NGM BIOPHARMACEUTICALS, INC.
333 Oyster Point Boulevard
South San Francisco, California 94080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2023
Dear Stockholder:
You are cordially invited to attend the 2023 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 10, 2023 at 7:30 a.m. Pacific Daylight Time. This year’s Annual Meeting will be held
virtually through a live webcast at www.virtualshareholdermeeting.com/NGM2023. 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 I director named in the
accompanying Proxy Statement to hold office until the Company’s 2026 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 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, 2023.
4. 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/
NGM2023 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/NGM2023
beginning at 7:15 a.m. Pacific Daylight Time on Wednesday, May 10, 2023.
Our Board of Directors has fixed the close of business on March 17, 2023 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.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held on May 10, 2023, 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, 2022 are available at www.proxyvote.com.
By Order of the Board of Directors,
/s/ Valerie Pierce
Valerie Pierce
Senior Vice President, General Counsel, Chief Compliance Officer and Secretary
South San Francisco, California
March 29, 2023
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/NGM2023 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, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CEO PAY RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PAY VERSUS PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPOSAL NO. 3 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2024 ANNUAL MEETING . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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NGM BIOPHARMACEUTICALS, INC.
333 Oyster Point Boulevard
South San Francisco, California 94080
PROXY STATEMENT
FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 2023
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 2023 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 March 29, 2023.
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 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 I director named herein to hold
office until our 2026 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; and
➢ Proposal No. 3 - 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, 2023.
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 three 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 three items noted above.
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 I director named
herein to hold office until our 2026 annual meeting of stockholders and until their successors have been duly elected
and qualified;
1
➢ 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; and
➢ Proposal No. 3 - 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, 2023.
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 17,
2023, will be entitled to vote at the Annual Meeting. As of the Record Date, 82,056,499 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 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 as described below:
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 as soon as possible.
➢ 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 9, 2023 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
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 9, 2023 to be counted.
In addition, you may vote online during
to
www.virtualshareholdermeeting.com/NGM2023. 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.
the Annual Meeting. To do so, please go
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.” Your broker, bank or other
nominee 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 your broker, bank or other nominee
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/NGM2023 to vote
during the meeting.
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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 17, 2023.
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 Proposal Nos. 1 and 2 are considered to be “non-routine” under applicable rules, we
expect broker non-votes to exist in connection with Proposal Nos. 1 and 2. Proposal No. 3 is considered to be
“routine” under applicable rules, and therefore we do not expect broker non-votes on Proposal No. 3.
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.
What is required to approve each proposal?
Proposal
Proposal No. 1 -
Election of directors
Voting Options
“FOR” or
“WITHHOLD”
Proposal No. 2 -
Advisory vote to
approve executive
compensation
“FOR,” “AGAINST,”
or “ABSTAIN”
Proposal No. 3 -
Ratification of
retention of Ernst &
Young LLP
“FOR,” AGAINST,” or
“ABSTAIN”
Effect of
Abstentions /
Withheld Votes
No effect. Only “FOR”
votes will affect the
outcome.
Effect of “Broker
Non-Votes”
No effect. Only “FOR”
votes will affect the
outcome
An abstention will
have the same effect
as a vote “AGAINST”
the proposal.
No effect
An abstention will
have the same effect
as a vote “AGAINST”
the proposal.
Not applicable;
brokers have
discretion to vote.
Vote Required to
Adopt the Proposal
Plurality of the shares
present or
represented by proxy
and entitled to vote;
the nominees
receiving the highest
number of votes
“FOR” will be elected.
Majority of the voting
power of the shares
present or
represented by proxy
and entitled to vote
generally on the
subject matter; of the
shares present and
entitled to vote on the
proposal, a majority
of them must be
voted “FOR” the
proposal for it to be
approved.
Majority of the voting
power of the shares
present or
represented by proxy
and entitled to vote
generally on the
subject matter; of the
shares present and
entitled to vote on the
proposal, a majority
of them must be
voted “FOR” the
proposal for it to be
approved.
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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,
and “For” Proposal No. 3, 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, 2023. 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
the frequency of stockholder votes on executive compensation) and certain corporate governance proposals, even if
management-supported. In this regard, Proposal Nos. 1 and 2 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. 3 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. 3. 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 9, 2023;
➢ 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/NGM2023.
the Annual Meeting and vote again online by
following
the
instructions at
4
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 82,056,499 shares outstanding and entitled to vote. Thus,
the holders of 41,028,250 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?
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
stockholder list.
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 three years, we have again 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 facilitate stockholder participation by enabling
stockholders to participate fully, and equally, from any location around the world, 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-
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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 of Directors 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/NGM2023, 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
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/NGM2023.
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/NGM2023. 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.
6
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 eight members, as follows: Class I directors: Shelly D. Guyer, Carole Ho,
M.D. and William J. Rieflin, whose terms will expire at the Annual Meeting; 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 of stockholders to be held in 2025.
Ms. Guyer, Dr. Ho and Mr. Rieflin, each a current Class I director, were recommended for re-election to our
Board of Directors as Class I director nominees by our Nominating and Corporate Governance Committee and each
was nominated for re-election by our Board of Directors. Ms. Guyer and Mr. Rieflin were previously elected to our
Board of Directors by our stockholders. The Board of Directors elected Dr. Ho to our Board of Directors on June 5,
2020 upon recommendation by our Nominating and Corporate Governance Committee, based on its review of her
experience and qualifications. Dr. Ho was initially recommended to our Nominating and Corporate Governance
Committee by an external search firm.
If re-elected at the Annual Meeting, Ms. Guyer, Dr. Ho and Mr. Rieflin would serve until the annual meeting of
stockholders to be held in 2026 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 “FOR”
votes from the holders of shares present in person or represented by proxy and entitled to vote on the election of
directors will be elected. Only votes “FOR” nominees will affect the outcome. 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 I director nominees standing for election at the
Annual Meeting and each of our Class II and Class III directors continuing to serve on the Board of Directors,
including their respective ages, as of March 17, 2023. 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 I Director Nominees for Election for a Three-Year Term Expiring at the 2026 Annual Meeting of
Stockholders
Shelly D. Guyer, age 62, has served as a member of our Board of Directors since December 2019. Ms. Guyer
previously led the sustainability and environmental, social and governance, or ESG, efforts of Invitae Corporation, or
Invitae, a publicly-traded leading medical genetics company, as Chief Sustainability Officer from June 2021 to
October 2022, 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., or Veracyte, 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
7
as Vice President of Business Development and Investor Relations of Nuvelo, Inc., or Nuvelo, 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 and as a member of the H&Q
Environmental Technology Fund. 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, as well as her ESG expertise, make her qualified to serve on our Board of
Directors.
Carole Ho, M.D., age 50, 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., or Denali, a biotechnology
company since June 2015. Prior to joining Denali, Dr. Ho held various roles of increasing responsibility at
Genentech, Inc., or Genentech, a private biotechnology company, between 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 63, became the Chairman of our Board of Directors in July 2022, after having served as
our Executive Chairman since September 2018. He also served as our Chief Executive Officer and a member of
our Board of Directors from September 2010 to September 2018. 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 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, a public biotechnology company, in 2004, most recently serving as
Executive Vice President, Administration, Chief Financial Officer, General Counsel and Secretary. Mr. Rieflin has
served as a director of RAPT Therapeutics, Inc., or RAPT, a publicly-traded biotechnology company, since 2015 and
as chair of the board since 2019, at Lyell Immunopharma, Inc., a publicly-traded biotechnology company, since
2020, at Kallyope Inc., a private biotechnology company, since 2016 and at Lycia Therapeutics, Inc., a private
biotechnology company, as chair of the board since 2020. 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 Pharmaceuticals, a private biopharmaceutical company, 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, which is a consequence of his
tenure as Chief Executive Officer and Executive Chairman, 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. Mr. Rieflin was elected to our Board of Directors prior to our
initial public offering pursuant to a voting agreement entered into with certain of our stockholders that terminated
upon completion of our initial public offering in April 2019.
The Board of Directors Recommends
a Vote “For” Each of the Class I Director Nominees Named Above.
Class II Directors Continuing in Office Until the 2024 Annual Meeting of Stockholders
Jin-Long Chen, Ph.D., age 60, 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 Therapeutics, or
Tenaya, a public biotechnology company, 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.
8
Dr. Chen was 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.
Roger M. Perlmutter, M.D., Ph.D., age 70, has served as a member of our Board of Directors since June 2021.
Dr. Perlmutter 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. He currently serves on the board of directors of Insitro, Inc., a privately held 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 The Column Group, or TCG, a venture capital partnership. 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. 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.
Class III Directors Continuing in Office Until the 2025 Annual Meeting of Stockholders
David V. Goeddel, Ph.D., age 71, 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 TCG since 2007. Dr. Goeddel co-founded Tularik in November
1991, was 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 positions, including Fellow, Staff Scientist and Director of
Molecular Biology. Dr. Goeddel served as a director at the following publicly-traded biotechnology companies:
RAPT, April 2015 to June 2020, Surrozen Inc., or Surrozen, a publicly traded biotechnology company, from February
2017 to 2021 and Board Chairman of Tenaya from October 2016 to the present and he currently serves as Board
Chairman on two privately held biotechnology companies. 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
privately-held life science companies and experience in founding and serving as President and Chief Executive
Officer of a publicly-traded biopharmaceutical company give him the qualifications, skills and financial expertise to
serve on our Board of Directors. Dr. Goeddel was 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.
Suzanne Sawochka Hooper, age 57, 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., or Jazz, a public biopharmaceutical company. 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. Ms. Hooper was 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.
9
David J. Woodhouse, Ph.D., age 53, became our Chief Executive Officer and a member of our Board of
Directors in September 2018 and was our Acting Chief Financial Officer between September 2018 and July 2020,
after having served as our Chief Financial Officer from March 2015 until September 2018. 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, a public biopharmaceutical company, and also as a research assistant at Amgen.
He currently serves on the board of directors of Surrozen. 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 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. Dr. Woodhouse was 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.
Board Diversity
The Board Diversity Matrix below provides the diversity statistics for our Board of Directors.
Board Diversity Matrix (As of March 17, 2023)
Non-
Binary
Did Not
Disclose
Gender
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
1
-
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
5
-
-
1
-
-
4
-
3
-
-
1
-
-
2
-
10
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 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 served as our
Executive Chairman through July 1, 2022 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 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
leadership structure has not affected its administration of its risk oversight function.
leadership structure. Our Board of Directors believes
review
its
its
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
11
responsibilities of the Lead Independent Director, which are detailed in our Corporate Governance Guidelines,
include:
•
•
•
•
•
•
•
establishing the agenda with the Chairman and Chief Executive Officer for regular meetings of the Board of
Directors and serving as the chairperson of Board of Directors meetings 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 and leading executive sessions of the Board of
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 Drs. Woodhouse and Chen and Mr. Rieflin, 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 Compensation Committee is also responsible for overseeing
risks with respect to our human capital management practices generally. 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.
12
Meetings of the Board of Directors; Annual Meeting Attendance
The Board of Directors met six times during 2022. 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 2022 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 2022 annual meeting of stockholders held on May 18, 2022.
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 2022 for each of these committees:
Name
David V. Goeddel, Ph.D.
Shelly D. Guyer
Carole Ho, M.D.
Suzanne Sawochka Hooper
Roger M. Perlmutter, M.D., Ph.D.
Number of Meetings
________________________________
*
Committee Chair
Audit
Compensation
✓*
✓
✓
5
✓
✓*
7
Nominating and
Corporate
Governance
✓
✓
✓*
3
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. 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. 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 Mses. Guyer and Hooper and Dr. Ho, 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;
13
•
•
•
reviewing and discussing with management and auditors our major financial and legal compliance risk
exposures, including risks related to data privacy and technology and information security, including
cybersecurity;
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, 2022 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
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, 2022.
Respectfully submitted,
The Audit Committee of the Board of Directors
Shelly D. Guyer (Chair)
Carole Ho, M.D.
Suzanne Sawochka Hooper
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 the performance of our Chief Executive Officer 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;
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;
overseeing the Company’s talent and employee development programs, employee recruitment and
retention, and the development and implementation of the Company’s policies and strategies regarding
diversity, equity, inclusion and corporate culture; and
14
•
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. Until his retirement as Executive Chairman in July 2022,
Mr. Rieflin did not participate in, and was not present during, any deliberations or determinations of the
Compensation Committee regarding his compensation or his individual performance.
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. With respect to director compensation matters, our Compensation Committee
recommends to our Board of Directors and our Board of Directors determines and sets director compensation. Our
compensation arrangements for our directors are described under the section of this Proxy Statement entitled
“Director Compensation.”
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 Ms.
Guyer, and Dr. Perlmutter serves as Chair. Our Board of Directors has determined that Drs. Goeddel and Perlmutter
and Ms. Guyer 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;
15
•
•
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
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 assesses the effectiveness of its
goal of achieving a balanced and effective Board comprised of a diverse set of directors through its periodic
evaluation of the composition of the full Board of Directors.
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
16
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.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics, the Code of Conduct, that applies to all of our
employees, officers and directors, including our principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions. The Code of Conduct is available on our
corporate website at https://www.ngmbio.com/ in the Investors & Media section under “Corporate Governance.” We
intend to promptly disclose on our website or in a Current Report on Form 8-K in the future (i) the date and nature of
any amendment (other than technical, administrative or other non-substantive amendments) to the Code of Conduct
that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or
persons performing similar functions and relates to any element of the code of ethics definition enumerated in Item
406(b) of Regulation S-K and (ii) the nature of any waiver, including an implicit waiver, from a provision of the Code
of Conduct that is granted to one of these specified individuals that relates to one or more of the elements of the
code of ethics definition enumerated in Item 406(b) of Regulation S-K, the name of such person who is granted the
waiver and the date of the waiver. 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.
17
The following table sets forth certain information with respect to our executive officers as of March 17, 2023:
EXECUTIVE OFFICERS
Name
David J. Woodhouse, Ph.D. (1)
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.(2)
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
Age
53
42
60
52
60
Position
Chief Executive Officer and Director
President and Chief Financial Officer
Founder, Chief Scientific Officer and Director
Executive Vice President, Chief Medical Officer
Senior Vice President, General Counsel, Chief
Compliance Officer and Secretary
(1)
(2)
Please see “Class III Directors Continuing in Office Until 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 42, has served as our President since July 2022 and as our Chief Financial Officer
since July 2020. Prior to that, Ms. Nolan Mangini served in various roles at Castlight Health, Inc., or Castlight, now
known as apree health, 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, and a member of the board of directors of Virta Health and
SmithRx, both private healthcare technology companies. 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 52, has served as our Executive Vice President since March 2023 and as our 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, or Eli Lilly, a public pharmaceutical 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., a public biopharmaceutical company, and CV Therapeutics, Inc., a public biopharmaceutical
company that 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 60, has served as our Senior Vice President, General Counsel, Chief Compliance Officer
and Secretary since October 2019. Prior to joining NGM, Ms. Pierce served as Senior Vice President, Associate
General Counsel at Jazz 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 and ALZA Corporation, a public pharmaceutical company. Ms.
Pierce received a B.A. from Yale University and a J.D. from Yale Law School.
18
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis discusses the principles underlying our policies and decisions with
respect to the compensation of our named executive officers and the material factors relevant to an analysis of
these policies and decisions. Our named executive officers for 2022 are:
•
•
•
•
•
David J. Woodhouse, Ph.D., our Chief Executive Officer;
Siobhan Nolan Mangini, our President and Chief Financial Officer;
Jin-Long Chen, Ph.D., our Founder and Chief Scientific Officer;
Hsiao D. Lieu, M.D., our Executive Vice President and Chief Medical Officer; and
Valerie Pierce, our Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.
Overview of Business
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-changing
medicines based on scientific understanding of key biological pathways underlying grievous diseases with critical
unmet or underserved patient need. 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 portfolio of product candidates ranging from early discovery to Phase 2b
development. Currently, we have five programs in active clinical development. Our biology-centric drug discovery
approach is therapeutic area agnostic and 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.
2022 Accomplishments
Our key accomplishments in 2022 included the following:
•
Sharpened our focus on oncology solid-tumor clinical development and advanced our solid tumor oncology
development programs in the clinic, including our three myeloid checkpoint inhibitor programs.
◦ Myeloid Checkpoint Inhibitor Portfolio
▪
▪
▪
NGM707, our ILT2/ILT4 antagonist antibody product candidate. Presented preliminary data
from the Phase 1a monotherapy portion of the ongoing Phase 1/2 trial of NGM707 in
patients with advanced or metastatic solid tumors at the 2022 European Society of Medical
Oncologists (ESMO) I-O Annual Congress. NGM707 was generally well tolerated, potential
proof-of-mechanism (myeloid reprogramming) was observed in peripheral blood and tumor
biopsies and early signals of anti-tumor activity were demonstrated across multiple tumor
types.
NGM831, our ILT3 antagonist antibody product candidate. Initiated a Phase 1 trial of
NGM831 as a monotherapy and in combination with KEYTRUDA® (pembrolizumab) in
patients with advanced solid tumors.
NGM438, our LAIR1 antagonist antibody product candidate. Initiated a Phase 1 trial of
NGM438 as a monotherapy and in combination with pembrolizumab in patients with
advanced solid tumors.
◦
NGM120, our GFRAL antagonist antibody product candidate. Presented updated preliminary
findings from ongoing Phase 1a and Phase 1b cohorts evaluating NGM120 for the treatment of
cancer at the 2022 ESMO Annual Congress and at the 2022 American Association for Cancer
Research (AACR) Special Conference: Pancreatic.
•
Presented preclinical data on NGM936, our ILT3 x CD3 bispecific antagonist antibody product candidate
designed for the treatment of acute myeloid leukemia and multiple myeloma, at the 2022 American Society
of Hematology (ASH) Annual Meeting.
19
•
Completed enrollment of patients in ALPINE 4, the Phase 2b trial of aldafermin, our engineered FGF19
analog product candidate, in patients with compensated cirrhosis due to non-alcoholic steatohepatitis (liver
fibrosis stage 4 by the NASH Clinical Research Network classification).
In addition, in 2022, we announced disappointing topline results from the Phase 2 CATALINA clinical trial of our
product candidate NGM621, a monoclonal antibody engineered to potently inhibit complement C3, which was being
evaluated for the treatment of patients with geographic atrophy, or GA. The trial did not meet its primary endpoint of
a statistically significant rate of change in GA lesion area using slope analysis over 52 weeks of treatment with
NGM621 versus sham.
Compensation Highlights for 2022 and Early 2023
We carefully evaluate our compensation arrangements and maintain and develop programs that we feel are the
most appropriate to drive results for our Company and our stockholders. We have evolved our compensation
policies since going public to align with our strategic priorities, best practices and compensation trends for
companies at a similar stage. We take a holistic approach to designing our policies to align our executive
compensation program with our stockholders’ interests and our Company performance, which is best viewed over
the long term to align with product development cycles. Highlights of our executive compensation program in 2022
and early 2023 include:
•
•
•
•
•
•
Base Salary: Our named executive officers’ base salaries for 2022 increased between 3% and 7% as
compared to 2021 figures, which is aligned with actions we have taken across the Company.
Annual Cash Performance-Based Bonus: We did not increase target bonus award opportunities for our
named executive officers (with the exception of Ms. Nolan Mangini, whose target was increased in
connection with her promotion to President of the Company). Our named executive officers received
performance-based cash bonuses for 2022 in amounts ranging between 73% and 80% of target. Our
performance-based bonus program supports our commitment to align pay and performance and reinforces
that these payments are “at-risk.”
Long-Term Equity Awards: Equity awards are an integral part of our executive compensation program
and comprise the primary “at-risk” portion of our named executive officer compensation package. In 2023,
we introduced restricted stock unit, or RSU, awards for the first time, which is consistent with our pay-for-
performance philosophy, as award value is directly dependent on stock price. Granting both stock options
and RSUs allows us to better balance our goals of attracting and retaining key executives, enhancing
stockholder value and motivating and incentivizing extraordinary performance.
Total Chief Executive Officer Compensation: Our Chief Executive Officer’s total compensation (base
salary, performance-based cash bonus earned and equity granted, as reported in the “Executive
Compensation—Summary Compensation Table”) for 2022 decreased approximately 40% from 2021 levels.
We granted our Chief Executive Officer one equity award in 2022 as part of our annual equity grant cycle.
Peer Group: We modified our peer group in October 2022 to better represent the current scale of our
business by actively excluding companies with higher market capitalizations and making changes to ensure
selection of an appropriate group of companies based on not only market capitalization, but also industry
focus, number of employees and state of development.
Stockholder Engagement: We engaged with our stockholders to understand their views on our executive
compensation program, as described in the section below entitled “2022 Say-on-Pay Advisory Vote and
Stockholder Outreach.”
Executive Compensation Philosophy and Pay-for-Performance Emphasis
Our overall compensation philosophy and executive officer compensation program are 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
20
•
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 linked to 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 to attract and retain 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-
based bonus payouts dependent upon Company and individual performance and equity awards. We believe this
approach best aligns our executive officers’ interests with those of our stockholders for both short- and long-term
performance. Target total compensation for our named executive officers for 2022, as shown below, reflects annual
base salary, target annual performance-based bonus amounts and the grant date fair value of equity awards
granted during the year (as reported in “Executive Compensation—Summary Compensation Table” below).
Equity Awards 84%
k
s
i
R
‐
t
A
%
0
9
k
s
i
R
‐
t
A
%
2
8
Equity Awards 75%
Target Performance‐Based Bonus 6%
Base Salary 10%
C E O P A Y
Target Performance‐Based Bonus 7%
Base Salary 18%
OTHER NAMED EXECUTIVE OFFICERS
AVERAGE TARGET PAY
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
✓ Tie performance-based cash bonus opportunities to pre-
determined corporate goals
✓ 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, which meets regularly in independent session
without management present
✓ Provide “double-trigger” change in control severance
payments
2022 Say-on-Pay Advisory Vote and Stockholder Outreach
In 2022, we held our first advisory vote from our stockholders regarding our executive compensation program.
Our Compensation Committee takes the results of this vote into account when determining the compensation of our
executive officers. At our annual meeting of stockholders held in May 2022, approximately 76% of the votes cast
were in favor of our say-on-pay proposal. While a significant percentage of the votes cast were in favor of our
executive compensation program for 2021, the vote result was below our desired level of support; therefore, we
sought to understand the reason for this result.
In response to the level of support for our 2022 say-on-pay proposal, we requested meetings with stockholders
owning, in the aggregate, approximately 84% of our outstanding common stock. We contacted all of our top 15
stockholders, which included large, dissenting stockholders. Most stockholders declined to have a meeting or
indicated they had no feedback for us on our say-on-pay vote. However, our head of investor relations and General
Counsel (and when requested, an independent member of our Board of Directors) held meetings with every
stockholder that responded and agreed to meet with us (reflecting in aggregate 11% of our outstanding common
stock). In these meetings, we solicited feedback on, and provided additional insight into, our executive
compensation program, with the goal of sharing any feedback for consideration by our Compensation Committee.
During these engagement meetings, stockholders expressed a general desire for clearer disclosure on the metrics
the Company uses to evaluate its performance to demonstrate a pay-for-performance mindset, with a stated
preference for measurable metrics that are meaningful to the Company and its business and a corresponding
recognition that it is challenging for clinical-stage, non-revenue-generating biotechnology companies with diverse
portfolios to set quantitative metrics; a request for a more detailed description of the rationale for compensation of
its executives; a stated cap on bonus payouts, while recognizing there never have been payouts above 100% of
target; and consideration of introducing performance-vesting criteria for equity awards, in addition to the Company’s
current program which includes time-vesting awards. In response to this feedback, we have included more detailed
disclosure about our executive compensation decisions and their relationship to corporate performance based on
pre-determined goals and the Compensation Committee will consider adding an explicit cap to our bonus program
and continue to monitor when it will be appropriate to add performance-vesting awards to the Company’s equity
incentive program for executives. We plan to continue to engage with stockholders on a regular basis to solicit and
consider their views on our executive compensation program, as well as our business strategy, performance and
corporate governance practices.
22
Process for Determining Executive Compensation
Role of Our Compensation Committee, Management and the Board
Our Compensation Committee is appointed by the Board of Directors to assist with the Board of Director’s
oversight responsibilities with respect to the Company’s compensation and benefit plans, policies and programs,
administration of Company equity plans and the Board’s responsibilities related to the compensation of the
Company’s executive officers, directors and senior management, as appropriate.
Our Compensation Committee is responsible for overseeing and reviewing our general compensation strategy.
In this capacity, our Compensation Committee approves the design of, implements, reviews and approves all
compensation for our executive officers, except for the approval of compensation for our Chief Executive Officer,
whose compensation is approved by our Board of Directors based on recommendations from our Compensation
Committee.
Our Compensation Committee works with and receives information and analyses from management, including
our legal, finance, and human resources departments, and our Chief Executive Officer, and considers such
information and analyses in determining the structure and amount of compensation to be paid to our executive
officers, including our named executive officers. Our Chief Executive Officer provides recommendations annually to
the Compensation Committee regarding the compensation of all executive officers (other than himself) 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 measured against corporate goals and achievement of other corporate
priorities.
From time to time, various other members of management and other employees as well as outside advisors or
consultants may be invited by the Compensation Committee to make presentations, provide financial or other
background information or advice or otherwise participate in Compensation Committee or Board of Directors
meetings.
Members of management, including our Chief Executive Officer, may attend portions of our Compensation
Committee’s meetings; however, neither our Chief Executive Officer nor any other member of management is
present during decisions regarding his or her own compensation.
Role of the Independent Compensation Consultant
For 2022, the Compensation Committee engaged Aon’s Human Capital Solutions practice, a division of Aon plc,
or 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 2022, 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, and our non-employee director
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;
developing a market-based framework for potential changes to our compensation program for the
Compensation Committee’s review and input;
assessing compensation risk to determine whether our compensation policies and practices are reasonably
likely to have a material adverse effect on the Company; and
supporting other ad hoc matters throughout the year.
23
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 2022. 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 what has been 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 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 under “Key Factors Used in Determining Executive Compensation.”
Determination of 2022 Peer Group
In September 2021, our Compensation Committee, using data provided by Aon, established a group of
companies that would be appropriate peers for compensation decisions for 2022 based on a balance of industry
focus, number of employees, state of development, complexity and market capitalization. Specifically, companies
were selected if they were publicly-traded biopharmaceutical companies that were pre-commercial, with a focus on
companies that have recently gone public and clinical-stage companies with products in Phase 2 or 3 clinical trials,
as well as preclinical platform companies where appropriate, 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., $600 million to $5.0 billion);
companies with 100 to 500 employees; and
companies based in the United States, with a focus on companies headquartered in the Bay Area and other
biotechnology hub markets.
Based on these criteria, in September 2021, Aon recommended, and our Compensation Committee approved,
the following companies as our peer group for 2022:
Alector, Inc.
Allakos Inc.
2022 Peer Group(1)
Atara Biotherapeutics, Inc.
Cytokinetics, Incorporated
Gossamer Bio, Inc.
Kodiak Sciences Inc.
Allogene Therapeutics, Inc.
CytomX Therapeutics, Inc.
Madrigal Pharmaceuticals, Inc.
AnaptysBio, Inc.
Denali Therapeutics Inc.
Replimune Group, Inc.
Apellis Pharmaceuticals, Inc.
Dicerna Pharmaceuticals, Inc.
Rubius Therapeutics, Inc.
Arcturus Therapeutics Holdings, Inc.
Editas Medicine, Inc.
Scholar Rock Holding Corporation
Arcus Biosciences, Inc.
Forma Therapeutics Holdings, Inc.
Turning Point Therapeutics, Inc.
_______________________________
(1)
Allakos Inc., Arcturus Therapeutics Holdings Inc., Cytokinetics, Incorporated, Forma Therapeutics Holdings, Inc., Kodiak Sciences Inc.
and Scholar Rock Holding Corporation were added to our 2022 peer group because they met the selection criteria, and Adverum
Biotechnologies, Inc., Constellation Pharmaceuticals, Inc., Fate Therapeutics, Inc., Intellia Therapeutics, Inc., Odonate Therapeutics,
Inc., Tricida, Inc. and Voyager Therapeutics, Inc. were removed from the peer group because they either were acquired or no longer
met the selection criteria.
At the time of approval of the 2022 peer group, our market cap was at approximately the 50th percentile of the
peer companies, reflecting strong alignment with the companies selected for inclusion.
24
Use of Market Data
In late 2021, Aon completed an assessment of executive compensation based on our chosen 2022 peer group
as one input into the pay policy development for 2022 and the Compensation Committee’s determination of
executive compensation. 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 2022 peer group companies listed above, or the peer survey data; (ii) the 2022 peer group companies’ publicly
disclosed information, or public peer data; and (iii) data from public pre-commercial biotechnology and
pharmaceutical companies in the Aon Global Life Sciences Survey with market capitalizations that range from
approximately $600 million to $5.0 billion and with 100 to 500 employees, or the general survey data. 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 target annual performance-based bonus) and equity
compensation, against the market data described above primarily to ensure that our executive compensation
program, as a whole, is competitive and within the standard practices for companies of a similar stage. This
supports our objectives to attract and retain the highest caliber of executive officers and to provide a total
compensation opportunity for executive officers that is aligned with our corporate objectives and strategic needs.
However, the Compensation Committee recognizes that its compensation decisions may result in 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; as such, market
data is just one factor we use in determining executive compensation. 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 each executive officer. While the
Compensation Committee views a range of market data, it generally considers the 60th percentile of market data for
base salary and the 50th percentile of market data for each of target annual performance-based bonus awards,
long-term incentive compensation and target total direct compensation as appropriate reference points to take into
consideration when determining executive officer compensation.
Determination of 2023 Peer Group
While the Compensation Committee believed that the peer group described above was appropriate when
approved in September 2021, the Compensation Committee asked Aon to reassess our peer group in October 2022
to better represent the then-current scale of our business following the announcement of topline results from the
Phase 2 CATALINA trial and the reduction in our market capitalization. The criteria remained similar to that used to
determine our 2022 peer group. However, in October 2022 Aon evaluated each 2022 peer company against an
adjusted market capitalization range of $100 million to $800 million (reflecting approximately 0.4x to 3.0x of our
market capitalization) for continued inclusion and determined to remove seven peers (Allogene, Apellis, Acrus,
Cytokinetics, Denali, Madrigal and Rubius) due to falling outside of this range and two peers (Dicerna and Turning
Point) due to acquisitions. Based on these criteria, in October 2022, Aon recommended, and our Compensation
Committee approved, the following companies as our peer group for 2023:
25
4D Molecular Therapeutics, Inc.*
CytomX Therapeutics, Inc.
2023 Peer Group
Alector, Inc.
Allakos Inc.
Allovir, Inc.*
Editas Medicine, Inc.
Kronos Bio, Inc.*
Nektar Therapeutics*
Evelo Biosciences, Inc.*
Protagonist Therapeutics, Inc.*
Forma Therapeutics Holdings, Inc.
Replimune Group, Inc.
Alpine Immune Sciences, Inc.*
AnaptysBio, Inc.
