, and liver and metabolic diseases, and there
are issued third-party patents and published third-party patent applications in these fields. The patent landscape
around our product candidates is complex, and we are aware of several third-party patents and patent applications
containing claims directed to compositions-of-matter, methods of use and related subject matter, some of which
pertain, at least in part, to subject matter that might be relevant to our product candidates. However, we may not be
aware of all third-party intellectual property rights potentially relating to our product candidates and technologies.
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Depending on what patent claims ultimately issue and how courts construe the issued patent claims, as well
as the ultimate formulation and method of use of our product candidates, we may need to obtain a license to
practice the technology claimed in such patents. There can be no assurance that such licenses will be available on
commercially reasonable terms, or at all. If we are unable to successfully obtain rights to required third-party
intellectual property rights or maintain the existing rights to third-party intellectual property rights we have, we might
be unable to develop and commercialize one or more of our product candidates, which could have a material
adverse effect on our business, financial condition, results of operations and prospects.
We could lose the ability to continue the development and commercialization of our products or product
candidates if we breach any license agreement related to those products or product candidates.
Our commercial success depends upon our ability, and the ability of our current and future licensors,
licensees and collaborators, to develop, manufacture, market and sell our products and product candidates and use
our proprietary technologies without infringing the proprietary rights of third parties. A third party may hold
intellectual property rights, including patent rights that are important or necessary to the development of our
products. As a result, we are a party to a number of technology and patent licenses that are important to our
business, and we expect to enter into additional licenses in the future. If we fail to comply with the obligations under
these agreements, including payment and diligence obligations, our licensors may have the right to terminate these
agreements. In the event of a termination of these agreements, we may not be able to develop, manufacture,
market or sell any product that is covered by these agreements or to engage in any other activities necessary to our
business that require the freedom-to-operate afforded by the agreements, or we may face other penalties under the
agreements. For example, we are party to license agreements with multiple vendors, including our licenses with
Horizon Discovery Ltd. and Lonza Sales AG, under which we license cell lines and other technology used to
produce multiple product candidates, including some that are currently subject to our collaboration with Merck. We
require prior consent from some of these vendors to grant sub-licenses under these agreements. Therefore, these
vendors may be able to prevent us from granting sub-licenses to third parties, which could affect our ability or
Merck’s ability to use certain desired manufacturers in order to manufacture our product candidates. In the event of
a termination of our license agreements, our ability or Merck’s ability to manufacture or develop any product
candidates covered by these agreements may be limited or halted unless we can develop or obtain the rights to
technology necessary to produce these product candidates.
Any of the foregoing could materially adversely affect the value of the product or product candidate being
developed under any such agreement. Termination of these agreements or reduction or elimination of our rights
under these agreements may result in our having to negotiate new or amended agreements, which may not be
available to us on equally favorable terms, or at all, or cause us to lose our rights under these agreements, including
our rights to intellectual property or technology important to our development programs.
We may become involved in lawsuits or other proceedings to protect or enforce our intellectual property,
which could be expensive, time-consuming and unsuccessful and have a material adverse effect on the
success of our business.
Third parties may infringe patents or misappropriate or otherwise violate intellectual property rights owned
or controlled by us or our current or future licensors, licensees or collaborators. In the future, it may be necessary to
initiate legal proceedings to enforce or defend these intellectual property rights, to protect trade secrets or to
determine the validity or scope of intellectual property rights that are owned or controlled by us or our current or
future licensors, licensees or collaborators. Litigation could result in substantial costs and diversion of management
resources, which could harm our business and financial results.
If we or our current or future licensors, licensees or collaborators initiated legal proceedings against a third
party to enforce a patent covering a product candidate, the defendant could counterclaim that such patent is invalid
or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of
several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld
relevant information from the United States Patent and Trademark Office, or USPTO, or made a misleading
statement, during prosecution. In an infringement or declaratory judgment proceeding, a court may decide that a
patent owned by or licensed to us or our current or future licensors, licensees or collaborators is invalid or
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that the
patent does not cover the technology in question. An adverse result in any litigation proceeding could put one or
more of the patents at risk of being invalidated, narrowed, held unenforceable or interpreted in such a manner that
would not preclude third parties from entering the market with competing products.
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Third parties may initiate legal proceedings against us or our current or future licensors, licensees or
collaborators to challenge the validity or scope of intellectual property rights we own or control. For example,
generic or biosimilar drug manufacturers or other competitors or third parties may challenge the scope, validity or
enforceability of patents owned or controlled by us or our current or future licensors, licensees or collaborators.
These proceedings can be expensive and time-consuming, and many of our adversaries may have the ability to
dedicate substantially greater resources to prosecuting these legal actions than us. Accordingly, despite our efforts,
we or our current or future licensors, licensees or collaborators may not be able to prevent third parties from
infringing upon or misappropriating intellectual property rights we own, control or have rights to, particularly in
countries where the laws may not protect those rights as fully as in the United States.
There is a risk that some of our confidential information could be compromised by disclosure during
litigation because of the substantial amount of discovery required. Additionally, many foreign jurisdictions have rules
of discovery that are different than those in the United States and that may make defending or enforcing our patents
extremely difficult. There also could be public announcements of the results of hearings, motions or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have
a material adverse effect on the price of shares of our common stock.
Third-party pre-issuance submission of prior art to the USPTO, opposition, derivation, revocation,
reexamination, inter partes review or interference proceedings, or other pre-issuance or post-grant proceedings, as
well as other patent office proceedings or litigation in the United States or other jurisdictions brought by third parties
against patents or patent applications owned or controlled by us or our current or future licensors, licensees or
collaborators, may be necessary to determine the inventorship, priority, patentability or validity of these patents or
patent applications. An unfavorable outcome could leave our technology or product candidates without patent
protection and allow third parties to commercialize our technology or product candidates without payment to us.
Additionally, potential licensees or collaborators could be dissuaded from collaborating with us to license, develop or
commercialize current or future product candidates if the breadth or strength of protection provided by our patents
and patent applications is threatened. Even if we successfully defend such litigation or proceeding, we may incur
substantial costs and it may distract our management and other employees.
Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property
rights or we may initiate legal proceedings against third parties to challenge the validity or scope of the
third-party intellectual property rights, the outcome of which would be uncertain and could have a material
adverse effect on the success of our business.
Third parties may initiate legal proceedings against us or our current or future licensors, licensees or
collaborators alleging that we infringe their intellectual property rights. Alternatively, we may initiate legal
proceedings to challenge the validity or scope of intellectual property rights controlled by third parties, including in
oppositions, interferences, revocations, reexaminations, inter partes review or derivation proceedings before the
USPTO or its counterparts in other jurisdictions. In this regard, we are aware of several third-party patents and
patent applications containing claims directed to compositions-of-matter, methods of use and related subject matter,
some of which pertain, at least in part, to subject matter that might be relevant to our product candidates. These
proceedings can be expensive and time-consuming, and many of our adversaries may have the ability to dedicate
substantially greater resources to prosecuting these legal actions than us.
In addition, we may be subject to claims that we or our employees have used or disclosed confidential
information or intellectual property, including trade secrets or other proprietary information, of any such employee’s
former employer, or that third parties have an interest in our patents as an inventor or co-inventor. Likewise, we and
our current or future licensors, licensees or collaborators may be subject to claims that former employees,
collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets or other
intellectual property as an inventor or co-inventor. Litigation may be necessary to defend against these claims.
Even if we believe third-party intellectual property claims are without merit, there is no assurance that a
court would find in our favor on questions of infringement, validity, enforceability or priority. In order to successfully
challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity
in favor of the granted third-party patent. This is a high burden, requiring us to present clear and convincing
evidence as to the invalidity of any such U.S. patent claim.
An unfavorable outcome in any such proceeding could require us and our current or future licensors,
licensees or collaborators to cease using the related technology or developing or commercializing the product or
product candidate, or to attempt to license rights to it from the prevailing party, which may not be available on
commercially reasonable terms, or at all. Additionally, we could be found liable for monetary damages, including
treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement
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could prevent us from commercializing our product candidates or force us to cease some of our business
operations, which could materially harm our business.
Risks Related to Ownership of Our Common Stock
The market price of our common stock has been and may continue to be volatile, and you could lose all or
part of your investment.
The market price for our common stock has fluctuated significantly from time to time, for example, varying
between a high of $32.12 on March 17, 2021 and a low of $8.81 on October 7, 2019. The trading price of our
common stock has been and may continue to be highly volatile and subject to wide fluctuations in response to
various factors, some of which we cannot control. In addition to the factors discussed elsewhere in this “Risk
Factors” section, these factors include:
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developments associated with our collaboration with Merck or any termination of the collaboration;
the success of competitive products or technologies, including disclosure of interim data by our competitors;
regulatory actions with respect to our product candidates or our competitors’ product candidates or
products;
results of clinical trials of our product candidates or those of our competitors;
timeline delays in our clinical trials, including delays resulting from the evolving effects of the global
COVID-19 pandemic or otherwise;
actual or anticipated changes in our growth rate relative to our competitors;
announcements by us or our competitors or collaborators of significant acquisitions, strategic collaborations,
joint ventures, collaborations or capital commitments;
regulatory, legal or payor developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our product candidates or clinical development programs;
the results of our efforts to in-license or acquire additional product candidates or products;
actual or anticipated changes
recommendations by securities analysts;
in estimates as
to
financial results, development
timelines or
variations in our financial results or those of companies that are perceived to be similar to us;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
announcement or expectation of additional financing efforts;
sales of our common stock by us, our insiders or our other stockholders;
changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors; and
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general economic, industry and market conditions.
In addition, the stock market in general, and The Nasdaq Global Select Market and biotechnology
companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies, including in connection with the ongoing
COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of
a fundamental change in their underlying business models or prospects. Broad market and industry factors,
including worsening economic conditions and other adverse effects or developments relating to the evolving effects
of the COVID-19 pandemic or geopolitical instability, may negatively affect the market price of our common stock,
regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of
other risks, including those described elsewhere in this “Risk Factors” section, could have a dramatic and material
adverse impact on the market price of our common stock.
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Because of potential volatility in our trading price and trading volume, we may incur significant costs from
class action securities litigation.
Holders of stock in companies that have a volatile stock price frequently bring securities class action
litigation against the company that issued the stock. We may be the target of this type of litigation in the future. If
any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could
incur substantial costs defending the lawsuit and the time and attention of our management could be diverted from
other business concerns, either of which could seriously harm our business. Refer also to the risk factor titled “Sales
of a substantial number of shares of our common stock in the public market could cause our stock price to fall.”
An active trading market for our common stock may not be sustained.
Our common stock is currently listed on The Nasdaq Global Select Market under the symbol “NGM” and
trades on that market. We cannot ensure that an active trading market for our common stock will be sustained.
Accordingly, we cannot ensure the liquidity of any trading market, your ability to sell your shares of our common
stock when desired or the prices that you may obtain for your shares.
Our principal stockholders, including entities affiliated with The Column Group, Merck and management,
own a substantial percentage of our stock and will be able to exert significant control over matters subject
to stockholder approval.
Our executive officers, directors, significant stockholders, including entities affiliated with The Column Group
and Merck, and their respective affiliates, beneficially own a substantial amount of our voting stock. These
stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders
may be able to control elections of directors, amendments of our organizational documents or approval of any
merger, sale of assets or other major corporate transaction. The interests of this group of stockholders may not
always coincide with your interests or the interests of other stockholders. In addition, if any of our significant
stockholders decide to sell a meaningful amount of their ownership position and there is not sufficient demand in the
market for our common stock, our stock price could fall.
Sales of a substantial number of shares of our common stock in the public market could cause our stock
price to fall.
For the trading days during the three months ended December 31, 2021, the average daily trading volume
for our common stock on The Nasdaq Global Select Market was only 305,717 shares and, during the three months
ended December 31, 2020, was 175,778 shares. As a result, sales of a substantial number of shares of our
common stock in the public market, including pursuant to the Sales Agreement or by any of our large stockholders,
or even the perception in the market that we or the holders of a large number of shares intend to sell shares, could
reduce the market price of our common stock. In addition, as a result of the low trading volume of our common
stock, the trading of relatively small quantities of shares by our stockholders could disproportionately influence the
market price of our common stock in either direction. The price for our shares could, for example, decline
significantly in the event that a large number of shares of our common stock are sold on the market without
commensurate demand, as compared to an issuer with a higher trading volume that could better absorb those sales
without an adverse impact on its stock price. Moreover, certain holders of our common stock have rights, subject to
certain conditions, to require us to file registration statements covering their shares or to include their shares in
registration statements that we may file for ourselves or other stockholders.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our
stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of
our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to
stockholders will therefore be limited to the appreciation of their stock, if any.
Some provisions of our charter documents, Delaware law and our agreement with Merck may have anti-
takeover effects or could otherwise discourage an acquisition of us by others, even if an acquisition would
benefit our stockholders, and may prevent attempts by our stockholders to replace or remove our current
management.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as
well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of
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acquiring us, even if doing so would benefit our stockholders, or to remove our current management. These
provisions include:
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a board of directors divided into three classes serving staggered three-year terms, such that not all
members of the board will be elected at one time;
authorizing the issuance of “blank check” preferred stock, the terms of which we may establish and shares
of which we may issue without stockholder approval;
prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a
majority of stockholders to elect director candidates;
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a
meeting of our stockholders;
eliminating the ability of stockholders to call a special meeting of stockholders; and
establishing advance notice requirements for nominations for election to the board of directors or for
proposing matters that can be acted upon at stockholder meetings.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our
current management by making it more difficult for stockholders to replace members of our board of directors, who
are responsible for appointing the members of our management. Because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which may
discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or
beneficial to our stockholders. In addition, Section 203 of the DGCL prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested stockholder, which is generally a person that together
with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years
after the date of the transaction in which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner.
Certain provisions in our agreement with Merck may also deter a change of control. For example, under the
current terms of our agreement with Merck, a change of control gives Merck the right to terminate the research
phase of the collaboration as well as additional rights if our acquirer is a qualifying large pharmaceutical company or
has a research, development or commercialization program that competes with a program licensed by Merck.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws,
Delaware law or our agreement with Merck that has the effect of delaying or deterring a change in control could limit
the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also
affect the price that some investors are willing to pay for our common stock.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of
Delaware and the federal district courts of the United States will be the exclusive forum for substantially all
disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of
Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or
common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of a fiduciary
duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of
incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by
the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by
the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section
22 of the Securities Act of 1933, as amended, or the Securities Act, creates concurrent jurisdiction for federal and
state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to
entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or
contrary rulings by different courts, among other considerations, our amended and restated certificate of
incorporation further provides that the federal district courts of the United States will be the exclusive forum for
resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts
have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to
bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would
expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and
restated certificate of incorporation. This may require significant additional costs associated with resolving such
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action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those
other jurisdictions.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits
against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in
our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur
further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could
seriously harm our business.
General Risk Factors
We, our CROs, our CMOs, our current and potential future partners and other third parties we rely on or
partner with could experience a cybersecurity incident that could harm our business.
We collect, store and transmit proprietary, confidential and sensitive information, including personal
information, in the course of our business. Our technology systems and the information and data processed and
stored in our technology systems or otherwise by us or on our behalf, and the technology systems of, and data
accessed on our behalf by, our research collaborators, CROs, CMOs, contractors, consultants and other third
parties on which we depend to operate our business, may be vulnerable to security breaches, loss, damage,
corruption, unauthorized access, use or disclosure or misappropriation. Such incidents may result from the actions
of a wide variety of actors, including traditional hackers, our personnel or the personnel of the third parties we work
with, sophisticated nation-states and nation-state-supported actors. Threats we and third parties on which we rely
may face are constantly evolving and include (without limitation), malware, viruses, software vulnerabilities and
bugs, software or hardware failure, hacking, denial of service attacks, social engineering (including phishing),
ransomware, inside threats, credential stuffing or other cyberattacks, telecommunications failures, earthquakes,
fires, floods and similar threats. Threats such as ransomware attacks, for example, are becoming increasingly
prevalent and severe. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be
unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such
payments.
We may, under certain data privacy and security obligations, be required to, or we may choose to, expend
significant resources or modify our business activities (including our clinical trial activities) in an effort to protect
against security incidents. While we have developed systems and processes designed to protect the integrity,
confidentiality and security of the confidential and personal information under our control, we cannot assure you that
any security measures that we or our third-party service providers implement will be effective in preventing
cybersecurity incidents. There are many different cyber-crime and hacking techniques, and as such techniques
continue to evolve, we may be unable to anticipate attempted security breaches, identify them before our
information is exploited or react in a timely manner.
As a result of the ongoing COVID-19 pandemic, certain functional areas of our workforce remain on a full-
or part-time basis in a remote work environment and outside of our corporate network security protection
boundaries, which imposes additional risks to our business, including increased risk of industrial espionage,
phishing and other cybersecurity attacks, and unauthorized dissemination of proprietary or confidential information,
including personal information, any of which could have a material adverse effect on our business.
Despite our efforts to strengthen security and authentication measures, we have not always been able in
the past, and may be unable in the future, to detect vulnerabilities in our information technology systems. We have
experienced an overall increase in cybersecurity incidents, none of which, to date, have caused material disruption
to our business, or to our knowledge, involved a material security breach. Most recently, in December 2020, we
detected that an attacker had gained access to a single system on our network and unsuccessfully attempted to use
that access to stage a broader attack against us. We or the third parties we rely on or partner with could experience
a material system failure, security breach or other cybersecurity incident, including any related to or in connection
with any of the aforementioned threats, in the future, which could interrupt our operations, disrupt our development
programs and have a material adverse effect on our business, financial condition and results of operations. For
example, the loss or corruption of clinical trial data from completed or future clinical trials could result in delays in
our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we
rely on third parties for the manufacture of our product candidates, to analyze clinical trial samples and to conduct
clinical trials, and cybersecurity incidents experienced by these third parties could have a material adverse effect on
our business. Security breaches and other cybersecurity incidents affecting us or the third parties we rely on or
partner with could also result in substantial remediation costs and expose us to litigation (including class claims),
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regulatory enforcement action (for example, investigations, fines, penalties, audits and inspections), additional
reporting requirements and/or oversight, fines, penalties, indemnification obligations, negative publicity, reputational
harm, monetary fund diversions, interruptions in our operations (including availability of data), financial loss and
other liabilities and harms. Additionally, such incidents may trigger data privacy and security obligations requiring us
to notify relevant stakeholders. These disclosures are costly, and the disclosures or the failure to comply with such
requirements could lead to adverse consequences.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance
that limitations of liability in our contracts are sufficient to protect us from claims related to our data privacy and
security obligations. Additionally, we cannot be certain that our insurance coverage will be adequate for data
security liabilities actually incurred, will continue to be available to us on economically and commercially reasonable
terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or
more large claims against us that exceed available insurance coverage, or the occurrence of changes in our
insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements,
could adversely affect our reputation, business, financial condition and results of operations.
The withdrawal of the United Kingdom from the EU, commonly referred to as Brexit, could increase our cost
of doing business, reduce our gross margins or otherwise negatively impact our business and our financial
results.
Brexit will continue to create significant uncertainty concerning the future relationship between the United
Kingdom, or UK, and the EU, following the UK withdrawal from the EU in January 2020. Since a significant portion
of the regulatory framework in the UK is derived from EU laws, Brexit materially impacts the regulatory regime with
respect to the development, manufacture, importation, approval and commercialization of our product candidates in
the UK or the EU. Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will
be treated as a “third country,” a country that is not a member of the EU and whose citizens do not enjoy the EU
right to free movement.
In this regard, in December 2020, the EU and UK reached an agreement in principle on the framework for
their future relationship, the EU-UK Trade and Cooperation Agreement, or TCA. The TCA primarily focuses on
ensuring free trade between the EU and the UK in relation to goods, including medicinal products. As part of the
TCA, the EU and the UK will recognize cGMP inspections carried out by the other party and the acceptance of
official cGMP documents issued by the other party. The TCA also encourages, although it does not oblige, the
parties to consult one another on proposals to introduce significant changes to technical regulations or inspection
procedures. Among the areas of absence of mutual recognition are batch testing and batch release. The UK has
unilaterally agreed to accept EU batch testing and batch release for a period of at least 2 years until January 1,
2023. However, the EU continues to apply EU laws that require batch testing and batch release to take place in the
EU territory. This means that medicinal products that are tested and released in the UK must be retested and re-
released when entering the EU market for commercial use. As it relates to marketing authorizations, Great Britain
will have a separate regulatory submission process, approval process and national marketing authorization.
Northern Ireland will, however, continue to be covered by the marketing authorizations granted by the European
Commission. For example, the scope of a marketing authorization for a medicinal product granted by the European
Commission or by the competent authorities of EU member states will no longer encompass Great Britain (England,
Scotland and Wales). In these circumstances, a separate marketing authorization granted by the UK competent
authorities will be required to place medicinal products on the market in Great Britain. Northern Ireland will,
however, continue to be covered by the marketing authorizations granted by the European Commission. These
changes, as well as future changes, could increase the costs and complexity of doing business in or with the UK,
which could adversely affect our business.
We are subject to rapidly changing and increasingly stringent foreign and domestic laws and regulations
relating to privacy, data protection and information security. The restrictions imposed by these
requirements or our actual or perceived failure to comply with them could harm our business.
We may collect, use, transfer or otherwise process proprietary, confidential and sensitive information,
including personal information (including health-related data), which subjects us to numerous evolving and complex
data privacy and security obligations, including various laws, regulations, guidance, industry standards, external and
internal privacy and security policies, contracts and other obligations that govern the processing of such information
by us and on our behalf. For example, we process personal information from clinical trials participants and other
individuals located in the European Economic Area, or EEA, and, if any of our product candidates are approved, we
may seek to commercialize those products in the EEA. The collection, use and other processing of personal
information, including health data, in the EEA or regarding residents of the EEA are governed by the EU’s General
74
Data Protection Regulation ((EU) 2016/679), or EU GDPR, and other relevant laws that govern patient
confidentiality and storage of personal health data. Companies that violate the EU GDPR can face private litigation,
prohibitions on data processing, other administrative measures, reputational damage and fines of up to the greater
of 20 million Euros or 4% of their worldwide annual revenue. The EU GDPR requires us to, among other things: give
detailed disclosures about how we collect, use and share personal information; contractually commit to data
protection measures in our contracts with vendors; maintain adequate data security measures; notify regulators and
affected individuals of certain data breaches; meet extensive privacy governance and documentation requirements;
and honor individuals’ data protection rights, including their rights to access, correct and delete their personal
information. The UK has incorporated an amended version of the EU GDPR into UK law, commonly referred to as
the UK GDPR, which is independent from, but aligned with, the EU GDPR, which together with the UK Data
Protection Act of 2018, or UK DPA, covers the processing of personal data of UK residents. Non-compliance with
UK data protection laws may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue,
whichever is higher.
The EU GDPR and accompanying laws are evolving and subject to interpretation and may impose
limitations on our activities or otherwise adversely affect our business. Because of the remote work policies we
implemented due to the COVID-19 pandemic, information that is normally protected, including company confidential
information, may be less secure. Cybersecurity and data security threats continue to evolve and raise the risk of an
incident that could affect our operations or compromise our business information or sensitive personal data,
including health data. We may also need to collect more extensive health-related information from our employees to
manage our workforce.
Certain jurisdictions, including the EEA, UK and Switzerland, have enacted data localization laws and laws
restricting cross-border transfers of personal information. For example, the EU GDPR generally restricts the transfer
of personal information from the EEA to countries outside of the EEA, such as the United States, which the
European Commission does not consider is providing an adequate level of data privacy and security. One of the
primary mechanisms designed to allow United States companies to continue to import personal information from the
EA has been the European Commission’s Standard Contractual Clauses, or SCCs. SCCs are standard contractual
obligations that may be entered between a party exporting personal information from the EU and a party receiving
the personal information in a third country that has not been deemed by the European Commission to provide an
adequate level of data privacy and security. In addition to implementing and complying with such contractual
obligations, the European Commission’s most recent version of the SCCs, released on June 4, 2021, requires
parties to meet additional obligations, such as conducting transfer impact assessments to determine whether
additional security measures are necessary to protect the data at issue. If adequate data protection cannot be
guaranteed, EEA residents may complain to the data protection authorities, which may require data transfers under
the contract to be suspended. The European Commission’s updated SCCs may further increase the legal risks and
liabilities under European privacy, data protection and information security laws. Additionally, due to potential legal
challenges, there exists some uncertainty regarding whether the SCCs will remain a valid mechanism for transfers
of personal information out of the EEA. Laws in the UK and Switzerland similarly restrict transfers of personal
information outside of those jurisdictions to countries such as the United States that are deemed not to provide an
adequate level of personal information protection.
We continue to monitor changes in data protection laws related to the cross-border transfer of personal
information; however, uncertainty remains regarding any future regulations, interpretations or guidance that may be
issued, particularly by the EU authorities. At present, we primarily rely on individuals’ explicit consent, which can be
revoked at any time, to transfer their personal information from the EU to the United States and other countries, but
in certain cases we have relied or may rely on the SCCs. If we are unable to rely on explicit consent to transfer
individuals’ personal information from the EU, or if we are otherwise unable to implement a valid compliance
solution for cross-border transfers of personal information, we will face increased exposure to substantial fines,
regulatory actions, as well as injunctions against the export and processing of personal information from Europe.
Our inability to import personal information from the EEA, UK or Switzerland or other countries may also restrict our
clinical trial activities in those countries; limit our ability to collaborate with CROs, service providers, contractors and
other companies subject to laws restricting cross-border data transfers; require us to increase our data processing
capabilities in other countries at significant expense and may otherwise negatively impact our business operations.
