So far this year, NGM Biopharmaceuticals has licensed a drug to Merck, extended a research agreement with that partner, and laid the groundwork to continue mid-stage testing of its wholly-owned lead compound. Now it can add a $107 million IPO to the list.
Late Wednesday, NGM sold appoximately 6.7 million shares for $16 apiece, the high end of the price range the South San Francisco company had planned. Those shares are expected to begin trading on the Nasdaq exchange Thursday under the stock symbol “NGM.”
Since starting operations in 2008, NGM’s research has generated a pipeline of seven experimental drugs for metabolic disorders, cancer, and eye diseases. For the past four years, NGM has been working with Merck (NYSE: MRK) in a partnership focused on developing drugs for diabetes, obesity, and nonalcoholic steatohepatitis (NASH), which is a type of fatty liver disease.
That Merck partnership has already borne fruit with positive Phase 1b data for NGM313, a drug tested in both NASH and type 2 diabetes. Through the end of 2018, Merck has paid NGM more than $336 million through the partnership, according to the IPO prospectus. That sum includes Merck’s exercise of its option for rights to the NASH and diabetes drug, which it has renamed MK-3655.
NGM and Merck will continue working together; last month, the companies extended their collaboration another two years to 2022. During the extension period, Merck will pay up to $20 million to fund NGM’s research. The IPO is also deepening the connections between the companies. According to the prospectus, Merck has agreed to purchase more than 4.1 million shares of the company at the IPO price, which will increase its equity stake in its partner to 19.9 percent. NGM says proceeds from that stock sale are expected to be $65.9 million.
The IPO allows NGM to turn its attention to lead drug NGM282, a mid-stage NASH compound whose rights the company owns outright. In preliminary Phase 2 results, NGM reported a reduction in the fat and enzymes that are hallmarks of fibrosis, or liver damage, after 12 weeks of treatment. Interim results from tests of a second group after 24 weeks are expected in the second half this year, according to the prospectus.
NGM282 has raised red flags previously, however. The once-daily injectable drug is an engineered version of FGF19, a human hormone that has been associated with liver cancer in rodent testing, the company says in its prospectus. In 2014, the FDA placed a clinical hold on NGM’s application to test the drug in type 2 diabetes. After analyzing Phase 2a results in 2015, NGM decided to stop work on the drug in type 2 diabetes and pursue NASH instead. So far, the FDA has not asked for additional information about the drug’s link to cancer risks, NGM says in its filings.
Last year, NGM spent $95.7 million on research and development, according to the prospectus. The company says between $95 million and $105 million of the IPO proceeds will be spent on NGM282 and related drugs. That work will include advancing its lead drug to a Phase 2b study.
Up to $55 million is budgeted for other NGM programs, including early-stage drug discovery work. The company adds that it may use some of its cash haul to license or acquire products or businesses, but it currently has no plans to do so. The company says it has enough cash to fund operations through 2021.
NGM had raised nearly $295 million in funding. Prior to the IPO, NGM’s largest shareholder was The Column Group, which owned 25 of the company; Merck’s stake was 16.3 percent.
Here’s more on the early days of NGM.