Gossamer Bio, Inc.
Gritstone bio, Inc.*
Scholar Rock Holding Corporation
Summit Therapeutics Inc.*
Arcturus Therapeutics Holdings, Inc.
KalVista Pharmaceuticals, Inc.*
Syros Pharmaceuticals, Inc.*
Atara Biotherapeutics, Inc.
Kodiak Sciences Inc.
Vaxart, Inc.*
_______________________________
*
New peer company.
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 (other than for himself) and reference to market data, may consider 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 the executive officer’s role;
the executive officer’s individual performance and career trajectory;
internal pay equity;
the need to attract and retain talent in what has been a competitive market; and
the impact of aggregate compensation on the annual budget and on stockholder dilution.
In making decisions regarding executive compensation, the Compensation Committee members also exercise
their independent judgment and use their professional experience and understanding of compensation practices in
the biopharmaceutical industry.
Elements of Executive Compensation
The primary components of our executive compensation program are base salary, annual performance-based
cash bonus awards and annual equity-based 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 equity 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 short- and long-
term compensation, or between cash and non-cash compensation. However, as described above, in practice, the
vast majority of our named executive officers’ compensation is structured in the form of “at-risk” compensation,
intentionally designed to align our executive officers’ interests with those of our stockholders for short- and long-term
performance. Long-term compensation in the form of equity awards comprises the primary “at-risk” portion of our
named executive officer compensation package. We also provide our executive officers with benefits available to all
our employees, including retirement benefits under our 401(k) plan and participation in various employee health and
welfare benefit plans, and we provide certain of our executive officers with severance and change-in-control-related
payments and benefits.
26
2022 Compensation Decisions for Our Named Executive Officers
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 February 2022, the 2022 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, 2022. The base salary increases
from 2021 principally reflected general merit increases and competitive market adjustments. After his increase, Dr.
Woodhouse’s base salary was in the range of the 50th percentile of the market data. After his increase, the base
salary of Dr. Chen was above the 75th percentile of the market data, reflecting the criticality of the Chief Scientific
Officer position to our Company generally, as well as recognition of Dr. Chen’s founder status and the
Compensation Committee’s consideration of his significant ongoing contributions, including to the culture of our
Company. The base salaries of the other named executive officers were at approximately the 60th percentile of the
market data after their respective base salary increases.
Thereafter, in June 2022, in connection with Ms. Nolan Mangini’s promotion to serve in the additional position of
President of the Company, the Board of Directors approved a further increase to Ms. Nolan Mangini’s annual base
salary from $460,000 to $500,000, effective as of July 1, 2022, to reflect Ms. Nolan Mangini’s increased
responsibilities and position criticality and to more closely align with market data.
The increases provided to our NEOs were aligned with the prevailing policy implemented across the Company.
The following table shows each named executive officer’s 2022 annual base salary rate approved in February 2022:
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini (1)
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
2021 Annual
Base Salary
($)
2022 Annual
Base Salary
($)
% Increase
580,000
435,000
530,000
450,000
412,000
610,000
460,000
550,000
475,000
440,000
5.2 %
5.7 %
3.8 %
5.6 %
6.8 %
(1)
In connection with Ms. Nolan Mangini’s promotion to serve in the additional position of President of the Company, the Board of
Directors approved an annual base salary of $500,000 for Ms. Nolan Mangini, effective as of July 1, 2022.
Annual Cash Performance-Based Bonus Program
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. Whether a bonus is paid to any executive officer in any given year is dependent primarily on
an assessment of the Company’s achievements against corporate goals and individual contributions to the
outcomes. The philosophy of the Board of Directors since the inception of the Company has been to establish very
aggressive annual corporate goals, with the expectation that all such goals are not going to be achieved in the year
given the uncertainty of product development and clinical trial outcomes. 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.
27
Named Executive Officer Bonus Targets
The annual cash bonus targets for our executive officers are set by the Compensation Committee (or, with
respect to our Chief Executive Officer, by our Board of Directors) as a percentage of each executive officer’s base
salary. They are reviewed annually by the Compensation Committee (and the Board of Directors, as applicable),
taking into consideration, as applicable, market data, internal equity and the executive officer’s position criticality
and experience in role, and adjusted if deemed appropriate by the Compensation Committee (or the Board of
Directors, as applicable). In February 2022, the Compensation Committee (and the Board of Directors, as
applicable) determined that the existing bonus targets from 2021 remained aligned with competitive trends and with
the level of “at-risk” cash appropriate for the Company and, as a result, were unchanged for 2022.
In June 2022, in connection with Ms. Nolan Mangini’s promotion to serve in the additional position of President
of the Company, the Board of Directors approved an increase to Ms. Nolan Mangini’s bonus target from 40% to
45%, effective as of July 1, 2022, to reflect Ms. Nolan Mangini’s increased responsibilities and position criticality and
to more closely align with market data.
The following table shows each named executive officer’s 2022 target bonus award:
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini(1)
Jin-Long Chen, Ph.D.(2)
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
2022 Target Bonus Award
(% of base salary)
55.0%
42.5%
45.0%
40.0%
40.0%
2022 Target Bonus Award
Relative to Peer Data
(percentile)
25th
50th
75th
50th
50th
(1)
(2)
The 2022 target bonus award listed for Ms. Nolan Mangini reflects that, (i) in February 2022, the Compensation Committee determined
that Ms. Nolan Mangini’s bonus target for 2022 would remain at 40%, effective as of January 1, 2022, and (ii) in June 2022, in
connection with Ms. Nolan Mangini’s promotion to the additional position of President of the Company, the Board of Directors approved
a bonus target of 45% for Ms. Nolan Mangini, effective as of July 1, 2022.
The 2022 target bonus award listed for Dr. Chen fell 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 in recognition of Dr. Chen’s founder status and the
Compensation Committee’s consideration of his significant ongoing contributions, including to the culture of our Company.
Determination of Total Company Bonus Pool
Bonuses for all employees, including our executive officers, are allocated from a bonus pool that is determined
by the Compensation Committee each year. The total aggregate bonus payout for all employees, including
executive officers, is capped at the amount of the approved bonus pool.
The bonus pool for any given year is determined primarily based on the Compensation Committee’s
determination of the Company’s percentage achievement of intentionally aggressive annual corporate goals
approved by our Board of Directors and the Compensation Committee, or the bonus pool performance percentage.
The Company’s annual corporate goals generally fall into two broad strategic areas — advancement of research
and development, or 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. In February 2022, our Board of Directors
approved our 2022 corporate goals, or the 2022 goals, and the Compensation Committee adopted the 2022 goals
for purposes of considering the bonus pool release for 2022 performance. Our 2022 goals focused on generating
clinical data for certain of our clinical-stage programs, completing enrollment in certain other clinical trials, building
up our oncology development capabilities expertise, achieving certain capital-raising and business development
objectives, advancing our discovery research efforts and meeting certain recruiting, retention and operating
expense targets.
Consistent with the philosophy of the Board of Directors that more progress will be made by striving to achieve
stretch goals, even if all of the goals are not fully achieved, the 2022 goals were set as intentionally aggressive
stretch goals. The probability of achievement of our 2022 goals, as a whole, was dictated by clinical outcomes
28
which, by their nature, are uncertain and risky. As such, the 2022 goals were designed to incentivize extraordinary
performance, while recognizing that 100% achievement of all of the 2022 goals was unlikely to be achieved. The
Compensation Committee recognized that achieving even 80% of the 2022 goals would be difficult, requiring
focused effort and diligence, and would represent strong positive alignment with the Company’s business
objectives. As a result, the Compensation Committee determined that the achievement of approximately 80% of our
2022 goals could result in funding 100% of the bonus pool in an aggregate amount equal to all employee bonuses
paid at 100% of their respective targets, or a 100% bonus pool performance percentage, as shown below:
% of 2022 Goals Achieved
% of Bonus Pool Funding
80%
100%
In early 2023, in making its decision regarding the amount of the bonus pool for 2022 performance, the
Compensation Committee, considering input from our Chief Executive Officer and other members of the Board of
Directors, considered our achievements against our aggressive 2022 goals. Specifically, the Compensation
Committee noted the following achievements with respect to our 2022 goals:
•
•
•
•
•
•
advancement of our NGM707 Phase 1/2 trial to support advancement of Phase 2a development;
completion of enrollment in the Phase 1a portion of the NGM831 Phase 1 trial, and completion of
enrollment in the Phase 1a portion of the NGM438 Phase 1 trial in early 2023;
buildup of our oncology development expertise, including improvements in clinical oncology development,
regulatory and biometrics capabilities;
raising approximately $50 million in capital;
advancing research discovery efforts, including progress towards a new biologics platform; and
directing cash resources to optimally develop our R&D portfolio within our approved management operating
plan.
In addition, the Compensation Committee considered that, in October 2022, we announced disappointing topline
results from the Phase 2 CATALINA clinical trial of our NGM621 which was being evaluated for the treatment of
patients with GA.
Based on the Compensation Committee’s evaluation of the achievements against our 2022 goals, and the
results of the CATALINA trial, the Compensation Committee determined that the Company had achieved
approximately 60% of its 2022 goals. Under the established approach that the achievement of approximately 80%
of our 2022 goals could result in funding 100% of the bonus pool, the Compensation Committee determined to fund
the bonus pool in an aggregate amount equal to all employee bonuses paid at 75% of their respective targets, or a
75% bonus pool performance percentage, as shown below. In addition to this bonus pool, we fund an
exceptionalism bonus pool that is used to reward key talent and our highest performing employees below the vice
president level. Our named executive officers are not eligible for exceptionalism bonuses.
% of 2022 Goals Achieved
% of Bonus Pool Funding
60%
75%
Named Executive Officer Bonus Payments
The Compensation Committee and the Board of Directors (with respect to Dr. Woodhouse) aims to award each
executive officer a bonus equivalent to the portion of their target bonus award adjusted by the bonus pool
performance percentage, but generally believes that allowing for adjustments based on an assessment of individual
contributions to the Company’s goals is an important aspect of compensation governance and is consistent with our
Company’s culture.
In February 2022, the Board of Directors determined that Dr. Woodhouse’s performance goals for purposes of
determining his 2022 bonus were the 2022 goals. As such, in early 2023, the Board of Directors deemed it
appropriate to pay Dr. Woodhouse an amount commensurate with the 75% bonus pool performance percentage.
The Compensation Committee approved the cash bonus amount for each other named executive officer based on
each named executive officer’s bonus target and the 75% bonus pool performance percentage, as well as the
Compensation Committee’s consideration of individual performance, target total cash compensation relative to
29
market data and other factors. Specifically, 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 2022 cash bonus payment.
• Ms. Nolan Mangini: our Compensation Committee considered numerous contributions, including her role in
raising $50 million of new capital through equity financing, expanding and strengthening our business
development capabilities and her contributions to our business development efforts, and the successful
completion of the Company’s first SOX 404(b) audit.
•
•
Dr. Chen: our Compensation Committee considered numerous contributions, including advancement of
several new research-stage programs and platform technologies, selection and mentoring of new
leadership within the biology and protein engineering functions and contributions to business development
efforts.
Dr. Lieu: our Compensation Committee considered key contributions to the buildup of oncology expertise
within clinical development, increased capabilities in biometrics and regulatory and timely execution of trials
in a broadened portfolio of clinical programs.
• Ms. Pierce: our Compensation Committee considered numerous contributions, including legal support for
financing and business development activities during the year, leadership of organizational improvements in
SEC reporting and broader contributions to managing company growth and diversity, equity and inclusion
efforts.
In light of the foregoing, the 2022 bonus awards set forth in the table below were approved by our Board of
Directors (with respect to Dr. Woodhouse) and by our Compensation Committee (with respect to our other named
executive officers):
Named Executive Officer
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
Equity Compensation
Actual 2022 Performance-
Based Bonus Award
($)
Actual 2022 Performance-
Based Bonus Award
(% of Target Bonus)
250,000
150,000
180,000
150,000
140,000
75
74
73
79
80
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. Prior to 2023, all equity awards were granted
in the form of stock options, which is consistent with early-stage development companies, to align with increases in
stockholder value. The Compensation Committee also believes that stock options align with a focus on future value
consistent with the longer product cycles that come from executing on research and clinical trial objectives. The
Compensation Committee believes that stock options are inherently performance-based, and automatically link
executive pay to stockholder return, as the value realized, if any, from an award of stock options is dependent upon,
and directly proportionate to, future appreciation in our stock price. Regardless of the reported value in the
Summary Compensation Table, our named executive officers will only receive value from their stock option awards if
the market price of our common stock increases above the market price of our common stock at the time of grant
and remains above such price as the stock options continue to vest. Stock options also do not have downside
protection, and the awards will not provide value to the holder when the stock price is below the exercise price.
Vesting of options is generally tied to continuous service with us, serving as an additional retention measure.
Prior to 2023, our executive officers were typically awarded an initial new hire option grant upon commencement of
employment, as well as annual option grants thereafter. Annual grants 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
30
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 the Board of Directors, as appropriate). We consider annual option
grants to be a form of “at-risk” compensation.
Beginning in 2023, our Compensation Committee introduced restricted stock unit, or RSU, awards as part of our
annual grant program, as further described below under “Preview of 2023 Equity Awards.” The Compensation
Committee made the decision to introduce RSU awards to reflect macro-economic factors in our sector, for
additional retention as the Company addressed ongoing clinical trial and scientific outcomes and implemented a
shift in strategic focus to oncology, which has inherently long development cycles. In addition, this action was
considered to manage overall dilution for our stockholders and to reflect the ongoing talent pressure across the life
sciences sector, in particular in the Bay Area.
Each of our named executive officers 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 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 “Executive
Compensation—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, 2022.” For additional information about our
equity compensation plans, please see the section titled “Executive Compensation—Equity Compensation Plans”
below.
Annual 2022 Stock Option Awards
In February 2022, the Compensation Committee (or, with respect to Dr. Woodhouse, the Board of Directors)
granted a stock option to each of our named executive officers that vests as follows: 1/48th of the shares subject to
the option vest each month from January 1, 2022, subject to the executive officer’s 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, 2021 was filed. Stock option grants for
each of the named executive officers in 2022 were based on the Compensation Committee’s consideration of a
number of factors, including market data for the relevant position (based on award value and percent of company),
management of dilution, the retention value of existing holdings for each named executive officer and internal equity
across the senior leadership team. In determining the size of the stock options, the Compensation Committee (and
the Board, as applicable) considered the 50th percentile of the market data for the award value and percent of
company as reference points.
Named Executive Officer
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
2022 Stock Option Awards
(# of shares)
500,000
200,000
175,000
150,000
150,000
31
Ms. Nolan Mangini’s Promotion Stock Option Award
In connection with Ms. Nolan Mangini’s promotion to serve in the additional position of President of the
Company, on July 1, 2022, Ms. Nolan Mangini was granted a stock option to purchase 100,000 shares of our
common stock, which vests as to 1/48th of the shares subject to the option each month from July 1, 2022, subject to
her continued service to us on each applicable vesting date. The size of Ms. Nolan Mangini’s grant was determined
after consideration of her increased responsibilities, internal pay equity and market data for comparable positions.
Dr. Lieu’s Supplemental Stock Option Award
In November 2022, in recognition of Dr. Lieu’s criticality to the Company’s business and strategy, our
Compensation Committee granted Dr. Lieu a stock option to purchase 150,000 shares of our common stock, which
vests as to 50% of the shares subject to the option on each of the first and second anniversaries of the grant date,
subject to his continued service to us on each applicable vesting date. Our Compensation Committee determined
that this grant was an appropriate retention tool that would further incentivize Dr. Lieu at a pivotal moment for the
Company’s business. The size of the grant was determined after taking into consideration, among other things, Dr.
Lieu’s then-current compensation opportunities, equity ownership (including the value of his equity holdings and the
extent to which the exercise prices of his then-outstanding stock options were below market value), retention
considerations and market data.
Preview of 2023 Equity Awards – Introduction of RSUs
In February 2023, we introduced RSU awards into our long-term incentive program to promote the stability and
retention of our employees, including our named executive officers. Our Compensation Committee believes a more
diversified long-term incentive program, pursuant to which both stock options and RSUs are granted to our
employees, including executive officers, better balances our goals of attracting and retaining key executives,
enhancing stockholder value, and motivating and incentivizing extraordinary performance. In addition, RSUs are
consistent with our pay-for-performance philosophy, as the award value is directly dependent on stock price over
the long-term and RSUs provide less dilution than stock options.
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 focus our named executive
officers on our business goals and objectives. The key terms of the employment agreements or offer letters are
described below under “Executive Compensation—Employment, Severance and Change-in-Control Arrangements.”
Pursuant to their employments agreements or offer letters, each of Dr. Woodhouse, Mses. Nolan Mangini and
Pierce and Dr. Lieu (effective as of February 2023) 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 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 “Executive Compensation—
Employment, Severance and Change-in-Control Arrangements.”
In addition, each of our named executive officers holds equity awards under our equity incentive plans that were
granted subject to the applicable forms of award agreement. A description of the termination and change-in-control
provisions in such equity incentive plans and forms of award agreement is provided below under “Executive
Compensation—Equity Compensation Plans.”
32
Other Benefits and Perquisites
Our named executive officers are eligible to participate in all of our benefit plans, including 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 2022, 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 $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
Equity Grant Practices
Our general practice is to grant annual equity awards to our executive officers and other employees as of the
second business day following the day on which our Annual Report on Form 10-K for the applicable year is filed.
Accordingly, grants to our executive officers are made shortly after we have released information about our financial
performance to the public for the applicable annual period. As a result, the timing of equity awards is not
coordinated in a manner that intentionally benefits our executive officers.
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
or RSU awards 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.
33
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
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 adopt a clawback policy that is compliant with the Dodd-
Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, in a timely manner following
finalization of the Nasdaq listing standards relating to the recovery of erroneously awarded compensation.
Risk Assessment Concerning Compensation Practices and Policies
With the assistance of the Compensation Committee’s compensation consultant and our outside legal counsel,
in December 2022, 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 equity awards) 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, 2022.
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.
34
Summary Compensation Table
EXECUTIVE COMPENSATION
The following table shows, for the years ended December 31, 2022, 2021 and 2020, the compensation awarded
to or paid to, or earned by, our named executive officers.
Salary
($)
Year
2022 610,000
2021 580,000
2020 525,000
2022 480,000
2021 435,000
Bonus
($)(1)
—
300,000
200,000
—
175,000
Option
Awards
($)(2)
5,072,750
9,031,230
3,833,880
2,903,030
1,003,470
Non-
Equity
Incentive
Plan
Compen-
sation
($)(3)
250,000
—
—
150,000
—
2020 199,695
2022 550,000
2021 530,000
2020 515,000
2022 475,000
2021 450,000
155,000
—
200,000
175,000
7,500
175,000
3,458,520
1,775,463
3,512,145
1,677,323
2,106,660
2,006,940
—
180,000
—
—
142,500
—
All Other
Compen-
sation
($)(4)
750
750
750
750
750
750
750
750
750
750
750
Total
($)
5,933,500
9,911,980
4,559,630
3,533,780
1,614,220
3,813,965
2,506,213
4,242,895
2,368,073
2,732,410
2,632,690
Name and Principal Position
David J. Woodhouse, Ph.D.
Chief Executive Officer
Siobhan Nolan Mangini (5)
President and Chief Financial
Officer
Jin-Long Chen, Ph.D.
Founder and Chief Scientific
Officer
Hsiao D. Lieu, M.D.(6)
Executive Vice President and
Chief Medical Officer
2020 432,000
2022 440,000
2021 412,000
Valerie Pierce(7)
Senior Vice President,
General Counsel, Chief
Compliance Officer and
Secretary
_______________________________
150,000
8,000
170,000
239,618
1,521,825
2,006,940
—
132,000
—
750
750
750
822,368
2,102,575
2,589,690
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Amounts represent discretionary portion of annual performance-based bonuses awarded for the year indicated. For a description of the
Company’s annual performance-based bonus program for 2022, see “Compensation Discussion and Analysis—2022 Compensation
Decisions for Our Named Executive Officers—Annual Cash Performance-Based Bonus Program” in this Proxy Statement.
Amounts represent the aggregate grant date fair value of stock options granted to our named executive officers during 2020, 2021 and
2022, as applicable, computed in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included
in “Note 7—Stockholders’ Equity” to our consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2022. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by
the named executive officers.
Amounts represent annual performance-based bonuses awarded for the year indicated. For a description of the Company’s annual
performance-based bonus program for 2022, see “Compensation Discussion and Analysis—2022 Compensation Decisions for Our
Named Executive Officers—Annual Cash Performance-Based Bonus Program” in this Proxy Statement.
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 was promoted to President of the Company, in addition to her role as Chief Financial Officer of the Company,
effective July 1, 2022.
Dr. Lieu was promoted to Executive Vice President of the Company, in addition to his role as Chief Medical Officer of the Company,
effective March 8, 2023.
Ms. Pierce was not a named executive officer in 2020 and, thus, only 2021 and 2022 compensation information is shown for Ms.
Pierce in this table.
35
Grants of Plan-Based Awards in 2022
Award Type Grant Date
Approval
Date
Estimated
Future
Payouts
Under Non-
Equity
Incentive
Plan
Awards
Target ($)(1)
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
Exercise
Price of
Option
Awards
($/Share)
Grant Date
Fair Value of
Option
Awards ($)(2)
Stock Option
3/3/2022 (3)
2/7/2022
500,000 (4)
15.20 5,072,750
Annual Cash
$ 335,500
Stock Option
3/3/2022 (3)
2/7/2022
200,000 (4)
15.20 2,029,100
Stock Option
7/1/2022 (5)
6/29/2022
100,000 (5)
12.78
873,930
Annual Cash
$ 204,000
Stock Option
3/3/2022 (3)
2/7/2022
175,000 (4)
15.20 1,775,463
Annual Cash
$ 247,500
Stock Option
3/3/2022 (3)
2/7/2022
150,000 (4)
15.20 1,521,825
Stock Option
Annual Cash
Stock Option
Annual Cash
11/4/2022 (6) 10/31/2022
150,000 (6)
5.36
584,835
3/3/2022 (3)
2/7/2022
150,000 (4)
15.20 1,521,825
$ 190,000
$ 176,000
Name
David J.
Woodhouse,
Ph.D.
Siobhan Nolan
Mangini
Jin-Long Chen,
Ph.D.
Hsiao D. Lieu,
M.D.
Valerie Pierce
_______________________________
(1)
(2)
(3)
(4)
(5)
(6)
This column sets forth the target amount for each named executive officer for the year ended December 31, 2022 under annual
performance-based bonus program. There are no threshold or maximum values applicable. For a description of the Company’s annual
performance-based bonus program for 2022, see “Compensation Discussion and Analysis—2022 Compensation Decisions for Our
Named Executive Officers—Annual Cash Performance-Based Bonus Program” in this Proxy Statement.
Amounts represent the grant date fair value of stock options granted to our named executive officers during 2022 computed in
accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in “Note 7 — Stockholders’ Equity”
to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. These
amounts do not necessarily correspond to the actual value recognized or that may be recognized by the named executive officers.
Consistent with the Company’s historical annual grant practices, the 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, 2021 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, 2022, subject to each executive’s continued service to us on each applicable vesting date. Options may be exercised when
vested following the grant date.
Awarded in connection with Ms. Nolan Mangini’s promotion to President of the Company, in addition to her role as Chief Financial
Officer of the Company, effective July 1, 2022. Options vest as to 1/48th of the shares subject to the option each month from July 1,
2022, subject to Ms. Nolan Mangini’s continued service to us on each applicable vesting date. Options may be exercised when vested
following the grant date.
Awarded in recognition of Dr. Lieu’s criticality to the Company’s business and strategy. Options vest as to 50% of the shares subject to
the option on each of November 4, 2023 and November 4, 2024, subject to Dr. Lieu’s continued service to us on each applicable
vesting date. Options may be exercised when vested following the grant date.
36
Outstanding Equity Awards at December 31, 2022
The following table shows certain information regarding outstanding equity awards at December 31, 2022
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
3/3/2022
8/3/2020
3/17/2021
3/3/2022
7/1/2022
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
3/3/2022
3/19/2019
2/4/2020
3/17/2021
3/3/2022
11/4/2022
10/1/2019
3/17/2021
3/3/2022
3/2/2015
1/1/2017
1/1/2018
7/13/2018
1/1/2019
1/1/2020
1/1/2021
1/1/2022
7/13/2020
1/1/2021
1/1/2022
7/1/2022
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
1/1/2022
3/19/2019
1/1/2020
1/1/2021
1/1/2022
11/4/2022
9/30/2019
1/1/2021
1/1/2022
255,000 (3)
87,013
57,833
500,000
200,000
400,000
215,625 (4)
114,583 (4)
300,000 (3)
23,958 (4)
45,833 (4)
10,416 (4)
85,082
175,000
200,000
225,000
225,000
200,000
175,000
175,000
83,854 (4)
40,104 (4)
190,000 (3)
25,000
47,916 (4)
34,375 (4)
(4)
(5)
—
200,000 (3)
47,916 (4)
34,375 (4)
—
—
—
—
—
—
234,375
385,417
—
26,042
154,167
89,584
—
—
—
—
—
—
—
—
91,146
134,896
—
—
52,084
115,625
150,000
—
52,084
115,625
7.54
7.70
8.14
11.00
12.06
16.47
31.93
15.20
18.88
31.93
15.20
12.78
1.44
2.16
4.00
7.64
7.70
8.14
12.06
16.47
31.93
15.20
12.06
16.47
31.93
15.20
5.36
13.42
31.93
15.20
4/21/2025
1/19/2027
1/30/2028
7/24/2028
2/6/2029
2/3/2030
3/16/2031
3/2/2032
8/2/2030
3/16/2031
3/2/2032
6/30/2032
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
3/2/2032
3/18/2029
2/3/2030
3/16/2031
3/2/2032
11/3/2032
9/30/2029
3/16/2031
3/2/2032
Name
David J. Woodhouse,
Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
_______________________________
(1)
(2)
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.
37
(3)
(4)
(5)
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.
Option may be exercised when vested following the date of grant.
50% of the shares subject to this option vest on each of November 4, 2023 and November 4, 2024.
Option Exercises in 2022
There were no option exercises by our named executive officers in 2022.
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. Each of our named executive
officers is an at-will employee. In addition, Dr. Woodhouse’s employment agreement and Ms. Nolan Mangini’s, Dr.
Lieu’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 is entitled to an annual base salary, which was $610,000 in 2022.
Pursuant to Dr. Woodhouse’s employment agreement, 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 of the Company, 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.
Under Dr. Woodhouse’s employment agreement, “cause” means: (a) conviction of any felony or any crime
involving moral turpitude or dishonesty; (b) participation in a fraud or act of dishonesty against the Company; (c)
willful and material breach of executive’s duties that has not been cured within 30 days after written notice from the
Board of Directors of such breach; (d) intentional and material damage to the Company’s property; (e) material
breach of the proprietary information and inventions agreement between the Company and Dr. Woodhouse; or (f)
death, severe physical or mental disability.
Under Dr. Woodhouse’s employment agreement, Dr. Woodhouse has “good reason” to resign from all positions
held with the Company if any of the following actions are taken by the Company or a successor corporation or entity
without Dr. Woodhouse’s consent, and Dr. Woodhouse notifies the Company in writing, within ten days after the
occurrence of one of the following actions, that he intends to terminate his employment no earlier than 30 days after
providing such notice, and the Company fails to cure such actions within 30 days after receipt of such notice, and
such resignation is effective not later than 30 days after the Company fails to cure the issue: (a) a substantial
reduction of Dr. Woodhouse’s rate of compensation; (b) a material reduction in Dr. Woodhouse’s duties; (c) a
material failure or refusal of a successor to the Company to assume the Company’s obligations under Dr.
Woodhouse’s employment agreement in the event of a change in control; or (d) a relocation of Dr. Woodhouse’s
principal place of employment to a place greater than 50 miles from his then-current principal place of employment,
which relocation results in a material increase in Dr. Woodhouse’s commute.
Under Dr. Woodhouse’s employment agreement, “change in control” means: (a) a sale of substantially all of the
assets of the Company; (b) a merger or consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation in which stockholders immediately before the merger or consolidation have,
immediately after the merger or consolidation, a majority of the voting power of the surviving corporation); (c) a
38
reverse merger in which the Company is the surviving corporation but the shares of the Company’s common stock
outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise (other than a reverse merger in which stockholders immediately before the
merger have, immediately after the merger, a majority of the voting power of the surviving corporation); or (d) any
transaction or series of related transactions in which 50% or more of the Company’s voting power is transferred,
other than the sale by the Company of stock in transactions the primary purpose of which is to raise capital for the
Company’s operations and activities.
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 is entitled to an annual base salary, which was $460,000 from January 1,
2022 through June 30, 2022 and $500,000 starting July 1, 2022 in connection with her promotion to President as
further described below.
On July 1, 2022, Ms. Nolan Mangini was promoted to President of the Company, in addition to her role as Chief
Financial Officer of the Company, effective July 1, 2022. In connection with her promotion, our Board of Directors
approved changes to Ms. Nolan Mangini’s compensation, including changes to her severance package provided in
her employment offer letter described below and changes to her annual base salary, annual bonus target and equity
compensation, as further described in “Compensation Discussion and Analysis—2022 Compensation Decisions for
Our Named Executive Officers.”
Pursuant to Ms. Nolan Mangini’s employment offer letter, as updated in connection with her promotion on July
1, 2022, 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 of the
Company, 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 nine months; (ii)
payment or reimbursement of COBRA premiums for her and her eligible dependents for up to nine 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 is entitled to an annual base salary, which was $550,000 in 2022.
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 is entitled to an annual base salary, which was $475,000 in 2022.
On February 27, 2023, the Compensation Committee approved certain changes to Dr. Lieu’s employment offer
letter to provide that 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 of
the Company, and contingent on execution of an effective release of claims against us and satisfaction of certain
other conditions, Dr. Lieu will be entitled to (i) continued payment of his base salary for six months; (ii) payment or
reimbursement of COBRA premiums for him and his eligible dependents for up to six months; and (iii) full vesting of
any unvested equity awards held by Dr. Lieu.
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 is entitled to an annual base salary, which was $440,000 in 2022. In May 2020, the
Compensation Committee approved certain changes to Ms. Pierce’s employment offer letter to provide that 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 of the Company, 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 six months; (ii) payment or reimbursement of
39
COBRA premiums for her and her eligible dependents for up to six 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, RSU 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 and RSU awards 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.”
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
40
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.
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.
41
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 $20,500 for 2022. Participants who are at least 50
years old can also make “catch-up” contributions, which in 2022 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 beginning in the year ended December 31, 2022 was
generally equal to 50% of the participant’s plan contribution up to a maximum employer contribution of $3,500 worth
of our common stock per year. In 2022, we merged the 401(k) Matching Plan into our 401(k) plan for ease of
administration. In the future, we may make additional discretionary contributions for all participants to the 401(k)
plan. Each participant’s contributions, and the corresponding investment earnings, are generally not taxable to the
participants until withdrawn. Participant contributions are held in trust as required by law. Individual participants may
direct the trustee to invest their accounts in authorized investment alternatives.