Additionally, other countries have enacted or are considering enacting similar cross-border data transfer
restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our
services and operating our business.
Privacy and data security laws in the United States at the federal, state and local level are increasingly
complex and changing rapidly. For example, at the federal level, HIPAA, as amended by HITECH, imposes specific
75
requirements relating to the privacy, security and transmission of individually identifiable health information.
Additionally, at the state level, the privacy and data protection landscape is changing rapidly. For example, just over
a month after the EU GDPR took effect, the California legislature passed the California Consumer Privacy Act of
2018, or CCPA, which took effect on January 1, 2020. The CCPA gives California residents certain rights similar to
the individual rights given under the EU GDPR, including the right to access and delete their personal information,
opt-out of certain personal information sharing and receive detailed information about how their personal information
is used. The CCPA provides for civil penalties for violations, including statutory fines for noncompliance and a
limited private right of action in connection with certain data breaches. Since the enactment of the CCPA, new
privacy and data security laws have been proposed in more than half of the states and in United States Congress,
reflecting a trend toward more stringent privacy legislation in the United States. The evolving patchwork of differing
state and federal privacy and data security laws increases the cost and complexity of operating our business and
increase our exposure to liability. The CCPA itself will expand substantially as a result of California voters approving
a November 2020 ballot measure that adopted the California Privacy Rights Act of 2020, or CPRA, which becomes
fully effective on January 1, 2023, and will, among other things, create a new administrative agency to implement
and enforce California’s privacy laws. While certain clinical trials activities are exempt from the CCPA’s
requirements, other personal information that we handle may be subject to the CCPA, forthcoming CPRA and
similar laws, which may increase our compliance costs, exposure to regulatory enforcement action and other
liabilities.
Our obligations related to data privacy and security are quickly changing in an increasingly stringent
fashion. These obligations may be subject to differing applications and interpretations, which may be inconsistent or
in conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant
resources (including, without limitation, financial and time-related resources). These obligations may necessitate
changes to our information technologies, systems and practices and to those of any third parties that process
personal information on our behalf. In addition, these obligations may require us to change aspects of our business
model. Although we endeavor to comply with applicable data privacy and security obligations, we may at times fail
(or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we
rely may fail to comply with such obligations, which could impact whether or not we are in compliance.
If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations,
we could face significant consequences, including (without limitation): government enforcement actions (e.g.,
investigations, fines, penalties, audits, inspections and similar); litigation (including class-related claims); additional
reporting requirements and/or oversight; bans on processing personal information; orders to destroy or not use
personal information; and imprisonment of company officials. Any of these events could have a material adverse
effect on our reputation, business or financial condition, including but not limited to: loss of customers; interruptions
or stoppages in our business operations (including clinical trials); inability to process personal information or to
operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and
resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.
We use and generate materials that may expose us to material liability.
Our research programs involve the use of hazardous materials, chemicals and radioactive and biological
materials. We are subject to foreign, federal, state and local environmental and health and safety laws and
regulations governing, among other matters, the use, manufacture, handling, storage and disposal of hazardous
materials and waste products. We may incur significant costs to comply with these current or future environmental
and health and safety laws and regulations. In addition, we cannot completely eliminate the risk of contamination or
injury from hazardous materials and may incur material liability as a result of such contamination or injury. In the
event of an accident, an injured party may seek to hold us liable for any damages that result. Any liability could
exceed the limits or fall outside the coverage of our workers’ compensation, property and business interruption
insurance and we may not be able to maintain insurance on acceptable terms, if at all. We currently carry no
insurance specifically covering environmental claims.
Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure,
terrorist activity and other events beyond our control, which could harm our business.
Our facilities have experienced electrical blackouts as a result of a shortage of available electrical power.
Future blackouts, which may be implemented by the local electricity provider in the face of high winds and dry
conditions, could disrupt our operations. Our facility is located in a seismically active region. We have not
undertaken a systematic analysis of the potential consequences to our business and financial results from a major
earthquake, fire, power loss, terrorist activity or other disasters and do not have a comprehensive recovery plan for
such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption
76
of our business that may occur, and any losses or damages incurred by us could harm our business. In addition, the
sole supplier of clinical drug substances for NGM120, NGM621, NGM707, NGM831 and NGM438 is located in
Lithuania, a region that has experienced political unrest. See “We rely completely on CMOs for the manufacture of
our product candidates and are subject to many manufacturing risks, any of which could substantially increase our
costs and limit supply of our product candidates and any future products.” If our operations or the operations of third
parties providing services to us experiences are disrupted by any such occurrences, our business and future
prospects may be negatively affected.
Our ability to use net operating loss carryforwards to offset taxable income could be limited.
We plan to use our current year operating losses to offset taxable income from any revenue generated from
operations, including corporate collaborations. To the extent that our taxable income exceeds any current year
operating losses, we plan to use our net operating loss carryforwards to offset income that would otherwise be
taxable. Our net operating loss carryforwards generated in tax years ended on or prior to December 31, 2017 are
only permitted to be carried forward for 20 years under applicable U.S. tax law. Under the 2017 Tax Act, as modified
by the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, our federal net operating losses
generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the ability to
deduct such federal net operating losses generated in tax years beginning after December 31, 2020 is limited to
80% of taxable income. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the
CARES Act.
In addition, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, and
corresponding provisions of state law, if we experience an “ownership change,” generally defined as a greater than
50% change, by value, in equity ownership over a three-year period, our ability to use our pre-change net operating
loss carryforwards to offset our post-change income may be limited. Due to our initial public offering and other shifts
in our stock ownership, we have experienced ownership changes in the past and may experience ownership
changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control.
As a result, our use of federal net operating loss carryforwards could be limited. State net operating loss
carryforwards may be similarly limited. In addition, at the state level, there may be periods during which the use of
net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes
owed. For example, California has imposed limits on the usability of California net operating loss carryforwards and
certain tax credits to offset California taxable income or California tax liabilities in tax years beginning after 2019 and
before 2023. Any such limitations may result in greater tax liabilities than we would incur in the absence of such
limitations and any increased liabilities could adversely affect our business, results of operations, financial position
and cash flows.
New tax laws or regulations, changes to existing tax laws or regulations or changes in their application to
us or our customers may have a material adverse effect on our business, cash flows, financial condition or
results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations, directives, decrees or ordinances
could be enacted at any time, which could adversely affect our business and financial condition. Further, existing tax
laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
For example, the 2017 Tax Act sanctioned many significant changes to the U.S. tax laws. Future guidance from the
U.S. Internal Revenue Service, or IRS, and other tax authorities with respect to the 2017 Tax Act may affect us, and
certain aspects of the 2017 Tax Act may be repealed or modified in future legislation. For example, the CARES Act
modified certain provisions of the 2017 Tax Act. Changes in corporate tax rates, the realization of net deferred tax
assets relating to our operations, the taxation of foreign earnings and the deductibility of expenses under the 2017
Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result
in significant one-time charges and could increase our future U.S. tax expense.
Future changes in financial accounting standards or practices may cause adverse and unexpected revenue
fluctuations and adversely affect our reported results of operations.
Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and
affect our reported financial position or results of operations. Financial accounting standards in the United States
are constantly under review and new pronouncements and varying interpretations of pronouncements have
occurred frequently in the past and are expected to occur again in the future. As a result, we may be required to
make changes in our accounting policies. Those changes could affect our financial condition and results of
operations or the way in which such financial condition and results of operations are reported. Compliance with new
accounting standards may also result in additional expenses. As a result, we intend to invest all reasonably
77
necessary resources to comply with evolving standards, and this investment may result in increased general and
administrative expenses and a diversion of management time and attention from business activities to compliance
activities.
We continue to incur increased costs as a result of operating as a public company, and our management
devotes substantial time to new compliance initiatives. In addition, we are obligated to develop and
maintain proper and effective internal control over financial reporting. In the future, we may not complete
our analysis of our internal control over financial reporting in a timely manner, or our internal control over
financial reporting may not be determined to be effective, which may adversely affect investor confidence in
our company and, as a result, the value of our common stock.
As a public company, we incur significant legal, accounting, insurance and other expenses, and these
expenses further increased in connection with our loss of “emerging growth company” status as of December 31,
2021. As a public company, we are subject to the reporting requirements of the Securities and Exchange Act of
1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the
Dodd-Frank Act, as well as rules adopted, and to be adopted, by the SEC and The Nasdaq Global Select Market.
Our management and other personnel devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations increase our legal and financial compliance costs and may make some
activities more time-consuming and costly. The increased costs will increase our net loss. For example, these rules
and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance and
we may be required to incur substantial costs to maintain sufficient coverage. We cannot predict or estimate the
amount or timing of additional costs we may incur in the future to respond to these requirements. The impact of
these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our
board of directors, our board committees or as executive officers.
Specifically, in order to comply with the requirements of being a public company, we need to undertake
various actions, including maintaining effective internal controls and procedures. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal control over financial
reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that
information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our
principal executive and financial officers. In addition, we must perform system and process evaluation and testing of
our internal control over financial reporting to allow management to report on the effectiveness of our internal control
over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, and to allow our independent
registered public accounting firm to issue an attestation report on the effectiveness of our internal control over
financial reporting. Our compliance with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial
accounting expense and expend significant management efforts. We currently do not have an internal audit staff,
and we have hired and will need to hire additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404
of the Sarbanes-Oxley Act in a timely manner, or if we or our independent registered public accounting firm identify
deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, investors
may lose confidence in our operating results and the price of our common stock could decline. In addition, if we are
unable to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Global Select
Market.
Our ability to successfully implement our business plan and comply with Section 404 of the Sarbanes-Oxley
Act requires us to be able to prepare timely and accurate financial statements. We expect that we will need to
continue to improve existing, and implement new operational and financial systems, procedures and controls to
manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or
enhanced systems, procedures or controls may cause our operations to suffer and we may be unable to conclude
that our internal control over financial reporting is effective and to obtain an attestation report from our independent
registered public accounting firm as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have
an adverse impact on the price for our common stock, and could adversely affect our ability to access the capital
markets.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We designed our disclosure controls and procedures to reasonably assure that information we must
disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management,
and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
78
SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how
well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may
occur and not be detected.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research,
about our business, our stock price and trading volume could decline.
Our stock price and trading volume is heavily influenced by the way analysts and investors interpret our
clinical trial results, financial information and other disclosures. If securities or industry analysts do not publish
research or reports about our business, delay publishing reports about our business or publish negative reports
about our business, regardless of accuracy, our stock price and trading volume could decline.
Item 1B.
Unresolved Staff Comments.
None.
Item 2.
Properties.
We lease and occupy approximately 122,000 square feet of laboratory and office space in South San
Francisco, California. The lease is scheduled to expire in December 2023. We believe that our current spaces are
adequate and suitable for our needs. We also believe we will be able to extend our lease or obtain new and/or
additional space, as needed, on commercially reasonable terms, although based on current market conditions our
lease obligations will likely be higher in the future.
Item 3.
Legal Proceedings.
None.
Item 4.
Mine Safety Disclosures.
Not applicable.
79
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Market Information
Our common stock has been listed on the Nasdaq Global Select Market under the symbol “NGM” since
April 4, 2019. Prior to that date, there was no public trading market for our common stock.
Holders of Record
As of the close of business on February 23, 2022, there were 44 stockholders of record of our common
stock. The actual number of stockholders is greater than the number of stockholders of record and includes
stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
This number of stockholders of record also does not include stockholders whose shares may be held in trust by
other entities.
Performance Graph
The following stock performance graph compares the value of an investment in (i) our common stock, (ii)
the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index for the period from April 4, 2019 (the date
our common stock commenced trading on the Nasdaq Global Select Market) through December 31, 2021. The
figures represented below assume an investment of $100 in our common stock at the closing price on April 4, 2019
and in the Nasdaq Composite Index and Nasdaq Biotechnology Index on April 4, 2019 and the reinvestment of
dividends into shares of common stock. However, no dividends have been declared on our common stock to date.
The comparisons in the table are required by the Securities and Exchange Commission, or SEC, and are not
intended to forecast or be indicative of possible future performance of our common stock.
80
NGM Biopharmaceuticals, Inc.
NASDAQ Composite Index
NASDAQ Biotechnology Index
4/4/2019
3/31/2021
12/31/2021
$ 100.00 $ 125.78 $ 206.09 $ 197.76 $ 134.15 $ 142.99 $ 120.48
12/31/2019
12/31/2020
6/30/2021
9/30/2021
100.00
100.00
113.70
106.66
163.31
134.05
167.86
133.09
183.79
145.00
183.08
143.23
198.24
133.20
The information under “Performance Graph” is not deemed to be “soliciting material” or “filed” with the SEC or
subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, and is not to be incorporated by reference in any filing of NGM under the Securities
Act of 1933, as amended, or the Securities Act, or the Exchange Act, whether made before or after the date of this
Annual Report on Form 10-K and irrespective of any general incorporation language in those filings.
Recent Sales of Unregistered Securities
During the year ended December 31, 2021, we did not issue or sell any unregistered securities.
Issuer Purchases of Equity Securities
During the three-month period ended December 31, 2021, we repurchased unvested shares of our common
stock that had been issued upon early exercise of stock options. Upon termination of employment of a person
holding unvested shares, we are entitled to repurchase the unvested shares. The following table summarizes
repurchases of our common stock:
October 1 - October 31, 2021
November 1 - November 30, 2021
December 1 - December 31, 2021
Total
______________
Total Number of
Shares Purchased (1)
Average Price Paid
per Share
157 $
—
—
157 $
8.14
—
—
8.14
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs (2)
Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased Under
the Plans or
Programs (2)
(1) All of the shares repurchased were repurchases of unvested shares of our common stock that had been issued upon early
exercise of stock options.
(2) Not applicable. Share repurchases were not made pursuant to publicly announced plans or programs.
Item 6.
[Reserved]
81
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our audited consolidated financial statements and related notes appearing elsewhere in this Annual
Report. This discussion and analysis contains forward-looking statements based upon current beliefs, plans and
expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives,
expectations, intentions and projections. Our actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements as a result of several factors that could impact our business,
including those set forth in the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-
K. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative
of these terms or other similar expressions. See “Special Note Regarding Forward-Looking Statements” in this
Annual Report on Form 10-K.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the
relevant subject. These statements are based upon information available to us as of the date of this Annual Report
on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate we have conducted
exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently
uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-
changing medicines based on scientific understanding of key biological pathways underlying retinal diseases,
cancer and liver and metabolic diseases. These diseases represent a significant burden for patients and healthcare
systems and, in some cases, are leading causes of morbidity and mortality. Since the commencement of our
operations in 2008, we have generated a robust portfolio of product candidates ranging from early discovery to
Phase 2b development. Currently, we have seven disclosed programs, including four in Phase 2 or 2b studies,
across three therapeutic areas: cancer, retinal diseases and liver and metabolic diseases. Our biology-centric drug
discovery approach aims to seamlessly integrate interrogation of complex disease-associated biology and protein
engineering expertise to unlock proprietary insights that are leveraged to generate promising product candidates
and enable their rapid advancement into proof-of-concept studies. As explorers on the frontier of life-changing
science, we aspire to operate one of the most productive research and development engines in the
biopharmaceutical industry. All therapeutic candidates in our pipeline have been generated by our in-house
therapeutic area-agnostic discovery engine, led by biology and motivated by unmet patient need.
Pipeline Programs and Operational Updates
Pipeline Programs
We currently have five product candidates in the clinic, three wholly-owned by us (NGM707, NGM120 and
aldafermin), one being progressed by our collaborator, Merck Sharp & Dohme Corp., or Merck (MK-3655) and one
optionable by Merck (NGM621). In addition, we have two wholly-owned product candidates expected to enter the
clinic in the first half of 2022:
• Oncology. Our oncology product candidates NGM707, NGM831, NGM438 and NGM120 and their related
compounds are wholly-owned by us.
◦
NGM707. NGM707, the lead asset in our myeloid reprogramming and checkpoint inhibition portfolio,
is a dual antagonist monoclonal antibody that is designed to improve patient immune responses to
tumors by inhibiting both Immunoglobulin-like transcript 2, or ILT2 (also known as LILRB1), and
Immunoglobulin-like transcript 4, or ILT4 (also known as LILRB2) receptors. We believe NGM707 has
the potential to reprogram ILT4- and ILT2-expressing myeloid cells to shift them from a suppressive
state that restricts anti-tumor immunity to a stimulatory state that may promote anti-tumor immunity.
Blocking ILT2 may also reverse inhibition of ILT2-expressing lymphoid cells to further stimulate anti-
tumor immune responses.
▪
In June 2021, we initiated the open-label, Phase 1 portion of a Phase 1/2 clinical trial
evaluating NGM707 as a monotherapy and
in combination with KEYTRUDA®
(pembrolizumab) for the treatment of patients with advanced solid tumors. We expect to
enroll approximately 180 patients in this trial. The ongoing Phase 1a cohort of the trial is
82
evaluating NGM707 as a monotherapy. The Phase 1b cohort will evaluate NGM707 in
combination with pembrolizumab in patients with advanced solid tumors.
▪
Looking forward: We anticipate a readout of initial data from the Phase 1a cohort in the
second half of 2022. The Phase 1 portion of the trial is expected to be followed by a Phase 2
dose-expansion in cohorts of specific tumor types.
NGM831. In August 2021, we disclosed NGM831, an antagonist antibody that is designed to block
the interaction of the Immunoglobulin-like transcript 3, or ILT3 (also known as LILRB4) receptor, with
fibronectin, as well as other cognate ligands. For tumors in which both ILT3 and fibronectin are
upregulated, the ILT3-fibronectin signaling pathway may act as a stromal checkpoint to repress
myeloid cell function and inhibit anti-tumor immunity. By inhibiting ILT3's interaction with fibronectin
and its other ligands, we believe NGM831 has the potential to mobilize a patient's own immune
system to fight tumors by shifting myeloid cells from a suppressive state to a stimulatory state and
promoting antitumor activity.
▪
▪
The disclosure of NGM831 coincided with a publication in Cancer Immunology Research, a
journal of the American Association for Cancer Research, describing our discovery of one of
ILT3's functional ligands, fibronectin, a key component of the tumor stroma.
Looking forward: We expect to initiate first-in-human testing of NGM831 in patients with
advanced solid tumors in the first quarter of 2022.
NGM438. NGM438 is an antagonist antibody that is designed to inhibit leukocyte-associated
immunoglobulin-like receptor 1, or LAIR1, and thereby promote anti-tumor immune responses.
NGM438 has the potential to potently block the binding of all collagens to LAIR1, including tumor-
derived collagens. Collagens produced by the tumor stroma are believed to bind LAIR1 to create an
immuno-suppressive tumor microenvironment. The interaction of collagens from the tumor stroma
with LAIR1 on immune cells represents a “stromal checkpoint” that restrains anti-tumor immune
responses. Reinvigoration of these collagen-suppressed immune cells by blocking the binding of
collagens to LAIR1 may address a key resistance mechanism that limits tumor responses to current
immunotherapies.
▪
Looking forward: We expect to initiate first-in-human testing of NGM438 in patients with
advanced solid tumors in the second quarter of 2022.
NGM120. NGM120 is an antagonist antibody that binds to glial cell-derived neurotrophic factor
receptor alpha-like, or GFRAL, and is designed to block the effects of elevated serum levels of growth
differentiation factor 15, or GDF15. We designed NGM120 as a potent, humanized monoclonal
antibody inhibitor of GFRAL with the potential for once-monthly or less frequent dosing. Preclinical
studies suggest that NGM120 may reduce tumor growth and improve survival in syngeneic orthotopic
pancreatic tumor models.
◦
◦
◦
▪ We are conducting the Phase 1/2 PINNACLES clinical trial to assess NGM120’s effect on
cancer and cancer-related cachexia in patients with select advanced solid tumors and
metastatic pancreatic cancer. We are currently enrolling patients into a Phase 2 component of
the ongoing PINNACLES clinical trial. This Phase 2 component of the PINNACLES trial is
testing NGM120 in combination with gemcitabine and Nab-paclitaxel as first-line treatment in
patients with metastatic pancreatic cancer.
▪
▪
In September 2021, at the European Society for Medical Oncology, or ESMO, Virtual
Congress, we reported preliminary findings from two Phase 1 dose-escalation cohorts of the
PINNACLES trial, including a Phase 1a cohort evaluating NGM120 as a monotherapy in
patients with select advanced solid tumors and a Phase 1b cohort evaluating NGM120 in
combination with gemcitabine and Nab-paclitaxel in patients with metastatic pancreatic
cancer. The preliminary results reported at ESMO showed that NGM120 was well tolerated
with no dose-limiting toxicities and provided encouraging initial signals of anti-cancer activity
in patients with advanced solid tumors.
Looking forward: We plan to report additional data from the Phase 1a and Phase 1b cohorts
of the PINNACLES trial in the second half of 2022.
83
•
Retinal diseases.
◦
NGM621. NGM621 is a humanized Immunoglobulin 1, or IgG1, monoclonal antibody administered via
intravitreal, or IVT, injection. NGM621 was engineered to potently bind to, and be a long-acting
inhibitor of, complement C3 with the treatment goal of reducing disease progression in patients with
geographic atrophy, or GA, secondary to age-related macular degeneration.
▪
▪
▪
▪
Data from a Phase 1 trial we conducted showed that NGM621 was well tolerated, with no
patients experiencing serious adverse events, or SAEs, or drug-related adverse events.
Ocular adverse events observed were mild in severity and representative of those commonly
associated with IVT injections.
In July 2021, we completed enrollment of the ongoing Phase 2 CATALINA clinical trial,
enrolling 320 patients at 65 sites in the United States. The CATALINA trial was designed to be
a Phase 3-supportive or -enabling clinical trial and is evaluating the efficacy and safety of
NGM621 when given to patients with GA every four weeks or every eight weeks via IVT
injections compared to sham control.
In February 2022, NGM621 received Fast Track designation from the United States Food and
Drug Administration, or FDA, for GA secondary to age-related macular degeneration.
Looking forward: We expect to report topline data from the Phase 2 CATALINA trial in the
fourth quarter of 2022. We plan to use the CATALINA trial results and guidance from the FDA
to inform Phase 3 planning and design for NGM621. Merck has a one-time option to license
NGM621 and its related compounds upon completion of the ongoing Phase 2 CATALINA
clinical trial (either alone or bundled with all of the other ophthalmology compounds and their
respective related compounds included within the scope of the current collaboration with
Merck).
•
Liver and metabolic diseases.
◦
Aldafermin. Aldafermin is an engineered analog of human hormone fibroblast growth factor 19, or
FGF19, that is administered through a once-daily subcutaneous injection. Aldafermin is wholly-owned
by us. In May 2021, we announced that the ALPINE 2/3 Phase 2b trial of aldafermin in patients with
non-alcoholic steatohepatitis, or NASH, and liver fibrosis stage 2 or 3, or F2 or F3, did not meet its
primary endpoint. As a result, we decided to suspend further development of aldafermin in patients
with F2/F3 NASH, allowing for the reallocation of resources to advancing our other programs.
Aldafermin remains in Phase 2b development in the ALPINE 4 trial for the treatment of patients with
compensated NASH cirrhosis (liver fibrosis stage 4, or F4).
▪
In January 2022, we completed enrollment of 160 patients in the United States, Europe, Hong
Kong and Australia in our Phase 2b ALPINE 4 clinical trial of aldafermin. The ALPINE 4
clinical trial is designed to evaluate the treatment effect of aldafermin over 48 weeks in a
population of patients with NASH with F4 liver fibrosis and well-compensated cirrhosis. We
recently updated the design of the ALPINE 4 trial, elevating the Enhanced Liver Fibrosis, or
ELF, test, a reproducible, quantitative non-invasive liver prognostic test that evaluates liver
fibrosis and correlates to liver-related outcomes, to be the primary endpoint for the trial. The
ELF test is a composite blood test measuring the presence of three biomarkers associated
with liver matrix metabolism. Liver biopsy data will also be measured and reported as a
secondary endpoint upon completion of the trial.
▪
Looking forward: We expect to report topline data from the Phase 2 ALPINE 4 trial in the
first half of 2023.
◦ MK-3655 (formerly NGM313). MK-3655 is an agonistic antibody discovered by us that selectively
activates fibroblast growth factor receptor 1c-beta-klotho, or FGFR1c/KLB, which regulates insulin
sensitivity, blood glucose and liver fat and is administered every four weeks through a subcutaneous
injection. MK-3655, in Phase 2b development for the treatment of NASH, was licensed by Merck in
November 2018.
▪ Merck is continuing enrollment in the worldwide 52-week randomized, double-blind Phase 2b
trial of MK-3655 in patients with NASH and F2 or F3 liver fibrosis that it initiated in the fourth
quarter of 2020.
84
We have additional undisclosed programs that are in various stages of development ranging from functional
validation to preclinical development.
The success of each of our product candidates may be affected by numerous factors, including preclinical
data, clinical data, competition, manufacturing capability, sales capability, collaboration partners, the sufficiency of
our cash resources, regulatory matters, third-party payor matters and commercial viability. We do not have any
products approved for sale and do not anticipate generating revenue from product sales for the foreseeable future, if
ever.
Operational Updates
Partnering has been and is expected to continue to be a key component of our strategy. For example, our
collaboration with Merck, described in " — Our Merck Collaboration" below, historically provided us with robust
financial support that enabled us to broaden and accelerate our research efforts and to develop more product
candidates for major indications than we likely could have advanced on our own. Given the breadth of opportunities
produced by our prolific discovery engine, and the narrower scope of our Merck collaboration going forward, we
may decide to pursue additional strategic partners to progress, in whole or in part, some of our wholly-owned
product candidates and/or commercialize any resulting approved product.