Potential Payments Upon Termination or Change in Control
The tables below show estimates of the compensation payable to each of our named executive officers upon
their termination of employment with the Company and/or upon a change in control, calculated as if the triggering
event had occurred effective December 31, 2022. The actual amounts due to any one of the named executive
officers upon termination of employment can only be determined at the time of the termination. There can be no
assurance that a termination or change in control would produce the same or similar results as those described
below if it occurs on any other date or at any other stock price, or if any assumption is not, in fact, correct.
42
Name
David J. Woodhouse, Ph.D.
Siobhan Nolan Mangini
Jin-Long Chen, Ph.D.
Hsiao D. Lieu, M.D.
Valerie Pierce
Involuntary Termination
Without Cause or
Resignation for Good
Reason in Connection with a
Change of Control ($)(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 $
610,000 $
37,692
—
647,692 $
375,000 $
28,269
—
403,269 $
— $
—
—
— $
— $
—
—
— $
220,000 $
18,846
—
238,846 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
_______________________________
(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, 2022. With respect to Dr. Lieu, the addendum regarding his severance benefits was added to his
employment offer letter subsequent to December 31, 2022 and, thus, is not reflected in this table. 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 in which the
successor corporation elects not to assume or substitute for each outstanding award and such named executive officer’s employment
continues, assuming the vesting acceleration took place on December 31, 2022. See “Equity Compensation Plans” above for further
information.
The value of stock option acceleration is based on the closing price of $5.02 on December 30, 2022 (given that December 31, 2022
was not a business day), minus the exercise price of the unvested stock option shares subject to acceleration. No amounts are
included as of December 31, 2022 because all unvested stock options were out-of-the-money based on such closing price.
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—2022 Compensation Decisions for
Our Named Executive Officers—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 2022.
Perquisites and Other Personal Benefits
We do not provide perquisites or other personal benefits to our named executive officers.
43
No Tax Gross-Ups
In 2022, 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.
44
EQUITY COMPENSATION PLANS AT DECEMBER 31, 2022
The following table shows certain information with respect to all of our equity compensation plans in effect as of
December 31, 2022.
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))
2,282,016 $
11,933,405
—
—
14,215,421 $
5.76
16.43
—
—
14.74
—
5,660,466
263,830
—
5,924,296
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,
2022, there were 192,385 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. On
January 1, 2023, the number of shares available for issuance under the Restated 2018 Plan automatically increased by 3,275,416
shares.
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. On January 1, 2023, the number of shares available for
issuance under the ESPP automatically increased by 818,854 shares.
45
CEO Pay Ratio Disclosure
CEO PAY RATIO
Under rules adopted pursuant to the Dodd-Frank Act, we are required to calculate and disclose the total
compensation paid to our median employee, as well as the ratio of the total compensation paid to our Chief
Executive Officer as compared to the total compensation paid to the median employee, or the CEO Pay Ratio. The
paragraphs that follow describe our methodology and the resulting CEO Pay Ratio.
Determination Date
We identified the median employee using our employee population as of December 1, 2022 (including all
employees, whether employed on a full-time, part-time, seasonal or temporary basis).
Consistently Applied Compensation Measure
Under the relevant rules, we are required to identify the median employee by use of a consistently applied
compensation measure, or CACM. We chose a CACM that closely approximates the annual target total
compensation of our employees. Specifically, we identified the median employee by aggregating, for each
employee: (1) annual base pay (using a reasonable estimate of the hours worked for hourly employees and
expected annual salary for the remaining employees), (2) the target annual performance-based bonus amount and
(3) the grant date fair value of equity awards granted in 2022. In identifying the median employee, we annualized
the compensation values of individuals that joined our Company during 2022.
Methodology and Pay Ratio
After applying our CACM methodology, we identified the median employee. Once the median employee was
identified, we calculated the median employee's annual total compensation in accordance with the requirements of
the Summary Compensation Table. Our median employee compensation for 2022 as calculated using Summary
Compensation Table requirements was $251,078. Our Chief Executive Officer's compensation for 2022 as reported
in the Summary Compensation Table was $5,933,500. Therefore, our CEO Pay Ratio for 2022 is approximately
24:1.
This information is being provided for compliance purposes and is a reasonable estimate calculated in a manner
consistent with the SEC rules, based on our internal records and the methodology described above. The SEC rules
for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply
certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and
compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay
ratio reported above, as other companies have different employee populations and compensation practices and
may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Neither
the Compensation Committee nor management of the Company used the CEO Pay Ratio measure in making
compensation decisions.
46
PAY VERSUS PERFORMANCE
The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how the
Company or the Compensation Committee view the link between the Company’s performance and named
executive officer pay. For additional information about our pay-for-performance philosophy and how we align
executive compensation with Company performance, refer to “Compensation Discussion and Analysis” in this Proxy
Statement, beginning on page 19.
Required Tabular Disclosure of Pay Versus Performance
The amounts set forth below under the headings “Compensation Actually Paid to PEO” and “Average
Compensation Actually Paid to Non-PEO NEOs” have been calculated in a manner consistent with Item 402(v) of
Regulation S-K. Use of the term “compensation actually paid” is required by the SEC’s rules and as a result of the
calculation methodology required by the SEC, such amounts differ from compensation actually received by the
individuals and the compensation decisions described in “Compensation Discussion and Analysis.”
In 2022, the Company did not use any “financial performance measures” as defined Item 402(v) of Regulation
S-K to link compensation paid to the named executive officers, which are referred to as NEOs in the headers to the
following tables. Accordingly, we have omitted the tabular list of financial performance measures and the table
below does not include a column for a “Company-Selected Measure” as defined in Item 402(v) of Regulation S-K.
Our Chief Executive Officer is our principal executive officer and is referred to as PEO in the headers to the
following tables.
Value of Initial Fixed $100
Investment Based On:
Summary
Compensation
Table Total for
PEO(1)
($)
5,933,500
9,911,980
4,559,630
Year
2022
2021
2020
Compensation
Actually Paid to
PEO(2)
($)
(736,553)
(325,199)
10,775,804
Average
Summary
Compensation
Table Total for
Non-PEO
NEOs(3)
($)
2,718,744
2,769,874
3,091,019
Average
Compensation
Actually Paid
to Non-PEO
NEOs(4)
($)
236,800
(314,657)
5,857,903
Total
Shareholder
Return(5)
($)
34.15
120.48
206.09
Net Loss
(in
thousands)
(7)
Peer Group
Total
Shareholder
Return(6)
($)
118.67 (162,667)
133.20 (120,335)
134.05 (102,487)
($)
(1)
(2)
Represents the amount of total compensation reported for Dr. Woodhouse (our Chief Executive Officer) for each corresponding year in
the “Total” column of the Summary Compensation Table in the “Executive Compensation—Summary Compensation Table” section of
this Proxy Statement.
Represents the amount of “compensation actually paid” to Dr. Woodhouse, as computed in accordance with Item 402(v) of Regulation
S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Dr. Woodhouse during the applicable
year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Dr. Woodhouse’s
total compensation for each year to determine the compensation actually paid:
Reported
Summary Compensation
Table Total for PEO
($)
5,933,500
9,911,980
4,559,630
Reported
Value of Equity
Awards(a)
($)
(5,072,750)
(9,031,230)
(3,833,880)
Year
2022
2021
2020
Equity
Award Adjustments(b)
($)
(1,597,303)
(1,205,949)
10,050,054
Compensation
Actually Paid to PEO
($)
(736,553)
(325,199)
10,775,804
(a)
(b)
The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option
Awards” columns in the Summary Compensation Table in the “Executive Compensation—Summary Compensation Table”
section of this Proxy Statement for the applicable year.
The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following:
(i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the
end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair
value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for
awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (iv) for awards granted
in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the
47
prior fiscal year) in fair value; and (v) for awards granted in prior years that are determined to fail to meet the applicable
vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior
fiscal year. The amounts deducted or added in calculating the equity award adjustments are as follows:
Year End Fair
Value of Equity
Awards
Granted and
Unvested in
the Year
($)
1,111,103
3,320,587
6,347,279
Year over Year
Change in Fair
Value of
Outstanding
and Unvested
Equity Awards
($)
(2,629,286)
(3,613,487)
3,124,409
Year
2022
2021
2020
Fair Value as
of Vesting
Date of Equity
Awards
Granted and
Vested in the
Year
($)
922,601
1,351,292
876,747
Year over
Year Change
in Fair Value
of Equity
Awards
Granted in
Prior Years
that Vested in
the Year
($)
(1,001,721)
(2,264,341)
(298,381)
Fair Value at
the End of the
Prior Year of
Equity
Awards that
Failed to Meet
Vesting
Conditions in
the Year
($)
—
—
—
Total Equity
Award
Adjustments
($)(i)
(1,597,303)
(1,205,949)
10,050,054
(i)
The fair values of the equity awards as of the applicable vest dates and fiscal year-end dates were calculated using the
Lattice option pricing model with the assumptions in the table below, while the assumptions used for estimating the grant
date fair value as reported in the “Option Awards” column in the Summary Compensation Table in the “Executive
Compensation—Summary Compensation Table” section of this Proxy Statement were calculated using the Black-
Scholes option pricing model. The change in our stock price was also a key driver of change in the fair value of the equity
awards.
Assumptions
Volatility
Expiration term (years)
Risk-free interest rate
Expected dividend yield
Measurement
Dates in Fiscal
Year 2020
Measurement
Dates in Fiscal
Year 2022
Measurement
Dates in Fiscal
Year 2021
75.1% - 81.8% 72.3% - 78.1% 66.2% - 78.1%
6.05 – 9.96
0.5% - 1.7%
—
6.03 – 9.92
1.4% - 4.2%
—
6.05 – 9.93
0.3% - 1.9%
—
(3)
(4)
Represent the average of the amounts reported for the named executive officers as a group (excluding our principal executive officer)
in the “Total” column of the Summary Compensation Table in the “Executive Compensation—Summary Compensation Table” section of
this Proxy Statement in each applicable year. The named executive officers (excluding our principal executive officer) included for
purposes of calculating the average amounts in each applicable year are as follows: (i) for 2022 and 2021, Ms. Nolan Mangini, Drs.
Chen and Lieu and Ms. Pierce; and (ii) for 2020, Ms. Nolan Mangini and Dr. Chen.
Represent the average amount of “compensation actually paid” to the named executive officers as a group (excluding our principal
executive officer), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average
amount of compensation earned by or paid to the named executive officers as a group (excluding our principal executive officer) during
the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to
average total compensation for the named executive officers as a group (excluding our principal executive officer) for each year to
determine the compensation actually paid, using the same methodology described above in footnote (2):
Average
Reported Summary
Compensation Table
Total for Non-PEO NEOs
($)
2,718,744
2,769,874
3,091,019
Average Reported
Value of Equity
Awards
($)
(2,076,744)
(2,132,374)
(2,567,922)
Year
2022
2021
2020
Average Equity
Award Adjustments(a)
($)
(405,200)
(952,157)
5,334,806
Compensation
Actually Paid to PEO
($)
236,800
(314,657)
5,857,903
(a)
The amounts deducted or added in calculating the total average equity award adjustments are as follows:
48
Average
Year End Fair
Value of Equity
Awards
Granted and
Unvested in
the Year
($)
442,099
784,032
4,503,893
Year over Year
Average
Change in Fair
Value of
Outstanding
and Unvested
Equity Awards
($)
(862,839)
(1,344,371)
745,133
Year
2022
2021
2020
Average Fair
Value as of
Vesting Date
of Equity
Awards
Granted and
Vested in the
Year
($)
328,644
319,047
191,790
Year over Year
Average
Change in Fair
Value of Equity
Awards
Granted in
Prior Years that
Vested in the
Year
($)
(313,104)
(710,865)
(106,010)
Average Fair Value
at the End of the
Prior Year of
Equity Awards
that Failed to Meet
Vesting
Conditions in the
Year
($)
—
—
—
Total
Average Equity
Award
Adjustments
($)
(405,200)
(952,157)
5,334,806
(5)
(6)
(7)
Total shareholder return, or TSR, is determined based on the value of an initial fixed investment of $100 on December 31, 2019.
Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming
dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period
by the Company’s share price at the beginning of the measurement period.
Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the
beginning of each period for which a return is indicated. As permitted by SEC rules, the peer group used for this purpose is the group
of companies included in the NASDAQ Biotechnology Index, which is the industry peer group used in our Annual Report on Form 10-K
pursuant to Item 201(e) of Regulation S-K for the fiscal year ended December 31, 2022. The separate peer group used by the
Compensation Committee for purposes of determining compensation paid to our executive officers is described on page 19.
The dollar amounts reported represent the amount of net loss reflected in the Company’s audited financial statements for the
applicable year included in our 2022 Annual Report on Form 10-K. Due to the fact that the Company is not a commercial-stage
company, the Company did not have any revenue during the periods presented, other than revenue associated with research and
development payments under the Company’s amended and restated research collaboration, product development and license
agreement, or the Amended Collaboration Agreement, with Merck Sharpe & Dohme LLC, or Merck. Consequently, the Company did
not use net loss as a performance measure in its executive compensation program.
Narrative to Pay Versus Performance Table
Analysis of the Information Presented in the Pay Versus Performance Table
As described in more detail above in “Compensation Discussion and Analysis” in this Proxy Statement, the
Company’s executive compensation program reflects a performance-driven compensation philosophy. While the
Company utilizes several performance measures to align executive compensation with Company performance,
those Company measures are not financial performance measures and are therefore not presented in the Pay
Versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and
therefore does not specifically align the Company’s performance measures with “compensation actually paid” (as
computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of
Regulation S-K, we are providing the following descriptions of the relationships between information presented in
the Pay Versus Performance table above.
Compensation Actually Paid and Net Loss
Because the Company is a pre-commercial stage company, we had no revenue during the periods presented,
other than revenue associated with research and development payments under the Amended Collaboration
Agreement. Consequently, we do not use net loss as a performance measure in our executive compensation
program. Moreover, as a pre-commercial stage company with only limited, nonrecurring revenue associated with
our Amended Collaboration Agreement, we do not believe there is any meaningful relationship between our net loss
and compensation actually paid to our named executive officers during the periods presented.
Compensation Actually Paid and Cumulative TSR
The chart below shows the relationship between the compensation actually paid to our principal executive officer
and the average compensation actually paid to our non-principal executive officer named executive officers, on the
one hand, to the Company’s cumulative TSR over the three years presented in the table, on the other. As described
in more detail above in “Compensation Discussion and Analysis” of this Proxy Statement, the Company structures a
significant portion of target total compensation of our named executive officers to be comprised of equity awards.
49
$12,000,000
$10,000,000
i
d
a
P
y
l
l
a
u
t
c
A
n
o
i
t
a
s
n
e
p
m
o
C
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$‐
$(2,000,000)
Compensation Actually Paid vs Company TSR
$206.09
$120.48
$34.15
$250
$200
$150
$100
$50
$‐
R
S
T
l
e
v
i
t
a
u
m
u
C
)
t
n
e
m
t
s
e
v
n
i
0
0
1
$
l
a
i
t
i
n
i
f
o
e
u
a
v
(
l
2020
2021
2022
Compensation Actually Paid to PEO
Average Compensation Actually Paid to Non‐PEO NEOs
Total Shareholder Return
Cumulative TSR of the Company and Cumulative TSR of the Peer Group
The chart below shows the relationship between the Company’s three-year cumulative TSR to the three-year
cumulative TSR of the companies in the NASDAQ Biotechnology Index. For more information regarding the
Company’s performance and the companies that we consider when determining compensation, refer to
“Compensation Discussion and Analysis” in this Proxy Statement.
50
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$‐
4/4/2019
Comparison of Cumulative Total Return
Among NGM Biopharmaceuticals, Inc. and NASDAQ Biotechnology Index
12/31/2019
12/31/2020
12/31/2021
12/31/2022
NGM Biopharmaceuticals, Inc.
NASDAQ Biotechnology Index
All information provided above under the “Pay Versus Performance” heading will not be deemed to be
incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing, except to the extent the Company specifically incorporates such
information by reference.
51
The following table shows for the year ended December 31, 2022 certain information with respect to the
compensation of our non-employee directors:
DIRECTOR COMPENSATION
Name
David V. Goeddel, Ph.D.
Shelly D. Guyer
Carole Ho, M.D.
Suzanne Sawochka Hooper
Mark Leschly(3)
Roger M. Perlmutter, M.D., Ph.D.
William J. Rieflin(4)
_________________________________
Fees Earned
or
Paid in Cash
($)
Option Awards
($)(1)(2)
70,233
73,091
52,181
65,000
19,094
50,000
37,500
200,001
200,001
200,001
200,001
—
200,001
—
All Other
Compensation
($)
—
—
—
—
—
—
1,067,350(5)
Total
($)
270,234
273,092
252,182
265,001
19,094
250,001
1,104,850
(1)
(2)
(3)
(4)
(5)
Amounts represent the aggregate grant date fair value of annual stock option awards of 24,222 options granted to each of our non-
employee directors during 2022, computed in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts
are included in “Note 7 — Stockholders’ Equity” to our consolidated financial statements included in our Annual Report on Form 10-K
for the year ended December 31, 2022. 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, 2022 are set
forth in the table below. As of December 31, 2022, none of our non-employee directors held unvested stock awards other than options.
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.
William J. Rieflin
Number of Shares
Underlying Option
Awards
84,647
109,844
83,356
147,647
—
70,460
510,000
Mr. Leschly ceased to be a director upon the expiration of his term in May 2022.
Effective as of July 1, 2022, Mr. Rieflin was appointed by the Company’s Board to the position of Chairman of the Board, following Mr.
Rieflin’s retirement from his position as the Company’s Executive Chairman, after which he only earned compensation in his capacity
as a non-employee director pursuant to our non-employee director compensation policy.
Amounts represent compensation paid and options granted to Mr. Rieflin for services as an employee of the Company. Specifically,
these amounts include Mr. Rieflin’s compensation through June 29, 2022 as Executive Chairman, which consisted of $255,710 in cash
compensation and 80,000 options granted to Mr. Rieflin during 2022 with an aggregate grant date fair value of $811,640, computed in
accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in “Note 7 — Stockholders’ Equity”
to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. These
amounts do not necessarily correspond to the actual value recognized or that may be recognized by Mr. Rieflin. Because Mr. Rieflin
provided services in his capacity as an employee, these amounts were not paid under the non-employee director compensation policy.
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.
The tables above do not include Dr. Woodhouse or Dr. Chen because neither Dr. Woodhouse nor Dr. Chen
receive additional compensation for services provided as a director. Drs. Woodhouse and Chen are named
executive officers and their compensation information is included under “Compensation Discussion and Analysis”
and “Executive Compensation” in this Proxy Statement.
52
Non-Employee Director Compensation Policy
Our non-employee directors receive cash and equity compensation for service on our Board of Directors
and committees of our Board of Directors. The Board of Directors approves changes to the compensation of our
non-employee directors after carefully considering recommendations from the Compensation Committee. The
Compensation Committee periodically reviews our non-employee director compensation practices and recommends
changes that it determines appropriate. It is the practice of the Compensation Committee to seek input from Aon, its
independent compensation consultant, on our non-employee director compensation program. Aon provides
comprehensive assessments and recommendations based on an analysis of director compensation at the same
peer companies we use for executive compensation decision-making, as well as related governance considerations.
Our non-employee director compensation policy was originally adopted in 2019. We amended our non-
employee director compensation policy in June 2022, after carefully considering market data analysis and
recommendations from Aon. The terms of our non-employee director compensation policy, as in effect for 2022, are
provided below.
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 annual cash retainer of $25,000 in addition to the
annual retainer received by other non-employee directors for serving as our Lead Independent Director. Following
the June 2022 amendment, the Non-Executive Chairperson is entitled to an additional annual cash retainer of
$35,000 in addition to the annual retainer received by other non-employee directors for serving as our Non-
Executive Chairperson.
The Chairs and members of the three committees of our Board of Directors are entitled to the following
additional annual cash retainers:
Board Committee
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Chair Fee
($)
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 options vesting
quarterly in years two and three following the grant date, such that the options 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 options 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
options 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.
53
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under 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. Currently, consistent with the
preference expressed by the shareholders at the Company’s 2022 Annual Meeting of Stockholders, the policy of the
Board of Directors is to solicit a non-binding advisory vote on the compensation of the named executive officers
every year.
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 “Compensation Discussion and
Analysis” in this Proxy Statement, 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 of Directors 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 of Directors and, accordingly, the Board of Directors 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 voting power 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.
54
PROPOSAL NO. 3
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, 2023 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 voting power 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. 3.
The Board of Directors Recommends
a Vote “For” Proposal No. 3.
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, 2021 and 2022:
Audit Fees(1)
Audit-Related Fees(2)
Tax Fees(3)
All Other Fees(4)
Total Fees
_______________________________
Year Ended December 31,
2021
2022
$ 2,261,822 $ 1,953,689
52,388
—
2,965
12,500
25,000
—
$ 2,317,175 $ 1,991,189
(1)
(2)
(3)
(4)
Audit Fees consisted of fees for professional services billed for the audit of our annual consolidated financial statements and the
effectiveness of our internal control over financial reporting, the review of interim financial statements, and related services, and
services provided in connection with regulatory filings with the SEC.
Audit-Related Fees consisted of fees for accounting consultations and professional 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”.
Tax Fees consisted of fees billed for professional services for tax compliance and tax advice.
All other fees for services that are not included under the “Audit” or “Audit-Related” categories were associated with fees related to an
online 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
55
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
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.
56
TRANSACTIONS WITH RELATED PERSONS AND INDEMNIFICATION
The following is a summary of transactions since January 1, 2022 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 “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation” in
this Proxy Statement.
Related-Person Transactions Policy
In connection with our initial public offering, we adopted a written Related-Person Transactions that sets forth
our policies and procedures regarding the identification, review, consideration and approval or ratification of
“related-person transactions,” which was subsequently amended in November 2022. 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
and in which any related person had, has or will have a direct or indirect interest and involving an amount that
exceeds $120,000, other than those transactions specifically excluded under Item 404 of Regulation S-K, including
transactions involving compensation for service provided to us as an employee, director, consultant or similar
capacity by a related person. 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 Related-Person Transactions 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 research and
development 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
research and development activities 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
57
Collaboration Agreement. Under the Amended Collaboration Agreement, the collaboration was 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
collaboration scope also included 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.
Currently, the only ongoing research activities funded under the Amended Collaboration Agreement are certain
CVM-related activities and remaining activities under the Lab Programs. The ophthalmology compounds in the
collaboration under the Amended Collaboration Agreement initially included NGM621 (and its related compounds)
and compounds directed against two other undisclosed ophthalmology targets (and their related compounds).
Merck had a one-time option to license NGM621 and its related compounds upon completion of the Phase 2
CATALINA trial. In December 2022, Merck notified us that it would not exercise its option to license NGM621 and its
related compounds, nor would Merck exercise the related ophthalmology bundle option; accordingly, these options
expired unexercised in January 2023 and the programs are now wholly-owned by us. Further, Merck did not elect
for us to continue to conduct research and development on any compounds from our other ophthalmology programs
that were subject to the collaboration, which are preclinical and directed to undisclosed targets. Such an election
would have resulted in an extended tail period in which Merck would continue to fund our research and
development of such ophthalmology compounds. Because Merck did not exercise its ophthalmology license options
or make such a tail period election, we do not have any funding from Merck to pursue such ophthalmology
programs.
For the year ended December 31, 2022, we recognized collaboration and license revenue of $55.3 million
under our collaboration with Merck. See “Business—Licensing and Collaboration Arrangements—Merck
Collaboration” 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, 2022 for additional information on our collaboration with Merck.
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.
58
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 2,
2023 (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.
Unless otherwise indicated in the footnotes, 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 82,046,499
shares outstanding on March 2, 2023, 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)
EcoR1 Capital, LLC(3)
The Vanguard Group (4)
Blackrock Inc. (5)
Named Executive Officers and Directors
Jin-Long Chen, Ph.D.(6)
David V. Goeddel, Ph.D.(7)
Shelly D. Guyer(8)
Carole Ho, M.D.(9)
Suzanne Sawochka Hooper(10)
Hsiao D. Lieu, M.D.(11)
Siobhan Nolan Mangini(12)
Roger M. Perlmutter, M.D., Ph.D.(13)
Valerie Pierce(14)
William J. Rieflin(15)
David J. Woodhouse, Ph.D.(16)
All executive officers and directors as a group (11 persons)(17)
_______________________________
*
Represents beneficial ownership of less than 1%.
Beneficial Ownership
Number of
Shares
Percent of
Total
21,661,782
12,955,016
6,435,518
4,489,149
4,158,643
2,669,309
22,060,373
103,788
77,300
148,591
325,938
416,665
45,137
315,000
3,197,672
2,026,666
31,386,439
26.4%
15.8%
7.8%
5.5%
5.1%
3.2%
26.9%
*
*
*
*
*
*
*
3.9%
2.4%
35.9%
(1)
The indicated ownership is based solely on a Form 4 filed with the SEC by the reporting person on February 1, 2023. The Form 4
provides information as of January 31, 2023. 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) 927,231 shares held of record by The Column Group Opportunity III, LP, (x)
2,650,177 shares held of record by The Column Group IV, LP and (xi) 90,442 shares held of record by The Column Group IV-A, LP. Mr.
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
may be deemed to share voting, investment and dispositive power with respect to such shares. Mr. Svennilson, Dr. Goeddel and Dr.
Tim Kutzkey are managing members 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 may be deemed to share voting, investment and dispositive 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
59
the general partner of The Column Group III, LP and The Column Group III-A, LP, and may be deemed to share voting, investment and
dispositive power with respect to such shares. The Column Group Opportunity III GP, LP is the general partner of The Column Group
Opportunity III, LP and may be deemed to share voting, investment and dispositive power with respect to such shares. Mr. Svennilson,
Dr. Goeddel and Dr. Kutzkey are managing members of TCG Opportunity III GP, LLC, which is the general partner of The Column
Group Opportunity III GP, LP and the ultimate general partner of The Column Group Opportunity III, LP and may be deemed to have
voting, investment and dispositive 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 may be deemed to share voting, investment and dispositive 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.
The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on October 28, 2022. The
Schedule 13G provides information as of October 18, 2022. EcoR1 Capital, LLC has shared voting and dispositive power over all
shares held by it. The principal address of EcoR1 Capital, LLC is 357 Tehama Street #3, San Francisco, CA 94103.
The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on February 9, 2023. The
Schedule 13G provides information as of December 30, 2022. The Vanguard Group has (i) shared voting power over 50,562 shares,
(ii) sole dispositive power over 4,411,444 shares and (iii) share dispositive power over 77,705 shares. The principal address of The
Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on February 3, 2023. The
Schedule 13G provides information as of December 31, 2022. Blackrock Inc. has sole voting power over 3,953,380 shares and sole
dispositive power over 4,158,643 shares. The principal address of BlackRock Inc. is 55 East 52nd Street, New York, NY 10055.
Consists of (i) 908,893 shares held directly, (ii) 225,000 shares held in trust and (iii) 1,535,416 shares issuable pursuant to options
exercisable within 60 days of March 2, 2023, of which 1,484,373 shares have vested as of March 2, 2023.
Consists of (i) 130,000 common shares held directly, (ii) 110,000 shares held in the Alena Z. Goeddel Irrevocable Trust, (iii) 80,000
shares held in the David V. Goeddel and Alena Z. Goeddel 2004 Trust, (iv) 78,591 shares issuable pursuant to options exercisable
within 60 days of March 2, 2023, of which 78,591 shares have vested as of March 2, 2023 and (v) the shares described in footnote (1)
above.
Consists of 103,788 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which 103,788 shares have
vested as of March 2, 2023.
Consists of 77,300 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which 70,713 shares have
vested as of March 2, 2023.
Consists of (i) 7,000 shares held directly and (ii) 141,591 shares issuable pursuant to options exercisable within 60 days of March 2,
2023, of which 141,591 shares have vested as of March 2, 2023.
Consists of (i) 2,605 shares held directly and (ii) 323,333 shares issuable pursuant to options exercisable within 60 days of March 2,
2023, of which 303,540 shares have vested as of March 2, 2023.
Consists of 416,665 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which 295,832 shares have
vested as of March 2, 2023.
Consists of 45,137 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which 41,283 shares have
vested as of March 2, 2023.
Consists of (i) 6,667 shares held directly and (ii) 308,333 shares issuable pursuant to options exercisable within 60 days of March 2,
2023, of which 268,749 shares have vested as of March 2, 2023.
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 held directly and (iii) 423,332 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which
401,041 shares have vested as of March 2, 2023.
Consists of (i) 17,654 shares held directly, (ii) 80,000 shares held in trust for which Dr. Woodhouse serves as trustee and shares voting
and investment control and (iii) 1,929,012 shares issuable pursuant to options exercisable within 60 days of March 2, 2023, of which
1,806,095 shares have vested as of March 2, 2023.
Consists of (i) 26,003,941 shares held of record or beneficially owned by our executive officers and directors as a group and (ii)
5,382,498 shares issuable pursuant to options exercisable by our executive officers and directors as a group within 60 days of March
2, 2023, of which 4,995,596 shares have vested as of March 2, 2023.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
60
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, 2022 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, 2022 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, 2022,
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.
61
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR THE 2024 ANNUAL MEETING
To be considered for inclusion in our proxy materials for our 2024 annual meeting of stockholders, your proposal
must be submitted in writing by November 30, 2023 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 2024 annual meeting
of stockholders is advanced by more than 30 days prior to or delayed by more than 30 days after May 10, 2024,
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 2024 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 10, 2024 and no earlier than the close of business on January 11, 2024; 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 10, 2024 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 the date 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 2024 annual
meeting other than by inclusion in our proxy statement for the 2024 annual meeting of stockholders, the proxy
solicited by our Board of Directors for the 2024 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,
stockholders who intend to solicit proxies in support of director nominees other than our Board of Director’s
nominees must provide in their notice any additional information required by Rule 14a-19 under the Exchange Act.
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
Senior Vice President, General Counsel, Chief
Compliance Officer and Secretary
March 29, 2023
A copy of our Annual Report on Form 10-K for the year ended December 31, 2022 is available without
charge upon written request to: Secretary, NGM Biopharmaceuticals, Inc., 333 Oyster Point Boulevard,
South San Francisco, California 94080.
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.
62
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, 2022
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
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, 2022, the last business day of the registrant’s most
recently completed second fiscal quarter, was approximately $699 million, calculated based on the closing price of the registrant’s common stock as reported by the
Nasdaq Global Select Market. Excludes 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 22, 2023, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 82,046,499.
Portions of the registrant’s definitive Proxy Statement for the 2023 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.
DOCUMENTS INCORPORATED BY REFERENCE
2
NGM BIOPHARMACEUTICALS, INC.
2022 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.