We do not own, and have no plans to establish, any manufacturing facilities. All of our manufacturing
activities are outsourced to third-party contract development and manufacturing organizations or third-party contract
manufacturing organizations, which we refer to collectively as CMOs, which are generally single-source suppliers of
the drug product or drug substance they are manufacturing for us. We also utilize third-party contract research
organizations, or CROs, to carry out many of our clinical development activities. We expect to be reliant on CMOs
and CROs for these activities for the foreseeable future. Significant portions of our research and development, or
R&D, resources are focused, and will continue to be focused, on the manufacture and testing of clinical trial
materials. If our CROs and CMOs fail to satisfy their contractual duties to us or meet expected deadlines or if our
CMOs experience difficulties in scaling production, higher than anticipated costs or lower than anticipated yields,
product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or
operator error, turnover of qualified staff or improper storage conditions, difficulties with quality control, product
stability or quality assurance testing, or difficulties procuring raw materials or components as a result of the ongoing
COVID-19 pandemic or otherwise, our ongoing and planned trials and possible acceleration or expansion of those
trials may be delayed, perhaps substantially, or abandoned, which could materially and adversely affect our
business. For example, while we expect to commence first-in-human testing of NGM831 in the first quarter of 2022
and of NGM438 in the second quarter of 2022, our planned individual new drug application, or IND, submissions for
NGM438 and NGM831 were delayed due to challenges at one of our CMOs with respect to the manufacture of
those product candidates, primarily related to analytical method qualification and release testing. It is possible that
we could experience further supply-related delays that would create supply challenges and possible timing delays
for ongoing and planned clinical trials or delay the commencement of first-in-human testing of future product
candidates. In addition, there is increased competition in the biotechnology industry for CMO manufacturing slots
and other capabilities generally, which has had, and may continue to have, a negative impact on the availability of
manufacturing capacity and therefore our ability to supply clinical trial materials for planned, ongoing, accelerated or
expanded clinical trials. Our CMOs’ facilities and operations have also been adversely affected by labor, raw
material and component shortages, high turnover of staff and difficulties in hiring trained and qualified replacement
staff. Changes in economic conditions, supply chain constraints, labor, raw material and component shortages and
steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other
stimulus and spending programs, could lead to higher inflation than previously experienced or expected, which
could, in turn, lead to an increase in costs. These supply chain effects, increased competition and higher costs of
acquired goods and services may negatively impact our business operations and our financial results.
In addition, all of our product candidates other than aldafermin and MK-3655 are currently manufactured at
a facility in Lithuania. At the end of 2021 and into 2022, tensions between Russia and the United States and its
allies escalated when Russia amassed large numbers of military ground forces and support personnel on the
Ukraine-Russia border and, in February 2022, Russia invaded Ukraine. While the situation is evolving and fluid at
the time of filing of this Annual Report on Form 10-K, the response from the United States and its allies has included
both economic sanctions and NATO's deployment of additional military forces to Eastern Europe, including to
Lithuania. The invasion of Ukraine and the retaliatory measures taken or that may be taken by the United States,
NATO and others create global security concerns, including the possibility of expanded regional or global conflict,
and are likely to have short-term and likely longer-term negative impacts on regional and global economies, any or
85
all of which could disrupt our supply chain and adversely affect our ability to conduct ongoing and future clinical
trials of our product candidates and our ability to raise capital on favorable terms.
We seek to allocate our capital efficiently and strategically and fund our portfolio based on each program’s
scientific and other merits. Our discipline has been demonstrated by our decision not to proceed with development
activities on multiple potentially viable product candidates for portfolio management reasons to concentrate our
resources on what we consider our most promising product candidates. However, given the substantial decrease in
research funding we will receive from Merck beginning in 2022 commensurate with the decreased collaboration
scope described below, going forward we will need to devote a substantial amount of our own financial resources to
our R&D programs, and we may need to delay or suspend development activities on product candidates that we
consider promising unless and until we are able to raise sufficient additional capital and/or we will need to enter into
additional collaborations in order to proceed with such development through to regulatory approval.
Our Merck Collaboration
In 2015, we entered into a research collaboration, product development and license agreement with Merck,
which, together with amendments made prior to June 30, 2021, is referred to as the Original Collaboration
Agreement, covering the discovery, development and commercialization of novel therapies across a range of
therapeutic areas, including a broad, multi-year drug discovery and early development program financially
supported by Merck, but scientifically directed by us with input from Merck. The original research phase of the
collaboration was for five years and was extended for an additional two years by Merck through March 2022. As part
of that extension, Merck agreed to continue to fund up to $75.0 million of our R&D efforts each year consistent with
the initial five-year research term and, in lieu of a $20.0 million extension fee payable to us, Merck agreed to make
additional payments totaling up to $20.0 million in support of our R&D activities during 2021 through the first quarter
of 2022.
On June 30, 2021, we entered into an amended and restated research collaboration, product development
and license agreement with Merck, or the Amended Collaboration Agreement, replacing the Original Collaboration
Agreement and extending the research phase of the collaboration, but with a narrower scope than in the Original
Collaboration Agreement. Under the Amended Collaboration Agreement, the collaboration is focused primarily on
the identification, R&D of collaboration compounds directed to targets of interest to Merck in the fields of
ophthalmology and cardiovascular or metabolic, or CVM, disease, including heart failure. The ophthalmology
compounds in the collaboration include NGM621 (and its related compounds) and compounds directed against two
other undisclosed ophthalmology targets (and their related compounds). The collaboration scope also includes
certain laboratory testing and other activities on compounds that are directed to one of up to two undisclosed targets
outside of the fields of ophthalmology and CVM disease, or the Lab Programs. The research phase will now
continue generally through March 31, 2024, with possible extensions for each of the various programs to allow us or
Merck to complete ongoing development.
Under the Amended Collaboration Agreement, Merck committed to provide up to $86.0 million in R&D
funding for the four calendar quarters ending March 31, 2022. Merck is providing significantly more limited annual
R&D funding beginning in 2022. For the period starting on April 1, 2022 and ending on March 31, 2024, Merck will
provide up to $20.0 million of R&D funding for the ophthalmology programs (other than NGM621), the CVM-related
programs and the Lab Programs. If the parties mutually agree to extend the research phase for the CVM-related
programs from March 31, 2024 to March 31, 2026, then Merck will provide up to a total of $20.0 million in R&D
funding during the additional two years of the CVM program research phase. Merck will also fund certain R&D costs
related to NGM621 in an amount expected to be up to approximately $20.0 million, until the earlier of Merck's
decision to exercise, or not to exercise, its License Option with respect to NGM621 alone or bundled with the other
continuing ophthalmology compounds (as described below and in "Business - Our Collaboration with Merck -
Description of Amended Collaboration Agreement" in Part I, Item 1 of this Annual Report on Form 10-K) or, March
31, 2024.
In addition, we have certain obligations to conduct R&D related to collaboration compounds that will not be
reimbursed by Merck. We are required to use commercially reasonable efforts to research and develop a specific
product candidate directed to an ophthalmology target to be ready by March 31, 2023 for starting investigational
new drug application-, or IND-, enabling studies and we are responsible for the cost of such work after March 2022.
We will have additional R&D funding obligations under the collaboration of up to $5.0 million or $15.0 million in the
event that Merck, as described in greater detail below, exercises its License Option to NGM621 alone or bundled
with the other continuing ophthalmology compounds, respectively, and pays us the applicable option exercise fee.
We also may spend more than the amounts we will be reimbursed by Merck for activities related to collaboration
compounds, including certain NGM621 costs necessary to avoid delays in Phase 3 readiness.
86
Under the Original Collaboration Agreement, upon the completion of each proof-of-concept clinical trial
under the program, Merck had a one-time option to obtain a worldwide, exclusive license to the product candidate
tested in the trial and compounds related to it, referred to as a License Option. Under the Amended Collaboration
Agreement, Merck retains a License Option to each collaboration compound and its related compounds upon
completion of a human proof-of-concept trial for a particular collaboration compound, regardless of the results of
such trial, or at earlier points as specified in the Amended Collaboration Agreement, including the option to license
NGM621 and its related compounds upon completion of a human proof-of-concept trial (either alone or bundled with
all of the other ophthalmology collaboration compounds and their respective related compounds included within the
scope of the Amended Collaboration Agreement). For each program for which Merck exercises its License Option
and pays
further development and
commercialization activities for the licensed compounds and we have the option, when a licensed compound has
advanced to Phase 3 clinical trials, to receive milestones and royalty payments or, in certain cases, to co-fund
development and participate in a global cost and profit share arrangement of up to 50%, with an additional option to
co-detail any such licensed compounds in the United States. If Merck does not exercise a License Option within the
specified time period, then we would be free to develop and commercialize the product candidate tested in the
proof-of-concept trial and its related compounds independently or with third-party partners, subject to an obligation
to make low single-digit royalty payments to Merck. Merck exercised its License Option for MK-3655 and its related
FGFR1c/KLB agonists in November 2018 under the Original Collaboration Agreement.
the applicable option exercise
is responsible
fee, Merck
for any
As a result of entering into the Amended Collaboration Agreement, we have the right to independently
research, develop and commercialize all of the clinical, preclinical and research assets that we researched or
developed under the Original Collaboration Agreement that are now outside the narrower scope of the collaboration,
including NGM707, NGM831, NGM438 and NGM120, subject to an obligation to make low single-digit royalty
payments to Merck. The parties’ rights and obligations remain the same with respect to MK-3655 and its related
FGFR1c/KLB agonists. We also have full rights to all future programs we pursue that fall outside of the scope of the
specific therapeutic areas and programs included in Amended Collaboration Agreement.
Similar to the Original Collaboration Agreement, during the applicable research phase (including any
applicable tail period for each program as described in "Business - Our Collaboration with Merck - Description of
Amended Collaboration Agreement" in Part I, Item 1 of this Annual Report on Form 10-K) for the ophthalmology
programs, CVM-related programs and Lab Programs, we may not directly or indirectly research, develop,
manufacture or commercialize, outside of the collaboration, any product with specified activity against any target
that is being researched or developed under the applicable programs and, if Merck exercises its License Option for
a program, we may not directly or indirectly research, develop, manufacture or commercialize any product with
specified activity against the target that is the subject of that program for so long as Merck’s license to it remains in
effect. In addition, under the Amended Collaboration Agreement, we are prohibited from directly or indirectly
researching, developing or commercializing any product for the treatment of heart failure with preserved ejection
fraction, or HFpEF, during the research phase for the CVM-related programs.
Because, under the Amended Collaboration Agreement, the level of R&D funding from Merck will be
substantially lower on an annual and overall basis beginning in 2022 than the R&D funding previously provided by
Merck, we will need to devote a substantial amount of our own financial resources to our R&D programs, particularly
with respect to our wholly-owned programs, and, to a lesser extent, with respect to programs that are within the
scope of the collaboration under the Amended Collaboration Agreement that we are required to fund. In addition,
our funding requirements would increase for any programs that are within the scope of the current collaboration in
the event Merck does not elect to license these programs and we decide to continue them, in the event Merck
elects to terminate its license to any program it licenses and we decide to continue it or in the event we opt to co-
develop any Merck-licensed programs. Accordingly, we will need to raise significant additional capital and/or we will
need to enter into additional collaborations in order to proceed with development through regulatory approval and
commercialization of our current and potential future product candidates. Neither may be possible and, as a result, if
adequate funds are not available when we need them, we may need to significantly delay, scale back or discontinue
development of some or all of such product candidates or scale back or discontinue discovery efforts, which could
have a material adverse effect on our business, operating results and prospects, or we may be required to cease
operations altogether.
For more information on the terms of the Amended Collaboration Agreement, see "Business - Our
Collaboration with Merck - Description of Amended Collaboration Agreement" in Part I, Item 1 of this Annual Report
on Form 10-K and Note 5, “Research Collaboration and License Agreements,” of the notes to audited consolidated
financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
87
Financial Highlights
Since inception, we have funded our operations primarily through:
•
•
•
•
•
fees received from collaboration partners, primarily Merck, which since inception through
December 31, 2021 includes reimbursement of R&D expenses of $497.7 million, and upfront cash
licensing fees of $123.0 million, primarily from Merck, and a payment of $20.0 million from Merck to
license MK-3655 and related compounds;
proceeds from private placements of convertible preferred stock prior to our initial public offering, or
IPO, including approximately $106.0 million of our Series E convertible preferred stock purchased
by Merck;
net proceeds from our IPO in 2019 of approximately $107.8 million, together with proceeds from the
concurrent private placement of shares of common stock to Merck of $65.9 million;
net proceeds of $22.1 million from sales of 817,100 shares of our common stock under an Open
Market Sale AgreementSM, or the Sales Agreement, we entered into with Jefferies LLC, or Jefferies,
in June 2020 (809,700 shares sold at an average price of $27.94 per share in December 2020 and
7,400 shares sold at an average price of $27.22 per share in September 2021); and
net proceeds of $134.6 million from the sale of 5,324,074 shares of our common stock in January
2021 upon completion of an underwritten public offering of our common stock, or the follow-on
offering, which included the full exercise by the underwriters of their option to purchase additional
shares.
At December 31, 2021, we had $366.3 million in cash, cash equivalents and short-term marketable
securities.
We have incurred net losses each year since our inception. As of December 31, 2021, we had an
accumulated deficit of $419.0 million. Substantially all of our net losses have resulted from costs incurred in
connection with our R&D programs and general and administrative, or G&A, costs associated with our operations.
Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our
clinical trials and our expenses on other R&D activities, and the amount of R&D funding we receive from Merck or
future collaboration partners, if any, particularly after March 2022. For further discussion of our financial position and
future sources of funding, see “Liquidity and Capital Resources” below.
COVID-19 Business Update
We are continuing to closely monitor the impact of the global COVID-19 pandemic on our business and
have taken and continue to take proactive efforts designed to protect the health and safety of our patients,
employees, clinical trial investigators and site staff, while maintaining business continuity. Following guidance from
federal, state and local authorities, we operated with a primarily remote work model from March 2020 through
October 2021, under which employees working on site were mostly individuals conducting essential in-person
laboratory work and other business functions considered essential under COVID-19 regulations and guidance, while
others worked remotely. In October 2021, we allowed additional employees to return to onsite work. With the
increased rate of transmission experienced with the Omicron SARS-CoV-2 variant in early 2022, we pivoted to
temporarily discouraging in-person meetings and presence on site unless necessary to perform one’s job
responsibilities. There were relatively minor impacts on overall productivity as we operated under a remote work
model and under our current hybrid work model. However, the labor market has tightened significantly since the
beginning of the COVID-19 pandemic, and we have experienced employee attrition at rates higher than we
experienced historically, together with an increased rate of hiring new employees. We cannot predict whether these
trends will continue or be exacerbated, the impact of COVID-19 on future productivity or whether or when we may
be required to return to a more restrictive work model as the pandemic continues to evolve.
For patients enrolled in our clinical trials, we work closely with clinical trial investigators and site staff with
the goal of continuing treatment in a manner designed to uphold trial integrity, while allowing some flexibility in the
manner and timing of patient visits, and to observe government and institutional guidelines designed to safeguard
the health and safety of patients, clinical trial investigators and site staff. During the COVID-19 pandemic, we have
experienced, from time to time, a slower pace of clinical trial site initiation and clinical trial enrollment than originally
anticipated in certain of our clinical trials, and we experienced a higher subject dropout rate in our aldafermin
ALPINE 2/3 trial than we had anticipated based on our previous trials in patients with NASH. We believe this may
be due to factors such as the vulnerability of our studied patient populations, clinical trial site suspensions,
reallocation of medical resources, site staff shortages and the challenges of working remotely due to shelter-in-
place and similar government orders and guidelines, among other factors.
88
We have been proactively working to mitigate these and other effects of the COVID-19 pandemic by
monitoring site initiations, patient enrollment and patient study adherence to provide support to patients and trial
staff, often on a case-by-case and/or patient-by-patient basis. For example, we have developed and implemented
additional clinical study policies and procedures designed to help protect trial participants from exposure to
COVID-19 as a result of their trial participation, which include the use of telemedicine visits with trial participants,
remote monitoring of clinical trial sites and other measures, as appropriate, designed to ensure that data from our
clinical trials that may be temporarily disrupted as a result of safety measures during the COVID-19 pandemic are
collected pursuant to the study protocol and consistent with current Good Clinical Practices, or cGCPs, with any
material protocol deviation reviewed and approved by the clinical trial sites' institutional review boards, or IRBs, or
ethics committees. Most of our clinical trial sites, both within and outside of the United States, continue to screen
patients in our clinical trials, and new patients are being enrolled when appropriate. While the COVID-19 pandemic
has not yet resulted in a significant impact to our disclosed clinical development timelines, as the COVID-19
pandemic continues, there may continue to be negative impacts on our ability to initiate new clinical trial sites, to
enroll new patients and to retain existing patients participating in our clinical trials. These negative impacts may
include increased clinical trial costs, longer timelines and delay in our ability to obtain regulatory approvals of our
product candidates, if at all.
We also could see an adverse impact on our ability to report clinical trial results, or interact with or receive a
timely response from regulators, IRBs and ethics committees or other important agencies due to limitations in health
authority employee resources or otherwise. Moreover, we rely on CROs and other third parties to assist us with
clinical development activities, and we cannot guarantee that they will continue to perform their contractual duties in
a timely and satisfactory manner as a result of the COVID-19 pandemic.
In addition, while we have not yet experienced significant disruption to drug or related component supply for
our ongoing clinical trials due to the COVID-19 pandemic, our contract manufacturers' facilities and operations have
been adversely affected by labor, raw material and component shortages, high turnover of staff and difficulties in
hiring trained and qualified replacement staff. These difficulties have resulted in some delays in early development
timelines and we could experience more significant disruptions to our supply chain and operations as a result of the
evolving effects of the continuing COVID-19 pandemic. If our contract manufacturers are required to obtain an
alternative source of certain raw materials and components, for example, additional testing, validation activities and
regulatory approvals may be required, which can also have a negative impact on timelines. Any associated delays
in the manufacturing and supply of drug substance and drug product for our clinical trials could adversely affect our
ability to conduct ongoing and future clinical trials of our product candidates on our anticipated development
timelines. For example, early in the pandemic, our aldafermin drug product manufacturer advised us that it could be
required under orders of the U.S. government to allocate manufacturing capacity to the manufacture or distribution
of COVID-19 vaccines. If any of our contract manufacturers or raw materials or components suppliers become
subject to acts or orders of U.S. or foreign government entities requiring them to allocate or prioritize manufacturing
capacity, raw materials and components to the manufacture or distribution of COVID-19 vaccines or medical
supplies needed to treat COVID-19 patients, this could delay our clinical trials, perhaps substantially, which could
materially and adversely affect our business.
While the potential economic impact caused by, and the duration of, the COVID-19 pandemic is difficult to
assess or predict, the COVID-19 pandemic could result in significant and prolonged disruption of global financial
markets, and our ability to raise additional capital through public or private equity or debt offerings may be adversely
impacted by disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, and
in the biotechnology industry specifically, which could negatively affect the financial resources available to us. In
addition, economic recession or additional market corrections resulting from, among other things, the spread of
COVID-19 could materially affect our business and the value of our common stock. Finally, we also cannot predict
how the evolving effects of the COVID-19 pandemic may influence the future decisions of Merck to license any
programs available to it under the Amended Collaboration Agreement. For additional information about risks and
uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and results of
operations, see the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Related Party Revenue
Financial Operations Overview
Our revenue to date has been generated primarily from recognition of license fees and R&D services
funded pursuant to our collaboration with Merck. Merck is also a significant stockholder and, as such, collaboration
revenue from Merck is referred to as related party revenue.
89
Since the Company's inception through December 31, 2021, Merck paid us $572.9 million pursuant to the
terms of our collaboration. Due to the nature of our collaboration with Merck and the timing of related revenue
recognition, our revenue has fluctuated from period to period in the past and we expect that it will continue to
fluctuate in future periods, particularly beginning in April 2022, given the substantial decrease in the level of funding
we will receive from Merck under with the Amended Collaboration Agreement commensurate with the decreased
collaboration scope. As a result, we believe that period-to-period comparisons of our revenue may not be
meaningful and should not be relied upon as being indicative of future performance.
We use the cost-based input method in accordance with Accounting Standards Codification 606, or ASC
606, to calculate the corresponding amount of revenue to recognize at each reporting period. In applying the cost-
based input measure of revenue recognition, we measure actual costs incurred relative to budgeted costs to fulfill
our performance obligation. We apply considerable judgment when we re-evaluate the estimate of expected costs
to satisfy the performance obligation each reporting period and make adjustments for any significant changes. A
significant change in the estimate of expected costs under the Amended Collaboration Agreement could have a
material impact on revenue recognized (including the possible reversal of previously recognized revenue) at each
reporting period.
In the past three years, our related party revenue was as follows (in thousands):
Related party revenue
Research and Development Expenses
Year Ended December 31,
2021
2020
$
77,882 $
87,368 $
2019
103,544
R&D efforts include drug discovery and other research activities and development activities relating to our
product candidates, such as manufacturing drug substance, drug product and other clinical trial materials,
conducting preclinical studies and clinical trials and providing support for these operations. Our R&D expenses
consist of both internal and external costs. Our internal costs include employee, consultant, facility and other R&D
operating expenses. Our external costs include fees paid to CROs and other service providers in connection with
our clinical trials and preclinical studies, third-party license fees and CMO costs related to manufacturing drug
substance, drug product and other clinical trial materials.
Our R&D efforts are extensive and costly. Our R&D expenses related to the development of our product
candidates consist primarily of:
•
•
•
•
•
•
•
fees paid to our CROs in connection with our clinical trials and other related clinical trial fees, when
applicable;
costs related to acquiring and manufacturing drug substance, drug product and clinical trial materials, and
the costs of continued testing, such as process validation testing and stability testing, of drug substance and
drug product;
costs related to toxicology testing and other research- and preclinical-related studies;
salaries and related overhead expenses, which include stock-based compensation and benefits, for
personnel in R&D functions;
fees paid to consultants for R&D activities;
R&D operating expenses, including facility costs and depreciation expenses; and
costs related to compliance with regulatory requirements.
As a result of the substantial decrease in the level of funding we will receive from Merck under with the
Amended Collaboration Agreement commensurate with the decreased collaboration scope as described above,
beginning in 2022, we will need to devote a substantial amount of our own financial resources to our development
programs, particularly with respect to our wholly-owned programs and, to a lesser extent, with respect to programs
that are within the scope of the Amended Collaboration Agreement that we are required to fund, as described
above. In addition, our funding requirements would increase for any programs that are within the scope of the
collaboration in the event Merck does not elect to license these programs and we decide to continue them, in the
event Merck elects to terminate its license to any program it licenses and we decide to continue it or in the event we
opt to co-develop any Merck-licensed programs. For the foreseeable future, we anticipate a significant portion of our
financial resources, other than those received from Merck which are dedicated to activities under the Amended
Collaboration Agreement, will be directed to activities required to advance initiate and advance clinical trials of our
90
oncology programs, to prepare for the manufacture of NGM621 in anticipation of a potential Phase 3 trial and to
complete the Phase 2b ALPINE 4 clinical trial of aldafermin.
The successful development of our product candidates is highly uncertain. At this time, we cannot
reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the
development of our product candidates. This is due to the numerous risks and uncertainties associated with
developing medicines, including the uncertainty of:
•
our ability to hire and retain key R&D personnel;
• manufacturing scale-up challenges, production shortages or other supply disruptions for clinical trial
•
•
•
•
•
•
•
•
materials, including raw materials and components;
the evolving effects of the COVID-19 pandemic on our employees, patients, clinical trial sites and our
CROs, CMOs and other service providers;
the timely and quality performance of our CROs, CMOs and other service providers;
whether Merck will elect to license, or to terminate its license, to any of our programs within the scope of the
collaboration and the timing of such election or termination;
the amount of our financial resources that we will need to devote to our development programs and our
obligations under the Amended Collaboration Agreement, and our ability to raise adequate additional capital
or enter into collaborations to meet our funding requirements;
the effect of products that may compete with our product candidates or other market developments;
our ability to expand and enforce our intellectual property portfolio;
the scope, rate of progress, results and expense of our ongoing, as well as any future, clinical trials and
other R&D-related activities; and
the impact and timing of any interactions with regulatory authorities, including timing and receipt of
regulatory approvals.
A change in the outcome of any of the risks and uncertainties associated with the development of a product
candidate could mean a significant change in the costs, as well as the timing, associated with the development of
that product candidate. For example, if the FDA or a comparable foreign health authority were to require us to
conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical
development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials,
we could be required to expend significant additional financial resources and time on the completion of clinical
development. For additional discussion of the risks and uncertainties associated with our R&D efforts, see “Risk
Factors—Risks Related to Our Business and Industry,” “—Risks Related to Our Dependence on Third Parties,” “—
Risks Related to Regulatory Approvals” and "—Risks Related to Our Intellectual Property” in Part I, Item 1A of this
Annual Report on Form 10-K.
General and Administrative Expenses
G&A expenses consist primarily of salaries and other related costs, including stock-based compensation
and benefits. Other significant costs include legal fees relating to patent and corporate matters, facility costs not
otherwise included in R&D expenses and fees for accounting and other consulting services.