3
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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the success, cost and timing of our product development activities and clinical trials and the initiation of,
enrollment in, availability of data for and other events related to such clinical trials;
our belief that NGM707 has the potential to reprogram immunoglobulin-like transcript 4-, or ILT4-, and
immunoglobulin-like transcript 2-, or 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 block the interaction of the Immunoglobulin-like transcript 3, or
ILT3 (also known as LILRB4), receptor with fibronectin, as well as other cognate ligands, and mobilize a
patient's own immune system to fight tumors by shifting myeloid cells from a suppressive state to a
stimulatory state promoting anti-tumor activity;
our belief that NGM438 has the potential to potently block the binding of all collagens to leukocyte-
associated immunoglobulin-like receptor 1, or 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;
our belief that MK-3655 (NGM313) has the potential to be a treatment for patients with NASH with early to
moderate fibrosis;
our plans to research, develop and commercialize our key programs in active development, NGM707,
NGM831, NGM438 and NGM120, and the therapeutic potential of those product candidates;
the therapeutic potential of our additional programs currently without significant resource allocation whose
further development is primarily dependent on our ability to secure potential future collaboration, out
licensing, partnering or other business development arrangements, or BD Arrangements, with third-party
partners and our ability to secure such BD Arrangements on beneficial terms, if at all;
our ability to obtain funding for our operations;
our estimates regarding future expenses, revenue, capital requirements and needs for additional financing,
particularly in light of our estimates of Merck Sharp & Dohme LLC providing further decreased funding in
2023 and minimal funding thereafter;
our ability to obtain and maintain regulatory approvals for our current and any of our future product
candidates, and any related restrictions, limitations and/or warnings in the label of any approved product
candidate;
our belief regarding the impact of our product candidates’ side effects and our ability to effectively manage
these side effects;
the commercialization of our product candidates, if approved;
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;
regulatory developments in the United States and other countries;
our beliefs with respect to the availability of the accelerated approval pathway for any marketing
applications that we 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;
4
•
•
•
•
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 expectations regarding our ability to obtain, maintain, protect and enforce intellectual property protection
for our product candidates; and
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.
• 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.
• Our product candidates are in early stages of development, with our most advanced product
candidates only in Phase 2 development.
• Our product candidates 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.
• We have incurred net losses every year since our inception, we have no source of product revenue, we
expect to continue to incur significant 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 LLC, or Merck, and that revenue will be substantially lower in 2023 and minimal thereafter.
• We will need significant additional capital to proceed with development and commercialization of our current
and potential future product candidates and to finance our other operations, and that additional capital may
not be available to us on acceptable terms, or at all; as a result, we may be required to delay, scale back or
discontinue development of our product candidates or other operations.
• We may depend in the future on BD Arrangements with third-party partners for the development and
commercialization of our product candidates and for revenue and, if we are unable to secure those BD
Arrangements, or if any future BD Arrangements are not successful, we may not be able to capitalize on the
market potential of our product candidates or continue their development.
• We may not be able to obtain and maintain relationships with future partners that are necessary to develop,
manufacture and commercialize some or all of our product candidates.
• While we may opportunistically consider BD Arrangements to advance development of our key solid
tumor oncology programs, we are actively seeking, or intend to seek, BD Arrangements with third-
party partners to progress, in whole or in part, the development of one or more of our other
programs whose further development is primarily dependent on our ability to secure potential future
BD Arrangements, and if we are unable to secure BD Arrangements to support these programs,
which include NGM621, aldafermin, NGM936, and, once termination of Merck's license is effective,
MK-3655, we are unlikely to be able to advance their development unless our portfolio prioritization
changes and we have access to the necessary capital to fund such development, and may
discontinue or abandon any or all of these programs altogether, in which case we will not realize
any return on our investments in those programs.
BD Arrangements involve numerous risks, any of which could materially and adversely affect our
business and financial condition.
•
5
• 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
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.
• Our product candidates other than NGM621 and aldafermin are currently manufactured at a facility in
Lithuania. The ongoing conflict between Russia and Ukraine and the retaliatory measures taken or that may
be taken by the United States, NATO and others against Russia 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 may not successfully identify new product candidates to expand our development pipeline.
• 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.
• We face substantial competition, which may result in others discovering, developing or commercializing
products before, or more successfully than, us.
• Our business could be materially and adversely affected in the future by effects of disease outbreaks,
epidemics and pandemics, including the COVID-19 pandemic.
• Our success depends in significant part upon our ability to obtain and maintain intellectual property
protection for our products and technologies.
• 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.
• 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; for example, we are obligated to develop
and maintain proper and effective internal control over financial reporting and to comply with the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
6
Item 1.
Business.
PART I
Overview of Our Business
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-
changing medicines based on scientific understanding of key biological pathways underlying grievous diseases with
critical unmet or underserved patient need. 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 portfolio of product candidates ranging from early discovery to Phase
2b development. Currently, we have five programs in active clinical development. Our biology-centric drug discovery
approach is therapeutic area agnostic and 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
discovery engine led by biology and motivated by patient need.
For more detailed information about our product candidate pipeline and their targeted therapeutic areas,
see “—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, led by biology and motivated by patient need.
Our pipeline is currently divided into two categories with separate approaches to development strategy and
resource allocation in an effort to enable more of the product candidates in our pipeline to be advanced as
effectively and efficiently as possible. To that end, we are currently focusing most of our execution efforts and
resources on advancing our clinical-stage solid tumor oncology programs to potentially rapid proof of concept. For
our other programs that are in therapeutic areas where clinical development is relatively resource intensive and can
have long timelines to generate proof-of-concept data, due to the need to conserve capital and prioritize focused
execution, we are actively seeking, or intend to seek, collaboration, out licensing, partnering or other business
development arrangements, or BD Arrangements, with third-party partners with sufficient resources and relevant
domain expertise to further their development.
Key elements of our strategy are:
•
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interrogate complex disease-associated biology. We employ
Systematically and empirically
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.
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 and capital conservation reasons and to
concentrate our resources and focus our execution on our solid tumor oncology programs.
7
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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 BD Arrangements with partners. Pursuing BD Arrangements has been and is expected to
continue to be a key component of our strategy. Given the breadth of opportunities that have been, and may
in the future be, produced by our discovery engine, we are actively seeking, or intend to seek, BD
Arrangements with third-party partners to progress, in whole or in part, the development of one or more of
our product candidates. We believe that this strategy, if successfully implemented, may enable more of the
programs in our pipeline, including those in active development by us, to be advanced as effectively and
efficiently as possible.
Our Pipeline Programs
Our biology-driven and therapeutic area agnostic discovery engine has produced a diverse pipeline of
product candidates spanning oncology, retinal disease and liver and metabolic disease. We have divided our
pipeline programs into two distinct categories with separate approaches to development strategy and resource
allocation.
Key Programs in Active Development
Our pipeline includes four solid tumor oncology programs in active ongoing clinical development. We are
currently focusing most of our execution efforts and resources on these key programs. We have intentionally built
our clinical capabilities primarily in areas such as solid tumor oncology that offer development paths that are
relatively resource efficient and have the potential to generate clinical proof-of-concept data more rapidly than
certain other indications. Subject to our ability to obtain sufficient additional capital, whether through potential future
BD Arrangements or otherwise, we may in the future pursue development of programs in other therapeutic areas.
While we will opportunistically consider BD Arrangements to advance development of our key programs, we intend
to invest our resources in their development even in the absence of BD Arrangements.
SOLID TUMOR ONCOLOGY
Preclinical
Phase 1
Phase 2
Phase 3
Status
Rights
NGM707
ILT2/ILT4 Dual
Antagonist
Antibody
Advanced or
Metastatic Solid
Tumors
PHASE 1/2
NGM831
ILT3 Antagonist
Antibody
NGM438
LAIR1 Antagonist
Antibody
Advanced or
Metastatic Solid
Tumors
Advanced or
Metastatic Solid
Tumors
NGM120
GFRAL
Antagonist
Antibody
Advanced Solid
Tumors (Ph1a) and
PDAC, mCRPC (Ph1b)
PDAC
PHASE 1
PHASE 1
PHASE 1
PHASE 2
Enrolling
Global
Enrolling
Global
Enrolling
Global
Ongoing
Global
PINNACLES Trial
Ongoing
Global
ILT2 = immunoglobulin-like transcript 2; ILT4 = immunoglobulin-like transcript 4; ILT3 = immunoglobulin-like transcript 3; LAIR1 = leukocyte-
associated immunoglobulin-like receptor 1; GFRAL = glial cell-derived neurotrophic factor receptor alpha-like; PDAC = pancreatic ductal
adenocarcinoma; mCRPC = metastatic castration-resistant pancreatic cancer
Therapeutic Area: Solid Tumor Oncology
Cancer Disease Overview
Cancer involving solid tumors is a leading cause of death globally and was responsible for an estimated
over nine million deaths in 2020. There were an estimated almost 17 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 over 25 million and the number of cancer-related deaths per year to grow to nearly 15
million, excluding non-melanoma skin cancer. Cancer was the second leading cause of death in the United States in
2020, causing over 500,000 deaths that year.
8
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. 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.
Our cancer research is currently focused 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 Sharp & Dohme LLC, or Merck, we have had the sole right, at our sole discretion, to
independently research, develop and commercialize each of them, at our sole expense, since March 2022, subject
to the payment to Merck of low single-digit royalties on commercial sales of any resulting products. See “Licensing
and Collaboration Arrangements—Merck Collaboration.”
NGM707: ILT2/ILT4 Dual Antagonist Antibody
Overview of 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 also may reverse inhibition of ILT2-expressing lymphoid cells to further
stimulate anti-tumor immune responses.
Clinical Development of NGM707
We are conducting an open-label Phase 1/2 clinical trial evaluating NGM707 as a monotherapy and in
combination with KEYTRUDA® (pembrolizumab) for the treatment of patients with advanced or metastatic solid
tumors. We expect to enroll approximately 220 patients in this trial. A Phase 1, Part 1a cohort evaluating NGM707
as a monotherapy was initiated in the second quarter of 2021. A Phase 1, Part 1b cohort evaluating NGM707 in
combination with pembrolizumab was initiated in the second quarter of 2022. Both Phase 1 cohorts are ongoing and
will be followed by Phase 2 expansion cohorts evaluating NGM707 in combination with pembrolizumab in specific
tumor types. In December 2022, we presented initial data from the Phase 1, Part 1a cohort at the European Society
for Medical Oncology Immuno-Oncology, or ESMO I-O, Annual Congress. The data indicated that NGM707 was
generally well tolerated across all dose cohorts and demonstrated promising early signals of anti-tumor activity. In
the presentation, we disclosed that of 24 response-evaluable patients as of November 23, 2022, best overall
responses were a partial response in one patient, stable disease in six patients and non-complete response/non-
progressive disease in one patient, and that potential proof-of-mechanism (myeloid reprogramming) was observed
in peripheral blood and tumor biopsies.
9
NGM707 Patent Portfolio
As of December 31, 2022, 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 most advanced candidate currently in clinical development targeting both ILT2
and ILT4. We are aware that ImmunOs Therapeutics AG announced in January 2023 that it will conduct a Phase 1
trial of its lead program IOS-1002, which demonstrated the ability to bind to three different immune checkpoint
targets, LILRB1 (ILT2), LILRB2 (ILT4) and KIR3DL1 in preclinical trials. Additionally, there are several products in
development that target either ILT4 or ILT2. We are aware of four clinical stage anti-ILT4 programs from Merck,
Jounce Therapeutics, Inc., or Jounce, Immune-Onc Therapeutics, Inc., or Immune-Onc, and Bristol-Myers Squibb.
In September 2020, Merck presented interim findings from a Phase 1 dose-escalation study evaluating its
investigational anti-ILT4 therapeutic candidate, MK-4830, and Phase 1 results were published in January 2022.
Jounce is developing an anti-ILT4 monoclonal antibody, JTX-8064, and clinical data from its Phase 1 trial were
presented in December 2022. In February 2023, Jounce announced that as part of a corporate restructuring and
business combination with Redx Pharma Plc it would be seeking business development opportunities for the future
development of JTX-8064. In September 2021, Immune-Onc initiated a Phase 1 study of its anti-ILT4 therapeutic
candidate, IO-108. OncoResponse, Inc., 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. Agenus Inc. has an antagonist antibody targeting ILT2,
AGEN1571, that entered Phase 1 clinical development in August 2022. Jounce also has a preclinical program
targeting ILT2. Finally, Adanate, Inc. has an antibody, ADA-01, in early clinical development targeting LILRB family
receptors that may include ILT4 and ILT2.
NGM831: ILT3 Antagonist Antibody
Overview of NGM831
NGM831 is an antagonist antibody that is designed to block the interaction of Immunoglobulin-like transcript
3, or ILT3 (also known as LILRB4) receptor, with fibronectin, as well as other cognate ligands. 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. 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 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 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, in 2021.
Clinical Development of NGM831
In 2022, we initiated an open-label Phase 1/1b clinical trial to evaluate NGM831 as a monotherapy and in
combination with pembrolizumab for the treatment of patients with advanced or metastatic solid tumors. A Phase 1,
Part 1a cohort evaluating NGM831 as a monotherapy was initiated in the first quarter of 2022 and is ongoing. In
addition, a Phase 1, Part 1b cohort evaluating NGM831 in combination with pembrolizumab was initiated in the third
quarter of 2022 and is ongoing. We expect to enroll up to approximately 80 patients in these two cohorts.
NGM831 Patent Portfolio
As of December 31, 2022, 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.
10
NGM831 Competition
We are aware of only one other 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, which is Immune-Onc's Phase 1 asset, IO-202. However, there are other programs that target ILT3
in the clinic. Merck, Immune-Onc and 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. Carbiogene’s ILT3
program is 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 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, meaning the non-malignant, non-immune components of the tumor, 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
In 2022, we initiated an open-label, Phase 1/1b clinical trial to evaluate NGM438 as a monotherapy and in
combination with pembrolizumab for the treatment of patients with advanced or metastatic solid tumors. A Phase 1,
Part 1a cohort evaluating NGM438 as a monotherapy commenced in the second quarter of 2022 and is ongoing. In
addition, a Phase 1, Part 1b cohort evaluating NGM438 in combination with pembrolizumab commenced in the
fourth quarter of 2022 and is ongoing. We expect to enroll up to approximately 80 patients in these two cohorts.
NGM438 Patent Portfolio
As of December 31, 2022, 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, a disorder that causes extreme weight loss and muscle wasting. 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 to 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
11
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 in mice.
Although NGM120 was originally researched and developed under a collaboration agreement with funding
from Merck, we have had the sole right, at our sole discretion, to independently research, develop and
commercialize NGM120, at our sole expense, since March 2022, subject to the payment to Merck of low single-digit
royalties on commercial sales of any resulting products. See “Licensing and Collaboration Arrangements—Merck
Collaboration.”
Clinical Development of NGM120
We are currently conducting a Phase 1/2 clinical trial to assess NGM120’s effect on cancer and cancer-
related cachexia in patients with select advanced solid tumors, metastatic pancreatic cancer and metastatic
castration-resistant prostate cancer, or mCRPC. The trial includes:
•
•
•
•
a Phase 1a cohort evaluating NGM120 as a monotherapy in patients with select advanced solid tumors,
a Phase 1b cohort evaluating NGM120 in combination with gemcitabine and Nab-paclitaxel in patients with
metastatic pancreatic cancer,
an additional Phase 1b cohort testing NGM120 in combination with one or more lines of hormone therapies
in patients with mCRPC, and
a Phase 2 cohort evaluating NGM120 in combination with gemcitabine and Nab-paclitaxel as first-line
treatment in patients with metastatic pancreatic cancer (referred to as the PINNACLES trial).
In August 2022, we initiated the Phase 1b cohort testing NGM120 in combination with one or more lines of
hormone therapies in patients with mCRPC.
In September 2022, at the European Society for Medical Oncology, or ESMO, Annual Congress, we
reported updated preliminary findings for a subgroup of patients with advanced prostate cancer from the Phase 1a
cohort evaluating NGM120 as a monotherapy in patients with select advanced solid tumors. The updated
preliminary results reported at ESMO demonstrated that NGM120 was well tolerated with no dose-limiting toxicities
and provided encouraging signals of anti-cancer activity in patients with advanced prostate cancer.
In September 2022, at the American Association for Cancer Research, or AACR, Special Conference:
Pancreatic Cancer, we reported updated preliminary findings from the Phase 1b cohort evaluating NGM120 in
combination with gemcitabine and Nab-paclitaxel in patients with metastatic pancreatic cancer. The updated
preliminary results reported at AACR demonstrated that NGM120 was well tolerated with no dose-limiting toxicities
and provided encouraging signals of anti-cancer activity in patients with metastatic pancreatic cancer.
NGM120 Patent Portfolio
As of December 31, 2022, we owned two issued patents in the United States, as well as six issued foreign
patents 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
We are not aware of any publicly disclosed program other than NGM120 that targets GFRAL. There are
three 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 visugromab (formerly known as CTL-002) in Europe to explore the treatment of cancer in solid
tumors, and initial results from this trial were presented in September 2022. AstraZeneca also has a preclinical
program, AZD8853, an antibody targeting GDF15, and CatalYm has an additional discovery program targeting the
GDF15 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. Over 50 therapies are in Phase 1 and
12
Phase 2 trials for pancreatic cancer, spanning multiple mechanisms of action, including immune checkpoint
inhibitors, cancer vaccines, tyrosine kinase inhibitors and chemokine receptor antagonists.
Additional Programs Currently Without Significant Resource Allocation
Due to the need to conserve capital and prioritize focused execution, the remainder of our pipeline includes
programs whose further development is primarily dependent on our ability to secure potential future BD
Arrangements. These programs are in therapeutic areas where clinical development is relatively resource intensive
and can have long timelines to generate proof-of-concept data. As a result, we are actively seeking, or intend to
seek, BD Arrangements with third-party partners possessing sufficient resources and relevant domain expertise in
the relevant therapeutic area in order to further clinical development of these programs. In the absence of such BD
Arrangements for these programs, we are unlikely to be able to advance their development unless our portfolio
prioritization changes and we have access to the necessary capital to fund such development. These programs are
set forth below:
RETINAL
Preclinical
Phase 1
Phase 2
Phase 3
Status
Rights
NGM621
Anti-Complement
C3 Antibody
Geographic
Atrophy
PHASE 2
CATALINA Trial
Completed
Global
NASH
Aldafermin
FGF19 Analog
NASH F4
MK-3655
(NGM313)
FGFR1c/KLB
Agonist Antibody
NASH F2/F3
PHASE 2
PHASE 2
HEMATOLOGIC ONCOLOGY
NGM936
ILT3 x CD3
Bispecific T Cell
Engager
AML, Multiple
Myeloma
PRECLINICAL
Topline ALPINE 4 Data
Expected in 2Q23
Global
Merck Ph2b Trial
Terminated
Merck license rights
terminate in April 2023;
thereafter wholly-owned
by NGM Bio
Pre-IND
Global
C3 = component 3; NASH = non-alcoholic steatohepatitis; FGF19 = fibroblast growth factor 19; FGFR1c = fibroblast growth factor receptor 1c;
KLB = beta-klotho; F2/3/4 = stage 2/3/4 liver fibrosis; ILT3 = immunoglobulin-like transcript 3; CD3 = cluster of differentiation 3; AML = acute
myeloid leukemia
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.
NGM621: A Potential Treatment for Geographic Atrophy
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 the rate of disease progression in patients with geographic atrophy, or GA, secondary
to age-related macular degeneration, or AMD.
In October 2022, we announced topline results from the Phase 2 CATALINA clinical trial, which evaluated
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. The trial did not meet its primary endpoint of a statistically significant reduction
in the rate of change in GA lesion area growth using slope analysis over 52 weeks of treatment with NGM621
versus sham. NGM621 demonstrated a favorable safety profile, with no evidence of increased choroidal
13
neovascularization in NGM621-treated patients compared to sham. In addition, there were no serious adverse
events deemed by an investigator to be treatment-related.
In November 2022, we presented additional findings from the CATALINA trial at The Retina Society Annual
Scientific Meeting. One of the post-hoc analyses presented at the Retina Society meeting involved the evaluation of
a sub-population of patients least likely to be impacted by fundus autofluorescence, or FAF, grading methodology
limitations: those in the middle two quartiles of a quartile analysis based on baseline lesion area. The patients in this
sub-group had baseline GA lesions measuring 4.17 – 9.64 mm2 as compared to study inclusion criteria of baseline
GA area between ≥2.5 mm2 and ≤17.5 mm2. In this analysis, NGM621 demonstrated a reduction in the rate of
change in GA lesion area (slope) of 21.9% (Q4W) (n=55) and 16.8% (Q8W) (n=52), compared to sham (n=53).
Using MMRM analysis, a mixed effects model for repeated measures, to evaluate the change from baseline in GA
area at weeks 24 and 52 for this subgroup, the reduction in GA growth (change from baseline vs sham) at 52 weeks
was 20.6% (Q4W) and 16.6.% (Q8W).
Merck had a one-time option to license NGM621 and its related compounds upon completion of the
CATALINA trial. In December 2022, Merck notified us that it would not exercise its option to license NGM621 and its
related compounds, nor would Merck exercise the related ophthalmology bundle option; accordingly, these options
expired unexercised in January 2023 and the program is now wholly-owned by us. Further development of NGM621
is primarily dependent on our ability to secure potential future BD Arrangements and, in the absence of such BD
Arrangements, we are unlikely to be able to advance development of NGM621 unless our portfolio prioritization
changes and we have access to the necessary capital to fund such development.
NGM621 Patent Portfolio
As of December 31, 2022, 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 is currently only one medicine approved by the FDA and none approved by the EMA for the treatment
of GA. Patients with GA have very limited options other than SYFOVRE™ (pegcetacoplan injection) approved by
the FDA in February 2023 for the treatment of GA secondary to AMD. Patients 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 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, and one has
received regulatory approval from the FDA. In February 2023, Apellis Pharmaceuticals, Inc., or Apellis, announced
that the FDA approved SYFOVRE™ (pegcetacoplan injection) for the treatment of GA secondary to AMD. With
reference to other therapies currently in clinical development, Iveric bio, Inc.’s, or Iveric's, avacincaptad pegol, 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 avacincaptad pegol arm versus the sham arm. In
14
February 2023, Iveric announced that the FDA had accepted its NDA of avacincaptad pegol. 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 visual cycle modulators (for example, ALK001 in Phase 3 development by Alkeus
Pharmaceuticals, Inc.), an NLRP3 inflammasome-targeting molecule, Xiflam, in Phase 2 development by InflammX
Therapeutics, and others with undeclared targets (for example, EG-301 moving into Phase 2 development in early
2023 by Evergreen Therapeutics). 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
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. Aldafermin is wholly-owned by us. Further development
of aldafermin is primarily dependent on our ability to secure potential future BD Arrangements and, in the absence
of such BD Arrangements, we are unlikely to be able to advance development of aldafermin unless our portfolio
prioritization changes and we have access to the necessary capital to fund such development.
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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 cirrhosis due
to NASH (liver fibrosis stage 4, or F4, by the NASH Clinical Research Network classification). The Phase 2b
ALPINE 4 clinical trial, which is fully enrolled, 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. The primary endpoint for the trial is 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. 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 second quarter 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 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.
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, results showed that the most common reported adverse
events occurring in more than 10% of patients 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, 2022, 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 (NGM313): An Insulin Sensitizer for the Treatment of NASH
MK-3655, also known as NGM313, 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. 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 described below, in January 2023, Merck provided us
with the required 90-days' notice of partial termination of our collaboration with Merck as it relates to MK-3655 and
its related compounds. As a result, in late April 2023, the license rights granted to Merck in 2018 with respect to
MK-3655 will revert to us and the program will become wholly-owned by us. Further development of MK-3655, once
the termination is effective, is primarily dependent on our ability to secure potential future BD Arrangements and, in
the absence of such BD Arrangements, we are unlikely to be able to advance development of MK-3655 unless our
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portfolio prioritization changes and we have access to the necessary capital to fund such development. See
“Licensing and Collaboration Arrangements—Merck Collaboration.”
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. The trial was 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. The primary objective
of the Phase 2b trial was NASH resolution without worsening of fibrosis at 52 weeks. In January 2023, we
announced that Merck notified us of its decision to terminate the Phase 2b trial based on the results of an interim
analysis of safety and reduction in liver fat at Week 24. Although it was not the primary endpoint of the trial, the
percent reduction from baseline in liver fat for MK-3655, while greater than placebo across multiple dose arms, did
not reach Merck’s threshold for continuing the trial through to completion. The trial was not discontinued for safety
concerns.
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, 2022, 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. Once the partial termination of our collaboration with Merck as it relates to MK-3655 and its related
compounds becomes effective, the license rights to these patents will revert to us.
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
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, or Madrigal'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
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Genentech/Roche’s BFKB8488A, an FGFR1c/KLB bi-specific agonistic antibody. In December 2022, Madrigal
announced positive topline results from the pivotal Phase 3 MAESTRO-NASH biopsy clinical trial of resmetirom.
MAESTRO-NASH, a registrational Phase 3 trial, achieved both liver histological improvement endpoints that FDA
proposed as reasonably likely to predict clinical benefit to support accelerated approval for the treatment of NASH
with liver fibrosis.
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, or NDA, 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. In December 2022,
Intercept resubmitted an NDA with the FDA and in January 2023, Intercept announced that the FDA had accepted
its NDA with a Prescription Drug User Fee Act, or PDUFA, target action date of June 22, 2023.
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.
Therapeutic Area: Hematologic Oncology
Hematologic Cancer Disease Overview
Hematologic cancer, also referred to as blood cancer, refers to various forms of cancer that lead to
uncontrolled growth or dysregulation of blood cells or blood-forming tissues. Examples of hematologic cancer
include leukemia, lymphoma and multiple myeloma.
NGM936: ILT3xCD3 Bispecific T Cell Engager
Overview of NGM936
NGM936 is a bispecific T cell engager therapeutic candidate for the treatment of hematologic malignancies
that targets ILT3 and cluster of differentiation 3, or CD3. NGM936 is designed to direct T cell mediated killing of
ILT3-positive cancer cells while sparing normal hematopoietic stem cells, or HSCs, and minimizing CD3-driven
cytokine release. ILT3, a myeloid-cell restricted receptor, has enriched expression in myelomonocytic leukemia,
monocytic leukemia and leukemia stem cells but is not expressed on healthy HSCs. The expression profile of ILT3
may make it a potential target for the treatment of monocytic acute myeloid leukemia, or AML, and multiple
myeloma.
Preclinical Development of NGM936
NGM936 has been evaluated in preclinical studies, where it has demonstrated in vitro the ability to potently
kill ILT3+ AML cells, kill ILT3+ multiple myeloma cells and preserve healthy bone marrow cells. Further development
of NGM936 is primarily dependent on our ability to secure potential future BD Arrangements and, in the absence of
such BD Arrangements, we are unlikely to be able to advance development of NGM936 unless our portfolio
prioritization changes and we have access to the necessary capital to fund such development.
NGM936 Patent Portfolio
As of December 31, 2022, we did not own or have a license to any issued patent that covers NGM936.
However, NGM936 and related compositions-of-matter and methods of use are disclosed in pending U.S.
provisional 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 2043, including any patent issued in the United States, if
any, not including any patent term adjustments and any patent term extensions.
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NGM936 Competition
We are not aware of any publicly disclosed program other than NGM936 that targets ILT3 and CD3 using a
bispecific T cell engager. Immune-Onc has a bispecific antibody, IO-312, in preclinical development which targets
ILT3 and is being pursued for cancer. The identity of the target of the second arm of IO-312 has not been disclosed.
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
R&D 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 collaboration or partnering 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 R&D of products that may be competitive to 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, in February 2023, Apellis announced that the FDA approved SYFOVRE™ (pegcetacoplan
injection) for the treatment of GA secondary to AMD. And in February 2023, Iveric announced that the FDA
accepted Iveric's NDA of avacincaptad pegol for the treatment of GA. 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 “—Our Pipeline Programs.”
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
Intellectual Property
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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, 2022, our patent portfolio includes over 600 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 500
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 eight of our disclosed product candidates, see the discussion of intellectual property protection for each
product candidate in “—Our 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
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. and, as described below, Lonza Sales AG, or
Lonza, for the use of their cell lines. 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
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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.
Merck Collaboration
Licensing and Collaboration Arrangements
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 by Merck for an additional two years through March 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 was 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
collaboration scope also included 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.
Currently, the only ongoing research activities funded under the Amended Collaboration Agreement are certain
CVM-related activities and remaining activities under the Lab Programs, or the Remaining Research Programs. The
ophthalmology compounds in the collaboration under the Amended Collaboration Agreement initially included
NGM621 (and its related compounds) and compounds directed against two other undisclosed ophthalmology
targets (and their related compounds). Merck had a one-time option to license NGM621 and its related compounds
upon completion of the Phase 2 CATALINA trial. In December 2022, Merck notified us that it would not exercise its
option to license NGM621 and its related compounds, nor would Merck exercise the related ophthalmology bundle
option; accordingly, these options expired unexercised in January 2023 and the programs are now wholly-owned by
us. Further, Merck did not elect for us to continue to conduct R&D on any compounds from our other ophthalmology
programs that were subject to the collaboration, which are preclinical and directed to undisclosed targets. Such an
election would have resulted in an extended or tail period in which Merck would continue to fund our R&D of such
ophthalmology compounds. Because Merck did not exercise its ophthalmology license options or make such a tail
period election, we do not have any funding from Merck to pursue such ophthalmology programs.
For the period that started on January 1, 2023 and ends on March 31, 2024, we expect to receive funding of
approximately $13.0 million in the aggregate from Merck for ongoing activities under the Remaining Research
Programs and for certain costs and reimbursements related to the NGM621 program. Funding from Merck after
December 31, 2023 is expected to be minimal. The research phase for the CVM-related programs under the
Amended Collaboration Agreement will continue through March 31, 2024, unless the parties mutually agree to
extend the research phase through March 31, 2026, in which case Merck would provide up to a total of $20.0 million
in R&D funding during the additional two years of the CVM program research phase. New CVM-related programs
may be added to the collaboration if recommended by us and selected by Merck, although we do not expect any
new CVM-related programs to be added. The research phase for the Lab Programs was scheduled to end no later
than December 31, 2022, although certain limited activities continue and will be wrapped up in 2023.
In January 2023, we announced that Merck notified us of its decision to terminate the Phase 2b trial of
MK-3655 in patients with NASH and liver fibrosis stage 2 or 3 and Merck subsequently provided us with the required
21
90-days' notice of partial termination of the Amended Collaboration Agreement as it relates to MK-3655 and its
related compounds. As a result, in late April 2023, the license rights granted to Merck in 2018 with respect to
MK-3655 will revert to us and the program will become wholly-owned by us. Further development of MK-3655, once
the termination is effective, is primarily dependent on our ability to secure potential future BD Arrangements and, in
the absence of such BD Arrangements, we are unlikely to be able to advance development of MK-3655 unless our
portfolio prioritization changes and we have access to the necessary capital to fund such development.
During the three-month period before the end of 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 R&D activities
continue 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 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. All R&D 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 under the Remaining Research Programs. 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 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 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 R&D 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 R&D 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 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,
22
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.
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.
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 paid a one-time milestone payment to Lonza of £100,000 for each of the Phase 2 trial initiations for
MK-3655, NGM621 and NGM120. 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 or any potential future partners)
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
were required to pay this fee for NGM621 prior to Merck's decision not to exercise its option to license NGM621 and
its related compounds in January 2023.
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
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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
results of animal and
toxicology, pharmacology, pharmacokinetics 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
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
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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
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 RTOR, Program.
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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
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 and provide regular updates to the agency on 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
26
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 (RTOR) Program
The RTOR program is 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 program 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 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
RTOR program acceptance do not change the standards for product approval.
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.
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. 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 must 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
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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.
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
28
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
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
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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.
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
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agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or
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.
European Union Development of Medicinal Products
In the European Economic Area, or EEA, which consists of the 27 Member States of the European Union,
or the EU and the EU Member States, as well as Norway, Iceland and Liechtenstein, medicinal products can only be
commercialized after a marketing authorization, or MA, has been granted by a competent regulatory authority. This
is similar to the approach in the United States. The various phases of preclinical and clinical research in the EEA 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 EEA countries, 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 Review of Marketing Authorization and Approval
Depending on the type of product and its intended therapeutic indication, related MAs may be granted
either by the European Commission at the EU level or by the competent authorities of the EEA countries. An 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, subject to the approval of the EMA, for products containing a new
active 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 EEA countries, 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 an EEA country, that National MA can be recognized
in another EEA country through the Mutual Recognition Procedure. If the product has not received a National MA in
any EEA country at the time of application for authorization, it can be approved simultaneously in various EEA
countries through the Decentralized Procedure. Under the Decentralized Procedure, an identical dossier is
submitted to the competent authorities of each of the EEA countries 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 Product Characteristics, or SmPC, the document that provides
information to physicians concerning the safe and effective use of the product, and a draft of the labeling and
package leaflet, which are sent to the other EEA countries, referred to as the Concerned Member States, or CMSs,
for their approval. If the CMSs raise no objections to the assessment, SmPC, labeling or packaging proposed by the
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RMS, the product is subsequently granted a National MA in the RMS and the Concerned Member States. The RMS
or CMSs may only raise objections to authorization that are based on a potential serious risk to public health.
In the EEA, a MA, whether granted through the Centralized, Decentralized or Mutual Recognition
Procedures, may be granted only to an MA applicant 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 EEA country in which
the original MA was granted. The European Commission or the competent authorities of the EEA country may
decide, on justified grounds relating to pharmacovigilance, to require one additional five-year period for the MA
before it is definitively renewed. Once subsequently definitively renewed, the MA is valid for an unlimited period. Any
MA that is not followed by the actual placing of the medicinal product on the EEA market (in case of Centralized
Procedure approvals), or on the market of the authorizing EEA country if applicable, 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
United States. In the EEA, a conditional MA may be granted by the European Commission through the Centralized
Procedure in cases where all the required safety and efficacy data are not yet available. The conditional MA is
subject to conditions to be fulfilled concerning generation of 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. After this, the
conditional MA is converted to a normal MA. An MA may also be granted “under exceptional circumstances” by the
European Commission through the Centralized Procedure where the MA applicant can show that it is unable to
provide comprehensive data on the efficacy and safety of the medicinal product under normal conditions of use
even after the product has been authorized and subject to specific procedures after being introduced. These
circumstances may arise in particular when the intended therapeutic indications are very rare and, based on 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.
Data and Market Exclusivity
The EU legislation governing the grant of marketing authorizations for medicinal products also provides
opportunities for data and market exclusivity related to MAs in certain circumstances. Upon grant of an MA,
innovative medicinal products generally benefit from eight years of data exclusivity and ten years of market
exclusivity. Data exclusivity, if granted, prevents regulatory authorities in the EEA from referencing the innovator’s
data to assess a biosimilar application for eight years from the date of authorization of the innovative product, after
which a biosimilar application for MA can be submitted, and the innovator’s data may be referenced. The market
exclusivity period prevents a successful biosimilar applicant from commercializing its product in the EEA until ten
years have elapsed from the initial MA of the innovator product in the EEA. 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. There is, however, no guarantee that our products will be considered by European regulatory
authorities to be a new biological entity. In such circumstances, our products, even if granted MA, may not qualify
for data and market exclusivity.
Pediatric Development
Regulation (EC) No 1901/2006 provides that all applicants for MA 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 to with the EMA’s Pediatric Committee, or 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 EEA countries and study results in compliance with the PIP are included in the product
information, even when those results are negative, the product may be eligible for a six-month extension to certain
patent protections or, in the case of orphan medicinal products, a two-year extension of orphan market exclusivity.
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Post-Approval Requirements
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 EEA countries and regional authorities within those countries. Legislation adopted at the
EU level, such as Directives, may be implemented differently by individual EEA countries. Examples of post-
approval requirements include the obligation on the holder of an MA to comply with a range of regulatory
requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products, 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 applicants for MA 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 risk-minimization measures or post-authorization obligations as a condition of the MA, which may
include additional safety monitoring, more frequent submission of PSURs or the conduct of additional clinical trials
or post-authorization safety studies.
Marketing of Medicinal Products in the EEA
In the EEA, the advertising and promotion of medicinal products are subject to both EU law and the national
law of individual EEA countries governing promotion of medicinal products, interactions with physicians and other
healthcare professionals, misleading and comparative advertising and unfair commercial practices. Although
general requirements for advertising and promotion of medicinal products are established at the EU level, the
details are governed by rules developed in individual EEA countries and can differ from one country to another.
Examples of regulatory obligations include the requirement that promotional materials and advertising in relation to
medicinal products comply with the product’s SmPC as approved by the competent authorities in connection with an
MA. Promotional activity that does not comply with the SmPC is considered off-label and is prohibited in the EU.
Direct-to-consumer advertising of prescription medicinal products is also prohibited in the EU.
Marketed products in the EEA are subject to substantial continuing regulation. This includes, 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 EEA. The provision of benefits or advantages to physicians is governed by national laws,
including anti-bribery laws, industry codes or professional codes of conduct and related national implementing laws.
Payments made to physicians in certain EEA countries must also be publicly disclosed, and agreements with
physicians are often 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 EEA countries. Failure to comply with
these requirements could result in reputational risk, public reprimands, administrative penalties, fines or
imprisonment.
Regulation in the United Kingdom Following Brexit
The withdrawal of the UK from the EU, commonly referred to as “Brexit,” took effect on January 31, 2020.
Pursuant to the formal withdrawal arrangements agreed between the UK and the EU, the UK was subject to a
transition period that ended December 31, 2020, during which EU rules continued to apply. A Trade and
Cooperation Agreement, or the TCA, that outlines the trading relationship between the UK and the EU entered into
force provisionally in January 2021, and permanently since May 2021. The TCA primarily focuses on ensuring free
trade between the EU and the UK in relation to goods, including medicinal products. Although the body of the TCA
includes general terms which apply to medicinal products, greater detail on sector-specific issues is provided in an
Annex. Under the TCA, Great Britain (England, Scotland and Wales) is be treated as a third country, except that
Northern Ireland will, with regard to EU regulations on free movement of goods, continue to follow the EU regulatory
rules. As part of the TCA, the EU and the UK will mutually recognize cGMP inspections and accept official cGMP
documents. The UK has unilaterally agreed to accept EU batch testing and batch release. However, the EU
continues to apply EU laws that require batch testing and batch release to take place in the EU. 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. 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.
With respect to MAs, Great Britain has a separate regulatory submission and approval process and a
national MA implemented through its regulator, the Medicines and Healthcare products Regulatory Agency, or
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MHRAs, with certain exceptions for Northern Ireland. Companies established in the UK can no longer use the
Centralized Procedure for approval by the European Commission to obtain an MA to market products in the UK and
instead must follow one of the UK national authorization procedures. Until the end of 2023, the MHRA may rely on a
decision made by the European Commission on the approval of a new Centralized Procedure MA when deciding on
an application for a Great Britain MA. Thereafter, a new international recognition process, which will take into
consideration decisions made by the EMA and certain other regulatory authorities, is anticipated to be in place. The
MHRA has also established its own decentralized or mutual recognition procedures enabling MAs approved in EU
Member States through decentralized and mutual recognition procedures to be recognized in the United Kingdom or
Great Britain. It is currently unclear to what extent the UK will seek to align its regulations with the EU in the future.
The data exclusivity periods in the UK are currently in line with those in the EU, but the TCA provides that
the periods for both data and market exclusivity are to be determined by domestic law, so there could be divergence
in the future.
Privacy and Data Security Laws and Compliance Obligations
In the ordinary course of our business, we may process personal or sensitive data. Accordingly, we are, or
may become, subject to numerous obligations, including U.S. federal, state and local, as well as foreign, data
privacy and security laws, regulations, guidance and industry standards, and other legal obligations related to
privacy and data security. 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 Federal Trade Commission Act, the California Consumer Privacy Act of 2018,
or CCPA, the California Privacy Rights Act of 2020, or CPRA, and similar laws enacted or proposed in other states
in the United States, the EU’s General Data Protection Regulation 2016/679, or EU GDPR, and the EU GDPR as it
forms part of UK law by virtue of section 3 of the European Union (Withdrawal) Act 2018, or UK GDPR. Additionally,
we are, or may become, subject to various U.S. federal and state consumer protection laws which require us to
publish statements that accurately and fairly describe how we handle personal data and choices individuals may
have about the way we handle their personal data.
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. The CCPA and EU GDPR are examples of the increasingly stringent
and evolving regulatory frameworks related to personal data processing that may increase our compliance
obligations and exposure for any noncompliance. For example, the CCPA imposes obligations on covered
businesses to provide specific disclosures related to a business’s collecting, using and disclosing personal data and
to respond to certain requests from California residents related to their personal data. Also, the CCPA provides for
civil penalties and a private right of action for data breaches which may include an award of statutory damages. In
addition, the CPRA, effective January 1, 2023, expanded the CCPA to, among other things, give California residents
the ability to limit use of certain sensitive personal data, establish restrictions on personal data retention, expand the
types of data breaches that are subject to the CCPA’s private right of action and establish a new California Privacy
Protection Agency to implement and enforce the new law.
Foreign data privacy and security laws (including but not limited to the EU GDPR and UK GDPR) impose
significant and complex compliance obligations on entities that are subject to those laws. As one example, the EU
GDPR applies to any company established in the EEA and to companies established outside the EEA that process
personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of
the behavior of data subjects in the EEA. These obligations may include limiting personal data processing to only
what is necessary for specified, explicit and legitimate purposes; requiring a legal basis for personal data
processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency
obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the
collection and retention of personal data; increasing rights for data subjects; formalizing a heightened and codified
standard of data subject consents; requiring the implementation and maintenance of technical and organizational
safeguards for personal data; mandating notice of certain personal data breaches to the relevant supervisory
authorities and affected individuals; and mandating the appointment of representatives in the EU in certain
circumstances. 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.
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Rest of the World Regulation
For other countries outside of the EU, United Kingdom and the United States, such as 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 U.S. Securities and Exchange
Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of
the FCPA’s accounting provisions.
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.
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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.
Before products become available to patients in the EEA, 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 EEA. Our ability to commercialize any such products
successfully in the EEA will depend, in part, on the outcome of these decisions.
In many EU Member States periodically review their reimbursement procedures for medicinal products,
which could have an adverse impact on reimbursement status. 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
European countries, including 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 pricing and reimbursement decisions are influenced
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by the HTA of the specific medicinal product currently varies between EU Member States. In 2021 the European
Union Parliament adopted the HTA regulation which, when it enters into application in 2025, will be intended to
harmonize the clinical benefit assessment of HTA across the European Union. If we are unable to maintain
favorable pricing and reimbursement status in EU Member States for product candidates that we may successfully
develop and for which we may obtain regulatory approval, any anticipated revenue from and growth prospects for
those products in the European Union could be negatively affected.
Legislators, policymakers and healthcare insurance funds in the EU and the UK 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. These measures could include limitations on
the prices we would be able to charge for product candidates that we may successfully develop and for which we
may obtain regulatory approval 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.
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
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.
The ultimate content, timing or effect of any healthcare reform legislation on the U.S. healthcare industry is
unclear. For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA,
into law, which among other things, (1) directs the U.S. Department of Health and Human Services, or HHS, to
negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates
under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will
take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently
unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
Further, in March 2010, the ACA was signed into law and 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. However, the ACA 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 IRA, among other things, extends enhanced subsidies for individuals purchasing health insurance
coverage in ACA marketplaces through plan year 2025 and eliminates the “donut hole” under the Medicare Part D
program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly
established manufacturer discount program.
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
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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. Under
current legislation. the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in later years.
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. Further, the Biden administration released an additional
executive order on October 14, 2022, directing HHS to submit a report on how the Center for Medicare and
Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid
beneficiaries. It is unclear whether this executive order or similar policy initiatives will be implemented in the future.
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.
Human Capital
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
essential driver of our business and key to our future opportunities. As of December 31, 2022, we had 239
employees, of which approximately 155 (65%) were engaged in R&D activities, 89 hold Ph.D. and/or M.D. degrees
and an additional 52 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. We recruit for talent in the biotechnology and pharmaceutical industry in the San Francisco Bay
Area, which is in one of the most competitive and highest cost labor markets in the United States and periodically
experiences higher turnover rates than other industries. For example, in 2022, we continued to experience a
challenging recruiting environment with relative high rates of employees leaving the company to pursue other
opportunities, particularly in the first three quarters of the year. This turnover was mitigated by a robust recruiting
effort, including extensive efforts to source and interview a talented and diverse pipeline of candidates. 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 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
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and retirement benefits for all our employees. Our compensation package for all employees includes market-
competitive base salaries, eligibility for annual performance bonuses and equity 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. In conjunction with the
California’s Pay Transparency law (SB 1162), beginning January 1, 2023, we will publish pay ranges in all job
postings and we are proactively providing existing employees with the salary range for their positions. In addition,
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, 2022, NGM employed 136 women
(57%) and 103 men (43%), and 59% 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 43% women and 22% who self-identify as non-white. To champion our
efforts in this area, a cross-functional team of employees continues to drive our diversity, equity and inclusion
initiatives that have focused on awareness and understanding; diverse candidate pipelines; community outreach;
advocacy and career advancement; and business impact. Our efforts, which began in 2020 with a focus on anti-
Black racism, have included mandatory unconscious bias and discrimination training, an employee-led diversity
page on our intranet updated monthly with fresh content, voluntary participation in a program to encourage allyship,
guest speaker programs on Diversity, Equity & Inclusion, or DEI, topics, and conducting a survey to understand
employee sentiment around race-related issues to establish a baseline for tracking future progress. We
implemented an internship program targeted to students from underrepresented minorities and adopted specific
quantitative efforts to provide the company with a diverse candidate pipeline and more diverse interview panels. In
addition to internal efforts, our research employees volunteer to teach elementary school students various topics in
biology.
In 2022, we engaged an external consultant with expertise in DEI to help conduct an assessment to
understand where improvements could be made in our culture to drive equitable outcomes and foster an inclusive
environment, with a particular focus on women scientists. The assessment included cross-organizational interviews,
focus group discussions, a detailed review of our policies, programs and business norms, an all-employee inclusion
survey and a review of organizational diversity metrics to determine what are the barriers to success and
advancement of women and underrepresented groups. The project identified three areas of action that are being
shared across the company, and we plan to begin to implement the recommendations in 2023. In addition, we
supported an employee-led effort to develop our first employee resource group, N-GAGE (NGM Gathers to Advance
Gender Equity). Since its inception, N-GAGE has supported the DEI assessment, created community spaces for
engagement and discussions on current topics disproportionately affecting women, and incubated a company-wide
mentorship and professional enrichment program starting with speed-mentoring events and guest speakers with a
planned roll-out in 2023.
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. In 2022, after nearly two years of the COVID-19 pandemic, we were able to reinstate many of the
traditions and celebrations that contribute to what makes NGM a special place to work: monthly themed happy
hours; weekly group lunch programs, often with employee-led lunch-and-learns with scientific and other updates of
interest; quarterly all-hands' meetings; regular coffee chats or other gatherings for small groups with our CEO and
other members of senior management; and events including a summer family picnic, Thanksgiving potluck and
holiday white elephant party, among many others.
We survey our employees each year to measure their level of engagement at NGM. Our employee
engagement scores have remained relatively steady over the past three years, despite the challenges we faced
through the COVID-19 pandemic and disappointing clinical trial readouts. These surveys provide rich feedback each
year that helps us to continue to grow our culture and make NGM a great place to work.
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Health, Wellness and Safety
In addition to specific support relating to health and safety during the COVID-19 pandemic, we continue
other activities that continue to promote our employees' whole health and wellness, including an on-site gym,
external support from our employee assistance program and mental wellness and health advocacy services.
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 website 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 website
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 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and in our consolidated 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 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 $162.7 million, $120.3 million and $102.5 million for the years ended December 31,
2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $581.6 million.
We expect to continue to incur significant 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 incurred substantial net operating losses in 2022 and expect to continue to incur
significant operating losses in 2023 and over the next several years as our research, development, manufacturing,
preclinical studies, clinical trial and related activities increase. We expect our accumulated deficit will also increase
in future periods. The size of our future net losses will depend, in part, on the amount of our expenses and our
ability to generate revenue. All of our revenue from recent periods has been provided under our collaboration with
Merck Sharp & Dohme LLC, or Merck, under 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. That revenue will be substantially lower in 2023 than in 2022 and prior years and minimal thereafter.
See the risk factor titled “All of our revenue for recent periods has been received from a single collaboration partner,
and that revenue will be substantially lower going forward as compared to historical periods.”
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.
Our ability to generate any product revenue from our current or future product candidates also depends on
a number of additional factors, including our ability or the ability of any potential future third-party partner 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 marketing approval is obtained, if any, and, if
launched independently by us without a partner, 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 for any product candidates that we
take forward, 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 going forward as compared to historical periods.
We do not have any committed external source of funds, other than pursuant to our collaboration with
Merck, which has provided us with substantial financial support since 2015. However, as described under
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview of Our
Business—Licensing and Collaboration Updates” in Part II, Item 7 of this Annual Report on Form 10-K, in 2023 the
R&D funding we receive from Merck under the collaboration will be substantially lower on an annual basis than the
research funding previously provided by Merck. In this regard, for the period that started on January 1, 2023 and
ends on March 31, 2024, we expect to receive funding of approximately $13.0 million in the aggregate from Merck
for the ongoing activities under the Amended Collaboration Agreement and for certain costs and reimbursements
related to the NGM621 program. Funding from Merck after December 31, 2023 is expected to be minimal.
In any event, we need to devote a substantial amount of our own financial resources to our R&D programs,
particularly with respect to our wholly-owned programs that now include all of our ophthalmology programs and, as
described below, once Merck's termination of its license with respect to MK-3655 is effective, MK-3655 (NGM313).
In addition, our funding requirements would increase for any preclinical programs that remain 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 example, as a result of Merck’s decision not to exercise its
option to license NGM621 and its related compounds, as described below, NGM621 and its related compounds are
now wholly-owned by us. Further development of NGM621 is primarily dependent on our ability to secure potential
future collaboration, out licensing, partnering or other business development arrangements, or BD Arrangements,
with third-party partners and, in the absence of such BD Arrangements, we are unlikely to be able to advance
development of NGM621 unless our portfolio prioritization changes and we have access to the necessary capital to
fund such development. In addition, as a result of Merck's decision to terminate its license to MK-3655 and its
related compounds, once the termination is effective, the license rights granted to Merck in 2018 with respect to
MK-3655 will revert to us and the program will become wholly-owned by us. Further development of MK-3655, once
the termination is effective, is also primarily dependent on our ability to secure potential future BD Arrangements
and, in the absence of such BD Arrangements, we are unlikely to be able to advance development of MK-3655
unless our portfolio prioritization changes and we have access to the necessary capital to fund such development.
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 we will
need to enter into additional partnering arrangements 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 or abandon 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.
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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 or other operations.
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;
the outcome, timing and cost of seeking and obtaining regulatory approvals from the United States 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;
whether Merck exercises its option to license any preclinical candidates that remain within the scope of the
collaboration at the 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, such as its
decision to terminate its license for MK-3655 and its related compounds;
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.
Moreover, based on our current development plans and related assumptions, we believe our current cash position is
sufficient to fund our key solid tumor oncology programs through generation of proof-of-concept data. We have
based these estimates on plans and assumptions that may prove to be insufficient or inaccurate (for example, with
respect to anticipated costs, timing or success of certain activities), 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, BD
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. While the long-term economic impact of either
the COVID-19 pandemic or the conflict between Russia and Ukraine is difficult to assess or predict, each of these
events has caused significant disruptions to the global financial markets and contributed to a general global
economic slowdown. Furthermore, inflation rates, particularly in the United States and the U.K., have increased
recently to levels not seen in decades. Increased inflation may result in increased operating costs (including labor
costs) and may affect our operating budgets. In addition, the U.S. Federal Reserve has raised, and is expected to
further raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled
with reduced government spending and volatility in financial markets, may further increase economic uncertainty
43
and heighten these risks. If the financial market disruptions and economic slowdown deepen or persist, we may not
be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our
financial condition and our ability to pursue our business strategy.
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
enter into BD Arrangements 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.
In this regard, due to the need to conserve capital and prioritize focused execution, we are actively seeking,
or intend to seek, BD Arrangements with third-party partners with sufficient resources and relevant domain expertise
in order to further the clinical development, if any, of NGM621, aldafermin, NGM936 and, once termination of
Merck's license is effective, MK-3655. Further development of these programs, which are in therapeutic areas
where clinical development is relatively resource intensive and can have long timelines to generate proof-of-concept
data, is primarily dependent on our ability to secure potential future BD Arrangements. However, we may not be
able to enter into such BD Arrangements on acceptable terms, if at all. We face significant competition in seeking
appropriate partners. Whether we reach a definitive agreement for a BD Arrangement will depend, among other
things, upon the potential partner’s evaluation of the subject product candidate and its market opportunity, our
assessment of the partner’s resources and expertise and the terms and conditions of the potential BD Arrangement.
In the absence of such BD Arrangements for these programs, we are unlikely to be able to advance their
development unless our portfolio prioritization changes and we have access to the necessary capital to fund such
development.
We are also restricted under our existing Amended Collaboration Agreement with Merck, and may be
restricted under future BD Arrangements, from entering into additional agreements on certain terms with potential
partners. 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. 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 BD Arrangements on a
timely basis, on acceptable terms or at all. If we are unable to do so, we may need to significantly delay, scale back
or discontinue development of or abandon some or all of our product candidates, or scale back or discontinue
discovery research efforts, which could have a material adverse effect on our business, operating results and
prospects, or we may be required to cease operations altogether.
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. Our ability to raise capital may be adversely impacted
by the trading prices of our common stock following the announcement in October 2022 that the CATALINA trial did
not meet its primary endpoint. 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.
44
Risks Related to Our Dependence on Third Parties
Funding from Merck under the collaboration after December 31, 2023 is expected to be minimal, and we
may never realize the anticipated benefits to us of the collaboration.
As described in more detail under “Business—Licensing and Collaboration Arrangements—Merck
Collaboration” in Part I, Item 1 of this Annual Report on Form 10-K and under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Overview of Our Business—Business Development and
Merck Collaboration Updates” in Part II, Item 7 of this Annual Report on Form 10-K, our continuing Merck
collaboration involves a complex allocation of rights, provides for certain limited R&D funding and, for remaining
collaboration preclinical candidates 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.
The level of R&D funding we expect to receive from Merck will be limited and substantially lower on an
annual basis than the funding previously provided by Merck. In this regard, for the period that started on January 1,
2023 and ends on March 31, 2024, we expect to receive funding of approximately $13.0 million in the aggregate
from Merck for the ongoing activities under the Amended Collaboration Agreement and for certain costs and
reimbursements related to the NGM621 program. Funding from Merck after December 31, 2023 is expected to be
minimal.
In addition, in January 2023, we announced that Merck notified us of its decision to terminate the Phase 2b
trial of MK-3655 in patients with nonalcoholic steatohepatitis, or NASH, and liver fibrosis stage 2 or 3, or F2/F3, and
Merck subsequently provided us with the required 90-days' notice of partial termination of the Amended
Collaboration Agreement as it relates to MK-3655 and its related compounds. As a result, in late April 2023, the
license rights granted to Merck in 2018 with respect to MK-3655 will revert to us and the program will become
wholly-owned by us. Further development of MK-3655, once the termination is effective, is primarily dependent on
our ability to secure potential future BD Arrangements and, in the absence of such BD Arrangements, we are
unlikely to be able to advance development of MK-3655 unless our portfolio prioritization changes and we have
access to the necessary capital to fund such development.
Similarly, in October 2022, we announced that our Phase 2 CATALINA trial evaluating NGM621 in patients
with geographic atrophy, or GA, secondary to age-related macular degeneration, or AMD, did not meet its primary
endpoint and, in December 2022, Merck notified us that it would not exercise its option to license NGM621 and its
related compounds or the related ophthalmology bundle option and, as a result, those options expired unexercised
in January 2023. Further, Merck did not elect for us to continue to conduct R&D on any compounds from our other
ophthalmology programs that were subject to the collaboration, which are preclinical and directed to undisclosed
targets. Such an election would have resulted in an extended or tail period in which Merck would continue to fund
our R&D of such ophthalmology compounds. Because Merck did not make such an election, we do not have any
funding from Merck to pursue such ophthalmology programs after we complete certain wind down activities related
to NGM621, and if we choose to develop these programs further, we will be responsible for funding them. As a
result, while our ophthalmology programs, including NGM621, are now wholly-owned by us, further development of
those programs is primarily dependent on our ability to secure potential future BD Arrangements and, in the
absence of such BD Arrangements, we are unlikely to be able to advance development of NGM621 or the
preclinical ophthalmology programs unless our portfolio prioritization changes and we have access to the necessary
capital to fund such development.
We do not know whether Merck will elect to exercise its option to license any CVM-related preclinical
candidates that remain subject to the collaboration. Accordingly, the anticipated benefits to us of the collaboration
with Merck may never be realized and it possible that the Amended Collaboration Agreement will be terminated
without Merck exercising its option to license any other programs or product candidates.
Moreover, 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 that remain 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 any future licensed program, as they did with
respect to MK-3655 in January 2023 (effective in late April 2023) and with respect to our growth differentiation factor
15, or GDF15, agonist program, which included product candidates NGM395 and NGM386, in 2019. Merck may
also unilaterally terminate the Amended Collaboration Agreement as it relates to its rights to research and develop
45
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 further our CVM-related research programs, which could materially and adversely affect our business.
In addition, in the event that Merck decides to take over any CVM-related preclinical candidates that remain within
the scope of the collaboration for development during any tail period, or exercises its license option for any such
preclinical 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 BD Arrangements with third-party partners for the development and
commercialization of our product candidates and for revenue. If we are unable to secure those BD
Arrangements on beneficial terms, if at all, or if any such future arrangements are not successful, we may
not be able to capitalize on the market potential of our product candidates or continue their development.
Pursuing BD arrangements has been and is expected to continue to be a key component of our strategy,
and we are actively seeking, or intend to seek, BD Arrangements with third-party partners to progress, in whole or in
part, the development of one or more of our product candidates. While we may opportunistically consider BD
Arrangements to advance development of our key solid tumor oncology programs, the further development of other
programs in our pipeline, including NGM621, aldafermin, NGM936 and, once termination of Merck's license is
effective, MK-3655, is primarily dependent on our ability to secure potential future BD Arrangements for these
programs. Due to the need to conserve capital and prioritize focused execution and unless our portfolio prioritization
changes, if we are unable to secure BD Arrangements for these programs on beneficial terms, if at all, we are
unlikely to be able to advance their development unless our portfolio prioritization changes and may discontinue or
abandon any or all of these programs altogether, in which case we will not realize any return on our investments in
these programs. Even if we are successful in entering into any BD Arrangements with third-party partners for our
programs, we will likely have limited control over the amount and timing of resources that our partners dedicate to
the development or commercialization of the applicable product candidates. Our ability to generate revenue from
any such arrangement will depend on the specific financial terms we reach with any partner, as well as each of our
partners’ abilities to successfully perform the functions assigned to them in such arrangement towards developing,
seeking regulatory approval for and commercializing our product candidates.
BD Arrangements involving our product candidates pose risks to us, including the following:
•
•
Partners have significant discretion in determining the efforts and resources that they will apply to these
arrangements. For example, under the terms of the collaboration with Merck, if Merck exercises its option to
acquire an exclusive license for any CVM-related preclinical candidate that remains within the scope of the
collaboration, our ability to influence the resources Merck devotes to such 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.
Partners 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 partner’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 we
entered into with Merck in 2015. In addition, under the terms of the Amended Collaboration Agreement, it is
possible for Merck to unilaterally terminate and any other future licensed program, if any, (whether or not we
have exercised our cost and profit share option) upon prior written notice, such as it did for NGM386 and
NGM395 in 2019 and most recently in its notice of termination for MK-3655 (effective late April 2023),
without triggering a termination of the remainder of the Amended Collaboration Agreement. Moreover,
Merck might also opt not to designate any collaboration preclinical candidates for further development
46
•
•
•
•
•
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, as it did with respect to the preclinical ophthalmology product candidates.
Partners 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.
Partners could independently develop, or develop with third parties, products that compete directly or
indirectly with our product candidates if the partners 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 partner with marketing and distribution rights might not commit sufficient resources to the marketing and
distribution of our product candidates.
Partners 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 partners 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 BD Arrangements, including, in
the case of our collaboration with Merck, if we undergo a change in control.
•
•
BD Arrangements 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.
BD Arrangements might not lead to development or commercialization of product candidates in the most
efficient manner, or at all. If a present or future partner of ours were to be involved in a business
combination, the continued pursuit and emphasis on our product development or commercialization
program under such arrangement 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 any potential future partners, 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 we 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 partners 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 partners 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 partners 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.
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 partners will devote to our R&D programs, product candidates or potential product
47
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 we 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;
• 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 partners;
48
•
•
our CMOs’ changing strategies and business priorities, which can affect the availability of facilities where we
intend 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 effects of the ongoing 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. 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 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
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 investigational new drug application, or IND, 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
49
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 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 “Our business could be materially and adversely affected in the future
by the effects of disease outbreaks, epidemics and pandemics, including 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 NGM621 and aldafermin are currently solely manufactured at a facility in
Lithuania. Following Russia's invasion of Ukraine in February 2022, the response from the United States and its
allies has included both significant sanctions and NATO's deployment of additional military forces to Eastern
Europe, including to Lithuania. The ongoing conflict between Russia and Ukraine and the retaliatory measures
taken or that may be taken by the United States, NATO and others, including significant sanctions against Russia,
create global security concerns and regional instability, including due to 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.
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, if any, or for which Merck decides not to
exercise its license option, we must either develop our own sales, marketing and distribution capabilities or make
50
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
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 effects of the ongoing
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;
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 R&D personnel; or
the placement of a clinical hold on a trial by the FDA or comparable foreign health authorities.