We anticipate that our G&A expenses will increase in the future to support our continued and increasing
R&D activities. These increases will likely include increased costs related to the hiring of additional personnel, as
well as fees paid to outside consultants, lawyers and accountants, among other expenses. Additionally, we
anticipate continued increased costs associated with being a public company, including expenses related to
services associated with maintaining compliance with Nasdaq listing rules and related Securities and Exchange
Commission, or SEC, requirements and costs related to insurance, investor relations and compliance with Section
404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. In addition, we may incur expenses associated
with negotiating and entering into agreements with collaboration partners and with building a commercial
organization in connection with, and prior to, potential future regulatory approval of our product candidates.
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Our results of operations were as follows (in thousands):
Results of Operations
Related party revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other expense, net
Net loss
Related Party Revenue from Merck
Year Ended December 31,
Change
2021
2020
2019
2021 vs 2020
2020 vs 2019
$
77,882 $
87,368 $
103,544 $
(9,486) $
(16,176)
161,712
163,972
129,253
(2,260)
34,719
36,865
198,577
(120,695)
420
(60)
27,229
191,201
(103,833)
1,939
(593)
23,631
152,884
(49,340)
6,692
(147)
9,636
7,376
(16,862)
(1,519)
533
3,598
38,317
(54,493)
(4,753)
(446)
$
(120,335) $
(102,487) $
(42,795) $
(17,848) $
(59,692)
Revenue decreased $9.5 million in the year ended December 31, 2021 compared to the same period in
2020 primarily due to a reduction in revenue of $4.6 million for an amount we had recorded under the prior two-year
extension of the research phase that was no longer billable to Merck under the Amended Collaboration Agreement
as of June 30, 2021 and a $3.9 million decrease related to the recognition of the remaining portion of an upfront
payment in the first quarter of 2020.
Revenue decreased $16.2 million in the year ended December 31, 2020 compared to the same period in
2019 primarily due to a decrease of $14.9 million related to the recognition of a portion of the initial upfront payment
received from Merck that was included within the transaction price and recognized over the initial five-year term of
our Collaboration Agreement using the cost-based input model. The initial five-year term ended in the first quarter of
2020.
Under the Amended Collaboration Agreement, for the period starting on April 1, 2022 and ending on March
31, 2024, Merck will provide up to $20.0 million of R&D funding for the ophthalmology programs (other than
NGM621), the CVM-related programs and the Lab Programs. If the parties mutually agree to extend the research
phase for the CVM-related programs from March 31, 2024 to March 31, 2026, then Merck will provide up to a total
of $20.0 million in R&D funding during the additional two years of the CVM program research phase. Merck will also
fund certain R&D costs related to NGM621 in an amount expected to be up to approximately $20.0 million, until the
earlier of Merck's decision to exercise, or not to exercise, its License Option with respect to NGM621 alone or
bundled with the other continuing ophthalmology compounds, or, March 31, 2024. In this regard, we expect our
related party revenue from Merck will decrease substantially in 2022 compared to 2021 and continue to remain at a
significantly lower level during the remainder of the collaboration.
Due to the nature of our collaboration with Merck and the timing of related revenue recognition, our revenue
has fluctuated from period to period in the past and we expect that it will continue to fluctuate in future periods,
particularly after March 2022.
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Research and Development Expenses
Our R&D expenses by program were as follows (in thousands):
External R&D expenses:
Aldafermin (FGF19 analog)
NGM621 (C3 inhibitor)
NGM120 (GFRAL antagonist)
NGM707 (Anti-ILT2/ILT4 dual antagonist)
NGM438 (LAIR1 antagonist)
NGM831 (ILT3 antagonist)
Other external R&D expenses
Total external R&D expenses
Personnel-related expenses
Internal and unallocated R&D expenses (1)
Total R&D expenses
Year Ended December 31,
2021
2020
2019
$
31,766 $
20,415
6,856
5,521
4,074
2,377
1,437
72,446
56,209
33,057
50,553 $
13,126
5,606
4,817
3,586
4,756
4,822
87,266
43,811
32,895
$
161,712 $
163,972 $
32,001
4,420
3,414
2,295
1,302
2,128
11,257
56,817
38,171
34,265
129,253
_________________
(1) Internal and unallocated R&D expenses consist primarily of research supplies and consulting fees, which we deploy across multiple R&D
programs.
R&D expenses decreased $2.3 million in the year ended December 31, 2021 compared to the same period
in 2020 primarily due to a decrease in expenses for our manufacturing activities and our clinical trials of aldafermin,
partially offset by an increase in personnel-related expenses, including an increase in share-based compensation
expense of $5.8 million, and an increase in external expenses driven by our ongoing clinical trials of NGM621,
NGM120 and NGM707 and our preclinical studies of NGM438 and NGM831.
R&D expenses increased $34.7 million in the year ended December 31, 2020 compared to the same period
in 2019 primarily due to a $31.0 million increase in external expenses driven by our manufacturing activities and
ongoing clinical trials of aldafermin, NGM621, NGM120 and a product candidate for which development has since
been suspended. The increase in R&D expenses in 2020 also included an increase of $5.6 million in personnel-
related expenses and costs associated with preclinical IND-enabling studies for NGM707, NGM831 and NGM438.
These increases were partially offset by a decrease of $3.9 million in clinical trial materials and $1.4 million in
unallocated R&D expenses related to multiple R&D programs.
We expect our R&D expenses will increase in 2022 compared to 2021 primarily due to our increased
investment in our wholly-owned oncology programs. In 2022, we have substantial activities ongoing in all of our
programs, and are targeting achievement of multiple milestones, including:
•
•
•
•
•
•
NGM621: continuing treatment of patients in the fully enrolled Phase 2 CATALINA clinical trial, preparing to
report topline data from that trial in the fourth quarter of 2022 and preparing for a potential Phase 3 trial;
NGM707: continuing enrollment in the Phase 1 portion of the ongoing Phase 1/2 clinical trial and preparing
for a readout of initial data from the Phase 1a cohort in the second half of 2022;
NGM120: continuing enrollment in the Phase 2 portion of the Phase 1/2 PINNACLES clinical trial and
preparing to report additional data from the Phase 1a and Phase 1b cohorts of the PINNACLES trial in the
second half of 2022;
NGM831: conducting a Phase 1 clinical trial expected to be initiated in the first quarter of 2022;
NGM438: conducting a Phase 1 clinical trial expected to be initiated in the second quarter of 2022; and
Aldafermin: continuing treatment of patients in the fully enrolled Phase 2b ALPINE 4 clinical trial and
preparing to report topline data from that trial in the first half of 2023.
General and Administrative Expenses
G&A expenses increased $9.6 million in the year ended December 31, 2021 compared to the same period
in 2020 primarily due to an increase in personnel-related expenses due to increased headcount, an increase in
share-based compensation expense of $4.7 million and a $2.5 million increase in fees paid to outside consultants,
93
lawyers and accountants. G&A expenses increased $3.6 million in the year ended December 31, 2020 compared to
the same period in 2019 primarily due to an increase in personnel-related expenses due to increased headcount.
We anticipate that our G&A expenses in 2022 will increase compared to 2021 due to an increase in
compensation-related expenses driven by higher headcount and other expenses related to the expansion and
support of our business, in particular as needed to support our continued and increasing R&D activities, and to a
lesser extent due to expenses associated with being a public company and with negotiating and entering into
agreements with collaboration partners.
Interest Income, net
Interest income, net decreased $1.5 million in the year ended December 31, 2021 compared to the same
period in 2020 primarily due to an increase in unrealized losses in marketable securities offset by an increase in
interest income due to an increase in our average cash balance. Interest income, net decreased $4.8 million in the
year ended December 31, 2020 compared to the same period in 2019 primarily due to the decrease in market
interest rates and a reduction in our cash balance.
Liquidity and Capital Resources
Funding Requirements
We have no products approved for commercial sale, have not generated any revenue from product sales to
date and we are not and may never be profitable. We have incurred losses in each year since commencing
operations, and we expect to incur significant and increasing operating losses in 2022 and over the next several
years. As of December 31, 2021, we had an accumulated deficit of $419.0 million, and we expect our accumulated
deficit will increase significantly over time.
We have an active discovery research group and multiple pipeline programs in development. We have
spent, and expect to continue to spend, significant resources to fund R&D of, and seek regulatory approvals for, our
product candidates for the foreseeable future as our research, development, manufacturing, preclinical studies,
clinical trial and related activities increase.
Prior to 2022, we received substantial R&D funding from our collaboration with Merck. However, under the
narrower scope of the Amended Collaboration Agreement, beginning in 2022, R&D funding from Merck will be
substantially lower on an annual and overall basis, than the R&D funding previously provided by Merck and,
beginning in April 2022, we cannot use R&D funding from Merck to support the development of any of our wholly-
owned oncology programs, including NGM707, NGM831, NGM438 and NGM120. As a result, we need to fund not
only our currently wholly-owned programs going forward, but also certain activities that remain within the scope of
the ongoing collaboration with Merck that we are required to fund ourselves (and our failure to allocate funding to
meet such requirements may be deemed a breach of the Amended Collaboration Agreement). In addition, we will
need to fund any programs that are within the scope of the current collaboration with Merck in the event Merck does
not elect to license these programs and we decide to continue to develop them, in the event Merck elects to
terminate its license to any program it licenses and we decide to continue to develop it or in the event we opt to co-
develop any program Merck elects to license, which could include NGM621.
Our cash requirements for fiscal year 2022 are expected to consist primarily of our R&D and G&A
expenses. In 2021 and 2020, our R&D expenses were $161.7 million and $164.0 million, respectively. In 2022 and
over the next several years, we expect our R&D expenses to increase substantially unless we partner one or more
of our wholly-owned programs, particularly as we advance our oncology product candidates into and through clinical
development and support our later-stage clinical development of NGM621. In 2021 and 2020, our G&A expenses
were $36.9 million and $27.2 million, respectively. Beginning in 2022 and over the next several years, we expect our
G&A expenses to increase moderately as we continue to hire additional personnel to support our growing R&D
activities and as we continue to incur the increased costs associated with being a public company.
We believe that our existing cash, cash equivalents and short-term marketable securities will be sufficient to
fund our operations for at least twelve months from the date this Annual Report on Form 10-K is filed. We have
based this estimate on assumptions that may prove to be wrong and we could utilize our available capital resources
sooner than we currently expect. In addition, our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and
actual results could vary materially as a result of a number of factors, including the factors discussed under “Risk
Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Nonetheless, in order to advance our current and
potential future product candidates through development and to regulatory approval and commercialization, we will
need to raise significant additional capital or we will need to partner one or more of our wholly-owned programs and
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obtain funding or other resources through such arrangements. Neither may be possible and, as a result, we may be
required to delay, scale back or discontinue development of such product candidates, which could have a material
adverse effect on our business, operating results and prospects.
Sources of Liquidity
Cash and Investments
As of December 31, 2021, we had cash and cash equivalents of $151.8 million and short-term marketable
securities of $214.5 million. In January 2021, we sold 5,324,074 shares of our common stock upon completion of
the follow-on offering for aggregate net proceeds of $134.6 million.
Merck Collaboration
The revenue we receive under the Amended Collaboration Agreement with Merck is currently our only
source of revenue. For the period starting on April 1, 2022 and ending on March 31, 2024, Merck is committed to
fund up to $20.0 million of R&D funding for the ophthalmology programs (other than NGM621), the CVM-related
programs and the Lab Programs. Merck is also obligated to fund certain R&D costs related to NGM621 in an
amount expected to be up to approximately $20.0 million, until the earlier of Merck's decision to exercise, or not to
exercise, its license option with respect to NGM621 alone or bundled with the other continuing ophthalmology
compounds or, March 31, 2024. See “Overview – Our Merck Collaboration” above.
Other Sources of Capital
In June 2020, we entered into the Sales Agreement with Jefferies. In accordance with the terms of the Sales
Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $150.0
million from time to time through Jefferies, acting as our sales agent. As of December 31, 2021, $127.2 million of
our common stock remained available to be sold under the Sales Agreement, subject to conditions specified in the
Sales Agreement.
We plan to finance our future cash needs through public or private equity or debt offerings, including under
the Sales Agreement, product collaborations, strategic alliances, licensing arrangements or a combination of these
potential financing sources. Additional capital may not be available in sufficient amounts, on reasonable terms or
when we need it, if at all.
Our ability to raise additional capital through public or private equity or debt offerings may be adversely
impacted by worsening global economic conditions and the disruptions to, and volatility in, the credit and financial
markets in the United States and worldwide, and in the biotechnology industry specifically, resulting from, among
other things, the continuing effects of the COVID-19 pandemic and geopolitical instability. If we raise additional
funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may
involve restrictive covenants. Any debt financing or additional equity that we raise may contain terms that are not
favorable to us or our stockholders. Furthermore, any securities that we may issue may have rights senior to those
of our common stock and could contain covenants or protective rights that would lead to restrictions on our
operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt,
limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that
could adversely impact our ability to conduct our business.
We may seek other third-party collaborators for the development and commercialization of any product
candidates that are not within the scope of the collaboration with Merck. If we decide to enter into any such
arrangements with any third parties, and are successful in doing so, we will likely have limited control over the
amount and timing of resources that our collaborators dedicate to the development or commercialization of our
product candidates. Our ability to generate revenue from any such arrangement will depend on the specific terms
we reach with any collaborator, as well as each of our collaborators’ abilities to successfully perform the functions
assigned to them in such arrangement towards developing, seeking regulatory approval for and commercializing our
product candidates.
If we are unable to raise adequate additional capital through public or private equity or debt offerings,
collaborations or otherwise, on acceptable terms or at all, we may be delayed in or prevented from pursuing our
planned and any future development and commercialization efforts, which will have a material adverse effect on our
business, operating results and prospects.
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Cash Flow Activity
The following table summarizes our cash flow activity for the periods indicated:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2021
2020
2019
$
(73,229) $
(71,650)
149,657
(83,496) $
(50,998)
35,538
(41,174)
48,723
180,751
Net increase (decrease) in cash, cash equivalents and restricted
cash
$
4,778 $
(98,956) $
188,300
Operating Activities
Cash used in operating activities in 2021 was $73.2 million, which consisted of a net loss of $120.3 million,
adjusted for non-cash charges of $42.9 million and a change in operating assets and liabilities of $4.2 million. The
non-cash charges consisted primarily of stock-based compensation expense of $26.2 million, depreciation expense
of $6.1 million, a decrease in related party contract assets due to the Amended Collaboration Agreement with Merck
of $4.6 million, amortization of a premium on marketable securities of $3.5 million and noncash lease expense of
$1.8 million. The change in operating assets and liabilities was mainly driven by increases in contract liabilities of
$17.8 million, related party receivable of $4.6 million, prepaid expenses and other current assets of $4.1 million and
accrued liabilities of $2.9 million, partially offset by decreases in operating lease liabilities of $4.8 million, accounts
payable of $4.4 million and related party contract assets of $1.5 million.
Cash used in operating activities in 2020 was $83.5 million, which consisted of a net loss of $102.5 million,
adjusted for non-cash charges of $22.3 million and net cash used in operating assets and liabilities of $3.3 million.
The non-cash charges consisted primarily of stock-based compensation expense of $15.7 million and depreciation
expense of $6.6 million. The change in operating assets and liabilities was mainly driven by increases in accrued
expenses of $6.2 million, prepaid expenses and other current assets of $1.9 million, accounts payable of $0.9
million and a related party contract asset of $6.1 million. These increases were offset by a decrease in deferred rent
of $2.8 million.
Cash used in operating activities in 2019 was $41.2 million, which consisted of a net loss of $42.8 million,
adjusted for non-cash charges of $19.6 million and net cash used in operating assets and liabilities of $17.9 million.
The non-cash charges consisted primarily of stock-based compensation expense of $12.9 million and depreciation
expense of $7.6 million. The change in operating assets and liabilities was mainly driven by increases in the related
party receivable of $1.5 million, prepaid expenses and other current assets of $2.0 million, accounts payable of
$3.6 million and accrued expenses and other current liabilities of $8.9 million. These increases were offset by
decreases in deferred rent of $2.7 million and contract liabilities of $24.2 million, which was primarily due to the
adoption of Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606),
referred to as ASC 606, and the timing of advance payments from Merck related to the reimbursement of costs
associated with R&D activities.
Investing Activities
Cash used in investing activities in 2021 was $71.7 million, which consisted of purchases of marketable
securities of $293.5 million primarily from the net proceeds of the follow-on offering, partially offset by $223.5 million
in net proceeds on maturity of marketable securities. Cash used in investing activities in 2020 was $51.0 million,
which consisted of purchases of marketable securities of $177.7 million and purchases of property and equipment
of $1.9 million partially offset by net proceeds on maturity of marketable securities of $128.5 million. Cash provided
by investing activities in 2019 was $48.7 million, which consisted of net proceeds on maturity of marketable
securities of $186.5 million partially offset by purchases of marketable securities of $134.3 million and purchases of
property and equipment of $3.5 million.
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Financing Activities
Cash provided by financing activities in 2021 was $149.7 million, which consisted of net proceeds from the
follow-on offering of $134.6 million and proceeds from employee equity incentive and purchase plans of $14.9
million. Cash provided by financing activities in 2020 was $35.5 million and primarily related to net proceeds from
the Sales Agreement of $21.9 million and proceeds from employee equity incentive and purchase plans of $14.2
million. Cash provided by financing activities in 2019 was $180.8 million and primarily related to net proceeds from
our IPO of $110.0 million, proceeds from a concurrent private placement with Merck of $65.9 million and proceeds
from employee equity incentive and purchase plans of $4.8 million.
Contractual Obligations
We have contractual obligations related to our lease liabilities. See Note 6 to our consolidated financial
statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on
Form 10-K for information regarding our lease commitments.
We enter into agreements in the normal course of business with CROs, CMOs and other vendors for
preclinical studies and other services and products for operating purposes that are generally cancelable at any time
by us, upon prior written notice, and may or may not include cancellation fees. Given that the amount and timing
related to such payments are uncertain, they are not considered to be contractual obligations. Significant portions of
our R&D resources are focused, and will continue to be focused, on the manufacture and testing of clinical trial
materials. We expect our R&D expenses to increase substantially beginning in 2022 and over the next several
years unless we partner one or more of our wholly-owned programs, particularly as we advance our oncology
product candidates into and through clinical development and support our later-stage clinical development of
NGM621. See "Funding Requirements" above for additional information regarding our expected R&D spend.
We are obligated to make future payments to third parties under in-license agreements, including
sublicense fees, low single-digit royalties and payments that become due and payable on the achievement of
certain development and commercialization milestones. As the amount and timing of sublicense fees and the
achievement and timing of these milestones are not probable and estimable, such commitments have not been
included on our consolidated balance sheets and are not considered to be contractual obligations. See "Business -
Licensing Arrangements" in Part I, Item 1 of this Annual Report on Form 10-K for additional information regarding
our current in-license agreements.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on
our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted
accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of our consolidated financial statements, as well as revenue and expenses during
the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on
historical experience and on various other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ materially from these estimates under different
assumptions or conditions.
While our significant accounting policies are described in Note 2 to our consolidated financial statements
included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K, we
believe that the following critical accounting policies are the most important policies in understanding and evaluating
our financial condition and results of operations because they are complex and relate to the more significant areas
involving management’s judgment.
Revenue Recognition
ASC 606 requires an entity to recognize revenue upon the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. We apply the following five-step revenue recognition model outlined in ASC 606 to adhere to this core
principle: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and
(5) recognize revenue when (or as) the Company satisfies a performance obligation.
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All of our revenue to date has been generated from collaboration agreements, primarily the collaboration
agreement with Merck. The terms of these agreements generally require us to provide (i) license options for our
compounds, (ii) R&D services and (iii) non-mandatory services in connection with participation in research or
steering committees. Payments received under these arrangements may include non-refundable upfront license
fees, partial or complete reimbursement of R&D costs, contingent consideration payments based on the
achievement of defined collaboration objectives and royalties on sales of commercialized products.
We assess whether the promises in our arrangements, including any options provided to the partner, are
considered distinct performance obligations that should be accounted for separately. Judgment is required to
determine whether the license to a compound is distinct from R&D services or participation in research and steering
committees, as well as whether options create material rights in the contract. In situations when a contract includes
distinct services that are substantially the same and have the same pattern of transfer to the customer over time,
they are recognized as a series of distinct services.
The transaction price in each arrangement is generally comprised of a non-refundable upfront fee and
unconstrained variable consideration related to the performance of R&D services. The unconstrained variable
consideration amount included in the transaction price represents an amount for which it is probable that a
significant reversal of cumulative revenue recognized will not occur. We typically submit a budget for the R&D
services to our partner in advance of performing the services. The transaction price is allocated to the identified
performance obligations based on the standalone selling price, or SSP, of each distinct performance obligation.
Judgment is required to determine the SSP. In instances where the SSP is not directly observable, such as when a
license or service is not sold separately, the SSP is determined using information that may include market
conditions and other observable inputs. We utilize judgment to assess the nature of our performance obligations to
determine whether they are satisfied over time or at a point in time and, if over time, the appropriate method of
measuring progress toward completion. We re-evaluate estimated costs to satisfy a performance obligation each
reporting period and make adjustments for any significant changes. In applying the cost-based input method, we
measure actual costs incurred relative to budgeted costs to fulfill our performance obligation. These budgeted costs
consist of our employee full-time equivalent hours plus allowable external (third-party) costs incurred. Management
applies considerable judgment in estimating expected costs as such costs are key inputs when applying the cost-
based input method. We recognize revenue based on actual costs incurred as a percentage of total budgeted costs
as we complete a performance obligation applied to the transaction price. A significant change in the estimate of
expected costs for the remainder of a contract term could have a material impact on revenue recognized (including
the possible reversal of previously recognized revenue) at each reporting period, as well as a related impact on
contract assets and liabilities.
Our collaboration agreements may include contingent payments related to specified development and
regulatory milestones or contingent payments for royalties based on sales of a commercialized product. Milestones
can be achieved for such activities in connection with progress in clinical trials, regulatory filings in various
geographical markets and marketing approvals from health authorities. Sales-based royalties are generally related
to the volume of annual sales of a commercialized product. At the inception of each agreement that includes such
payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount
to be included in the transaction price by using the most likely amount method. If it is probable that a significant
revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone
payments that are not within our or our partner’s control, such as those related to regulatory approvals, are not
considered probable of being achieved until those approvals are received. The transaction price is then allocated to
each performance obligation based on a relative SSP basis. At the end of each subsequent reporting period, we re-
evaluate the probability of achievement of each such milestone and any related constraint and, if necessary, adjust
our estimate of the overall transaction price. Pursuant to the guidance in ASC 606, sales-based royalties are not
included in the transaction price. Instead, royalties are recognized at the later of when the performance obligation is
satisfied or partially satisfied, or when the sale that gives rise to the royalty occurs.
Contract modifications, defined as changes in the scope or price (or both) of a contract that are approved by
the parties to the contract, such as a contract amendment, exist when the parties to a contract approve a
modification that either creates new, or changes existing, enforceable rights and obligations of the parties to the
contract. Depending on facts and circumstances, we account for a contract modification as one of the following: (i) a
separate contract; (ii) a termination of the existing contract and a creation of a new contract; or (iii) a combination of
the preceding treatments. A contract modification is accounted for as a separate contract if the scope of the contract
increases because of the addition of promised services that are distinct and if the price of the contract increases by
an amount of consideration that reflects our standalone selling prices of the additional promised services. When a
contract modification is not considered a separate contract and the remaining services are distinct from the services
transferred on or before the date of the contract modification, we account for the contract modification as a
98
termination of the existing contract and a creation of a new contract. When a contract modification is not considered
a separate contract and the remaining services are not distinct, we account for the contract modification as an add-
on to the existing contract and as an adjustment to revenue on a cumulative catch-up basis.
Accrued Research and Development Expenses
As part of the process of preparing these consolidated financial statements, we are required to estimate and
accrue expenses, the largest of which are R&D expenses. This process involves:
•
•
•
•
•
•
•
identifying services that have been performed on our behalf by third-party vendors and estimating the level
of service performed and the associated cost incurred for the service when we have not yet been invoiced
or otherwise notified of actual cost;
estimating and accruing expenses in our consolidated financial statements as of each balance sheet date
based on facts and circumstances known to us at the time; and
periodically confirming the accuracy of our estimates with selected service providers and making
adjustments, if necessary.
Examples of estimated R&D expenses that we accrue include:
fees paid to CROs in connection with preclinical studies and clinical trials;
fees paid to investigative sites in connection with clinical trials;
fees paid to CMOs in connection with the production of clinical trial materials and to procure raw materials
and components for manufacture; and
professional service fees for consulting and other services.
We base our expense accruals related to clinical trials on our estimates of the services received and efforts
expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials
on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven
payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of
patients and the completion of clinical study milestones. Our service providers generally invoice us monthly in
arrears for services performed. In accruing service fees, we estimate the time period over which services will be
performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to
incur or if we underestimate or overestimate the level of services performed or the costs of these services, our
actual expenses could differ from our estimates.
All of our clinical trials have been executed with support from CROs and other vendors. We accrue costs for
clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. For
clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the
activities to be performed for each patient, the number of active clinical sites and the duration for which the patients
will be enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through
internal reviews, correspondence with CROs and review of contractual terms. We base our estimates on the best
information available at the time.
To date, we have not experienced significant changes in our estimates of accrued R&D expenses after a
reporting period. However, due to the nature of estimates, we cannot assure that we will not make changes to our
estimates in the future as we become aware of additional information about the status or conduct of our clinical trials
and other research activities.