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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 partners’ 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 or sufficient to demonstrate
differentiation from other approved therapies or therapies in development, we may incur additional costs or
the development and
experience delays
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 partners 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
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, despite the results of preclinical and Phase 1 studies of
NGM621, our Phase 2 CATALINA clinical trial evaluating NGM621 in patients with GA secondary to AMD did not
meet its primary endpoint. Since Merck did not elect to exercise its option to license NGM621 and its related
compounds, further development of NGM621 is primarily dependent on our ability to secure potential future BD
Arrangements and, in the absence of such BD Arrangements, we are unlikely to be able to advance development
of NGM621 unless our portfolio prioritization changes and we have access to the necessary capital to fund such
development.
Similarly, our Phase 2b ALPINE 2/3 trial evaluating aldafermin in patients with F2/F3 NASH 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 cirrhosis
due to NASH (liver fibrosis stage 4, or F4, by the NASH Clinical Research Network classification), we 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, refer to the risk factor titled “Aldafermin is, and MK-3655
was, 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 continued clinical development, if any, and
regulatory approval for the treatment of NASH, or otherwise.”
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
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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.
We may also not be successful in generating clinical data sufficient to differentiate our product candidates
from other products in the same therapeutic area. If our competitors' products are, or are perceived to be, more
effective, more convenient, less costly or safer than our products, or we are unable to demonstrate differentiation in
any of those factors, we may not be able to achieve a competitive position in the market. For more information, refer
to the risk factor titled “We face substantial competition, which may result in others discovering, developing or
commercializing products before or more successfully than us."
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 partners 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, the data
supporting our drug discovery and development programs are derived from laboratory and preclinical studies, and
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, despite the results of preclinical
and Phase 1 studies of NGM621, our Phase 2 CATALINA clinical trial evaluating NGM621 in patients with GA
secondary to AMD did not meet its primary endpoint. Similarly, 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 F2/F3 NASH did not meet its primary endpoint. For more information, refer to
the risk factor titled “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 or sufficient to demonstrate
differentiation from other approved therapies or therapies in development, we may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and commercialization of our
product candidates." There can be no assurance that any clinical testing of our product candidates will be
successful or will otherwise be supportive of continued development and/or regulatory approvals of such product
candidates.
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. As a general matter, there is also a substantial risk that Phase 3 trials
with larger numbers of patients and/or longer durations of therapy will fail to replicate efficacy and safety results
observed in earlier clinical trials.
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
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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 experienced, and we reported, serious adverse events, or SAEs, in the treatment arms of our
completed trials of MK-3655, NGM621 and aldafermin. 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, NGM707, NGM831 and NGM438, 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, it may result in a regulatory authority putting a clinical hold on the clinical
trial or it may 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 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 determine that ADAs are causing
safety or efficacy concerns when using any of our product candidates, we 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 safety events, or that the detection of ADAs will
not otherwise result in the non-approvability of any of our product candidates.
NGM621 had 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. While we have not experienced any safety concerns in our completed NGM621 clinical
trials relating to syringe use, we communicated with the FDA and our study investigators regarding this issue and
this issue could preclude or delay any efforts to partner our NGM621 program.
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.
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Aldafermin is, and MK-3655 was, 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
continued clinical development, if any, and regulatory approval for the treatment of NASH, or otherwise.
We are developing aldafermin, and MK-3655 was in development by Merck, 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
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 compensated cirrhosis
due to NASH (stage F4) 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.
In addition, certain of our competitors have 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. Moreover, the above factors could make it difficult or preclude altogether our ability to secure
potential future partners necessary to further the development of aldafermin and MK-3655 in NASH or otherwise.
As a result of the above, the future development of aldafermin and MK-3655 in patients with NASH is
substantially uncertain and could be discontinued altogether, in which case, we will not receive any return on our
investments in these programs.
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
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
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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. For
example, our key pipeline programs in active development include product candidates in solid tumor oncology, and
we are focusing most of our execution efforts and resources on these programs, intending to mainly advance them
in generation of proof-of-concept data internally. However, our focus on the solid tumor oncology therapeutic area
may be unsuccessful and may never lead to the development of viable commercial products. 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/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
necessary for the successful research, development and future commercialization, if any, of our product candidates.
We recruit for talent in the biotechnology and pharmaceutical industry in the San Francisco Bay Area, which is one
of the most competitive and highest cost labor market in the United States and periodically experiences higher
turnover rates than other industries. For example, in 2022, we continued to experience a challenging recruiting
environment with relatively high rates of employees leaving the company to pursue other opportunities, particularly
in the first three quarters of the year.
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 tightened significantly
after the beginning of the ongoing COVID-19 pandemic. During the first couple of years of the COVID-19 pandemic,
we experienced employee attrition at rates higher than we experienced historically, which may recur and could have
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a negative impact on our productivity. If we are unable 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 seek to treat the same diseases that we are
pursuing with our most advanced product candidates, particularly in the oncology field. Some of these
pharmaceuticals in development are active, or seek to be active, against the same targets that our product
candidates are engineered to effect, including the targets that are the focus of our immuno-oncology candidates,
ILT2, ILT3, ILT4 and LAIR1. 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 collaboration or partnering
relationships. Smaller and earlier-stage companies may also prove to be significant competitors, particularly through
collaboration or partnering 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 European Commission-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-Our Pipeline Programs” in this Annual
Report on Form 10-K.
In February 2023, Apellis Pharmaceuticals, Inc., or Apellis, announced that the FDA approved SYFOVRE™
(pegcetacoplan injection) for the treatment of GA secondary to AMD. Apellis' regulatory approval for pegcetacoplan
injection may affect future late-stage clinical trial designs, if any, and require added clinical development expense.
Iveric bio, Inc.’s, or Iveric's, avacincaptad pegol, 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 avacincaptad pegol arm versus the sham arm. In February 2023, Iveric announced that the FDA had accepted
its NDA for avacincaptad pegol. Even if we are successful in securing a future BD Arrangement for the NGM621
program, which may not occur in a timely manner or at all, and our partner obtains regulatory approval of NGM621,
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which is substantially uncertain given the failure to meet the primary endpoint in the CATALINA trial, NGM621 may
not be able to compete effectively against pegcetacoplan and avacincaptad pegol, which could adversely affect our
future revenues and business prospects in the event we are able to successfully partner the program.
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, which may
negatively impact market acceptance of an approved aldafermin product, if any. In addition, refer to 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
European Union, or 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.
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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 partners obtain regulatory approval. If coverage and reimbursement are not available
or reimbursement is available only to limited levels, we and our partners 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
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, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA,
into law, which among other things, (1) directs the U.S. Department of Health and Human Services, or HHS, to
negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates
under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will
take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently
unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
Further, 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.” 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. Prior to the United States Supreme Court
ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for
purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed
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
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through Medicaid or the ACA. The IRA also, among other things, extends enhanced subsidies for individuals
purchasing health insurance coverage in ACA marketplaces through plan year 2025 and eliminates the “donut hole”
under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-
pocket cost through a newly established manufacturer discount program. It is possible that the ACA and IRA may be
subject to judicial or Congressional challenges in the future. It is unclear how any additional healthcare reform
measures may impact the ACA or IRA, 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, 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. Further, the Biden administration released an additional executive order on October 14, 2022,
directing HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged
to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether this
executive order or similar policy initiatives will be implemented in the future. 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
and we expect that legislators, policy makers and healthcare insurance funds in the EU Member States will continue
to propose and implement cost cutting measures. These measures include mandatory price controls, price
referencing, therapeutic-reference pricing, increases in mandates, incentives for generic substitution and biosimilar
usage, government-mandated price cuts, limitations on coverage of target population and introduction of volume
caps.
Many countries implement health technology assessment, or HTA, procedures that use formal economic
metrics such as cost-effectiveness to determine prices, coverage and reimbursement of new therapies. These
assessments are increasingly implemented in established and emerging markets. In the EU, the newly-adopted
Regulation (EU) 2021/2282 on Health Technology Assessment, or HTA Regulation, which will become effective in
January 2025, will allow EU member states to use common HTA tools, methodologies and procedures to conduct
joint clinical assessments and joint scientific consultations whereby HTA authorities may provide advice to health
technology developers. Each EU member state will, however, remain exclusively competent for assessing the
relative effectiveness of health technologies and making pricing and reimbursement decisions. Given that the extent
to which pricing and reimbursement decisions are influenced by the HTA process currently varies between EU
member states, it is possible that our products may be subject to favorable pricing and reimbursement status only in
certain EU countries. If we are unable to maintain favorable pricing and reimbursement status in EU member states
that represent significant markets, including following periodic review, our anticipated revenue from and growth
prospects for our products in the EU could be negatively affected. 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. Efforts to generate additional data for the HTA process will
involve additional expenses which may substantially increase the cost of commercializing and marketing our
products in certain EU member states.
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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
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 partner
succeeds in developing any of our product candidates, we intend to market them in the EU and other jurisdictions in
addition to the United States. If approved, we, Merck or any future partner 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
inflation and local and regional financial crises on demand and payment for our products and exposure to
foreign currency exchange rate fluctuations;
natural disasters, political, geopolitical and economic instability, including wars such as the conflict between
Russia and Ukraine, terrorism and political unrest, disease outbreaks, epidemics and pandemics, 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 partner 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;
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 partner 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 partner 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;
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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
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
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.
Our business could be materially and adversely affected in the future by the effects of disease outbreaks,
epidemics and pandemics, including the COVID-19 pandemic.
Disease outbreaks, epidemics and pandemics, such as the COVID-19 pandemic, in regions where we have
concentrations of clinical trial sites or other business operations 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. Disease outbreaks, epidemics and pandemics have negative impacts 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. For example, 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 was impacted by COVID-19 quarantines, shelter-in-place and similar restrictions imposed by federal,
state and local governments. In addition, during the COVID-19 pandemic, we experienced, from time to time, a
slower pace of clinical site initiation and clinical trial enrollment and a higher subject dropout rate than originally
anticipated in certain of our clinical trials, which we believe may have been 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.
General supply chain issues may be exacerbated during disease outbreaks, epidemics and pandemics and
may also impact the ability of our clinical trial sites to obtain basic medical supplies used in our trials in a timely
fashion, if at all. For example, in 2022 we were made aware of a shortage of tubes required for taking blood
samples, requiring the use of tubes of a different size from those specified in one of our protocols. In addition, our
CMOs’ facilities and operations have been adversely affected by labor, raw material and component shortages, high
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turnover of staff and difficulties in hiring trained and qualified replacement staff during the COVID-19 pandemic.
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 disease outbreaks, epidemics or pandemics
in the future. 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. For
example, early in the COVID-19 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 vaccines or medical supplies needed to test or treat patients in a disease
outbreak, epidemic or pandemic, this could delay our clinical trials, perhaps substantially, which could materially and
adversely affect our business.
Moreover, COVID-19 continues to evolve, and the extent to which COVID-19 may impact our business,
results of operations and financial position will depend on future developments, which are highly uncertain and
cannot be predicted with confidence, such as the emergence, infectiousness and severity of new variants, travel
restrictions, quarantines and social distancing in the United States and other countries, business closures or
business disruptions, global supply challenges, and the effectiveness of actions in the United States and other
countries to contain and treat the disease. New health epidemics or pandemics may emerge that result in similar or
more severe disruptions to our business. To the extent the effects of the continuing COVID-19 pandemic, or any
future disease outbreak, epidemic or 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.
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;
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/inspection findings; or
changes in the approval policies or regulations that render our preclinical and clinical data insufficient for
approval.
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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 or conditional marketing authorization 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.
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.
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 or a future partner 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, or NDA, 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 or a future partner 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.
Sponsors that benefit from PRIME designation are potentially eligible for accelerated assessment of their
marketing authorization applications, although this is not guaranteed. If a product for which PRIME designation was
granted is the subject of an accelerated assessment, the product may be placed on the market in the EU before our
product candidate with a similar therapeutic indication.
Our failure to obtain health authority approval in foreign jurisdictions would prevent us from marketing our
product candidates outside the United States.
If we or our partners 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.
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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 R&D 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 or the manufacturing facilities for our product candidates fail to comply with applicable regulatory
requirements, or if our product candidates are found to cause undesirable or unacceptable side effects, 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 and complete 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;
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.
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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
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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.
In the EU, the advertising and promotion of medicinal products are subject to both EU and EU member
state laws governing promotion of medicinal products, interactions with physicians and other healthcare
professionals, misleading and comparative advertising and unfair commercial practices. Although general
requirements for advertising and promotion of medicinal products are established under EU directives, the details
are governed by regulations in each member state and can differ from one country to another. For example,
applicable laws require that promotional materials and advertising in relation to medicinal products comply with the
product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities in connection
with a marketing authorization. The SmPC is the document that provides information to physicians concerning the
safe and effective use of the product. Promotional activity that does not comply with the SmPC is considered off-
label and is prohibited in the EU. Direct-to-consumer advertising of prescription medicinal products is also prohibited
in the EU.
Failure to comply with EU, EU member state, and other country 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. In addition, legislation adopted at the EU level may be 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.
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. Equivalent obligations could be imposed by the foreign health authorities. 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.
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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, partners 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, partners 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, partners 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’, partners' 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
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, partners 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, partners 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, partners 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, partners 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,
partners 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, partners 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, partners 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
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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.
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, partners 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.
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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, partners 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, partners 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, partners 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, partners 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.
Third parties may initiate legal proceedings against us or our current or future licensors, licensees, partners
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, partners 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, partners 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,
partners 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, partners 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, partners
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
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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, partners or collaborators may be subject to claims that former employees,
partners, 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, partners 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 could prevent us from commercializing our product candidates or force us to cease some of our
business operations, which could materially harm our business.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents in all countries throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries outside the United States can be less extensive
than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property
rights to the same extent as federal and state laws in the United States, even in jurisdictions where we do pursue
patent protection. Consequently, we may not be able to prevent third parties from practicing our or our licensors’
inventions in all countries outside the United States, even in jurisdictions where we or our licensors do pursue
patent protection. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own competing products and, further, may export otherwise infringing products to
territories where we have patent protection, but enforcement is not as strong as that in the United States.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant
licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies
or government contractors. In these countries, the patent owner may have limited remedies, which could materially
diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents
relevant to our business, our competitive position may be impaired, and our business, financial condition, results of
operations and prospects may be adversely affected.
In Europe, expected by the end of 2023, European applications will soon have the option, upon grant of a
patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court, or the UPC.
This will be a significant change in European patent practice. As the UPC is a new court system, there is no
precedent for the court, increasing the uncertainty of any litigation. It is our initial belief that the UPC, while offering a
cheaper streamlined process, has potential disadvantages to patent holders, such as making a single European
patent vulnerable in all jurisdictions when challenged in a single jurisdiction.
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 $2.92 on October 17, 2022. The trading price of our
common stock has been and may continue to be highly volatile and subject to wide fluctuations in response to
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various factors, some of which we cannot control. In addition to the factors discussed in this “Risk Factors” section,
these factors include:
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results of clinical trials of our product candidates or those of our competitors;
our ability to raise adequate capital through public or private equity or debt offerings or negotiate potential
future BD Arrangements;
the success of competitive products or technologies, including disclosure of data by our competitors;
regulatory actions with respect to our product candidates or our competitors’ product candidates or
products;
timeline delays in our clinical trials, including delays resulting from the effects of the ongoing 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 partners of significant acquisitions, strategic collaborations,
joint ventures 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;
purchases or 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 and the conflict between Russia and Ukraine, 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 effects of the ongoing COVID-19 pandemic, macroeconomic factors including inflation
and rising interest rates, and geopolitical instability, including instability resulting from the conflict between Russia
and Ukraine and the related sanctions imposed against Russia, 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.
Because of 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 to the risk factor titled “An active
trading market for our common stock may not be sustained and sales of a substantial number of shares of our
common stock in the public market could cause our stock price to fall.”
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Our principal stockholders, including entities affiliated with The Column Group, Merck and management,
own a substantial percentage of our stock and collectively 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 collectively may be able to determine all matters requiring stockholder approval. For example, these
stockholders collectively 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.
An active trading market for our common stock may not be sustained and sales of a substantial number of
shares of our common stock in the public market could cause our stock price to fall.
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.
For the trading days during the nine months ended September 30, 2022, the average daily trading volume
for our common stock on The Nasdaq Global Select Market was only 376,739 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
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
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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 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 Delaware General Corporation Law 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
Amended Collaboration Agreement, 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, if any.
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 owed by any director, officer or other employee to us or our stockholders; any action asserting a claim against
us or any director or officer or other employee arising pursuant to the Delaware General Corporation Law, our
amended and restated certificate of incorporation or our amended and restated bylaws; any action with respect to
the validity of our amended and restated certificate of incorporation or amended and restated bylaws; any action as
to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of
Delaware; or any action asserting a claim against us or any director or officer or other employee 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 Securities and Exchange Act of 1934, as amended, or 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 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.
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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 (such as health-related data), 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, partners, 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. During
times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be
vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our
systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. 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,
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. Supply-chain attacks have also increased in frequency and severity,
and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply
chains have not been compromised. Our ability to monitor third parties on whom we rely to operate our business is
limited, and these third parties may be subject to, and may expose us to, cyberattacks and other security incidents.
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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.
Certain functional areas of our workforce work remotely on a full- or part-time basis outside of our corporate
network security protection boundaries or otherwise utilize network connections, computers and devices outside of
our premises or network, 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 since 2020, none of which, to date, have caused material
disruption to our business, or to our knowledge, involved a material security breach. For example, 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), 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
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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.
The United Kingdom’s, or UK, 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, or MHRA, is now the UK’s standalone regulator.
On December 24, 2020, the EU and UK reached an agreement in principle on the framework for their future
relationship, the EU-U.K. Trade and Cooperation Agreement, or the TCA. The TCA primarily focuses on ensuring
free trade between the EU and the UK in relation to goods, including medicinal products. Although the body of the
TCA includes general terms which apply to medicinal products, greater detail on sector-specific issues is provided in
an Annex to the TCA.
Among the changes that are now applied are that Great Britain (England, Scotland and Wales) are treated
as a third country. Northern Ireland, with regard to EU regulations, continues to follow many aspects of EU
regulatory rules. As part of the TCA, the EU and the UK recognize GMP inspections carried out by the other party
and accept official GMP 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
eventual adoption of the Retained EU Law (Revocation and Reform) Bill that is currently going through the UK
adoption procedure may, however, result in substantial change to the extent to which EU laws influence these and
other actions in the UK.
After running a public consultation which ended in December 2022, the UK government unilaterally agreed
to permanently accept EU batch testing and batch release. However, it is not certain whether the UK will continue
this approach, particularly following adoption of the current Retained EU Law (Revocation and Reform) Bill. If the
UK were to adopt an approach whereby re-testing and/or re-release in the UK would be required, this could result in
increased costs. Furthermore, 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 regards marketing authorizations,
Great Britain has a separate regulatory submission process, approval process and a national marketing
authorization. Northern Ireland, however, continues to be covered by the marketing authorizations granted by the
European Commission.
The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as
implemented into UK law, through secondary legislation) and, as such, it falls within the scope of the Retained EU
Law (Revocation and Reform) Bill as currently drafted. Adoption of the Retained EU Law (Revocation and Reform)
Bill as currently drafted would result in the regulatory framework governing clinical trials in the UK being revoked
unless Ministerial action were taken to retain or replace it. It is currently unclear to what extent the UK will seek to
align its regulations with the EU following entry into application of the Clinical Trials Regulation in the EU which
occurred on January 31, 2022.
Since January 1, 2021, an applicant for a marketing authorization granted by the European Commission in
accordance with the centralized procedure based on the opinion of the Committee for Medicinal Products for
Human Use, or CHMP, of the EMA can no longer be established in the UK. Since 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 a marketing authorization to market products in the UK. For an initial two-year period from
January 1, 2021, MHRA could rely on a decision taken by the European Commission on the approval of a new
centralized procedure marketing authorization when determining an application for a Great Britain marketing
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authorization, or use the MHRA’s decentralized or mutual recognition procedures which enable marketing
authorizations approved in EEA countries to be granted in Great Britain. Post Brexit, the MHRA has been updating
various aspects of the regulatory regime for medicinal products in the UK. These include: introducing the Innovative
Licensing and Access Procedure to accelerate the time to market and facilitate patient access for innovative
medicinal products; updates to the UK national approval procedure, introducing a 150-day objective for assessing
applications for marketing authorizations in the UK, Great Britain and Northern Ireland and a rolling review process
for marketing authorization applications (rather than a consolidated full dossier submission). In September 2022, the
MHRA extended the procedure whereby it may rely on a decision taken by the European Commission when
determining an application for a Great Britain marketing authorization until December 31, 2023.
Orphan designation in Great Britain following Brexit is, unlike in the EU, not a pre-marketing authorization.
Applications for orphan designation are made at the same time as an application for a marketing authorization. The
criteria to be granted an orphan drug designation are essentially identical to those in the EU but based on the
prevalence of the condition in Great Britain. It is therefore possible that medical conditions that were or would have
been designated as orphan conditions in Great Britain prior to the end of the Transition Period are or would no
longer be and that conditions that were not or would not have been designated as orphan conditions in the EU will
be designated as such in Great Britain.
Since a significant part of the regulatory framework in the UK applicable to our business and our product
candidates is derived from EU legislation, Brexit has the potential of materially impacting the regulatory framework
with respect to the development, manufacture, approval, import and placement of our product candidates on the
market in the UK and the EU. The changes effected by the TCA, as well as any future changes in the regulatory
framework governing medicinal products, including the adoption of the Retain EU Law (Revocation and Reform) Bill,
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. Outside the United States, an increasing number of laws, regulations, and industry
standards may govern data privacy and security. For example, the European Union’s General Data Protection
Regulation, or EU GDPR, and the United Kingdom’s GDPR, or UK GDPR, impose strict requirements for processing
personal information. For example, the EU GDPR, UK GDPR and other relevant laws that govern patient
confidentiality and storage of personal health data may apply to our processing of personal information from clinical
trials participants and other individuals located in the European Economic Area, or EEA, and/or the UK and, if any of
our product candidates are approved, we may seek to commercialize those products in the EEA and/or the UK (as
applicable). 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 at present materially aligned with, the EU GDPR, which together with the UK Data Protection
Act of 2018, or UK DPA, covers the processing of personal information of UK residents. Non-compliance with UK
GDPR may result in substantially similar adverse consequences to those in relation to the EU GDPR, including
monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher.
On June 28, 2021, the European Commission adopted an adequacy decision permitting flows of personal
data between the EU and the UK to continue without additional requirements. The UK Government also adopted a
reciprocal adequacy decision in respect of EEA member states permitting flows of personal data from the UK to the
EEA. However, the European Commission's UK adequacy decision will automatically expire in June 2025 unless the
European Commission re-assesses and renews/extends that decision and remains under review by the European
Commission during this period. The entry into force of the US-UK Data Access Agreement on October 3, 2022 may
put at risk the European Commission’s adequacy decision granted to the UK. If such adequacy decision were to be
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withdrawn, personal data could not flow freely between the UK and the EU and additional safeguards would need to
be adopted, which could result in additional costs for us.
The relationship between the UK and the EU in relation to certain aspects of data protection laws remains
unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term,
and how data transfers to and from the UK will be regulated in the long term. The UK’s Data Protection and Digital
Information Bill, or the Bill, was laid before the UK Parliament on July 18, 2022, introducing reforms intended to
update and simplify the UK’s data protection framework, deviating from the EU GDPR. However, the Bill’s progress
through Parliament is currently on pause following changes to the UK Government’s leadership. The Bill is expected
to re-enter the legislative process in due course.
Certain jurisdictions have enacted data localization laws and laws restricting cross-border transfers of
personal information. In particular, regulators and courts in the EEA and the UK have significantly restricted the
transfer of personal information to the United States and other countries whose privacy laws it believes are
inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-
border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal
information from the EEA and UK to the United States in compliance with law, such as the EEA’s standard
contractual clauses and the UK's international data transfer agreement, these mechanisms are subject to legal
challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal
information to the United States.
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 of existing law or
guidance that may be issued, particularly by the EU authorities. If we are unable to implement a valid compliance
solution for cross-border transfers of personal information, or if the requirements for a legally-compliant transfer are
too onerous, we will face increased exposure to significant adverse consequences, including substantial fines,
regulatory actions, as well as injunctions against the export and processing of personal information from the EEA.
Our inability to import personal information from the EEA, UK or Switzerland or other countries may also restrict or
prohibit 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. We may also become subject to new laws in the EEA that regulate cybersecurity and non-
personal data, such as data collected through the internet of things. Depending on how these laws are interpreted,
we may have to make changes to our business practices and products to comply with such obligations.
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
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, the
California Consumer Privacy Act of 2018, or CCPA, 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. In addition, the
California Privacy Rights Act of 2020, or CPRA, which becomes operative January 1, 2023, will expand the CCPA’s
requirements, including in that it applies to personal information of business representatives and employees and
establishes a new regulatory agency to implement and enforce the law. While the CCPA contains an exemption for
certain personal information processed in connection with clinical trials, we may process other personal information
that is subject to the CCPA and forthcoming CPRA. Other states, such as Virginia and Colorado, have also passed
comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal
and local levels. 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.
We may also be bound by contractual obligations related to data privacy and security, and our efforts to
comply with such obligations may not be successful. We may publish privacy policies, marketing materials and
other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy
and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive,
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unfair or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators
or other adverse consequences.
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 (or third parties on which we rely) 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.
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
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, NGM707, NGM831, NGM438 and MK-3655 is located in
Lithuania, a region that has experienced political unrest. Refer to the risk factor 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.” If our
operations or the operations of third parties providing services to us are disrupted by any such occurrences, our
business and future prospects may be negatively affected.
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 ability to use net operating loss carryforwards and certain other tax attributes 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 BD Arrangements. 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
federal net operating loss carryforwards generated in tax years beginning before January 1, 2018 are only permitted
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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 Sections 382 and 383 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 and certain other pre-change tax attributes (such as R&D tax credits) 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 and certain other tax attributes 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.
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 tax laws, statutes, rules, regulations, directives, decrees or ordinances could be enacted at any time.
Further, existing tax laws, statutes, rules, regulations, directives, decrees or ordinances could be interpreted,
changed or modified. Any such enactment, interpretation, change or modification could adversely affect us, possibly
with retroactive effect. For example, the recently enacted IRA imposes, among other rules, a 15% minimum tax on
the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases. In
addition, for certain research and experimental, or R&E, expenses incurred in tax years beginning after December
31, 2021, the 2017 Tax Act requires the capitalization and amortization of such expenses over five years if incurred
in the United States and fifteen years if incurred outside the United States, rather than deducting such expenses
currently. Although there have been legislative proposals to repeal or defer the capitalization requirement, there can
be no assurance that such requirement will be repealed, deferred or otherwise modified. 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, as amended by the CARES Act or any future tax reform legislation
could have a material impact on the value of our deferred tax assets, result in significant one-time charges and
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
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 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 Exchange Act, the Sarbanes-Oxley
80
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(b) 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(b) 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 outsource this function to a third party. We have hired and will need to retain our current accounting and
financial staff who have the appropriate public company experience and technical accounting knowledge. 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(b) 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(b) 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
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
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, any BD Arrangements we may enter into, our financial information and other disclosures. If
securities or industry analysts do not publish research or reports about our business, delay publishing reports about
81
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 office space and facilities in South San
Francisco, California. In July 2022, we entered into an operating lease agreement, or the 2024 Lease Agreement,
for our existing corporate office space and facilities at 333 Oyster Point Boulevard, South San Francisco, California,
that we currently occupy pursuant to a sublease agreement scheduled to expire on December 31, 2023. The initial
term of the 2024 Lease Agreement will commence on January 1, 2024 and expire on December 31, 2033.
Item 3.
Legal Proceedings.
None.
Item 4.
Mine Safety Disclosures.
Not applicable.
82
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.
Holders of Record
As of the close of business on February 22, 2023, there were 38 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, 2022. 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.
Comparison of Cumulative Total Return
Among NGM Biopharmaceuticals, Inc., the Nasdaq Composite Index and Nasdaq Biotechnology Index
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$‐
4/4/2019
12/31/2019
12/31/2020
12/31/2021
12/31/2022
NGM Biopharmaceuticals, Inc.
NASDAQ Composite Index
NASDAQ Biotechnology Index
NGM Biopharmaceuticals, Inc.
NASDAQ Composite Index
NASDAQ Biotechnology Index
4/4/2019
12/31/2019
12/31/2020
12/31/2021
$ 100.00 $ 125.78 $ 206.09 $ 120.48 $
12/31/2022
34.15
100.00
100.00
113.70
106.66
163.31
134.05
198.24
133.20
132.63
118.67
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
83
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, 2022, we did not issue or sell any unregistered securities.
Issuer Purchases of Equity Securities
During the three-month period ended December 31, 2022, we did not repurchase shares of our common
stock.
Item 6.
[Reserved]
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,” "aspire,"
“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 of Our Business
We are a biopharmaceutical company focused on discovering and developing novel, potentially life-
changing medicines based on scientific understanding of key biological pathways underlying grievous diseases with
critical unmet or underserved patient need. 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 portfolio of product candidates ranging from early discovery to Phase
2b development. Currently, we have five programs in active clinical development. Our biology-centric drug discovery
approach is therapeutic area agnostic and 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
discovery engine, led by biology and motivated by patient need.
Our pipeline is currently divided into two categories with separate approaches to development strategy and
resource allocation in an effort to enable more of the product candidates in our pipeline to be advanced as
effectively and efficiently as possible. To that end, we are currently focusing most of our execution efforts and
resources on advancing our clinical-stage solid tumor oncology programs to potentially rapid proof of concept. For
our other programs that are in therapeutic areas where clinical development is relatively resource intensive and can
have long timelines to generate proof-of-concept data, due to the need to conserve capital and prioritize focused
execution, we are actively seeking, or intend to seek, collaboration, out licensing, partnership or other business
development arrangements, or BD Arrangements, with third-party partners with sufficient resources and relevant
domain expertise in order to further their development.
84
Pipeline Programs and Operational Updates
Key Programs in Active Development
Our pipeline includes four solid tumor oncology programs in active ongoing clinical development. We are
currently focusing most of our execution efforts and resources on these key programs. We have intentionally built
our clinical capabilities primarily in areas such as solid tumor oncology that offer development paths that are
relatively resource efficient and have the potential to generate clinical proof-of-concept data more rapidly than
certain other indications, although we may in the future pursue development of programs in other therapeutic areas.
While we will opportunistically consider BD Arrangements to advance development of our key programs, we intend
to invest our resources in their development even in the absence of BD Arrangements.
•
Solid Tumor Oncology. Our solid tumor 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 also may reverse inhibition of ILT2-expressing lymphoid cells to further stimulate anti-
tumor immune responses.
• We are conducting an open-label Phase 1/2 clinical trial evaluating NGM707 as a
monotherapy and in combination with KEYTRUDA® (pembrolizumab) for the treatment of
patients with advanced or metastatic solid tumors. We expect to enroll approximately 220
patients in this trial.
•
•
A Phase 1, Part 1a cohort evaluating NGM707 as a monotherapy was initiated in the second
quarter of 2021. A Phase 1, Part 1b cohort evaluating NGM707 in combination with
pembrolizumab was initiated in the second quarter of 2022. Both cohorts are ongoing and will
be followed by Phase 2 expansion cohorts evaluating NGM707 in combination with
pembrolizumab in specific tumor types.