Stock-Based Compensation
We account for stock-based compensation arrangements in accordance with Topic 718, Compensation—
Stock Compensation. On January 1, 2019, we adopted ASU 2018-07, Compensation – Stock Compensation (Topic
718): Improvements to Nonemployee Share-Based Payment Accounting, which expanded the scope of Topic 718 to
include share-based payment transactions with nonemployees.
Stock-based compensation expense represents the grant-date fair value of stock options granted under our
2008 Equity Incentive Plan, or 2008 Plan, and our 2018 Amended and Restated Equity Incentive Plan, or 2018
Plan, and rights to acquire stock granted under our 2019 Employee Stock Purchase Plan, or ESPP, recognized over
the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of estimated
forfeitures.
99
We use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock-based
compensation awards. The Black-Scholes option-pricing model requires the use of subjective assumptions,
including stock price volatility, the expected term that stock options will remain outstanding, risk-free interest rates
and expected dividends.
The expected volatility is based on the historical volatility of the stock of similar entities within our industry
over periods commensurate with our expected term assumption. The expected term of stock option grants
represents the weighted-average period the options are expected to remain outstanding and is based on the
“simplified” method where the expected term is the midpoint between the vesting date and the end of the
contractual term for each option. We base the risk-free interest rate on the interest rate payable on U.S. Treasury
securities in effect at the time of grant for a period that is commensurate with the assumed expected option term. In
reference to the expected dividend yield assumption, we have not historically paid, and do not expect for the
foreseeable future to pay, a dividend.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and
Supplementary Data,” of this Annual Report on Form 10-K for a description of recent accounting pronouncements
applicable to our business.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business, primarily related to interest rate and
foreign currency sensitivities.
Interest Rate Sensitivity
We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and
short-term marketable securities of $366.3 million as of December 31, 2021, which consisted primarily of money
market funds and marketable securities, largely composed of investment grade, short-to-intermediate term fixed
income securities.
The primary objective of our investment activities is to preserve capital to fund our operations. We also seek
to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain
a portfolio of investments in a variety of securities of high credit quality and short-term duration, according to our
board-approved investment charter. Our investments are subject to interest rate risk and could fall in value if market
interest rates increase. A hypothetical 10% relative change in interest rates during any of the periods presented
would not have had a material impact on our consolidated financial statements.
Foreign Currency Sensitivity
The majority of our transactions occur in U.S. dollars. However, we do have certain transactions that are
denominated in currencies other than the U.S. dollar, primarily British Pounds, Swiss Francs, Australian dollars and
the Euro, and we therefore are subject to foreign exchange risk. The fluctuation in the value of the U.S. dollar
against other currencies affects the reported amounts of expenses, assets and liabilities associated with a limited
number of manufacturing, preclinical and clinical activities. A hypothetical 10% change in foreign currency exchange
rates during any of the periods presented would not have had a material impact on our consolidated financial
statements.
100
Item 8. Financial Statements and Supplementary Data.
NGM BIOPHARMACEUTICALS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) . . . . . . . . . . . . . . . . . . . . .
Audited Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
102
105
106
107
108
109
110
101
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of NGM Biopharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NGM Biopharmaceuticals, Inc. (the Company)
as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss,
convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period
ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
102
Description of
the Matter
Related party revenue
Related party revenue was $77.9 million for the year ended December 31, 2021 and related to the
ongoing collaboration with Merck Sharp & Dohme Corp., or Merck, which is focused primarily on
the identification, research and development of collaboration compounds directed to targets of
interest to Merck in the fields of ophthalmology and cardiovascular or metabolic, or CVM,
diseases. As discussed in Notes 2 and 5 to the consolidated financial statements, the total
transaction price in this arrangement represents the sum of potential funding amounts to be
received from Merck through March 2024, for performing a series of distinct research and
development services in the area of both the continuing collaboration compounds and the
released NGM compounds and has one performance obligation. The Company submits a budget
for the research and development services to Merck in advance of performing the services and
uses the cost-based input method to calculate the amount of revenue to be recognized.
Revenue was recognized based on actual costs incurred as a percentage of total budgeted costs
as the Company completed its performance obligation applied to the transaction price. The
Company re-evaluated the estimate of expected costs to satisfy the performance obligation each
reporting period and made adjustments for any changes. In addition, the Company also
considered any necessary adjustments to the transaction price to ensure that it was within the
range of potential funding amounts.
Auditing the Company’s assessment of its obligation under this arrangement, including its
determination of transaction price (including variable consideration) and the remaining research
and development costs necessary to satisfy the Company’s performance obligation over time,
requires a high degree of audit judgment. The application of the cost-based input model is
inherently sensitive to significant changes in the estimate of expected internal personnel and
external costs to be incurred for the remainder of the contract term and therefore could have had
a material impact on revenue recognized (including the possible reversal of previously recognized
revenue) at each reporting period.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company's accounting assessment for this arrangement, including control
attributes over management's identification of applicable activities to be performed under its
obligation, as well as management’s review of the accuracy and completeness of the underlying
data and the significant assumptions used to estimate the total budgeted costs expected to be
incurred to satisfy the respective activities under its performance obligation throughout the
duration of the arrangement where the associated unconstrained transaction price is earned.
the arrangement and expected
Our audit procedures included, among others, obtaining and reviewing the license and
collaboration agreement and obtaining an understanding and evaluation of the performance
obligations within
including variable
consideration. We tested the Company’s estimates of total expected costs by project, including
both estimates for external costs to be incurred and internal personnel costs related to employees
assigned to each project. We further tested the completeness and accuracy of the underlying data
used by the Company in its assembly of its cost-based input model used to recognize revenue.
Additionally, we compared the estimates of expected costs to actual costs incurred to evaluate the
historical accuracy of management’s estimates and performed corroborative inquiries with those
outside of the finance department and inspected evidence of actual costs incurred.
transaction price,
103
Description of
the Matter
Accrued clinical trials expenses
During the year ended December 31, 2021, the Company incurred $161.7 million in research and
development related expenses, of which $12.1 million was recorded as accrued clinical trials
expenses as of December 31, 2021. As described in Note 2 of the consolidated financial
statements, the Company records accruals for its estimated costs of research and development
activities, including contract services for clinical trials. Clinical trial activities performed by outside
third-party service providers, including those performed by clinical research organizations (CRO),
are recorded based upon estimates of the proportion of work completed over the life of the
individual clinical trial and patient enrollment rates in accordance with agreements established
with third-party service providers. Estimates are determined by reviewing contracts, vendor
agreements and purchase orders, and through detailed discussions with internal clinical
personnel and external service providers as to the progress or stage of completion of trials or
services and then applying these estimates of completion to previously agreed-upon rates and
fees to be paid for such services.
Auditing management’s accounting estimates of accrued clinical trials expenses was especially
challenging as evaluating the nature, progress, and stage of completion of the activities being
performed under the Company’s research and development agreements is dependent upon the
accumulation of a high volume of information from internal clinical personnel and third-party
service providers.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the accounting for accrued clinical trials expenses, including controls over
management’s review of clinical trial progress and activities in comparison to budgets and
invoices received from third-party service providers.
Our audit procedures included, among others, testing the accuracy and completeness of the
underlying data used by management to determine the amount of the accrued clinical trials
expenses. Additionally, we inspected the terms and conditions of selected service providers’
contracts and change orders, assessed patient enrollment as well as the activities to be
performed for each patient, and tested the clinical cost models which calculate the costs incurred
for the period under audit. We also agreed selected inputs used in a sample of clinical cost
models back to contractual terms, performed inquiries with the Company’s internal clinical
personnel that oversee the clinical trials, as well as inspected information obtained by the
Company directly from service providers. For a sample of contracts, we obtained external
confirmation from service providers of key inputs to the clinical cost models, such as an amount of
unbilled costs as of the balance sheet date, the number of patient visits, the number of sites
activated and the progress of contracted clinical activities. Further, we inspected a sample of
subsequent payments made and invoices received from service providers after the balance sheet
date and compared such information back to the accruals recorded by the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Redwood City, California
March 1, 2022
104
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term marketable securities
Related party receivable from collaboration
Related party contract asset
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use asset
Restricted cash
Other non-current assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Operating lease liability, current
Deferred rent, current
Contract liabilities
Total current liabilities
Operating lease liability, non-current
Deferred rent, non-current
Total liabilities
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares
issued or outstanding as of December 31, 2021 and 2020, respectively
Common stock, $0.001 par value; 400,000,000 shares authorized; 77,962,722
and 70,585,364 shares issued and outstanding as of December 31, 2021 and
2020, respectively
December 31,
2021
December 31,
2020
$
151,795 $
147,017
214,458
4,945
—
8,082
379,280
10,071
4,045
1,499
7,492
148,139
333
6,100
6,837
308,426
14,526
—
1,499
4,592
$
402,387 $
329,043
$
5,246 $
33,258
5,077
—
17,774
61,355
5,385
—
66,740
—
78
9,663
29,945
—
2,975
—
42,583
—
6,417
49,000
—
71
Additional paid-in capital
Accumulated other comprehensive (loss) income
Accumulated deficit
Total stockholders' equity
754,664
578,599
(129)
4
(418,966)
(298,631)
335,647
280,043
Total liabilities and stockholders' equity
$
402,387 $
329,043
See accompanying notes to consolidated financial statements.
105
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Related party revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Other expense, net
Net loss
Net loss per share, basic and diluted
Weighted average shares used to compute net loss per share,
basic and diluted
Year Ended December 31,
2021
2020
2019
$
77,882 $
87,368 $
103,544
161,712
36,865
198,577
(120,695)
420
(60)
163,972
27,229
191,201
(103,833)
1,939
(593)
(120,335) $
(102,487) $
129,253
23,631
152,884
(49,340)
6,692
(147)
(42,795)
(1.56) $
(1.50) $
(0.85)
$
$
77,085,405
68,475,378
50,297,524
See accompanying notes to consolidated financial statements.
106
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss
Other comprehensive (loss) income, net of tax:
Year Ended December 31,
2021
2020
2019
$
(120,335) $
(102,487) $
(42,795)
Net unrealized (loss) income on available-for-sale marketable
securities
Total comprehensive loss
(133)
(21)
$
(120,468) $
(102,508) $
292
(42,503)
See accompanying notes to consolidated financial statements.
107
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
Balance at December 31, 2018
47,267
$
294,874
6,733
$
7
$
39,258
$
(267) $
(147,193) $
(108,195)
Convertible
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-In
Capital
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity (Deficit)
Cumulative effect adjustment upon adoption of
ASU 2014-09
Net exercise of preferred stock warrant to Series
A preferred stock
Conversion of Series A, B, C, D, E convertible
preferred stock to common stock concurrent with
initial public offering
Issuance of common stock upon initial public
offering, net of issuance costs
Issuance of common stock upon private
placement
Issuance of common stock to participants in
401(k) Plan
Issuance of common stock upon exercise of
stock options
Issuance of common stock under employee
stock purchase plan
Vesting of common stock from early exercises
Stock-based compensation expense
Comprehensive income
Net loss
Balance at December 31, 2019
Issuance of common stock upon exercise of
stock options
Issuance of common stock under Open Market
Agreement, net of issuance costs
Issuance of common stock under employee
stock purchase plan
Vesting of common stock from early exercises
Issuance of common stock to participants in
401(k) Plan
Stock-based compensation expense
Comprehensive loss
Net loss
Balance at December 31, 2020
Issuance of common stock under offering, net of
issuance costs
Issuance of common stock upon exercise of
stock options
Issuance of common stock under employee
stock purchase plan
Issuance of common stock under Open Market
Agreement, net of issuance costs
Issuance of common stock to participants in
401(k) plan
Vesting of common stock from early exercises
Stock-based compensation expense
Comprehensive loss
Net loss
Balance at December 31, 2021
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
—
198
—
—
—
—
—
—
(47,283)
(295,072)
47,283
47
295,025
7,521
4,122
8
984
103
132
—
—
—
8
4
—
1
—
—
—
—
—
107,748
65,943
98
3,574
1,270
993
12,862
—
—
—
—
—
—
—
—
—
—
—
—
292
—
(6,156)
(6,156)
—
—
—
—
—
—
—
—
—
—
—
295,072
107,756
65,947
98
3,575
1,270
993
12,862
292
(42,795)
(42,795)
66,886
$
67
$
526,771
$
25
$
(196,144) $
330,719
2,616
810
197
68
6
—
—
—
3
1
—
—
—
—
—
—
11,835
21,329
2,370
524
119
15,651
—
—
—
—
—
—
—
—
(21)
—
—
—
—
—
—
—
—
11,838
21,330
2,370
524
119
15,651
(21)
(102,487)
(102,487)
70,583
$
71
$
578,599
$
4
$
(298,631) $
280,043
5,324
1,845
193
7
4
6
—
—
—
5
2
—
—
—
—
—
—
—
134,575
12,360
2,519
196
125
48
26,242
—
—
—
—
—
—
—
—
—
(133)
—
—
—
—
—
—
—
—
—
134,580
12,362
2,519
196
125
48
26,242
(133)
(120,335)
(120,335)
77,962
$
78
$
754,664
$
(129) $
(418,966) $
335,647
See accompanying notes to consolidated financial statements.
108
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Year Ended December 31,
2021
2020
2019
$
(120,335) $
(102,487) $
(42,795)
Stock-based compensation expense
26,242
15,651
12,862
Reduction in related party contract asset due to Amended Collaboration
Agreement with Merck
Depreciation
Amortization of premium (discount) on marketable securities
Noncash lease expense
Other non-cash expenses
Changes in operating assets and liabilities:
Related party receivable from collaboration
Related party contract asset
Prepaid expenses and other assets
Accounts payable
Accrued and other liabilities
Operating lease liability
Deferred rent
Contract liabilities
Net cash used in operating activities
Cash flows from investing activities
Purchase of marketable securities
Proceeds from maturities of marketable securities
Purchase of property and equipment
Net cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from follow on offering, net
Proceeds from initial public offering, net of issuance costs
Proceeds from private placement of common stock
Proceeds from Open Market Agreement
Proceeds from exercise of stock options
Proceeds from employee stock purchase plan
Deferred offering costs paid
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Non-cash investing and financing activities:
Right of use asset acquired under operating lease on the adoption of ASC 842
Net exercise of convertible preferred stock warrant to Series A preferred stock
$
$
Vesting of common stock from early exercises
Property and equipment purchases accrued and not yet paid
Deferred offering costs accrued and not yet paid
4,600
6,089
3,514
1,810
643
(4,612)
1,500
(4,145)
(4,417)
2,893
(4,785)
—
17,774
(73,229)
(293,466)
223,500
(1,684)
(71,650)
134,580
—
—
196
12,362
2,519
—
149,657
4,778
148,516
—
6,555
(128)
—
613
4,873
(6,100)
(1,864)
910
6,182
—
(2,829)
(4,872)
(83,496)
(177,655)
128,536
(1,879)
(50,998)
—
—
—
21,943
11,838
2,370
(613)
35,538
(98,956)
247,472
—
7,605
(1,123)
—
217
(1,537)
—
(1,988)
3,642
8,877
—
(2,683)
(24,251)
(41,174)
(134,306)
186,518
(3,489)
48,723
—
109,959
65,947
—
3,575
1,270
—
180,751
188,300
59,172
153,294 $
148,516 $
247,472
5,855 $
— $
—
48
—
—
—
524
20
228
—
198
993
305
—
See accompanying notes to consolidated financial statements.
109
NGM BIOPHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
NGM Biopharmaceuticals, Inc. and its wholly-owned subsidiary, NGM Biopharmaceuticals Australia Pty Ltd.,
collectively referred to as the Company, is focused on discovering and developing novel, potentially life-changing
medicines based on scientific understanding of key biological pathways underlying cancer, retinal diseases and liver
and metabolic diseases. The Company’s robust portfolio of product candidates range from early discovery to Phase
2b development and include NGM707, NGM831, NGM438, NGM120, NGM621, aldafermin and MK-3655. The
Company has additional undisclosed programs that are in various stages of development ranging from functional
validation to preclinical development.
The Company was incorporated in Delaware in December 2007 and commenced operations in 2008. The
Company's headquarters are located at 333 Oyster Point Blvd., South San Francisco, California 94080.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles, or U.S. GAAP, and include the consolidated accounts of NGM Biopharmaceuticals, Inc. and
its wholly-owned foreign subsidiary in Australia, NGM Biopharmaceuticals Australia Pty Ltd. All intercompany
balances and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to
make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and
expenses. Specific accounts that require management estimates include, but are not limited to, the valuation of
common stock and the associated stock-based compensation expense, contract manufacturing accruals, clinical
trial accruals and revenue recognition in accordance with Accounting Standards Update, or ASU, 2014-09, Revenue
from Contracts with Customers (Topic 606), or ASC 606. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results could differ materially from those estimates, and to the extent that there are
differences between management's estimates and actual results, the Company's future financial statement
presentation, financial condition, results of operations and cash flows may be affected.
Sources and Uses of Liquidity
Since inception, the Company has incurred net losses and negative cash flow from operations. During the
years ended December 31, 2021, 2020 and 2019, the Company incurred net losses of $120.3 million, $102.5 million
and $42.8 million, respectively. As of December 31, 2021, the Company had an accumulated deficit of $419.0
million. The Company expects its accumulated deficit will increase significantly over time and does not expect to
experience positive cash flows from operations in the near future.
As of December 31, 2021, the Company had $366.3 million of cash, cash equivalents and short-term
marketable securities.
In June 2020, the Company entered into an Open Market Sale AgreementSM, or the Sales Agreement, with
Jefferies LLC. As of December 31, 2021, $127.2 million of the Company's common stock remained available to be
sold under the Sales Agreement, subject to conditions specified in the Sales Agreement.
The Company believes its existing cash, cash equivalents and short-term marketable securities will be
sufficient to fund its operations for a period of at least one year from the date of these consolidated financial
statements.
To fully implement the Company’s business plan and fund its operations, the Company will need to raise
significant additional capital through public or private equity or debt offerings (which may include potential net
proceeds from future sales, if any, under the Sales Agreement), product collaborations, strategic alliances and
licensing arrangements or a combination of the foregoing.
110
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, the related party receivable from collaboration and
other current assets and liabilities approximate their respective fair values due to their short-term nature.
Cash and Cash Equivalents
Cash and cash equivalents are stated at fair value. Cash equivalents are securities with an original maturity
of three months or less at the time of purchase. The Company limits its credit risk associated with cash and cash
equivalents by placing its investments with a bank it believes is highly creditworthy and with highly rated money
market funds. As of December 31, 2021 and 2020, cash and cash equivalents consisted of bank deposits and
investments in money market funds.
Marketable Securities
The appropriate classification of the Company’s marketable securities is determined at the time of purchase
and such designations are re-evaluated at each balance sheet date. All of the Company’s securities are considered
as available-for-sale and carried at estimated fair values and reported in cash equivalents and short-term
marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net loss and
reported in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity.
Interest income, net, includes interest, amortization of purchase premiums and accretion of purchase discounts,
realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if
any. The cost of securities sold is based on the specific identification method.
The Company’s investments are regularly reviewed for other-than-temporary declines in fair value. This
review includes the consideration of the cause of the impairment, including the creditworthiness of the security
issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses,
whether the Company has the intent to sell the securities and whether it is more likely than not that the Company
will be required to sell the securities before the recovery of their amortized cost basis. When the Company
determines that the decline in fair value of an investment is below its carrying value and this decline is other-than-
temporary, the Company reduces the carrying value of the security it holds and records a loss for the amount of
such decline. As of December 31, 2021, the Company did not record any impairment related to other-than-
temporary declines in the fair value of securities.
Restricted Cash
The Company’s restricted cash balance represents collateral required under the Company’s facility lease
agreement and is classified as a non-current asset on the consolidated balance sheets, as the collateral will not be
returned to the Company within twelve months from the date of these consolidated financial statements.
Concentration of Credit and Other Risks
Cash, cash equivalents and marketable securities from the Company’s available-for-sale and marketable
securities portfolio potentially subject the Company to concentrations of credit risk. The Company is invested in
money market funds and marketable securities through custodial relationships with major United States, or U.S.,
and Australian banks. Under its investment policy, the Company limits amounts invested in such securities by credit
rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government.
Related party receivables from collaborations are typically unsecured. Accordingly, the Company may be
exposed to credit risk generally associated with its current amended and restated research collaboration, product
development and license agreement, or the Amended Collaboration Agreement, with Merck Sharp & Dohme Corp.,
or Merck, and any future collaboration agreements with other collaboration partners. To date, the Company has not
experienced any losses related to these receivables.
Amounts recognized as revenue prior to the Company having an unconditional right (other than a right that
is conditioned only on the passage of time) to receipt are recorded as contract assets in the Company's
consolidated balance sheets. Although the Company expects to have an unconditional right to receive such
amounts, the Company may be exposed to the risk of not receiving the recorded amounts under its current
collaboration agreement with Merck and any future collaboration agreements with other collaboration partners. To
date, the Company has not experienced any losses related to contract assets.
Merck accounted for 100% of the Company’s revenue for the years ended December 31, 2021, 2020 and
2019.
111
Property and Equipment, Net
Property and equipment is recorded at cost and consists of computer equipment, laboratory equipment and
office furniture and leasehold improvements. Maintenance and repairs, and training on the use of equipment, are
expensed as incurred. Costs that improve assets or extend their economic lives are capitalized. Depreciation is
recognized using the straight-line method based on an estimated useful life of the asset, which is as follows:
Computer equipment
Laboratory equipment and office furniture
Leasehold improvement
Leases
3 years
3 years
Shorter of life of asset or lease term
Effective January 1, 2021, the Company adopted Accounting Standards Update, or ASU, 2016-02, Leases
(Topic 842), referred to as ASC 842. Under ASC 842, the Company determines if an arrangement is a lease at
inception. Lease assets represent the Company's right to use an underlying asset for the lease term and lease
liabilities represent the Company's obligation to make lease payments arising from the lease. Lease liabilities are
measured at the lease commencement date as the present value of future minimum lease payments over the term
of the lease. Lease assets are measured as the lease liability plus initial direct costs and prepaid lease payments
less lease incentives. In measuring the present value of the future minimum lease payments, the Company
generally uses its incremental borrowing rate. The lease term is the non-cancelable period of the lease and includes
options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Leases with
terms of 12 months or less are not recorded on the Company's balance sheet. Lease expense is recognized on a
straight-line basis over the lease terms, or in some cases, the useful life of the underlying asset. The Company
accounts for the lease and non-lease components as a single lease component. The Company’s lease agreement
for its laboratory and office facilities is classified as an operating lease.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds
its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the
carrying amount of the asset exceeds the estimated fair value of the asset. As of December 31, 2021 and 2020, no
revision to the remaining useful lives or write-down of long-lived assets was required.
Income Taxes
Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to the differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and the operating loss and tax credit carryforwards.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be
realized. Deferred tax assets and liabilities are measured at the balance sheet date using the enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period such
tax rate changes are enacted.
Revenue Recognition
Under ASC 606, the Company estimates each arrangement’s total transaction price, which includes
unconstrained variable consideration, and the recognition of that transaction price based on a cost-based input
method that requires estimates to determine, at each reporting period, the percentage of completion based on the
estimated total effort required to complete the project and the total transaction price. The unconstrained variable
consideration amount included in the transaction price represents an amount for which it is probable that a
significant reversal of cumulative revenue recognized will not occur.
The Company applies the following five-step revenue recognition model outlined in ASC 606 to adhere to
this core principle: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the
contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the
contract; and (5) recognize revenue when (or as) the Company satisfies a performance obligation.
112
All of the Company’s revenue to date has been generated from its collaboration agreements, primarily its
collaboration agreement with Merck. The terms of these agreements generally require the Company to provide (i)
license options for its compounds, (ii) research and development services and (iii) non-mandatory services in
connection with participation in research or steering committees. Payments received under these arrangements
may include non-refundable upfront license fees, partial or complete reimbursement of research and development
costs, contingent consideration payments based on the achievement of defined collaboration objectives and
royalties on sales of commercialized products. In some agreements, the collaboration partner is solely responsible
for meeting defined objectives that trigger contingent or royalty payments. Often the partner only pursues such
objectives subsequent to exercising an optional license on compounds identified as a result of the research and
development services performed under the collaboration agreement.
The Company assesses whether the promises in its arrangements, including any options provided to the
partner, are considered distinct performance obligations that should be accounted for separately. Judgment is
required to determine whether the license to a compound is distinct from research and development services or
participation in research or steering committees, as well as whether options create material rights in the contract. In
situations when a contract includes distinct services that are substantially the same and have the same pattern of
transfer to the customer over time, they are recognized as a series of distinct services.
The transaction price in each arrangement is generally comprised of a non-refundable upfront fee and
unconstrained variable consideration related to the performance of research and development services. The
unconstrained variable consideration amount included in the transaction price represents an amount for which it is
probable that a significant reversal of cumulative revenue recognized will not occur. The Company typically submits
a budget for the research and development services to the partner in advance of performing the services. The
transaction price is allocated to the identified performance obligations based on the standalone selling price, or SSP,
of each distinct performance obligation. Judgment is required to determine the SSP. In instances where the SSP is
not directly observable, such as when a license or service is not sold separately, SSP is determined using
information that may include market conditions and other observable inputs. The Company utilizes judgment to
assess the nature of its performance obligations to determine whether they are satisfied over time or at a point in
time and, if over time, the appropriate method of measuring progress toward completion. The Company evaluates
the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related
revenue recognition.