In December 2022, we presented initial data from the Part 1a cohort at the European Society
for Medical Oncology Immuno-Oncology, or ESMO I-O, Annual Congress. The data indicated
that NGM707 was generally well tolerated across all dose cohorts and demonstrated
promising early signals of anti-tumor activity. In the presentation, we disclosed that of 24
response-evaluable patients as of November 23, 2022, best overall responses were a partial
response in one patient, stable disease in six patients and non-complete response/non-
progressive disease in one patient, and that potential proof-of-mechanism (myeloid
reprogramming) was observed in peripheral blood and tumor biopsies.
NGM831. NGM831 is 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 anti-tumor activity.
•
In the first quarter of 2022, we initiated an open-label Phase 1/1b clinical trial to evaluate
NGM831 as a monotherapy and in combination with pembrolizumab for the treatment of
patients with advanced or metastatic solid tumors. A Phase 1, Part 1a cohort evaluating
NGM831 as a monotherapy was initiated in the first quarter of 2022 and is ongoing. In
addition, a Phase 1, Part 1b cohort evaluating NGM831 in combination with pembrolizumab
was initiated in the third quarter of 2022 and is ongoing. We expect to enroll up to
approximately 80 patients in these two cohorts.
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, meaning the non-malignant, non-
85
immune components of the tumor, 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.
•
In the second quarter of 2022, we initiated an open-label, Phase 1/1b clinical trial to evaluate
NGM438 as a monotherapy and in combination with pembrolizumab for the treatment of
patients with advanced or metastatic solid tumors. A Phase 1, Part 1a cohort evaluating
NGM438 as a monotherapy commenced in the second quarter of 2022 and is ongoing. In
addition, a Phase 1, Part 1b cohort evaluating NGM438 in combination with pembrolizumab
commenced in the fourth quarter of 2022 and is ongoing. We expect to enroll up to
approximately 80 patients in these two cohorts.
•
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 in mice.
• We are currently conducting a Phase 1/2 clinical trial to assess NGM120’s effect on cancer
and cancer-related cachexia in patients with select advanced solid tumors, metastatic
pancreatic cancer and metastatic castration-resistant prostate cancer, or mCRPC.
The trial includes:
• a Phase 1a cohort evaluating NGM120 as a monotherapy in patients with select
advanced solid tumors,
• a Phase 1b cohort evaluating NGM120 in combination with gemcitabine and Nab-
paclitaxel in patients with metastatic pancreatic cancer,
• an additional Phase 1b cohort testing NGM120 in combination with one or more lines of
hormone therapies in patients with mCRPC, and
• a Phase 2 cohort evaluating NGM120 in combination with gemcitabine and Nab-
paclitaxel as first-line treatment in patients with metastatic pancreatic cancer (referred
to as the PINNACLES trial).
•
•
•
In August 2022, we initiated the Phase 1b cohort testing NGM120 in combination with one or
more lines of hormone therapies in patients with mCRPC.
In September 2022, at the European Society for Medical Oncology, or ESMO, Annual
Congress, we reported updated preliminary findings for a subgroup of patients with advanced
prostate cancer from the Phase 1a cohort evaluating NGM120 as a monotherapy in patients
with select advanced solid tumors. The updated preliminary results reported at ESMO
demonstrated that NGM120 was well tolerated with no dose-limiting toxicities and provided
encouraging signals of anti-cancer activity in patients with advanced prostate cancer.
In September 2022, at the American Association for Cancer Research, or AACR, Special
Conference: Pancreatic Cancer, we reported updated preliminary findings from the Phase 1b
cohort evaluating NGM120 in combination with gemcitabine and Nab-paclitaxel in patients
with metastatic pancreatic cancer. The updated preliminary results reported at AACR
demonstrated that NGM120 was well tolerated with no dose-limiting toxicities and provided
encouraging signals of anti-cancer activity in patients with metastatic pancreatic cancer.
Additional Programs Currently Without Significant Resource Allocation
Due to the need to conserve capital and prioritize focused execution, the remainder of our pipeline includes
programs whose further development is primarily dependent on our ability to secure potential future BD
Arrangements. These programs are in therapeutic areas where clinical development is relatively resource intensive
and can have long timelines to generate proof-of-concept data. As a result, we are actively seeking, or intend to
seek, BD Arrangements with third-party partners possessing sufficient resources and relevant domain expertise in
the relevant therapeutic area in order to further clinical development of these programs. In the absence of such BD
Arrangements for these programs, we are unlikely to be able to advance their development unless our portfolio
86
prioritization changes and we have access to the necessary capital to fund such development. These programs are
set forth below:
•
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 the rate of disease progression in
patients with geographic atrophy, or GA, secondary to age-related macular degeneration, or AMD.
•
•
In October 2022, we announced topline results from the Phase 2 CATALINA clinical trial,
which evaluated 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. The trial did not
meet its primary endpoint of a statistically significant rate of change in GA lesion area using
slope analysis over 52 weeks of treatment with NGM621 versus sham. NGM621
demonstrated a
increased choroidal
neovascularization in NGM621-treated patients compared to sham. In addition, there were no
serious adverse events deemed treatment-related by an investigator.
In November 2022, we presented additional findings from the CATALINA trial at The Retina
Society Annual Scientific Meeting and we intend to continue to evaluate various pre-specified
secondary endpoints and post-hoc analyses relating to NGM621.
favorable safety profile, with no evidence of
• Merck had a one-time option to license NGM621 and its related compounds upon completion
of the CATALINA trial. In December 2022, Merck notified us that it would not exercise its
option to license NGM621 and its related compounds, nor would Merck exercise the related
ophthalmology bundle option; accordingly, these options expired unexercised in January
2023 and these programs are now wholly-owned by us.
•
Further development of NGM621 is primarily dependent on our ability to secure potential
future BD Arrangements and, in the absence of such BD Arrangements, we are unlikely to be
able to advance development of NGM621 unless our portfolio prioritization changes and we
have access to the necessary capital to fund such development.
•
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. Aldafermin remains in Phase 2b development for the treatment of patients with compensated
cirrhosis due to non-alcoholic steatohepatitis, or NASH (liver fibrosis stage 4, or F4, by the NASH
Clinical Research Network classification). The Phase 2b ALPINE 4 clinical trial, which is fully enrolled,
is designed to evaluate the treatment effect of aldafermin over 48 weeks. The primary endpoint for the
trial is 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. 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.
•
•
Further development of aldafermin is primarily dependent on our ability to secure potential
future BD Arrangements and, in the absence of such BD Arrangements, we are unlikely to be
able to advance development of aldafermin unless our portfolio prioritization changes and we
have access to the necessary capital to fund such development.
Looking forward: We expect to report topline data from the Phase 2b ALPINE 4 trial in the
second quarter of 2023.
• MK-3655 (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 was licensed by Merck in November 2018.
•
In January 2023, we announced that Merck notified us of its decision to terminate the Phase
2b trial of MK-3655 in patients with NASH and liver fibrosis stage 2 or 3 based on the results
of an interim analysis of safety and reduction in liver fat at Week 24. Although it was not the
primary endpoint of the trial, the percent reduction from baseline in liver fat for MK-3655,
87
while greater than placebo across multiple dose arms, did not reach Merck’s threshold for
continuing the trial. The trial was not discontinued for safety concerns. Later in January 2023,
Merck also provided us with the required 90-days' notice of partial termination of our
collaboration with Merck as it relates to MK-3655 and its related compounds. As a result, in
late April 2023, the license rights granted to Merck in 2018 with respect to MK-3655 will revert
to us and the program will become wholly-owned by us.
•
Further development of MK-3655 once termination of Merck's license is effective is primarily
dependent on our ability to secure potential future BD Arrangements and, in the absence of
such BD Arrangements, we are unlikely to be able to advance development of MK-3655
unless our portfolio prioritization changes and we have access to the necessary capital to
fund such development.
•
Hematologic cancer diseases.
•
NGM936. NGM936 is a bispecific T cell engager therapeutic candidate for the treatment of
hematologic malignancies that targets ILT3 and cluster of differentiation 3, or CD3. NGM936 is
designed to direct T cell mediated killing of ILT3-positive cancer cells while sparing normal
hematopoietic stem cells, or HSCs, and minimizing CD3-driven cytokine release. ILT3, a myeloid-cell
restricted receptor, has enriched expression in myelomonocytic leukemia, monocytic leukemia and
leukemia stem cells but is not expressed on healthy HSCs. This expression profile of ILT3 may make
it an effective target for the treatment of monocytic acute myeloid leukemia, or AML, and multiple
myeloma.
•
•
NGM936 has been evaluated in preclinical studies, where it has demonstrated the ability to
potently kill ILT3+ AML cells, kill ILT3+ multiple myeloma cells and preserve healthy bone
marrow cells.
Further development of NGM936 is primarily dependent on our ability to secure potential
future BD Arrangements and, in the absence of such BD Arrangements, we are unlikely to be
able to advance development of NGM936 unless our portfolio prioritization changes and we
have access to the necessary capital to fund such development.
We have additional 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, any future 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.
Business Development and Merck Collaboration Updates
Pursuing BD Arrangements has been and is expected to continue to be a key component of our strategy.
Given the breadth of opportunities that have been, and may in the future be, produced by our discovery engine, we
are actively seeking, or intend to seek, BD Arrangements with third-party partners to progress, in whole or in part,
the development of one or more of our product candidates. We believe that this strategy, if successfully
implemented, may enable more of the programs in our pipeline, including those in active development by us, to be
advanced as effectively and efficiently as possible. Further development of NGM621, aldafermin, NGM936 and,
once termination of Merck's license is effective, MK-3655, is primarily dependent on our ability to secure potential
future BD Arrangements and, in the absence of such BD Arrangements, we are unlikely to be able to advance
development of those programs unless our portfolio prioritization changes and we have access to the necessary
capital to fund such development.
Our collaboration with Merck, described in "Business — Licensing and Collaboration Arrangements —
Merck Collaboration" 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, 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. We do not have any committed external source of funds, other than pursuant to our
collaboration with Merck under 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. Currently, the
only ongoing activities funded under the Amended Collaboration Agreement are ongoing cardiovascular or
metabolic-, or CVM-, related activities and remaining laboratory testing and other activities on compounds that are
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directed to one of up to two undisclosed targets outside of the fields of ophthalmology and CVM disease, or the Lab
Programs, collectively referred to as the Remaining Research Programs. In 2023, the R&D funding we receive from
Merck under the Amended Collaboration Agreement will be limited and substantially lower on an annual basis than
the research funding previously provided by Merck. In this regard, for the period that started on January 1, 2023 and
ends on March 31, 2024, we expect to receive funding of approximately $13.0 million in the aggregate from Merck
for activities under the Remaining Research Programs and for certain costs and reimbursements related to the
NGM621 program. Funding from Merck after December 31, 2023 is expected to be minimal. The research phase for
the CVM-related programs under the Amended Collaboration Agreement will continue through March 31, 2024,
unless the parties mutually agree to extend the research phase through March 31, 2026, in which case Merck would
provide up to a total of $20.0 million in R&D funding during the additional two years of the CVM program research
phase.
In December 2022, Merck notified us that it would not exercise its option to license NGM621 and its related
compounds or the related ophthalmology bundle option and, as a result, those options expired unexercised in
January 2023. Further, Merck did not elect for us to continue to conduct R&D on any compounds from our other
ophthalmology programs that were subject to the collaboration, which are preclinical and directed to undisclosed
targets. Such an election would have resulted in an extended or tail period in which Merck would continue to fund
our R&D of such ophthalmology compounds. Because Merck did not make such an election, we do not have any
funding from Merck to pursue such ophthalmology programs. Similarly, in January 2023, as described above, we
announced that Merck notified us of its decision to terminate the Phase 2b trial of MK-3655. Later in January 2023,
Merck provided us with the required 90-days' notice of partial termination of the Amended Collaboration Agreement
as it relates to MK-3655 and its related compounds. After the license rights granted to Merck with respect to
MK-3655 revert to us, we will be responsible for funding further development of the program, if any.
Other Operational Updates
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 initiated the Phase 1/1b clinical trial of NGM831 in March 2022 and the Phase 1/1b
clinical trial of NGM438 in May 2022, our planned individual new drug application, or IND, submissions for NGM831
and NGM438 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 NGM621 and aldafermin are currently manufactured
solely at a facility in Lithuania. Following Russia's invasion of Ukraine in February 2022, NATO deployed additional
military forces to Eastern Europe, including to Lithuania. The ongoing conflict between Russia and Ukraine and the
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retaliatory measures taken or that may be taken by the United States, NATO and others, including significant
sanctions against Russia, create global security concerns and regional instability, including due to 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.
In July 2022, we entered into an operating lease agreement, or the 2024 Lease Agreement, for our existing
corporate office space and facilities at 333 Oyster Point Blvd., South San Francisco, California, which allows us to
remain in our existing facilities through December 31, 2033, subject to our compliance with the 2024 Lease
Agreement. We also have an option to extend the 2024 Lease Agreement for a period of either eight or ten years
after the initial ten-year term of January 1, 2024 to December 31, 2033.
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 and capital conservation
reasons to concentrate our resources and focus our execution on our solid tumor oncology programs. Given the
substantial decrease in research funding, we will now receive from Merck as compared to historical periods
commensurate with the decreased collaboration scope described below, going forward we will need to devote a
substantial amount of our own financial resources to fund 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 BD Arrangements in order to proceed
with such development through to regulatory approval.
Financial Highlights
Since inception, we have funded our operations primarily through:
•
•
•
•
•
fees received from collaboration partners which since inception through December 31, 2022
includes reimbursement of R&D expenses of $533.0 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 $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; and
net proceeds of $71.5 million through December 31, 2022 from sales of approximately 4.1 million
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.
At December 31, 2022, we had $271.5 million in cash, cash equivalents and short-term marketable
securities.
We have incurred net losses each year since our inception. As of December 31, 2022, we had an
accumulated deficit of $581.6 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 future BD
Arrangements, if any. For further discussion of our financial position and future sources of funding, see “Liquidity
and Capital Resources” below.
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Financial Operations Overview
Related Party Revenue
Our revenue to date has been generated primarily from recognition of license fees and R&D service funding
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.
Since the Company's inception through December 31, 2022, Merck paid us $608.2 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 2023 given the substantial decrease in the level of funding we will receive from Merck in 2023. After
December 31, 2023, we expect funding, and revenue recognized, from Merck to be minimal. 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,
2022
2021
2020
$
55,333 $
77,882 $
87,368
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.
We need to devote a substantial amount of our own financial resources to our wholly-owned development
programs, primarily our solid tumor oncology programs in active ongoing clinical development. In addition, because
Merck declined to exercise its license to option NGM621, decided not to continue funding further research on the
other preclinical ophthalmology compounds and provided notice of termination of its existing its license to MK-3655
and in prior years other product candidates, our funding requirements would increase even further if our portfolio
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prioritization changes and we decide to continue to develop those programs on our own. As a result, further
development of NGM621, aldafermin, NGM936 and, once termination of Merck's license is effective, MK-3655, is
currently primarily dependent on our ability to secure potential future BD Arrangements and, in the absence of such
BD Arrangements, we are unlikely to be able to advance development of those programs unless our portfolio
prioritization changes and we have access to the necessary capital to fund such development. 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 initiate
and advance clinical trials of our solid tumor oncology programs and 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 or if we will be able to enter into BD Arrangements or otherwise raise
adequate additional capital to meet our funding requirements to support such efforts, particularly outside of our key
solid tumor oncology programs. This is due to the numerous risks and uncertainties associated with developing
medicines, including the uncertainty of:
•
•
•
the scope, rate of progress, results and expense of our ongoing, as well as any future, clinical trials and
other R&D-related activities;
the impact and timing of any interactions with regulatory authorities, including timing and receipt of
regulatory approvals:
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 effects of the continuing 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 preclinical programs remaining
within the scope of the collaboration and the timing of such election or termination;
the effect of products that may compete with our product candidates or other market developments; and
our ability to expand and enforce our intellectual property portfolio.
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 in 2023 will remain relatively consistent with 2022 in support of our
narrowed R&D activities. Beginning in 2024, our G&A expenses will include an increase in operating lease
expenses under the 2024 Lease Agreement. Additionally, we anticipate continued costs associated with being a
public company, including expenses related to services associated with maintaining compliance with Nasdaq listing
rules and related 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 BD Arrangements.
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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
2022
2021
2020
2022 vs 2021
2021 vs 2020
$
55,333 $
77,882 $
87,368 $
(22,549) $
(9,486)
181,067
40,515
161,712
36,865
163,972
27,229
221,582
(166,249)
198,577
(120,695)
191,201
(103,833)
3,714
(132)
420
(60)
1,939
(593)
19,355
3,650
23,005
(45,554)
3,294
(72)
(2,260)
9,636
7,376
(16,862)
(1,519)
533
$
(162,667) $
(120,335) $
(102,487) $
(42,332) $
(17,848)
Revenue decreased $22.5 million in the year ended December 31, 2022 compared to the same period in
2021 primarily due to a decrease in R&D revenue under the Amended Collaboration Agreement with Merck.
Revenue in the year ended December 31, 2022 includes $4.75 million in reimbursable expenses by Merck related
to a third-party manufacturer for NGM621.
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.
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 2023 given the
substantial decrease in the level of funding we will receive from Merck in 2023. After December 31, 2023, we expect
funding, and revenue recognized, from Merck to be minimal.
Research and Development Expenses
Our R&D expenses by program were as follows (in thousands):
External R&D expenses:
NGM707 (Anti-ILT2/ILT4 dual antagonist)
NGM621 (C3 inhibitor)
Aldafermin (FGF19 analog)
NGM438 (LAIR1 antagonist)
NGM120 (GFRAL 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,
2022
2021
2020
$
24,333 $
23,738
13,665
8,504
7,183
6,832
1,186
85,441
62,151
33,475
5,521 $
20,415
31,766
4,074
6,856
2,377
1,437
72,446
56,209
33,057
$
181,067 $
161,712 $
4,817
13,126
50,553
3,586
5,606
4,756
4,822
87,266
43,811
32,895
163,972
_________________
(1) Internal and unallocated R&D expenses consist primarily of research supplies and consulting fees, which we deploy across multiple R&D
programs.
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R&D expenses increased $19.4 million in the year ended December 31, 2022 compared to the same period
in 2021 primarily due to increases in external expenses, driven by our ongoing clinical trials of NGM707, NGM831,
NGM438 and NGM120, our completed trial of NGM621, and personnel-related expenses including an increase in
share-based compensation expense of $3.6 million, partially offset by a decrease in expenses for our manufacturing
activities and our clinical trials of aldafermin.
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.
We expect our R&D expenses will decrease moderately in 2023 compared to 2022 as we suspend
development activities related to NGM621 and aldafermin and focus on the continued advancement of our solid
tumor oncology portfolio, including:
•
•
•
•
NGM707: continuing enrollment in the ongoing Phase 1/2 clinical trial;
NGM831: continuing enrollment in the Phase 1/1b clinical trial;
NGM438: continuing enrollment in the Phase 1/1b clinical trial, and
NGM120: continuing enrollment in the Phase 2 PINNACLES portion of the Phase 1/2 clinical trial and the
Phase 1b cohort of patients with mCRPC.
General and Administrative Expenses
G&A expenses increased $3.7 million in the year ended December 31, 2022 compared to the same period
in 2021 primarily due to an increase in personnel-related expenses due to increased headcount and an increase in
share-based compensation expense of $2.5 million.
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,
lawyers and accountants.
We anticipate that our G&A expenses in 2023 will remain relatively consistent compared to 2022 as we
continue to support our oncology program and operate as a public company.
Interest Income, net
Interest income, net increased $3.3 million in the year ended December 31, 2022 compared to 2021
primarily due to higher yielding investments.
Interest income, net decreased $1.5 million in the year ended December 31, 2021 compared to 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.
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 operating losses in 2023 and over the next several years. As of
December 31, 2022, we had an accumulated deficit of $581.6 million, and we expect our accumulated deficit will
continue to increase over time.
We have an active discovery research group and have spent significant resources to fund R&D of multiple
pipeline programs. Our pipeline includes four key solid tumor oncology programs, NGM707, NGM831, NGM438 and
NGM120, in active ongoing clinical development. We are currently focusing most of our execution efforts and
resources on these programs as our substantial research, development, clinical trial and related activities continue.
While we will opportunistically consider BD Arrangements to advance development of these key programs, we
intend to invest our resources in their development even in the absence of BD Arrangements.
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Due to the need to conserve capital and prioritize focused execution, the remainder of our pipeline includes
programs whose further development is primarily dependent on our ability to secure potential future BD
Arrangements. We are actively seeking, or intend to seek, BD Arrangements with third-party partners possessing
sufficient resources and relevant domain expertise in the relevant therapeutic area in order to further clinical
development of these programs. In the absence of such BD Arrangements for these programs, we are unlikely to be
able to advance their development unless our portfolio prioritization changes and we have access to the necessary
capital to fund such development.
Prior to 2022, we received substantial R&D funding from our collaboration with Merck. However, under the
narrower scope of the Amended Collaboration Agreement, R&D funding from Merck beginning April 2022 was and is
expected to be substantially lower than the R&D funding previously provided by Merck. For the period that started
on January 1, 2023 and ends on March 31, 2024, we expect to receive funding of approximately $13.0 million in the
aggregate from Merck for activities remaining under the Amended Collaboration Agreement and for certain costs
and reimbursements related to the NGM621 program. Funding from Merck after December 31, 2023 is expected to
be minimal.
Our cash requirements for fiscal year 2023 will continue to be driven by our R&D and G&A expenses. In
2022 and 2021, our R&D expenses were $181.1 million and $161.7 million, respectively. In 2023, we expect our
R&D expenses to decrease moderately compared to 2022 as we suspend development activities related to
NGM621 and our other preclinical ophthalmology programs and focus on the continued advancement of our solid
tumor oncology portfolio, as well as completion of development activities related to ALPINE 4. In 2022 and 2021,
our G&A expenses were $40.5 million and $36.9 million, respectively. In 2023, we expect our G&A expenses will
remain relatively consistent compared to 2022 in support of our narrowed R&D activities and expenses associated
with being a public company. Beginning in 2024, our operating lease costs will increase pursuant to the 2024 Lease
Agreement we entered into in July 2022 for our current corporate office space and facilities in South San Francisco,
California. Our current sublease will expire on December 31, 2023. The 2024 Lease Agreement will commence on
January 1, 2024 and expire on December 31, 2033. We will pay an initial monthly base rent of approximately $0.9
million for the first year, which is subject to increase at an annual rate of 3.5% each year thereafter, plus certain
operating and tax expenses.
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. Moreover,
based on our current development plans and related assumptions, we believe our current cash position is sufficient
to fund our key solid tumor oncology programs through generation of proof-of-concept data. We have based these
estimates on plans and assumptions that may prove to be insufficient or inaccurate (for example, with respect to
anticipated costs, timing or success of certain activities), 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 and we will need to enter into BD Arrangements for one or more of our wholly-
owned programs and obtain funding or other resources through such BD 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, 2022, we had cash and cash equivalents of $73.5 million and short-term marketable
securities of $198.0 million.
Merck Collaboration
The revenue we receive under the Amended Collaboration Agreement with Merck is currently our only
source of revenue. For the period that started on January 1, 2023 and ends on March 31, 2024, we expect to
receive funding of approximately $13.0 million in the aggregate from Merck for the ongoing CVM-related activities,
the remaining activities under the Lab Programs and for certain costs and reimbursements related to the NGM621
program. See “Overview of Our Business—Business Development and Merck Collaboration Updates” above.
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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, 2022, $76.2 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, BD 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. While the long-term
economic impact of either the COVID-19 pandemic or the conflict between Russia and Ukraine is difficult to assess
or predict, each of these events has caused significant disruptions to the global financial markets and contributed to
a general global economic slowdown. Furthermore, inflation rates across the globe have increased to levels not
seen in decades. Increased inflation may result in increased operating costs (including labor costs) and may affect
our operating budgets. In addition, the U.S. Federal Reserve has raised, and is expected to further raise, interest
rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced
government spending and volatility in financial markets, may further increase economic uncertainty and heighten
these risks. If the financial market disruptions and economic slowdown deepen or persist, we may not be able to
access additional capital on favorable terms, or at all, which could negatively affect our financial condition and our
ability to pursue our business strategy.
In addition, 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.
While we may opportunistically consider BD Arrangements to advance development of our key solid tumor
oncology programs, we are actively seeking, or intend to seek, BD Arrangements with third-party partners to
progress, in whole or in part, the development of one or more of our other programs whose further development is
primarily dependent on our ability to secure potential future BD Arrangements. We believe that this strategy, if
successfully implemented, may enable more of the product candidates in our pipeline to be advanced as effectively
and efficiently as possible. If we are unable to secure BD Arrangements for NGM621 and our preclinical
ophthalmology programs, aldafermin, NGM936 and, once termination of Merck's license is effective, MK-3655, we
may discontinue or abandon any or all of them altogether, in which case we will not realize any return on our
investments in these programs. Even if we are successful in securing BD Arrangements for these programs, we will
likely have limited control over the amount and timing of resources that our partners dedicate to the development or
commercialization of the applicable product candidates. Our ability to generate revenue from any such BD
Arrangement will depend on the specific terms of the BD Arrangement.
If we are unable to raise adequate additional capital through public or private equity or debt offerings, BD
Arrangements 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.
96
Cash Flow Activity
The following table summarizes our cash flow activity for the periods indicated (in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2022
2021
2020
$
(144,439) $
14,322
54,233
(73,229) $
(71,650)
149,657
(83,496)
(50,998)
35,538
Net (decrease) increase in cash, cash equivalents and restricted
cash
$
(75,884) $
4,778 $
(98,956)
Operating Activities
Cash used in operating activities in 2022 was $144.4 million, which consisted of a net loss of $162.7 million,
adjusted for non-cash charges of $39.0 million and a change in operating assets and liabilities of $20.7 million. The
non-cash charges consisted primarily of stock-based compensation expense of $32.4 million, depreciation expense
of $4.0 million and noncash lease expense of $1.9 million. The change in operating assets and liabilities was mainly
driven by decreases in contract liabilities of $17.4 million, operating lease liabilities of $5.1 million, prepaid expenses
and other current assets of $1.8 million and accrued liabilities of $0.6 million, partially offset by increases in
accounts payable of $3.2 million and related party receivable of $2.6 million.
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.
Investing Activities
Cash provided by investing activities in 2022 was $14.3 million, which consisted primarily of $289.0 million
in net proceeds on maturity of marketable securities offset by purchases of marketable securities of $272.9 million.
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.
Financing Activities
Cash provided by financing activities in 2022 was $54.2 million, which consisted of net proceeds of $49.4
million from the sale of shares of our common stock under the Sales Agreement and proceeds from our employee
equity incentive and purchase plans of $4.8 million. 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 sale of shares of our common stock under the Sales Agreement of
$21.9 million and proceeds from employee equity incentive and purchase plans of $14.2 million.
97
Contractual Obligations
We have contractual obligations related to our lease liabilities. In July 2022, we entered into the 2024 Lease
Agreement for the corporate office space and facilities in South San Francisco, California that we currently occupy
pursuant to a sublease agreement scheduled to expire on December 31, 2023. The initial term of the 2024 Lease
Agreement will commence on January 1, 2024 and expire on December 31, 2033. Base rent during the initial ten-
year term of the 2024 Lease Agreement will total $124.1 million. 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 for clinical trials, CMOs and other
vendors for preclinical studies, supplies, manufacturing and other services and products for operating purposes.
These agreements are generally cancellable 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. Following Merck's decision to not exercise its NGM621 option and our
decision not to proceed with further development of NGM621, we cancelled future Phase 3 manufacturing activities
for NGM621 and recorded approximately $3.0 million for cancellation charges as of December 31, 2022. No other
termination or cancellation charges have been recorded as they were not considered probable. Significant portions
of our R&D resources are focused, and will continue to be focused, on the manufacture and testing of clinical trial
materials. See "Funding Requirements" above for 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 and Collaboration 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. In accordance with U.S.
GAAP, 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.
All of our revenue to date has been generated from collaborations, 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
98
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 R&D 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 or partnering 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
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.
99
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 and other service providers 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.
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.
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 our stock and 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
100
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 $271.5 million as of December 31, 2022, 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.
101
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 Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
103
105
106
107
108
109
110
102
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, 2022 and 2021, the related consolidated statements of operations, comprehensive loss,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, 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,
2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2022, 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, 2022, 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 February 28, 2023 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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 matter 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
matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it
relates.
Description of
the Matter
Accrued clinical trials expenses
During the year ended December 31, 2022, the Company incurred $181.1 million in research and
development related expenses, and $14.6 million was recorded as accrued clinical trials
expenses as of December 31, 2022. 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.
103
How We
Addressed the
Matter in Our
Audit
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.
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.
We have served as the Company’s auditor since 2008.
/s/ Ernst & Young LLP
San Mateo, California
February 28, 2023
104
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term marketable securities
Related party receivable from collaboration
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
Contract liabilities
Total current liabilities
Operating lease liability, non-current
Total liabilities
Commitments and contingencies (Note 6)
Stockholders' equity:
December 31,
2022
December 31,
2021
$
73,456 $
198,036
7,580
9,787
288,859
8,496
2,096
3,954
3,997
151,795
214,458
4,945
8,082
379,280
10,071
4,045
1,499
7,492
$
307,402 $
402,387
$
8,453 $
33,638
5,385
366
47,842
—
47,842
5,246
33,258
5,077
17,774
61,355
5,385
66,740
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued
or outstanding as of December 31, 2022 and 2021, respectively
—
—
Common stock, $0.001 par value; 400,000 shares authorized; 81,885 and
77,962 shares issued and outstanding as of December 31, 2022 and 2021,
respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
82
841,413
(302)
(581,633)
259,560
307,402 $
78
754,664
(129)
(418,966)
335,647
402,387
$
See accompanying notes to consolidated financial statements.
105
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except 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
Year Ended December 31,
2022
2021
2020
$
55,333 $
77,882 $
87,368
181,067
161,712
40,515
221,582
(166,249)
3,714
(132)
36,865
198,577
(120,695)
420
(60)
163,972
27,229
191,201
(103,833)
1,939
(593)
$
$
(162,667) $
(2.03) $
(120,335) $
(1.56) $
(102,487)
(1.50)
Weighted average shares used to compute net loss per share,
basic and diluted
79,950
77,085
68,475
See accompanying notes to consolidated financial statements.
106
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss
Other comprehensive loss, net of tax:
Net unrealized loss on available-for-sale marketable
securities
Total comprehensive loss
Year Ended December 31,
2022
2021
2020
$
(162,667) $
(120,335) $
(102,487)
(173)
(133)
$
(162,840) $
(120,468) $
(21)
(102,508)
See accompanying notes to consolidated financial statements.
107
NGM BIOPHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Balance at December 31, 2019
66,886 $
67 $
526,771 $
25 $
(196,144) $
330,719
Common Stock
Shares
Amount
Additional Paid-
In Capital
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
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
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
—
—
—
(102,487)
119
15,651
(21)
(102,487)
Balance at December 31, 2020
70,583 $
71 $
578,599 $
4 $
(298,631) $
280,043
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
5,324
1,845
193
7
4
6
—
—
—
5
2
—
—
—
—
—
—
—
134,575
12,360
2,519
196
125
48
26,242
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(133)
—
—
(120,335)
134,580
12,362
2,519
196
125
48
26,242
(133)
(120,335)
Balance at December 31, 2021
77,962 $
78 $
754,664 $
(129) $
(418,966) $
335,647
Issuance of common stock under
Open Market Sale Agreement, 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 to
participants in 401(k) plan
Stock-based compensation expense
Comprehensive loss
3,246
426
243
8
—
—
3
1
—
—
—
—
49,443
2,983
1,803
137
32,383
—
—
—
—
—
—
(173)
—
—
—
—
—
—
49,446
2,984
1,803
137
32,383
(173)
Net loss
Balance at December 31, 2022
—
81,885 $
—
82 $
—
841,413 $
—
(302) $
(162,667)
(581,633) $
(162,667)
259,560
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,
2022
2021
2020
$
(162,667) $
(120,335) $
(102,487)
Stock-based compensation expense
32,383
26,242
15,651
Reduction in related party contract asset due to Amended Collaboration
Agreement with Merck
Depreciation
Amortization of premium (accretion of 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 provided by (used in) investing activities
Cash flows from financing activities
Proceeds from Open Market Agreement, net
Proceeds from exercise of stock options
Proceeds from employee stock purchase plan
Proceeds from follow on offering, net
Deferred offering costs paid
Net cash provided by financing activities
Net (decrease) increase 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
Supplemental disclosures of non-cash investing and financing activities:
Property and equipment purchases not yet paid
Right of use asset acquired under operating lease on the adoption of ASC 842
$
$
—
4,035
69
1,949
504
(2,635)
—
1,790
3,207
(589)
(5,077)
—
(17,408)
(144,439)
(272,857)
289,037
(1,858)
14,322
49,446
2,984
1,803
—
—
54,233
(75,884)
153,294
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)
196
12,362
2,519
134,580
—
149,657
4,778
148,516
77,410 $
153,294 $
—
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
148,516
606 $
—
— $
5,855
20
—
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.,
NGM Australia, collectively referred to as the Company, is a biopharmaceutical company focused on discovering
and developing novel, potentially life-changing medicines based on scientific understanding of key biological
pathways underlying grievous diseases with critical unmet or underserved patient need. The Company's portfolio of
product candidates range from early discovery to Phase 2b development and includes five programs in active
clinical development. The Company has additional 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, NGM Australia. 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, 2022, 2021 and 2020, the Company incurred net losses of $162.7 million, $120.3 million
and $102.5 million, respectively. As of December 31, 2022, the Company had an accumulated deficit of $581.6
million. The Company expects its accumulated deficit will continue to increase over time and does not expect to
experience positive cash flows from operations in the near future.
As of December 31, 2022, the Company had $271.5 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, 2022, $76.2 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), collaboration or partnering arrangements, strategic
alliances, 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 investing in highly rated money market funds and placing its cash with a bank it believes is highly
creditworthy in amounts that may at times exceed federally insured limits. As of December 31, 2022 and 2021, 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 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, 2022, 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.,
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 collaboration and partnering arrangements 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 and any future collaboration or partnering arrangements with other potential future 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 or partnering arrangements with other potential
future 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, 2022, 2021 and
2020.
111
Property and Equipment, Net
Property and equipment are 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 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 noncancelable 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 corporate office space and
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, 2022 and 2021, 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. The net deferred tax assets have been fully offset by a valuation allowance.
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, or 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. 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 R&D 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 R&D 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 R&D 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. The Company typically submits a budget for the
R&D 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
R&D costs are expensed as incurred. R&D 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 R&D
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 R&D 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 non-
employees. The Company measures stock-based compensation expense for all stock-based awards at the grant
date based on the fair value measurement of the award. 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 Australia 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
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 per share amounts):
Numerator:
Net loss
Denominator:
Year Ended December 31,
2022
2021
2020
$
(162,667) $
(120,335) $
(102,487)
Weighted average number of shares used in calculating net
loss per share—basic and diluted
Net loss per share—basic and diluted
79,950
77,085
$
(2.03) $
(1.56) $
68,475
(1.50)
Potentially dilutive securities that were not included in the diluted per share calculations because they would
be anti-dilutive were as follows (in thousands):
Options to purchase common stock
Shares committed under the ESPP
Total
Segment and Geographical Information
Year Ended December 31,
2022
2021
2020
14,215
1,222
15,437
10,485
390
10,875
10,018
292
10,310
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,
2022, 2021 and 2020, 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.
115
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, 2022
U.S. treasury securities
Money market funds
Corporate and agency bonds
Commercial paper
U.S. government agency securities
Totals
Classified as:
Cash and cash equivalents
Short-term marketable securities (amortized
cost of $198,338)
Total
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
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
$
89,039 $
7 $
62,844
46,300
42,746
20,253
—
—
—
51
(160) $
—
(200)
—
—
88,886
62,844
46,100
42,746
20,304
$
261,182 $
58 $
(360) $
260,880
$
62,844
198,036
$
260,880
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair
Value
$
141,093 $
— $
(116) $
140,977
129,763
64,997
8,497
—
7
—
—
(20)
—
129,763
64,984
8,497
$
344,350 $
7 $
(136) $
344,221
$
129,763
214,458
$
344,221
Cash and cash equivalents in the table above excludes cash on deposit with banks of $10.6 million and
$22.0 million as of December 31, 2022 and 2021, 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, 2022 and 2021, all of the Company’s marketable securities had remaining contractual
maturities of less than one year. As of December 31, 2022, the Company had 19 marketable securities in an
unrealized loss position compared to 21 marketable securities in an unrealized loss position as of December 31,
2021. Marketable securities that had been in unrealized loss positions as of December 31, 2022 and 2021 were in
an unrealized loss position for less than twelve months. The Company does not need to nor does it 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.
116
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes, by major security type, the Company's 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, 2022
Assets:
U.S. treasury securities
Money market funds
Corporate and agency bonds
Commercial paper
U.S. government agency securities
Totals
As of December 31, 2021
Assets:
U.S. treasury securities
Money market funds
Corporate and agency bonds
Commercial paper
Totals
Fair Value Measurements
Level 1
Level 2
Level 3
Total
$
88,886 $
62,844
—
—
—
— $
—
46,100
42,746
20,304
$
151,730 $
109,150 $
— $
—
—
—
—
— $
88,886
62,844
46,100
42,746
20,304
260,880
Fair Value Measurements
Level 1
Level 2
Level 3
Total
$
140,977 $
129,763
—
—
$
270,740 $
— $
—
64,984
8,497
73,481 $
— $
—
—
—
— $
140,977
129,763
64,984
8,497
344,221
The Company estimates the fair values of investments in commercial paper, corporate and agency bond
securities and U.S. government agency 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, 2022 and 2021.
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,
2022
2021
$
$
73,456 $
3,954
77,410 $
151,795
1,499
153,294
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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,
2022
2021
$
25,866 $
23,807
1,433
284
51,390
(42,894)
$
8,496 $
25,880
21,916
1,225
18
49,039
(38,968)
10,071
Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was approximately $4.0
million, $6.1 million and $6.6 million, respectively.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
Clinical trials and research and development costs
Personnel-related costs
Manufacturing costs (1)
Accrued expenses
Total accrued liabilities
December 31,
2022
2021
$
14,597 $
9,181
6,026
3,834
$
33,638 $
12,070
10,298
7,773
3,117
33,258
_________________
(1) As of December 31, 2022, the Company recorded an aggregate of $3.0 million for cancellation charges related to the Company's cancellation
of its agreement with Lonza Ltd for the Phase 3 manufacturing of NGM621 following Merck's decision to not exercise its option to license
NGM621 and the Company's decision not to proceed with further development of NGM621, of which $1.8 million was recorded in accrued
manufacturing costs and $1.2 million was included in accounts payable. See Note 5 for additional information.
5. Research Collaboration and License Agreements
Merck
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 that was
financially supported by Merck, and scientifically directed by the Company with input from Merck. The original
research phase of the collaboration was for five years and was extended by Merck for an additional two years
through March 2022. As part of that extension, Merck agreed to continue to fund up to $75.0 million of the
Company's 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 the Company, Merck agreed to make additional payments totaling up to $20.0 million in
support of the Company's R&D activities during 2021 through the first quarter of 2022.
On June 30, 2021, the Company 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 generally through March 31, 2024,
with possible extensions for each of the various programs to allow the Company or Merck to complete ongoing
development, but with a narrower scope than in the Original Collaboration Agreement. Under the Amended
Collaboration Agreement, the collaboration was 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 collaboration scope also included certain laboratory testing
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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.
Currently, the only ongoing research activities funded under the Amended Collaboration Agreement are
certain CVM-related activities and remaining activities under the Lab Programs, or the Remaining Research
Programs. The ophthalmology compounds in the collaboration under the Amended Collaboration Agreement initially
included NGM621 (and its related compounds) and compounds directed against two other undisclosed
ophthalmology targets (and their related compounds). Merck had a one-time option to license NGM621, its related
compounds and the ophthalmology bundle upon completion of the Phase 2 CATALINA trial. In December 2022,
Merck notified us that it would not exercise its option to license NGM621 and its related compounds, nor would
Merck exercise the related ophthalmology bundle option; accordingly, these options expired unexercised in January
2023 and the programs are now wholly-owned by us. Further, Merck did not elect for us to continue to conduct R&D
on any compounds from our other ophthalmology programs that were subject to the collaboration, which are
preclinical and directed to undisclosed targets. Such an election would have resulted in an extended or tail period in
which Merck would continue to fund our R&D of such ophthalmology compounds. Because Merck did not exercise
its ophthalmology license options or make such a tail period election, we do not have any funding from Merck to
pursue such ophthalmology programs.
Merck owned approximately 16% of the Company's outstanding shares as of December 31, 2022.
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 R&D 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 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. Under the Amended Collaboration
Agreement, the scope of the collaboration and the resulting programs for which Merck has the Merck license option
was narrowed, but included NGM621 and its related compounds, and compounds directed against two other
undisclosed ophthalmology targets and their related compounds and the CVM-related activities and the Lab
Programs. Collaboration compounds that remained within the R&D 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 gained 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 R&D
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.
Under the Amended Collaboration Agreement, Merck continued 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. We do not expect any new CVM-related programs to be
added to the collaboration.
Merck had 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
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point. The Merck license option exercise point for all collaboration compounds under the Original Collaboration
Agreement was the completion of a human proof-of-concept trial, exercisable within 60 days of Merck's receipt of an
agreed-upon data package for the relevant program. This remained the Merck license option exercise point under
the Amended Collaboration Agreement for the continuing collaboration compounds directed to ophthalmology
targets, including NGM621 and its related compounds and the continuing collaboration compounds from two other
ophthalmology 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). Merck also had an additional one-time option at the same license option exercise point
to obtain an exclusive, worldwide license to all of the continuing ophthalmology collaboration compounds together,
referred to as the ophthalmology bundle option. As described above, Merck's license option for NGM621 (and its
related compounds) and compounds directed against two other undisclosed ophthalmology targets (and their
related compounds) expired unexercised in January 2023.
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. If the Company elects to exercise its cost and profit share option for a particular continuing collaboration
compound and its related compounds, Merck has 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 would accrue interest and 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.
Under the Amended Collaboration Agreement, if Merck exercises the Merck license option for a continuing
collaboration compound from a CVM-related continuing program or the Lab Programs, 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
(NGM313) and related FGFR1c/KLB agonists for which Merck exercised its Merck license option in November 2018
did not change.
In March 2022, the Company and Merck entered into a letter agreement, or the Letter Agreement, regarding
NGM621 manufacturing activities that the Company undertook with the intention of avoiding a significant delay
between the completion of the CATALINA trial and the start of any Phase 3 clinical trial for NGM621.
Under the Amended Collaboration Agreement, Merck provided $86.0 million in research funding for the four
calendar quarters that ended on March 31, 2022, which included 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 was obligated to use commercially reasonable efforts to expend, and did spend, at least $35.0 million of
such $86.0 million in funding during the same time frame on the ophthalmology and CVM-related programs and Lab
Programs as required under the Amended Collaboration Agreement. The Company was permitted to use the
remainder of the $86.0 million in research funding provided by Merck during such time frame to advance the
released NGM compounds. During the remaining two years of the research phase after March 2022, Merck could
provide up to a total of $20.0 million in research funding for the ophthalmology and CVM-related programs and the
Lab Programs. Pursuant to the Letter Agreement, the Company also used part of this research funding to cover the
costs of its personnel who provide support for the manufacturing activities that the Company undertook in
preparation for a potential Phase 3 clinical trial for NGM621. Merck also funded certain R&D costs related to
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NGM621 prior to Merck's decision to not exercise its license option with respect to NGM621 in December 2022. In
accordance with the Letter Agreement, Merck agreed to reimburse the Company the maximum reimbursable
amount for NGM621 third-party manufacturing costs of $4.75 million which is included in the related party receivable
balance as of December 31, 2022. Merck continues to have license options for the CVM-related continuing
programs and the Lab Programs.
The research phase for the CVM-related continuing programs will continue until March 31, 2024, unless the
parties mutually agree to extend the research phase to March 31, 2026, in which case Merck would provide up to a
total of $20.0 million in research funding during those additional two years. Although the research phase for the Lab
Programs was scheduled to end no later than December 31, 2022, the Company is continuing to provide certain
limited activities in 2023 to wrap up the Lab Programs.
In January 2023, the Company announced that Merck notified the Company of its decision to terminate the
Phase 2b trial of MK-3655 in patients with nonalcoholic steatohepatitis, or NASH, and liver fibrosis stage 2 or 3, or
F2/F3, and Merck subsequently provided the Company with the required 90-days' notice of partial termination of the
Amended Collaboration Agreement as it relates to MK-3655 and its related compounds. As a result, in late April
2023, the license rights granted to Merck in 2018 with respect to MK-3655 will revert to the Company and the
program will become wholly-owned by the Company.
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 R&D 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 Programs 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 CVM-related continuing programs or any Lab Programs, Merck would be
primarily responsible for performing all R&D activities, itself or through third-party contractors.
The Company concluded that the Amended Collaboration Agreement is a separate arrangement containing
a three-year performance obligation to provide distinct R&D services in accordance with ASC 606. At December 31,
2022, the total transaction price under the Amended Collaboration Agreement is $120.3 million which includes
$86.0 million in research funding for the four calendar quarters that ended on March 31, 2022, $15.7 million in
research funding for the ophthalmology and CVM-related continuing programs and the Lab Programs during the
remaining two years of the research phase after March 2022, $13.9 million in estimated NGM621 reimbursable
expenses and costs during the remaining two years of the research phase after March 2022 and $4.75 million for
reimbursable amounts paid to a third-party manufacturer in accordance with the terms of the Letter Agreement. 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 its R&D 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. For the period that
started on January 1, 2023 and ends on March 31, 2024, the Company expects Merck will provide funding of
approximately $13.0 million in the aggregate for the ongoing CVM-related activities, the remaining activities under
the Lab Programs, and for certain costs and reimbursements related to the NGM621 program and this amount is
included in the transaction price.
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.
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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,
2022
2021
2020
$
55,333 $
77,882 $
87,368
For the year ended December 31, 2022, the Company recognized collaboration and license revenue of
$55.3 million primarily related to reimbursable R&D activities associated with the performance obligation under the
Amended Collaboration Agreement under which Merck is providing significantly less annual R&D funding than it had
provided through March 31, 2022. Revenue recognized related to the reimbursable R&D activities was recognized
using the cost-based input model related to R&D activities.
For the year ended December 31, 2021, the Company recognized collaboration and license revenue of
$77.9 million primarily related to reimbursable R&D 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 R&D 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 related to reimbursable R&D activities was recognized using the
cost-based input model.
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, 2022 and 2021, the
Company did not have a related party contract asset.
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
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the next twelve months, the contract liability will be classified in current liabilities. As of December 31, 2022 and
December 31, 2021, the Company recorded contract liabilities of $0.4 million and $17.8 million, respectively.
6. Commitments and Contingencies
Operating Leases and Lease Guarantee
In December 2015, the Company entered into an operating lease agreement, or the 333 Oyster Point lease
agreement, for its corporate office space and facilities 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. As of
December 31, 2022, restricted cash on the Company's consolidated balance sheets included a letter of credit in the
amount of $1.5 million required under the 333 Oyster Point lease agreement.
As of December 31, 2022, the weighted-average remaining lease term for the 333 Oyster Point lease
agreement was 1 year 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 $5.3 million and
$5.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.
During the year ended December 31, 2022, 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
2022
$
$
2,166 $
1,286
3,452 $
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.
As of December 31, 2022, the maturities of the Company’s operating lease liabilities and future minimum
lease payments were as follows (in thousands):
Total undiscounted lease payments for the year ending December 31, 2023
Less: present value adjustment
Present value of lease liabilities
5,455
(70)
5,385
$
In July 2022, the Company entered into an operating lease agreement, or the 2024 Lease Agreement, for
its corporate office space and facilities at 333 Oyster Point Blvd., South San Francisco, California, which the
Company currently occupies pursuant to a sublease agreement that is scheduled to expire on December 31, 2023.
Pursuant to the 2024 Lease Agreement, the lease term with the new landlord begins on January 1, 2024 and
expires on December 31, 2033, and the Company will pay an initial monthly base rent of approximately $0.9 million
for the first year, which is subject to increase at an annual rate of 3.5% each year thereafter, plus certain operating
and tax expenses. Base rent during the initial ten-year term of the 2024 Lease Agreement will total $124.1 million.
The 2024 Lease Agreement provides a tenant improvement allowance of approximately $4.9 million. The Company
has an option to extend the 2024 Lease Agreement for a period of either eight or ten years after the initial term. In
July 2022, pursuant to the 2024 Lease Agreement, the Company provided the landlord with a letter of credit in the
amount of $2.5 million, which the landlord may draw from upon the occurrence of certain events provided in the
lease.
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.
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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 10.0 million 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 may fix the number, rights, preferences, privileges and restrictions on such shares. 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, 2022, 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 5.3 million 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.
As of December 31, 2022 and 2021, the Company had 81.9 million and 78.0 million shares of common
stock outstanding, respectively.
The Company had reserved the following shares of common stock for issuance as follows (in thousands):
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,
2022
2021
10,937
14,215
5,661
264
192
31,269
14,183
10,485
6,698
507
18
31,891
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. During the year ended December 31, 2022, approximately 3.2 million shares were sold
pursuant to the Sales Agreement for net proceeds to the Company of $49.4 million, after deducting issuance
costs. As of December 31, 2022, $76.2 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
124
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, 2022, 19.9 million 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. 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
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 15.0% 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. As of December 31, 2022, 736,170 shares of common stock
had been purchased under the ESPP.
125
Stock Option Activity
A summary of the activity under the 2008 Plan and the 2018 Plan is as follows:
Outstanding Options
Number of
Options
(in Thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(In Years)
Aggregate
Intrinsic
Value
(In Thousands)
Balances at December 31, 2021
Options granted
Options exercised
Options forfeited
Options expired
Balances at December 31, 2022
Vested and expected to vest at December 31,
2022
Exercisable at December 31, 2022
10,485 $
4,925
(426)
(552)
(217)
14,215 $
13,646 $
9,087 $
15.79
12.82
7.01
20.98
14.74
14.78
13.99
6.68 $
52,349
6.89 $
1,749
6.79 $
5.63 $
1,749
1,749
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.
Stock-Based Compensation Expense
Stock-based compensation expense for stock options was calculated based on awards previously granted
to employees, directors and non-employees that are ultimately expected to vest and has been reduced for
estimated forfeitures.
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,
2022
2021
2020
$
$
17,875 $
14,508
32,383 $
14,271 $
11,971
26,242 $
8,339
7,312
15,651
Stock-based compensation expense included expense related to the ESPP of $2.9 million, $1.6 million and
$1.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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 Company's stock and 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,
2022, 2021 and 2020 was $8.63, $18.57 and $10.86 per share, respectively. The intrinsic value of stock options
126
exercised was $3.2 million, $34.2 million and $40.9 million for the years ended December 31, 2022, 2021 and 2020,
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, 2022, 2021 and 2020.
The fair value of stock option awards granted to employees and directors was 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,
2022
2021
2020
78 %
5.93
2.52 %
—
72 %
5.98
0.95 %
—
68 %
6.23
1.04 %
—
As of December 31, 2022, total compensation cost not yet recognized related to unvested stock options
granted to employees and directors was $54.3 million, which is expected to be recognized over a weighted-average
period of 2.6 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,
2022
2021
2020
110 %
1.63
3.76 %
—
72 %
1.27
0.27 %
—
74 %
1.17
0.15 %
—
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 of $3,500 of common stock per employee per year beginning in 2022 and $750 prior to 2022. As of
December 31, 2022 and 2021, the Company had reserved 192,385 and 17,813 shares of common stock for
issuance pursuant to the 401(k) Matching Plan, respectively. Matching contributions of 7,615, 4,117 and 6,344
shares, or $137,000, $125,000 and $119,000 were issued for the years ended December 31, 2022, 2021 and 2020,
respectively.
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,
2022
(161,813) $
$
(854)
$
(162,667) $
2021
(120,858) $
523
(120,335) $
2020
(102,209)
(278)
(102,487)
127
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 (recovery)
Change in valuation allowance
Other
Total
Year Ended December 31,
2022
2021
2020
21.0 %
0.1
—
(1.3)
(19.9)
0.1
— %
21.0 %
—
—
1.3
(21.8)
(0.5)
— %
21.0 %
—
(0.1)
3.8
(25.0)
0.3
— %
The components of the net deferred tax assets are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Capitalized R&D Section 174
Stock-based compensation
Research and development credit
Lease liability
Other temporary differences
Total gross deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
ROU asset
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,
2022
2021
$
77,563 $
31,964
4,739
2,918
1,132
435
118,751
(779)
(440)
(15)
(1,234)
117,517
(117,517)
$
— $
83,322
—
7,579
2,918
2,198
514
96,531
(997)
(850)
(15)
(1,862)
94,669
(94,669)
—
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.
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 $22.8 million and $24.6 million during the years ended December 31, 2022
and 2021, respectively.
As of December 31, 2022, the Company had approximately $345.4 million in federal net operating loss
carryforwards to reduce future taxable income. Of this amount, $285.6 million was generated after December 31,
2017 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. The utilization of
the federal net operating loss carryforwards generated in fiscal year 2020 and onwards is limited to 80% of the
federal taxable income. The Company also had approximately $466.6 million in state net operating loss
carryforwards to reduce future taxable income, which will begin to expire after 2028, if not utilized.
128
In accordance with the 2017 Tax Act, research and experimental, or R&E, expenses under Internal
Revenue Code Section 174 are required to be capitalized beginning in 2022. R&E expenses are required to be
amortized over a period of five years for domestic expenses and 15 years for foreign expenses.
The Company had approximately $3.1 million in federal R&D tax credits for each of the years ended
December 31, 2022 and 2021. In addition, the Company had approximately $4.0 million in state R&D tax credits for
each of the years ended December 31, 2022 and 2021. The federal research credits will begin to expire in the years
2028 through 2035, if not utilized. The state R&D credits have no expiration date and can be carried forward
indefinitely.
As of December 31, 2022, the Company had no foreign net operating loss carryforwards. As of
December 31, 2021, the Company had foreign net operating loss carryforwards of approximately $21.3 million
which had no expiration date.
Utilization of the Company’s net operating losses and R&D tax 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 R&D tax
credits before utilization.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
December 31,
2022
2021
2020
Balance at beginning of year
$
25,870 $
10,346 $
Additions based on tax positions related to prior year
Additions based on tax positions related to current year
49
12,778
4,447
11,077
3,819
314
6,213
Balance at end of year
$
38,697 $
25,870 $
10,346
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, 2022 and 2021, 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 U.S. federal, state and foreign income tax returns with varying statutes of limitations.
The tax years from inception in 2008 to December 31, 2022 remain subject to examination.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2022, 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,
or 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 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, 2022, the design and operation of our
disclosure controls and procedures were effective at a reasonable assurance level.
129
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, 2022 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, 2022 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, 2022.
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, 2022 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, 2022,
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, 2022, 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, 2022 and 2021, the related consolidated
statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 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
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
130
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
San Mateo, California
February 28, 2023
Item 9B.
Other Information.
On February 27, 2023, the Compensation Committee of our Board of Directors approved an addendum, or
the Addendum, to the offer letter agreement between us and Hsiao D. Lieu, M.D., dated January 16, 2019. Pursuant
to the Addendum, 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 of
the Company, and contingent on execution of an effective release of claims against us and satisfaction of certain
other conditions, Dr. Lieu will be entitled to (i) continued payment of his base salary for six months; (ii) payment or
reimbursement of COBRA premiums for him and his eligible dependents for up to six months; and (iii) full vesting of
any unvested equity awards held by Dr. Lieu.
The foregoing description of the Addendum does not purport to be complete and is qualified in its entirety by
reference to the full text of the Addendum, which is filed herewith as Exhibit 10.14.
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 2023 Annual Meeting of
Stockholders, or the 2023 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 2023 Proxy Statement. The 2023 Proxy Statement will be
filed with the SEC no later than 120 days after December 31, 2022.
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, principal accounting officer
or controller or persons performing similar functions. The Code of Conduct is available on our corporate website at
https://www.ngmbio.com/ in the Investors & Media section under “Corporate Governance.” We intend to promptly
disclose on our website or in a Current Report on Form 8-K in the future (i) the date and nature of any amendment
(other than technical, administrative or other non-substantive amendments) to the Code of Conduct that applies to
our principal executive officer, principal financial officer, principal accounting officer or controller or persons
performing similar functions and relates to any element of the code of ethics definition enumerated in Item 406(b) of
Regulation S-K and (ii) the nature of any waiver, including an implicit waiver, from a provision of the Code of
Conduct that is granted to one of these specified individuals that relates to one or more of the elements of the code
of ethics definition enumerated in Item 406(b) of Regulation S-K, the name of such person who is granted the
waiver and the date of the waiver.
131
Item 11.
Executive Compensation.
Information required by this item regarding executive compensation is incorporated by reference to the
information set forth under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “CEO
Pay Ratio” and “Director Compensation” in the 2023 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, 2022” in the 2023
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 2023 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. 3—Ratification of Selection of Independent
Registered Public Accounting Firm” in the 2023 Proxy Statement.
Item 15.
Exhibits and 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 Consolidated 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*
10.3*
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
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. . . . . . .
S-1
S-1
333-227608
333-227608
4.1
4.2
4.3
9/28/2019
4/1/2019
3/17/2020
Description of Capital Stock. . . . . . . . . . . . .
10-K
001-38853
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. . . . . . . . . . . . . . . . . . .
Amended and Restated 2018 Equity
Incentive Plan. . . . . . . . . . . . . . . . . . . . . . . . .
S-1
333-227608
10.2
9/28/2018
S-1
333-227608
10.3
3/25/2019
132
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**
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. . . . . . . . . . . . . .
S-1
333-227608
10.4
3/25/2019
S-1
333-227608
10.5
3/25/2019
S-1
333-227608
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. .
Amended and Restated Non-Employee
Director Executive 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. . 10-Q 001-38853
333-227608
333-227608
S-1
S-1
10.6
3/25/2019
10.7
9/28/2018
10.8
3/25/2019
10.2
8/5/2021
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. . . . . . . . . . . .
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
X
X
Offer Letter Agreement, by and between
the Registrant and Valerie L. Pierce, dated
as of August 6, 2019, and related
information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-Q 001-38853
Offer Letter Agreement, by and between
the Registrant and Siobhan Nolan
Mangini, dated as of May 20, 2020. . . . . . . 10-Q
Research Collaboration, Product
Development and License Agreement by
and between NGM Biopharmaceuticals,
Inc. and Merck Sharp & Dohme Corp.,
dated as of February 18, 2015. . . . . . . . . . .
001-38853
S-1
333-227608
10.3
5/6/2021
10.12
8/12/2020
10.15
9/28/2018
Letter Agreement, by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp., dated as of March 20,
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-1
333-227608
10.17
9/28/2018
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. . . . . . . . . . . . . . . . . . . . . . . . . 10-Q 001-38853
10.1
8/5/2021
133
10.20#
10.21**
10.22**
10.23**
10.24
10.25
10.26
21.1
23.1
24.1
31.1
31.2
32.1†
101.INS
101.SCH
S-1
S-1
10-K
10-K
10-K
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter Agreement, by and between NGM
Biopharmaceuticals, Inc. and Merck Sharp
& Dohme Corp., dated as of March 30,
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-Q
Lease agreement, by and between NGM
Biopharmaceuticals, Inc. and HCP BTC,
LLC, dated as of July 7, 2022. . . . . . . . . . . . 10-Q
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
XBRL Instance Document - the instance
document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline XBRL
document. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inline XBRL Taxonomy Extension Schema
Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134
333-227608
10.17
4/1/2019
001-38853
10.17
3/15/2020
001-38853
10.18
3/15/2020
001-38853
10.23
3/1/2022
333-227608
10.18
3/25/2019
001-38853
10.1
5/5/2022
001-38853
10.1
8/4/2022
X
X
X
X
X
X
X
X
101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension
Calculation Linkbase Document. . . . . . . . . .
Inline XBRL Taxonomy Extension
Definition Linkbase Document. . . . . . . . . . .
Inline XBRL Taxonomy Extension Label
Linkbase Document. . . . . . . . . . . . . . . . . . . .
Inline XBRL Taxonomy Extension
Presentation Linkbase Document. . . . . . . .
Cover Page Interactive Data File
(formatted as Inline XBRL and contained
in Exhibit 101) . . . . . . . . . . . . . . . . . . . . . . . . .
X
X
X
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.
The agreements and other documents filed as exhibits to this Annual Report on Form 10-K are not intended to provide
factual information or other disclosure other than with respect to the terms of the agreements or other documents
themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made
by us in these agreements or other documents were made solely within the specific context of the relevant agreement
or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Item 16.
Form 10-K Summary.
None.
135
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: February 28, 2023
Date: February 28, 2023
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
President and Chief Financial Officer
(Principal Financial Officer)
136
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints 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
Title
Date
/s/ David J. Woodhouse
David J. Woodhouse, Ph.D.
Chief Executive Officer and Director
February 28, 2023
(Principal Executive Officer)
/s/ Siobhan Nolan Mangini
President and Chief Financial Officer
February 28, 2023
Siobhan Nolan Mangini
(Principal Financial and Accounting Officer)
/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, M.D.
/s/ Suzanne Sawochka Hooper
Suzanne Sawochka Hooper
/s/ Roger M. Perlmutter, M.D.
Roger M. Perlmutter, M.D.
Chairman and Director
February 28, 2023
Chief Scientific Officer and Director
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
Director
Director
Director
Director
Director
137