The Company’s collaboration agreements may include contingent payments related to specified
development and regulatory milestones or contingent payments for royalties based on sales of a commercialized
product. Milestones can be achieved for such activities in connection with progress in clinical trials, regulatory filings
in various geographical markets and marketing approvals from health authorities. Sales-based royalties are
generally related to the volume of annual sales of a commercialized product. At the inception of each agreement
that includes such payments, the Company evaluates whether the milestones are considered probable of being
achieved and estimates the amount to be included in the transaction price by using the most likely amount method.
If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the
transaction price. Milestone payments that are not within the Company’s or its partner’s control, such as those
related to regulatory approvals, are not considered probable of being achieved until those approvals are received.
The transaction price is then allocated to each performance obligation based on a relative SSP basis. At the end of
each subsequent reporting period, the Company re-evaluates the probability of achievement of each such milestone
and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Pursuant to the
guidance in ASC 606, sales-based royalties are not included in the transaction price. Instead, royalties are
recognized at the later of when the performance obligation is satisfied or partially satisfied, or when the sale that
gives rise to the royalty occurs.
Contract modifications, defined as changes in the scope or price (or both) of a contract that are approved by
the parties to the contract, such as a contract amendment, exist when the parties to a contract approve a
modification that either creates new, or changes existing, enforceable rights and obligations of the parties to the
contract. Depending on facts and circumstances, the Company accounts for a contract modification as one of the
following: (i) a separate contract; (ii) a termination of the existing contract and a creation of a new contract; or (iii) a
combination of the preceding treatments. A contract modification is accounted for as a separate contract if the scope
of the contract increases because of the addition of promised services that are distinct and if the price of the
contract increases by an amount of consideration that reflects the Company’s standalone selling prices of the
additional promised services. When a contract modification is not considered a separate contract and the remaining
services are distinct from the services transferred on or before the date of the contract modification, the Company
accounts for the contract modification as a termination of the existing contract and a creation of a new contract.
When a contract modification is not considered a separate contract and the remaining services are not distinct, the
113
Company accounts for the contract modification as an add-on to the existing contract and as an adjustment to
revenue on a cumulative catch-up basis.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses
primarily include salaries and benefits for medical, clinical, quality, preclinical, manufacturing and research
personnel, costs related to research activities, preclinical studies, clinical trials, drug manufacturing expenses and
allocated overhead and facility occupancy costs. The Company accounts for non-refundable advance payments for
goods or services that will be used in future research and development activities as expenses when the goods have
been received or when the service has been performed rather than when the payment is made.
Clinical trial costs are a component of research and development expenses. The Company accrues
estimated costs for its clinical trial activities performed by third parties, including clinical research organizations, or
CROs, and other service providers based upon estimates of the proportion of work completed over the life of the
individual clinical trial and patient enrollment rates in accordance with associated agreements. The Company's
estimates are determined through detailed discussions with internal personnel and its service providers as to the
progress of each clinical trial and by reviewing contracts, vendor agreements and purchase orders for previously
agreed-upon rates and fees to be paid for such services.
Stock-Based Compensation
The Company’s stock-based compensation programs include stock option grants, as well as shares issued
under its 2019 Employee Stock Purchase Plan, or ESPP. Grants are awarded to employees, directors and
nonemployees. The Company measures employee and director stock-based compensation expense for all stock-
based awards at the grant date based on the fair value measurement of the award. Subsequent to the adoption of
ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting on January 1, 2019, stock-based compensation expense for nonemployee awards is
measured based on the fair value on the date of adoption. The expense is recorded on a straight-line basis over the
requisite service period, which is generally the vesting period, for the entire award. Forfeitures are estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures materially differ from estimates.
The Company calculates the fair value measurement of stock options using the Black-Scholes option-pricing model.
Foreign Currency Transactions
The functional currency of NGM Biopharmaceuticals Australia Pty Ltd., the Company’s wholly-owned
subsidiary, is the U.S. dollar. Accordingly, all monetary assets and liabilities of the subsidiary are remeasured into
U.S. dollars at the current period-end exchange rates and non-monetary assets are remeasured using historical
exchange rates. Income and expense elements are remeasured to U.S. dollars using the average exchange rates in
effect during the period. Remeasurement gains and losses are recorded as other expense, net on the consolidated
statements of operations.
The Company is subject to foreign currency risk with respect to its clinical and manufacturing contracts
denominated in currencies other than the U.S. dollar, primarily British Pounds, Swiss Francs, Australian dollars and
the Euro. Payments on contracts denominated in foreign currencies are made at the spot rate on the day of
payment. Changes in the exchange rate between billing dates and payment dates are recorded within other income
(expense), net, on the consolidated statements of operations.
Comprehensive Loss
Comprehensive loss is composed of net loss and certain changes in stockholders’ equity that are excluded
from net loss, primarily unrealized gains or losses, net of taxes, on the Company’s marketable securities.
Net Loss per Share
Basic net loss per share is calculated by dividing net loss by the weighted average number of shares
outstanding during the period, less shares subject to repurchase and excludes any dilutive effects of stock-based
options and awards. Diluted net income per share is computed by giving effect to all potentially dilutive shares,
including common stock issuable upon exercise of stock options. However, where there is a diluted net loss per
share, no adjustment is made for potentially issuable shares since their effect would be anti-dilutive. In this case,
diluted net loss per share is equal to basic net loss per share.
114
Net loss per share was computed as follows (in thousands, except share and per share amounts):
Numerator:
Net loss
Year Ended December 31,
2021
2020
2019
$
(120,335) $
(102,487) $
(42,795)
Denominator:
Weighted average number of shares used in calculating net loss
per share—basic and diluted
Net loss per share—basic and diluted
77,085,405
68,475,378
50,297,524
$
(1.56) $
(1.50) $
(0.85)
Potentially dilutive securities that were not included in the diluted per share calculations because they would
be anti-dilutive were as follows:
Options to purchase common stock
Shares committed under ESPP
Total
Segment and Geographical Information
Year Ended December 31,
2021
10,484,553
389,947
10,874,500
2020
10,017,918
291,992
10,309,910
2019
10,824,780
396,682
11,221,462
The Company operates in one business segment. Substantially all of the Company’s long-lived assets,
primarily comprised of property and equipment, are based in the United States. For the years ended December 31,
2021, 2020 and 2019, the Company’s revenues were entirely within the United States based upon the location of
the Company and Merck.
Recent Accounting Pronouncements
New accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or
other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise
discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the
Company’s results of operations and financial position upon adoption.
Recently Adopted Accounting Pronouncements
Under the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act, the Company met
the definition of an emerging growth company prior to December 31, 2021 and elected the extended transition
period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act and, as
a result, had not been subject to the same implementation timing for new or revised accounting standards as for
other public companies that are not emerging growth companies. Effective December 31, 2021, the Company was
no longer an emerging growth company, and as a result, the Company was required to adopt ASC 842 for the fiscal
year beginning January 1, 2021 using a modified-retrospective approach under which the Company recognized and
measured leases existing at, or entered into after, January 1, 2021.
The Company elected the optional transition approach of not adjusting its comparative period financial
statements for the adoption of ASC 842, and as a result, the Company's consolidated balance sheet as of
December 31, 2020 was not restated to reflect the adoption of ASC 842. Effective January 1, 2021, the Company
recorded a right-of-use, or ROU, asset of $5.9 million (which was net of its deferred rent liability of $9.4 million as of
December 31, 2020) and corresponding lease liability of $15.2 million related to the Company's real estate lease.
Lease liabilities are measured at the lease commencement date as the present value of future minimum lease
payments over the term of the lease. Lease ROU assets are measured as the lease liability plus initial direct costs
and prepaid lease payments less lease incentives. In measuring the present value of the future minimum lease
payments, the discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily
determined. In that case, the lessee is required to use its incremental borrowing rate. In computing its lease
liabilities, the Company used its incremental borrowing rate based on information available on the commencement
effective date of January 1, 2021 using a company-specific rate in the United States that is fully collateralized and
consistent with the lease term for the Company's real estate lease. The lease term is the non-cancelable period of
115
the Company's real estate lease. The Company does not assume renewals in its determination of the lease term
unless the renewals are deemed by management to be reasonably certain at lease inception.
The Company elected the package of practical expedients permitted under the transition guidance
associated with ASC 842, which, among other things, allowed the Company to carry forward the historical lease
classification of those leases in place as of January 1, 2021. The Company also elected the practical expedient to
not separate non-lease components from lease components and instead accounts for them as a single lease
component for all classes of underlying assets.
The effect of adopting ASC 842 on the Company’s consolidated balance sheet as of January 1, 2021 was
as follows (in thousands):
Assets
Operating lease right-of-use asset
Liabilities
Deferred rent, current
Operating lease liability, current
Deferred rent, non-current
Operating lease liability, non-current
Totals
_________________
(1) As reported in the Company's 2020 Annual Report on Form 10-K.
December 31,
2020 (1)
ASC 842
adjustments
Adjusted
balances as of
January 1, 2021
$
$
$
— $
5,855 $
5,855
2,975 $
—
6,417
—
9,392 $
(2,975) $
4,785
(6,417)
10,462
5,855 $
—
4,785
—
10,462
15,247
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (ASC 808): Clarifying the
Interaction between ASC 808 and ASC 606, which clarifies that certain transactions between collaborative
arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement
participant is a customer. In addition, ASC 808 precludes an entity from presenting consideration from a transaction
in a collaborative arrangement as revenue from contracts with customers if the participant is not a customer for that
transaction. The Company adopted ASU 2018-18 effective January 1, 2021, noting no material impact on the
Company’s results of operations and financial position.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting
for Income Taxes. The new guidance modifies ASC 740 to simplify several aspects of accounting for income taxes,
including eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax
allocation. The Company adopted ASU 2019-12 effective January 1, 2021, noting no material impact on the
Company’s results of operations and financial position.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The standard amends guidance on reporting credit losses
for financial assets held at amortized cost basis, including accounts receivable, investments classified as available
for sale, such as the Company's debt securities, and unbilled related party revenue. Estimated credit losses will be
recorded as an allowance rather than a write-down. In November 2019, the FASB issued ASU 2019-10, which
deferred the effective date for certain ASUs including ASU 2016-13. Given the Company was no longer an emerging
growth company as of December 31, 2021, the Company adopted ASU 2016-13 effective January 1, 2021, noting
no material impact on the Company’s results of operations and financial position.
116
3. Fair Value Measurements
Cash equivalents and marketable securities are classified as available-for-sale securities and consisted of
the following (in thousands):
As of December 31, 2021
U.S. treasury securities
Money market funds
Corporate and agency bonds
Commercial paper
Totals
Classified as:
Cash and cash equivalents
Short-term marketable securities (amortized
cost of $214,587)
Total
As of December 31, 2020
Money market funds
U.S. government agencies securities
Commercial paper
Corporate and agency bonds
Totals
Classified as:
Cash and cash equivalents
Short-term marketable securities (amortized
cost of $148,135)
Total
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
$
141,093 $
— $
(116) $
140,977
129,763
64,997
8,497
344,350 $
$
—
7
—
7 $
—
(20)
—
(136) $
129,763
64,984
8,497
344,221
$
129,763
214,458
344,221
$
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
$
137,658 $
— $
— $
137,658
98,647
41,945
7,543
9
—
—
(3)
—
(2)
98,653
41,945
7,541
$
285,793 $
9 $
(5) $
285,797
$
137,658
148,139
285,797
$
Cash and cash equivalents in the table above excludes cash on deposit with banks of $22.0 million and
$9.4 million as of December 31, 2021 and 2020, respectively.
To date, the Company has not recorded any impairment charges against the market value of its marketable
securities. In determining whether a decline is other than temporary, the Company considers various factors
including the length of time and extent to which the market value has been less than cost, the financial condition
and near-term prospects of the issuer and the Company’s intent and ability to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in market value.
As of December 31, 2021 and 2020, the Company’s marketable securities had remaining contractual
maturities of less than one year. As of December 31, 2021, the Company had 21 marketable securities in an
unrealized loss position compared to one marketable security in an unrealized loss position as of December 31,
2020. Marketable securities that had been in unrealized loss positions as of December 31, 2021 and 2020 had been
in an unrealized loss position for less than twelve months. The Company does not intend to sell marketable
securities that are in an unrealized loss position and it is highly unlikely that the Company will be required to sell the
investments before recovery of their amortized cost basis, which may be maturity.
117
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes, by major security type, our available-for-sale securities that were
measured at fair value on a recurring basis and were categorized using the fair value hierarchy (in thousands):
As of December 31, 2021
Assets:
U.S. treasury securities
Money market funds
Corporate and agency bonds
Commercial paper
Totals
As of December 31, 2020
Assets:
Money market funds
U.S. government agencies securities
Commercial paper
Corporate and agency bonds
Fair Value Measurements
Level 1
Level 2
Level 3
Total
$
140,977 $
129,763
—
—
— $
— $
64,984
8,497
$
270,740 $
73,481 $
— $
—
—
—
— $
140,977
129,763
64,984
8,497
344,221
Fair Value Measurements
Level 1
Level 2
Level 3
Total
$
137,658 $
— $
—
—
—
98,653
41,945
7,541
148,139 $
— $
—
—
—
— $
137,658
98,653
41,945
7,541
285,797
Totals
$
137,658 $
The carrying amounts of cash and cash equivalents, the related party receivable and contract asset from
collaboration and other current assets and liabilities approximate their respective fair values due to their short-term
nature.
The Company estimates the fair values of investments in corporate and agency bond securities,
commercial paper and U.S. government agencies and treasury securities using Level 2 inputs by taking into
consideration valuations obtained from third-party pricing services.
There were no transfers of assets or liabilities between the fair value measurement levels during the years
ended December 31, 2021 and 2020.
4. Balance Sheet Components
Cash, Cash Equivalents and Restricted Cash
A reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance
sheets to the amount reported within the consolidated statements of cash flows is as follows (in thousands):
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
December 31,
2021
2020
$
$
151,795 $
147,017
1,499
1,499
153,294 $
148,516
118
Property and Equipment
Property and equipment consisted of the following (in thousands):
Leasehold improvements
Laboratory equipment and office furniture
Computer equipment
Construction-in-progress
Total property and equipment, gross
Less: accumulated depreciation and amortization
Total property and equipment, net
December 31,
2021
2020
$
25,880 $
21,916
1,225
18
49,039
25,880
23,638
1,271
48
50,837
(38,968)
10,071 $
(36,311)
14,526
$
Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was approximately $6.1
million, $6.6 million and $7.6 million, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
Clinical trials and research and development costs
Personnel-related costs
Manufacturing costs
Accrued expenses
Total accrued liabilities
5. Research Collaboration and License Agreements
Merck
December 31,
2021
2020
$
$
12,070 $
10,298
7,773
3,117
33,258 $
9,316
8,921
8,297
3,411
29,945
In 2015, the Company entered into a research collaboration, product development and license agreement
with Merck, which, together with amendments made prior to June 30, 2021, is referred to as the Original
Collaboration Agreement, covering the discovery, development and commercialization of novel therapies across a
range of therapeutic areas, including a broad, multi-year drug discovery and early development program financially
supported by Merck. Merck owned approximately 16.6% of the Company's outstanding shares as of December 31,
2021.
On June 30, 2021, the Company and Merck entered into an amended and restated research collaboration,
product development and license agreement, or the Amended Collaboration Agreement, with a narrower scope than
contemplated in the Original Collaboration Agreement, as described in more detail below.
The Original Collaboration Agreement
The Original Collaboration Agreement had an initial five-year research term, and Merck was granted the
unilateral right to extend the research phase of the collaboration for two additional two-year terms in exchange for a
$20.0 million extension fee payable at each extension, as described in more detail below. Each extension, if and
when exercised by Merck, would be considered and would be accounted for as a separate arrangement. Under the
Original Collaboration Agreement, in March 2019, Merck exercised its first option to extend the research phase of
the collaboration for two additional years through March 16, 2022, agreeing at that time to continue to fund the
Company’s research and development efforts up to $75.0 million each year consistent with the initial five-year term
and, in lieu of the $20.0 million extension fee that would have otherwise been payable to the Company at that time,
Merck agreed to make additional payments totaling up to $20.0 million in support of the Company’s research and
development program activities during 2021 and in the first quarter of 2022. Merck’s decision whether or not to
exercise its second option to extend the research phase of the collaboration under the Original Collaboration
119
Agreement was mooted when, on June 30, 2021, Merck and the Company entered into the Amended Collaboration
Agreement, as described in more detail below.
Under the terms of Original Collaboration Agreement, the Company determined the scientific direction and
areas of therapeutic interest for the collaboration, with input from Merck, and was primarily responsible for the
conduct of all research, preclinical and early clinical development activities through human proof-of-concept trials.
The Company made the final determinations as to which collaboration compounds to advance into and through
initial clinical trials, which collaboration compounds to progress into a human proof-of-concept trial and the design of
any such trials, in each case with input from Merck through various governance committees.
Under the terms of the Original Collaboration Agreement, upon completion of a human proof-of-concept trial
for a particular collaboration compound, regardless of the results of such trial, Merck had the one-time option to
obtain an exclusive, worldwide license, on specified terms, to that collaboration compound, as well as to all other
compounds that were directed against the same target and that result in the same effect on such target, or the
related compounds, referred to as the Merck license option. For each program that Merck licensed, Merck was
required to pay the Company a one-time fee of $20.0 million. Following exercise of a Merck license option, Merck
was responsible, at its own cost, for any further development and any commercialization activities for compounds
within the applicable program that it licensed, or the licensed compounds, subject to the Company’s option on a
licensed compound-by-licensed compound basis, prior to Merck initiating any Phase 3 clinical trial of such licensed
compound, to enter into a worldwide cost and profit share with Merck, or the cost and profit share option, and to co-
detail the applicable licensed compound in the United States. If the Company elected to exercise its cost and profit
share option for a particular licensed compound, Merck agreed to advance to the Company and/or assume up to
25% of the Company’s share of the global development costs for such licensed compound, subject to an aggregate
cap over the course of the collaboration. All such amounts advanced or assumed by Merck accrued interest and
would be recouped by Merck in full out of the Company’s share of any profits resulting from sales of the licensed
compound for which the Company elected to exercise its cost and profit share option before the Company was
entitled to receive any of those profits. If the Company did not elect to exercise its cost and profit share option for a
particular licensed compound, the Company was eligible to receive (i) an aggregate of up to $449.0 million in pre-
commercial milestone payments upon the achievement of specific clinical development and regulatory events with
respect to the licensed compound for the first three indications in the United States, the European Union, or EU, and
Japan; (ii) commercial milestone payments of up to $125.0 million; and (iii) royalties at ascending low-double digit to
mid-teen percentage rates, depending on the level of net sales Merck achieves worldwide for such licensed
compound.
Under the terms of the Original Collaboration Agreement, the Company also granted Merck a worldwide,
exclusive right to conduct research and development on, and to manufacture, use and commercialize, small
molecule compounds identified or developed by Merck that have specified activity against any target that the
Company researched or developed during the research phase of the collaboration and that, but for use of the
Company’s confidential and proprietary information, Merck would not have discovered. If Merck ultimately did not
exercise its Merck license option to a collaboration compound the Company advanced through a human proof-of-
concept study that was directed to any such target, Merck’s research license for its own small molecule program
with respect to such target would become non-exclusive, but it would retain an exclusive license to any small
molecule compounds that it had, as of that time, identified and developed. Merck had sole responsibility for
research and development of any of these small molecule compounds, at its own cost. The Company was eligible to
receive milestone and royalty payments on small molecule compounds that were developed by Merck under such a
license from the Company, in some cases at the same rates as those the Company was eligible to receive from
Merck for a program that Merck licensed and that originated from the Company’s own research and development
efforts, provided that, but for use of the Company’s confidential and proprietary information, Merck would not have
discovered such small molecule compounds. However, the Company did not have the option to enter into a cost
and profit share with respect to, or the option to co-detail, those small molecule compounds.
Under the terms of the Original Collaboration Agreement, during the three-month period before the end of
the research phase as defined in the Original Collaboration Agreement, Merck had the right to review the
Company’s then-existing programs and to elect to designate one or more such programs and require the Company
to continue to conduct research and development on such Merck-designated programs for up to three years, a
period referred to as the Original Collaboration Agreement tail period. Merck would pay all of the Company’s internal
and external costs for its work on such Merck-designated programs during the Original Collaboration Agreement tail
period, up to certain funding caps that decreased over the Original Collaboration Agreement tail period based on a
specified percentage of certain funding actually provided to the Company by Merck during the last 12 months of the
research phase as defined in the Original Collaboration Agreement. Merck also had the right to take over such
Merck-designated programs and conduct such research and development activities itself or in partnership with a
120
third party, at its own cost, or to terminate the Original Collaboration Agreement tail period after a specified notice
period. If Merck terminated the Original Collaboration Agreement tail period, it had the right to elect to transition to
itself or a third-party partner, at its own cost, any clinical trials that were then being conducted in such Merck-
designated programs. If the Company completed a human proof-of-concept trial in one of such Merck-designated
programs during the Original Collaboration Agreement tail period or if Merck or its third-party partner completed a
human proof-of-concept trial of a collaboration compound in one of such Merck-designated programs during or after
the Original Collaboration Agreement tail period, then Merck would have the same one-time Merck license option to
obtain an exclusive, worldwide license, on specified terms, to that collaboration compound, as well as to all its
related compounds. Merck would lose its Merck license option rights at the end of the Original Collaboration
Agreement tail period with respect to all programs for which no collaboration compound had completed a human
proof-of-concept trial by such time, except for Merck-designated programs that Merck was continuing to use
commercially reasonable efforts to research and develop.
The Company evaluated the Original Collaboration Agreement under ASC 606. The Company identified the
following promised goods or services at the inception of the Original Collaboration Agreement: (i) a license to the
Company’s growth differentiation factor 15, or GDF15, agonist program; (ii) a license to pursue research and
development and commercialization of small molecule compounds; (iii) the performance of research and
development services for five years; (iv) two options to extend performance of the research and development
services, each for two additional years; and (v) Merck license options to obtain licenses to collaboration compounds
and related compounds after proof-of-concept trials. The Company determined that the GDF15 agonist program
license and small molecule program license were not distinct from the research and development services, resulting
in these items being combined into a single performance obligation.
The Company also considered whether such options created material rights in the contract and concluded
that the fee attached to the exercise of such options approximated the SSP of the promised goods or services
included in the options. Therefore, the Company concluded that such options did not give rise to material rights,
were not performance obligations in the Original Collaboration Agreement and, if and when exercised, would be
accounted for as separate arrangements under ASC 606.
Additionally, if a separate arrangement were created by the exercise of such an option, such amounts would
be contingent on events outside of either party’s control, such as products proving to be commercially viable and
governmental agencies granting regulatory approval. Such contingencies and uncertainties resulted in the amounts
being constrained and withheld from inclusion in the estimated transaction price of a separate arrangement.
Consequently, the estimated transaction price related to the Original Collaboration Agreement was comprised of the
upfront cash licensing fee of $94.0 million and ongoing research and development reimbursements.
Any fees associated with such options, including associated upfront fees, follow on funding fees and
milestones, were not included in the transaction price related to the Original Collaboration Agreement as they were
associated with options that were not material rights and, thus, were not performance obligations within the Original
Collaboration Agreement. For example, in November 2018, Merck exercised its option for a license to further
research and develop MK-3655, an agonistic antibody discovered by the Company that selectively activates
fibroblast growth factor receptor 1c-beta-klotho, or FGFR1c/KLB, and other FGFR1c/KLB agonists and paid the
Company $20.0 million. The $20.0 million license fee for MK-3655 was not included in the transaction price related
to the Original Collaboration Agreement and was instead recognized in the period of exercise in the fourth quarter of
2018 as the Company had no further obligation related to that license. The Phase 3 clinical study for MK-3655 has
not begun, and the Company has therefore not made an election as to whether it will participate in the cost and
profit share or receive milestone and royalty payments with respect to MK-3655.
The transaction price associated with the initial five-year term of the Original Collaboration Agreement
consisted of the $94.0 million upfront fee and the funding amounts of up to $75.0 million per year for each of the first
five years of the Original Collaboration Agreement. No milestones or other forms of consideration were included in
the transaction price related to the Original Collaboration Agreement as those amounts were contingent upon Merck
exercising an option for licenses on collaboration compounds and would, therefore, be pursuant to separate
arrangements and not part of the Original Agreement estimated transaction price. As there was only one
performance obligation in the Original Collaboration Agreement, the transaction price was allocated entirely to that
performance obligation.
At the end of the initial five-year term of the Original Collaboration Agreement, the remaining contract
liability amount of $4.9 million related to the upfront license fee included within the transaction price as of December
31, 2019 was fully earned and recognized during the three months ended March 31, 2020. The Company has fully
recognized revenue of approximately $388.1 million related to the single performance obligation associated with the
initial five-year term of the Original Collaboration Agreement.
121
Upon Merck exercising its option to extend the research phase of the collaboration through March 16, 2022,
the Company deemed that a separate arrangement containing a two-year performance obligation to provide distinct
research and development services was created on March 17, 2020. The transaction price of $170.0 million for this
two-year performance obligation under the Original Collaboration Agreement consisted of the potential funding of
amounts of up to $75.0 million per year plus the additional funding amount of $20.0 million to be made during 2021
through to the first quarter of 2022 if the Company exceeded the $75.0 million funding cap. The Company used a
cost-based input method to calculate the corresponding amount of revenue to recognize. In applying the cost-based
input measure of revenue recognition, the Company measured actual costs incurred relative to budgeted costs to
fulfill this distinct two-year performance obligation. These costs consisted of Company employee full-time equivalent
hours plus allowable external (third-party) costs incurred. Revenue was recognized based on actual costs incurred
as a percentage of total budgeted costs as the Company completed its performance obligation applied to the
transaction price. The Company re-evaluated the estimate of expected costs to satisfy the performance obligation
each reporting period and made adjustments for any significant changes. In addition, the Company also considered
any necessary adjustments in an effort to ensure that the transaction price was within the range of potential funding
amounts as described above. As such, management applied considerable judgment in estimating expected costs as
such costs were key inputs when applying the cost-based input method. As the Company’s estimated measure of
progress was updated at each reporting period and revenue was recognized on a cumulative catch-up basis, a
significant change in the estimate of expected costs for the remainder of the contract term could have had a
material impact on revenue recognized (including the possible reversal of previously recognized revenue) at each
reporting period, as well as the related impact on contract assets and liabilities.
Since the transaction price under the Original Collaboration Agreement included an additional funding
amount of $20.0 million to be made during 2021 and in the first quarter of 2022, the timing of when the revenue was
recognized for this additional funding amount for performance of the services and when this additional funding
amount can be billed resulted in the recognition of a related party contract asset of $4.6 million at March 31, 2021.
The Amended Collaboration Agreement.
Under the Original Collaboration Agreement, Merck was required to notify the Company no later than March
17, 2021 of its unilateral decision whether to exercise its option to extend the research phase of the collaboration for
an additional two-year term through March 16, 2024. In March 2021, Merck initiated discussions with the Company
with respect to elements of the ongoing collaboration that might be optimized to better address the evolving
interests and priorities of both the Company and Merck. After such discussions, on June 30, 2021, the Company
and Merck entered into the Amended Collaboration Agreement. Pursuant to the Amended Collaboration Agreement,
the prior two-year extension of the research phase under the Original Agreement was deemed to end on March 31,
2021, while a new three-year research phase commenced on April 1, 2021. Under the Original Collaboration
Agreement, all of the Company’s research and development programs, both those existing at the time the Company
entered into the Original Collaboration Agreement and those the Company worked on during the research phase of
the collaboration, other than aldafermin, were included within the scope of the collaboration. Under the Amended
Collaboration Agreement, the scope of the collaboration and the resulting programs for which Merck has the Merck
license option was narrowed. The collaboration as conducted under the Amended Collaboration Agreement, or the
continuing collaboration, is focused primarily on the identification, research and development of collaboration
compounds directed to targets of interest to Merck in the fields of ophthalmology and cardiovascular or metabolic, or
CVM, disease, including heart failure, as well as certain laboratory testing and other activities on compounds that
are directed to one of up to two undisclosed targets outside of the fields of ophthalmology and CVM disease,
referred to as the lab programs. The ophthalmology compounds in the continuing collaboration include NGM621, an
ophthalmology compound in a Phase 2 clinical trial, and its related compounds, and compounds directed against
two other undisclosed ophthalmology targets and their related compounds. Collaboration compounds that remain
within the scope of the continuing collaboration under the Amended Collaboration Agreement are referred to as
continuing collaboration compounds. Given the narrowed research scope under the Amended Collaboration
Agreement, the Company has the right, in its sole discretion, to independently research, develop and commercialize
the collaboration compounds known as NGM120, NGM707, NGM831 and NGM438, their related compounds and
all other preclinical and research assets that the Company researched or developed under the Original
Collaboration Agreement but that are not included within the research and development scope of the continuing
collaboration, which are referred to as the released NGM compounds. Merck retained the right to receive royalties
at low single-digit rates on the sales of any released NGM compounds that receive regulatory approval and, if the
Company decides during a certain time period to engage in a formal partnering process for a released NGM
compound or negotiations regarding a license or asset sale of a released NGM compound, the Company is
obligated to notify Merck, provide Merck with certain information and engage in good faith, non-exclusive
negotiations with respect to such released NGM compound with Merck at Merck’s request.
122
Under the Amended Collaboration Agreement, Merck continues to have a Merck license option, as it did
under the Original Agreement, to each continuing collaboration compound that is identified, researched and
developed under the Amended Collaboration Agreement and reaches the specified option exercise point for such
continuing collaboration compound as described below, and to its related compounds (each such continuing
collaboration compound and its related compounds are referred to generally as a continuing program). In addition,
under the terms of the Amended Collaboration Agreement, new CVM-related programs may be added to the
continuing collaboration if recommended by the Company and selected by Merck, and Merck would have a Merck
license option to such CVM-related continuing program. Merck has a one-time right to exercise its Merck license
option, during the research phase or a tail period following such research phase, as applicable, for any continuing
collaboration compound on a continuing program-by-continuing program basis when the Company or Merck
achieves the specified Merck license option exercise point. The Merck license option exercise point for collaboration
compounds under the Original Collaboration Agreement was the completion of a human proof-of-concept trial. This
generally continues to be the Merck license option exercise point under the Amended Collaboration Agreement for
continuing collaboration compounds that are directed to ophthalmology targets, including NGM621 and its related
compounds and all of the continuing collaboration compounds from two other ophthalmology continuing programs
directed against undisclosed ophthalmology targets and their related compounds (including NGM621 and its related
compounds, collectively referred to as the continuing ophthalmology collaboration compounds). Upon the
completion of the ongoing Phase 2 NGM621 CATALINA clinical trial, Merck will have an additional one-time option
to obtain an exclusive, worldwide license to all of the continuing ophthalmology collaboration compounds together,
referred to as the ophthalmology bundle option. If Merck does not exercise this one-time ophthalmology bundle
option for all continuing ophthalmology collaboration compounds, it may nevertheless exercise its regular Merck
license option with respect to NGM621 and its related compounds at such time, and it may also exercise its regular
Merck license option for the continuing ophthalmology collaboration compounds from each of the other two
programs if a continuing ophthalmology collaboration compound from such continuing program completes a human
proof-of-concept trial. Unlike the Original Collaboration Agreement, the Merck license option exercise point for a
continuing collaboration compound from the CVM-related continuing programs or the lab programs will be the
designation by Merck of such continuing collaboration compound as a research program development candidate
that Merck intends to progress into preclinical development.
As was the case under the Original Collaboration Agreement, under the Amended Collaboration Agreement,
if Merck exercises a Merck license option and obtains the relevant exclusive, worldwide license for a continuing
collaboration compound and its related compounds, Merck will pay an option exercise fee to the Company and will
be responsible, at its own cost, for any further development and commercialization activities for continuing
collaboration compounds within that licensed continuing program. In such case, the Company will have the option to
receive milestones and royalty payments or, in certain cases, to co-fund development and participate in a global
cost and profit share arrangement of up to 50%, with an additional option to co-detail any such licensed continuing
collaboration compound in the United States under the same terms as set forth in the Original Collaboration
Agreement. Except for the ophthalmology bundle option, the amount of the option exercise fees for continuing
ophthalmology collaboration compounds upon completion of a human proof-of-concept trial remains the same under
the Amended Collaboration Agreement as under the Original Collaboration Agreement. If Merck exercises the
ophthalmology bundle option, it will pay the Company either $40.0 million or $45.0 million as the Merck license
option exercise fee, depending upon the stage of development of one of the two earlier stage ophthalmology
programs that is included in the ophthalmology bundle option. Under the Amended Collaboration Agreement, if
Merck exercises the Merck license option for a continuing collaboration compound from a CVM-related continuing
program or a lab program, Merck will pay the Company a $6.0 million option exercise fee at the time of selection to
progress such licensed continuing collaboration compound or any of its related compounds into preclinical
development and an additional $10.0 million milestone payment if such continuing collaboration compounds or one
of its related compounds subsequently completes a human proof-of-concept trial.
Under the Amended Collaboration Agreement, the parties’ rights and obligations with respect to MK-3655
and related FGFR1c/KLB agonists for which Merck exercised its Merck license option in November 2018 did not
change.
Under the Amended Collaboration Agreement, Merck will provide up to $86.0 million in research funding for
the four calendar quarters ending March 31, 2022, which includes the remaining $16.0 million of the up to
$20.0 million in additional payments Merck agreed to pay as part of exercising its first option to extend the research
phase of the collaboration under the Original Collaboration Agreement for two years through March 16, 2022. The
Company is obligated to use commercially reasonable efforts to expend $35.0 million of such $86.0 million in
funding during the same time frame on the ophthalmology, CVM-related and lab continuing programs. The
Company is permitted to use the remainder of the $86.0 million in research funding provided by Merck during such
123
time frame to advance the released NGM compounds. During the remaining two years of the research phase after
March 2022, Merck will provide up to a total of $20.0 million in research funding for the ophthalmology, CVM-related
and lab continuing programs. Merck will also fund certain research and development costs related to NGM621,
subject to certain limitations, until the earlier of the remaining two years of the research phase after March 2022 or
until Merck exercises, or decides not to exercise, its license option with respect to NGM621 alone or bundled with
the other continuing ophthalmology compounds. After March 2022, the Company, using its own funding, is required
to use commercially reasonable efforts to research and develop a specific product candidate directed to a specific
ophthalmology target to be ready for starting investigational new drug application-, or IND-, enabling studies by
March 31, 2023. If Merck exercises its regular Merck license option with respect to NGM621 or the ophthalmology
bundle option for all of the continuing ophthalmology collaboration compounds upon completion of the ongoing
Phase 2 CATALINA clinical trial of NGM621 and pays the applicable option exercise fee to the Company, then the
Company will be obligated to reinvest $5.0 million or up to $15.0 million, respectively, of such option fee to fund
research on the ophthalmology and CVM-related continuing programs.
Under the Amended Collaboration Agreement, the research phase for the ophthalmology continuing
programs will end no later than March 31, 2024. The research phase for the CVM-related continuing programs will
also continue until March 31, 2024, unless the parties mutually agree to extend the research phase to March 31,
2026, in which case Merck will provide up to a total of $20.0 million in research funding during those additional two
years. The research phase for the lab programs will end no later than December 31, 2022.
As under the Original Collaboration Agreement, Merck has the right under the Amended Collaboration
Agreement to review the then-ongoing continuing programs in the three-month period before the end of applicable
research phase and to elect to designate one or more continuing programs for which research and development
would continue to be conducted, until the applicable Merck license option exercise point is reached, for up to three
years after the end of such research phase, with the possibility of extension if the Company is conducting ongoing
ophthalmology clinical trials, if Merck is using commercially reasonable efforts to progress one or more
ophthalmology continuing programs or if Merck determines to continue progressing a CVM-related continuing
program or lab program toward the nomination of a research program development candidate, and any such
extension is referred to as an Amended Collaboration Agreement tail period. Under the Amended Collaboration
Agreement, the Amended Collaboration Agreement tail period, if any, for the ophthalmology continuing programs
would be separate from the Amended Collaboration Agreement tail period, if any, for the CVM-related continuing
programs or any lab program, and Merck would be primarily responsible for performing all research and
development activities, itself or through third-party contractors, during the Amended Collaboration Agreement tail
period, if any, for the CVM-related continuing programs or any lab program.
The Company concluded that the Amended Collaboration Agreement is a separate arrangement containing
a three-year performance obligation to provide distinct research and development services in accordance with ASC
606. The total transaction price under the Amended Collaboration Agreement is $124.7 million and represents the
sum of potential funding amounts, including $86.0 million in research funding for the four calendar quarters ending
March 31, 2022, $20.0 million in research funding for the ophthalmology and CVM-related continuing programs
during the remaining two years of the research phase after March 2022 and $18.7 million in estimated NGM621
reimbursable expenses also during the remaining two years of the research phase after March 2022. The Company
will continue to re-evaluate the transaction price as uncertain events are resolved or other changes in
circumstances occur. The Company continues performing a series of research and development services in the
area of both the continuing collaboration compounds and the released NGM compounds and has one performance
obligation across all continuing programs. The Company will continue to use the cost-based input method to
calculate the amount of revenue to recognize as services are being rendered from April 1, 2021 through March 31,
2024.
The Company considered whether the Merck license option and the ophthalmology bundle option created
material rights in the contract and concluded that the fee attached to the exercise of such options approximated the
SSP of the promised goods or services included in the options. Therefore, the Company concluded that such
options did not give rise to material rights, were not performance obligations in the Amended Collaboration
Agreement and, if and when exercised, would be accounted for as separate arrangements under ASC 606.
If Merck exercises its regular Merck license option for NGM621 or the ophthalmology bundle option for all of
the continuing ophthalmology collaboration compounds upon completion of the Phase 2 CATALINA clinical trial and
pays the applicable Merck license option exercise fee to the Company, this would not result in a modification of the
contract as total contract consideration and the Company's performance obligation under the Amended
Collaboration Agreement will not change.
124
As of March 31, 2021, the Company had a contract asset of $4.6 million under the prior two-year extension
of the research phase under the Original Collaboration Agreement, which, under the Amended Collaboration
Agreement, was no longer billable to Merck at any point and therefore was recorded as a reduction in both the
transaction price under the Original Collaboration Agreement and revenue on June 30, 2021.
A breakout of the milestone payments in connection with the potential achievement of certain clinical
development events for each of the first three indications is as follows (in thousands):
First
Indication
Second
Indication
Third
Indication
Upon administration of an applicable product to the first patient in
the first Phase 3 clinical trial for such product for the given
indication
Upon first completion of a proof-of-concept trial for a CVM-related
research program development candidate
Upon first completion of a proof-of-concept trial for a certain
research development candidate for a lab program
$
$
$
35,000 $
25,250 $
17,500
10,000 $
— $
10,000 $
— $
—
—
A breakout of the aggregate milestone payments in connection with the potential achievement of both
acceptance of an application for and receipt of regulatory approval for each of the first three indications, for each of
the three geographic areas, is as follows (in thousands):
United States
European Union
Japan
First
Indication
Second
Indication
Third
Indication
$
75,000 $
60,000
30,000
56,250 $
45,000
22,500
$
165,000 $
123,750 $
37,500 $
30,000
15,000
82,500 $
Total
168,750
135,000
67,500
371,250
Summary of Related Party Revenue
The Company recognized revenue from its collaboration and license agreements as follows (in thousands):
Related party revenue
Year Ended December 31,
2021
2020
$
77,882 $
87,368 $
2019
103,544
For the year ended December 31, 2021, the Company recognized collaboration and license revenue of
$77.9 million primarily related to reimbursable research and development activities associated with the performance
obligation for the two-year extension period through March 31, 2021 under the Original Collaboration Agreement
and from April 1, 2021 through December 31, 2021 under the Amended Collaboration Agreement, all of which were
recognized using the cost-based input model.
For the year ended December 31, 2020, the Company recognized collaboration and license revenue under
the Original Collaboration Agreement of $87.4 million primarily related to reimbursable research and development
activities, including $61.8 million associated with the performance obligation for the prior two-year extension period
under the Original Collaboration Agreement, and $4.9 million related to collaboration and license revenue earned
under the initial five-year term that ended in March 2020. Revenue recognized related to the reimbursable research
and development activities were recognized using the cost-based input model related to research and development
activities.
For the year ended December 31, 2019, the Company recognized collaboration and license revenue under
the Original Collaboration Agreement of $103.5 million, of which $24.0 million was recognized from the upfront
license fee by applying the cost-based input measure of revenue recognition in accordance with ASC 606 and the
remaining balance related to research and development activities.
125
Related Party Contract Assets and Liabilities
Amounts recognized as revenue prior to the Company having an unconditional right (or a right that is
conditioned only on the passage of time) to receipt are recorded as contract assets in the Company's consolidated
balance sheets. If the Company expects to have an unconditional right to receive the consideration in the next
twelve months, the contract asset will be classified in current assets. As of December 31, 2021, the Company did
not have a related party contract asset. As of December 31, 2020, the Company had a related party contract asset
of $6.1 million.
Amounts received prior to satisfying the revenue recognition criteria are recorded as contract liabilities in
the Company’s consolidated balance sheets. If the related performance obligation is expected to be satisfied within
the next twelve months, the contract liability will be classified in current liabilities. As of December 31, 2021, the
Company had a contract liability of $17.8 million. The Company did not have a contract liability as of December 31,
2020.
6. Commitments and Contingencies
Leases
Operating Leases
In December 2015, the Company entered into an operating lease agreement, or the 333 Oyster Point lease
agreement, for its corporate office space and laboratory facility at 333 Oyster Point Blvd., South San Francisco,
California, or the 333 Oyster Point facility, for approximately 122,000 square feet that expires in December 2023.
The 333 Oyster Point lease agreement provided a tenant improvement allowance of $15.2 million that the Company
used in 2016 towards $22.3 million in total leasehold improvements that are amortized over the lease term of seven
years. The 333 Oyster Point lease agreement required a letter of credit in the amount of $2.3 million as a security
deposit to the lease, which the Company has recorded as non-current restricted cash on the consolidated balance
sheets. The Company has the right to reduce the letter of credit amount by $0.4 million on each of the third
anniversary and fourth anniversary of the rent commencement date. In 2020, the Company reduced its letter of
credit by $0.4 million and reclassified that amount from restricted cash to cash and cash equivalents on the
consolidated balance sheets.
In September 2009, the Company entered into an operating lease agreement, or the 630 Gateway lease
agreement, for a corporate office space and laboratory facility at 630 Gateway Blvd., in South San Francisco,
California for approximately 50,000 square feet, as amended in June 2014. In July 2016, the Company assigned the
630 Gateway lease agreement to Merck, as part of the Company’s relocation to 333 Oyster Point facility. The 630
Gateway lease agreement expired in November 2020. Following expiration of the 630 Gateway lease agreement,
the Company retains the obligation to indemnify the landlord and Merck under certain limited circumstances, but
has no further payment obligations.
As of December 31, 2021, the weighted-average remaining lease term for the 333 Oyster Point lease
agreement was two years and the weighted-average discount rate used to determine the Company's operating
lease liability was 2.85%. Cash paid for amounts included in the measurement of the lease liabilities
were $5.1 million for the year ended December 31, 2021.
During the year ended December 31, 2021, the components of lease costs, which were included in general
and administrative expenses on the Company's consolidated statements of operations, were as follows (in
thousands):
Operating lease costs
Variable lease costs (1)
Total lease costs
_________________
Year Ended
December 31, 2021
2,166
$
1,235
3,401
$
(1) Variable lease costs include certain additional charges for operating costs, including insurance, maintenance, taxes and other costs incurred,
which are billed based on both usage and as a percentage of the Company’s share of total square footage.
126
As of December 31, 2021, the maturities of the Company’s operating lease liabilities and future minimum
lease payments were as follows (in thousands):
Year Ending December 31,
2022
2023
Total undiscounted lease payments
Less: present value adjustment
Present value of lease liabilities
$
$
5,294
5,455
10,749
(287)
10,462
Prior to the Company's adoption of the new lease accounting standard ASC 846 on January 1, 2021, the
maturity schedule of future minimum lease payments under the Company's operating lease agreement as of
December 31, 2020 was as follows:
Year Ending December 31,
2021
2022
2023
Total
$
$
5,141
5,294
5,455
15,890
Rent expense for the 333 Oyster Point facility was approximately of $2.2 million for the years ended
December 31, 2020 and 2019, respectively, under the previous lease accounting standard ASC 840.
Indemnification
In the normal course of business, the Company enters into contracts and agreements that contain a variety
of representations and warranties and may provide for indemnification of the counterparty. The Company’s
exposure under these agreements is unknown because it involves claims that may be made against it in the future
but have not yet been made.
In accordance with the Company’s amended and restated certificate of incorporation and its amended and
restated bylaws, the Company has indemnification obligations to its officers and directors, subject to some limits,
with respect to their service in such capacities. The Company has also entered into indemnification agreements with
its directors and certain of its officers. To date, the Company has not been subject to any claims, and it maintains
director and officer insurance that may enable it to recover a portion of any amounts paid for future potential claims.
The Company’s exposure under these agreements is unknown because it involves claims that may be
made against it in the future but have not yet been made. The Company believes that the fair value of these
indemnification obligations is minimal and, accordingly, it has not recognized any liabilities relating to these
obligations for any period presented.
7. Stockholders’ Equity
Preferred Stock
The Company has 10,000,000 shares of preferred stock authorized, which may be issued at the discretion
of the Company’s board of directors. The board of directors may issue shares of preferred stock in one or more
series and to fix the number, rights, preferences, privileges and restrictions. These rights, preferences and privileges
could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and
sinking fund terms. As of December 31, 2021, the Company does not have any shares of preferred stock issued or
outstanding.
Common Stock
Public Offering of Common Stock
In January 2021, the Company sold 5,324,074 shares of its common stock through an underwritten public
offering at a price to the public of $27.00 per share for aggregate net proceeds to the Company of $134.6 million,
after deducting underwriting discounts and commissions and other offering expenses paid by the Company. The
offering closed on January 8, 2021.
127
As of December 31, 2021 and 2020, the Company had 77,962,722 and 70,585,364 shares of common
stock outstanding, respectively, which included shares subject to repurchase of 42 and 6,508, respectively, as a
result of early exercise of stock options not yet vested.
The Company had reserved the following shares of common stock for issuance:
Reserve balance for Sales Agreement
Common stock options outstanding
Common stock options available for grant
ESPP shares available for purchase
401(k) matching plan
Total
Open Market Sale Agreement
December 31,
2021
14,182,900
10,484,553
6,698,538
506,978
17,813
31,890,782
2020
14,190,300
10,017,918
6,186,497
700,074
21,930
31,116,719
In June 2020, the Company entered into the Sales Agreement with Jefferies relating to the sale of shares of
its common stock. In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of
its common stock having an aggregate offering price of up to $150.0 million from time to time through Jefferies
acting as its sales agent. In 2020, under the Sales Agreement, the Company sold 809,700 shares of its common
stock at an average price of $27.94 per share for net proceeds of $21.3 million, after deducting $0.7 million in sales
commissions. During the year ended December 31, 2021, 7,400 shares of the Company's common stock were sold
pursuant to the Sales Agreement. As of December 31, 2021, $127.2 million of the Company’s common stock
remained available to be sold under the Sales Agreement, subject to conditions specified in the Sales Agreement.
Equity Incentive Plan
In 2018, the Company adopted the 2018 Equity Incentive Plan, or the 2018 Plan, for eligible employees,
officers, directors, advisors and consultants, which provides for the grant of incentive and non-statutory stock
options, restricted stock awards and stock appreciation rights. The terms of the stock option agreements, including
vesting requirements, are determined by the board of directors, subject to the provisions of the 2018 Plan. Options
granted by the Company generally vest within four years and are exercisable from the grant date until ten years
after the date of grant. Vesting of certain employee options may be accelerated in the event of a change in control of
the Company. Pursuant to the terms of the 2018 Plan, the number of shares reserved and available to issue will
automatically increase on January 1st of each year in an amount equal to 4% of the total number of common shares
outstanding on the December 31st immediately preceding calendar year, unless the board of directors elects to
forego or reduce such increase. As of December 31, 2021, 17,183,091 shares of common stock had been
authorized for issuance under the 2018 Plan and the Company's 2008 Equity Incentive Plan which expired in 2018.
Stock options are governed by stock option agreements between the Company and recipients of stock
options. Prior to the closing of the Company’s IPO, the board of directors exercised reasonable judgment and
considered a number of objective and subjective factors to determine the best estimate of the fair value of the
Company’s common stock, including: the Company’s stage of development; progress of its research and
development efforts; the rights, preferences and privileges of its convertible preferred stock relative to those of its
common stock; equity market conditions affecting comparable companies; and the lack of marketability of the
Company’s common stock. Subsequent to the IPO, the exercise price of each option may not be less than 100% of
the fair market value of the common stock subject to the option on the date the option is granted. A 10% or greater
stockholder may not be granted an incentive stock option unless the exercise price of such option is at least 110%
of the fair value of the common stock on the date of grant and the option is not exercisable after the expiration of
five years from the grant date. Options become exercisable and expire as determined by the Compensation
Committee of the Company’s board of directors, provided that the term of incentive stock options may not exceed
ten years from the date of grant for options granted to those other than 10% stockholders.
Early Exercise of Stock Options
The 2018 Plan allows for the granting of options that may be exercised before the options have vested.
Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon
termination of the purchaser’s employment or services, at the price paid by the purchaser, and are not deemed to
128
be issued for accounting purposes until those related shares vest. The amounts received in exchange for these
shares have been recorded as a liability on the consolidated balance sheets and will be reclassified into Company
common stock and additional paid-in-capital as the shares vest. The Company’s right to repurchase these shares
generally lapses in equal installments over four years beginning from the original vesting commencement date.
Since the beginning of March 2021, the Company has not granted any options under the 2018 Plan that can be
early exercised prior to vesting.
2019 Employee Stock Purchase Plan
In March 2019, the Company adopted the ESPP. The Company reserved 1,000,000 shares of common
stock pursuant to purchase rights granted to the Company’s employees. The ESPP provides that the number of
shares reserved and available for issuance will automatically increase on January 1 of each calendar year,
beginning January 1, 2020, by the lesser of (1) 1.0% of the total number of shares of common stock outstanding on
December 31 of the preceding calendar year, (2) 1,000,000 shares or (3) a number determined by the Company’s
board of directors that is less than (1) and (2). Under the ESPP, eligible employees are granted the right to purchase
shares of the Company’s common stock through payroll deductions that cannot exceed 15% of each employee’s
salary. The ESPP provides for a 24-month offering period, which includes four six-month purchase periods. At the
end of each purchase period, eligible employees are permitted to purchase shares of common stock at the lower of
85% of fair market value at the beginning of the offering period or fair market value at the end of the purchase
period. The ESPP is considered a compensatory plan and the Company has recorded stock-based compensation
expense of $1.6 million, $1.2 million and $1.0 million for the years ended December 31, 2021, 2020 and 2019,
respectively. As of December 31, 2021, 493,022 shares of common stock had been purchased under the ESPP.
Stock Option Activity
A summary of the activity under the 2008 Plan and the 2018 Plan is as follows:
Outstanding Options
Balances at December 31, 2020
Options granted
Options exercised
Options cancelled
Number of
Options
10,017,918 $
2,924,383
(1,845,276)
(612,472)
Balances at December 31, 2021
10,484,553 $
Vested and expected to vest at December 31, 2021 10,183,536 $
8,504,265 $
Exercisable at December 31, 2021
Weighted
Average
Exercise
Price
10.52
29.42
6.70
22.03
15.79
15.55
12.72
Weighted
Average
Remaining
Contractual
Life
(In Years)
Aggregate
Intrinsic
Value
(In
Thousands)
198,097
6.45 $
6.68 $
6.62 $
6.08 $
52,349
52,221
52,279
The aggregate intrinsic values of options outstanding, vested and expected to vest, and exercisable were
calculated as the difference between the exercise price of the options and the estimated fair value of the Company’s
common stock.
Employee Stock-Based Compensation Expense
Employee and director stock-based compensation expense is calculated based on awards previously
granted to employees and directors that are ultimately expected to vest and has been reduced for estimated
forfeitures.
Employee and director stock-based compensation expense was allocated as follows (in thousands):
Research and development
General and administrative
Total stock-based compensation expense
Year Ended December 31,
2021
2020
2019
$
$
13,983 $
11,971
25,954 $
8,145 $
7,312
15,457 $
7,145
5,584
12,729
129
Valuation Assumptions
The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the
grant date. The Black-Scholes option-pricing model requires the Company to make certain estimates and
assumptions, including assumptions related to the expected price volatility of the Company’s stock, the period
during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend
yield for the Company’s stock.
The expected volatility is based on the historical volatility of the stock of similar entities within the
Company’s industry over periods commensurate with the Company’s expected term assumption. The expected term
of stock option grants represents the weighted-average period the options are expected to remain outstanding and
is based on the “simplified” method where the expected term is the midpoint between the vesting date and the end
of the contractual term for each option. The Company bases the risk-free interest rate on the interest rate payable
on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed
expected option term. In reference to the expected dividend yield assumption, the Company has not historically
paid, and does not expect for the foreseeable future to pay, a dividend.
The weighted average grant-date fair value of stock options granted during the years ended December 31,
2021, 2020 and 2019 was $18.57, $10.86 and $8.00 per share, respectively. The intrinsic value of stock options
exercised was $34.2 million, $40.9 million and $10.2 million for the years ended December 31, 2021, 2020 and
2019, respectively. Due to the Company’s net operating losses, the Company did not realize any tax benefits from
stock-based payment arrangements for the years ended December 31, 2021, 2020 and 2019.
The fair value of stock option awards granted to employees and directors were estimated at the date of
grant using a Black-Scholes option-pricing model with the following weighted average valuation assumptions:
Volatility
Expected term (years)
Risk-free interest rate
Expected dividend yield
Year Ended December 31,
2021
2020
2019
72 %
5.98
0.95 %
—
68 %
6.23
1.04 %
—
65 %
6.18
2.25 %
—
As of December 31, 2021, total compensation cost not yet recognized related to unvested stock options
granted to employees and directors was $48.3 million, which is expected to be recognized over a weighted-average
period of 2.9 years.
The fair value of the rights granted to employees under the ESPP was estimated at the date of offer using a
Black-Scholes option-pricing model with the following weighted average valuation assumptions:
Volatility
Expected term (years)
Risk-free interest rate
Expected dividend yield
8. Employee Benefit Plan
Year Ended December 31,
2021
2020
2019
72 %
1.27
0.27 %
—
74 %
1.17
0.15 %
—
59 %
1.23
1.97 %
—
The Company sponsors a 401(k) defined contribution plan for its employees. Employee contributions are
voluntary. In December 2011, the Company adopted the 401(k) Matching Plan, under which the Company makes
matching contributions in the form of common stock at a rate of $1.00 for each $2.00 of employee contributions up
to a maximum $750 of common stock per employee per year. As of December 31, 2021 and 2020, the Company
had reserved 17,813 and 21,930 shares of common stock for issuance pursuant to the 401(k) Matching Plan,
respectively. Matching contributions of 4,117, 6,344 and 8,477 shares, or $125,000, $119,000 and $98,000 were
issued for the years ended December 31, 2021, 2020 and 2019, respectively.
130
9. Income Taxes
The Company has reported pre-tax operating losses for all periods presented. The Company has not
reflected any benefit for corresponding tax net operating loss carryforwards in the accompanying consolidated
financial statements. The Company has established a full valuation allowance against its deferred tax assets due to
the uncertainty surrounding the realization of such assets.
The components of the Company’s losses before income taxes were as follows (in thousands):
Domestic
Foreign
Total
Year Ended December 31,
2021
(120,858) $
523
(120,335) $
2020
(102,209) $
(278)
(102,487) $
2019
(34,634)
(8,161)
(42,795)
$
$
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
U.S. federal tax at statutory rate
Foreign tax rate differential
State, net of federal benefit
Stock-based compensation
Change in valuation allowance
Other
Total
Year Ended December 31,
2021
2020
2019
21.0 %
0.0
—
1.3
(21.8)
(0.5)
0.0 %
21.0 %
—
(0.1)
3.8
(25.0)
0.3
0.0 %
21.0 %
1.7
—
0.2
(23.2)
0.2
0.0 %
The components of the net deferred tax assets are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Stock-based compensation
Research and development credit
ROU asset
Other temporary differences
Total gross deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Lease liability
Non-qualified stock options with 83(b) election
Total gross deferred tax liabilities
Net deferred tax assets before valuation allowance
Deferred tax asset valuation allowance
Net deferred tax assets
December 31,
2021
2020
$
83,322 $
7,579
2,918
2,198
514
96,531
(997)
(850)
(15)
(1,862)
94,669
(94,669)
$
— $
60,879
4,580
2,918
—
2,079
70,456
(389)
—
(15)
(404)
70,052
(70,052)
—
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit
carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than
not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable
income within the carryforward period. Because of the Company’s recent history of operating losses, management
believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently
not more-likely-than-not to be realized and, accordingly, has provided a valuation allowance.
131
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which
are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation
allowance increased by approximately $24.6 million and $24.3 million during the years ended December 31, 2021
and 2020, respectively.
As of December 31, 2021, the Company had approximately $342.3 million in federal net operating loss
carryforwards to reduce future taxable income. Of this amount, $277.0 million was generated after December 31,
2017 and does not expire per the Tax Cuts and JOBS Act, or the 2017 Tax Act, and can be carried forward
indefinitely. The federal net operating loss carryforwards generated prior to January 1, 2018 are subject to a 20-year
carryforward period and will begin to expire after 2032. Subsequent to the enactment of the 2018 Tax Act, the
utilization of the federal net operating loss carryforwards generated in fiscal year 2019 and onwards is limited to
80% of the federal taxable income. The Company also had approximately $321.5 million in state net operating loss
carryforwards to reduce future taxable income, which will begin to expire after 2028, if not utilized.
The Company had approximately $3.1 million in federal research and development tax credits for each of
the years ended December 31, 2021 and 2020. In addition, the Company had approximately $4.0 million in state
research and development tax credits for each of the years ended December 31, 2021 and 2020. The federal
research credits will begin to expire in the years 2028 through 2035, if not utilized. The state research and
development credits have no expiration date and can be carried forward indefinitely.
As of December 31, 2021 and 2020, the Company had foreign net operating loss carryforwards of
approximately $21.3 million and $35.8 million, respectively, which have no expiration date.
Utilization of the Company’s net operating losses and credits may be subject to a substantial annual
limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before
utilization.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
Balance at beginning of year
Additions based on tax positions related to prior year
Additions based on tax positions related to current year
Balance at end of year
December 31,
2021
2020
2019
$
10,346 $
3,819 $
4,447
11,077
25,870 $
314
6,213
10,346 $
$
3,819
—
—
3,819
The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if
recognized. The Company has elected to include interest and penalties as a component of tax expense. During the
years ended December 31, 2021 and 2020, the Company did not recognize accrued interest and penalties related
to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax
benefits will significantly increase or decrease during the next 12 months.
The Company files federal, state and foreign income tax returns with varying statutes of limitations. The tax
years from inception in 2008 to December 31, 2020 remain subject to examination.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
132
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2021, management, with the participation of our Chief Executive Officer and Chief
Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls
and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended,
the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be
disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's, or SEC’s, rules and forms, and that
such information is accumulated and communicated to our management, including the Chief Executive Officer and
Chief Financial Officer, to allow timely decisions regarding required disclosures.
Any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that, as of December 31, 2021, the design and operation of our
disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the
evaluation required by Rule 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the quarter ended
December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act).
Under the supervision of and with the participation of our principal executive officer and principal financial
officer, our management assessed the effectiveness of our internal control over financial reporting as of December
31, 2021 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in “Internal Control—Integrated Framework” (2013). Based on this assessment, management concluded that our
internal control over financial reporting was effective as of December 31, 2021.
Our independent registered public accounting firm, Ernst & Young LLP, has audited our Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K and have issued an audit report on our
internal control over financial reporting as of December 31, 2021 which appears below.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of NGM Biopharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited NGM Biopharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, NGM
Biopharmaceuticals, Inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets as of December 31, 2021 and 2020, the related consolidated
statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and
cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report
dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
133
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
Redwood City, California
March 1, 2022
Item 9B.
Other Information.
None.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information required by this item regarding directors and director nominees, executive officers, the
board of directors and its committees, and certain corporate governance matters is incorporated by reference to the
information set forth under the captions “Proposal No. 1—Election of Directors,” “Corporate Governance and Board
Matters” and “Executive Officers” to be included in our Proxy Statement for our 2022 Annual Meeting of
Stockholders, or the 2022 Proxy Statement. If required, information required by this item regarding compliance with
Section 16(a) of the Exchange Act is incorporated by reference to the information set forth under the caption
“Delinquent Section 16(a) Reports” to be included in our 2022 Proxy Statement. The 2022 Proxy Statement will be
filed with the Securities and Exchange Commission no later than 120 days after December 31, 2021.
Our written code of business conduct and ethics, the Code of Conduct, applies to all of our employees,
officers and directors, including our principal executive officer, principal financial officer and principal accounting
officer or controller. The Code of Conduct is available on our corporate website at https://www.ngmbio.com/ in the
Investors & Media section under “Corporate Governance.” If we make any substantive amendments to our Code of
Conduct or grant any of our directors or executive officers any waiver, including any implicit waiver, from a provision
134
of our Code of Conduct, we will disclose the nature of the amendment or waiver on our website or in a Current
Report on Form 8-K.
Item 11.
Executive Compensation.
Information required by this item regarding executive compensation is incorporated by reference to the
information set forth under the captions “Executive Compensation” and “Director Compensation” in the 2022 Proxy
Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Information required by this item regarding security ownership of certain beneficial owners and
management is incorporated by reference to the information set forth under the caption “Security Ownership of
Certain Beneficial Owners and Management” and “Equity Compensation Plans at December 31, 2021” in the 2022
Proxy Statement.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
Information required by this item regarding certain relationships, related transactions and director
independence is incorporated by reference to the information set forth under the caption “Transactions with Related
Persons and Indemnification” and “Corporate Governance and Board Matters” in the 2022 Proxy Statement.
Item 14.
Principal Accounting Fees and Services.
Information required by this item regarding principal accounting fees and services is incorporated by
reference to the information set forth under the caption “Proposal No. 4—Ratification of Selection of Independent
Registered Public Accounting Firm” in the 2022 Proxy Statement.
Item 15.
Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this Annual Report on Form 10-K:
PART IV
1.
2.
3.
Financial Statements. See Index to Financial Statements in Part II, Item 8 of this Annual Report on
Form 10-K.
Financial Statement Schedules. None. All financial statement schedules are omitted because they
are not applicable, not required under the instructions, or the requested information is included in
the consolidated financial statements or notes thereto.
Exhibits. The following is a list of exhibits filed with this Annual Report or incorporated herein by
reference:
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
10.1*
10.2*
Exhibit Description
Amended and Restated Certificate of
Incorporation
Amended and Restated Bylaws
Amended and Restated Investors’ Rights
Agreement among the Registrant and
certain of its stockholders, dated March
20, 2015.
Form of Common Stock Certificate.
Description of Capital Stock.
Incorporated by Reference
Form
8-K
File No.
001-38853
Exhibit
3.1
Filing
Date
4/8/19
Filed
Herewith
S-1
333-227608
3.4
9/28/18
S-1
S-1
333-227608
333-227608
10-K
001-38853
4.1
4.2
4.3
9/28/2019
4/1/2019
3/17/2020
2008 Equity Incentive Plan, as amended.
S-1
333-227608
10.1
9/28/2018
Form of Stock Option Agreement and
Stock Option Grant Notice under the 2008
Equity Incentive Plan.
S-1
333-227608
10.2
9/28/2018
135
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10
10.11*
10.12*
10-13*
10-14*
10.15*
10.16#
10.17#
10.18
10.19**
Amended and Restated 2018 Equity
Incentive Plan.
Forms of Stock Option Agreement and
Notice of Grant of Stock Option under the
Amended and Restated 2018 Equity
Incentive Plan.
Forms of Restricted Stock Unit Agreement
and Notice of Grant of Restricted Stock
Unit under the Amended and Restated
2018 Equity Incentive Plan.
2019 Employee Stock Purchase Plan.
Form of Indemnification Agreement, by
and between NGM Biopharmaceuticals,
Inc. and each of its directors and executive
officers.
NGM Biopharmaceuticals, Inc. Non-
Employee Director Compensation Policy.
Forms of Stock Option Agreement and
Notice of Grant of Stock Option for Non-
employee Directors Under the Amended
and Restated 2018 Equity Incentive Plan.
Sublease Agreement, by and between
NGM Biopharmaceuticals, Inc. and
AMGEN Inc., dated December 11, 2015.
Executive Employment Offer Letter, by
and between NGM Biopharmaceuticals,
Inc. and Jin-Long Chen, Ph.D.
Executive Employment Agreement, by and
between NGM Biopharmaceuticals, Inc.
and David Woodhouse, Ph.D.
Offer Letter Agreement, by and between
the Registrant and Hsiao D. Lieu, M.D.,
dated as of January 16, 2019.
Offer Letter Agreement, by and between
the Registrant and Valerie L. Pierce, dated
as of August 6, 2019, and related
information.
Offer Letter Agreement, by and between
the Registrant and Siobhan Nolan
Mangini, dated as of May 20, 2020.
Research Collaboration, Product
Development and License Agreement by
and between NGM Biopharmaceuticals,
Inc. and Merck Sharp & Dohme Corp.,
dated as of February 18, 2015.
First Amendment to Research
Collaboration, Product Development and
License Agreement by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp., dated as of January 1,
2016.
Letter Agreement, by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp., dated as of March 20,
2015.
Amended and Restated Research
Collaboration, Product Development and
License Agreement, made effective as of
June 30, 2021, by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp.
S-1
333-227608
10.3
3/25/2019
S-1
333-227608
10.4
3/25/2019
S-1
S-1
333-227608
10.5
3/25/2019
333-227608
10.6
3/25/2019
S-1
333-227608
10.7
9/28/2018
S-1
333-227608
10.8
3/25/2019
10-Q 001-38853
10.2
8/5/2021
S-1
333-227608
10.9
9/28/2018
S-1
333-227608
10.11
9/28/2018
S-1
333-227608
10.13
3/25/2019
10-Q 001-38853
10.2
5/6/2021
10-Q 001-38853
10.3
5/6/2021
10-Q
001-38853
10.12
8/12/2020
S-1
333-227608
10.15
9/28/2018
S-1
333-227608
10.16
9/28/2018
S-1
333-227608
10.17
9/28/2018
10-Q 001-38853
10.1
8/5/2021
136
10.20#
10.21**
10.22**
10.23**
10.24
21.1
23.1
24.1
31.1
31.2
32.1†
Multi-Product Licence Agreement by and
between NGM Biopharmaceuticals, Inc.
and Lonza Sales AG, dated as of October
31, 2014, as amended by Amendment No.
1 on July 28, 2015, Amendment No. 2 on
October 7, 2015, Amendment No. 3 on
April 26, 2016, Amendment No. 4 on
October 3, 2017, Amendment No. 5 on
March 16, 2018 and Amendment No. 6 on
February 6, 2019.
Amendment No. 7 on December 22, 2020
to Multi-Product Licence Agreement by
and between NGM Biopharmaceuticals,
Inc. and Lonza Sales AG, dated as of
October 31, 2014.
Amendment No. 8 on February 10, 2021
to Multi-Product Licence Agreement by
and between NGM Biopharmaceuticals,
Inc. and Lonza Sales AG, dated as of
October 31, 2014.
Amendment No. 9 on November 3, 2021
to Multi-Product Licence Agreement by
and between NGM Biopharmaceuticals,
Inc. and Lonza Sales AG, dated as of
October 31, 2014.
Letter Agreement, by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp., dated as of March 15,
2019.
Subsidiaries of NGM Biopharmaceuticals,
Inc.
Consent of Independent Registered Public
Accounting Firm.
Power of Attorney (included on signature
page).
Certification of Chief Executive Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Financial Officer
pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Executive Officer and
Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act
of 2002.
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
XBRL Instance Document.
XBRL Taxonomy Extension Schema
Document.
XBRL Taxonomy Extension Calculation
Linkbase Document
XBRL Taxonomy Extension Definition
Linkbase Document
XBRL Taxonomy Extension Label
Linkbase Document
S-1
333-227608
10.17
4/1/2019
10-K
001-38853
10.17
3/15/2020
10-K
001-38853
10.18
3/15/2020
S-1
333-227608
10.18
3/25/2019
X
X
X
X
X
X
X
X
X
X
X
X
137
101.PRE
104
XBRL Taxonomy Extension Presentation
Linkbase Document
Cover Page Interactive Data File
(formatted as Inline XBRL and contained
in Exhibit 101)
X
X
*
**
#
†
Indicates management contract or compensatory plan or arrangement.
Certain confidential information contained in this exhibit has been omitted because it is both not material and
is of the type that the Registrant treats as private or confidential.
Confidential treatment has been granted for a portion of this exhibit.
The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K are not deemed filed
with the SEC and are not to be incorporated by reference into any filing of NGM Biopharmaceuticals, Inc.
under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation
language contained in such filing.
Item 16.
Form 10-K Summary.
None.
138
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 1, 2022
Date: March 1, 2022
NGM Biopharmaceuticals, Inc.
By:
/s/ David J. Woodhouse
David J. Woodhouse, Ph.D.
Chief Executive Officer and Director
By:
/s/ Siobhan Nolan Mangini
Siobhan Nolan Mangini
Chief Financial Officer
139
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints William J. Rieflin, David J. Woodhouse, Siobhan Nolan Mangini and Valerie Pierce, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her
name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, and either of them, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ David J. Woodhouse
David J. Woodhouse, Ph.D.
/s/ Siobhan Nolan Mangini
Siobhan Nolan Mangini
/s/ Bill Rieflin
William J. Rieflin
/s/ Jin-Long Chen
Jin-Long Chen, Ph.D.
/s/ David V. Goeddel, Ph.D.
David V. Goeddel, Ph.D.
s/ Shelly D. Guyer
Shelly D. Guyer
s/ Carole Ho
Carole Ho, MD
/s/ Suzanne Hooper
Suzanne Sawochka Hooper
/s/ Mark Leschly
Mark Leschly
/s/ Roger M. Perlmutter, M.D.
Roger M. Perlmutter, M.D.
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Date
March 1, 2022
Chief Financial Officer
March 1, 2022
(Principal Financial and Accounting Officer)
Executive Chairman and Director
March 1, 2022
Chief Scientific Officer and Director
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
Director
Director
Director
Director
Director
Director
140
Corporate Information
MANAGEMENT TEAM
BOARD OF DIRECTORS
INVESTOR RELATIONS
WI LLIAM J. RIEFLIN
Executive Chairman
WILLIAM J. RIEFLIN
Executive Chairman,
NGM Biopharmaceuticals
DAV ID J. WOODHOUSE, PH.D.
Chief Executive Officer
JIN-LO NG CH EN, PH.D.
Founder and Chief Scientific Officer
KAR A CALHOUN, PH.D.
Vice President, CMC
and Process Development
ALEX DEPAOLI, M.D.
Senior Vice President,
Chief Translational Officer
MAR C LEARNED, PH.D.
Vice President, Research Operations
HSIAO D. L I EU, M .D .
Senior Vice President,
Chief Medical Officer
SIO BHAN N O L AN M AN GIN I
Chief Financial Officer
JIN-LONG CHE N, PH.D.
Founder and Chief Scientific Officer,
NGM Biopharmaceuticals
DAVID V. GOEDDEL, PH.D.
Managing Partner, The Column Group
SHELLY G UYER
Chief Sustainability Officer,
Invitae Corporation
CAROLE HO, M.D.
Chief Medical Officer & Head of
Development, Denali Therapeutics
S UZANNE SAWOCHKA HOOP ER
Former Executive Vice President &
General Counsel, Jazz Pharmaceuticals
MARK LESCHLY
Managing Partner, RHO Capital Partners
BR IAN MUM A
Vice President, Human Resources
R OGER M. PERLMUTTER, M.D., P H.D .
Chief Executive Officer, Eikon Therapeutics
VAL ERIE PI ERCE
Senior Vice President, General Counsel
and Chief Compliance Officer
DAVID J. WOODHOUSE , PH.D.
Chief Executive Officer,
NGM Biopharmaceuticals
Inquiries and requests for information,
including copies of NGM Bio’s Annual
Report on Form 10-K, may be obtained
without charge by contacting Investor
Relations at ir@ngmbio.com or visiting
our website at www.ngmbio.com.
ANNUAL MEETING - VIRTUAL
May 18, 2022 at 7:30 a.m. Pacific Daylight
Time. Accessed through a live webcast at
www.virtualshareholdermeeting.com/
NGM2022
TRANSFER AGENT
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
CORPORATE COUNSEL
Cooley LLP
3175 Hanover Street
Palo Alto, CA 94304
INDEPENDENT AUDITORS
Ernst & Young LLP
275 Shoreline Drive, Suite 600
Redwood City, CA 94065
Statements contained in this annual stockholder report regarding matters that are not historical facts are “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. Words such as “will,” “may,” “continue,” “expect,” “anticipate,” “preliminary,” “enable,” “believe,” “designed,”
“suggesting,” “suggest,” “look forward,” “potentially,” “potential,” “promise,” “goal,” “planned,” “plans,” “aspire,” “aim” and similar expressions (as well as other words
or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. These statements include those
related to: the therapeutic potential of NGM Bio’s product candidates, NGM Bio’s continued pipeline development and research and development output; the
availability and anticipated timing of the initial data readout from the ongoing Phase 1/2 trial of NGM707; the ability and timing of all three of NGM Bio’s
programs from its myeloid checkpoint inhibition portfolio to be in the clinic; the availability and anticipated timing of additional clinical data readouts from the
ongoing Phase 1a/Phase 1b dose escalation study of NGM120; the availability and anticipated timing of topline data from the Phase 2 CATALINA trial of NGM621;
the ability and timing of NGM Bio to continue to generate new product candidates and submit investigational new drug applications; the ability of NGM Bio to
deliver life-saving medications to patients; and other statements that are not historical fact. Because such statements deal with future events and are based
on NGM Bio’s current expectations, they are subject to various risks and uncertainties, and actual results, performance or achievements of NGM Bio could differ
materially from those described in or implied by the statements in this annual stockholder report. These forward-looking statements are subject to risks and
uncertainties, including, without limitation, risks and uncertainties associated with the costly and time-consuming pharmaceutical product development
process and the uncertainty of clinical success, including risks related to failure or delays in successfully initiating, enrolling, reporting data from or completing
clinical studies, as well as the risks that results obtained in clinical trials to date may not be indicative of results obtained in ongoing or future trials and that
NGM Bio’s product candidates may otherwise not be tolerable and effective treatments in their planned indications; NGM Bio’s ability to maintain its amended
collaboration with Merck, including the risk that if Merck were to breach or terminate the amended collaboration or Merck’s development funding obligations,
NGM Bio would not obtain all of the anticipated financial and other benefits of the amended collaboration, and the development and/or commercialization of
NGM Bio’s product candidates within the scope of the amended collaboration could be delayed, perhaps substantially; the ongoing COVID-19 pandemic,
which has adversely affected, and could materially and adversely affect in the future, NGM Bio’s business and operations, including NGM Bio’s ability to timely
supply, initiate, enroll and complete its ongoing and future clinical trials; the time-consuming and uncertain regulatory approval process; NGM Bio’s reliance
on third-party manufacturers for aldafermin, NGM120, NGM707, NGM831, NGM621 and its other product candidates and the risks inherent in manufacturing and
testing pharmaceutical products; the sufficiency of NGM Bio’s cash resources, including to fund its wholly-owned programs, and NGM Bio’s need for additional
capital; and other risks and uncertainties affecting NGM Bio and its development programs, including those discussed in the section titled “Risk Factors” in NGM
Bio’s annual report on Form 10-K for the year ended December 31, 2021 filed with the United States Securities and Exchange Commission (SEC) on March 1, 2022
and future filings and reports that NGM Bio makes from time to time with the SEC. Except as required by law, NGM Bio assumes no obligation to update these
forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.
Annual Report 2021
Annual Report 2021
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